| BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 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, and for the periods prior to its sale, Hang-ao. All material intercompany accounts and transactions have
been eliminated in consolidation. Cash and Cash Equivalents Cash and cash equivalents 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 and cash equivalents. The
Company maintained cash and cash equivalents with various financial institutions in the PRC. As of December 31, 2017 and 2016,
balances in banks in the PRC were $62,636,484 and $54,458,026, 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 customer’s payment history, its current
credit-worthiness and current economic trends. Management accrued no allowance for doubtful accounts at December 31, 2017 and 2016. Inventories Inventories, consisting of raw materials, work
in process and finished goods related to the Company’s products, 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 recorded no inventory reserve at December
31, 2017 and 2016, respectively. Prepaid Expenses Prepaid expenses at December 31, 2017 and 2016
totaled $3,038 and $112,676, respectively, and includes prepayments to suppliers for services that had not yet been provided to
us. We recognize prepayments as an expense as suppliers provide services, in compliance with our accounting policy. For the years
ended December 31, 2017 and 2016, the Company had amortized its prepaid insurance expense, warehouse leasing expense, and service
expense of $134,396 and $242,304, 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. In compliance with our accounting policy we recognize prepayments as inventory or expense as suppliers make delivery
of goods. 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 December 31, 2017 and 2016 totaled
$0 and $1,129,477, respectively, which were prepayments to the Company’s feed suppliers. The Company accrued no allowance
for doubtful accounts at December 31, 2017 and 2016. 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 Company’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 Company’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 breeding hogs and the expenditures related to labor and materials to feed
breeding hogs until they become commercially productive and breedable are capitalized. When 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 breeding hogs have completed their
production life of breeding, they are transferred into inventory as the vast majority of breeding hogs are then 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 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 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 asset’s
estimated fair value and its book value. During 2016, the Company recorded $1,375,629 as a long-lived asset impairment loss for
its plant and equipment. The loss reported in 2016 was caused by the flood which occurred in early July of the same year. 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 Company’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 entity’s own assumptions. The Company did not identify any assets and
liabilities that are required to be presented on the condensed 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 Company’s
subsidiaries are recorded in accordance with the provisions of ASC 810 and are reported as a component of equity, separate from
the parent’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 the business of breeding, raising, and selling hogs for use in Chinese pork meat production and the sale of hogs
for breeding by other hog producers. The Company also sells specialty pork products to retailers and direct to consumers through
the internet. Revenues generated from 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 Company’s bank account, is usually received by the Company at the time 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 they purchase. Segment Information The Company follows FASB ASC 280-Segment Reporting,
which requires that companies disclose segment data based on how management makes decision about allocating resources to segments
and evaluating their performance. In the second quarter of 2013, the Company entered
into distribution agreements with supermarkets whereby the Company is permitted to sell specialty pork products in the supermarkets’
retail facilities. Consequently, management determined that as of the end of the second quarter of 2013, the Company was engaged
in the retail business. As of December 31, 2017 and 2016, 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 December
31, 2017 and 2016. The Company is subject to the Enterprise Income
Tax law (“EIT”) of the People’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
Company’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 Company’s operations in servo-valve products, which are conducted through
Hang-ao and included in the Company’s discontinued operations, are subject to the 25% enterprise income tax. Renmin 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 Company’s hog sales are
not subject to the PRC’s 17% VAT tax or the 5% business tax levied on incomes from services rendered. However, the Company’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 Company’s operations in
retail, 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 Parties are considered to be related to the
Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are 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 of the Company and its 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 Company’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 years ended December 31, 2017 and 2016. The calculation of basic and diluted earnings per share is net of tax. Foreign Currency Translation As of December 31, 2017 and 2016, the accounts
of Renmin 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 6.5342 per US
dollar and RMB 6.945 per US dollar as of December 31, 2017 and 2016, respectively. Stockholders’ 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 stockholders’ equity. During the years ended December 31, 2017 and
2016, the transactions of Renmin Tianli were denominated and recorded in RMB and are translated at the average rates of exchange
for the period. There rates were RMB 6.7518 and RMB 6.643 per US dollar for the years ended December 31, 2017 and 2016, 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. Stock Based Compensation In December 2004, the Financial Accounting Standards
Board, or FASB, issued FASB ASC 718-10-55 - Compensation-Stock Compensation, or ASC 718-10-55. Under ASC 718-10-55, companies are
required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize
the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation
arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share
purchase plans. In addition, FASB ASC 825-10-50-10 – Financial Instruments – Overall – Disclosures, or ASC 825-10-50-10,
expresses views of the Securities and Exchange Commission, or the SEC, staff regarding the interaction between ASC 718-10-55 and
certain SEC rules and regulations and provides the staff's views regarding the valuation of share-based payment arrangements for
public companies. The Company’s compensation cost is measured on the date of grant at its fair value. Such compensation amounts,
if any, are amortized over the respective vesting periods or period of service of the option grant. During the years ended December
31, 2017 and 2016, the Company reported $6,023 and $313,438 as stock based compensation. Contingencies Certain conditions may exist as of the date
the 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 Company’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 Company’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 Company’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 December 31, 2017 and 2016, 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
Not Yet Adopted In May 2014, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with
Customers” (“ASU 2014-09”). ASU 2014-09 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. In
July 2015, the FASB deferred the effective date for annual reporting periods beginning after December 15, 2017
(including interim reporting periods within those periods). The Company will adopt ASU No. 2014-09 in the first quarter of
2018 and apply the modified retrospective approach.. The Company does not expect the impact on its consolidated financial statements
to be material. In February 2016, the FASB issued ASU 2016-02, Leases
(Topic 842) In November 2016, the FASB issued ASU 2016-18, Restricted
Cash Reclassification Certain prior year balances were reclassified
to conform to the current year's presentation with consideration of reflecting one of the Company’s subsidiaries, Hang-ao,
as discontinued operations. None of these reclassifications had an impact on reported financial position or cash flows for any
of the periods presented. Deconsolidation On December 23, 2016, the Company sold 88% of
Hang-ao’s equity interest for $3,913,894 in cash. Renmin Tianli recognized a gain of $70,820 from this transaction. The following is a reconciliation of the deconsolidation:
Amount
Selling price $ 3,913,894
Disposed assets and liabilities:
Cash 17
Current assets 1,554,722
Long-term prepaid expenses —
Fixed assets and construction in progress 4,581,775
Intangible assets —
Liabilities (2,293,440 )
3,843,074
Gain from disposal of subsidiary, net of income tax $ 70,820 |
