2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies) | 12 Months Ended |
Dec. 31, 2014 |
Summary Of Significant Accounting Policies Policies | |
BASIS OF PRESENTATION | BASIS OF PRESENTATION |
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These financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The company maintains its books and accounting records in Renminbi (“RMB”), and its reporting currency is United States dollars. |
ACCOUNTING METHOD | ACCOUNTING METHOD |
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The Company’s financial statements are prepared using the accrual method of accounting. The Company has elected a fiscal year ending on December 31. |
USE OF ESTIMATES | USE OF ESTIMATES |
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The preparation of financial statements in conformity with US 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. In the opinion of management, all adjustments necessary in order to make the financial statements not misleading have been included. Actual results could differ from those estimates. |
CASH AND CASH EQUIVALENTS | CASH AND CASH EQUIVALENTS |
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The Company considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. The Company had cash balances of $82,776 and $11,797 as of December 31, 2014 and 2013, respectively. The Company had no cash equivalents as of December 31, 2014 and 2013. |
INVENTORIES | INVENTORIES |
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Inventories are stated at the lower of cost or market value. Cost is determined using moving weighted average method. Inventories consist of raw materials, finished goods and growing crops. Cost of finished goods comprises direct material and direct production cost based on normal operating capacity. |
PROPERTY, PLANT AND EQUIPMENT | PROPERTY, PLANT AND EQUIPMENT |
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Property, plant and equipment are stated at cost less accumulated depreciation and impairment. Depreciation on property, plant and equipment is calculated on the straight-line method after taking into account their respective estimated residual values over the estimated useful lives of the assets as follows: |
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Building | | | 20 years | |
Plant equipment | | | 5-10 years | |
Office equipment | | | 3-5 years | |
Vehicles | | | 4 years | |
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Maintenance and repair costs are expensed as incurred, whereas significant renewals and betterments are capitalized. |
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Construction in progress represents capital assets under construction or being installed and is stated at cost. Cost comprises original cost of plant and equipment, installation, construction and other direct costs prior to the date of reaching the expected usable condition. Construction in progress is transferred to the property, plant and equipment and depreciation commences when the asset has been substantially completed and reaches the expected usable condition. |
LAND USE RIGHTS | LAND USE RIGHTS |
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The Company states land use right at cost less accumulated amortization. The land use right is amortized on straight line method during the contract period. |
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The Company has a land use right to 24,806 square meters of land. The term of the land use right is 50 years, starting in March 2011. The land use right purchase price of $579,580 was fully paid during 2011. For the years ended December 31, 2014 and 2013, the Company recorded amortization expense of $11,909 and $11,794, respectively. The Company recorded the land use right at its net value of $548,922 and $566,028 as of December 31, 2014 and 2013 respectively. |
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The Company has a land use right to 56,139 square meters of land. The term of the land use right is 46 years, starting in March 2011. The land use right purchase price of $2,698,027 was fully paid for during 2013. For the year ended December 31, 2014 and 2013, the Company recorded amortization expense of $59,503 and $58,926, respectively. The Company recorded the land use right at its net value of $2,540,116 and $2,623,698 as of December 31, 2014 and 2013 respectively. |
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The Company has a land use right to 428,214 square meters of land. The term of the land use right is 18 years, starting in January 2012. For the year ended December 31, 2014 and 2013, the Company recorded amortization expense of $157,017 and $157,949, respectively. The Company recorded the land use right at its net value of $2,347,313 and $2,531,925 as of December 31, 2014 and 2013 respectively. As the land use right was not yet fully paid for as of December 31, 2014, the Company recorded long term liabilities related to this land use right in the amount of $1,581,775 and $1,548,644 as of December 31, 2014 and 2013 respectively. |
LONG TERM PREPAID LEASE | LONG TERM PREPAID LEASE |
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Leases where substantially all the risks and rewards of ownership of assets remain with the lessor are accounted for as operating leases. Payments made under operating leases net of any incentives received from the lessor are charged to the consolidated statements of operations on a straight-line basis over the terms of the underlying lease. |
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The Company records lease payments at cost less accumulated rent. The Company entered into a long term agreement with certain unrelated parties to rent land in 2010. The lease payments are recorded as operating lease expenses using the straight line method during the contract period of 20 years beginning at January 1, 2010. The lease payments for the entire contract period were prepaid of $1,030,900. For the year ended December 31, 2014 and 2013, the Company recorded lease expense of $54,350 and $55,240, respectively. |
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The Company entered into a long term agreement with certain unrelated parties to rent land in 2013. The lease payments are recorded as operating lease expenses using the straight line method during the contract period of 17 years beginning at December 25, 2013. The lease payments for the entire contract period were prepaid of $984,107. For the year ended December 31, 2014 and 2013, the Company recorded lease expense of $56,040 and $0, respectively. |
INVESTMENTS | INVESTMENTS |
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The Company analyzes equity investments in privately held companies to determine if it should be accounted for under the cost or equity method of accounting based on such factors as the percentage ownership of the voting stock outstanding and our ability to exert significant influence over these companies. For the cost method investments, the Company determines at each reporting period whether a decline in fair value has occurred and whether such decline is considered to be an other-than-temporary impairment. If a decline in fair value is determined to be other-than-temporary, the Company would recognize an impairment to reduce the investment to the lower of cost or fair value. |
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Investments are considered impaired when a decline in fair value is judged to be other-than-temporary. The Company considers available quantitative and qualitative evidence in evaluating potential impairment of its investments. If the cost of an individual investment exceeds its fair value, the Company evaluates, among other factors, general market conditions, the duration and extent to which the fair value is less than cost, and its intent and ability to hold the investment. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded and a new cost basis in the investment is established. |
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For the years ended December 31, 2014 and 2013, the Company recorded an impairment on its cost-method investments in the amount of $4,891,500 and $0, respectively, in other expense, net in the consolidated statements of operations. As of December 31, 2014, the net carrying value of the Company’s investments in privately-held companies was $0. |
REVENUE RECOGNITION | REVENUE RECOGNITION |
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The Company engages in the business of growing, producing, marketing and selling fresh mushrooms, dried mushrooms, and mushroom seeds through its affiliated VIE, LiaoNing DingXu. |
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Sales revenue is recognized at the date of shipment from the Company’s facilities to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, ownership has passed, no other significant obligations of the Company exist and collectability is reasonably assured. |
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The Company’s revenue consists of the invoiced value of goods, net of value-added tax (“VAT”). |
FAIR VALUE OF FINANCIAL INSTRUMENTS | FAIR VALUE OF FINANCIAL INSTRUMENTS |
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Under FASB ASC 820-10-05, the Financial Accounting Standards Board establishes a framework for measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. This Statement reaffirms that fair value is the relevant measurement attribute. The adoption of this standard did not have a material effect on the Company’s financial statements as reflected herein. The carrying amounts of cash, accounts payable and accrued expenses reported on the balance sheet are estimated by management to approximate fair value primarily due to the short term nature of the instruments. The Company had no other items that required fair value measurement on a recurring basis. |
BASIC AND DILUTED LOSS PER SHARE | BASIC AND DILUTED LOSS PER SHARE |
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The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as if converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the periods presented, there were no outstanding potential common stock equivalents and therefore basic and diluted earnings per share result in the same figure. |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION |
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The Company adopted FASB guidance on stock based compensation upon inception on September 9, 2010. Under FASB ASC 718-10-30-2, all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative. The Company did not issue any share-based payments for services or compensation to employees, or otherwise for the periods presented. |
TAXATION | TAXATION |
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Taxation on profits earned in the PRC has been calculated on the estimated assessable profits for the year at the rates of taxation prevailing in the PRC where the Company operates after taking into account the benefits from any special tax credits or “tax holidays” allowed in the county of operations. |
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The Company does not accrue United States income tax since it has no operating income in the United States. The operating subsidiary is organized and located in the PRC and does not conduct any business in the United States. |
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Enterprise income tax |
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In accordance with the relevant tax laws in the PRC, as an agriculture growing enterprise, the operating subsidiary is exempted from enterprise income tax from 2010 to 2014. Accordingly, the Company statutory rate was 0% and 0% for the year ended December 31, 2014 and 2013, respectively. |
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Value added tax |
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The Provisional Regulations of The PRC concerning Value Added Tax promulgated by the State Council came into effect on January 1, 1994. Under these regulations and the Implementing Rules of the Provisional Regulations of the PRC Concerning Value Added Tax, value added tax is imposed on goods sold in or imported into the PRC and on processing, repair and replacement services provided within the PRC. |
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In accordance with the relevant tax laws in the PRC, as an agriculture growing enterprise, the Company is exempted from VAT from 2010 to 2014. |
FOREIGN CURRENCY TRANSLATION | FOREIGN CURRENCY TRANSLATION |
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The reporting currency of the Company is the U.S. dollar. The functional currency of the parent company is the U.S. dollar and the functional currency of the Company’s operating subsidiaries and variable interest entities is the RMB. For the subsidiaries and variable interest entities whose functional currencies are the RMB, results of operations and cash flows are translated at average exchange rates during the period, assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income. 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. All of the Company’s revenue transactions are transacted in the functional currency. The Company does not enter any material transaction in foreign currencies and accordingly, transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company. |
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In accordance with ASC Topic 230, cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets. |
ACCUMULATED OTHER COMPREHENSIVE INCOME | ACCUMULATED OTHER COMPREHENSIVE INCOME |
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Accumulated other comprehensive income represents the change in equity of the Company during the periods presented from foreign currency translation adjustments. |
NEW ACCOUNTING PRONOUNCEMENTS | NEW ACCOUNTING PRONOUNCEMENTS |
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On August 2014, The Financial Accounting Standards Board (FASB) issued Accounting Standard Update No. 2014-15, Presentation of Financial Statements – Going Concerns (Subtopic 205-40): Disclosures of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The amendments require management to assess an entity’s ability to continue as a going concern by incorporating and expanding upon certain principles that are currently in U.S. auditing standards. Specifically, the amendments (1) provide a definition of the term substantial doubt, (2) require an evaluation every reporting period including interim periods, (3) provide principles for considering the mitigating effect of management’s plans, (4) require certain disclosures when substantial doubt is alleviated as a result of consideration of management’s plans, (5) require an express statement and other disclosures when substantial doubt is not alleviated, and (6) require an assessment for a period of one year after the date that the financial statements are issued (or available to be issued). The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of ASU 2014-15 is not expected to have a material impact on our financial position or results of operations. |
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In June 2014, the FASB issued ASU No. 2014-12, Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. The new guidance requires that share-based compensation that require a specific performance target to be achieved in order for employees to become eligible to vest in the awards and that could be achieved after an employee completes the requisite service period be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant-date fair value of the award. Compensation costs should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. This new guidance is effective for fiscal years and interim periods within those years beginning after December 15, 2015. Early adoption is permitted. Entities may apply the amendments in this Update either (a) prospectively to all awards granted or modified after the effective date or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. The adoption of ASU 2014-12 is not expected to have a material impact on our financial position or results of operations. |
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In July 2013, FASB issued ASU No. 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward a Similar Tax Loss, or a Tax Credit Carryforward Exists." The provisions of ASU No. 2013-11 require an entity to present an unrecognized tax benefit, or portion thereof, in the statement of financial position as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward, with certain exceptions related to availability. ASU No. 2013-11 is effective for interim and annual reporting periods beginning after December 15, 2013. The adoption of ASU No. 2013-11 is not expected to have a material impact on the Company's Consolidated Financial Statements. |
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In February 2013, the FASB issued ASU No. 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, to improve the transparency of reporting these reclassifications. Other comprehensive income includes gains and losses that are initially excluded from net income for an accounting period. Those gains and losses are later reclassified out of accumulated other comprehensive income into net income. The amendments in the ASU do not change the current requirements for reporting net income or other comprehensive income in financial statements. All of the information that this ASU requires already is required to be disclosed elsewhere in the financial statements under U.S. GAAP. The new amendments will require an organization to: |
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• | Present (either on the face of the statement where net income is presented or in the notes) the effects on the line items of net income of significant amounts reclassified out of accumulated other comprehensive income - but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period; and | | | |
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• | Cross-reference to other disclosures currently required under U.S. GAAP for other reclassification items (that are not required under U.S. GAAP) to be reclassified directly to net income in their entirety in the same reporting period. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is initially transferred to a balance sheet account (e.g., inventory for pension-related amounts) instead of directly to income or expense. | | | |
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The amendments apply to all public and private companies that report items of other comprehensive income. Public companies are required to comply with these amendments for all reporting periods (interim and annual). The amendments are effective for reporting periods beginning after December 15, 2012, for public companies. Early adoption is permitted. The adoption of ASU No. 2013-02 is not expected to have a material impact on our financial position or results of operations. |
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In January 2013, the FASB issued ASU No. 2013-01, Balance Sheet (Topic 210): Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, which clarifies which instruments and transactions are subject to the offsetting disclosure requirements originally established by ASU 2011-11. The new ASU addresses preparer concerns that the scope of the disclosure requirements under ASU 2011-11 was overly broad and imposed unintended costs that were not commensurate with estimated benefits to financial statement users. In choosing to narrow the scope of the offsetting disclosures, the Board determined that it could make them more operable and cost effective for preparers while still giving financial statement users sufficient information to analyze the most significant presentation differences between financial statements prepared in accordance with U.S. GAAP and those prepared under IFRSs. Like ASU 2011-11, the amendments in this update will be effective for fiscal periods beginning on, or after January 1, 2013. The adoption of ASU 2013-01 is not expected to have a material impact on our financial position or results of operations. |