10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

For the quarterly period ended: September 30, 2016

Or

☐ Transition Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of 1934

For the transition period from ______________ to _______________

Commission File Number: 001-34708

BIOSTAR PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)

Maryland	20-8747899
(State or other jurisdiction of incorporation of origination)	(I.R.S. Employer Identification Number)

No. 588 Shiji Xi Avenue Xianyang, Shaanxi Province People’s Republic of China	712046
(Address of principal executive offices)	(Zip code)

011-86-29-33686638

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒  No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒  No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ☐	Accelerated filer ☐
Non-accelerated filer ☐	Smaller reporting company ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

As of November 21, 2016, the Company had 2,637,183 shares issued and outstanding.

TABLE OF CONTENTS

		Page
PART I	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	F-1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	10
Item 4.	Controls and Procedures	10
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	11
Item 1A.	Risk Factors	12
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	13
Item 3.	Defaults Upon Senior Securities	13
Item 4.	Mine Safety Disclosures	13
Item 5.	Other Information	13
Item 6.	Exhibits	13
Signatures		14

PART I - FINANCIAL INFORMATION

Item 1.    Condensed Consolidated Financial Statements (unaudited)

BIOSTAR PHARMACEUTICALS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Contents

	Page(s)
Financial Statements
Condensed Consolidated Balance Sheets (unaudited)	F-2
Condensed Consolidated Statements of Operations (unaudited)	F-3
Condensed Consolidated Statements of Cash Flows (unaudited)	F-4
Notes to Condensed Consolidated Financial Statements (unaudited)	F-5

F-1

BIOSTAR PHARMACEUTICALS, INC

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,			December 31,
	2016			2015
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	659,359		$	38,898
Accounts receivable, net		6,094,197			15,814,880
Inventories		439,596			234,660
Deposits and other receivables		2,525			2,591
Income tax recoverable		74,253			76,280
Loan receivables, net		-			-
Value-added tax recoverable		22,559			-
Total Current Assets		7,292,489			16,167,309
Non-current Assets
Deposits		15,672,054			16,099,958
Deferred tax assets, net		5,262,895			5,406,593
Property and equipment, net		6,270,436			6,810,933
Intangible assets, net		6,061,546			6,878,787
Total Non-Current Assets		33,266,931			35,196,271
Total Assets	$	40,559,420		$	51,363,580
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts and other payables	$	4,097,856		$	4,153,411
Short-term bank loans		2,422,213			2,773,199
Value-added tax payable		-			112,629
Warrants liability		12,703			59,202
Total Current Liabilities		6,532,772			7,098,441
Commitment and contingencies
Stockholders’ Equity
Common stock, $0.001 par value, 100,000,000 shares authorized,    2,210,913 shares issued and outstanding as of    September 30, 2016 and December 31, 2015		2,210			2,210
Additional paid-in capital		30,316,774			30,316,774
Statutory reserve		7,354,413			7,354,413
Retained earnings		(5,929,066	)		3,157,394
Accumulated other comprehensive income		2,282,317			3,434,348
Total Stockholders’ Equity		34,026,648			44,265,139
Total Liabilities and Stockholders’ Equity	$	40,559,420		$	51,363,580

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-2

BIOSTAR PHARMACEUTICALS, INC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(Unaudited)

	Three months ended September 30,						Nine months ended September 30,
	2016			2015			2016			2015
Sales, net	$	644,933		$	4,206,550		$	2,066,698		$	25,291,531
Cost of sales		336,870			3,390,439			1,114,777			14,955,491
Gross profit		308,063			816,111			951,921			10,336,040
Operating expenses:
Advertising expenses		-			-			-			3,838,912
Selling expenses		290,924			835,412			904,037			4,445,443
General and administrative expenses		488,136			682,972			1,717,992			2,672,351
Provision for doubtful debt		1,491,002			-			7,820,713			-
Research and development expenses		-			998,746			-			3,043,535
Total operating expenses		2,270,062			2,517,130			10,442,742			14,000,241
Loss from operations		(1,961,999	)		(1,701,019	)		(9,490,821	)		(3,664,201	)
Interest income		-			311,569			-			954,594
Interest expense		(105,401	)		-			(143,716	)		(62,290	)
Fair value adjustment on warrants		2,151			144,210			46,499			224,664
Other Income		501,578			546			501,578			2,065
Total other income, net		398,328			456,325			404,361			1,119,033
Loss before income taxes		(1,563,671	)		(1,244,694	)		(9,086,460	)		(2,545,168	)
Income tax expenses (benefits)		-			10,059			-			(637,884	)
Net loss	$	(1,563,671	)	$	(1,254,753	)	$	(9,086,460	)	$	(1,907,284	)
Foreign currency translation adjustment		(174,104	)		(3,140,062	)		(1,152,031	)		(2,479,077	)
Comprehensive (loss) income	$	(1,737,775	)	$	(4,394,815	)	$	(10,238,491	)	$	(4,386,361	)
Net loss per share
Basic	$	(0.71	)	$	(0.57	)	$	(4.11	)	$	(0.86	)
Diluted	$	(0.71	)	$	(0.57	)	$	(4.11	)	$	(0.86	)
Weighted average number of common shares outstanding
Basic		2,210,913			2,210,913			2,210,913			2,210,913
Diluted		2,210,913			2,210,913			2,210,913			2,210,913

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-3

BIOSTAR PHARMACEUTICALS, INC

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2016				2015
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net loss		$	(9,086,460	)		$	(1,907,284	)
Adjustments to reconcile net income to net cash provided by operating activities:
Accrued interest income			-				(949,582	)
Deferred tax benefit			-				(580,367	)
Depreciation and amortization			913,394				1,005,498
Recognition of deferred research and development expenses							1,014,512
Fair value adjustment on warrants			(46,499	)			(224,664	)
Provision for sales discounts			-				1,478,124
Provision for doubtful accounts			7,820,713				-
Changes in operating assets and liabilities:
Accounts receivable			1,605,000				(4,696,508	)
Inventories			(214,017	)			19,794
Deposits and other receivables			-				2,319,480
Accounts payable and accrued expenses			52,903				2,753,073
Value-added tax payable			(133,977	)			(381,380	)
Income tax payable/recoverable			-				(57,517	)
Net cash provided by (used in) operating activities			911,057				(206,821	)
CASH FLOWS USED IN INVESTING ACTIVITIES
Deposit paid for intended acquisition			-				(1,623,219	)
Purchase of property, plant and equipment			-				(30,522	)
Net cash used in investing activities			-				(1,653,741	)
CASH FLOWS USED IN FINANCING ACTIVITIES
Repayment of short-term bank loans			(281,016	)			(186,670	)
Net cash used in financing activities			(281,016	)			(186,670	)
Effect of exchange rate changes on cash and cash equivalents			(9,580	)			473,989
Net increase (decrease) in cash and cash equivalents			620,461				(1,573,243	)
Cash and cash equivalents, beginning balance			38,898				1,685,154
Cash and cash equivalents, ending balance		$	659,359			$	111,911
SUPPLEMENTAL DISCLOSURES:
Interest received		$	-			$	5,012
Interest paid		$	(143,716	)		$	(59,406	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-4

BIOSTAR PHARMACEUTICALS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – ORGANIZATION AND NATURE OF OPERATIONS

Biostar Pharmaceuticals, Inc. (“Biostar” or the “Company”) was incorporated in the State of Maryland on March 27, 2007. On June 15, 2007, Biostar formed Shaanxi Biostar Biotech Ltd. (“Shaanxi Biostar”). Shaanxi Biostar is a wholly owned subsidiary of Biostar and a limited liability company organized under the laws of the People’s Republic of China (the “PRC”).

On November 1, 2007, Shaanxi Biostar entered into a series of agreements including a Management Entrustment Agreement, a Shareholders’ Voting Proxy Agreement, an Exclusive Option Agreement and a Share Pledge Agreement (collectively the “Agreements”) with Shaanxi Aoxing Pharmaceutical Co., Ltd. (“Aoxing Pharmaceutical”) and its registered owners (the “Transaction”). Aoxing Pharmaceutical is a corporation formed under the laws of the PRC. According to these Agreements, Shaanxi Biostar acquired management control of Aoxing Pharmaceutical whereby Shaanxi Biostar is entitled to all of the net profits of Aoxing Pharmaceutical as a management fee and is obligated to fund Aoxing Pharmaceutical’s operations and pay all of the debts. In exchange for entering into the Agreements, on November 1, 2007, the Company issued 19,832,311 shares (representing 944,396 shares, after the one-for-three reverse split of the issued and outstanding common stock of the Company effective on April 3, 2012 and the one-for-seven reverse split of the issued and outstanding common stock of the Company effective on February 4, 2016) of its common stock to Aoxing Pharmaceutical’s registered owners, representing approximately 90% of the Company’s common stock outstanding immediately after the Transaction.

Following the change in registered owners of Aoxing Pharmaceutical on July 9, 2010, a set of new Agreements had been entered into with all the then existing registered owners of Aoxing Pharmaceutical on the same day.

The Agreements dated July 9, 2010 were merely replacements of the Agreements dated November 1, 2007 and therefore, there was no significant change in the contractual terms between the Agreements dated July 9, 2010 and November 1, 2007. The then existing registered owners of Aoxing Pharmaceutical, Shaanxi Biostar and Biostar had mutually agreed that no consideration would be paid / payable upon the execution of the Agreements on July 9, 2010. The interest of Biostar in Aoxing Pharmaceutical was not and would not be affected by the replacement for the Agreements.

Following the change in registered owners of Aoxing Pharmaceutical on May 24, 2013, a set of new Agreements had been entered into with all the existing registered owners of Aoxing Pharmaceutical on May 24, 2013.

The Agreements dated May 24, 2013 are merely replacements of the Agreements dated July 9, 2010 and therefore, there is no significant change in the contractual terms between the Agreements dated May 24, 2013, July 9, 2010 and November 1, 2007. The existing registered owners of Aoxing Pharmaceutical, Shaanxi Biostar and Biostar had mutually agreed that no consideration would be paid / payable upon the execution of the Agreements on May 23, 2013. The interest of Biostar in Aoxing Pharmaceutical was not and would not be affected by the replacement for the Agreements.

Following the change in registered owners of Aoxing Pharmaceutical on October 29, 2014, a set of new Agreements had been entered into with all the existing registered owners of Aoxing Pharmaceutical on October 29, 2014.

The Agreements dated October 29, 2014 are merely replacements of the Agreements dated May 24, 2013 and therefore, there is no significant change in the contractual terms between the Agreements dated October 29, 2014, May 24, 2013, July 9, 2010 and November 1, 2007. The existing registered owners of Aoxing Pharmaceutical, Shaanxi Biostar and Biostar had mutually agreed that no consideration would be paid / payable upon the execution of the Agreements on October 29, 2014. The interest of Biostar in Aoxing Pharmaceutical was not and would not be affected by the replacement for the Agreements.

Following the change in registered owners of Aoxing Pharmaceutical on May 11, 2015, a set of new Agreements had been entered into with all the existing registered owners of Aoxing Pharmaceutical on May 11, 2015.

The Agreements dated May 11, 2015 are merely replacements of the Agreements dated October 29, 2014 and therefore, there is no significant change in the contractual terms between the Agreements dated May 11, 2015, October 29, 2014, May 24, 2013, July 9, 2010 and November 1, 2007. The existing registered owners of Aoxing Pharmaceutical, Shaanxi Biostar and Biostar had mutually agreed that no consideration would be paid / payable upon the execution of the Agreements on May 11, 2015. The interest of Biostar in Aoxing Pharmaceutical was not and would not be affected by the replacement for the Agreements.

The Agreements provide Shaanxi Biostar with control over Aoxing Pharmaceutical as defined by Accounting Standards Codification (“ASC”) 810, Consolidation, which requires Shaanxi Biostar to consolidate the financial statements of Aoxing Pharmaceutical and ultimately consolidate with its parent company, Biostar (see Note 2 “Principles of Consolidation”).

F-5

In October 2011, Aoxing Pharmaceutical entered into and completed a Share Transfer Agreement (the “Weinan Share Transfer Agreement”) to acquire Shaanxi Weinan Huaren Pharmaceuticals, Ltd. (“Shaanxi Weinan”) from the holders of 100% of equity interests in Shaanxi Weinan.  Therefore, Shaanxi Weinan became a wholly owned subsidiary of Aoxing Pharmaceutical. Shaanxi Weinan is engaged in manufacturing of drugs and health products. In April 2013, Aoxing Pharmaceutical executed a supplemental agreement to the Weinan Share Transfer Agreement (the “Weinan Supplemental Agreement”) with all the former equity holders of Shaanxi Weinan to acquire 13 drug approval numbers which were excluded from the Weinan Share Transfer Agreement due to incomplete re-registration.  The Company acquired ownership of the 13 drug approval numbers for which re-registration has been completed in April 2013. The aggregate purchase price was approximately $10.2 million, consisting of approximately $8.8 million in cash and 228,938 shares (after the one-for-seven reverse split of the issued and outstanding common stock of the Company effective on February 4, 2016) of the Company’s common stock, valued at approximately $1.4 million.

The Company, through its subsidiary and the Agreements with Aoxing Pharmaceutical, is engaged in the business of developing, manufacturing and marketing over-the-counter (“OTC”) and prescription pharmaceutical products in the PRC.

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Liquidity and Going Concern

As of September 30, 2016, we had cash of $659,359 and net working capital of $759,717. For the period ended September 30, 2016, we reported a net loss of $9,086,460 and net cash provided by operating activities of $911,057. We generated cash flow from operations even though we incurred a net loss as (1) we collected outstanding receivables from our trade debtors; and (2) our net loss includes certain non-cash expenses that are added back to our cash flow from operations as shown on our condensed consolidated statements of cash flows.

We had experienced a substantial decrease in sales volume of all Aoxing Pharmaceutical Products due to the temporarily suspension of production to conduct maintenance of its production lines to renew its GMP certificates from 2015. While our production levels of Shaanxi Weinan products, being sold to a single customer as detailed in Note 13, helped to offset the substantial decrease in our sales volume in the most recent fiscal quarter, our sales volume continued to remain at the present decreased levels. There is no assurance that the production lines at Aoxing will resume and the renewal of GMP certificates will occur when anticipated, or even if they are renewed, we will be able to return to the production levels as anticipated. Our inability to regain our production levels as anticipated may have material adverse effects on our business, operations and financial performance, and the Company may become insolvent. In addition, the Company already violated its financial covenants included in its short-term bank loans as discussed in Note 5 “Short-term Bank Loans”.

During 2015, as a result of outstanding personal debts of the Chief Executive Officer, Mr. Ronghua Wang, one of the Company’s bank accounts was frozen, title of three residential properties of the Company had been transferred and resulted in a loss of approximately $0.5 million (RMB 3.3 million), and certain buildings and land use rights are currently seized by the court but have not been transferred to the lender. In February 2016, the count attempted to force a sale of the Company’s land use rights and buildings. As of September 30, 2016, Mr. Ronghua Wang had partially repaid the outstanding balance of the loan, thus the creditor petitioned the court to terminate the auction sale. Mr. Ronghua Wang has repaid approximately $0.5 million (RMB 3.3 million) to the company to make good the loss recognized in 2015. Such cash collection is included in “other income” for the three and nine months ended September 30, 2016. The Company has disclosed the above legal proceedings related to the Company to the best of its knowledge. There is no assurance that Mr. Ronghua Wang will be able to repay his personal debts in full before his creditors take any other further legal action. There is also no assurance that there will be no other cases that would put the Company’s properties at risk.

The factors discussed above raise substantial doubt as to our ability to continue as a going concern. Based on our current plans for the next twelve months, we anticipate that the sales of the Company’s pharmaceutical products in Shaanxi Weinan after having recently gained renewal of its GMP certificates, will be the primary organic source of funds for future operating activities in 2016. The Company will also make substantial efforts to collect outstanding accounts and other receivables to meet its debt obligations; we may also try to procure bank borrowing, if available, as well as capital raises through public or private offerings. There is no assurance that we will find such funding on acceptable terms, if at all. The accompanying consolidated financial statements do not include any adjustments that might result from these uncertainties.

We anticipate that the new topical health product called “Easy Breathing” will be launched for sale in November 2016. The product was developed by the Company’s research and development team over the past 3 years. The product is designed to have effects of relieving stuffy nose, inhibiting nasal bacteria and viruses, and mitigating effects on the inflammation of nasal mucosa. It will be manufactured, distributed and sold in China. Although we do not anticipate any significant sales revenue in 2016, we expect to sell approximately 400,000 units within the next 2 years, which is expected to yield approximately $7.5 million (RMB 50 million) and improve our cash flow position.

F-6

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company, its subsidiary and variable interest entity (“VIE”) for which the Company is the primary beneficiary. All inter-company accounts and transactions have been eliminated in those condensed consolidated financial statements. The Company has adopted ASC 810, Consolidation which requires a VIE to be consolidated by a company if that company has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and either (1) the obligation to absorb losses of the VIE or (2) the right to receive benefits from the VIE”.

In determining Aoxing Pharmaceutical is a VIE of Shaanxi Biostar, the Company considered the following indicators, among others:

● Shaanxi Biostar has the full right to control and administer the financial affairs and daily operation of Aoxing Pharmaceutical and has the right to manage and control all assets of Aoxing Pharmaceutical. The registered owners of Aoxing Pharmaceutical as a group have no right to make any decision about Aoxing Pharmaceutical’s activities without the consent of Shaanxi Biostar.

● Shaanxi Biostar is assigned all voting rights of Aoxing Pharmaceutical and has the right to appoint all directors and senior management personnel of Aoxing Pharmaceutical. The registered owners of Aoxing Pharmaceutical possess no substantive voting rights.

● Shaanxi Biostar is committed to provide financial support if Aoxing Pharmaceutical requires additional funds to maintain its operations and to repay its debts.

● Shaanxi Biostar is entitled to a management fee equal to Aoxing Pharmaceutical’s net profits and is obligated to assume all operation risks and bear all losses of Aoxing Pharmaceutical.  Therefore, Shaanxi Biostar is the primary beneficiary of Aoxing Pharmaceutical.

Additional capital provided to Aoxing Pharmaceutical by the Company was recorded as an interest-free loan to Aoxing Pharmaceutical. There was no written note to this loan, the loan was not interest bearing, and was eliminated during consolidation. Under the terms of the Agreements, the registered owners of Aoxing Pharmaceutical are required to transfer their ownership of Aoxing Pharmaceutical to the Company’s subsidiary in the PRC when permitted by the PRC laws and regulations or to designees of the Company at any time when the Company considers it is necessary to acquire Aoxing Pharmaceutical. In addition, the registered owners of Aoxing Pharmaceutical have pledged their shares in Aoxing Pharmaceutical as collateral to secure these Agreements.

Unaudited Interim Financial Information

These unaudited interim condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been made. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2016.

The consolidated balance sheets and certain comparative information as of December 31, 2015 are derived from the audited consolidated financial statements and related notes for the year ended December 31, 2015 (“2015 Annual Financial Statements”), included in the Company’s 2015 Annual Report on Form 10-K. These unaudited interim condensed consolidated financial statements should be read in conjunction with the 2015 Annual Financial Statements.

Foreign Currency

The Company’s reporting currency is the U.S. dollar (“$”). The Company’s operations in the PRC use the Chinese Yuan Renminbi (“RMB”) as its functional currency. The financial statements of the subsidiary and VIEs are translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters. According to the topic, all assets and liabilities were translated at the current exchange rate, stockholders’ equity are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC 220, Comprehensive Income. Foreign exchange transaction gains and losses are reflected in the statement of operations.  For the period ended September 30, 2016 and 2015, the Company recognized foreign translation under other comprehensive income adjustment of a loss for $1,152,031 and a loss for $2,479,077, respectively.

F-7

Fair Value of Financial Instruments

ASC 825, Financial Instruments, requires that the Company discloses estimated fair values of financial instruments. The carrying amounts reported in the balance sheets for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value.

The Company applies the provisions of ASC 820-10, Fair Value Measurements and Disclosures. ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. For certain financial instruments, including cash and cash equivalents, loan receivables and short-term bank loans, the carrying amounts approximate fair value due to their relatively short maturities. The three levels of valuation hierarchy are defined as follows:

ž Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

ž Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

ž Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. In addition, the fair values of freestanding derivative instruments such as warrant are valued using the Binominal Model.

The Company uses Level 3 inputs for its valuation methodology for the fair value of warrant.

The binomial lattice relies on the following Level 3 inputs: (1) expected volatility of the Company’s common stock; and (2) risk free rate which is based on daily treasury yield curve rates as published by U.S. Department of the Treasury. The expected volatility of the Company’s common stock is estimated from the historical volatility of daily returns in the Company’s common stock price.

The following tables present the estimated fair value of the following financial assets and liabilities of the Company:

At September 30, 2016:

	Carrying amount
	Level 1		Level 2		Level 3		Estimated fair value
Financial assets
Carried at (amortized) cost:
Cash and cash equivalents	$	659,359	$	-	$	-	$	659,359

	Carrying amount
	Level 1			Level 2			Level 3			Estimated fair value
Financial liabilities
Carried at (amortized) cost:
Short-term bank loans		$	-		$	-		$	2,422,213		$	2,422,213
Carried at fair value:
Warrants liability			-			-			12,703			12,703
		$	-		$	-		$	2,434,916		$	2,434,916

F-8

At December 31, 2015:

	Carrying amount
	Level 1		Level 2		Level 3		Estimated fair value
Financial assets
Carried at (amortized) cost:
Cash and cash equivalents	$	38,898	$	-	$	-	$	38,898

	Carrying amount
	Level 1			Level 2			Level 3			Estimated fair value
Financial liabilities
Carried at (amortized) cost:
Short-term bank loans		$	-		$	-		$	2,773,199		$	2,773,199
Carried at fair value:
Warrants liability			-			-			59,202			59,202
		$	-		$	-		$	2,832,401		$	2,832,401

Warrants Liability
Value at December 31, 2015	$	59,202
Fair value adjustment of warrants during the nine months end September 30, 2016		(46,499	)
Value at September 30, 2016	$	12,703

At September 30, 2016, the fair value of the warrants liability, which are recognized as level 3 financial instruments, were calculated using the binomial model that included the following inputs: stock price of the underlying asset of $3.72, an exercise price of $22.61 expected volatility of 149.91%, risk free rate of 0.37% and initial time to expiration of 3 years. The change in fair value was recognized on the Company’s statement of operations during the nine months ended September 30, 2016.

In accordance with ASC-820-10-50-2(g), the Company has performed a sensitivity analysis of the outstanding warrants of the Company which are classified as level 3 financial instruments. The Company recalculated the value of warrants by applying a +/- 5% changes to the input variables in the binomial model that vary overtime, namely, the volatility and the risk free rate. A 5.0% decrease in volatility would decrease the value of the warrants to $3,162; a 5.0% increase in volatility would increase the value of the warrants to $3,669. A 5.0% decrease or increase in the risk free rate would not have materially changed the value of the warrants; the value of the warrants is not strongly correlated with small changes in interest rates.

Use of Estimates

The preparation of the consolidated financial statements in conformity with the GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used for, but not limited to, the accounting for certain items such as allowance for doubtful accounts, depreciation and amortization, impairment, inventory allowance, taxes and contingencies.

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.  As of September 30, 2016 and December 31, 2015, cash and cash equivalents were mainly denominated in RMB and were placed with banks in the PRC.  These cash and cash equivalents may not be freely convertible into foreign currencies and the remittance of these funds out of the PRC may be subjected to exchange control restrictions imposed by the PRC government.

F-9

Accounts Receivable

The Company maintains allowance for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these allowances. Terms of sales vary. Allowances are recorded primarily on a specific identification basis.

As of September 30, 2016 and December 31, 2015, the allowance for doubtful debts was approximately $14.3 million and $6.8 million respectively.

Reverse Stock Split

On February 4, 2016, the Company effectuated a one-for-seven reverse split of its common stock; the Company’s stockholder’s equity, information on a number of shares and (loss) earnings per share has been retroactively restated to the first period presented. See Note 6(a).

Inventories

Inventories are valued at the lower of weighted average cost or market. Management compares the cost of inventories with the market value, and allowance is made for writing down the inventories to market value, if lower. Inventories consisted of the following:

	September 30,			December 31,
	2016			2015
	(unaudited)
Raw materials		$	362,700		$	164,352
Work in process			30,596			51,041
Finished goods			46,300			19,267
		$	439,596		$	234,660

Property and Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives of:

Buildings	30 years
Building improvements	30 years
Machinery & equipment	5-10 years
Furniture & fixtures and vehicles	5-10 years

Property and equipment consisted of the following:

	September 30,			December 31,
	2016			2015
	(unaudited)
Buildings	$	2,471,262		$	2,548,537
Building improvements		5,349,888			5,517,178
Machinery & equipment		1,151,416			1,187,421
Furniture & fixtures		51,579			53,192
Vehicle		108,314			111,701
Construction in progress		468,358			483,004
	$	9,600,817		$	9,901,033
Less: Accumulated depreciation		(3,330,381	)		(3,090,100	)
	$	6,270,436		$	6,810,933

As set out in Note 5, buildings with carrying value of approximately $1.2 million as of September 30, 2016 and December 31, 2015 were pledged to a local bank in PRC as part of security for a short term bank loan facilities granted to the Company.

F-10

Intangible Assets

Intangible assets are amortized using the straight-line method over their estimated period of benefit, ranging from ten to fifty years. Management evaluates the recoverability of intangible assets periodically and takes into account events or circumstances that warrant revised estimates of useful lives or that indicate impairment exists. The Company’s land use rights will expire between 2053 and 2056. The Company’s proprietary technologies include land use rights and drug approvals and permits. All of the Company’s intangible assets are subject to amortization with estimated useful lives of:

Land use rights	50 years
Proprietary technologies	10 years

 The components of finite-lived intangible assets are as follows:

	September 30,				December 31,
	2016				2015
	(unaudited)
Land use rights		$	2,976,746			$	3,083,608
Proprietary technologies			15,371,835				16,065,254
			18,348,581				19,148,862
Less: Accumulated amortization and impairment			(12,287,035	)			(12,270,075	)
		$	6,061,546			$	6,878,787

The estimated future amortization expenses related to intangible assets as of September 30, 2016 are as follows:

Years Ending December 31,
2016	$	144,340
2017		577,361
2018		577,361
2019		577,361
2020		103,920
Thereafter		4,081,203

As set out in Note 5, land use right with carrying value of approximately $2.2 million as of September 30, 2016 and December 31, 2015 were pledged to a local bank in PRC as part of security for a short term bank loan facilities granted to the Company.

Share warrants

In accordance with ASC815, Derivatives and Hedging, share warrants with term of down-round provision are initially recognized at fair value at grant date as a derivative liability. At each reporting period date, the fair value of the share warrants will be re-measured and the fair value change will be reported as gain/loss in the Condensed Consolidated Statements of Operations and Comprehensive Income.

Revenue Recognition

The Company’s revenue recognition policies are in compliance with ASC 605, Revenue Recognition. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

The Company does not allow its customers to return products. The Company’s customers can exchange products only if they are damaged in transportation.

Revenue reported is net of value added tax and sales discounts.

F-11

Recent accounting pronouncements

In May 2014, the FASB issued Accounting Standards Update ASU No. 2014-09, “Revenue from Contracts with Customers”, which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. ASU 2014-09 will be effective for the Company beginning in its first quarter of 2019, and early adoption is permitted. Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”); ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”); and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”). The Company must adopt ASU 2016-08, ASU 2016-10 and ASU 2016-12 with ASU 2014-09 (collectively, the “new revenue standards”). The new revenue standards may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company currently expects to adopt the new revenue standards in its first quarter of 2018 utilizing the full retrospective transition method. The adoption of the new revenue standards is not expected to have any material impact on the Company’s consolidated financial statements.

In February 2015, the FASB issued Accounting Standards Update ASU No. 2015-02, “Consolidation” (Topic 810). ASU 2015-02 changes the guidance with respect to the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. All legal entities are subject to reevaluation under the revised consolidation mode. ASU 2015-02 affects the following areas: (1) Limited partnerships and similar legal entities. (2) Evaluating fees paid to a decision maker or a service provider as a variable interest. (3) The effect of fee arrangements on the primary beneficiary determination. (4) The effect of related parties on the primary beneficiary determination. (5) Certain investment funds. ASU 2015-02 is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the guidance in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. A reporting entity may apply the amendments in this guidance using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A reporting entity also may apply the amendments retrospectively. The adoption of ASU 2015-02 is not expected to have any material impact on the Company’s financial statement presentation or disclosures.

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs”. The accounting guidance requires that debt issuance costs related to a recognized debt liability be reported on the Consolidated Statements of Financial Condition as a direct deduction from the carrying amount of that debt liability. The guidance is effective for the Company retrospectively beginning in the first quarter of fiscal 2017 and early adoption is permitted. The adoption of this accounting guidance is not expected to have any material impact on the Company’s Consolidated Statements of Financial Condition.

In July 2015, the FASB issued Accounting Standards Update ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which applies to inventory that is measured using first-in, first-out (“FIFO”) or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, first-out (“LIFO”). ASU 2015-11 is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company will adopt the standard in the interim and annual period after December 31, 2016.  The adoption of ASU 2015-11 is not expected to have any material impact on the Company’s consolidated financial statements.

F-12

In November 2015, the FASB issued Accounting Standards Updates ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). The FASB issued ASU 2015-17 as part of its ongoing Simplification Initiative, with the objective of reducing complexity in accounting standards. The amendments in ASU 2015-17 require entities that present a classified balance sheet to classify all deferred tax liabilities and assets as a noncurrent amount. This guidance does not change the offsetting requirements for deferred tax liabilities and assets, which results in the presentation of one amount on the balance sheet. Additionally, the amendments in this ASU align the deferred income tax presentation with the requirements in International Accounting Standards (IAS) 1, Presentation of Financial Statements.  The amendments in ASU 2015-17 are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently reviewing the provisions of this ASU 2015-17 to determine if there will be any impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued Accounting Standards Updates ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. ASU 2016-02 will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently reviewing the provisions of this ASU 2016-02 to determine if there will be any impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The objective of the simplification initiative is to identify, evaluate, and improve areas of US GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The areas for simplification involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. ASU 2016-09 will be effective for public companies for reporting periods beginning after December 15, 2016. The Company is assessing the impact to its accounting practices and financial reporting procedures as a result of the issuance of this standard.

In June 2016, the FASB issued Accounting Standards Update ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326), which modifies the measurement of expected credit losses of certain financial instruments. ASU 2016-13 will be effective for the Company beginning in its first quarter of 2021 and early adoption is permitted. The adoption of ASU 2016-13 is not expected to have any material impact on the Company’s consolidated financial statements.

In August 2016, the FASB issued Accounting Standards Update ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”. The updated guidance aims to reduce diversity in presentation and classification of certain cash receipts and cash payments by addressing eight specific cash flow issues including (1) Debt Prepayment or Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made after a Business Combination; (4) Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned Life Insurance Policies; (6) Distributions Received from Equity Method Investees; (7) Beneficial Interests in Securitization Transactions and (8) Separately Identifiable Cash Flows and Application of the Predominance Principle. Among the afore-mentioned eight addressed cash flow issues, the category of “Separately Identifiable Cash Flows and Application of the Predominance Principle” requires a reporting entity to classify cash receipts and payments that have aspects of more than one class of cash flows first by applying specific guidance in generally accepted accounting principles (GAAP) and, only in the absence of specific guidance, by determining each separately identifiable source or use within the cash receipts and cash payments on the basis of the nature of the underlying cash flows. In situations in which cash receipts and payments have aspects of more than one class of cash flows and cannot be separated by source or use, a reporting entity should classify such cash receipts and cash payments by referring to the predominant source or use of cash flows for the item. The updated guidance is effective from reporting periods beginning after December 15, 2018. The Company is assessing the impact to its accounting practices and financial reporting procedures as a result of the issuance of this standard.

F-13

As of September 30, 2016, there are no recently issued accounting standards not yet adopted that would have a material effect on the Company’s financial statements.

Note 3 – DEPOSITS AND OTHER RECEIVABLES

Deposits and other receivables consisted of the following:

	September 30,		December 31,
	2016		2015
Current portion
Deposit for research & development	$	80	$	80
Other receivables and prepaid expenses		2,445		2,511
		2,525		2,591
Non-current portion
a) Deposits paid for intended acquisition of a health product material supplier	$	12,072,730	$	12,402,360
b) Deposits paid for intended acquisition of a health product manufacturer		3,599,324		3,697,598
Deposits	$	15,672,054	$	16,099,958

a. In December 2014, the Company signed a letter of intent to acquire 100% interest in a company in the PRC, which is principally engaged in supply of raw materials to produce health product, for an aggregate consideration of approximately $12.3 million (RMB 82 million) in cash. The completion of the acquisition is subject to the completion of a valuation report and certain conditions set out in the letter of intent being met. The deposit is fully refundable if certain conditions set out in the letter of intent are not met. The acquisition was yet to complete by September 30, 2016.

b.   In November 2013, the Company signed a letter of intent to acquire 100% interest in a health product manufacturer for an aggregate consideration of approximately $8.7 million (RMB 56 million), consisting of approximately $4.7 million (RMB 30 million) in cash and shares of the Company’s common stock valued at approximately $4.0 million (RMB 26 million), the acquisition is in final stage and the Company is reviewing the draft of shares transfer agreement. The acquisition was yet to complete by September 30, 2016.

Note 4 – LOAN RECEIVABLES

In November 2012, the Company advanced approximately $9.2 million (RMB 60 million) to a third party as a commercial loan, interest bearing at 13% per annum. The principal and interest were originally to be repaid on December 31, 2013. In 2013, the term of loan was extended to June 30, 2014. In 2014, the term of loan was further extended to December 31, 2015.

No interest has been recognized for the nine months ended September 30, 2016 as the Company recognized full impairment loss on loan receivables in 2015 as the Company has determined the borrower is insolvent.

Note 5 - SHORT-TERM BANK LOANS

Short-term bank loans consisted of the followings:

		Balance as at
Inception date	Details	September 30, 2016			December 31, 2015
May 26, 2014	RMB 20 million, one year term loan, annual interest rate at 7.80%. During the six months ended June 30, 2016, the Company paid interest of RMB 0.3 million. As of September 30, 2016, the Company had cumulatively repaid RMB 3.8 million and recorded accrued interest expenses of RMB 1.6 million.		$	2,422,213		$	2,773,199

The loan is secured by (i) personal guarantee executed by a major shareholder of the Company; (ii) pledge of the Company’s buildings and land use right with carrying amount of approximately $3.4 million as of September 30, 2016 and December 31, 2015 (Note 2); and the guarantee executed by Shaanxi Biostar. As of September 30, 2016 and December 31, 2015, the short-term bank loan is due on demand due to violation of loan covenants. As of November18, 2016, the bank is reviewing the application of the extension of the outstanding loan balance.

F-14

Note 6 – STOCKHOLDERS’ EQUITY

(a) Common stock

As of September 30, 2016 and December 31, 2015, the Company has 100,000,000 shares of common stock authorized, 2,210,913 shares issued and outstanding at par value of $0.001 per share.

On February 4, 2016, the Company effectuated a one-for-seven reverse split of its common stock; the Company’s stockholder’s equity, information on number of shares and loss per share has been retroactively restated to the first period presented.

(b) Warrants

In connection with a public offering completed during the year ended December 31, 2014, the Company issued warrants to purchase an aggregate of 94,286 shares of common stock with a per share exercise price of $22.61. Additionally, the Company issued warrants to the placement agents to purchase 14,142 shares of common stock in the aggregate on the same terms as the warrants sold in the offering. The warrants are exercisable immediately as of the date of issuance and expiring three years from the date of issuance.

In accordance with the Company’s stated accounting policy in Note 2, the warrants are initially recognized as a derivative liability at fair value at grant date. Accordingly, an amount $960,894, representing the full fair value of the warrants was recognized. As of September 30, 2016, the carrying amount of the warrant was $12,703, being its fair value. For the years ended December 31, 2015 and 2014, a fair value adjustment of $324,093 and $577,599 reduced the carrying value of warrants was made and recorded as a gain in the Consolidated Statements of Operations and Comprehensive Income. The fair value adjustment for the nine months ended September 30, 2016 was a gain of $46,499.

As of September 30, 2016 and December 31, 2015, the Company has 108,428 warrants outstanding, with weighted average exercise price of $22.61.

The following table summarizes the Company’s outstanding warrants as of September 30, 2016 and December 31, 2015.

			Outstanding as at,
Expiry date	Exercise Price		September 30, 2016		December 31, 2015
March 12, 2017		22.61		108,428		108,428

(c) Stock Options

The following tables summarize activities for the Company’s options for the nine months ended September 30, 2016.

				Weighted Average
	Number of options			Exercise Price ($)		Remaining Life (years)
Balance, December 31, 2015		6,762			26.39		0.54
Expires		(3,333	)		41.37		-
Balance, September 30, 2016		3,429			11.76		0.45
Vested and exercisable as at September 30, 2016		3,429			11.76		0.45

As of September 30, 2016, there was no unrecognized compensation cost related to outstanding stock options, and the intrinsic value was close to zero because the exercise price was out-of-the-money.

Note 7 - INCOME TAXES

The Company was incorporated in the United States of America (“USA”) and has operations in one tax jurisdiction, i.e. the PRC. The Company generated substantially all of its net income from its operations in the PRC for the nine months ended September 30, 2016 and 2015, and has recorded income tax (benefits)/provision for the periods.

F-15

Uncertain Tax Positions

Interest associated with unrecognized tax benefits are classified as income tax, and penalties are classified in selling, general and administrative expenses in the statements of operations.  For the nine months ended September 30, 2016 and 2015, the Company had no unrecognized tax benefits and related interest and penalties expenses.  Currently, the Company is not subject to examination by major tax jurisdictions.

Note 8 - STATUTORY RESERVES

The Company’s subsidiaries and VIE in the PRC are required to make appropriations to certain non-distributable reserve funds. In accordance with the laws and regulations applicable to China’s foreign investment enterprises and with China’s Company Laws, an enterprise’s income, after the payment of the PRC income taxes, must be allocated to the statutory surplus reserves. The proportion of allocation for reserves is 10 percent of the profit after tax to the surplus reserve fund, and the cumulative amount shall not exceed 50 percent of registered capital.

Use of the statutory reserve fund is restricted to set offs against losses, expansion of production and operation or increase in the registered capital of a company. Use of the statutory public welfare fund is restricted to the capital expenditures for the collective welfare of employees. These reserves are not transferable to the Company in the form of cash dividends, loans or advances. These reserves are therefore not available for distribution except in liquidation. As of September 30, 2016 and December 31, 2015, the Company’s VIE had allocated approximately $7.4 million to these non-distributable reserve funds.

Note 9 - LOSS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share of common stock:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Basic loss per share:
Numerator:
Net loss used in computing basic earnings per share	$	(1,563,671	)	$	(1,254,753	)	$	(9,086,460	)	$	(1,907,284	)
Denominator:
Weighted average common shares outstanding		2,210,913			2,210,913			2,210,913			2,210,913
Basic loss per share	$	(0.71	)	$	(0.57	)	$	(4.11	)	$	(0.86	)
Diluted loss per share:
Numerator:
Net loss used in computing diluted earnings per share	$	(1,563,671	)	$	(1,254,753	)	$	(9,086,460	)	$	(1,907,284	)
Denominator:
Weighted average common shares outstanding		2,210,913			2,210,913			2,210,913			2,210,913
Diluted (loss) earnings per share	$	(0.71	)	$	(0.57	)	$	(4.11	)	$	(0.86	)

Dilutive securities having an anti-dilutive effect on diluted (loss) earnings per share are excluded from the calculation.

In accordance to ASC-260-10-50-1(c), for the three and nine months ended September 30, 2016, the Company, using the treasury stock method, determined that both the outstanding options and warrants would have been anti-dilutive if included in the denominator of the Company’s dilutive loss and earnings per share calculation because they were both out of the money. Holders of either securities would not have exercised the rights under these securities; accordingly, the options and warrants have been excluded from the loss and earnings per share calculation.  Details of the attributes, such a strike price and time to maturity of the options and warrants are detailed in “Note 6 Equity”.

F-16

Note 10 - OTHER COMPREHENSIVE INCOME

Balance of related after-tax components comprising accumulated other comprehensive income included in stockholders’ equity as of September 30, 2016 and December 31, 2015 were as follows:

	September30, 2016			December 31,2015
Accumulated other comprehensive income, beginning of period	$	3,434,348		$	6,391,998
Change in cumulative translation adjustment		(1,152,031	)		(2,957,650	)
Accumulated other comprehensive income, end of period	$	2,282,317		$	3,434,348

Note 11 - COMMITMENTS

	Total capital payment commitment		September 30, 2016		December 31, 2015
a) Three agreements with certain research institutes to conduct clinical trials for two new and one existing drugs.	$	2.0	$	0.8	$	0.8
b) In December 2014, the Company signed a letter of intent to acquire 100% interest in a company in the PRC, which is principally engaged in supply of raw materials to produce health product, for an aggregate consideration of approximately $12.3 million (RMB 82 million) in cash.		12.3		0.2		0.2
c) In November 2013, the Company signed a letter of intent to acquire 100% interest in a health product manufacturer for an aggregate consideration of approximately $8.7 million (RMB 56 million), consisting of approximately $4.7 million (RMB 30 million) in cash and shares of the Company’s common stock valued at approximately $4.0 million (RMB 26 million), subject to the completion of a due diligence report and certain conditions set out in the letter of intent being met.		8.7		5.1		4.9
Total capital payment commitment			$	6.1	$	5.9

In addition, on September 22, 2016, the Company entered into an Engagement Letter Agreement (the “Engagement Letter Agreement”) with FT Global Capital, Inc. pursuant to which FT Global Capital, Inc. agreed to act as the Company’s exclusive placement agent on a “best efforts” basis in connection with the Offering as set out in Note 14. The Placement Agent will be entitled to a shared cash fee of 8% of the gross proceeds paid to the Company for the securities the Company sells in the Offering.  Additionally, the Company will issue to the Placement Agent warrants (“Placement Agent Warrants”) to purchase 22,500 shares of Company common stock on substantially the same terms as the warrants issued pursuant to the Purchase Agreement. In connection with the offering, the Company agreed to indemnify the Placement Agents against certain liabilities under the Securities Act of 1933.

Note 12-SEGMENT INFORMATION

For the nine months ended September 30, 2016 and 2015, all revenues of the Company represented the net sales of pharmaceutical products. No financial information by business segment is presented. Furthermore, as all revenues are derived from the PRC, no geographic information by geographical segment is presented. All tangible and intangible assets are located in the PRC.

Note 13–RISKS CONCENTRATION

For the nine months ended September 30, 2016, two customers accounted for 100% of the Company’s total revenue. The loss of any of these customers could have a material adverse effect on the Company’s financial position and results of operations.

The following table illustrates the Company’s risks concentration:

Sales risks concentration
	Percentage of total sales during the
Customer	Nine Months Ended September 30,
	2016			2015
A		0	%		48	%
B		100	%		12	%
Total risks concentration		100	%		60	%

F-17

Note 14– SUBSEQUENT EVENTS

On October 11, 2016, the Company and certain institutional investors entered into a securities purchase agreement (the “Purchase Agreement”) in connection with an offering (“Offering”) pursuant to which the Company agreed to sell, and the investors agreed to purchase 425,000 shares of the Company’s common stock and warrants to purchase up to 212,500 shares of the Company’s common stock, for aggregate gross proceeds, before deducting fees to the placement agent and other estimated offering expenses payable by the Company, of approximately $1.91 million.  The warrants are exercisable beginning six months and a day after the closing of this offering and expire three and a half years from the date of issuance at an exercise price of $5.55 per share.  The exercise price and number of shares underlying the warrants are subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. The offering closed on October 17, 2016.  In connection with the offering, the Company’s outstanding warrants issued during the year ended December 31, 2014, were adjusted, whereby the per share exercise price was modified from $22.61 to $3.11.

F-18

Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with our financial statements and the notes thereto which appear elsewhere in this report. The results shown herein are not necessarily indicative of the results to be expected in any future periods. This discussion contains forward-looking statements based on current expectations, which involve uncertainties. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “predict,” “potential,” “continue,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” or the negative of these terms or other comparable terminology. All forward-looking statements included in this document are based on information available to the management on the date hereof.  Actual results and the timing of events could differ materially from the forward-looking statements as a result of a number of factors. Readers should also carefully review factors set forth in other reports or documents that we file from time to time with the Securities and Exchange Commission.

You should read the following discussion and analysis in conjunction with our unaudited financial statements contained in this report as well as the audited financial statements, “Management’s Discussion and Analysis of Financial Condition and Results of Operation’s and Risk Factors” contained in our Annual Report on Form 10-K, for the fiscal year ended December 31, 2015 and the Company’s subsequent public filings.  We undertake no obligation and do not intend to update, revise or otherwise publicly release any revisions to our forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of any unanticipated events.

Overview

Biostar Pharmaceuticals, Inc. (“we”, the “Company” or “Biostar”) was incorporated on March 27, 2007 in the State of Maryland. Our business operation is conducted in China primarily through our variable interest entity (“VIE”), Shaanxi Aoxing Pharmaceutical Co., Ltd. (“Aoxing Pharmaceutical”), which we control through contractual arrangements between Aoxing Pharmaceutical and our wholly owned subsidiary, Shaanxi Biostar Biotech Ltd. (“Shaanxi Biostar”). Shaanxi Weinan owns 99 drug approvals.

Prior to suspension of our production in order to conduct maintenance of such lines to renew our GMP certificates (as discussed below), we manufactured and sold twelve over-the-counter (“OTC”) medications and seventeen prescription-based pharmaceuticals which were sold and distributed in over 25 provinces and provincial-level cities throughout China.

When we sell our equity or borrow funds, we expect the proceeds will be forwarded to Aoxing Pharmaceutical and accounted for as a loan to Aoxing Pharmaceutical and eliminated during consolidation. If we borrow funds, we expect to be the primary obligor on any debt.

Neither Biostar nor Shaanxi Biostar has any operations or plans to have any operations in the future other than acting as a holding company and management company for Aoxing Pharmaceutical and raising capital for its operations. However, we reserve the right to change our operating plans regarding Biostar and Shaanxi Biostar.

October 2016 Registered Offering

On October 11, 2016, the Company and certain institutional investors entered into a securities purchase agreement (the “Purchase Agreement”) in connection with an offering (“Offering”) pursuant to which the Company agreed to sell, and the investors agreed to purchase 425,000 shares of the Company’s common stock and warrants to purchase up to 212,500 shares of the Company’s common stock, for aggregate gross proceeds, before deducting fees to the placement agent and other estimated offering expenses payable by the Company, of approximately $1.91 million. The warrants are exercisable beginning six months and a day after the closing of this offering and expire three and a half years from the date of issuance at an exercise price of $5.55 per share. The exercise price and number of shares underlying the warrants are subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions.

On September 22, 2016, the Company entered into an Engagement Letter Agreement (the “Engagement Letter Agreement”) with FT Global Capital, Inc. pursuant to which FT Global Capital, Inc. agreed to act as the Company’s exclusive placement agent on a “best efforts” basis in connection with this offering. The Placement Agent will be entitled to a shared cash fee of 8% of the gross proceeds paid to the Company for the securities the Company sells in this Offering.  Additionally, the Company will issue to the Placement Agent warrants (“Placement Agent Warrants”) to purchase 22,500 shares of Company common stock on substantially the same terms as the warrants issued pursuant to the Purchase Agreement. In connection with this offering, the Company agreed to indemnify the Placement Agents against certain liabilities under the Securities Act of 1933. This offering closed on October 17, 2016.

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Results of Operations

Net Sales

	Three Months Ended September 30,											%
	2016					2015						change
Aoxing Pharmaceutical Products			%						%
Xin Aoxing Oleanolic Acid Capsule	$	-		0.0	%	$	80,100			1.9	%		(100.0	%)
Other Aoxing Pharmaceutical products		-		0.0	%		4,472			0.1	%		(100.0	%)
Aoxing new products		-		0.0	%		8,337			0.2	%		(100.0	%)
Sub-total	$	-		0.0	%	$	92,909			2.2	%		(100.0	%)
Shaanxi Weinan Products		644,933		100.0	%		1,295,589			30.8	%		(50.2	%)
Hospital products		-		0.0	%		3,142,696			74.7	%		(100.0	%)
Subtotal	$	644,933		100.0	%	$	4,531,194			107.7	%		(85.8	%)
Less provision for sales discount	$	-		0.0	%	$	(324,644	)		(7.7	%)		(100.0	%)
Net sales	$	644,933		100.0	%	$	4,206,550			100	%		(84.7	%)

For the three months ended September 30, 2016, total net sales decreased by approximately $3.6 million or 84.7% as compared to the same period in 2015.  There were no sales for Aoxing Pharmaceutical Products and hospital products as the Company has temporarily stopped production for the maintenance of its production lines in order to renew its GMP certificates.  The Company expects to gain renewal of its GMP certificates in December of 2016, at which point the Company intends to resume production. If the Company is unable to resume production, then the Company may become insolvent.

Sales of Shaanxi Weinan’s products decreased during the three months ended September 30, 2016 as compared to the same period in 2015 by $0.7 million or 50.2%.  The Company’s limited working capital has led to limited production of Shaanxi Weinan products.

	Nine Months Ended September 30,											%
	2016					2015						change
Aoxing Pharmaceutical Products			%						%
Xin Aoxing Oleanolic Acid Capsule	$	-		0.0	%	$	9,192,522			36.3	%		(100.0	%)
*Other Aoxing Pharmaceutical products		-		0.0	%		1,162,557			4.6	%		(100.0	%)
Aoxing new products				0.0	%		1,967,979			7.8	%		(100.0	%)
Sub-total		-		0.0	%		12,323,088			48.7	%		(100.0	%)
Shaanxi Weinan Products		2,066,698		100.0	%		1,875,908			7.4	%		10.2	%
Hospital products		-		0.0	%		12,553,432			49.6	%		(100.0	%)
Subtotal	$	2,066,698		100.0	%	$	26,752,428			105.7	%		(92.3	%)
Less provision for sales discount	$	-		0.0	%	$	(1,460,897	)		(5.7	%)		(100.0	%)
Net sales	$	2,066,698		100.0	%	$	25,291,531			100	%		(91.8	%)

For the nine months ended September 30, 2016, total net sales decreased by approximately $23.2 million or 91.8% as compared to the same period in 2015.  There were no sales for Aoxing Pharmaceutical Products and hospital products as the Company has temporarily stopped production for the maintenance of its production lines in order to renew its GMP certificates. by The Company expects to gain renewal of its GMP certificates in December of 2016, at which point the Company intends to resume production. If the Company is unable to resume production, then the Company may become insolvent.

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Sales of Shaanxi Weinan’s products increased during the nine months ended September 30, 2016 as compared to the same period in 2015 by $0.2 million or 10.2%. The sales volume has increased when compared to the normal sales volume for nine months ended September 30, 2016 as Shaanxi Weinan has just received the renewed GMP certificate in June 2015.

Cost of sales

	Three Months Ended September 30,										%
	2016					2015					change
Aoxing Pharmaceutical Products			%					%
Xin Aoxing Oleanolic Acid Capsule	$	-		0.0	%	$	8,531		0.3	%		(100.0	%)
Other Aoxing Pharmaceutical products		-		0.0	%		3,123		0.1	%		(100.0	%)
Aoxing new products		-		0.0	%		6,309		0.2	%		(100.0	%)
Sub-total	$	-		0.0	%	$	17,963		0.6	%		(100.0	%)
Shaanxi Weinan Products		336,870		100.0	%		678,820		20.0	%		(50.4	%)
Hospital products		-		0.0	%		2,693,656		79.4	%		(100.0	%)
Total cost of sales	$	336,870		100.0	%	$	3,390,439		100.0	%		(90.1	%)

For the three months ended September 30, 2016, total cost of sales decreased by approximately $3.1 million or 90.1%, as compared to the same period in 2015.  This decrease is mainly due to the proportional decrease in sales volume.

	Nine Months Ended September 30,										%
	2016					2015					change
Aoxing Pharmaceutical Products			%					%
Xin Aoxing Oleanolic Acid Capsule	$	-		0.0	%	$	1,589,505		10.6	%		(100	%)
Other Aoxing Pharmaceutical products		-		0.0	%		839,730		5.6	%		(100	%)
Aoxing new products		-		0.0			1,508,801		10.1	%		(100	%)
Sub-total	$	-		0.0	%	$	3,938,036		26.3	%		(100	%)
Shaanxi Weinan Products		1,114,777		100.0	%		1,082,155		7.2	%		3	%
Hospital products		-		0.0	%		9,935,300		66.5	%		(100	%)
Total cost of sales	$	1,114,777		100.0	%	$	14,955,491		100.0	%		(92.5	%)

 For the nine months ended September 30, 2016, total cost of sales decreased by approximately $13.8 million or 92.5%, as compared to the same period in 2015.  This decrease is mainly due to the proportional decrease in sales volume.

Gross Profit

	Three Months Ended September 30,
	2016					2015
Aoxing Pharmaceutical Products	Gross Profit		Product Gross Margin %			Gross Profit			Product Gross Margin %
Xin Aoxing Oleanolic Acid Capsule	$	-		-	%	$	71,569			89.3	%
Other Aoxing Pharmaceutical products		-		-	%		1,349			30.2	%
Aoxing new product		-		-	%		2,028			24.3	%
Sub-total	$	-		-	%	$	74,946			80.7	%
Shaanxi Weinan Products	$	308,063		48	%		616,769			47.6	%
Hospital products		-		-	%		449,040			14.3	%
Subtotal	$	-		-	%	$	1,140,755			25.2	%
Less provision for sales discount	$	-		-	%	$	(324,644	)		(5.8	%)
Net sales	$	308,063		48	%	$	816,111			19.4	%

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Gross profit decreased by approximately $0.5 million or 62.3% for the three months ended September 30, 2016, as compared to the same period in 2015. The decrease in gross profit was due primarily to the decrease in sales volume.

The overall gross profit margin increased to 48% for the three months ended September 30, 2016 from 19.4% for the same period in 2015. The increase in gross profit margin during the period in 2016, as compared to the same period in 2015 was the result of the exceptional low profit margin in Shaanxi Weinan products during the temporary suspension of production facilities for applying the renewal of GMP in 2015.

	Nine Months Ended September 30,
	2016					2015
Aoxing Pharmaceutical Products	Gross Profit		Product Gross Margin %			Gross Profit			Product Gross Margin %
Xin Aoxing Oleanolic Acid Capsule	$	-		-	%	$	7,603,047			82.7	%
Other Aoxing Pharmaceutical products		-		-	%		322,827			27.8	%
Aoxing new product		-		-	%		459,178			23.3	%
Sub-total	$	-	-		%	$	8,385,052			68.0	%
Shaanxi Weinan Products		951,921		46	%		793,753			42.3	%
Hospital products		-		-	%		2,618,132			20.9	%
Subtotal	$	-		-	%	$	11,796,937			44.1	%
Less provision for sales discount	$	-		-	%	$	(1,460,897	)		(3.2	%)
Net sales	$	951,921		46	%	$	10,366,040			40.9	%

Gross profit decreased by approximately $9.4 million or 90.8% for the nine months ended September 30, 2016, as compared to the same period in 2015. The decrease in gross profit was due primarily to the decrease in sales volume.

The overall gross profit margin maintained at approximately the same level for the same period in 2015.

Operating Expenses

	Three months ended September 30,
	2016					2015
	Operating expenses		% of net sales			Operating expenses		% of net sales			% change
Advertising expenses	$	-		0.0	%	$	-		0.0	%		0.0	%
Selling expenses		290,924		45.1	%		835,412		19.9	%		(65.2	%)
General and administrative expenses		488,136		75.7	%		682,972		16.2	%		(28.5	%)
Provision for doubtful debt		1,491,002		231.2	%		-		0.0	%		100	%
Research and development expenses		-		0.0	%		998,746		23.7	%		(100	%)
Total operating expenses	$	2,270,062		352.0	%	$	2,517,130		59.8	%		(9.8	%)

Total operating expenses decreased by approximately $0.2 million or 9.8% for the three months ended September 30, 2016, as compared to the same period last year.

In anticipation of reduced sales volume as result of decreased production capacity, the Company significantly reduced its advertising and research activities during the three months ended September 30, 2016; however, as a result of the future roll-out of the Company’s new “Easy Breathing” nasal product, management is currently formulating its budget for future advertising and research spend. 

Selling expenses consist mostly of salesman salaries, commission and other selling expenses.  Overall decrease was approximately $0.5 million or 65.2%.  The Company’s accrued selling expenses are correlated with the Company’s sales; accordingly, with the reduced sales as function of the maintenance of the production line, the Company’s selling expenses decreased as well.

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General and administrative expenses consist of salaries and wages, amortization and depreciation, stock-based compensation and other general and administrative expenses. During the three months ended September 30, 2016, general and administrative expenses decreased by $0.2 million or 28.5% due to the decrease in staff salary and welfare.

	Nine months ended September 30,
	2016					2015
	Operating expenses		% of net sales			Operating expenses		% of net sales			% change
Advertising expenses	$	-		0.0	%	$	3,838,912		15.2	%		(100	%)
Selling expenses		904,037		43.7	%		4,445,443		17.6	%		(79.7	%)
General and administrative expenses		1,717,992		83.1	%		2,672,351		10.6	%		(35.7	%)
Provision for doubtful debt		7,820,713		378.4	%		-		0.0	%		100	%
Research and development expenses		-		0.0	%		3,043,535		12.0	%		(100	%)
Total operating expenses	$	10,442,742		505.2	%	$	14,000,241		55.4	%		(25.4	%)

Total operating expenses decreased by approximately $3.6 million or 25.4% for the nine months ended September 30, 2016, as compared to the same period last year.

In anticipation of reduced sales volume as result of decreased production capacity, the Company significantly reduced its advertising and research activities during the first nine months ended September 30, 2016; however, as a result of the future roll-out of the Company’s new “Easy Breathing” nasal product, management is currently formulating its budget for future advertising and research spend.

Selling expenses consist mostly of salesman salaries, commission and other selling expenses.  Overall decrease was approximately $3.5 million or 79.7%.  The Company’s accrued selling expenses are correlated with the Company’s sales; accordingly, with the reduced sales as function of the maintenance of the production line, the Company’s selling expenses decreased as well.

General and administrative expenses consist of salaries and wages, amortization and depreciation, stock-based compensation and other general and administrative expenses. During the nine months ended September 30, 2016, general and administrative expenses decreased by $1.0 million or 35.7% due to thedecrease in staff salary and welfare.

 Provision for Income Taxes

For the three and nine months ended September 30, 2016 and 2015, we had no income tax expense nor income tax benefit. We are subject to the uniform corporate income tax rate of 25% in China. The calculation of effective tax rate includes the operating results of all our subsidiaries and the U.S. parent company.

Liquidity and Capital Resources

As of September 30, 2016, we had cash and cash equivalents of approximately $0.7 million and net working capital of approximately $0.8 million. Collection of receivables and lower production capacity from preparation for further GMP renewal certification at our Aoxing facility led to weak results in generating cash flows during the fiscal year. We have been working with the bank to extend the outstanding loans, trying to collect as much account receivables as possible, and restoring production volumes to regular levels; however, as of the time of this filing, we cannot provide any assurance that we will be able to successfully extend our loans and restore all production to regular volumes. The Company’s short-term bank loan is due on demand and the Company is in negotiations to extend this loan. As of September 30, 2016, cash and cash equivalents were mainly denominated in RMB and were placed with banks in the PRC.  These cash and cash equivalents may not be freely convertible into foreign currencies and the remittance of these funds out of the PRC may be subjected to exchange control restrictions imposed by the PRC government.

On an on-going basis, we take steps to identify and plan our needs for liquidity and capital resources, to fund our operations and day to day business operations. Our future capital expenditures will include, among others, expanding product lines, research and development capabilities, and making acquisitions as deemed appropriate.

Based on our current plans for the next twelve months, we anticipate that the sales of the Company’s pharmaceutical products in Shaanxi Weinan after having recently gained renewal of its GMP certificates, as well as proceeds of the most recently completed capital raise in October 2016 will be the primary organic source of funds for future operating activities in 2016 and beyond. The Company will also make substantial efforts to collect outstanding accounts and other receivables to meet its debt obligations; we may also try to procure bank borrowing, if available, as well as capital raises through public or private offerings. There is no assurance that we will find such funding on acceptable terms, if at all. The accompanying consolidated financial statements do not include any adjustments that might result from these uncertainties.

We anticipate that the new topical health product called “Easy Breathing” will be launched for sale in November 2016. The product was developed by the Company’s research and development team over the past 3 years. The product is designed to have effects of relieving stuffy nose, inhibiting nasal bacteria and viruses, and mitigating effects on the inflammation of nasal mucosa. It will be manufactured, distributed and sold in China. We do not expect any substantial revenue from sales of this product in 2016.

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Net cash provided by operating activities increased by $1.1 million when comparing the same level for the same period.

Net cash used in financing activities for the nine months ended September 30, 2016 was approximately $0.3 million which was the result of the Company’s repayment of short term bank borrowings. 

Critical Accounting Policies

We believe the following critical accounting policies, among others, affect management’s more significant judgments and estimates used in the preparation of the financial statements:

Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. The allowance for doubtful accounts is based on specific identification of customer accounts and management’s best estimate of the likelihood of potential loss, taking into account such factors as the financial condition and payment history of major customers. Management evaluates the collectability of the receivables at least quarterly. If the financial condition of a customer was to deteriorate further, resulting in an impairment of their ability to make payments, additional allowances may be required.  Such differences could be material and could significantly impact cash flows from operating activities.

The following are steps the Company takes in collecting accounts receivable:

Step 1: After the payment term has been exceeded, the Company stops taking orders from the delinquent customer and allows the responsible sales person three to six months to collect the accounts receivable. Most of the accounts receivable will be collected in this step because the sales person’s compensation is tied to sales receipts. The Company typically offers is 90 to 120 days credit terms to its customers.

Step 2: If the sales person’s collection efforts are not successful, the Company hires a collection agent and allows the agent another three to six months to collect the accounts receivable.

Step 3: If the collection agent’s efforts are not successful, the Company will commence legal action to collect the accounts receivable.

Our policies for writing off the accounts receivable are as follows:

1. If after taking legal action, it appears that an accounts receivable is not likely to become collectible, such accounts receivable will be written off if it is more than two years old.

2. If during the collection period, the customer provides bankruptcy or other insolvency documentation, the corresponding accounts receivable will be written off.

3. If we are no longer able to locate a particular customer in order for us to take any collection or legal actions, the accounts receivable for such customer will be written off if it is more than two years old.

Inventory

We write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand, future pricing and market conditions. If actual future demands, future pricing or market conditions are less favorable than those projected by management, additional inventory write-downs may be required and the differences could be material. Such differences might significantly impact cash flows from operating activities.

Property and Equipment

Property and equipment are stated at historical cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Judgment is required to determine the estimated useful lives of assets, especially for computer equipment, including determining how long existing equipment can function and when new technologies will be introduced at cost-effective price points to replace existing equipment. Changes in these estimates and assumptions could materially impact the financial position and results of operations.

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Stock-Based Compensation

Our stock-based compensation expense is estimated at the grant date based on the award’s fair value as calculated by the Black-Scholes-Merton (BSM) option-pricing model for share options and Binominal model for warrants and is recognized as expense over the requisite service period. The BSM model and Binominal model requires various highly judgmental assumptions including expected volatility and option life. Changes in these assumptions could materially impact the financial position and results of operations.

Valuation of Intangibles

From time to time, we acquire intangible assets that are beneficial to our product development processes. Management periodically evaluates the carrying value of intangibles, including the related amortization periods. In evaluating acquired intangible assets, management determines whether there has been impairment by comparing the anticipated undiscounted cash flows from the operation and eventual disposition of the product line with its carrying value. If the undiscounted cash flows are less than the carrying value, the amount of the impairment, if any, will be determined by comparing the carrying value of each intangible asset with its fair value.  Fair value is generally based on either a discounted cash flows analysis or market analysis. Future operating income is based on various assumptions, including regulatory approvals, patents being granted, and the type and nature of competing products. If regulatory approvals or patents are not obtained or are substantially delayed, or other competing technologies are developed and obtain general market acceptance or market conditions otherwise change, our intangibles may have a substantially reduced value, which could be material.

Research and Development

The remuneration of the Company’s research and development staff, materials used in internal research and development activities, and payments made to third parties in connection with collaborative research and development arrangements, are all expensed as incurred.  Where the Company makes a payment to a third party to acquire the right to use a product formula which has received regulatory approval, that payment is accounted for as the acquisition of a license or patent and is capitalized as an intangible asset and amortized over the shorter of the remaining license period or patent life.

Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, income tax expense is recognized for the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities and for operating losses and tax credit carry-forwards. Management must make assumptions, judgments and estimates to determine the current provision for income taxes and the deferred tax assets and liabilities and any valuation allowance to be recorded against a deferred tax asset. Management’s judgments, assumptions and estimates relative to the current provision for income tax take into account current tax laws, management’s interpretation of current tax laws and possible outcomes of current and future audits conducted by foreign and domestic tax authorities. Changes in tax law or management’s interpretation of tax laws and the resolution of current and future tax audits could significantly impact the amounts provided for income taxes in the financial statements. Management’s assumptions, judgments and estimates relative to the value of a deferred tax asset take into account predictions of the amount and category of future taxable income, such as income from operations. Actual operating results and the underlying amount and category of income in future years could render management’s current assumptions, judgments and estimates of recoverable net deferred taxes inaccurate. Any of the assumptions, judgments and estimates mentioned above could cause our actual income tax obligations to differ from the estimates, thus materially impact the financial position and results of operations.

Foreign Currency

Our functional currency is the U.S. dollar, and our subsidiary and our VIE in China use their respective local currencies as their functional currencies, i.e. the RMB. An entity’s functional currency is the currency of the primary economic environment in which the entity operates. Management must use judgment in determining an entity’s functional currency, assessing economic factors including cash flow, sales price, sales market, expense, financing and inter-company transactions and arrangements. The impact from exchange rate changes related to transactions denominated in currencies other than the functional currency is recorded as a gain and loss in the statements of operations, while the impact from exchange rate changes related to translating a foreign entity’s financial statements from the functional currency to its reporting currency, the U.S. dollar, is disclosed and accumulated in a separate component under the equity section of the balance sheets. Different judgments or assumptions resulting in a change of functional currency may materially impact our financial position and results of operations.

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Business Combinations

Business combinations are accounted for under the acquisition method of accounting in accordance with ASC 805, Business Combinations. Under the acquisition method the acquiring entity in a business combination recognizes 100 percent of the acquired assets and assumed liabilities, regardless of the percentage owned, at their estimated fair values as of the date of acquisition. Any excess of the purchase price over the fair value of net assets and other identifiable intangible assets acquired is recorded as goodwill. To the extent the fair value of net assets acquired, including other identifiable assets, exceed the purchase price, a bargain purchase gain is recognized. Assets acquired and liabilities assumed from contingencies must also be recognized at fair value, if the fair value can be determined during the measurement period. Results of operations of an acquired business are included in the statement of earnings from the date of acquisition. Acquisition-related costs, including conversion and restructuring charges, are expensed as incurred.

Contractual Obligations

The following table sets forth our contractual obligations as of September 30, 2016:

	Payments due by period ($ million)
	Total		Within 1 year		1-3 years		3-5 years		>5 years
Research and development contracts		0.8		0.8		-		-		-
Payment for intended acquisition of a health product material supplier		0.2		0.2		-		-		-
Payment for intended acquisition of a health product manufacturer		5.1		5.1		-		-		-
Total contractual obligations	$	6.1		6.1	$	-		-		-

Inflation

Management believes that inflation has not had a material effect on our results of operations.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements, as defined in Regulation S-K Section 303(a)(4).

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

We are a “smaller reporting company” as defined by Regulations S-K and as such, are not required to provide this information.

Item 4.    Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q (the “Evaluation Date”), under the supervision and with the participation of our management, including the Chief Executive Officer and Interim Chief Financial Officer (the “Certifying Officers”), have evaluated the effectiveness of our disclosure controls and procedures. Based on that evaluation, our Certifying Officers have concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective such that the material information required to be filed with our SEC reports is recorded, processed, summarized, and reported within the required time periods specified in the SEC rules and forms.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are likely to materially affect, our internal control over financial reporting. 

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PART II - OTHER INFORMATION

Item 1.    Legal Proceedings.

From time to time, the Company is involved in legal matters arising in the ordinary course of business. Except as set forth in the updated disclosures below, there were no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2015. The Company undertakes no obligation to update or revise the information set forth herein, whether as a result of new information, changed circumstances or future events or for any other reason.

To the best of the Company’s present understanding, on September 1, 2015, Shaanxi Aoxing Biostar Biotech Ltd. was informed by the People’s Court of Shaanxi Province (the “Shaanxi Court”) that its properties, consisting of three residential properties valued at $0.54 million (RMB 3.3 million) had been transferred to Mr. Lianhe Wang, an individual (not affiliated with the Company) to settle an outstanding personal loan to Ronghua Wang, the Company’s Chairman and CEO, in the amount of approximately RMB 5.7 million (USD$0.9 million). It is the Company’s understanding that because the corporate seal of Shaanxi Biostar was affixed to the loan agreement between the foregoing parties (which was done at the request of the lender for the sole purpose of Shaanxi Biostar’s acknowledging the transaction that involved its Chief Executive Officer, and not for any guarantee, security and/or undertaking or other similar purpose), the Shaanxi Court deemed Shaanxi Biostar as a co-borrower under this loan arrangement. The foregoing debt was personal debt of Ronghua Wang and no assets of Shaanxi Aoxing Biostar Biotech Ltd. were pledged to secure Ronghua Wang’s obligations in connection with such personal loan. Ronghua Wang has not borrowed money from the Company; nor has the Company obtained any proceeds from, guaranteed or secured any of his loans. Subsequently, Shaanxi Biostar was informed by the Shaanxi Court that as a result of Ronghua Wang’s inability to service the personal debt in question, Shaanxi Biostar’s properties (3 properties totaling 504 sq. meters), valued at RMB 3.3 million (US$0.54 million) had been transferred to Lianhe Wang to satisfy the outstanding debt. Shaanxi Biostar agreed to the foregoing arrangement to avoid further legal costs; Ronghua Wang agreed to compensate the Company for any loss arising from this legal matter, with such compensation to be paid no later than September 2016. The Company understands that with respect to the properties transferred to Wang Lianhe, Wang Lianhe is willing to return the properties to Shaanxi Biostar if Ronghua Wang satisfies and discharges his personal loan obligations. Ronghua Wang has repaid in full the $0.5 million (RMB 3.3 million) to the Company as compensation for the loss of properties and there are no any material effects on the Company’s day-to-day operations as a result of the foregoing events.

To the best of the Company’s understanding, in May 2015, a bank account of Shaanxi Aoxing Pharmaceutical Company Limited was frozen as a result of actions by Bai Yun, an individual lender (not affiliated with the Company), in his attempt to collect the outstanding balance on the personal loan due to him from Ronghua Wang in the amount of RMB 3 million (USD$0.48 million), which personal loan was in default. The foregoing debt was personal debt of Ronghua Wang dating to 2010, which Ronghua Wang obtained to acquire a real estate parcel; no assets of Shaanxi Aoxing Pharmaceutical Company Limited were pledged to secure Ronghua Wang’s obligations in connection with such personal loan. Also, the corporate seal of Shaanxi Biostar was affixed to the loan agreement between the foregoing parties (which was done at the request of the lender for the sole purpose of Shaanxi Biostar’s acknowledging the transaction that involved its Chief Executive Officer, and not for any guarantee, security and/or undertaking or other similar purpose). As of June 2014, Wang Ronghua owed Bai Yun RMB 5.17 million (or US$0.8 million representing principal and accrued interest on the original loan. Subsequently, Ronghua Wang commenced a lawsuit against the seller of the real estate in question and, in December 2014, secured a judgment in the amount of RMB 17 million against the seller to recover the purchase price. At approximately the same time, Bai Yun initiated a legal action against Ronghua Wang to collect on the outstanding debt. The parties to the dispute engage in settlement negotiations and on January 9, 2015, the court finalized the settlement arrangement between the parties. Ronghua Wang has been attempting to collect on his judgment against the seller, but so far he has not been successful, which, in turn, resulted in his inability to honor the terms of his settlement arrangement with Bai Yun. In May 2015, Bai Yun sought to foreclose on the Company’s land and bank account to satisfy the outstanding debt and in February 2016, the court attempted to force a sale of the Company’s 2,674 sq. meter parcel which is currently idle, at an auction. In order to prevent such auction sale, Ronghua Wang paid RMB 2.5 million to Bai Yun in March 2016 which amount was applied to the outstanding debt; following this payment, Bai Yun petitioned the court to terminate the auction sale. The title of the buildings and land use rights subject of this legal matter are currently seized by the court, but have not been transferred to the lender. It is also the Company’s understanding that as of June 30, 2016, Ronghua Wang had partially repaid the outstanding balance of the loan, thus avoiding the Company’s land use rights and buildings being seized and auctioned with proceeds used to settle this debt. Ronghua Wang is in the process of resolving this matter and settling the outstanding balance on the loan; if he pays off the outstanding balance of the loan to Bai Yun, it is the Company’s understanding that the properties and land will be immediately released. As of the date of this report, the matter has not been resolved and the remaining balance owed to Bai Yun remains still outstanding; accordingly, the properties and land remain seized by the courts.

11

Item 1.    Legal Proceedings. (Cont’d)

Following Nasdaq Listing Qualifications staff’s comments on the Company’s disclosures relating to the foregoing matters set forth in its Annual Report on Form 10-K for the period ended December 31, 2015, the Company provided a full set of responses and supplemental materials for the staff’s review and consideration. There is also no assurance that Ronghua Wang will be able to repay his personal debts in full before his creditor(s) take any other further legal action. If the remaining balance is not repaid, the Company’s property and assets in question will remain in Ronghua Wang’s creditor(s)’ possession until the debt is discharged. If and to the extent such properties are not returned to the Company or the Company does not obtain timely and adequate compensation for such transfers, the Company’s business and operations may suffer adverse consequences. On October 10, 2016, the Nasdaq Listing Qualifications staff sent a follow up letter to the Company regarding the background and circumstances as well as involvement and actions by the Company’s Board of Directors regarding the use of Company assets, and internal controls governing the use of Company stamps and chops related to the legal proceedings described above. The Company provided its responses to the follow-up letter to Nasdaq on October 28, 2016 with details surrounding the legal proceedings as well as the Board involvement, or lack thereof, to the loan agreements entered into by Mr. Ronghua Wang that have resulted in the seizure of certain of the Company assets. There is no assurance that the Nasdaq staff will not continue its inquiry resulting in an action that may have adverse effects on the Company’s continued listing on the Nasdaq Stock Market.

Item 1A. Risk Factors.

Except as set forth below, there were no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2015.

There is substantial doubt as to our ability to continue as a going concern

As of September 30, 2016, we had cash of $659,359 and net working capital of $759,717. For the period ended September 30, 2016, we reported a net loss of $9,086,460 and net cash provided by operating activities of $911,057. We generated cash flow from operations even though we incurred a net loss as we collected outstanding receivables from our trade debtors, and our net loss includes certain non-cash expenses that are added back to our cash flow from operations as shown on our condensed consolidated statements of cash flows. There is no assurance that the production lines at Aoxing will resume and the renewal of GMP certificates will occur when anticipated, or even if they are renewed, we will be able to return to the production levels as anticipated. Our inability to regain our production levels as anticipated may have material adverse effects on our business, operations and financial performance, and the Company may become insolvent. In addition, as discussed elsewhere in this Report, there is no assurance that Mr. Wang will be able to repay his personal debts in full before his creditors take further legal actions. The factors discussed above raise substantial doubt as to our ability to continue as a going concern. Based on our current plans for the next twelve months, we anticipate that the sales of the Company’s pharmaceutical products in Shaanxi Weinan, after having recently gained renewal of its GMP certificates, will be the primary organic source of funds for future operating activities in 2016. However, no assurance can be given that we will have revenues sufficient to support and sustain our operations or that we would be able to obtain equity financing in the current economic environment. We intend to make substantial efforts to collect outstanding accounts and other receivables to meet its debt obligations; we may also seek bank borrowing, if available, as well as capital raises through public or private offerings. There is no assurance that we will find such funding on acceptable terms, if at all. If we are not able to secure additional funding when needed, we may have to delay, reduce the scope, or substantially curtail or, under certain dire financial circumstances, cease our operations. We also anticipate that the new topical health product called “Easy Breathing” will be launched for sale in November 2016. The product was developed by the Company’s research and development team over the past 3 years. The product is designed to have effects of relieving stuffy nose, inhibiting nasal bacteria and viruses, and mitigating effects on the inflammation of nasal mucosa. It will be manufactured, distributed and sold in China.

If we are unable to renew our GMP certificates and subsequently achieve anticipated production levels, our operations may be materially adversely affected.

The Company has experienced a substantial decrease in sales volume of all Aoxing Pharmaceutical Products in the year ended December 31, 2015 and for the nine months ended September 30, 2016. This decrease was due to Aoxing Pharmaceutical’s temporarily suspension of production to conduct maintenance of its production lines to renew its GMP certificates which is currently anticipated to be completed at the end of 2016. While our production levels of Shaanxi Weinan products helped to offset the substantial decrease in our sales volume in the most recent fiscal quarter, our sales volume continue to remain at the present decreased levels. However, there is no assurance that the production lines at Aoxing will resume as anticipated and the renewal of GMP certificates will occur when anticipated, or even if they are renewed, we will be able to return to the anticipated production levels. Our inability to regain anticipated production levels may have material adverse effects on our business, operations and financial performance, and may render the Company insolvent.

12

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.

During the nine months ended September 30, 2016, neither the Company, nor any of its affiliated purchasers repurchased any of the Company’s securities. The Company did not sell any unregistered securities during the same fiscal period.

Item 3.    Defaults upon Senior Securities.

None.

Item 4.    Mine safety Disclosures.

Not Applicable.

Item 5.    Other Information.

None.

Item 6.    Exhibits.

4.1	Form of Warrant to Purchase Shares of Common Stock (Incorporated by reference from the Company’s Current Report on Form 8-K filed with the SEC on October 12, 2016).
10.1	Securities Purchase Agreement (Incorporated by reference from the Company’s Current Report on Form 8-K filed with the SEC on October 12, 2016).
31.1	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of the Principal Executive Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of the Principal Financial Officer pursuant to U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Calculation Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Document

13

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	BIOSTAR PHARMACEUTICALS, INC. (Registrant)
Date: November 21, 2016	By:	/s/ Ronghua Wang
		Ronghua Wang, Chief Executive Officer and President (Principal Executive Officer)

Date: November 21, 2016	By:	/s/ Qinghua Liu
		Qinghua Liu, Interim Chief Financial Officer (Principal Financial and Accounting Officer)

14

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Ronghua Wang, certify that:

1. I have reviewed this Form 10-Q of Biostar Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 21, 2016

/s/ Ronghua Wang

Ronghua Wang

President, Chief Executive Officer (Principal Executive Officer)

A signed original of this written statement has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Qinghua Liu, certify that:

1. I have reviewed this Form 10-Q of Biostar Pharmaceuticals, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  November 21, 2016

/s/ Qinghua Liu

Qinghua Liu, Interim Chief Financial Officer (Principal Financial and Accounting Officer)

A signed original of this written statement has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. §1350

Pursuant to 18 U.S.C. §1350 and in connection with the Quarterly Report on Form 10-Q of Biostar Pharmaceuticals, Inc.  (the “Company”) for the fiscal period ended September 30, 2016 (the “Report”), I, Ronghua Wang, President and Chief Executive Officer of the Company, hereby certify that to the best of my knowledge and belief:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for said period.

/s/ Ronghua Wang

Ronghua Wang

President, Chief Executive Officer  (Principal Executive Officer)

Date:  November 21, 2016

A signed original of this written statement has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. §1350

Pursuant to 18 U.S.C. §1350 and in connection with the Quarterly Report on Form 10-Q of Biostar Pharmaceuticals, Inc. (the “Company”) for the fiscal period ended September 30, 2016 (the “Report”), I, Qinghua Liu, Interim Chief Financial Officer of the Company, hereby certify that to the best of my knowledge and belief:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for said period.

/s/ Qinghua Liu

Qinghua Liu

Interim Chief Financial Officer (Principal Financial and Accounting Officer)

Date:  November 21, 2016

A signed original of this written statement has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Nov. 21, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	Biostar Pharmaceuticals, Inc.
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		2,637,183
Amendment Flag	false
Entity Central Index Key	0001418133
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3

XML

CONDENSED CONSOLIDATED BALANCE SHEETS ¥ in Millions	Sep. 30, 2016 USD ($)	Dec. 31, 2015 USD ($)
Current Assets
Cash and cash equivalents	$ 659,359	$ 38,898
Accounts receivable, net	6,094,197	15,814,880
Inventories	439,596	234,660
Deposits and other receivables	2,525	2,591
Income tax recoverable	74,253	76,280
Loan receivables, net	0	0
Value-added tax recoverable	22,559	0
Total Current Assets	7,292,489	16,167,309
Non-current Assets
Deposits	15,672,054	16,099,958
Deferred tax assets, net	5,262,895	5,406,593
Property and equipment, net	6,270,436	6,810,933
Intangible assets, net	6,061,546	6,878,787
Total Non-Current Assets	33,266,931	35,196,271
Total Assets	40,559,420	51,363,580
Current Liabilities
Accounts and other payables	4,097,856	4,153,411
Short-term bank loans	2,422,213	2,773,199
Value-added tax payable	0	112,629
Warrants liability	12,703	59,202
Total Current Liabilities	6,532,772	7,098,441
Commitment and contingencies
Stockholders’ Equity
Common stock, $0.001 par value, 100,000,000 shares authorized, 2,210,913 shares issued and outstanding as of September 30, 2016 and December 31, 2015	2,210	2,210
Additional paid-in capital	30,316,774	30,316,774
Statutory reserve	7,354,413	7,354,413
Retained earnings	(5,929,066)	3,157,394
Accumulated other comprehensive income	2,282,317	3,434,348
Total Stockholders’ Equity	34,026,648	44,265,139
Total Liabilities and Stockholders’ Equity	$ 40,559,420	$ 51,363,580

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) - $ / shares	Sep. 30, 2016	Dec. 31, 2015
Common stock, par value (in Dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	2,210,913	2,210,913
Common stock, shares outstanding	2,210,913	2,210,913

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (Unaudited) ¥ in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016 USD ($) $ / shares shares	Sep. 30, 2015 USD ($) $ / shares shares	Sep. 30, 2016 USD ($) $ / shares shares	Sep. 30, 2015 USD ($) $ / shares shares
Sales, net	$ 644,933	$ 4,206,550	$ 2,066,698	$ 25,291,531
Cost of sales	336,870	3,390,439	1,114,777	14,955,491
Gross profit	308,063	816,111	951,921	10,336,040
Operating expenses:
Advertising expenses	0	0	0	3,838,912
Selling expenses	290,924	835,412	904,037	4,445,443
General and administrative expenses	488,136	682,972	1,717,992	2,672,351
Provision for doubtful debt	1,491,002	0	7,820,713	0
Research and development expenses	0	998,746	0	3,043,535
Total operating expenses	2,270,062	2,517,130	10,442,742	14,000,241
Loss from operations	(1,961,999)	(1,701,019)	(9,490,821)	(3,664,201)
Interest income	0	311,569	0	954,594
Interest expense	(105,401)	0	(143,716)	(62,290)
Fair value adjustment on warrants	2,151	144,210	46,499	224,664
Other Income	501,578	546	501,578	2,065
Total other income, net	398,328	456,325	404,361	1,119,033
Loss before income taxes	(1,563,671)	(1,244,694)	(9,086,460)	(2,545,168)
Income tax expenses (benefits)	0	10,059	0	(637,884)
Net loss	(1,563,671)	(1,254,753)	(9,086,460)	(1,907,284)
Foreign currency translation adjustment	(174,104)	(3,140,062)	(1,152,031)	(2,479,077)
Comprehensive (loss) income	$ (1,737,775)	$ (4,394,815)	$ (10,238,491)	$ (4,386,361)
Net loss per share
Basic (in Dollars per share) | $ / shares	$ (0.71)	$ (0.57)	$ (4.11)	$ (0.86)
Diluted (in Dollars per share) | $ / shares	$ (0.71)	$ (0.57)	$ (4.11)	$ (0.86)
Weighted average number of common shares outstanding
Basic (in Shares) | shares	2,210,913	2,210,913	2,210,913	2,210,913
Diluted (in Shares) | shares	2,210,913	2,210,913	2,210,913	2,210,913

XML

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) ¥ in Millions	9 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES
Net loss	$ (9,086,460)	$ (1,907,284)
Adjustments to reconcile net income to net cash provided by operating activities:
Accrued interest income	0	(949,582)
Deferred tax benefit	0	(580,367)
Depreciation and amortization	913,394	1,005,498
Recognition of deferred research and development expenses	0	1,014,512
Fair value adjustment on warrants	(46,499)	(224,664)
Provision for sales discounts	0	1,478,124
Provision for doubtful accounts	7,820,713	0
Changes in operating assets and liabilities:
Accounts receivable	1,605,000	(4,696,508)
Inventories	(214,017)	19,794
Deposits and other receivables	0	2,319,480
Accounts payable and accrued expenses	52,903	2,753,073
Value-added tax payable	(133,977)	(381,380)
Income tax payable/recoverable	0	(57,517)
Net cash provided by (used in) operating activities	911,057	(206,821)
CASH FLOWS USED IN INVESTING ACTIVITIES
Deposit paid for intended acquisition	0	(1,623,219)
Purchase of property, plant and equipment	0	(30,522)
Net cash used in investing activities	0	(1,653,741)
CASH FLOWS USED IN FINANCING ACTIVITIES
Repayment of short-term bank loans	(281,016)	(186,670)
Net cash used in financing activities	(281,016)	(186,670)
Effect of exchange rate changes on cash and cash equivalents	(9,580)	473,989
Net increase (decrease) in cash and cash equivalents	620,461	(1,573,243)
Cash and cash equivalents, beginning balance	38,898	1,685,154
Cash and cash equivalents, ending balance	659,359	111,911
SUPPLEMENTAL DISCLOSURES:
Interest received	0	5,012
Interest paid	$ (143,716)	$ (59,406)

XML

Note 1 - ORGANIZATION AND NATURE OF OPERATIONS

9 Months Ended

Sep. 30, 2016

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 1 – ORGANIZATION AND NATURE OF OPERATIONS

Biostar Pharmaceuticals, Inc. (“Biostar” or the “Company”) was incorporated in the State of Maryland on March 27, 2007. On June 15, 2007, Biostar formed Shaanxi Biostar Biotech Ltd. (“Shaanxi Biostar”). Shaanxi Biostar is a wholly owned subsidiary of Biostar and a limited liability company organized under the laws of the People’s Republic of China (the “PRC”).

On November 1, 2007, Shaanxi Biostar entered into a series of agreements including a Management Entrustment Agreement, a Shareholders’ Voting Proxy Agreement, an Exclusive Option Agreement and a Share Pledge Agreement (collectively the “Agreements”) with Shaanxi Aoxing Pharmaceutical Co., Ltd. (“Aoxing Pharmaceutical”) and its registered owners (the “Transaction”). Aoxing Pharmaceutical is a corporation formed under the laws of the PRC. According to these Agreements, Shaanxi Biostar acquired management control of Aoxing Pharmaceutical whereby Shaanxi Biostar is entitled to all of the net profits of Aoxing Pharmaceutical as a management fee and is obligated to fund Aoxing Pharmaceutical’s operations and pay all of the debts. In exchange for entering into the Agreements, on November 1, 2007, the Company issued 19,832,311 shares (representing 944,396 shares, after the one-for-three reverse split of the issued and outstanding common stock of the Company effective on April 3, 2012 and the one-for-seven reverse split of the issued and outstanding common stock of the Company effective on February 4, 2016) of its common stock to Aoxing Pharmaceutical’s registered owners, representing approximately 90% of the Company’s common stock outstanding immediately after the Transaction.

Following the change in registered owners of Aoxing Pharmaceutical on July 9, 2010, a set of new Agreements had been entered into with all the then existing registered owners of Aoxing Pharmaceutical on the same day.

The Agreements dated July 9, 2010 were merely replacements of the Agreements dated November 1, 2007 and therefore, there was no significant change in the contractual terms between the Agreements dated July 9, 2010 and November 1, 2007. The then existing registered owners of Aoxing Pharmaceutical, Shaanxi Biostar and Biostar had mutually agreed that no consideration would be paid / payable upon the execution of the Agreements on July 9, 2010. The interest of Biostar in Aoxing Pharmaceutical was not and would not be affected by the replacement for the Agreements.

Following the change in registered owners of Aoxing Pharmaceutical on May 24, 2013, a set of new Agreements had been entered into with all the existing registered owners of Aoxing Pharmaceutical on May 24, 2013.

The Agreements dated May 24, 2013 are merely replacements of the Agreements dated July 9, 2010 and therefore, there is no significant change in the contractual terms between the Agreements dated May 24, 2013, July 9, 2010 and November 1, 2007. The existing registered owners of Aoxing Pharmaceutical, Shaanxi Biostar and Biostar had mutually agreed that no consideration would be paid / payable upon the execution of the Agreements on May 23, 2013. The interest of Biostar in Aoxing Pharmaceutical was not and would not be affected by the replacement for the Agreements.

Following the change in registered owners of Aoxing Pharmaceutical on October 29, 2014, a set of new Agreements had been entered into with all the existing registered owners of Aoxing Pharmaceutical on October 29, 2014.

The Agreements dated October 29, 2014 are merely replacements of the Agreements dated May 24, 2013 and therefore, there is no significant change in the contractual terms between the Agreements dated October 29, 2014, May 24, 2013, July 9, 2010 and November 1, 2007. The existing registered owners of Aoxing Pharmaceutical, Shaanxi Biostar and Biostar had mutually agreed that no consideration would be paid / payable upon the execution of the Agreements on October 29, 2014. The interest of Biostar in Aoxing Pharmaceutical was not and would not be affected by the replacement for the Agreements.

Following the change in registered owners of Aoxing Pharmaceutical on May 11, 2015, a set of new Agreements had been entered into with all the existing registered owners of Aoxing Pharmaceutical on May 11, 2015.

The Agreements dated May 11, 2015 are merely replacements of the Agreements dated October 29, 2014 and therefore, there is no significant change in the contractual terms between the Agreements dated May 11, 2015, October 29, 2014, May 24, 2013, July 9, 2010 and November 1, 2007. The existing registered owners of Aoxing Pharmaceutical, Shaanxi Biostar and Biostar had mutually agreed that no consideration would be paid / payable upon the execution of the Agreements on May 11, 2015. The interest of Biostar in Aoxing Pharmaceutical was not and would not be affected by the replacement for the Agreements.

The Agreements provide Shaanxi Biostar with control over Aoxing Pharmaceutical as defined by Accounting Standards Codification (“ASC”) 810, Consolidation, which requires Shaanxi Biostar to consolidate the financial statements of Aoxing Pharmaceutical and ultimately consolidate with its parent company, Biostar (see Note 2 “Principles of Consolidation”).

In October 2011, Aoxing Pharmaceutical entered into and completed a Share Transfer Agreement (the “Weinan Share Transfer Agreement”) to acquire Shaanxi Weinan Huaren Pharmaceuticals, Ltd. (“Shaanxi Weinan”) from the holders of 100% of equity interests in Shaanxi Weinan.  Therefore, Shaanxi Weinan became a wholly owned subsidiary of Aoxing Pharmaceutical. Shaanxi Weinan is engaged in manufacturing of drugs and health products. In April 2013, Aoxing Pharmaceutical executed a supplemental agreement to the Weinan Share Transfer Agreement (the “Weinan Supplemental Agreement”) with all the former equity holders of Shaanxi Weinan to acquire 13 drug approval numbers which were excluded from the Weinan Share Transfer Agreement due to incomplete re-registration.  The Company acquired ownership of the 13 drug approval numbers for which re-registration has been completed in April 2013. The aggregate purchase price was approximately $10.2 million, consisting of approximately $8.8 million in cash and 228,938 shares (after the one-for-seven reverse split of the issued and outstanding common stock of the Company effective on February 4, 2016) of the Company’s common stock, valued at approximately $1.4 million.

The Company, through its subsidiary and the Agreements with Aoxing Pharmaceutical, is engaged in the business of developing, manufacturing and marketing over-the-counter (“OTC”) and prescription pharmaceutical products in the PRC.

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Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Liquidity and Going Concern

As of September 30, 2016, we had cash of $659,359 and net working capital of $759,717. For the period ended September 30, 2016, we reported a net loss of $9,086,460 and net cash provided by operating activities of $911,057. We generated cash flow from operations even though we incurred a net loss as (1) we collected outstanding receivables from our trade debtors; and (2) our net loss includes certain non-cash expenses that are added back to our cash flow from operations as shown on our condensed consolidated statements of cash flows.

We had experienced a substantial decrease in sales volume of all Aoxing Pharmaceutical Products due to the temporarily suspension of production to conduct maintenance of its production lines to renew its GMP certificates from 2015. While our production levels of Shaanxi Weinan products, being sold to a single customer as detailed in Note 13, helped to offset the substantial decrease in our sales volume in the most recent fiscal quarter, our sales volume continued to remain at the present decreased levels. There is no assurance that the production lines at Aoxing will resume and the renewal of GMP certificates will occur when anticipated, or even if they are renewed, we will be able to return to the production levels as anticipated. Our inability to regain our production levels as anticipated may have material adverse effects on our business, operations and financial performance, and the Company may become insolvent. In addition, the Company already violated its financial covenants included in its short-term bank loans as discussed in Note 5 “Short-term Bank Loans”.

During 2015, as a result of outstanding personal debts of the Chief Executive Officer, Mr. Ronghua Wang, one of the Company’s bank accounts was frozen, title of three residential properties of the Company had been transferred and resulted in a loss of approximately $0.5 million (RMB 3.3 million), and certain buildings and land use rights are currently seized by the court but have not been transferred to the lender. In February 2016, the count attempted to force a sale of the Company’s land use rights and buildings. As of September 30, 2016, Mr. Ronghua Wang had partially repaid the outstanding balance of the loan, thus the creditor petitioned the court to terminate the auction sale. Mr. Ronghua Wang has repaid approximately $0.5 million (RMB 3.3 million) to the company to make good the loss recognized in 2015. Such cash collection is included in “other income” for the three and nine months ended September 30, 2016. The Company has disclosed the above legal proceedings related to the Company to the best of its knowledge. There is no assurance that Mr. Ronghua Wang will be able to repay his personal debts in full before his creditors take any other further legal action. There is also no assurance that there will be no other cases that would put the Company’s properties at risk.

The factors discussed above raise substantial doubt as to our ability to continue as a going concern. Based on our current plans for the next twelve months, we anticipate that the sales of the Company’s pharmaceutical products in Shaanxi Weinan after having recently gained renewal of its GMP certificates, will be the primary organic source of funds for future operating activities in 2016. The Company will also make substantial efforts to collect outstanding accounts and other receivables to meet its debt obligations; we may also try to procure bank borrowing, if available, as well as capital raises through public or private offerings. There is no assurance that we will find such funding on acceptable terms, if at all. The accompanying consolidated financial statements do not include any adjustments that might result from these uncertainties.

We anticipate that the new topical health product called “Easy Breathing” will be launched for sale in November 2016. The product was developed by the Company’s research and development team over the past 3 years. The product is designed to have effects of relieving stuffy nose, inhibiting nasal bacteria and viruses, and mitigating effects on the inflammation of nasal mucosa. It will be manufactured, distributed and sold in China. Although we do not anticipate any significant sales revenue in 2016, we expect to sell approximately 400,000 units within the next 2 years, which is expected to yield approximately $7.5 million (RMB 50 million) and improve our cash flow position.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company, its subsidiary and variable interest entity (“VIE”) for which the Company is the primary beneficiary. All inter-company accounts and transactions have been eliminated in those condensed consolidated financial statements. The Company has adopted ASC 810, Consolidation which requires a VIE to be consolidated by a company if that company has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and either (1) the obligation to absorb losses of the VIE or (2) the right to receive benefits from the VIE”.

In determining Aoxing Pharmaceutical is a VIE of Shaanxi Biostar, the Company considered the following indicators, among others:

● Shaanxi Biostar has the full right to control and administer the financial affairs and daily operation of Aoxing Pharmaceutical and has the right to manage and control all assets of Aoxing Pharmaceutical. The registered owners of Aoxing Pharmaceutical as a group have no right to make any decision about Aoxing Pharmaceutical’s activities without the consent of Shaanxi Biostar.

● Shaanxi Biostar is assigned all voting rights of Aoxing Pharmaceutical and has the right to appoint all directors and senior management personnel of Aoxing Pharmaceutical. The registered owners of Aoxing Pharmaceutical possess no substantive voting rights.

● Shaanxi Biostar is committed to provide financial support if Aoxing Pharmaceutical requires additional funds to maintain its operations and to repay its debts.

● Shaanxi Biostar is entitled to a management fee equal to Aoxing Pharmaceutical’s net profits and is obligated to assume all operation risks and bear all losses of Aoxing Pharmaceutical.  Therefore, Shaanxi Biostar is the primary beneficiary of Aoxing Pharmaceutical.

Additional capital provided to Aoxing Pharmaceutical by the Company was recorded as an interest-free loan to Aoxing Pharmaceutical. There was no written note to this loan, the loan was not interest bearing, and was eliminated during consolidation. Under the terms of the Agreements, the registered owners of Aoxing Pharmaceutical are required to transfer their ownership of Aoxing Pharmaceutical to the Company’s subsidiary in the PRC when permitted by the PRC laws and regulations or to designees of the Company at any time when the Company considers it is necessary to acquire Aoxing Pharmaceutical. In addition, the registered owners of Aoxing Pharmaceutical have pledged their shares in Aoxing Pharmaceutical as collateral to secure these Agreements.

Unaudited Interim Financial Information

These unaudited interim condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been made. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2016.

The consolidated balance sheets and certain comparative information as of December 31, 2015 are derived from the audited consolidated financial statements and related notes for the year ended December 31, 2015 (“2015 Annual Financial Statements”), included in the Company’s 2015 Annual Report on Form 10-K. These unaudited interim condensed consolidated financial statements should be read in conjunction with the 2015 Annual Financial Statements.

Foreign Currency

The Company’s reporting currency is the U.S. dollar (“$”). The Company’s operations in the PRC use the Chinese Yuan Renminbi (“RMB”) as its functional currency. The financial statements of the subsidiary and VIEs are translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters. According to the topic, all assets and liabilities were translated at the current exchange rate, stockholders’ equity are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC 220, Comprehensive Income. Foreign exchange transaction gains and losses are reflected in the statement of operations.  For the period ended September 30, 2016 and 2015, the Company recognized foreign translation under other comprehensive income adjustment of a loss for $1,152,031 and a loss for $2,479,077, respectively.

Fair Value of Financial Instruments

ASC 825, Financial Instruments, requires that the Company discloses estimated fair values of financial instruments. The carrying amounts reported in the balance sheets for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value.

The Company applies the provisions of ASC 820-10, Fair Value Measurements and Disclosures. ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. For certain financial instruments, including cash and cash equivalents, loan receivables and short-term bank loans, the carrying amounts approximate fair value due to their relatively short maturities. The three levels of valuation hierarchy are defined as follows:

ž Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

ž Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

ž Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. In addition, the fair values of freestanding derivative instruments such as warrant are valued using the Binominal Model.

The Company uses Level 3 inputs for its valuation methodology for the fair value of warrant.

The binomial lattice relies on the following Level 3 inputs: (1) expected volatility of the Company’s common stock; and (2) risk free rate which is based on daily treasury yield curve rates as published by U.S. Department of the Treasury. The expected volatility of the Company’s common stock is estimated from the historical volatility of daily returns in the Company’s common stock price.

The following tables present the estimated fair value of the following financial assets and liabilities of the Company:

At September 30, 2016:

	Carrying amount
	Level 1		Level 2		Level 3		Estimated fair value
Financial assets
Carried at (amortized) cost:
Cash and cash equivalents	$	659,359	$	-	$	-	$	659,359

	Carrying amount
	Level 1			Level 2			Level 3			Estimated fair value
Financial liabilities
Carried at (amortized) cost:
Short-term bank loans		$	-		$	-		$	2,422,213		$	2,422,213
Carried at fair value:
Warrants liability			-			-			12,703			12,703
		$	-		$	-		$	2,434,916		$	2,434,916

At December 31, 2015:

	Carrying amount
	Level 1		Level 2		Level 3		Estimated fair value
Financial assets
Carried at (amortized) cost:
Cash and cash equivalents	$	38,898	$	-	$	-	$	38,898

	Carrying amount
	Level 1			Level 2			Level 3			Estimated fair value
Financial liabilities
Carried at (amortized) cost:
Short-term bank loans		$	-		$	-		$	2,773,199		$	2,773,199
Carried at fair value:
Warrants liability			-			-			59,202			59,202
		$	-		$	-		$	2,832,401		$	2,832,401

Warrants Liability
Value at December 31, 2015	$	59,202
Fair value adjustment of warrants during the nine months end September 30, 2016		(46,499	)
Value at September 30, 2016	$	12,703

At September 30, 2016, the fair value of the warrants liability, which are recognized as level 3 financial instruments, were calculated using the binomial model that included the following inputs: stock price of the underlying asset of $3.72, an exercise price of $22.61 expected volatility of 149.91%, risk free rate of 0.37% and initial time to expiration of 3 years. The change in fair value was recognized on the Company’s statement of operations during the nine months ended September 30, 2016.

In accordance with ASC-820-10-50-2(g), the Company has performed a sensitivity analysis of the outstanding warrants of the Company which are classified as level 3 financial instruments. The Company recalculated the value of warrants by applying a +/- 5% changes to the input variables in the binomial model that vary overtime, namely, the volatility and the risk free rate. A 5.0% decrease in volatility would decrease the value of the warrants to $3,162; a 5.0% increase in volatility would increase the value of the warrants to $3,669. A 5.0% decrease or increase in the risk free rate would not have materially changed the value of the warrants; the value of the warrants is not strongly correlated with small changes in interest rates.

Use of Estimates

The preparation of the consolidated financial statements in conformity with the GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used for, but not limited to, the accounting for certain items such as allowance for doubtful accounts, depreciation and amortization, impairment, inventory allowance, taxes and contingencies.

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.  As of September 30, 2016 and December 31, 2015, cash and cash equivalents were mainly denominated in RMB and were placed with banks in the PRC.  These cash and cash equivalents may not be freely convertible into foreign currencies and the remittance of these funds out of the PRC may be subjected to exchange control restrictions imposed by the PRC government.

Accounts Receivable

The Company maintains allowance for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these allowances. Terms of sales vary. Allowances are recorded primarily on a specific identification basis.

As of September 30, 2016 and December 31, 2015, the allowance for doubtful debts was approximately $14.3 million and $6.8 million respectively.

Reverse Stock Split

On February 4, 2016, the Company effectuated a one-for-seven reverse split of its common stock; the Company’s stockholder’s equity, information on a number of shares and (loss) earnings per share has been retroactively restated to the first period presented. See Note 6(a).

Inventories

Inventories are valued at the lower of weighted average cost or market. Management compares the cost of inventories with the market value, and allowance is made for writing down the inventories to market value, if lower. Inventories consisted of the following:

	September 30,			December 31,
	2016			2015
	(unaudited)
Raw materials		$	362,700		$	164,352
Work in process			30,596			51,041
Finished goods			46,300			19,267
		$	439,596		$	234,660

Property and Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives of:

Buildings	30 years
Building improvements	30 years
Machinery & equipment	5-10 years
Furniture & fixtures and vehicles	5-10 years

Property and equipment consisted of the following:

	September 30,			December 31,
	2016			2015
	(unaudited)
Buildings	$	2,471,262		$	2,548,537
Building improvements		5,349,888			5,517,178
Machinery & equipment		1,151,416			1,187,421
Furniture & fixtures		51,579			53,192
Vehicle		108,314			111,701
Construction in progress		468,358			483,004
	$	9,600,817		$	9,901,033
Less: Accumulated depreciation		(3,330,381	)		(3,090,100	)
	$	6,270,436		$	6,810,933

As set out in Note 5, buildings with carrying value of approximately $1.2 million as of September 30, 2016 and December 31, 2015 were pledged to a local bank in PRC as part of security for a short term bank loan facilities granted to the Company.

Intangible Assets

Intangible assets are amortized using the straight-line method over their estimated period of benefit, ranging from ten to fifty years. Management evaluates the recoverability of intangible assets periodically and takes into account events or circumstances that warrant revised estimates of useful lives or that indicate impairment exists. The Company’s land use rights will expire between 2053 and 2056. The Company’s proprietary technologies include land use rights and drug approvals and permits. All of the Company’s intangible assets are subject to amortization with estimated useful lives of:

Land use rights	50 years
Proprietary technologies	10 years

 The components of finite-lived intangible assets are as follows:

	September 30,				December 31,
	2016				2015
	(unaudited)
Land use rights		$	2,976,746			$	3,083,608
Proprietary technologies			15,371,835				16,065,254
			18,348,581				19,148,862
Less: Accumulated amortization and impairment			(12,287,035	)			(12,270,075	)
		$	6,061,546			$	6,878,787

The estimated future amortization expenses related to intangible assets as of September 30, 2016 are as follows:

Years Ending December 31,
2016	$	144,340
2017		577,361
2018		577,361
2019		577,361
2020		103,920
Thereafter		4,081,203

As set out in Note 5, land use right with carrying value of approximately $2.2 million as of September 30, 2016 and December 31, 2015 were pledged to a local bank in PRC as part of security for a short term bank loan facilities granted to the Company.

Share warrants

In accordance with ASC815, Derivatives and Hedging, share warrants with term of down-round provision are initially recognized at fair value at grant date as a derivative liability. At each reporting period date, the fair value of the share warrants will be re-measured and the fair value change will be reported as gain/loss in the Condensed Consolidated Statements of Operations and Comprehensive Income.

Revenue Recognition

The Company’s revenue recognition policies are in compliance with ASC 605, Revenue Recognition. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

The Company does not allow its customers to return products. The Company’s customers can exchange products only if they are damaged in transportation.

Revenue reported is net of value added tax and sales discounts.

Recent accounting pronouncements

In May 2014, the FASB issued Accounting Standards Update ASU No. 2014-09, “Revenue from Contracts with Customers”, which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. ASU 2014-09 will be effective for the Company beginning in its first quarter of 2019, and early adoption is permitted. Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”); ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”); and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”). The Company must adopt ASU 2016-08, ASU 2016-10 and ASU 2016-12 with ASU 2014-09 (collectively, the “new revenue standards”). The new revenue standards may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company currently expects to adopt the new revenue standards in its first quarter of 2018 utilizing the full retrospective transition method. The adoption of the new revenue standards is not expected to have any material impact on the Company’s consolidated financial statements.

In February 2015, the FASB issued Accounting Standards Update ASU No. 2015-02, “Consolidation” (Topic 810). ASU 2015-02 changes the guidance with respect to the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. All legal entities are subject to reevaluation under the revised consolidation mode. ASU 2015-02 affects the following areas: (1) Limited partnerships and similar legal entities. (2) Evaluating fees paid to a decision maker or a service provider as a variable interest. (3) The effect of fee arrangements on the primary beneficiary determination. (4) The effect of related parties on the primary beneficiary determination. (5) Certain investment funds. ASU 2015-02 is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the guidance in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. A reporting entity may apply the amendments in this guidance using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A reporting entity also may apply the amendments retrospectively. The adoption of ASU 2015-02 is not expected to have any material impact on the Company’s financial statement presentation or disclosures.

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs”. The accounting guidance requires that debt issuance costs related to a recognized debt liability be reported on the Consolidated Statements of Financial Condition as a direct deduction from the carrying amount of that debt liability. The guidance is effective for the Company retrospectively beginning in the first quarter of fiscal 2017 and early adoption is permitted. The adoption of this accounting guidance is not expected to have any material impact on the Company’s Consolidated Statements of Financial Condition.

In July 2015, the FASB issued Accounting Standards Update ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which applies to inventory that is measured using first-in, first-out (“FIFO”) or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, first-out (“LIFO”). ASU 2015-11 is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company will adopt the standard in the interim and annual period after December 31, 2016.  The adoption of ASU 2015-11 is not expected to have any material impact on the Company’s consolidated financial statements.

In November 2015, the FASB issued Accounting Standards Updates ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). The FASB issued ASU 2015-17 as part of its ongoing Simplification Initiative, with the objective of reducing complexity in accounting standards. The amendments in ASU 2015-17 require entities that present a classified balance sheet to classify all deferred tax liabilities and assets as a noncurrent amount. This guidance does not change the offsetting requirements for deferred tax liabilities and assets, which results in the presentation of one amount on the balance sheet. Additionally, the amendments in this ASU align the deferred income tax presentation with the requirements in International Accounting Standards (IAS) 1, Presentation of Financial Statements.  The amendments in ASU 2015-17 are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently reviewing the provisions of this ASU 2015-17 to determine if there will be any impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued Accounting Standards Updates ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. ASU 2016-02 will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently reviewing the provisions of this ASU 2016-02 to determine if there will be any impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The objective of the simplification initiative is to identify, evaluate, and improve areas of US GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The areas for simplification involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. ASU 2016-09 will be effective for public companies for reporting periods beginning after December 15, 2016. The Company is assessing the impact to its accounting practices and financial reporting procedures as a result of the issuance of this standard.

In June 2016, the FASB issued Accounting Standards Update ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326), which modifies the measurement of expected credit losses of certain financial instruments. ASU 2016-13 will be effective for the Company beginning in its first quarter of 2021 and early adoption is permitted. The adoption of ASU 2016-13 is not expected to have any material impact on the Company’s consolidated financial statements.

In August 2016, the FASB issued Accounting Standards Update ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”. The updated guidance aims to reduce diversity in presentation and classification of certain cash receipts and cash payments by addressing eight specific cash flow issues including (1) Debt Prepayment or Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made after a Business Combination; (4) Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned Life Insurance Policies; (6) Distributions Received from Equity Method Investees; (7) Beneficial Interests in Securitization Transactions and (8) Separately Identifiable Cash Flows and Application of the Predominance Principle. Among the afore-mentioned eight addressed cash flow issues, the category of “Separately Identifiable Cash Flows and Application of the Predominance Principle” requires a reporting entity to classify cash receipts and payments that have aspects of more than one class of cash flows first by applying specific guidance in generally accepted accounting principles (GAAP) and, only in the absence of specific guidance, by determining each separately identifiable source or use within the cash receipts and cash payments on the basis of the nature of the underlying cash flows. In situations in which cash receipts and payments have aspects of more than one class of cash flows and cannot be separated by source or use, a reporting entity should classify such cash receipts and cash payments by referring to the predominant source or use of cash flows for the item. The updated guidance is effective from reporting periods beginning after December 15, 2018. The Company is assessing the impact to its accounting practices and financial reporting procedures as a result of the issuance of this standard.

As of September 30, 2016, there are no recently issued accounting standards not yet adopted that would have a material effect on the Company’s financial statements.

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Note 3 - DEPOSITS AND OTHER RECEIVABLES

9 Months Ended

Sep. 30, 2016

Disclosure Text Block Supplement [Abstract]

Other Assets Disclosure [Text Block]

Note 3 – DEPOSITS AND OTHER RECEIVABLES

Deposits and other receivables consisted of the following:

	September 30,		December 31,
	2016		2015
Current portion
Deposit for research & development	$	80	$	80
Other receivables and prepaid expenses		2,445		2,511
		2,525		2,591
Non-current portion
a) Deposits paid for intended acquisition of a health product material supplier	$	12,072,730	$	12,402,360
b) Deposits paid for intended acquisition of a health product manufacturer		3,599,324		3,697,598
Deposits	$	15,672,054	$	16,099,958

a. In December 2014, the Company signed a letter of intent to acquire 100% interest in a company in the PRC, which is principally engaged in supply of raw materials to produce health product, for an aggregate consideration of approximately $12.3 million (RMB 82 million) in cash. The completion of the acquisition is subject to the completion of a valuation report and certain conditions set out in the letter of intent being met. The deposit is fully refundable if certain conditions set out in the letter of intent are not met. The acquisition was yet to complete by September 30, 2016.

b.   In November 2013, the Company signed a letter of intent to acquire 100% interest in a health product manufacturer for an aggregate consideration of approximately $8.7 million (RMB 56 million), consisting of approximately $4.7 million (RMB 30 million) in cash and shares of the Company’s common stock valued at approximately $4.0 million (RMB 26 million), the acquisition is in final stage and the Company is reviewing the draft of shares transfer agreement. The acquisition was yet to complete by September 30, 2016.

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Note 4 - LOAN RECEIVABLES

9 Months Ended

Sep. 30, 2016

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 4 – LOAN RECEIVABLES

In November 2012, the Company advanced approximately $9.2 million (RMB 60 million) to a third party as a commercial loan, interest bearing at 13% per annum. The principal and interest were originally to be repaid on December 31, 2013. In 2013, the term of loan was extended to June 30, 2014. In 2014, the term of loan was further extended to December 31, 2015.

No interest has been recognized for the nine months ended September 30, 2016 as the Company recognized full impairment loss on loan receivables in 2015 as the Company has determined the borrower is insolvent.

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Note 5 - SHORT-TERM BANK LOANS

9 Months Ended

Sep. 30, 2016

Disclosure Text Block [Abstract]

Short-term Debt [Text Block]

Note 5 - SHORT-TERM BANK LOANS

Short-term bank loans consisted of the followings:

		Balance as at
Inception date	Details	September 30, 2016			December 31, 2015
May 26, 2014	RMB 20 million, one year term loan, annual interest rate at 7.80%. During the six months ended June 30, 2016, the Company paid interest of RMB 0.3 million. As of September 30, 2016, the Company had cumulatively repaid RMB 3.8 million and recorded accrued interest expenses of RMB 1.6 million.		$	2,422,213		$	2,773,199

The loan is secured by (i) personal guarantee executed by a major shareholder of the Company; (ii) pledge of the Company’s buildings and land use right with carrying amount of approximately $3.4 million as of September 30, 2016 and December 31, 2015 (Note 2); and the guarantee executed by Shaanxi Biostar. As of September 30, 2016 and December 31, 2015, the short-term bank loan is due on demand due to violation of loan covenants. As of November18, 2016, the bank is reviewing the application of the extension of the outstanding loan balance.

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Note 6 - STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2016

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 6 – STOCKHOLDERS’ EQUITY

(a) Common stock

As of September 30, 2016 and December 31, 2015, the Company has 100,000,000 shares of common stock authorized, 2,210,913 shares issued and outstanding at par value of $0.001 per share.

On February 4, 2016, the Company effectuated a one-for-seven reverse split of its common stock; the Company’s stockholder’s equity, information on number of shares and loss per share has been retroactively restated to the first period presented.

(b) Warrants

In connection with a public offering completed during the year ended December 31, 2014, the Company issued warrants to purchase an aggregate of 94,286 shares of common stock with a per share exercise price of $22.61. Additionally, the Company issued warrants to the placement agents to purchase 14,142 shares of common stock in the aggregate on the same terms as the warrants sold in the offering. The warrants are exercisable immediately as of the date of issuance and expiring three years from the date of issuance.

In accordance with the Company’s stated accounting policy in Note 2, the warrants are initially recognized as a derivative liability at fair value at grant date. Accordingly, an amount $960,894, representing the full fair value of the warrants was recognized. As of September 30, 2016, the carrying amount of the warrant was $12,703, being its fair value. For the years ended December 31, 2015 and 2014, a fair value adjustment of $324,093 and $577,599 reduced the carrying value of warrants was made and recorded as a gain in the Consolidated Statements of Operations and Comprehensive Income. The fair value adjustment for the nine months ended September 30, 2016 was a gain of $46,499.

As of September 30, 2016 and December 31, 2015, the Company has 108,428 warrants outstanding, with weighted average exercise price of $22.61.

The following table summarizes the Company’s outstanding warrants as of September 30, 2016 and December 31, 2015.

			Outstanding as at,
Expiry date	Exercise Price		September 30, 2016		December 31, 2015
March 12, 2017		22.61		108,428		108,428

(c) Stock Options

The following tables summarize activities for the Company’s options for the nine months ended September 30, 2016.

				Weighted Average
	Number of options			Exercise Price ($)		Remaining Life (years)
Balance, December 31, 2015		6,762			26.39		0.54
Expires		(3,333	)		41.37		-
Balance, September 30, 2016		3,429			11.76		0.45
Vested and exercisable as at September 30, 2016		3,429			11.76		0.45

As of September 30, 2016, there was no unrecognized compensation cost related to outstanding stock options, and the intrinsic value was close to zero because the exercise price was out-of-the-money.

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Note 7 - INCOME TAXES

9 Months Ended

Sep. 30, 2016

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 7 - INCOME TAXES

The Company was incorporated in the United States of America (“USA”) and has operations in one tax jurisdiction, i.e. the PRC. The Company generated substantially all of its net income from its operations in the PRC for the nine months ended September 30, 2016 and 2015, and has recorded income tax (benefits)/provision for the periods.

Uncertain Tax Positions

Interest associated with unrecognized tax benefits are classified as income tax, and penalties are classified in selling, general and administrative expenses in the statements of operations.  For the nine months ended September 30, 2016 and 2015, the Company had no unrecognized tax benefits and related interest and penalties expenses.  Currently, the Company is not subject to examination by major tax jurisdictions.

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Note 8 - STATUTORY RESERVES

9 Months Ended

Sep. 30, 2016

Statutory Reserves [Abstract]

Statutory Reserves

Note 8 - STATUTORY RESERVES

The Company’s subsidiaries and VIE in the PRC are required to make appropriations to certain non-distributable reserve funds. In accordance with the laws and regulations applicable to China’s foreign investment enterprises and with China’s Company Laws, an enterprise’s income, after the payment of the PRC income taxes, must be allocated to the statutory surplus reserves. The proportion of allocation for reserves is 10 percent of the profit after tax to the surplus reserve fund, and the cumulative amount shall not exceed 50 percent of registered capital.

Use of the statutory reserve fund is restricted to set offs against losses, expansion of production and operation or increase in the registered capital of a company. Use of the statutory public welfare fund is restricted to the capital expenditures for the collective welfare of employees. These reserves are not transferable to the Company in the form of cash dividends, loans or advances. These reserves are therefore not available for distribution except in liquidation. As of September 30, 2016 and December 31, 2015, the Company’s VIE had allocated approximately $7.4 million to these non-distributable reserve funds.

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Note 9 - LOSS PER SHARE

9 Months Ended

Sep. 30, 2016

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 9 - LOSS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share of common stock:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Basic loss per share:
Numerator:
Net loss used in computing basic earnings per share	$	(1,563,671	)	$	(1,254,753	)	$	(9,086,460	)	$	(1,907,284	)
Denominator:
Weighted average common shares outstanding		2,210,913			2,210,913			2,210,913			2,210,913
Basic loss per share	$	(0.71	)	$	(0.57	)	$	(4.11	)	$	(0.86	)
Diluted loss per share:
Numerator:
Net loss used in computing diluted earnings per share	$	(1,563,671	)	$	(1,254,753	)	$	(9,086,460	)	$	(1,907,284	)
Denominator:
Weighted average common shares outstanding		2,210,913			2,210,913			2,210,913			2,210,913
Diluted (loss) earnings per share	$	(0.71	)	$	(0.57	)	$	(4.11	)	$	(0.86	)

Dilutive securities having an anti-dilutive effect on diluted (loss) earnings per share are excluded from the calculation.

In accordance to ASC-260-10-50-1(c), for the three and nine months ended September 30, 2016, the Company, using the treasury stock method, determined that both the outstanding options and warrants would have been anti-dilutive if included in the denominator of the Company’s dilutive loss and earnings per share calculation because they were both out of the money. Holders of either securities would not have exercised the rights under these securities; accordingly, the options and warrants have been excluded from the loss and earnings per share calculation.  Details of the attributes, such a strike price and time to maturity of the options and warrants are detailed in “Note 6 Equity”.

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Note 10 - OTHER COMPREHENSIVE INCOME

9 Months Ended

Sep. 30, 2016

Disclosure Text Block [Abstract]

Comprehensive Income (Loss) Note [Text Block]

Note 10 - OTHER COMPREHENSIVE INCOME

Balance of related after-tax components comprising accumulated other comprehensive income included in stockholders’ equity as of September 30, 2016 and December 31, 2015 were as follows:

	September30, 2016			December 31,2015
Accumulated other comprehensive income, beginning of period	$	3,434,348		$	6,391,998
Change in cumulative translation adjustment		(1,152,031	)		(2,957,650	)
Accumulated other comprehensive income, end of period	$	2,282,317		$	3,434,348

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Note 11 - COMMITMENTS

9 Months Ended

Sep. 30, 2016

Disclosure Text Block Supplement [Abstract]

Commitments Disclosure [Text Block]

Note 11 - COMMITMENTS

	Total capital payment commitment		September 30, 2016		December 31, 2015
a) Three agreements with certain research institutes to conduct clinical trials for two new and one existing drugs.	$	2.0	$	0.8	$	0.8
b) In December 2014, the Company signed a letter of intent to acquire 100% interest in a company in the PRC, which is principally engaged in supply of raw materials to produce health product, for an aggregate consideration of approximately $12.3 million (RMB 82 million) in cash.		12.3		0.2		0.2
c) In November 2013, the Company signed a letter of intent to acquire 100% interest in a health product manufacturer for an aggregate consideration of approximately $8.7 million (RMB 56 million), consisting of approximately $4.7 million (RMB 30 million) in cash and shares of the Company’s common stock valued at approximately $4.0 million (RMB 26 million), subject to the completion of a due diligence report and certain conditions set out in the letter of intent being met.		8.7		5.1		4.9
Total capital payment commitment			$	6.1	$	5.9

In addition, on September 22, 2016, the Company entered into an Engagement Letter Agreement (the “Engagement Letter Agreement”) with FT Global Capital, Inc. pursuant to which FT Global Capital, Inc. agreed to act as the Company’s exclusive placement agent on a “best efforts” basis in connection with the Offering as set out in Note 14. The Placement Agent will be entitled to a shared cash fee of 8% of the gross proceeds paid to the Company for the securities the Company sells in the Offering.  Additionally, the Company will issue to the Placement Agent warrants (“Placement Agent Warrants”) to purchase 22,500 shares of Company common stock on substantially the same terms as the warrants issued pursuant to the Purchase Agreement. In connection with the offering, the Company agreed to indemnify the Placement Agents against certain liabilities under the Securities Act of 1933.

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Note 12 - SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2016

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 12-SEGMENT INFORMATION

For the nine months ended September 30, 2016 and 2015, all revenues of the Company represented the net sales of pharmaceutical products. No financial information by business segment is presented. Furthermore, as all revenues are derived from the PRC, no geographic information by geographical segment is presented. All tangible and intangible assets are located in the PRC.

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Note 13 - RISKS CONCENTRATION

9 Months Ended

Sep. 30, 2016

Risks and Uncertainties [Abstract]

Concentration Risk Disclosure [Text Block]

Note 13–RISKS CONCENTRATION

For the nine months ended September 30, 2016, two customers accounted for 100% of the Company’s total revenue. The loss of any of these customers could have a material adverse effect on the Company’s financial position and results of operations.

The following table illustrates the Company’s risks concentration:

Sales risks concentration
	Percentage of total sales during the
Customer	Nine Months Ended September 30,
	2016			2015
A		0	%		48	%
B		100	%		12	%
Total risks concentration		100	%		60	%

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Note 14 - SUBSEQUENT EVENTS

9 Months Ended

Sep. 30, 2016

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 14– SUBSEQUENT EVENTS

On October 11, 2016, the Company and certain institutional investors entered into a securities purchase agreement (the “Purchase Agreement”) in connection with an offering (“Offering”) pursuant to which the Company agreed to sell, and the investors agreed to purchase 425,000 shares of the Company’s common stock and warrants to purchase up to 212,500 shares of the Company’s common stock, for aggregate gross proceeds, before deducting fees to the placement agent and other estimated offering expenses payable by the Company, of approximately $1.91 million.  The warrants are exercisable beginning six months and a day after the closing of this offering and expire three and a half years from the date of issuance at an exercise price of $5.55 per share.  The exercise price and number of shares underlying the warrants are subject to adjustment in the case of stock splits, stock dividends, combinations of shares and similar recapitalization transactions. The offering closed on October 17, 2016.  In connection with the offering, the Company’s outstanding warrants issued during the year ended December 31, 2014, were adjusted, whereby the per share exercise price was modified from $22.61 to $3.11.

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Accounting Policies, by Policy (Policies)

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Basis of Accounting, Policy [Policy Text Block]

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”).

Liquidity and Going Concern Policy [Policy Text Block]

Liquidity and Going Concern

As of September 30, 2016, we had cash of $659,359 and net working capital of $759,717. For the period ended September 30, 2016, we reported a net loss of $9,086,460 and net cash provided by operating activities of $911,057. We generated cash flow from operations even though we incurred a net loss as (1) we collected outstanding receivables from our trade debtors; and (2) our net loss includes certain non-cash expenses that are added back to our cash flow from operations as shown on our condensed consolidated statements of cash flows.

We had experienced a substantial decrease in sales volume of all Aoxing Pharmaceutical Products due to the temporarily suspension of production to conduct maintenance of its production lines to renew its GMP certificates from 2015. While our production levels of Shaanxi Weinan products, being sold to a single customer as detailed in Note 13, helped to offset the substantial decrease in our sales volume in the most recent fiscal quarter, our sales volume continued to remain at the present decreased levels. There is no assurance that the production lines at Aoxing will resume and the renewal of GMP certificates will occur when anticipated, or even if they are renewed, we will be able to return to the production levels as anticipated. Our inability to regain our production levels as anticipated may have material adverse effects on our business, operations and financial performance, and the Company may become insolvent. In addition, the Company already violated its financial covenants included in its short-term bank loans as discussed in Note 5 “Short-term Bank Loans”.

During 2015, as a result of outstanding personal debts of the Chief Executive Officer, Mr. Ronghua Wang, one of the Company’s bank accounts was frozen, title of three residential properties of the Company had been transferred and resulted in a loss of approximately $0.5 million (RMB 3.3 million), and certain buildings and land use rights are currently seized by the court but have not been transferred to the lender. In February 2016, the count attempted to force a sale of the Company’s land use rights and buildings. As of September 30, 2016, Mr. Ronghua Wang had partially repaid the outstanding balance of the loan, thus the creditor petitioned the court to terminate the auction sale. Mr. Ronghua Wang has repaid approximately $0.5 million (RMB 3.3 million) to the company to make good the loss recognized in 2015. Such cash collection is included in “other income” for the three and nine months ended September 30, 2016. The Company has disclosed the above legal proceedings related to the Company to the best of its knowledge. There is no assurance that Mr. Ronghua Wang will be able to repay his personal debts in full before his creditors take any other further legal action. There is also no assurance that there will be no other cases that would put the Company’s properties at risk.

The factors discussed above raise substantial doubt as to our ability to continue as a going concern. Based on our current plans for the next twelve months, we anticipate that the sales of the Company’s pharmaceutical products in Shaanxi Weinan after having recently gained renewal of its GMP certificates, will be the primary organic source of funds for future operating activities in 2016. The Company will also make substantial efforts to collect outstanding accounts and other receivables to meet its debt obligations; we may also try to procure bank borrowing, if available, as well as capital raises through public or private offerings. There is no assurance that we will find such funding on acceptable terms, if at all. The accompanying consolidated financial statements do not include any adjustments that might result from these uncertainties.

We anticipate that the new topical health product called “Easy Breathing” will be launched for sale in November 2016. The product was developed by the Company’s research and development team over the past 3 years. The product is designed to have effects of relieving stuffy nose, inhibiting nasal bacteria and viruses, and mitigating effects on the inflammation of nasal mucosa. It will be manufactured, distributed and sold in China. Although we do not anticipate any significant sales revenue in 2016, we expect to sell approximately 400,000 units within the next 2 years, which is expected to yield approximately $7.5 million (RMB 50 million) and improve our cash flow position.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company, its subsidiary and variable interest entity (“VIE”) for which the Company is the primary beneficiary. All inter-company accounts and transactions have been eliminated in those condensed consolidated financial statements. The Company has adopted ASC 810, Consolidation which requires a VIE to be consolidated by a company if that company has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and either (1) the obligation to absorb losses of the VIE or (2) the right to receive benefits from the VIE”.

In determining Aoxing Pharmaceutical is a VIE of Shaanxi Biostar, the Company considered the following indicators, among others:

● Shaanxi Biostar has the full right to control and administer the financial affairs and daily operation of Aoxing Pharmaceutical and has the right to manage and control all assets of Aoxing Pharmaceutical. The registered owners of Aoxing Pharmaceutical as a group have no right to make any decision about Aoxing Pharmaceutical’s activities without the consent of Shaanxi Biostar.

● Shaanxi Biostar is assigned all voting rights of Aoxing Pharmaceutical and has the right to appoint all directors and senior management personnel of Aoxing Pharmaceutical. The registered owners of Aoxing Pharmaceutical possess no substantive voting rights.

● Shaanxi Biostar is committed to provide financial support if Aoxing Pharmaceutical requires additional funds to maintain its operations and to repay its debts.

● Shaanxi Biostar is entitled to a management fee equal to Aoxing Pharmaceutical’s net profits and is obligated to assume all operation risks and bear all losses of Aoxing Pharmaceutical.  Therefore, Shaanxi Biostar is the primary beneficiary of Aoxing Pharmaceutical.

Additional capital provided to Aoxing Pharmaceutical by the Company was recorded as an interest-free loan to Aoxing Pharmaceutical. There was no written note to this loan, the loan was not interest bearing, and was eliminated during consolidation. Under the terms of the Agreements, the registered owners of Aoxing Pharmaceutical are required to transfer their ownership of Aoxing Pharmaceutical to the Company’s subsidiary in the PRC when permitted by the PRC laws and regulations or to designees of the Company at any time when the Company considers it is necessary to acquire Aoxing Pharmaceutical. In addition, the registered owners of Aoxing Pharmaceutical have pledged their shares in Aoxing Pharmaceutical as collateral to secure these Agreements.

Unaudited Interim Financial Information Policy [Policy Text Block]

Unaudited Interim Financial Information

These unaudited interim condensed consolidated financial statements have been prepared in accordance with GAAP for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. Therefore, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been made. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending December 31, 2016.

The consolidated balance sheets and certain comparative information as of December 31, 2015 are derived from the audited consolidated financial statements and related notes for the year ended December 31, 2015 (“2015 Annual Financial Statements”), included in the Company’s 2015 Annual Report on Form 10-K. These unaudited interim condensed consolidated financial statements should be read in conjunction with the 2015 Annual Financial Statements.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign Currency

The Company’s reporting currency is the U.S. dollar (“$”). The Company’s operations in the PRC use the Chinese Yuan Renminbi (“RMB”) as its functional currency. The financial statements of the subsidiary and VIEs are translated into U.S. dollars in accordance with ASC 830, Foreign Currency Matters. According to the topic, all assets and liabilities were translated at the current exchange rate, stockholders’ equity are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC 220, Comprehensive Income. Foreign exchange transaction gains and losses are reflected in the statement of operations.  For the period ended September 30, 2016 and 2015, the Company recognized foreign translation under other comprehensive income adjustment of a loss for $1,152,031 and a loss for $2,479,077, respectively.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair Value of Financial Instruments

ASC 825, Financial Instruments, requires that the Company discloses estimated fair values of financial instruments. The carrying amounts reported in the balance sheets for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value.

The Company applies the provisions of ASC 820-10, Fair Value Measurements and Disclosures. ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. For certain financial instruments, including cash and cash equivalents, loan receivables and short-term bank loans, the carrying amounts approximate fair value due to their relatively short maturities. The three levels of valuation hierarchy are defined as follows:

ž Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.

ž Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

ž Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging. Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. In addition, the fair values of freestanding derivative instruments such as warrant are valued using the Binominal Model.

The Company uses Level 3 inputs for its valuation methodology for the fair value of warrant.

The binomial lattice relies on the following Level 3 inputs: (1) expected volatility of the Company’s common stock; and (2) risk free rate which is based on daily treasury yield curve rates as published by U.S. Department of the Treasury. The expected volatility of the Company’s common stock is estimated from the historical volatility of daily returns in the Company’s common stock price.

The following tables present the estimated fair value of the following financial assets and liabilities of the Company:

At September 30, 2016:

	Carrying amount
	Level 1		Level 2		Level 3		Estimated fair value
Financial assets
Carried at (amortized) cost:
Cash and cash equivalents	$	659,359	$	-	$	-	$	659,359

	Carrying amount
	Level 1			Level 2			Level 3			Estimated fair value
Financial liabilities
Carried at (amortized) cost:
Short-term bank loans		$	-		$	-		$	2,422,213		$	2,422,213
Carried at fair value:
Warrants liability			-			-			12,703			12,703
		$	-		$	-		$	2,434,916		$	2,434,916

At December 31, 2015:

	Carrying amount
	Level 1		Level 2		Level 3		Estimated fair value
Financial assets
Carried at (amortized) cost:
Cash and cash equivalents	$	38,898	$	-	$	-	$	38,898

	Carrying amount
	Level 1			Level 2			Level 3			Estimated fair value
Financial liabilities
Carried at (amortized) cost:
Short-term bank loans		$	-		$	-		$	2,773,199		$	2,773,199
Carried at fair value:
Warrants liability			-			-			59,202			59,202
		$	-		$	-		$	2,832,401		$	2,832,401

Warrants Liability
Value at December 31, 2015	$	59,202
Fair value adjustment of warrants during the nine months end September 30, 2016		(46,499	)
Value at September 30, 2016	$	12,703

At September 30, 2016, the fair value of the warrants liability, which are recognized as level 3 financial instruments, were calculated using the binomial model that included the following inputs: stock price of the underlying asset of $3.72, an exercise price of $22.61 expected volatility of 149.91%, risk free rate of 0.37% and initial time to expiration of 3 years. The change in fair value was recognized on the Company’s statement of operations during the nine months ended September 30, 2016.

In accordance with ASC-820-10-50-2(g), the Company has performed a sensitivity analysis of the outstanding warrants of the Company which are classified as level 3 financial instruments. The Company recalculated the value of warrants by applying a +/- 5% changes to the input variables in the binomial model that vary overtime, namely, the volatility and the risk free rate. A 5.0% decrease in volatility would decrease the value of the warrants to $3,162; a 5.0% increase in volatility would increase the value of the warrants to $3,669. A 5.0% decrease or increase in the risk free rate would not have materially changed the value of the warrants; the value of the warrants is not strongly correlated with small changes in interest rates.

Use of Estimates, Policy [Policy Text Block]

Use of Estimates

The preparation of the consolidated financial statements in conformity with the GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates are used for, but not limited to, the accounting for certain items such as allowance for doubtful accounts, depreciation and amortization, impairment, inventory allowance, taxes and contingencies.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash and Cash Equivalents

Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.  As of September 30, 2016 and December 31, 2015, cash and cash equivalents were mainly denominated in RMB and were placed with banks in the PRC.  These cash and cash equivalents may not be freely convertible into foreign currencies and the remittance of these funds out of the PRC may be subjected to exchange control restrictions imposed by the PRC government.

Receivables, Policy [Policy Text Block]

Accounts Receivable

The Company maintains allowance for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these allowances. Terms of sales vary. Allowances are recorded primarily on a specific identification basis.

As of September 30, 2016 and December 31, 2015, the allowance for doubtful debts was approximately $14.3 million and $6.8 million respectively.

Reverse Stock Split [Policy Text Block]

Reverse Stock Split

On February 4, 2016, the Company effectuated a one-for-seven reverse split of its common stock; the Company’s stockholder’s equity, information on a number of shares and (loss) earnings per share has been retroactively restated to the first period presented. See Note 6(a).

Inventory, Policy [Policy Text Block]

Inventories

Inventories are valued at the lower of weighted average cost or market. Management compares the cost of inventories with the market value, and allowance is made for writing down the inventories to market value, if lower. Inventories consisted of the following:

	September 30,			December 31,
	2016			2015
	(unaudited)
Raw materials		$	362,700		$	164,352
Work in process			30,596			51,041
Finished goods			46,300			19,267
		$	439,596		$	234,660

Property, Plant and Equipment, Policy [Policy Text Block]

Property and Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives of:

Buildings	30 years
Building improvements	30 years
Machinery & equipment	5-10 years
Furniture & fixtures and vehicles	5-10 years

Property and equipment consisted of the following:

	September 30,			December 31,
	2016			2015
	(unaudited)
Buildings	$	2,471,262		$	2,548,537
Building improvements		5,349,888			5,517,178
Machinery & equipment		1,151,416			1,187,421
Furniture & fixtures		51,579			53,192
Vehicle		108,314			111,701
Construction in progress		468,358			483,004
	$	9,600,817		$	9,901,033
Less: Accumulated depreciation		(3,330,381	)		(3,090,100	)
	$	6,270,436		$	6,810,933

As set out in Note 5, buildings with carrying value of approximately $1.2 million as of September 30, 2016 and December 31, 2015 were pledged to a local bank in PRC as part of security for a short term bank loan facilities granted to the Company.

Intangible Assets, Finite-Lived, Policy [Policy Text Block]

Intangible Assets

Intangible assets are amortized using the straight-line method over their estimated period of benefit, ranging from ten to fifty years. Management evaluates the recoverability of intangible assets periodically and takes into account events or circumstances that warrant revised estimates of useful lives or that indicate impairment exists. The Company’s land use rights will expire between 2053 and 2056. The Company’s proprietary technologies include land use rights and drug approvals and permits. All of the Company’s intangible assets are subject to amortization with estimated useful lives of:

Land use rights	50 years
Proprietary technologies	10 years

 The components of finite-lived intangible assets are as follows:

	September 30,				December 31,
	2016				2015
	(unaudited)
Land use rights		$	2,976,746			$	3,083,608
Proprietary technologies			15,371,835				16,065,254
			18,348,581				19,148,862
Less: Accumulated amortization and impairment			(12,287,035	)			(12,270,075	)
		$	6,061,546			$	6,878,787

The estimated future amortization expenses related to intangible assets as of September 30, 2016 are as follows:

Years Ending December 31,
2016	$	144,340
2017		577,361
2018		577,361
2019		577,361
2020		103,920
Thereafter		4,081,203

As set out in Note 5, land use right with carrying value of approximately $2.2 million as of September 30, 2016 and December 31, 2015 were pledged to a local bank in PRC as part of security for a short term bank loan facilities granted to the Company.

Stockholders' Equity, Policy [Policy Text Block]

Share warrants

In accordance with ASC815, Derivatives and Hedging, share warrants with term of down-round provision are initially recognized at fair value at grant date as a derivative liability. At each reporting period date, the fair value of the share warrants will be re-measured and the fair value change will be reported as gain/loss in the Condensed Consolidated Statements of Operations and Comprehensive Income.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company’s revenue recognition policies are in compliance with ASC 605, Revenue Recognition. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue.

The Company does not allow its customers to return products. The Company’s customers can exchange products only if they are damaged in transportation.

Revenue reported is net of value added tax and sales discounts.

New Accounting Pronouncements, Policy [Policy Text Block]

Recent accounting pronouncements

In May 2014, the FASB issued Accounting Standards Update ASU No. 2014-09, “Revenue from Contracts with Customers”, which amends the existing accounting standards for revenue recognition. ASU 2014-09 is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled when products are transferred to customers. ASU 2014-09 will be effective for the Company beginning in its first quarter of 2019, and early adoption is permitted. Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (“ASU 2016-08”); ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing (“ASU 2016-10”); and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients (“ASU 2016-12”). The Company must adopt ASU 2016-08, ASU 2016-10 and ASU 2016-12 with ASU 2014-09 (collectively, the “new revenue standards”). The new revenue standards may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. The Company currently expects to adopt the new revenue standards in its first quarter of 2018 utilizing the full retrospective transition method. The adoption of the new revenue standards is not expected to have any material impact on the Company’s consolidated financial statements.

In February 2015, the FASB issued Accounting Standards Update ASU No. 2015-02, “Consolidation” (Topic 810). ASU 2015-02 changes the guidance with respect to the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. All legal entities are subject to reevaluation under the revised consolidation mode. ASU 2015-02 affects the following areas: (1) Limited partnerships and similar legal entities. (2) Evaluating fees paid to a decision maker or a service provider as a variable interest. (3) The effect of fee arrangements on the primary beneficiary determination. (4) The effect of related parties on the primary beneficiary determination. (5) Certain investment funds. ASU 2015-02 is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the guidance in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. A reporting entity may apply the amendments in this guidance using a modified retrospective approach by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption. A reporting entity also may apply the amendments retrospectively. The adoption of ASU 2015-02 is not expected to have any material impact on the Company’s financial statement presentation or disclosures.

In April 2015, the FASB issued ASU No. 2015-03, “Simplifying the Presentation of Debt Issuance Costs”. The accounting guidance requires that debt issuance costs related to a recognized debt liability be reported on the Consolidated Statements of Financial Condition as a direct deduction from the carrying amount of that debt liability. The guidance is effective for the Company retrospectively beginning in the first quarter of fiscal 2017 and early adoption is permitted. The adoption of this accounting guidance is not expected to have any material impact on the Company’s Consolidated Statements of Financial Condition.

In July 2015, the FASB issued Accounting Standards Update ASU No. 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory,” which applies to inventory that is measured using first-in, first-out (“FIFO”) or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, first-out (“LIFO”). ASU 2015-11 is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption permitted at the beginning of an interim or annual reporting period. The Company will adopt the standard in the interim and annual period after December 31, 2016.  The adoption of ASU 2015-11 is not expected to have any material impact on the Company’s consolidated financial statements.

In November 2015, the FASB issued Accounting Standards Updates ASU No. 2015-17, “Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes” (“ASU 2015-17”). The FASB issued ASU 2015-17 as part of its ongoing Simplification Initiative, with the objective of reducing complexity in accounting standards. The amendments in ASU 2015-17 require entities that present a classified balance sheet to classify all deferred tax liabilities and assets as a noncurrent amount. This guidance does not change the offsetting requirements for deferred tax liabilities and assets, which results in the presentation of one amount on the balance sheet. Additionally, the amendments in this ASU align the deferred income tax presentation with the requirements in International Accounting Standards (IAS) 1, Presentation of Financial Statements.  The amendments in ASU 2015-17 are effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. The Company is currently reviewing the provisions of this ASU 2015-17 to determine if there will be any impact on the Company’s consolidated financial statements.

In February 2016, the FASB issued Accounting Standards Updates ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases. ASU 2016-02 will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Company is currently reviewing the provisions of this ASU 2016-02 to determine if there will be any impact on the Company’s consolidated financial statements.

In March 2016, the FASB issued Accounting Standards Update ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting”. The objective of the simplification initiative is to identify, evaluate, and improve areas of US GAAP for which cost and complexity can be reduced while maintaining or improving the usefulness of the information provided to users of financial statements. The areas for simplification involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures, and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. ASU 2016-09 will be effective for public companies for reporting periods beginning after December 15, 2016. The Company is assessing the impact to its accounting practices and financial reporting procedures as a result of the issuance of this standard.

In June 2016, the FASB issued Accounting Standards Update ASU 2016-13, “Financial Instruments—Credit Losses (Topic 326), which modifies the measurement of expected credit losses of certain financial instruments. ASU 2016-13 will be effective for the Company beginning in its first quarter of 2021 and early adoption is permitted. The adoption of ASU 2016-13 is not expected to have any material impact on the Company’s consolidated financial statements.

In August 2016, the FASB issued Accounting Standards Update ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments”. The updated guidance aims to reduce diversity in presentation and classification of certain cash receipts and cash payments by addressing eight specific cash flow issues including (1) Debt Prepayment or Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made after a Business Combination; (4) Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned Life Insurance Policies; (6) Distributions Received from Equity Method Investees; (7) Beneficial Interests in Securitization Transactions and (8) Separately Identifiable Cash Flows and Application of the Predominance Principle. Among the afore-mentioned eight addressed cash flow issues, the category of “Separately Identifiable Cash Flows and Application of the Predominance Principle” requires a reporting entity to classify cash receipts and payments that have aspects of more than one class of cash flows first by applying specific guidance in generally accepted accounting principles (GAAP) and, only in the absence of specific guidance, by determining each separately identifiable source or use within the cash receipts and cash payments on the basis of the nature of the underlying cash flows. In situations in which cash receipts and payments have aspects of more than one class of cash flows and cannot be separated by source or use, a reporting entity should classify such cash receipts and cash payments by referring to the predominant source or use of cash flows for the item. The updated guidance is effective from reporting periods beginning after December 15, 2018. The Company is assessing the impact to its accounting practices and financial reporting procedures as a result of the issuance of this standard.

As of September 30, 2016, there are no recently issued accounting standards not yet adopted that would have a material effect on the Company’s financial statements.

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Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

9 Months Ended

Sep. 30, 2016

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) [Line Items]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

The following tables present the estimated fair value of the following financial assets and liabilities of the Company:

	Carrying amount
	Level 1		Level 2		Level 3		Estimated fair value
Financial assets
Carried at (amortized) cost:
Cash and cash equivalents	$	659,359	$	-	$	-	$	659,359

	Carrying amount
	Level 1			Level 2			Level 3			Estimated fair value
Financial liabilities
Carried at (amortized) cost:
Short-term bank loans		$	-		$	-		$	2,422,213		$	2,422,213
Carried at fair value:
Warrants liability			-			-			12,703			12,703
		$	-		$	-		$	2,434,916		$	2,434,916

	Carrying amount
	Level 1		Level 2		Level 3		Estimated fair value
Financial assets
Carried at (amortized) cost:
Cash and cash equivalents	$	38,898	$	-	$	-	$	38,898

	Carrying amount
	Level 1			Level 2			Level 3			Estimated fair value
Financial liabilities
Carried at (amortized) cost:
Short-term bank loans		$	-		$	-		$	2,773,199		$	2,773,199
Carried at fair value:
Warrants liability			-			-			59,202			59,202
		$	-		$	-		$	2,832,401		$	2,832,401

Schedule of Derivative Liabilities at Fair Value [Table Text Block]

The following tables present the estimated fair value of the following financial assets and liabilities of the Company:

Warrants Liability
Value at December 31, 2015	$	59,202
Fair value adjustment of warrants during the nine months end September 30, 2016		(46,499	)
Value at September 30, 2016	$	12,703

Schedule of Inventory, Current [Table Text Block]

Inventories are valued at the lower of weighted average cost or market. Management compares the cost of inventories with the market value, and allowance is made for writing down the inventories to market value, if lower. Inventories consisted of the following:

	September 30,			December 31,
	2016			2015
	(unaudited)
Raw materials		$	362,700		$	164,352
Work in process			30,596			51,041
Finished goods			46,300			19,267
		$	439,596		$	234,660

Property, Plant and Equipment [Table Text Block]

Property and equipment consisted of the following:

	September 30,			December 31,
	2016			2015
	(unaudited)
Buildings	$	2,471,262		$	2,548,537
Building improvements		5,349,888			5,517,178
Machinery & equipment		1,151,416			1,187,421
Furniture & fixtures		51,579			53,192
Vehicle		108,314			111,701
Construction in progress		468,358			483,004
	$	9,600,817		$	9,901,033
Less: Accumulated depreciation		(3,330,381	)		(3,090,100	)
	$	6,270,436		$	6,810,933

Schedule of Finite-Lived Intangible Assets [Table Text Block]

The components of finite-lived intangible assets are as follows:

	September 30,				December 31,
	2016				2015
	(unaudited)
Land use rights		$	2,976,746			$	3,083,608
Proprietary technologies			15,371,835				16,065,254
			18,348,581				19,148,862
Less: Accumulated amortization and impairment			(12,287,035	)			(12,270,075	)
		$	6,061,546			$	6,878,787

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

The estimated future amortization expenses related to intangible assets as of September 30, 2016 are as follows:

Years Ending December 31,
2016	$	144,340
2017		577,361
2018		577,361
2019		577,361
2020		103,920
Thereafter		4,081,203

Property and Equipment, Estimated Useful Lives [Member]

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) [Line Items]

Property, Plant and Equipment [Table Text Block]

Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives of:

Buildings	30 years
Building improvements	30 years
Machinery & equipment	5-10 years
Furniture & fixtures and vehicles	5-10 years

Estimated Useful Life [Member]

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables) [Line Items]

Schedule of Finite-Lived Intangible Assets [Table Text Block]

All of the Company’s intangible assets are subject to amortization with estimated useful lives of:

Land use rights	50 years
Proprietary technologies	10 years

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Note 3 - DEPOSITS AND OTHER RECEIVABLES (Tables)

9 Months Ended

Sep. 30, 2016

Disclosure Text Block Supplement [Abstract]

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Table Text Block]

Deposits and other receivables consisted of the following:

	September 30,		December 31,
	2016		2015
Current portion
Deposit for research & development	$	80	$	80
Other receivables and prepaid expenses		2,445		2,511
		2,525		2,591
Non-current portion
a) Deposits paid for intended acquisition of a health product material supplier	$	12,072,730	$	12,402,360
b) Deposits paid for intended acquisition of a health product manufacturer		3,599,324		3,697,598
Deposits	$	15,672,054	$	16,099,958

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Note 5 - SHORT-TERM BANK LOANS (Tables)

9 Months Ended

Sep. 30, 2016

Disclosure Text Block [Abstract]

Schedule of Short-term Debt [Table Text Block]

Short-term bank loans consisted of the followings:

		Balance as at
Inception date	Details	September 30, 2016			December 31, 2015
May 26, 2014	RMB 20 million, one year term loan, annual interest rate at 7.80%. During the six months ended June 30, 2016, the Company paid interest of RMB 0.3 million. As of September 30, 2016, the Company had cumulatively repaid RMB 3.8 million and recorded accrued interest expenses of RMB 1.6 million.		$	2,422,213		$	2,773,199

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Note 6 - STOCKHOLDERS' EQUITY (Tables)

9 Months Ended

Sep. 30, 2016

Stockholders' Equity Note [Abstract]

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

The following table summarizes the Company’s outstanding warrants as of September 30, 2016 and December 31, 2015.

			Outstanding as at,
Expiry date	Exercise Price		September 30, 2016		December 31, 2015
March 12, 2017		22.61		108,428		108,428

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

The following tables summarize activities for the Company’s options for the nine months ended September 30, 2016.

				Weighted Average
	Number of options			Exercise Price ($)		Remaining Life (years)
Balance, December 31, 2015		6,762			26.39		0.54
Expires		(3,333	)		41.37		-
Balance, September 30, 2016		3,429			11.76		0.45
Vested and exercisable as at September 30, 2016		3,429			11.76		0.45

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Note 9 - LOSS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2016

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The following table sets forth the computation of basic and diluted earnings per share of common stock:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Basic loss per share:
Numerator:
Net loss used in computing basic earnings per share	$	(1,563,671	)	$	(1,254,753	)	$	(9,086,460	)	$	(1,907,284	)
Denominator:
Weighted average common shares outstanding		2,210,913			2,210,913			2,210,913			2,210,913
Basic loss per share	$	(0.71	)	$	(0.57	)	$	(4.11	)	$	(0.86	)
Diluted loss per share:
Numerator:
Net loss used in computing diluted earnings per share	$	(1,563,671	)	$	(1,254,753	)	$	(9,086,460	)	$	(1,907,284	)
Denominator:
Weighted average common shares outstanding		2,210,913			2,210,913			2,210,913			2,210,913
Diluted (loss) earnings per share	$	(0.71	)	$	(0.57	)	$	(4.11	)	$	(0.86	)

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Note 10 - OTHER COMPREHENSIVE INCOME (Tables)

9 Months Ended

Sep. 30, 2016

Disclosure Text Block [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

Balance of related after-tax components comprising accumulated other comprehensive income included in stockholders’ equity as of September 30, 2016 and December 31, 2015 were as follows:

	September30, 2016			December 31,2015
Accumulated other comprehensive income, beginning of period	$	3,434,348		$	6,391,998
Change in cumulative translation adjustment		(1,152,031	)		(2,957,650	)
Accumulated other comprehensive income, end of period	$	2,282,317		$	3,434,348

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Note 11 - COMMITMENTS (Tables)

9 Months Ended

Sep. 30, 2016

Disclosure Text Block Supplement [Abstract]

Other Commitments [Table Text Block]

	Total capital payment commitment		September 30, 2016		December 31, 2015
a) Three agreements with certain research institutes to conduct clinical trials for two new and one existing drugs.	$	2.0	$	0.8	$	0.8
b) In December 2014, the Company signed a letter of intent to acquire 100% interest in a company in the PRC, which is principally engaged in supply of raw materials to produce health product, for an aggregate consideration of approximately $12.3 million (RMB 82 million) in cash.		12.3		0.2		0.2
c) In November 2013, the Company signed a letter of intent to acquire 100% interest in a health product manufacturer for an aggregate consideration of approximately $8.7 million (RMB 56 million), consisting of approximately $4.7 million (RMB 30 million) in cash and shares of the Company’s common stock valued at approximately $4.0 million (RMB 26 million), subject to the completion of a due diligence report and certain conditions set out in the letter of intent being met.		8.7		5.1		4.9
Total capital payment commitment			$	6.1	$	5.9

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Note 13 - RISKS CONCENTRATION (Tables)

9 Months Ended

Sep. 30, 2016

Customer Concentration Risk [Member]

Note 13 - RISKS CONCENTRATION (Tables) [Line Items]

Schedules of Concentration of Risk, by Risk Factor [Table Text Block]

The following table illustrates the Company’s risks concentration:

Sales risks concentration
	Percentage of total sales during the
Customer	Nine Months Ended September 30,
	2016			2015
A		0	%		48	%
B		100	%		12	%
Total risks concentration		100	%		60	%

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Note 1 - ORGANIZATION AND NATURE OF OPERATIONS (Details) $ in Millions				1 Months Ended
	Feb. 04, 2016	Apr. 03, 2012	Nov. 01, 2007 shares	Apr. 30, 2013 USD ($) shares	Oct. 31, 2011
Note 1 - ORGANIZATION AND NATURE OF OPERATIONS (Details) [Line Items]
Stockholders' Equity, Reverse Stock Split	one-for-seven	one-for-three
Shaanxi Aoxing Pharmaceutical Co., Ltd. [Member]
Note 1 - ORGANIZATION AND NATURE OF OPERATIONS (Details) [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares | shares			944,396
Sale of Stock, Percentage of Ownership after Transaction			90.00%
Business Combination, Consideration Transferred | $				$ 10.2
Payments to Acquire Intangible Assets | $				$ 8.8
Stock Issued During Period, Shares, Purchase of Assets | shares				228,938
Stock Issued During Period, Value, Purchase of Assets | $				$ 1.4
Shaanxi Weinan Huaren Pharmaceuticals, Ltd. [Member]
Note 1 - ORGANIZATION AND NATURE OF OPERATIONS (Details) [Line Items]
Business Acquisition, Percentage of Voting Interests Acquired					100.00%
Number of drug approval numbers acquired				13
Pre Reverse Stock Split [Member] | Shaanxi Aoxing Pharmaceutical Co., Ltd. [Member]
Note 1 - ORGANIZATION AND NATURE OF OPERATIONS (Details) [Line Items]
Business Acquisition, Equity Interest Issued or Issuable, Number of Shares | shares			19,832,311

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Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) $ / shares in Units, ¥ in Millions			3 Months Ended		9 Months Ended				12 Months Ended	24 Months Ended
	Feb. 04, 2016	Apr. 03, 2012	Sep. 30, 2016 USD ($) $ / shares	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($) $ / shares	Sep. 30, 2016 CNY (¥)	Sep. 30, 2015 USD ($)	Sep. 30, 2015 CNY (¥)	Dec. 31, 2015 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2018 CNY (¥)	Dec. 31, 2014 USD ($)
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Cash and Cash Equivalents, at Carrying Value			$ 659,359	$ 111,911	$ 659,359		$ 111,911		$ 38,898			$ 1,685,154
Working Capital (Deficit)			759,717		759,717
Net Income (Loss) Attributable to Parent			(1,563,671)	(1,254,753)	(9,086,460)		(1,907,284)
Net Cash Provided by (Used in) Operating Activities					911,057		(206,821)
Gain (Loss) on Disposition of Assets							(500,000)	¥ (3.3)
Other Nonoperating Income			501,578	546	501,578	¥ 3.3	2,065
Other Comprehensive Income (Loss), Foreign Currency Transaction and Translation Adjustment, Net of Tax			$ (174,104)	$ (3,140,062)	$ (1,152,031)		$ (2,479,077)		(2,957,650)
Share Price (in Dollars per share) | $ / shares			$ 3.72		$ 3.72
Fair Value Assumptions, Exercise Price (in Dollars per share) | $ / shares			$ 22.61		$ 22.61
Fair Value Assumptions, Expected Volatility Rate					149.91%	149.91%
Fair Value Assumptions, Risk Free Interest Rate					0.37%	0.37%
Fair Value Assumptions, Expected Term					3 years	3 years
Fair Value Inputs, Discount Rate					5.00%	5.00%
Derivative Liability			$ 12,703		$ 12,703				59,202
Allowance for Doubtful Accounts Receivable			14,300,000		$ 14,300,000				6,800,000
Stockholders' Equity, Reverse Stock Split	one-for-seven	one-for-three
Finite-Lived Intangible Assets, Amortization Method					straight-line method	straight-line method
Scenario, Forecast [Member]
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Inventory Expected to Sell, Units										400,000	400,000
Revenues										$ 7,500,000	¥ 50.0
Building [Member]
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Debt Instrument, Collateral Amount			1,200,000		$ 1,200,000				1,200,000
Use Rights [Member]
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Debt Instrument, Collateral Amount			2,200,000		$ 2,200,000				$ 2,200,000
Finite-Lived Intangible Asset, Useful Life					50 years	50 years
Minimum [Member]
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life					10 years	10 years
Maximum [Member]
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Finite-Lived Intangible Asset, Useful Life					50 years	50 years
Volatility Measured at 5% Decrease [Member] | Warrant [Member]
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Derivative Liability			3,162		$ 3,162
Volatility Measured at 5% Increase [Member] | Warrant [Member]
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) [Line Items]
Derivative Liability			$ 3,669		$ 3,669

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Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Carried at (amortized) cost:
Cash and cash equivalents	$ 659,359	$ 38,898
Carried at (amortized) cost:
Short-term bank loans	2,422,213	2,773,199
Carried at fair value:
Warrants liability	12,703	59,202
Financial liabilities	2,434,916	2,832,401
Fair Value, Inputs, Level 1 [Member]
Carried at (amortized) cost:
Cash and cash equivalents	659,359	38,898
Carried at (amortized) cost:
Short-term bank loans	0	0
Carried at fair value:
Warrants liability	0	0
Financial liabilities	0	0
Fair Value, Inputs, Level 2 [Member]
Carried at (amortized) cost:
Cash and cash equivalents	0	0
Carried at (amortized) cost:
Short-term bank loans	0	0
Carried at fair value:
Warrants liability	0	0
Financial liabilities	0	0
Fair Value, Inputs, Level 3 [Member]
Carried at (amortized) cost:
Cash and cash equivalents	0	0
Carried at (amortized) cost:
Short-term bank loans	2,422,213	2,773,199
Carried at fair value:
Warrants liability	12,703	59,202
Financial liabilities	$ 2,434,916	$ 2,832,401

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Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Derivative Liabilities	9 Months Ended
	Sep. 30, 2016 USD ($)
Warrants Liability
Value at December 31, 2015	$ 59,202
Fair value adjustment of warrants during the nine months end September 30, 2016	(46,499)
Value at September 30, 2016	$ 12,703

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Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Inventory - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Schedule of Inventory [Abstract]
Raw materials	$ 362,700	$ 164,352
Work in process	30,596	51,041
Finished goods	46,300	19,267
	$ 439,596	$ 234,660

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Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Property, Plant and Equipment, Estimated Useful Lives	9 Months Ended
	Sep. 30, 2016
Building [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	30 years
Building Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	30 years
Minimum [Member] | Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	5 years
Minimum [Member] | Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	5 years
Maximum [Member] | Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	10 years
Maximum [Member] | Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	10 years

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Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Property, Plant and Equipment - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 9,600,817	$ 9,901,033
Less: Accumulated depreciation	(3,330,381)	(3,090,100)
	6,270,436	6,810,933
Building [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	2,471,262	2,548,537
Building Improvements [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	5,349,888	5,517,178
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	1,151,416	1,187,421
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	51,579	53,192
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	108,314	111,701
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property, plant and equipment, gross	$ 468,358	$ 483,004

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Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Finite-Lived Intangible Assets, Estimated Useful LIves	9 Months Ended
	Sep. 30, 2016
Use Rights [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Asset, Useful Life	50 years
Technology-Based Intangible Assets [Member]
Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Asset, Useful Life	10 years

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Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Finite-Lived Intangible Assets - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 18,348,581	$ 19,148,862
Less: Accumulated amortization and impairment	(12,287,035)	(12,270,075)
	6,061,546	6,878,787
Use Rights [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	2,976,746	3,083,608
Technology-Based Intangible Assets [Member]
Finite-Lived Intangible Assets [Line Items]
Intangible assets, gross	$ 15,371,835	$ 16,065,254

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Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - Schedule of Expected Amortization Expense	Sep. 30, 2016 USD ($)
Schedule of Expected Amortization Expense [Abstract]
2016	$ 144,340
2017	577,361
2018	577,361
2019	577,361
2020	103,920
Thereafter	$ 4,081,203

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Note 3 - DEPOSITS AND OTHER RECEIVABLES (Details) ¥ in Millions, $ in Millions	1 Months Ended
	Dec. 31, 2014 USD ($)	Dec. 31, 2014 CNY (¥)	Nov. 30, 2013 USD ($)	Nov. 30, 2013 CNY (¥)
Health Product Material Supplier [Member]
Note 3 - DEPOSITS AND OTHER RECEIVABLES (Details) [Line Items]
Business Combination, Step Acquisition, Equity Interest in Acquiree, Percentage	100.00%	100.00%
Business Combination, Consideration Transferred	$ 12.3	¥ 82
Health Product Manufacturer [Member]
Note 3 - DEPOSITS AND OTHER RECEIVABLES (Details) [Line Items]
Business Combination, Step Acquisition, Equity Interest in Acquiree, Percentage			100.00%	100.00%
Business Combination, Consideration Transferred			$ 8.7	¥ 56
Payments to Acquire Businesses, Gross			4.7	30
Business Combination, Consideration Transferred, Equity Interests Issued and Issuable			$ 4.0	¥ 26

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Note 3 - DEPOSITS AND OTHER RECEIVABLES (Details) - Schedule of Prepaid Expenses and Other Receivables - USD ($)		Sep. 30, 2016	Dec. 31, 2015
Current portion
Deposit for research & development		$ 80	$ 80
Other receivables and prepaid expenses		2,445	2,511
		2,525	2,591
Non-current portion
Deposit paid for intended acquisition		15,672,054	16,099,958
Health Product Material Supplier [Member]
Non-current portion
Deposit paid for intended acquisition	[1]	12,072,730	12,402,360
Health Product Manufacturer [Member]
Non-current portion
Deposit paid for intended acquisition	[2]	$ 3,599,324	$ 3,697,598

[1] In December 2014, the Company signed a letter of intent to acquire 100% interest in a company in the PRC, which is principally engaged in supply of raw materials to produce health product, for an aggregate consideration of approximately $12.3 million (RMB 82 million) in cash. The completion of the acquisition is subject to the completion of a valuation report and certain conditions set out in the letter of intent being met. The deposit is fully refundable if certain conditions set out in the letter of intent are not met. The acquisition was yet to complete by September 30, 2016.

[2] In November 2013, the Company signed a letter of intent to acquire 100% interest in a health product manufacturer for an aggregate consideration of approximately $8.7 million (RMB 56 million), consisting of approximately $4.7 million (RMB 30 million) in cash and shares of the Company's common stock valued at approximately $4.0 million (RMB 26 million), the acquisition is in final stage and the Company is reviewing the draft of shares transfer agreement. The acquisition was yet to complete by September 30, 2016.

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Note 4 - LOAN RECEIVABLES (Details) - Loans Receivable [Member] ¥ in Millions			12 Months Ended
	Dec. 31, 2013	Nov. 20, 2012 USD ($)	Dec. 31, 2014	Sep. 30, 2016 USD ($)	Nov. 20, 2012 CNY (¥)
Note 4 - LOAN RECEIVABLES (Details) [Line Items]
Notes, Loans and Financing Receivable, Net, Current		$ 9,200,000			¥ 60
Notes and Loans Receivable, Interest Rate Percentage		13.00%
Notes and Loans Receivable, Maturity Date	Jun. 30, 2014	Dec. 31, 2013	Dec. 31, 2015
Interest Receivable				$ 0

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Note 5 - SHORT-TERM BANK LOANS (Details) - USD ($) $ in Millions	May 26, 2014	Sep. 30, 2016	Dec. 31, 2015
Use Rights [Member]
Note 5 - SHORT-TERM BANK LOANS (Details) [Line Items]
Debt Instrument, Collateral Amount		$ 2.2	$ 2.2
Notes Payable to Banks [Member]
Note 5 - SHORT-TERM BANK LOANS (Details) [Line Items]
Debt Instrument, Collateral	The loan is secured by (i) personal guarantee executed by a major shareholder of the Company; (ii) pledge of the Company’s buildings and land use right with carrying amount of approximately $3.4 million as of September 30, 2016 and December 31, 2015 (Note 2); and the guarantee executed by Shaanxi Biostar.
Notes Payable to Banks [Member] | Use Rights [Member]
Note 5 - SHORT-TERM BANK LOANS (Details) [Line Items]
Debt Instrument, Collateral Amount		$ 3.4	$ 3.4

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Note 5 - SHORT-TERM BANK LOANS (Details) - Schedule of Short-term Debt ¥ in Millions	Sep. 30, 2016 USD ($)	Sep. 30, 2016 CNY (¥)	Dec. 31, 2015 USD ($)	Dec. 31, 2015 CNY (¥)
Schedule of Short-term Debt [Abstract]
May 26, 2014	$ 2,422,213	¥ 20	$ 2,773,199	¥ 20

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Note 5 - SHORT-TERM BANK LOANS (Details) - Schedule of Short-term Debt (Parentheticals) ¥ in Millions	9 Months Ended			12 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2016 CNY (¥)	Sep. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)	Sep. 30, 2016 CNY (¥)	Dec. 31, 2015 CNY (¥)
Schedule of Short-term Debt [Abstract]
Short-term loan	$ 2,422,213			$ 2,773,199	¥ 20.0	¥ 20.0
Short-term loan, term	1 year	1 year		1 year
Short-term loan, interest rate	7.80%			7.80%	7.80%	7.80%
Short-term loan, cumulative repayment					¥ 3.8
Short-term loan, paid interest	$ 143,716	¥ 0.3	$ 59,406
Short-term loan, accrued interest					¥ 1.6

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Note 6 - STOCKHOLDERS' EQUITY (Details) - USD ($)			3 Months Ended		9 Months Ended		12 Months Ended
	Feb. 04, 2016	Apr. 03, 2012	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015	Dec. 31, 2014
Note 6 - STOCKHOLDERS' EQUITY (Details) [Line Items]
Common Stock, Par or Stated Value Per Share (in Dollars per share)			$ 0.001		$ 0.001		$ 0.001
Common Stock, Shares Authorized			100,000,000		100,000,000		100,000,000
Common Stock, Shares, Issued			2,210,913		2,210,913		2,210,913
Common Stock, Shares, Outstanding			2,210,913		2,210,913		2,210,913
Stockholders' Equity, Reverse Stock Split	one-for-seven	one-for-three
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)			$ 22.61		$ 22.61		$ 22.61
Derivative Liability, Current (in Dollars)			$ 12,703		$ 12,703		$ 59,202
Derivative, Gain (Loss) on Derivative, Net (in Dollars)			$ 2,151	$ 144,210	$ 46,499	$ 224,664
Class of Warrant or Right, Outstanding			108,428		108,428		108,428
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Stock Options (in Dollars)			$ 0		$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value (in Dollars)			0		0
Private Placement [Member]
Note 6 - STOCKHOLDERS' EQUITY (Details) [Line Items]
Class of Warrant or Rights, Granted								94,286
Class of Warrant or Right, Exercise Price of Warrants or Rights (in Dollars per share)								$ 22.61
Warrants, Term of Warrants								3 years
Derivative Liability, Current (in Dollars)			$ 12,703		$ 12,703			$ 960,894
Issuance of Stock and Warrants for Services or Claims (in Dollars)								960,894
Fair Value Adjustment of Warrants (in Dollars)							$ 324,093	$ 577,599
Warrants Issued to Placement Agent [Member] | Private Placement [Member]
Note 6 - STOCKHOLDERS' EQUITY (Details) [Line Items]
Class of Warrant or Rights, Granted								14,142

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Note 6 - STOCKHOLDERS' EQUITY (Details) - Schedule of Warrant Activity - $ / shares	Sep. 30, 2016	Dec. 31, 2015
Class of Warrant or Right [Line Items]
March 12, 2017 (in Dollars per share)	$ 22.61	$ 22.61
March 12, 2017	108,428	108,428
Warrants Expiring March 12, 2017 [Member]
Class of Warrant or Right [Line Items]
March 12, 2017 (in Dollars per share)	$ 22.61
March 12, 2017	108,428	108,428

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Note 6 - STOCKHOLDERS' EQUITY (Details) - Schedule of Stock Option Activity - $ / shares	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Schedule of Stock Option Activity [Abstract]
Options outstanding	3,429	6,762
Options outstanding, Weighted Average Exercise Price	$ 11.76	$ 26.39
Options outstanding, Weighted Average Remaining Life	164 days	197 days
Vested and exercisable as at September 30, 2016	3,429
Vested and exercisable as at September 30, 2016	$ 11.76
Vested and exercisable as at September 30, 2016	164 days
Expires	(3,333)
Expires	$ 41.37

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Note 7 - INCOME TAXES (Details)	9 Months Ended
	Sep. 30, 2016
Income Tax Disclosure [Abstract]
Number of tax jurisdictions	1

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Note 8 - STATUTORY RESERVES (Details) - USD ($)	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Statutory Reserves [Abstract]
Statutory reserves, percent of profit after taxes	10.00%
Statuory reserve fund, percentage of registered capital	50.00%
Retained Earnings, Appropriated	$ 7,354,413	$ 7,354,413

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Note 9 - LOSS PER SHARE (Details) - Schedule of Earnings Per Share, Basic and Diluted - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Numerator:
Net loss used in computing basic earnings per share	$ (1,563,671)	$ (1,254,753)	$ (9,086,460)	$ (1,907,284)
Denominator:
Weighted average common shares outstanding	2,210,913	2,210,913	2,210,913	2,210,913
Basic loss per share	$ (0.71)	$ (0.57)	$ (4.11)	$ (0.86)
Numerator:
Net loss used in computing diluted earnings per share	$ (1,563,671)	$ (1,254,753)	$ (9,086,460)	$ (1,907,284)
Denominator:
Weighted average common shares outstanding	2,210,913	2,210,913	2,210,913	2,210,913
Diluted (loss) earnings per share	$ (0.71)	$ (0.57)	$ (4.11)	$ (0.86)

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Note 10 - OTHER COMPREHENSIVE INCOME (Details) - Schedule of Accumulated Other Comprehensive Income (Loss) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Schedule of Accumulated Other Comprehensive Income (Loss) [Abstract]
Accumulated other comprehensive income, beginning of period			$ 3,434,348	$ 6,391,998	$ 6,391,998
Change in cumulative translation adjustment	$ (174,104)	$ (3,140,062)	(1,152,031)	$ (2,479,077)	(2,957,650)
Accumulated other comprehensive income, end of period	$ 2,282,317		$ 2,282,317		$ 3,434,348

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Note 11 - COMMITMENTS (Details) - Placement Agent [Member]	Sep. 22, 2016 shares
Note 11 - COMMITMENTS (Details) [Line Items]
Placement Agent, Cash Fee on Gross Proceeds Paid to the Company	8.00%
Class of Warrant or Rights, Granted	22,500

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Note 11 - COMMITMENTS (Details) - Schedule of Other Commitments - USD ($) $ in Millions	Sep. 30, 2016	Dec. 31, 2015
Other Commitments [Line Items]
Commitments	$ 6.1	$ 5.9
Agreement with Research Institute for Development of Drug [Member]
Other Commitments [Line Items]
Commitments	0.8	0.8
Health Product Material Supplier [Member]
Other Commitments [Line Items]
Commitments	0.2	0.2
Health Product Manufacturer [Member]
Other Commitments [Line Items]
Commitments	5.1	$ 4.9
Total Commitment [Member] | Agreement with Research Institute for Development of Drug [Member]
Other Commitments [Line Items]
Commitments	2.0
Total Commitment [Member] | Health Product Material Supplier [Member]
Other Commitments [Line Items]
Commitments	12.3
Total Commitment [Member] | Health Product Manufacturer [Member]
Other Commitments [Line Items]
Commitments	$ 8.7

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Note 11 - COMMITMENTS (Details) - Schedule of Other Commitments (Parentheticals) ¥ in Millions, $ in Millions	9 Months Ended		12 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2016 CNY (¥)	Dec. 31, 2015
Agreement with Research Institute for Development of Drug [Member]
Other Commitments [Line Items]
Agreements	Three agreements	Three agreements	Three agreements
Health Product Material Supplier [Member]
Other Commitments [Line Items]
Interest in a company	100.00%	100.00%	100.00%
Health Product Manufacturer [Member]
Other Commitments [Line Items]
Interest in a company	100.00%	100.00%	100.00%
Total Commitment [Member] | Agreement with Research Institute for Development of Drug [Member]
Other Commitments [Line Items]
Agreements	Three agreements	Three agreements
Total Commitment [Member] | Health Product Material Supplier [Member]
Other Commitments [Line Items]
Interest in a company	100.00%	100.00%
Aggregate Consideration (in Dollars)	$ 12.3	¥ 82
Aggregate Consideration (in Yuan Renminbi)	$ 12.3	¥ 82
Total Commitment [Member] | Health Product Manufacturer [Member]
Other Commitments [Line Items]
Interest in a company	100.00%	100.00%
Aggregate Consideration (in Dollars)	$ 8.7	¥ 56
Aggregate Consideration (in Yuan Renminbi)	8.7	56
Aggregate Consideration, Cash (in Dollars)	4.7	30
Aggregate Consideration, Cash (in Yuan Renminbi)	4.7	30
Aggregate Consideration, Shares valued (in Dollars)	4.0	26
Aggregate Consideration, Shares valued (in Yuan Renminbi)	$ 4.0	¥ 26

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Note 13 - RISKS CONCENTRATION (Details) - Purchase and accounts payable risks concentration - Sales Revenue, Goods, Net [Member] - Customer Concentration Risk [Member]	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Customer A [Member]
Concentration Risk [Line Items]
Customer Risk Concentration, Percentage	0.00%	48.00%
Customer B [Member]
Concentration Risk [Line Items]
Customer Risk Concentration, Percentage	100.00%	12.00%
Two Customers [Member]
Concentration Risk [Line Items]
Customer Risk Concentration, Percentage	100.00%	60.00%

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Note 14 - SUBSEQUENT EVENTS (Details) - USD ($) $ / shares in Units, $ in Thousands	Oct. 11, 2016	Oct. 17, 2016	Sep. 30, 2016	Dec. 31, 2015
Note 14 - SUBSEQUENT EVENTS (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights			$ 22.61	$ 22.61
Securities Purchase Agreement [Member] | Subsequent Event [Member]
Note 14 - SUBSEQUENT EVENTS (Details) [Line Items]
Stock Issued During Period, Shares, New Issues (in Shares)	425,000
Class of Warrant or Right, Number of Securities Called by Warrants or Rights (in Shares)	212,500
Proceeds from Issuance or Sale of Equity (in Dollars)	$ 1,910
Warrants, Term of Warrants	3 years 6 months
Class of Warrant or Right, Exercise Price of Warrants or Rights	$ 5.55
Before Modification of Warrants Issued in 2014 [Member] | Subsequent Event [Member]
Note 14 - SUBSEQUENT EVENTS (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights		$ 22.61
After Modification of Warrants Issued in 2014 [Member] | Subsequent Event [Member]
Note 14 - SUBSEQUENT EVENTS (Details) [Line Items]
Class of Warrant or Right, Exercise Price of Warrants or Rights		$ 3.11