| 2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
| Jun. 30, 2016 |
| Notes to Financial Statements | |
| Basis of Presentation | The accompanying consolidated financial statements have been prepared
in conformity with US GAAP. The basis of accounting differs from that used in the statutory accounts of the Company, which are
prepared in accordance with the accounting principles of the PRC (“PRC GAAP”). The Company’s functional currency
is the Chinese Renminbi (“RMB”); however the accompanying consolidated financial statements have been translated and
presented in United States Dollars (“USD”). All significant intercompany transactions and balances have been eliminated. |
| Use of Estimates | The preparation of these financial statements in conformity with
generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts
of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of these financial statements
and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience
and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ
from these estimates. Significant estimates include the useful lives of property and equipment, land use rights and biological
assets, and assumptions used in assessing impairment for long-term assets. |
| Principles of Consolidation | We consolidate wholly-owned subsidiaries, HCS, WFOE, Fengze, Tianzhili,
as well as Hang-ao, and for the periods prior to their sales, Sanqiang, Optical Networking, and OV Orange. All material intercompany
accounts and transactions have been eliminated in consolidation. The 12% equity interest holders in Hang-ao will be accounted as
noncontrolling interest in the CompanyÂ’s consolidation financial statements. |
| Cash | Cash consist of all cash balances and highly liquid investments with
an original maturity of three months or less. Because of the short maturity of these investments, the carrying amounts approximate
their fair value. Restricted cash is excluded from cash. The Company maintained cash and cash equivalents with various financial
institutions in the PRC. As of June 30, 2016 and December 31, 2015, balances in banks in the PRC were $52,441,600 and $49,656,897,
respectively. |
| Accounts Receivable | Accounts receivable is stated at cost, net of an allowance for doubtful
accounts. The Company maintains allowances for doubtful accounts for estimated losses resulting from the failure of customers to
make required payments. The Company reviews the accounts receivable on a periodic basis and makes allowances where there is doubt
as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company
considers many factors, including the age of the balance, the customerÂ’s payment history, its current credit-worthiness and
current economic trends. Management did not accrue any allowance for doubtful accounts at June 30, 2016 and December 31, 2015. |
| Inventories | Inventories are stated at the lower of cost, as determined by the
weighted-average method, or market. Management compares the cost of inventories with the market value, and allowance is made for
writing down the inventories to their market value if that is lower. Costs of raised animals include proportionate costs of breeding,
including amortization of the breeding herd or biological assets, plus the costs of feed and other maintenance costs through the
balance sheet date. Management inspects and monitors inventory on a continual basis. The Company did not record any inventory reserve
for its continuing operations at June 30, 2016 and December 31, 2015, respectively. However, the Company reported $1,890,398 and
$0 for its discontinued operations at June 30, 2016 and December 31, 2015, respectively. |
| Prepaid Expenses | Prepaid expenses at June 30, 2016 and December 31, 2015 totaled $204,756
and $816,646, respectively, and includes prepayments to suppliers for services that had not yet been provided to us. We recognize
prepayments as expense as suppliers provide services, in compliance with our accounting policy. For the three months ended June
30, 2016 and 2015, the Company had amortized its prepaid insurance expense, warehouse leasing expense, and service expense of $130,900
and $58,574, respectively. For the six months ended June 30, 2016 and 2015, the Company had amortized its prepaid insurance expense,
warehouse leasing expense, and service expense of $261,744 and $145,314, respectively. |
| Advances to Suppliers | Advances to suppliers are stated at cost, net of an allowance for
doubtful accounts and include prepayments to suppliers for merchandise and raw materials that had not yet been shipped to us. We
recognize prepayments as inventory or expense as suppliers make delivery of goods in compliance with our accounting policy. The
Company maintains allowances for doubtful accounts for estimated losses resulting from prepayments without future economic benefits
to the Company. The Company reviews the advances to suppliers on a periodic basis and makes allowances where there is doubt as
to the future economic benefits of individual balances. Advances to suppliers at June 30, 2016 and December 31, 2015 totaled $3,596,568
and $7,823,138, respectively, which represented prepayments to the CompanyÂ’s feed suppliers. Management accrued allowance
for doubtful accounts of $112,585 and $115,215 at June 30, 2016 and December 31, 2015. |
| Restricted Cash | Restricted cash consists of
cash deposits held by a bank and a guarantee service provider to secure bank acceptance notes payable. |
| Plant and Equipment | The Company states plant and
equipment at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to operations as incurred;
additions, renewals and betterments are capitalized. When plant and equipment assets are retired or otherwise disposed of, the
related cost and accumulated depreciation are removed from the respective accounts, and any resulting gain or loss is recorded
as an operating expense. In accordance with US GAAP, the Company examines the possibility of decreases in the value of plant and
equipment when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. The Company
computes depreciation using the straight-line method over the estimated useful lives of the assets with a residual value of 5%
of plant and equipment. Estimated useful lives of the
CompanyÂ’s assets are as follows:
Useful Life
Buildings 20 years
Vehicles 5-10 years
Office equipment 3-5 years
Research equipment 3-20 years
Production equipment 3-20 years |
| Biological Assets | Biological assets consist primarily of hogs purchased or selected
from the CompanyÂ’s own production for breeding and farrowing, which management believes will produce piglets that grow faster
and have better quality breeding capabilities and carcasses with a high percentage of meat and a small quantity of fat. The costs
to purchase and cultivate these breeding hogs and the expenditures related to labor and materials to feed the breeding hogs until
they become commercially productive and breedable are capitalized. When these breeding hogs are entered into breeding and farrowing
production, amortization of the costs of these breeding hogs commences. The estimated production life for breeding hogs is three
years, and the costs are amortized to a residual value of $76 (RMB 500). After the breeding hogs have completed their production
life of breeding, these breeding hogs are then transferred into inventory as the vast majority of these breeding hogs will then
be sold for meat processing. Expenses incurred maintaining breeding hogs during gestation until piglets are weaned are capitalized
into inventory and included in Work in process—biological assets, a component of inventories. If these breeding hogs produce
piglets which are deemed appropriate for internal breeding purposes, the gestation and raising costs until weaned for these piglets
are then allocated into biological assets. Amortized expenses pertaining to biological assets are included in
inventory costs for those piglets to be sold and ultimately become a component of cost of goods sold. |
| Intangible Assets | Included in the intangible assets are land use rights and distribution
networks. According to the laws of the PRC, the government owns all the land in the PRC. Companies or individuals are authorized
to possess and use the land only through land use rights granted by the Chinese government. Intangible assets are being amortized
using the straight-line method over their lease terms or estimated useful life. The Company carries intangible assets at cost less accumulated amortization.
In accordance with US GAAP, the Company examines the possibility of decreases in the value of intangible assets when events or
changes in circumstances reflect the fact that their recorded value may not be recoverable. The Company computes amortization using
the straight-line method over the 50 year life of the land use rights and 10 year life of the acquired distribution network. |
| Impairment of Long-lived Assets | In accordance with US GAAP, the Company periodically reviews its
long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may
not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is
less than the carrying amount of the asset. The amount of impairment is measured as the difference between the assetÂ’s estimated
fair value and its book value. For the six months ended June 30, 2016 and 2015, the Company did not record impairment charges against
its plant and equipment. |
| Fair Value of Financial Instruments | Effective January 1, 2008,
the Company adopted ASC 820, Fair Value Measurements and Disclosure (“ASC 820”) for assets and liabilities measured
at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally
accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value
and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the CompanyÂ’s
financial position or operating results, but did expand certain disclosures. ASC 820 defines fair value
as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable
inputs and minimize the use of unobservable inputs. These inputs are prioritized below: Level 1: Observable inputs
such as quoted market prices in active markets for identical assets or liabilities Level 2: Observable market-based
inputs or unobservable inputs that are corroborated by market data Level 3: Unobservable inputs
for which there is little or no market data, which require the use of the reporting entityÂ’s own assumptions. The Company did not identify
any assets and liabilities that are required to be presented on the consolidated balance sheets at fair value in accordance with
the relevant accounting standards. The carrying values of cash
and cash equivalents, trade receivables and payables, and short-term bank loans and debts approximate their fair values due to
the short maturities of these instruments. |
| Non-controlling Interest | Non-controlling interests in
the CompanyÂ’s subsidiaries are recorded in accordance with the provisions of ASC 810 and are reported as a component of equity,
separate from the parentÂ’s equity. Purchase or sale of equity interests that do not result in a change of control are accounted
for as equity transactions. Results of operations attributable to the non-controlling interest are included in our consolidated
results of operations and, upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair
value with any gain or loss recognized in earnings. |
| Revenue Recognition | Pursuant to the guidance of ASC Topic 605 and ASC Topic 360, the
Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered,
the purchase price is fixed or determinable and collectability is reasonably assured. The Company generates revenues from breeding,
raising, and selling hogs for use in Chinese pork meat production, the sale of hogs for breeding by other hog producers and selling
specialty pork products to retailers. Revenues generated from the sales of breeding and meat hogs and specialty
pork are recognized when these products are delivered to customers in accordance with previously agreed upon pricing and delivery
arrangements, and the collectability of these sales is reasonably assured. Cash payment, which sometimes is in the form of wired
cash transfers to the CompanyÂ’s bank account, is usually received by the Company at the time the hogs are sold. Sold hogs
and specialty pork are not returnable and accordingly, no provision has been made for returnable goods. The customers are responsible
for shipping the hogs that they purchase. |
| Segment Information | The Company follows FASB ASC 280-Segment Reporting, which requires
that companies disclose segment data based on how management makes decisions about allocating resources to segments and evaluates
their performance. In the second quarters of 2013, the Company entered into distribution
agreements with supermarkets whereby the Company is permitted to sell specialty pork products in the supermarketsÂ’ retail
facilities. Consequently, management determined that as of the end of the second quarter of 2013, the Company was operating in
two segments, Hog Farming and Retail. After completion of the Hang-ao and OV Orange acquisitions in 2014,
the Company had determined to establish another segment, the emerging business segment, in which it included its operations in
electro-hydraulic servovalves and optical fiber hardware and software solutions. During the fourth quarter of 2015, the Company
determined to sell its subsidiaries, Hang-ao and OV Orange. Subsequently, OV Orange was sold on December 29, 2015. Accordingly,
the results of operations from Hang-ao and OV Orange were reflected as discontinued operations in the CompanyÂ’s consolidated
financial statements. As of June 30, 2016 and December 31, 2015, the Company was operating in two segments, Hog Farming and Retail. |
| Income Taxes | The Company accounts for income taxes under the provisions of Section
740-10-30 of the FASB Accounting Standards Codification, which is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in its financial
statements or tax returns. The Company did not have any deferred tax assets or liabilities as of June 30, 2016 and December 31,
2015. The Company is subject to the Enterprise Income Tax law (“EIT”)
of the PeopleÂ’s Republic of China. However, according to the EIT, companies that are engaged in the agricultural business
and primary processing of agricultural products are exempt from the 25% enterprise income tax. The CompanyÂ’s operations in
breeding, raising, and selling hogs for use in Chinese pork meat production and hog breeding, are exempt from the Chinese income
tax. However, the CompanyÂ’s operations in servo-valve products, which are conducted through Hang-ao and included in the CompanyÂ’s
discontinued operations, are subject to the 25% enterprise income tax. Aoxin Tianli is incorporated in the British Virgin Islands.
Under the current tax laws of the British Virgin Islands, the Company is not subject to income taxes. In addition the CompanyÂ’s hog sales are not subject to the
PRCÂ’s 17% VAT tax or the 5% business tax levied on incomes from services rendered. However, the CompanyÂ’s operations
in servo-valve products, conducted through Hang-ao, are subject to such taxes. According to the PRC tax regulations, companies
engaging in the agricultural business are exempt from these taxes. With respect to the CompanyÂ’s operations in Retail segment,
the Company is engaged in breeding, processing, and distributing black hogs and black hog meats which are exempt from VAT taxes
and corporate income tax as well. |
| Related parties | A Party is considered to be related to the Company if the party,
directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the Company.
Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners
and management and other parties with which the Company may deal with if one party controls or can significantly influence the
management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing
its own separate interests. The Company discloses all related party transactions. All transactions are recorded at fair value of
the goods or services exchanged. |
| Basic and Diluted Earnings per Share | The Company reports earnings per share in accordance with FASB ASC
260 “Earnings per share”. The Company’s basic earnings per share are computed using the weighted average number
of shares outstanding for the periods presented. Diluted earnings per share are computed based on the assumption that any dilutive
options or warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this
method, the CompanyÂ’s outstanding stock warrants are assumed to be exercised, and funds thus obtained were assumed to be
used to purchase common stock at the average market price during the period. There were no dilutive instruments outstanding
during the six month periods ended June 30, 2016 and 2015. |
| Foreign Currency Translation | As of June 30, 2016 and December 31, 2015, the accounts of Aoxin
Tianli were maintained and its financial statements were expressed in Chinese Renminbi (RMB). Such financial statements were translated
into United States Dollars (USD) in accordance with US GAAP, with the RMB as the functional currency. All assets and liabilities
are translated at the current exchange rates as of the balance sheet dates. These rates were RMB 6.6434 and RMB 6.4917 per US dollar
as of June 30, 2016 and December 31, 2015, respectively. StockholdersÂ’ equity is translated at the historical rates and items
in the statements of operations and cash flows are translated at the average exchange rate for the period. The resulting translation
adjustments are reported under other comprehensive income in accordance with US GAAP as a component of stockholdersÂ’ equity. During the six months ended June 30, 2016 and 2015, the transactions
of Tianli were denominated and recorded in RMB and are translated at the average rates of exchange for the period. These rates
were RMB 6.5354 and RMB 6.0888 per US dollar for the six months ended June 30, 2016 and 2015, respectively. Exchange gains and
losses are recognized for the different foreign exchange rates applied when the foreign currency assets and liabilities are settled.
Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the
functional currency are included in the results of operations as incurred. |
| Contingencies | Certain conditions may exist as of the date financial statements
are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail
to occur. The CompanyÂ’s management and legal counsel assess such contingent liabilities, and such assessments inherently
involve an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company
or unasserted claims that may result in such proceedings, the CompanyÂ’s legal counsel evaluates the perceived merits of any
legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought. If the assessment of a contingency indicates that it is probable
that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be
accrued in the CompanyÂ’s financial statements. If the assessment indicates that a potential material loss contingency is
not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together
with an estimate of the range of possible loss if determinable and material would be disclosed. Loss contingencies considered to be remote by management are generally
not disclosed unless they involve guarantees, in which case the guarantee would be disclosed. |
| Accrual of Environmental Obligations | ASC Section 410-30-25 “Recognition” of environmental
obligations requires the accrual of a liability if both of the following conditions are met:
a) Information available before the financial statements are issued or are available to be issued indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements.
b) The amount of the loss can be reasonably estimated. As of June 30, 2016 and December 31, 2015, the Company did not have
any environmental remediation obligations, nor did it have any asset retirement obligations under ASC 410. Furthermore, the Company
did not have any environmental remediation loss contingencies requiring recognition or disclosure in its financial statements. |
| Recently Issued Accounting Pronouncements | In May 2014, as part of its ongoing efforts to assist in the convergence
of U.S. GAAP and International Financial Reporting Standards, the Financial Accounting Standards Board (“FASB”) issued
a new standard related to revenue recognition. FASB issued Accounting Standards Update (“ASU”) No. 2014-9, “Revenue
from Contracts with Customers” (“ASU 2014-9”). ASU 2014-9 provides for a single comprehensive principles-based
standard for the recognition of revenue across all industries through the application of the following five-step process: Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations
in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance
obligation. The updated guidance related to revenue recognition affects any entity
that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial
assets unless those contracts are within the scope of other standards. The guidance requires that an entity recognize revenue to
depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The guidance is effective for the Company starting on January 1,
2017. The Company is currently evaluating the impact this guidance will have on its combined financial position, results of operations
and cash flows. In April 2015, the FASB issued guidance to simplify the presentation
of debt issuance costs. This new guidance requires that debt issuance costs related to a recognized debt liability be presented
in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This
new guidance will be effective for us beginning July 1, 2016. We are currently evaluating the impact of this standard on our consolidated
financial statements. In September 2015, the FASB issued ASU No. 2015-16, Business Combinations
(Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. ASU 2015-16 requires that an acquirer recognize adjustments
to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts
are determined. Entities are currently required to retrospectively apply adjustments made to provisional amounts recognized in
a business combination. ASU 2015-16 is effective for fiscal years beginning after December 15, 2015, including interim periods
within those fiscal years. The guidance is to be applied prospectively to measurement period adjustments that occur after the effective
date of the guidance with earlier application permitted for financial statements that have not been issued. The Company elected
to adopt ASU 2015-16 early, effective in the year ended December 31, 2015. In November 2015, the FASB issued ASU No. 2015-17, Income Taxes (Topic
740): Balance Sheet Classification of Deferred Taxes. The standard requires that deferred tax liabilities and assets be classified
as noncurrent in a classified statement of financial position. Entities are currently required to separate deferred income tax
liabilities and assets into current and noncurrent amounts in a classified statement of financial position. The amendments, which
require non-current presentation only (by jurisdiction), are effective for financial statements issued for annual periods beginning
after December 15, 2016 with earlier application permitted as of the beginning of an interim or annual reporting period. The guidance
is to be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The
Company elected to early adopt this standard, effective as of December 31, 2015. There was no impact from this adoption. In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall
(Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The standard requires several targeted
changes including that equity investments (except those accounted for under the equity method of accounting, or those that result
in consolidation of the investee) be measured at fair value with changes in fair value recognized in net income. The new guidance
also changes certain disclosure requirements and other aspects of current US GAAP. Amendments are to be applied as a cumulative-effect
adjustment to the balance sheet as of the beginning of the fiscal year of adoption. This standard is effective for fiscal years
starting after December 15, 2017, including interim periods within those fiscal years. The standard does not permit early adoption
with the exception of certain targeted provisions. The Company is currently assessing the impact and timing of adopting this guidance
on its consolidated financial statements. In February 2016, the FASB issued a new standard related to leases
to increase transparency and comparability among organizations by requiring the recognition of lease assets and lease liabilities
on the balance sheet. Most prominent among the amendments is the recognition of assets and liabilities by lessees for those leases
classified as operating leases under previous U.S. GAAP. Under the new standard, disclosures are required to meet the objective
of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. We anticipate
this standard will have a material impact on our consolidated balance sheets, and we are currently evaluating its impact. In March 2016, the Financial Accounting Standards Board (“FASB”)
issued a new standard that changes the accounting for certain aspects of share-based payments to employees. The new guidance requires
excess tax benefits and tax deficiencies to be recorded in the income statement when the awards vest or are settled. In addition,
cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income
tax cash flows. The standard also allows us to repurchase more of an employeeÂ’s shares for tax withholding purposes without
triggering liability accounting, clarifies that all cash payments made on an employeeÂ’s behalf for withheld shares should
be presented as a financing activity on our cash flows statement, and provides an accounting policy election to account for forfeitures
as they occur. The Company is currently assessing the impact and timing of adopting this guidance on its consolidated financial
statements. In April 2016, the FASB issued ASU 2016- 10, “Revenue from
Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing”. The amendments add further guidance
on identifying performance obligations and also to improve the operability and understandability of the licensing implementation
guidance. The amendments do not change the core principle of the guidance in Topic 606. Public entities should apply the amendments
for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein. Early application
for public entities is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting
periods within that reporting period. The Company is currently in the process of evaluating the impact of the adoption on its consolidated
financial statements. In May 2016, the FASB issued ASU 2016-11, “Revenue Recognition
(Topic 605) and Derivatives and Hedging (Topic 815): Rescission of SEC Guidance Because of Accounting Standards Updates 2014-09
and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting.” The amendment rescinds SEC paragraphs pursuant
to two SEC Staff Announcements at the March 3, 2016 Emerging Issues Task Force (EITF) meeting. Specifically, registrants should
not rely on the following SEC Staff Observer comments upon adoption of Topic 606: 1) Revenue and Expense Recognition for Freight
Services in Process, which is codified in paragraph 605-20-S99-2; 2) Accounting for Shipping and Handling Fees and Costs, which
is codified in paragraph 605-45-S99-1; 3) Accounting for Consideration Given by a Vendor to a Customer (including Reseller of the
Vendor's Products), which is codified in paragraph 605-50-S99-1; 4) Accounting for Gas-Balancing Arrangements (i.e., use of the
"entitlements method"), which is codified in paragraph 932-10-S99-5, which is effective upon adoption of ASU 2014-09.
The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements. In May 2016, the FASB issued ASU 2016-12, "Revenue from Contracts
with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients". The amendments, among other things: (1) clarify
the objective of the collectability criterion for applying paragraph 606-10-25-7; (2) permit an entity to exclude amounts collected
from customers for all sales (and other similar) taxes from the transaction price; (3) specify that the measurement date for noncash
consideration is contract inception; (4) provide a practical expedient that permits an entity to reflect the aggregate effect of
all modifications that occur before the beginning of the earliest period presented when identifying the satisfied and unsatisfied
performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied
performance obligations; (5) clarify that a completed contract for purposes of transition is a contract for which all (or substantially
all) of the revenue was recognized under legacy GAAP before the date of initial application, and (6) clarify that an entity that
retrospectively applies the guidance in Topic 606 to each prior reporting period is not required to disclose the effect of the
accounting change for the period of adoption. The effective date of these amendments is at the same date that Topic 606 is effective.
The Company is currently in the process of evaluating the impact of the adoption on its consolidated financial statements. Based on the CompanyÂ’s initial assessment of the standard,
the Company expects that any potential future disposals of individual hog farms will not be reported as discontinued operations
and that the results of operations of any disposed hog farm, including revenues, costs and any gains or losses on disposal, will
be classified as continuing operations within the Consolidated Statements of Operations and Comprehensive Income for all periods
presented through the date of disposition. |
| Reclassification | Certain prior year balances were reclassified to conform to the current
period presentation wherein Hang-ao and OV Orange, are classified as discontinued operations. None of these reclassifications had
an impact on reported financial position or cash flows for any of the periods presented. |
| Repurchase of 40% Noncontrolling Interest | On March 22, 2014, the Company acquired the 40% minority equity interest
in Hubei Tianzhili Breeder Hog Co., Ltd. (“Tianzhili”) for RMB 6,666,700 or $1,083,100. As a result of this purchase,
Tianzhili became the wholly owned subsidiary of the Company. Tianzhili, which is based in Hubei Province, China, is engaged in
the business of raising and selling black hogs through several major Chinese retail channels located in Wuhan, Hubei. The following table summarizes the fair values of the assets acquired
and liabilities assumed as of the date of the acquisition of the noncontrolling interest in Tianzhili. The allocation of the purchase
price reflects final values assigned and may differ from preliminary values reported in the consolidated financials for prior periods.
March 22, 2014
Property, plant and equipment $ 10,129,629
Intangible asset – land use right 262,913
Intangible asset - distribution network 1,926,417
Other assets, including cash of $185,531 519,845
Assets acquired $ 12,838,804
Accounts payable and other liabilities 3,496
Other payables 3,153,447
Liabilities assumed $ 3,156,943
Net assets acquired $ 9,681,861 The intangible asset arising from the Tianzhili noncontrolling interest
acquisition reflects the economic potential of the markets in which the acquired company operates as well as the synergies and
economies of scale expected from operating the business as part of Aoxin Tianli. |
| Acquisitions | On July 15, 2014, the Company acquired Hang-ao, a Chinese limited
liability company located in Xiangyang, Hubei Province. In accordance with the acquisition agreement, Aoxin Tianli became the holder
of 88% of the equity interest of Hang-ao for consideration of $9,055,605, including RMB 42 million or approximately $6.8 million
in cash and 1,047,000 common shares of Aoxin Tianli. Hang-ao, at the time of the acquisition, was the sole shareholder of Beijing
Sanqiang Tongwei Electromechanical Hydraulic Technology Development Co., Ltd. and engaged in the business of manufacturing
and marketing electro-hydraulic servo-valves and related servo systems and components. The acquisition agreement includes a three
year “earn out payment” provision which requires Hang-ao to reach certain levels of net income for the years 2014,
2015, and 2016 for the sellers to retain the 1,047,000 common shares of Aoxin Tianli. The net income targets are RMB 4.5 million
($733,000), 9 million ($1.5 million), and RMB 15 million ($2.4 million) for the years 2014, 2015, and 2016. The following is a reconciliation of the purchase:
Shares Price per Share Amount
Fair value of the CompanyÂ’s stock issued 1,047,000 $ 2.13 $ 2,230,110
Cash 6,825,495
Total purchase price $ 9,055,605
Acquired assets and liabilities:
Cash $ 215,236
Current assets 8,121,512
Fixed assets 2,036,448
Intangible assets 3,684,084
Liabilities (3,766,820 )
10,290,460
Percentage of acquired equity 88 %
88% of acquired assets and liabilities 9,055,605
Purchase price 9,055,605
Goodwill $ -
Amount
Acquired assets and liabilities, net $ 10,290,460
Percentage of equity 12 %
Noncontrolling Interest $ 1,234,855 On August 26, 2014, the Company entered into and consummated a stock
purchase agreement (the “Stock Purchase Agreement”) whereby it acquired 95% of the outstanding equity of Wuhan Optical
Valley Orange Technology Co., Ltd., a corporation organized under the laws of the People’s Republic of China (“OV Orange”),
from certain of the former shareholders of OV Orange in exchange for 2,552,000 of the CompanyÂ’s common shares, of which 403,000
shares were deposited in escrow to be issued to Mr. Hai Liu, CEO of OV Orange and the former beneficial owner of 7,500,000 (representing
15% of the outstanding) OV Orange shares (the “Escrow Shares”), subject to the attainment by OV Orange of certain agreed
upon net profit targets for the years ended December 31, 2014, 2015 and 2016. Specifically, Mr. Liu will be entitled to the Escrow
Shares only if OV Orange achieves net profits equal to not less than 90% of RMB 2.6 million, RMB 6.8 million and RMB 10.5 million
for the years ending December 31, 2014, 2015, and 2016, respectively. If the net profits of OV Orange in any of the three target
years are less than 90% of the target, the number of Escrow Shares to be issued to Mr. Liu will be reduced in accordance with a
formula set forth in the Stock Purchase Agreement. If the net profit targets set forth in the Stock Purchase Agreement
are achieved for all three years Mr. Liu and Mr. Jin Wu, the record holder of 806,000 shares of the CompanyÂ’s common stock
issued in exchange for 30% of the OV Orange shares, shall have the right to exchange shares of the CompanyÂ’s common stock
received in the acquisition for up to 7,500,000 and 15,000,000 shares, respectively, of OV Orange purchased by the Company during
the three month period (the “Option Period”) commencing March 16 and terminating June 15, 2017. The ratio at which
the OV Orange shares may be acquired by Mr. Liu or Mr. Wu is based upon the relative fair market values of the shares of the Company
and OV Orange at the time of the re-purchase, except that if the value of the shares of the Company issued to Mr. Liu or Mr. Wu
is less than the value of the shares of OV Orange he is entitled to receive, he can receive all of the OV Orange shares by delivering
all of his Company shares and will not receive any additional compensation. The following is a reconciliation of the purchase:
Shares Price per Share Amount
Fair value of the CompanyÂ’s stock issued 2,552,000 $ 1.95 $ 4,976,400
Acquired assets and liabilities:
Cash $ 690,990
Current assets 3,881,918
Fixed assets 376,075
Long-term prepaid expense 1,282,037
Intangible assets 2,699,753
Liabilities (989,226 )
7,941,547
Discount from bargain purchase (2,703,232 )
5,238,315
Percentage of acquired equity 95 %
95% of acquired assets and liabilities 4,976,400
Purchase price 4,976,400
Goodwill $ -
Amount
Acquired assets and liabilities, net $ 5,238,315
Percentage of equity 5 %
Noncontrolling Interest $ 261,915 Before Aoxin Tianli acquired OV Orange, 45% of OV OrangeÂ’s
equity interest was held by Hubei Aoxin Science & Technology Group Co. Ltd., a company whose Chairman and principal shareholder
is Mr. Ping Wang, the same as Aoxin TianliÂ’s former CEO. Therefore, the acquisition of OV Orange is a related party transaction
and the discount of $2,703,232 from this bargain purchase was recorded as part of additional paid-in capital. |
| Deconsolidation | On November 10, 2014, the Company sold 100% of SanqiangÂ’s equity
interest for $3,906,759 in cash. Aoxin Tianli recognized a gain of $312,945 from this transaction. The following is a reconciliation of the deconsolidation:
Amount
Selling price $ 3,906,759
Disposed assets and liabilities:
Cash 16,839
Current assets 292,795
Fixed assets 17,370
Intangible assets 3,550,949
Liabilities (284,139 )
3,593,814
Gain from disposal of subsidiaries, net of income tax $ 312,945 On November 10, 2014, the Company sold 100% of Optical NetworkingÂ’s
equity interest for $162,906 in cash. Aoxin Tianli recognized a gain of $5,965 from this transaction. The following is a reconciliation of the deconsolidation:
Amount
Selling price $ 162,906
Disposed assets and liabilities:
Cash 72,665
Current assets 84,276
156,941
Gain from disposal of subsidiaries, net of income tax $ 5,965 On December 29, 2015, the Company sold 95% of OV OrangeÂ’s equity
interest for $7,317,036 in cash. Aoxin Tianli recognized a gain of $2,144,226 from this transaction. The following is a reconciliation of the deconsolidation:
Amount
Selling price $ 7,317,036
Disposed assets and liabilities:
Cash 65,446
Current assets 2,202,581
Long-term prepaid expenses 1,103,974
Fixed assets and construction in progress 925,524
Intangible assets 2,190,288
Liabilities (1,315,003 )
5,172,810
Gain from disposal of subsidiaries, net of income tax $ 2,144,226 |
