Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 2013 |
Presentation, Nature Of Business, and Going Concern [Abstract] | |
Nature of Business | Nature of Business |
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China Ginseng Holdings, Inc. (the “Company”), was incorporated under the laws of Nevada on June 24, 2004. |
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On November 24, 2004, the Company acquired 55% of Yanbian Huaxing Ginseng Industry Co. Limited (“Yanbian Huaxing”), which is located in China and, is in the business of farming, processing, distribution, and marketing of Asian Ginseng. The company utilizes the Ginseng harvest to produce a Ginseng beverage and buys Ginseng for the resale market. On November 24, 2005, the Company acquired the remaining 45% of Yanbian Huaxing. |
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Yanbian Huaxing controls, through 20 year leases granted by the Chinese Government, approximately 1,500 hectors (3,705 acres) of land used to grow ginseng. The Company had no operations prior to November 24, 2004. These leases expire through 2024. |
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On August 24, 2005, the Company acquired Jilin Ganzhi Ginseng Produce Co. Limited, whose principal business is the manufacture of Ginseng drinks. |
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On October 19, 2005, the Company incorporated a new company, Jilin Huamei Beverage Co. Limited (“Jilin Huamei”). |
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On March 31, 2008 the Company acquired Tonghua Linyuan Grape Planting Co. Limited (“Tonghua Linyuan”) whose principal activity was the growing, cultivation and harvesting of a grape vineyard. The Company plans to produce wine and grape juice but to date has not commenced production. As of June 30, 2012, Tonghua Linyuan leased 750 acres of land on which the grapes were planted. In June 2012, the Company decided to abandon the growing and harvesting of grapes due to the poor quality of recent harvests which were not suitable for the production of wine or grape juice. Accordingly, the Company has abandoned the vineyard and recorded a charge to operations of $872,658. The Company has also decided not to renew its leases with the Chinese Government. The Company will now purchase grapes in the open market to produce wine and grape juice. On June 30, 2013, the Company sold the assets and liabilities of Tonghua Linyuan to a third party. See Note O. |
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On March 2, 2012, the Company approved the incorporation of a new subsidiary, Hong Kong Huaxia International Industrial Co., Limited (“Hong Kong Huaxia”) in Hong Kong in order to sell health and specialized local products. Hong Kong Huaxia was incorporated in Hong Kong on March 18, 2012 and began operations in April 2012. Hong Kong Huaxia has registered 880,000,000 shares of 1 HKD par value stock in Hong Kong. None of the $113,443,000 (880,000,000 HKD) registered capital of Hong Kong Huaxia has been funded. |
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Consolidated Financial Statements | Consolidated Financial Statements |
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The financial statements include the accounts and activities of China Ginseng Holdings, Inc. and its wholly-owned subsidiaries, Yanbian Huaxing Ginseng Co. Limited, Jilin Huamei Beverage Co. Limited, Jilin Ganzhi Ginseng Products Co. Limited, Tonghua Linyuan Grape Planting Co. Limited and Hong Kong Huaxia International Industrial, Co. Limited. All intercompany transactions have been eliminated in consolidation. |
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Going Concern | Going Concern |
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As indicated in the accompanying financial statements, the Company had an accumulated deficit of $9,357,413, at June 30, 2013, a negative working capital deficit of $1,173,760 at June 30, 2013 and there are existing uncertain conditions the Company foresees relating to its ability to obtain working capital and operate successfully. See also Note S as to losses from typhoon which occurred in August of 2012. Management’s plans include the raising of capital through the equity markets to fund future operations and the generating of revenue through its businesses. Failure to raise adequate capital and generate adequate sales revenues could result in the Company having to curtail or cease operations. |
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Additionally, even if the Company does raise sufficient capital to support its operating expenses and generate adequate revenues, there can be no assurances that the revenues will be sufficient to enable it to develop business to a level where it will generate profits and cash flows from operations. These matters raise substantial doubt about the Company’s ability to continue as a going concern. However, the accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern. |
Use of Estimates | Use of Estimates |
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The preparation of the financial statements in conformity with U.S. generally accepted accounting principles 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Foreign Currency Translation | Foreign Currency Translation |
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The Company considers the Chinese Renminbi to be its functional currency. Assets and liabilities were translated into US dollars at period-end exchange rates. Statement of operations amounts were translated using the average rate during the period. Gains and losses resulting from translating foreign currency financial statements are included in accumulated other comprehensive income, a separate component of stockholders’ equity. |
Cash Equivalents | Cash Equivalents |
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For purposes of reporting cash flows, cash equivalents include investment instruments purchased with an original maturity of three months or less. There were no cash equivalents at June 30, 2013 and 2012. |
Inventory | Inventory |
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Inventory consists of fresh and dried Ginseng, as well as formerly crushed grapes, and is stated at the lower of cost or market value. Cost is determined using the First-In, First-Out (FIFO) Method. |
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Advertising | Advertising |
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The Company expenses advertising costs as incurred. For the year ended June 30, 2013 and 2012, advertising expenses were $1,035 and $17,735, respectively. |
Ginseng Crops | Ginseng Crops |
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The Company uses the full absorption costing method to value its Ginseng crops. Included in crop costs are seeds, labor, applicable overhead including depreciation, and supplies. Common costs are allocated in each period based upon the total number of hectors under cultivation during the period. |
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The carrying value of the Ginseng crops is reviewed on a regular basis for any impairment in value using management’s best estimate as to expected future market values, yields and costs to harvest. Costs accumulated on the acres expected to be harvested during the next fiscal year have been classified as a current asset. |
Revenue Recognition | Revenue Recognition |
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The Company processes Ginseng and stores the stock for its Ginseng juice production. Any grown Ginseng not suitable for the beverage production is sold. The Company is also purchasing Ginseng for its resale business. Ginseng is planted in the Spring (March) and Fall (September) of each year and is generally harvested in September. It usually takes 6 years for a Ginseng root to mature, although, senior maturity can be 8 years. |
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Harvested Ginseng can be sold in two ways: (1) fresh Ginseng which can be sold immediately and stored in refrigerators for up to 3 years and (2) dried Ginseng which is processed and dried via sunlight and steam machines. Drying is a two month process. Dried Ginseng can be stored up to 5 years. The Company has focused on selling dried Ginseng as it is more profitable than selling fresh Ginseng. The Company has also been storing fresh Ginseng for future juice manufacturing. |
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When the Company sells Ginseng, it receives orders prior to harvest. For major customers, approximately 20% to 30% is paid upon delivery as payment in advance. The balance is billed after the customer incurs a lengthy inspection process which can take up to 60 days. Until the customer finalizes its inspection and deems the shipment acceptable, the shipment is still the property of the Company. Upon customer completion of inspection and approval, the sale is then recognized and the balance of the invoice price is wired to the Company. For smaller sales, customers pick up the Ginseng from the Company, pay in cash at time of pick up and receive an invoice with appropriate sales tax applied and a cash acknowledgement. On these orders, revenue is recognized upon shipment/payment. |
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The Company has entered into several distribution agreements to sell Ginseng juice and wine. In accordance with these agreements, the distributors will advance funds to the Company for orders to be placed. Upon the placement of orders by the distributor, the Company will ship the product to the distributor and title will pass to the distributor. In relation to distribution agreements for Ginseng beverages, it is the Company’s policy, commencing with the initiation of the distribution agreements, to allow the distributors to return all unsold products at the end of six months from the shipment date should the product not be sold and the product has not exceeded the expiration date. The Company is establishing history as to the quantity of the Ginseng which has been returned in order to determine if a reserve for returns and allowances is necessary. To date, returns have been minimal. |
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For each reporting period, the Company ascertains from each distributor its’ current on hand quantity and assesses the situation in order to establish a return allowance, if necessary. At June 30, 2013, no inventory was held on consignment. |
Accounts Receivable and Allowance for Doubtful Accounts | Accounts Receivable and Allowance for Doubtful Accounts |
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Accounts receivable consist principally of trade receivables. When Ginseng is shipped to a customer, the customer is entitled to an inspection process which could take up to 60 days. Upon completion of the inspection and approval process, the customer notifies the company and a sale is recorded. The allowance for doubtful accounts represents management’s estimate of the amount of probable credit losses, determined by reviewing past due balances and other information. Account balances are written off against the allowance if management determines the receivable is uncollectible. The Company’s standard terms stipulate payment in 60 days. The Company considers a receivable to be uncollectible after one year. The allowance for doubtful accounts was $1,507,992 and $664,976 at June 30, 2013 and June 30, 2012, respectively. |
Property and Equipment | Property and Equipment |
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Property and equipment is recorded at cost and is depreciated using the straight line method over the estimated useful lives of the respective assets, as follows: |
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Buildings and improvements | 6 - 40 years |
Machinery and equipment | 5 - 15 years |
Motor vehicles | 5 - 10 years |
Office equipment | 5 - 10 years |
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Routine maintenance, repairs and replacement costs are expensed as incurred and improvements that extend the useful life of the assets are capitalized. When equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recognized in operations. |
Vineyard Development Costs | Vineyard Development Costs |
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In June 2012, the Company decided to abandon the growing and harvesting of grapes due to the poor quality of recent harvests which were not suitable for the production of wine or grape juice. Accordingly, the Company has abandoned the vineyard and recorded a charge to operations of $872,568, which is included under discontinued operations. The Company has also decided not to renew its leases with the Chinese Government. The Company will now purchase grapes in the open market to produce wine and grape juice. |
Net Loss Per Common Share | Net Loss Per Common Share |
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The Company computes per share amounts in accordance with ASC Topic 260 Earnings per Share (EPS) which requires presentation of basic and diluted EPS. Basic EPS is computed by dividing the income (loss) available to Common Stockholders by the weighted-average number of common shares outstanding for the period. Diluted EPS is based on the weighted-average number of shares of Common Stock and Common Stock equivalents outstanding during the periods. |
Comprehensive Income | Comprehensive Income |
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The Company follows ASC 220-10, Reporting Comprehensive Income, (formerly SFAS No. 130). ASC 220-10 requires the reporting of comprehensive income in addition to net income from operations. Comprehensive income is a more inclusive financial reporting methodology that includes disclosure of information that historically has not been recognized in the calculation of net income. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments |
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The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts receivable and accounts payable approximate fair value because of the immediate or short-term maturity of these financial instruments. |
Income Taxes | Income Taxes |
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The Company accounts for income taxes utilizing the liability method of accounting. Under the liability method, deferred taxes are determined based on differences between financial statement and tax bases of assets and liabilities at enacted tax rates in effect in years in which differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts that are expected to be ultimately realized. |
Uncertainty in Income Taxes | Uncertainty in Income Taxes |
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The Company follows ASC 740-10 Accounting for Uncertainty in Income Taxes (“ASC 740-10”). This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. Management evaluates their tax positions on an annual basis, and has determined that as of June 30, 2012 and 2013, no additional accrual for income taxes other than the foreign, federal and state provisions and related interest and estimated penalty accruals are considered necessary. |
Impairment of Long-Lived Assets | Impairment of Long-Lived Assets |
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Long-lived assets, primarily property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets might not be recoverable. Conditions that would necessitate an impairment assessment include a significant decline in the observable market value of an asset, a significant change in the extent or manner in which an asset is used, or a significant adverse change that would indicate that the carrying amount of an asset or group of assets is not recoverable. For long-lived assets to be held and used, the Company recognizes an impairment loss only if its carrying amount is not recoverable through its undiscounted cash flows and measures the impairment loss based on the difference between the carrying amount and estimated fair value. |
Fair Value Measurements | Fair Value Measurements |
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ASC 820 Fair Value Measurements defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosure about fair value measurements. ASC issued 825-10, The Fair Value Option for Financial Assets and Financial Liabilities-Including an Amendment of ASC 320-10, (“ASC 825-10”) which permits entities to choose to measure many financial instruments and certain other items at fair value at specified election dates. A business entity is required to report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. |
Reclassifications | Reclassifications |
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Certain reclassifications have been made to consolidated financial statements for the year ended June 30, 2012 to make them comparable to the presentation for the year ended June 30, 2013. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements |
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In June 2012, the FASB issued an accounting standard update to provide guidance on increasing the prominence of items reported in other comprehensive income. This accounting standard update eliminates the option to present components of other comprehensive income as part of the statement of equity and requires that the total of comprehensive income, the components of net income, and the components of other comprehensive income be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. It is also required to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. The Company adopted this accounting standard effective July 1, 2011. |