SIGNIFICANT ACQUISITIONS OF PROPERTY, PLANT AND EQUIPMENT AND OTHER ASSETS

9 Months Ended

Sep. 30, 2011

SIGNIFICANT ACQUISITIONS OF PROPERTY, PLANT AND EQUIPMENT AND OTHER ASSETS [Text Block]

NOTE 4 – SIGNIFICANT ACQUISITIONS OF PROPERTY, PLANT AND EQUIPMENT AND OTHER ASSETS

In December 2009, Harbin Hainan Kangda completed the acquisition of land use rights for 50 years to property located in Langbei Village Baisha Town, Guangdong Province, PRC, covering an area of 181,854 square meters pursuant to an Asset Purchase Agreement dated August 25, 2009 with the local government. The purchase price for the land use rights was 66,376,800 RMB ($10,407,882 translated at the September 30, 2011 exchange rate), which commencing January 1, 2010 is being amortized on a straight line basis over the 50 years term of the rights. See Note 7.

In May 2010, Harbin Hainan Kangda completed the acquisition of various patents relating to cactus used in manufacturing cattle, hog and fish feed pursuant to a Patent Transfer Agreement dated January 20, 2010 with Heilongjiang Institute of Biological Development. The purchase price for the patents was 54,112,700 RMB ($8,484,871 translated at the September 30, 2011 exchange rate), which commencing April 10, 2010 is being amortized on a straight line basis over the 15 year term of the patents. See Note 8.

In December 2010, Harbin Hainan Kangda completed the acquisition of certain assets (consisting of land use rights for 50 years to property located in Raoping County, Guangdong Province, PRC covering an area of 12,144 square meters, three buildings, machinery and equipment used in the manufacture of cigarettes, and eight trademarks relating to cigarettes) pursuant to an Asset Purchase Agreement dated June 28, 2010 with Dadi Tobacco Trade Center. The total purchase price was 35,000,000 RMB ($5,488,000 translated at the September 30, 2011 exchange rate), which the Company allocated to the assets based on appraisals as follows:

		In RMB		In USD
Buildings	¥	3,643,480	$	571,298
Plant equipment and machinery		12,493,800		1,959,028
Total property,plant and equipment		16,137,280		2,530,326
Land use rights		7,650,720		1,199,633
Trademarks		11,212,000		1,758,041
Total	¥	35,000,000	$	5,488,000

The trademarks expire in September 2014. The Company expects that it will renew these trademarks in March 2014 (PRC trademark law requires renewal of trademarks a half year earlier before the expiration date).

Commencing January 1, 2011, the buildings are being depreciated on a straight line basis over their 40 years estimated useful life, the plant equipment and machinery are being depreciated on a straight line basis over their 12 years estimated useful life, the land use rights are being amortized on a straight line basis over the 50 years term of the rights and the trademarks are being amortized on a straight line basis over their 46 months remaining registered lives.