OTHER RECEIVABLES

9 Months Ended

Sep. 30, 2015

OTHER RECEIVABLES [Text Block]

5. OTHER RECEIVABLES

Other receivables consisted of the following as of September 30, 2015 and December 31, 2014:

		9/30/2015		12/31/2014
Advances to employees for job/travel disbursements		1,274,822		2,623,067
Amount due by a non-related enterprise		867,425		162,907
Other non-related receivables		2,896,767		580,634
Other related party receivables		172,357		1,420,548
Short-term investment sale receivable		1,573,862		1,629,062
Vendor rebate receivable		5,885,397		1,767,267
	$	12,670,630	$	8,183,485

Advances to employees for job/travel disbursements consisted of advances to employees for transportation, meals, client entertainment, commissions, and procurement of certain raw materials. The advances issued to employees may be carried for extended periods of time because employees may spend several months out in the field working to procure new sales contracts or fulfill existing contracts.

Specifically, the company uses available employees of the purchasing department to arrange purchases with desirable chestnut or other raw material growers. However, because many of these growers are in rural farming areas of China where traditional banking and credit arrangements are difficult to implement, the Company must utilize cash purchases and also must contract for its future needs by placing a good faith deposit in cash with the growers. However none of these advances to employees for delivery to the growers on behalf of the Company are “personal loans” to the employees. Advances to employees for purchase of materials in other receivables are adjusted to advances to suppliers as of September 30, 2015.

Related party receivable represented advances issued by management for job or travel disbursement in the normal course of business. The receivable had no impact on earnings. As with other employees, officers sign notes when cash is issued to them as job or travel disbursement. In order to satisfy certain criteria for obtaining the long-term loan with DEG, as noted in footnote 10, Junan Hongrun lent money to senior management to purchase life insurance. Related party receivable amounts are disclosed as “other related party receivables” in other receivables.

In September 2010, Shandong Lorain and Junan Hengji Real Estate Development Co., Ltd. ("Junan Hengji") entered into a cooperative development agreement (the "Agreement"), and in March 2011, Jiangsu Heng An Industrial Investment Group Co., Ltd. ("Heng An Investment"), an affiliated company of Junan Hengji also entered into the Agreement with Shandong Lorain to jointly develop the project with Junan Hengji. Pursuant to the Agreement, Shandong Lorain agreed to sell the Company’s interest in the amount of $7,764,577 (RMB49,604,000) in a parcel of land located in Junan Town, Shandong Province, to construct residential buildings by Junan Hengji and Heng An Investment. The land was sold to Junan Hengji and Heng An Investment for a total sales price of RMB69,604,000 and a guaranteed gross profit of RMB20,000,000 without consideration of the profit or loss of the residential building project.

As of September 30, 2015, a total of RMB42,029,955 has been received and there was an unpaid balance of RMB27,574,045. The Company filed litigation against Junan Hengji and Heng An Investment in 2014 for a claim of RMB10,000,000, which is half of the original guaranteed profit of RMB20,000,000. The Company evaluated the potential claims against Junan Hengji and Heng An Investment, disputes between the parties with respect to out of pocket expenses paid by Junan Hengji as well as the litigation fee that is required to be paid to the court by Shandong Lorain first based upon the amount claimed for disputes between the parties. Shandong Lorain decided to file the lawsuit with the Linyi City Intermediate People's Court to claim a fixed return of RMB10 million (approximately US$1,573,862).

On March 21, 2015, Shandong Lorain received the Linyi City Intermediate People's Court decision that rejected Shandong Lorain's claim for RMB10 million against Junan Hengji and Heng An Investment. On April 3, 2015, Shandong Lorain appealed the decision to the Supreme Court of Shandong Province and the case is still in the process. The balance of the claim was deemed to be uncollectable and was written off as a loss. As of September 30, 2015, RMB10,000,000 (US$1,573,862) is due and payable to the Company since the decision from the lower court does not become effective until the appeal procedure is completed or expired.