DEFM14C 1 yasheng_defm14c-16686.htm YASHENG GROUP DEFINITIVE INFORMATION STATEMENT yasheng_defm14c-16686.htm


DEFINITIVE INFORMATION STATEMENT
 
SCHEDULE 14C INFORMATION
 
INFORMATION STATEMENT
PURSUANT TO SECTION 14(C) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 
 
Check the appropriate box:
o  Preliminary Information Statement
o Confidential, for Use of the Commission only (as permitted by Rule 14c-5(d)(2))
x Definitive Information Statement

YASHENG GROUP
(Name of registrant as Specified in its Charter)

Payment of Filing Fee (Check the appropriate box):

o No fee required
x Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
(1) Title of each class of securities to which transaction applies: N/A.
(2) Aggregate number of securities to which transaction applies: N/A.
(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): The net value of properties being received in the SWAP after deducting the appraised value of the properties being swapped out, is $45,671,300. The filing fee is $116.20 per $1,000,000. Hence the filing fee is $5,307.01.
(4) Proposed maximum aggregate value of transaction: $45,671,300
(5) Total fee paid: $5,307.01
x Fee paid previously by written preliminary materials
o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: . . . . . . . . . . . . . . . . . .
(2) Form, Schedule or Registration Statement No.: 000-31899
(3) Filing Party:. . Yasheng Group.
(4) Date Filed:. . . .December 4, 2015
 
 


 

 
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FOR FURTHER INFORMATION CONTACT
 
HAIYUN ZHUANG
CHIEF FINANCIAL OFFICER
YASHENG GROUP
(650) 363-8345
 
YASHENG GROUP
805 Veterans Boulevard
#228
Redwood City, CA 94063
U.S.A.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


 

 
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NOTICE OF ACTION BY CONSENT TAKEN WITHOUT A MEETING
 
 
 
 
Dear Shareholders:
 
Principal shareholders holding 90.17% of the outstanding shares of our company, Yasheng Group, took Action by Consent without a Meeting approving the Swap Agreement (attached hereto) between our wholly-owned subsidiary Gansu Asia-America Trade Co. Ltd (also translated into English as “Gansu Yasheng America Trade Co., Ltd.”)and our sister company Gansu Yasheng Agro-Industrial and Commerce Group Co. Ltd. pursuant to which Gansu Asia-America Trade Co. Ltd. will swap out all of its agricultural properties in exchange for certain long-term lease management rights in agricultural properties held by Gansu Yasheng Agro-Industrial and Commerce Group Co Ltd.
 
Only shareholders of record at the close of business on December 4, 2015 are entitled to receive this Information Statement and notice of the action taken by consent of the principal shareholders.
 
By Order of the Board of Directors,
 
 
/S/ Ye Dong
Chairman and CEO
 
 

Redwood City, California
December 7, 2015

 
 
 
 
 
 
 
 
 


 

 
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YASHENG GROUP
805 Veterans Boulevard
#228
Redwood City, CA 94063

INFORMATION STATEMENT
CONCERNING ACTION TAKEN BY CONSENT WITHOUT A MEETING
INTRODUCTION
 
This Information Statement is being furnished to the shareholders of Yasheng Group, a California corporation (the "Company"), to inform them that the principal shareholders took action by consent without a meeting approving the principal terms of the swap agreement attached to this Notice (“Swap Agreement”) whereby our wholly-owned subsidiary Gansu Asia-America Trade Co. Ltd. (“GAAT”) will agree to exchange all of its agricultural properties for the long-term lease management rights in the agricultural properties held by our sister company, Gansu Yasheng Agro-Industrial Commerce Group Co. Ltd. (“GY”). Only shareholders of record at the close of business on December 4, 2015 (the "Record Date") will be entitled to receive this Information Statement. This Information Statement is first being mailed to the Company's shareholders on or about December 7, 2015.
 
All of the principal shareholders holding 90.17% of our voting power consented to the adoption of the Swap Agreement. Accordingly, no proxies or consents will be solicited and no action is required on your behalf. The cost of printing and distributing this Information Statement will be paid by the Company.
 
The Company's principal executive offices are located at 805 Veterans Boulevard, Suite 228, Redwood City, California 94063.
 
THIS DOCUMENT IS REQUIRED UNDER THE FEDERAL SECURITIES LAWS AND IS PROVIDED SOLELY FOR YOUR INFORMATION.
 
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
 


SUMMARY TERM SHEET

The following is a summary of the transaction described in more detail in this Information Statement together with the cross references to the sections in the Information Statement which describe the transaction in greater detail:

 
·
Our wholly-owned subsidiary GAAT is swapping out its right to manage and operate seven companies which have the long term lease management rights to certain agricultural properties located in North West China and related assets and liabilities pertaining to such properties.  See, “Description of Growing Conditions of Crops being Swapped Out”.

 
·
As a result of the swap out, GAAT also are eliminating any future revenues from the assets being swapped out.  See, “YaSheng Consolidated Statement of Operations”.

 
·
In connection with the swap transaction GAAT entered into agreements to receive long-term lease management rights until 2039 of 12,633 acres of plantations which grow broccoli, moso bamboo, tangerines and waxberry.  See, “Description of Farmlands being Swapped In”.

 
·
As a result of the swap, GAAT will be receiving the assets and associated liabilities in connection with the farmlands being swapped in.  See, “Assets Swapped In”.

 
·
As a result of the swap, GAAT will be entitled to the income from the plantations being swapped in.  For information concerning the historical income and expense pertaining to the assets being swapped in, see “Statements of Income”.
 
 
·
The swap of assets will be a non-currency transaction executed with our sister company, GY.  There will be no monetary payments made or received by GAAT or any party in connection with the swap transaction.  See, “Financial Terms of Swap”.

 
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INFORMATION REGARDING THE SWAP
 
GENERAL
 
Our principal shareholders holding 90.17% of our voting power have taken action by consent without a meeting approving the swap of all of the agricultural lease management rights of GAAT’s in return for the long-term lease management rights to the agricultural properties of our sister company, GY. The swap is being implemented pursuant to the Swap Agreement attached to this Information Statement between our wholly-owned subsidiary GAAT and our sister company, GY. Under the terms of the Swap Agreement, GAAT will transfer to GY its right to manage and operate seven companies which have the agricultural lease management rights, and GAAT will receive the agricultural long-term lease management rights held by our sister company, GY. The swap will be implemented by our parent corporation causing the parties from whom our sister company received the long-term agricultural lease management rights  to transfer such rights directly to GAAT so that GAAT will have separate lease management contracts with each of the parties from whom our sister company, GY, acquired those management rights.

EFFECTIVE DATE OF SWAP

The swap out of GAAT’s right to manage and operate the seven companies which have the existing agricultural lease management rights to GY will occur 21 days after the date of mailing of this Information Statement at which time the provisions for divesting all of GAAT’s right to manage and operate the seven companies which have the agricultural lease management rights pursuant to the Swap Agreement will be made effective. The swap out and swap in will be effective and complete simultaneously.

COMPANIES HOLDING PROPERTIES BEING SWAPPED OUT

The names of the companies GAAT has the right to manage and operate and which have the long term land farming rights that it will be swapping out to GY are set forth in the following table:
 
COMPANIES
 
Gansu Tiaoshan Agricultural Industrial Commercial Group Co., Ltd
 
Gansu Hongtai Agricultural Technology Co., Ltd.
 
Gansu Xiaheqing Industrial Co., Ltd.
 
Gansu Jinta Hengsheng Agricultural Development Co., Ltd.
 
Gansu Jinta Xingsheng Industrial Co., Ltd.
 
Gansu Jinta Yongsheng Agricultural Development Company.
 
Gansu Jinta Yuantai Commercial Trading Co., Ltd.

These seven companies are all wholly owned subsidiaries of our parent corporation, Gansu Yasheng Salt Chemical Industrial Group.

 
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SWAP OF BALANCE SHEETS
 
The Swap also includes a swap of balance sheets, meaning that GAAT is swapping out to GY its assets and liabilities related to the right to manage the seven companies who hold the land use farming rights in the properties operated by GAAT and swapping in the assets and liabilities of our sister company, GY, related to the lease management rights that are being swapped in.
 
ASSETS SWAPPED OUT
 
For comparison purposes, the following is our existing balance sheet for the periods indicated without the Swap:
 
YASHENG GROUP
CONSOLIDATED BALANCE SHEETS
 
   
Year Ended December 31,
 
   
2014
 
     
2013
$
      2012  
ASSETS
 
Current assets:
                     
Cash and cash equivalents
    11,907,242       11,337,958       10,980,384  
Accounts receivable, net
    112,094,824       103,061,683       91,880,065  
Inventories
    341,756,253       318,980,143       227,294,252  
Prepaid and other current assets
    4,070,937       4,400,112       3,962,855  
                         
Total current assets
    469,829,255       437,779,896       334,117,556  
                         
Equity and other investments
    209,941       210,702       204,380  
                         
Property, plant and equipment, net
    905,268,722       848,678,908       785,135,358  
Construction in progress
    6,960,289       7,083,472       7,488,107  
Intangible assets, net
    1,097,762,161       1,057,082,947       1,033,037,846  
                         
Total assets
    2,480,030,368       2,350,835,926       2,159,983,247  
 
 

 
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LIABILITIES AND STOCKHOLDERS' EQUITY
 
Current liabilities:
                 
Accounts payable and accrued expenses
   
27,402,889
     
31,495,004
     
25,058,592
 
Short term loans
   
4,902,762
     
6,560,711
     
9,545,780
 
VAT Tax payable
   
701,760
     
789,243
     
828,517
 
Current portion of long term debt
   
3,560,394
     
4,431,287
     
4,930,826
 
Other current liabilities
   
607,853
     
685,982
     
726,773
 
                         
Total current liabilities
   
37,175,659
     
43,962,227
     
41,090,488
 
                         
Long term debt
   
-
     
-
     
-
 
Long term payable
   
21,073,928
     
24,573,824
     
28,124,436
 
                         
Total liabilities
   
58,249,587
     
68,536,050
     
69,214,924
 
                         
Stockholders' equity:
                       
Common stock, US$1.00 par value
                       
800,000,000 shares authorized
                       
155,097,355 shares issued and outstanding
   
155,097,355
     
155,097,355
     
155,097,355
 
Accumulated other comprehensive income
   
443,988,809
     
443,442,989
     
388,404,930
 
Retained earnings
   
1,822,694,617
     
1,683,759,531
     
1,547,266,038
 
Total stockholders' equity
   
2,421,780,781
     
2,282,299,875
     
2,090,768,323
 
                         
Total liabilities & stockholders' equity
   
2,480,030,368
     
2,350,835,926
     
2,159,983,247
 
 
The above is an excerpt from our 2014 10-K.
 
 
 
 
 
 

 
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The following are the statements of operations from our historical business for the years 2014, 2013, and 2012:
 
YASHENG GROUP
CONSOLIDATED STATEMENTS OF OPERATIONS
 
   
Year Ended December 31,
 
   
2014
 
   
2013
$
     
2012
 
 
                       
Net sales
   
1,012,135,672
     
1,011,323,630
     
993,102,745
 
                         
Cost of goods sold
   
868,280,442
     
867,845,745
     
859,918,076
 
                         
Gross profit
   
143,855,230
     
143,477,886
     
133,184,669
 
Operating expenses:
                       
Sales and marketing
   
1,792,470
     
2,009,990
     
1,944,354
 
General and administrative
   
4,147,497
     
4,725,345
     
4,598,557
 
Total operating expenses
   
5,939,968
     
6,735,335
     
6,542,911
 
                         
Operating profit
   
137,915,263
     
136,742,550
     
126,641,758
 
                         
Interest expense
   
666,613
     
937,163
     
1,110,340
 
                         
Other income (expense) )
   
1,686,436
     
688,106
     
885,804
 
                         
Income before income tax expense
   
138,935,086
     
136,493,493
     
126,417,222
 
Income tax expense
                       
                         
Net income
   
138,935,086
     
136,493,493
     
126,417,222
 
                         
Basic earnings per share
   
0.90
     
0.88
     
0.82
 
Weighted average number of shares
   
155,097,355
     
155,097,355
     
155,097,355
 
 
The above is an excerpt from our 2014 10-K.
 
 

 

 
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ASSETS SWAPPED IN

The following is the pro-forma balance sheet pertaining to the assets being swapped for the periods ended December 31, 2014, 2013, and 2012 as if we had affected the Swap for those periods:
 
Balance sheet
 
                $  
   
December 31, 2014
   
December 31, 2013
   
December 31, 2012
 
Current assets
                   
Cash and cash equivalent
    1,482,866.49       1,627,458.65       1,695,472.15  
Accounts receivable
    911,732.31       793,337.21       789,059.46  
Inventories
    1,327,592.45       1,398,435.26       1,472,710.25  
Prepayments
    3,002,941.66       2,349,882.73       2,495,425.98  
Deferred income tax assets
                       
other
                       
Total Current Assets
    6,725,132.91       6,169,113.85       6,452,667.84  
                         
Non-current assets
                       
Long-term investments
                       
Property, plant, and equipment
    10,849,479.63       9,634,761.91       7,942,054.39  
Construction in progress
    30,993,174.95       25,232,914.03       17,981,355.34  
Intangible assets
    2,405,809,200.85       2,335,606,045.70       2,197,557,811.15  
Deferred income tax assets
                       
Total Assets
    2,454,376,988.34       2,376,642,835.48       2,229,933,888.72  
                         
Current Liabilities
                       
Accounts payable
    18,415.46       -       -  
Accrued employee compensation and benefits
    63,072.13       45,707.16       42,626.82  
Current maturities of long-term debt
                       
Other current liabilities
    23,940.10       12,687.10       14,434.01  
                   
Long-term Liabilities
                 
long-term debt
                 
Obligations under capital leases
                 
Deferred income tax liabilities
                 
Other non-current liabilities
                 
Total Liabilities
    105,427.68       58,394.27       57,060.84  
                         
Stockholder’s equity
                       
Paid in on capital stock Common
    2,758,620.69       2,768,620.12       2,685,546.10  
Additional paid-in capital
    263,135,806.50       264,089,619.31       256,165,460.19  
Other comprehensive income
                       
Retained earnings
    2,188,377,133.46       2,109,726,201.78       1,971,025,821.60  
Total Equity & Liabilities
    2,454,376,988.34       2,376,642,835.48       2,229,933,888.72  

See attached Exhibit 3 setting forth the financial statements in full pertaining to assets being swapped in.
 
 

 
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The following is the pro-forma statements of income pertaining to the agricultural lease management rights being swapped in for the years ended December 31, 2014, 2013, and 2012 as if we had effected the swap for those periods:
 
Statements of Income
 
                   
   
2014
   
2013
   
2012
 
           $          
Sales revenue
    190,536,897.98       179,885,898.08       173,021,275.25  
Cost of goods sold
    41,432,360.78       35,276,635.02       34,623,710.61  
Gross profit
    149,104,537.21       144,609,263.06       138,397,564.64  
General and administrative expense
    9,282,831.93       9,295,490.70       9,103,371.56  
Income from operations
    139,821,705.27       135,313,772.36       129,294,193.08  
                         
Interest revenue
    254,110.75       184,198.02       116,882.62  
Other income (loss), net
    84,916,192.13       76,520,518.96       66,522,575.21  
Income from continuing operations before income tax
    224,992,008.16       212,018,489.34       195,933,650.90  
Income tax
                       
Income from continuing operations
    224,992,008.16       212,018,489.34       195,933,650.90  
Discontinued operations
                       
Net income
    224,992,008.16       212,018,489.34       195,933,650.90  

See attached Exhibit 3 setting forth the financial statements pertaining to the assets being swapped in.
 
 
 


 

 
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SUMMARY COMPARISONS
DECEMBER 31, 2014
 
Our Existing Balance Sheet
 
Our Pro-Forma Balance Sheet
Total Equity & Liabilities
$2,480,030,368
$2,454,376,988
Our Existing Statement of Operations
 
Our Pro-Forma Statement of Operation
Net Income
$138,935,086
$224,992,008
Our Existing Net Income Per Share
$0.90
$1.45

COMPARATIVE VALUES OF SWAPPED OUT AND SWAPPED IN PROPERTIES
 
YaSheng hired two assets appraisal firms, Beijing Northern Yashi Assets Appraisal Co., LTD for the swap in and JinChang Niedu Joint Assets Appraisal Firm for the swap out of the assets.

The two firms were selected randomly from the list, issued by China Appraisal Society, of several institutions with good reputations and selected through competitive negotiations. Neither YaSheng nor any affiliates had any business transaction with these firms in the past two years.
 
The costs of the appraisal was 1.6 million Yuan (about $250,000) for each appraisal, and the fee was paid when the appraisal reports were completed.

Beijing Northern Yashi Assets Appraisal Co., LTD, founded in 1993, with the qualification of evaluating the securities and futures, is qualified by China Securities Regulatory Commission and the Ministry of Finance, and JinChang Niedu Joint Assets Appraisal Firm (special ordinary partnership) has the appraisal qualification issued by the Department of Finance of Gansu province.

Summary of appraisal by Beijing Northern Yashi Assets Appraisal Co. Ltd.:  The appraisal is based on fair value of the assets as of December 31, 2014 of the long term lease management rights in the five to be acquired by Yasheng’s wholly-owned subsidiary, GAAT.  The appraisal took into account the capitalized value of the land eases, the location of the properties, the utmost utilization of the land, the supply and demand of similar properties, the profits that can be generated from farming the land and other factors.  Based on these factors, the appraisal of the lease management rights to be swapped in was $USD 2,308,149,500.

Summary of appraisal by JinChang Niedu Joint Assets Appraisal Firm:  The appraisal is based on fair market value and includes all the net assets related to seven companies which hold the land use farming rights to the agricultural properties currently held by GAAT.  The appraisal included the total assets and liabilities.  The appraiser utilized the market approach, the cost approach, and the income approach and concluded the swapped out assets as of December 31, 2014 were worth $USD 2,262,478,200.

Based on appraisals we have received, copies of which are attached as exhibits to this Information Statement, we believe that the value of the agricultural lease management rights being swapped in exceeds the value of the agricultural lease management rights being swapped out:
 
Appraised Value of Lease Management Rights
Being Swapped In
Appraised Value of Lease Management Rights
Being Swapped Out
RMB 14,721,146,500
RMB 14,429,859,500
USD$ 2,308,149,500
USD$ 2,262,478,200

BACKGROUND OF SWAP TRANSACTION
 
During the last quarter of 2014 management realized that because the Chinese government started promoting a new ecological protection policy and because of changes in market prices of our agricultural products, we will face the following challenges with respect to our GAAT subsidiary’s right to manage and operate the seven companies which hold the land farming rights to the agricultural properties operated by GAAT:
 
First, the properties are mostly distributed in the Hexi Corridor in Gansu Province in China. Although the Qilian Mountain glacier melt water can provide water for irrigation, the area is a semi-desert. In order to restore the ecological environment in these areas, the Chinese government has begun to implement the policies of “close wells and reduce farmland areas” and “return the grain plots to forestry” where the properties are located which limits the use of the glacier water for irrigation. As a result of this policy, the properties would be subject to restriction as to the amount of water that may be used for irrigation of crops. Consequently, we project that GAAT’s farming operations with respect to the properties will be reduced year by year due to restrictions on our water supply.

 
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Secondly, under the influence of domestic market forces, the prices of hop and cotton were falling, thus reducing the operating income GAAT can expect from selling these crops.
 
Management concluded that the influence of the above changes on our company will be long-term; that it would be difficult to further improve operating revenue and profit levels in the future. To ensure that our company will have good agricultural prospects, after careful consideration, our Chairman, Ye Dong, on or about October 2014 met with the Management of our major shareholder, Gansu Yasheng Salt Chemical Industrial Group at Lanzhou, Gansu and proposed that GAAT transfer its right to manage and operate the seven companies that have the land farming rights over the agricultural properties currently being farmed by GAAT and in exchange receive the long term lease farming rights for the agricultural properties of our sister company, GY. The reason for the proposed Swap is that the agricultural properties of our sister company are rich in water resources and more suitable for farming than GAAT’s properties. Furthermore, the mix of crops grown by our sister company are not as subject to downward price pressures as are GAAT’s hop and cotton crops because they grow premium-value fruit and vegetables which can be sold at higher prices.
 
On or about January 2015 the Management of Gansu YaSheng Salt Chemical Industrial Group met and considered the proposal by our Chairman. The meeting took place in Lanzhou, Gansu. The Management agreed to review the proposal by our Chairman to exchange GAAT’s existing agricultural properties for those with better water supplies and higher market prices.
 
Beginning in January 2015 and continuing through the spring and summer of 2015 our management reviewed and identified agricultural properties of our sister company GY, and determined that their farmlands would be appropriate for the Swap due to their better access to water and the fact that the prices for their crops were not declining as some of GAAT’s crops. Thereafter during the period from June through August 2015 our Chinese counsel prepared documents for the Swap and our Chairman had numerous discussions with management of Gansu Yasheng Salt Chemical Industrial Group regarding the implementation of the Swap. Thereafter we procured appraisals of the incoming and outgoing properties and an audit report on the incoming assets and our Board of Directors took action by written consent on August 18, 2015 and approved the Swap. Thereafter from September 23, 2015 through September 25, 2015 our Board members reviewed this Information Statement and took action by consent on September 25, 2015 to approve the filing of this Information Statement.
 
DESCRIPTION OF FARMLANDS BEING SWAPPED IN
 
The following describes the farmlands under lease management right contracts held by GY to be swapped in:
 
INTRODUCTION:
 
Currently, GY, our sister company, farms 76,557 mu (12,633 acres) of land in Taizhou City, Zhejiang Province, PRC, among which: 24,300 mu (4,010 acres) is a broccoli plantation, 18,000 mu (2,970 acres) is a moso bamboo and bamboo shoot plantation, 25,200 mu (4,158 acres) tangerine plantations, and 9,057 mu (1,495 acres) is waxberry plantation. GY farms these crops under 30 year land management leases. These properties all of which are being swapped in are described as follows:
 
 
 

 
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A. 24,300 mu (4,010 acres) of Broccoli Plantation:
 
The plantation is located on a coastal plain in Linhai City Zhejiang Province with fertile land and favorable spring and winter weather conditions, ensuring the premium quality and high yield of broccoli. The plantation produces winter and spring broccoli. The broccoli plantation takes up 20% of the total planted area of Taizhou City. The yield of the broccoli plantation is 1600 plants per mu per crop, with an export conformity rate of 62.5%. The plantation harvests 3 crops a year. It yields 7,290 broccoli plants conforming to the exporting standards.
 
B. 18,000 mu (2,970 acres) of Moso Bamboo & Bamboo Shoot Plantation:
 
The plantation is located in Huangyan District Taizhou City Zhejiang Province. The yearly yield of commercial production at the plantation of moso bamboo is 45,000 tons. The plantation also yields 2,700 tons of bamboo shoots (100 kilograms of spring bamboo shoots and 50 kilograms of winter bamboo shoots per mu).
 
C. 25,200 mu (4,158 acres) of Huangyan Tangerine Plantations:
 
The Huangyan tangerines are grown in two plantations, one consisting of 9,200 MU and another of 16,000 MU located in Huangyan District Taizhou City. Huangyan tangerines are considered premium quality and were formerly served as tribute to ancient emperors. The yearly yield of Huangyan tangerines grown at the plantations is 65,100 tons.
 
D. 9,057 mu (1,495 acres) of Waxberry Plantation:
 
The plantation is located at Xianju County Taizhou City Zhejiang Province, being a major waxberry production zone in China with more than 100 varieties grown in the area. Donghuai waxberry is a premium quality fruit. The plantation is at high altitude with a considerable temperature difference between day and night, and the area enjoys abundant sunshine. The waxberries at this plantation contain a high sugar level. The plantation only grows Donghuai waxberry. The yearly yield of waxberries grown at this plantation is 14,500 tons.
 
General Description of Growing Conditions:
 
The bamboo, waxberry and Huangyan tangerine plantations are all built on small hills in mountain areas in Taizhou, a city of mild, damp and rainy climate, meeting the plants’ need for water, sunshine and temperatures. Therefore, no investment in irrigation infrastructures is needed. Moreover, the tangerine plantation has a complete irrigation system. The broccoli plantation is built on a coastal plain with complete water, electricity, transportation and irrigation infrastructures.
 
Detailed Descriptions of the Particular Crops:
 
Huangyan tangerine: Thin peel (0.11 cm on average), glossy yellow and orange color, small and dense oil sacs, 8-12 segments, shape of kidney, segment clothed with thin membranes, yellow juice pulps, soft and juicy, rich and sweet, smooth, tasty with aroma. Its juice contains citric acid, multivitamins, sugar, amino acid, phosphorus, iron and calcium, etc.
 
 
 

 
13

 

Xianju Dongkui is known for its waxberry production. Dongkui waxberry grown in Xianju has a beautiful color and sweet taste. It has a big shape and a small kernel with shorter maturation period. It becomes ripe and available in the market in early June. Our waxberry is strictly managed. It has characteristics of short maturation period, and high yield. The fruit looks beautiful from the outside. It’s big, juicy and has a unique taste. The average fruit weight is 21grams. The highest record weight is 54grams. Our waxberry abounds in protein, sugar, AHA, calcium, iron, glucose, fructose, citric acid, malic acid and multivitamins. It contains 10.9-14.6% soluble solids, 0.97% titratable acid, 15.23mg vitamins per 100g. Dongkui waxberry is a premium quality fruit.
 
Broccolis are identical with cauliflowers and cabbages in shape and growth habit. They belong to the cruciferae family, brassica rapa genus, cabbage species. Thanks to superb soils and favorable weather conditions, the broccoli in the plantation contains rich and comprehensive nutrition, including protein, carbohydrate, fat, minerals, vitamin C and carotene. Based on analyses, every 100g fresh broccoli blossoms contain 3.5g-4.5g protein, wide varieties of minerals, calcium, phosphorus, iron, potassium, zinc and manganese. The broccoli grown in our plantation is exported to markets overseas, such as Japan, Korea and Russia.
 
Bamboo shoots are Chinese traditional cooking materials. They are tasty, crispy and have a long history of being part of peoples’ cuisines in China. They abound in protein, amino acid, fat, sugar, calcium, phosphorus, iron, carotene, vitamin B1 and B2 & C. Every 100g fresh bamboo shoots contain 3.28g protein, 4.47g carbohydrate, 0.9g fiber, 0.13g fat, 22mg calcium, 56mg phosphorus and 0.1mg iron. They contain multivitamins and carotene more than twice as much as in Chinese cabbage. As a healthy vegetable, they contain superior protein, lysine, tryptophan, threonine and phenylalanine that are critical to the human body, glutamic acid that is needed for significant protein metabolism, cystine that sustains protein structuring.
 
Moso bamboos belong to the grass family, phyllostachys genus, and uniaxial scattered type. They are bamboo plants in the shape of evergreen trees with giant culms as high as 20m or above and as wide as 18cm in diameter. Moso bamboos have tall culms and are evergreen for all seasons. They have beautiful looks and are resistant to frigid winters. The bamboo also has high aesthetic and economic values. They are used in paper making, furniture manufacturing, construction and weaving hand craftsmanship.
 
Description of Growing Conditions of Crops Being Swapped Out
 
The crop plantations operated by our wholly-owned subsidiary, GAAT, which are being swapped out are located in Northwest China Gansu Hexi Corrido, 32°11′42°57′ N, 92°13′~108°46′ E. GAAT’s plantations mostly dwelled in Gansu Hexi Corrido of Northwest China, which was a dry climate and lacks rainfall, with an average yearly temperature between 0~14. The average yearly temperature of Gansu Hexi Corrido is between 4~9, and Qi Lian mountain areas 0~6, with an average yearly precipitation of about 300mm. Precipitations vary widely within the area with a difference of 42~760mm. Rainfall decreases from southeast to northwest with huge seasonal differences, mainly concentrating from June to September. Most of the area is a dry desert climate where crops are very susceptible to disastrous weathers like sandstorm, frost and hail. Agricultural operations have relied on melting glaciers and groundwater for irrigation.
 
 
 

 
14

 

However, due to a great deal of land reclamation in recent years, underground water has been over-drawn, resulting in a substantial decrease of underground water level by more than 20m in ten years. Even though the central government of China as well as local governments has been working to launch a series of ecological restoration policies, forbidding the use of wells to conserve farm land, converting farm land into forests and grassland, the area of arable land is shrinking continuously. Additionally glacier water has been diverted by the government to other non-agricultural areas and uses.
 
Despite these challenges our company has been able to maintain stable revenues and profits in the past few years by using glacier melt water and groundwater, but due to further tightened national ecological restoration policies and continuously worsening farming conditions, our company cannot continue to operate sustainably under these conditions. In order to maintain the company’s future prospects, after extensive research and field work, we decided to swap-in to GAAT, the crops GY, in Southeast China and swap-out GAAT’s low-efficiency agriculture in West China.
 
The below table sets forth the crops being swapped in and the crops being swapped out:
 
Crops being swapped in from GY
Crops being swapped out from
GAAT
Broccoli
Wheat
Moso bamboo
Dried corn
Bamboo shoot
Onion
Tangerine
Fruits
Waxberry
Pear
 
Apricot
 
Liquorice
 
Barley
 
Melon seed
 
Cotton
 
Hop
 
Malt
 
Potato
 
Medicago
 
Cumin
 
Wolfberry
 
Beet
 
Pea
 
Soybean
 
Flaxseed
 
Hybrid corn
 
Egg
 
 
 

 
15

 

Summary of Factors Driving Swap
 
The Board of Directors believe that the past agricultural business of GAAT, which was located in West China, was heavily influenced by disastrous weathers like sandstorm, frost and hail and could not produce agricultural products with high added value. The past model was unable to develop into an expandable farming operation yielding high value crops. Also, we would have needed to make large investments in protecting agricultural production from natural disasters such as the construction of sand-fixation forests, artificial precipitation and artificial hail removal equipment. The new crops being swapped-in will give a high-efficiency agriculture operation in Southeast China. As a result, the major impact of bad weather conditions of West China will no longer affect our company. While we have been successful in the past by adapting to the conditions, the government’s ecological restoration policies will make it more difficult to support the sustainable development of our company because one of GAAT’s primary water sources will be redirected away from us over a period of years. While we do not see an immediate threat to our operations, in order to support our future growth we believe the Swap is the best strategy.
 
Moreover, in West China where we currently operate, the average value per mu is about RMB 2,000 while in Southeast China coastal areas, where the farmlands being swapped in are located, the minimum value is RMB 3,600, and can be as high as over RMB 100,000 per mu.
 
Financial Terms of Swap
 
The Swap will be a non-currency transaction executed between, GAAT, and, GY, whereby there will be an exchange of GAAT’s farmlands by which we mean GAAT’s right to manage and operate the seven companies which hold land use farming rights currently operated by GAAT, for those managed by GY.
 
Summary of Lease Management Rights Held by GY)

The crop plantations described above being swapped in were under long-term management lease agreements which entitled our sister company to grow crops on the land and realize any profits from the sale of the crops for periods and for the one-time up-front lease payments made by, GY, to the lessors of the land as summarized in the following table:
 
Plantation/crop
Expiration Date of Management Lease
Amount of up-front lease payments made by GY to the lessors
1. Tangerine Plantation (9,200 MU)
Dec. 31, 2039
RMB 184,000,000; USD $29,629,629
2. Tangerine Plantation (16,000 MU)
Dec. 31, 2039
RMB 320,000,000; USD $51,297,790
3. Broccoli Plantation (24,000 MU)
Dec. 31, 2039
RMB 240,000,000; USD $58,647,342
4. Moso Bamboo Plantation (13,000 MU)
Dec. 31, 2039
RMB 10,200,000; USD $1,643,512
5. Waxberry Plantation (9057 MU)
Dec. 31, 2039
RMB 180,000,000; USD $28,985,507
 

 

 
16

 

In order to implement the swap-in, our parent corporation and, GY, have caused the land lessors of the agricultural properties described above to enter into new lease management agreements directly with GAAT which agreements will be effective upon completion of the Swap. The following is a summary of the lease management agreements which were entered into by GAAT and the land lessors pursuant to which GAAT will be entitled to all the profits earned from farming these properties for the lease term, for no additional payments to the land owner beyond those which GY already paid when it originally was granted the lease management rights:
 
Plantation Crop
Party From Whom We Are Receiving Lease Management Rights
Expiration of Term of Lease Management Rights
1. Tangerine Plantation (9,200 MU)
C
Linhai City Tengfei Fruit & Vegetable Professional Cooperative
12/31/2039
 
2. Tangerine Plantation (16,000 MU)
C
Linhai City Sitian Fruit & Vegetable Professional Cooperative
12/31/2039
 
3. Broccoli Plantation (24,000 MU)
A
Linhai City Sitian Fruit & Vegetable Professional Cooperative
12/31/2039
 
4. Moso Bamboo Plantation (18,000 MU)
B
Taizhou City Huang Yan Hou Ao Asparagus and Bamboo Professional Cooperative
12/31/2039
 
5. Waxberry Plantation (9,057 MU)
B
Xianju County Xiajing Golden Plum Farming and Breeding Professional Cooperative
12/31/2039
 

Summary of Contract Terms of the Lease Management Rights GAAT Will Acquire Directly Which Are Currently Held by GY:
 
 
·
GAAT is entitled to the profits from managing the property and from the crops grown on the property.
 
 
·
GAAT may build production and living facilities on the land for purposes of producing the crops and housing any necessary farmhands on the property.
 
 
·
GAAT may not use the land for non-agricultural purposes.
 
 
·
GAAT may not re-lease the land to a third party or transfer the management rights to a third party.
 
 
·
At expiration of the lease management term, GAAT will be required to clean up all ground facilities and installations on the land.
 
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE SWAP

The following is a summary of material U.S. federal income tax consequences to the Company and Company shareholders of the Swap.  This summary is based on the tax laws of the United States, including the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions, all as of the date hereof and all subject to change at any time, possibly with retroactive effect.

The United States Internal Revenue Service, or the IRS, may challenge the tax consequences described below, and we have not requested, nor will we request, a ruling from the Internal Revenue Service or an opinion of counsel with respect to the United States federal income tax consequences of the Swap.

All shareholders are urged to consult their own tax advisors regarding the particular tax consequences to them of the Swap, including the applicability and effect of U.S. federal, state, local, foreign or other tax law and possible changes in tax law.
U.S. Federal Income Tax Consequences to the Company

The Swap consists of an exchange between GAAT and GY of assets used by each in the conduct of an active trade or business outside the United States.  None of the assets received by GAAT in the Swap will be distributed to the Company, and none of the assets received by GY are expected to be distributed to its parent.  Accordingly, the Company is not expected to recognize gain or loss for United States federal income tax purposes as a result of the Swap.

U.S. Federal Income Tax Consequences to Shareholders

For the reasons stated above, shareholders of the Company are not expected to recognize gain or loss for United States federal income tax purposes as a result of the Swap.
 
Regulatory Approvals
 
No federal or state regulatory requirements must be complied with or approvals obtained in connection with the Swap Transaction.

 
17

 
 
CALIFORNIA CORPORATE LAW MATTERS

The following is a summary of the relevant California law statutes applicable to the disposition of all the agricultural assets of our wholly-owned subsidiary, GAAT, in exchange for the agricultural properties being swapped in from our sister company GY:

Action Without Meeting

Under the California Corporations Code section 603, any action which may be taken by shareholders at a meeting may be taken without a meeting and without prior notice if consent in writing setting forth the actions so taken shall be provided by the holders of a majority of the outstanding shares. Pursuant to section 603 (b) (1) of the California Corporations Code, notice of any shareholder approval pursuant to action taken without a meeting by less than unanimous written consent shall be given at least 10 days before the consummation of the action authorized by that approval. In this case, consummation of the swap will be effective as of 21 days from the date that this Information Statement is mailed to our shareholders. Please see a copy of section 603 of the Corporations Code of the state of California attached to this information statement for a more complete statement of the provisions of that section.

Transactions with Affiliated Corporations

In the case of the swap transaction, GAAT, will be swapping out the right to manage and control the seven companies who have the land use farming rights of the properties operated by GAAT, GY, and will be swapping in the agricultural properties managed, GY. Accordingly this transaction is governed by Section 310 of the California Corporations Law dealing with transactions with affiliated corporations. California Corporations Code Section 310 provides that no contract or other transaction between the Corporation and one or more of its directors, or between a corporation and any corporation in which one or more of its directors has a material financial interest, in this case, our parent corporation Gansu Yasheng Salt Chemical Industrial Group, by virtue of such interests or affiliation is void or voidable, if the material facts as to the transaction and as to such director's interest are fully disclosed or known to the shareholders and such transaction is approved by the shareholders exclusive of the shares owned by the interested director or if the material facts as to the transaction are fully disclosed and are known to the board and approved by the board without counting the vote of the interested directors or as to any contract or transaction not so approved, if the person asserting the validity of the contract or transaction sustains the burden of proving that the contract or transaction was just and reasonable. See a copy of Section 310 attached to this Information Statement for a more complete statement of the provisions of that Section.

Sale or Transfer of all Corporate Assets

California Corporations Code Section 1001 provides that a corporation may sell, convey, exchange, transfer, or otherwise dispose of all or substantially all of its assets when the principal terms are approved by the board of directors and approved by a majority of the outstanding shares. The sale, conveyance, or exchange transfer or other disposition may be made upon those terms and conditions and for that consideration as the board may deem in the best interests of the Corporation. The consideration may be money, securities, or other property. If the acquiring corporation is in control of the disposing corporation, as is the case here, the principal terms of the transaction must be approved by 90% of the voting power of the disposing corporation. In this case, our parent corporation, Gansu Yasheng Salt Chemical Industrial Group, Ltd and indirectly our chairman Ye Dong who owns 83.25% of our shares, Mei Ping Wu, our President, who owns 6.92% of our shares and amounting to a total of 90.17% of our shares have signed consent to action taken without a meeting approving the Swap.

 

 
18

 

DISSENTERS RIGHTS
 
No Dissenters' Rights: Pursuant to the California Corporation Code, the holders of the Company's Common Stock are not entitled to dissenters' rights in connection with the Swap. Furthermore, the Company does not intend to independently provide those shareholders with any such rights.
 
INTERESTS OF CERTAIN PERSONS IN THE SWAP TRANSACTION
 
Our Chairman, Ye Dong, is the Executive Director of our parent corporation, Gansu Yasheng Salt Chemical Industrial Group. Mr. Dong as a result of his affiliation with our parent corporation may be deemed to control 83.25% of our shares. GY, is wholly-owned by our parent corporation, Gansu Yasheng Salt Chemical Industrial Group. See "Security Ownership of Certain Beneficial Owners and Management."
 
DESCRIPTION OF CAPITAL STOCK
 
The authorized capital stock of the Company consists of the following:
 
COMMON STOCK
 
As of the Record Date, there were 800 million shares of common stock authorized with a stated value of $1.00 per share, of which 157,165,783 shares were issued and outstanding. The holders of the Common Stock vote as a single class and are entitled to one vote per share on all matters to be voted on by the shareholders and have the right of cumulative voting in connection with the election of directors. The holders of Common Stock are entitled to receive pro rata dividends, when and as declared by the Board of Directors in its discretion, out of funds legally available therefore, but only if all dividends on the preferred stock have been paid in accordance with the terms of such preferred stock and there exists no deficiency in the sinking fund for the preferred stock.
 
Dividends on the Common Stock are declared by the Board of Directors. The payment of dividends on the Common Stock in the future, if any, will be subordinate to the preferred stock, must comply with the provisions of the California Corporation Code and will be determined by the Board of Directors. In addition, the payment of such dividends will depend on the Company's financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.
 
 

 
19

 
 
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table sets forth, as of October 2, 2015, the beneficial ownership of the Company's Common Stock on which date there were 157,165,783 shares outstanding (i) by any person or group known by the Company to beneficially own more than 5% of the outstanding Common Stock, (ii) by each Director and executive officer and (iii) by all Directors and executive officers as a group. Unless otherwise indicated, the holders of the shares shown in the table have sole voting and investment power with respect to such shares. The address of all individuals for whom an address is not otherwise indicated is 805 Veterans Boulevard, Suite 228, Redwood City, CA 94063.
 
Beneficial ownership is determined according to the rules of the Securities and Exchange Commission. Beneficial ownership means that a person has or shares voting or investment power of a security and includes any securities that person has the right to acquire within 60 days after the measurement date, such as pursuant to options, warrants or convertible notes. Except as otherwise indicated, we believe that each of the beneficial owners of our common stock listed below, based on information each of them has given to us, has sole investment and voting power with respect to such beneficial owner's shares, except where community property or similar laws may apply. Investment and voting power with respect to such beneficial owner's shares, except where community property or similar laws may apply.
 
   
Common Stock Beneficially Owned
 
 
 
Name and Address of Beneficial Owner
 
Total Outstanding
   
Shares Underlying Convertible Securities (1)
   
Total
   
Percent (2)
Directors and Named Executive Officers(3)
                       
Ye Dong (2)
   
130,842,733
     
0
     
130,842,733
     
83.25
%
Mei Ping Wu (4)
   
10,870,888
     
0
     
10,870,888
     
6.92
%
Fu Wang Deng
   
n/a
     
0
     
n/a
     
n/a
%
Hai Yun Zhuang
   
n/a
     
0
     
n/a
     
n/a
%
Wang Xitian
   
n/a
     
0
     
n/a
     
n/a
%
Wei Lefu
   
n/a
     
0
     
n/a
     
n/a
%
He Shurong
   
n/a
     
0
     
n/a
     
n/a
%
Yang Shengniu
   
n/a
     
0
     
n/a
     
n/a
%
Directors and executive officers as a group persons
   
141,713,621
     
0
     
141,713,621
     
83.25
%
5% or more Beneficial Owners
                               
Gansu Yasheng Salt Chemical Industrial Group, Ltd (3)
   
130,842,733
     
0
     
130,842,733
     
83.25
%
 
(1)
Based on 157,165,783 shares of our common stock outstanding as of Oct. 2, 2015.
(2)
Unless otherwise indicated, the business address of each of our directors and executive offices is Yasheng Mansion, 105 Qin’an Road, Lanzhou, Gansu, China.
(3)
Represents 130,842,733 shares owned by Gansu Yasheng Salt Chemical Industrial Group for which Mr. Dong serves as legal representative and has voting control.
(4)
The address for this beneficial owner is 805 Veterans Blvd., Suite 228, Redwood City, California 94063.
 
 

 
20

 
 
AVAILABLE INFORMATION
 
The Company is subject to the periodic reporting requirements of the Securities Exchange Act of 1934, as amended, and, in accordance therewith, files reports and other information with the Commission. Such reports and other information can be inspected and copied at the public reference facilities maintained by the Commission at 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. Please call the Commission at (202) 942-8088 for further information. Copies of such materials may also be accessed electronically by means of the Commission's home page on the Internet at "http://www.sec.gov."
 
INCORPORATION OF DOCUMENTS BY REFERENCE
 
The following documents filed by the Company with the Commission are incorporated herein by reference and shall be deemed to be a part hereof:
 
-
The Company's Annual Report on Form 10-K for the year ended December 31, 2014
 
-
The Company's Quarterly Report on Form 10-Q for the three months ended June 30, 2015
 
Any document incorporated herein by reference can be obtained by contacting the Commission as described above under "Available Information" or by contacting the Company by mail at 805 Veterans Boulevard, Suite 228, Redwood City, California 94063, by telephone at (650) 363-8345. The Company will provide the documents incorporated by reference without charge upon such written or oral request.
 
 
/S/ Ye Dong
Ye Dong
Chairman and CEO
 
 
 
December 7, 2015

 
 

 
 
 

 
21

 

 
Schedule 14C Information Statement
 
INDEX OF EXHIBITS
 

 
Swap Agreement, consisting of Agreement of Assets Replacement Attachment to be signed and dated 21 days after mailing of this Information Statement and Attachment #1, Agreement of Assets Withdrawal, and Attachment #2, Agreement on the Transfer of Management Rights; Form of Agreement for Alteration of Parties to the Entrusted Management Protocol.
 
Agreement for the Circulation of Land Contracted Management Right between our wholly-owned subsidiary, Gansu Asia-America Trade Co., Ltd. and:
 
 
·
Linhai City Tengfei Fruit & Vegetable Professional Cooperative Tangerine Plantation (9,200 MU)
 
 
·
Linhai City Sitian Fruit & Vegetable Professional Cooperative Tangerine Plantation (16,000 MU)
 
 
·
Linhai City Sitian Fruit & Vegetable Professional Cooperative Broccoli Plantation (24,000 MU)
 
 
·
Taizhou City Huang Yan Hou Ao Asparagus and Bamboo Professional Cooperative Moso Bamboo Plantation (18,000 MU)
 
 
·
Xianju County Xiajing Golden Plum Farming and Breeding Professional Cooperative Waxberry Plantation (9,057 MU)
 
Financial Statements of Gansu Yasheng Agro-Industrial and Commerce Co., Ltd. for years ended December 31, 2014, 2013 and 2012.
 
Report by Beijing Northern Yashi Asset Appraisal Co., Ltd., Sept. 18, 2015 (Incoming Assets); and Appraisal Report by Shou Ming Wang, dated Sept 18, 2015 (Outgoing Assets)
 
California Corporate Law Sections 310, 603, 1001
 
 
 
 

 
 
 
 
 

 
22

 
 



















 
 
 
 
 
 
 
 
 
 
 
 



 

 
23

 
 
Exhibit 1, Part 1

 
Agreement of Assets Replacement Attachment
 
 
Place of Signing: Lanzhou China
 
 
Party A:
Gansu YaSheng Salt Industrial Group Co., Ltd
 
Address:
No. 105 Qin An Rd, Chengguan District, Lanzhou City, Gansu Province
 
Legal Representative: Ye Dong
 
Party B:
Gansu Asia-America Trade Co., Ltd.
 
Address:
No. 105 Qin An Rd, Chengguan District, Lanzhou City, Gansu Province
 
Legal Representative: Haiyun Zhuang
 
Party C:
Gansu YaShengAgro-Industrial and Commerce(Group) Co., Ltd
 
Address:
Jiefang Rd, Jinta County, Gansu Province
 
Legal Representative: Zhiguo Ren
 
Considering that: YaSheng Group is a US company registered at 805 Veterans Blvd., Suite 228, Redwood City, CA 94063, which reports to The U.S. Securities and Exchange Commission(SEC) in accordance to the Securities Exchange Act of 1934 Article 13 or 15(d). It is a Party A's holding subsidiary.  Party B is YaSheng Group's wholly owned subsidiary operating in China, Party C is Party A's wholly owned subsidiary.
 
Considering that: In 2010, Party B signed a series of entrusted management with the following seven entities:
 
Gansu Tiaoshan Agricultural Industrial Commercial GroupCo., Ltd,
 
Gansu Hongtai Agricultural Technology Co., Ltd.
 
Gansu Xiaheqing Industrial Co., Ltd.
 
Gansu Jinta Hengsheng Agricultural Development Co., Ltd.
 
Gansu Jinta Xingsheng Industrial Co., Ltd.
 
Gansu Jinta Yongsheng Agricultural Development Company
 
Gansu Jinta Yuantai Commercial Trading Co., Ltd
 
 
 
24

 
 
Under the lead of Party A, all parties have agreed to the replacement of assets: Party B and C have agreed to a single unified swap transaction whereby Party B shall assign, convey and transfer to Party C all its rights and obligations arising from and in connection with seven long-term lease management rights (the “Management Rights”)  and that Party C shall, in exchange for the receipt of such Management Rights, assign, convey and transfer to Party B all its rights and obligations arising from and in connection with five agricultural lease management rights (the “Lease Management Rights”).  The exchange of the Management Rights and the Lease Management Rights is hereafter referred to as the “Swap”.  The Swap is undertaken to optimize the group's internal structure and to bring it to a significant leap in its business.
 
Hence, all parties agree to the following:
 
1.           Party B agrees to transfer all of Party B’s rights and obligations under the Management Rights and transfers all of B’s rights and obligations under the Management Rights to Party C.  Details of the Agreement for the Alteration of Parties Pertaining to the Entrusted Management Protocol can be found in attachment #1.
 
2.           Party C agrees to accept the assignment of rights and obligations under the Management Rights and, as consideration for and in exchange for the receipt of those Management Rights, Party C agrees to transfer all of Party C’s rights and obligations under the Lease Management Rights to Party B.
 
3.           Pursuant to the Swap, therefore, Party B will have the management right of the assets of the waxberry plantation, broccoli plantation, honey orange plantation and bamboo plantation, etc.
 
4.           Pursuant to the Swap, Party B will be swapping out the assets and liabilities as reflected in its most recent balance sheet filed on form  10Q with the U.S. securities and exchange Commission to Party C ,and receiving as part of the Swap, the assets and liabilities of Party C, as reflected on the balance sheet dated Dec 31, 2014 set forth in the information statement under heading ''assets swapped in" to be mailed to its shareholders
 
5.           Independent asset appraisal agencies have been hired to undergo asset appraisal against inflow and outflow assets before the replacement.  [All parties consent to the result of appraisal and agree that the Management Rights and the Lease Management Rights are of equivalent value.]
 
6.           The accounted replacement of assets are agreed and authorized by the respective boards of directors of Party C and B.
 
7.           Effectiveness of the replacement
 
A.          The base day of the appraisal is 12/31/2014.
 
B.           Starting from the effective day as described below in Section 13, the assets shall be transferred to the prescribed party unless stated otherwise in other agreements. The assets, liabilities and business consequences shall be held against the new party.
 
8.           Promises and commitments
 
A.           All parties promise that all obligations regarding the assets that are the subject of the Swap will have been realized as of the effective day. Furthermore, all parties shall manage their assets to be replaced, liabilities and business in due manner starting from the base day.
 
B.           All parties promise that the assets to be exchanged of each party will not have new significant liabilities except for those disclosed in financial statements and those small amount of liabilities in the course of normal business after the base day.
 
C.           All parties promise that, as of the effective day, the assets to be exchanged will not carry pledges, guaranties, liens or security interests of any fashion (except for those disclosed in financial statements).
 
D.           According to Article 1 of the Guiding Catalog of Foreign Invested Industries (2015 edition), the agricultural assets to be transferred to Party B are organic agricultural produce and fruits, which belong to the industries open to foreign investment without restrictions or prohibitions. Party A and C will make sure the assets to be exchanged are in line with national and industrial standards and specifications.
 
 
 
25

 
 
9.           Responsibilities for the breach of agreement
 
A.           All parties shall be held accountable for the loss of others provided that the prescribed assets to be exchanged are not placed in full amount, and a penalty of 10% of the net value of the assets to be exchanged will be charged.
 
B.           The exchange of assets being unable to be approved, registered or filed by the government will be deemed force majeure so that there is no legal accountability against each other.
 
10.           Agreement Termination:
 
A.           On occasion of significant change at any time up to the effectiveness date as set forth in Section 13, this agreement may be terminated with the consent of all parties through mutual consultation.
 
B.           On occasion of force majeure at any time up to the effectiveness date as set forth in Section 13, this agreement may be terminated.
 
11.           Dispute settlement
 
On occasion of dispute over matters concerning the acceptance and execution of this agreement, all parties should resort to friendly consultation.  However, if consultation fails, any party may file a law suit to the local court that has the jurisdiction over the place of signing.
 
12.           Pending issues
 
All parties may sign supplementary agreements over pending issues.
 
13.           Effectiveness
 
This Agreement takes effect upon the signing or stamping by all parties and the receipt by Party B of all five Lease Management Rights and the receipt by Party C of all seven Management Rights that are included as part of the Swap .
 
14.           This Agreement is signed in six copies. Each party shall keep two copies. Each copy carries equal legal validity.
 
15.           The attachments are part of the agreement and cannot be used apart. They carry equal legal validity with this agreement.
 
16.           It is agreed that
 
Not with standing anything to the contrary in this Agreement, the transfer of the seven Management Rights and the related balance sheet to party C shall not be effective before 21 days after mailing of the information statement describing the Swap to the shareholders of Yasheng Group
 
The end of agreement main body followed by signature page.
 

 
26

 

Part A: Gansu YaSheng Salt Chemical Industrial Group Co., Ltd (stamp)
 
 
 

Legal Representative: Ye Dong
 
 
Date:
 
 
 
 
Party B: Gansu Asia-America Trade Co., Ltd
 
 
 

 Legal Representative: Haiyun Zhuang
 
 
Date:
 
 
 
 
Party C: Gansu YaSheng Agro-Industrial and Commerce (Group) Co., Ltd
 
 
 
 

 Legal Representative: Zhiguo Ren
 
 
Date:
 
 
 
 
Attachment:
 
I. Form of AGREEMENT FOR THE ALTERATION OF PARTIES PERTAINING TO THE ENTRUSTED MANAGEMENT PROTOCOL

2. Form of AGREEMENT FOR THE ALTERATION OF PARTIES PERTAINING TO THE AGREEMENT OF CIRCULATION OF LAND
 


 
27

 

AGREEMENT FOR THE ALTERATION OF

PARTIES PERTAINING TO THE ENTRUSTED MANAGEMENT PROTOCOL

DATED: ________, 2015

Party A:
Gansu Yamei Trading Company Ltd.

Address:
Qinan Road No. 81, Lanzhou City, Gansu Province

Legal Representative: Zhuang, Haiyun

Party B:
Gansu Hongtai Agricultural Science and Technology Co., Ltd.

Address:
Camel City Township, Gaotai County Gansu Province

Legal Representative:  Zhou Changfu

Party C:
Gansu YaSheng Agro-Industrial and Commerce (Group) Co., Ltd.

Address:
Jiefang Road, Jinta County, Gansu Province

Legal Representative: Zhiguo Ren

1.           Based on the fact that:  (A) Party A and C are companies under Gansu YaSheng Salt Chemical Industrial Group Co., Ltd.; (B) Party A and C have agreed to a singleunified swap transaction whereby Party A shall assign, convey and transfer to Party C all its rights and obligations arising from and in connection with seven long-term lease management rights  and that Party C shall, in exchange for the receipt of such lease management rights, assign, convey and transfer to Party A all its rights and obligations arising from and in connection with five agricultural lease management rights (the “Swap”); and (C) Party A and B entered into the Entrusted Management Protocol on 12/28/2010 (the “Management Agreement”) and the Management Agreement is one of the seven long-term lease management rights held by Party A that is to be assigned, conveyed and transferred to Party C as part of the Swap.  Now, as a component part of the Swap, Party A, B and C have agreed to alter the parties pertaining to the Management Agreement.  Details are as follows:
 
A.           Party A and B agree to terminate the Management Agreement.
 
B.           All parties agree to transfer Party A’s rights and obligations to Party C.
 
C.           Party B and C agree to sign a new Entrusted Management Protocol.
 
D.           Party B promises that the original rights and obligations will remain unchanged.
 
E.           Party C is entitled to Party A’ obligations in the Management Agreement.
 
F.           This Agreement is signed in six copies.  Each party shall keep two copies.
 
G.           This Agreement takes effect upon the signing or stamping by all parties and the receipt by Party A of all five replacement agricultural lease management rights that are included as part of the Swap .
 
Date:           __________________________


 
28

 

9057
AGREEMENT FOR THE ALTERATION OF
PARTIES PERTAINING TO THE AGREEMENT OF
CIRCULATION OF LAND CONTRACTED
MANAGEMENT RIGHT FOR 9057 mu PLUM
FARMING
 
 
Party A:
Gansu YaSheng Agro-Industrial and Commerce (Group)Co., Ltd
 
Address:
Jiefang Rd, Jinta County, Gansu Province
 
Legal Representative: Zhiguo Ren
 
Party B:
The Xianju County Xiajing Golden Plum Farming & Breeding Professional Cooperative of Zhejiang Province
 
Address:
Wangzhaoling Village, Guangdu Township, XianjuCounty
 
Legal Representative: Liufu Zhang
 
Party C:
Gansu Asia-America Trade Co., Ltd
 
Address:
No.105 Qin An Rd, Chengguan District, Lanzhou City,Gansu Province
 
Legal Representative: Haiyun Zhuang
 
1.           Based on the fact that: Party A and C are companies under Gansu YaSheng Salt Chemical Industrial Group Co., Ltd, and Party A and B entered into the Agreement of Circulation of Rural Land Contracted Management Right on 12/19/2009. Now, Party A, B and C have agreed to alter the parties pertaining to the agreement. Details are as follows:
 
 
 
29

 
 
A.          Party A and B agree to terminate the Agreement of Circulation of Rural Land Contracted Management Right signed into effect on 12/19/2009.
 
B.          All parties agree to alter the subcontractor in the agreement and transfer Party A’s rights and obligations to Party C: Gansu Asia-America Trade Co., Ltd.
 
C.          Party B and C agree to sign a new Agreement of Circulation of Rural Land Contracted Management Right.
 
D.          Party B promises that the original rights and obligations will remain unchanged.
 
E.          Party C is entitled to Party A’s obligations in the agreement. The balance from the transaction of the circulation of land contracted management right has been paid in full amount as of the signing of this agreement.
 
F.         This Agreement is signed in six copies. Each party shall keep two copies. This Agreement takes effect from the day of signing or stamping by all parties.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30

 
 
 
Party A:   
Party B:
       
Party C:    
       
       
   
2015 09 22
Date: 09/22/2015
 
 
 
 
 
 
 
 
31

 
 
Exhibit 1, Part 4

AGREEMENT FOR THE ALTERATION OF
 
PARTIES PERTAINING TO THE ENTRUSTED MANAGEMENT PROTOCOL
 
DATED DECEMBER 28, 2010
 

 
Party A:
Trading Company Ltd.
 
Address:
Qinan Road No. 81, Lanzhou City, Gansu Province
 
Legal Representative:
Zhuang Haiyuh
 

 
Party B:
Gansu Hongtai Agricultural Science and Technology Co., Ltd.
 
Address:
Camel City Township, Gaotai County Gansu Province
 
Legal Representative:
Zhou Changfu
 

 
Party C:
Gansu Agro-Industrial and Commerce (Group) Co., Ltd.
 
Address:
Jiegang Road, Jinta County Gansu Province
 
Legal Representative:
Zhiguo Ren
 

 
1.           Based on the fact that:  Party A and C are companies under Gansu YaSheng Salt Chemical Industrial Group Co., Ltd. And Party A and B entered into the Entrusted Management Protocol on 12/28/2010 (the “Management Agreement”).  Now, Party A, B and C have agreed to alter the parties pertaining to the agreement.  Details are as follows:
 
A.           Party A and B agree to terminate the Management Agreement of _________________________________________________.
 
B.           All parties agree to transfer Party A’s rights and obligations to Party C:  Gansu Asia-America Trade Co., Ltd.
 
C.           Party B and C agree to sign a new Entrusted Management Protocol.
 
D.           Party B promises that the original rights and obligations will remain unchanged.
 
E.           Party C is entitled to Party A’ obligations in the agreement.
 
F.           This Agreement is signed in six copies.  Each party shall keep two copies.  This Agreement takes effect from the day of signing or stamping by all parties.
 
Date:           __________________________
 


 
 
 

 
32

 







 



 






 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
33

 
 
Exhibit 2, Item 1
 

 
AGREEMENT FOR THE CIRCULATION OF LAND CONTRACTED MANAGEMENT RIGHT OF THE LINHAI CITY TENGFEI FRUIT & VEGETABLE PROFESSIONAL COOPERATIVE
 

 
Party A: The Linhai City Tengfei Fruit & Vegetable Professional Cooperative
 
Party B: Gansu Asia-America Trade Co., Ltd
 

 
In order to safeguard the lawful rights and interests of both parties, on the basis of The Contract Law of the People’s Republic of China, The Law of the People’s Republic of China on Land Contract in Rural Areas, The Measures for the Administration of Circulation of Rural Land Contracted Management Right and all other related laws and regulations, and according to The Contract for the Reclamation of Undeveloped Rural Mountain Areas signed between Party A and the village committee of Chengwai Village Taozhu County Linhai City, both parties agree to conclude this Agreement through mutual consultation and consent. It is each party’s responsibility to observe this Agreement.
 
Article 1: The Ways of Settlement, Use of Land, Term of Validity and Delivery Specifications Regarding Land Lease
 
The Conditions of the Land for Lease: Party A shall transfer the land contracted management right over the tangerine plantation with an area of 9200 mu (614 hectares), located in Chengwai Village Taozhu County Linhai City, to Party B for planting economic forestry like fruits. The plantation starts from Taozhu County in the East, Shangjiang Village in the West, and stops at Jiansi Village in the North and Donggua (wax gourd) Mountain in the South.
 
Use of Land: For the purpose of planting and operating economic forestry like fruits.
 
Term of Validity: Start from the date of complete assets replacement and official announcement to 12/31/2039 (the length of this term shall not go beyond the remaining contractual life of the land’s contracted management)
 
Delivery Specifications: The tangerine plantation will be delivered to Party B as is, on the day of lease.
 
Article 2: Rights and Obligations for Both Parties
 

 
34

 
 
For Party A:
 
1. Monitor and supervise the use of land during Party B’s contracted management, ensuring that the land is legitimately and appropriately used in line with this Agreement.
 
2. Collect leasing fees receivable from Party B according to this Agreement. Within the term of this Agreement, Party A should not raise the contract cost by any means.
 
3. Assure the independent operation of Party B, not committing acts that will infringe upon Party B’s lawful rights and interests.
 
4. Execute all-round cooperation with Party B and provide comprehensive support to them on the development and application of cutting-edge agricultural technologies.
 
5. Ensure the uninterruptible supply of water and electricity as per this Agreement.
 
6. Party A must not re-lease the land to a third party after this Agreement takes effect.
 
 
For Party B:
 
1. Lawfully act the land-contracted management right under the land use and term of contract agreed and specified in this Agreement. Within the term of this Agreement, Party B has the right to execute the following to its land contracted management right: leasing, selling shares, subcontracting, etc.
 
2. Party B is entitled to the profits made from the contracted management of the land and the ownership of any expanded land and purchased asset consistent with this Agreement.
 
3. Party B may build production and living facilities with functions in line with this Agreement on the contracted land.
 
4. Enjoy the right to access community facilities.
 
5. Party B must not use its land contracted management right to commit non-agricultural for-profit activities.
 
6. Party B must develop the contracted land in view of environmental protection and land conservation.
 
7. Party B is entitled to the national preferential policies and incentives for agricultural enterprises.
 
Article 3: The Amount of Leasing Fees and Payment Methods
 
The original party A has paid in full for the land leasing fees under the agreement of leasing land contracted management right which signed with Gansu Yasheng Agribusiness Co.
 
 
35

 
 
Article 4: Liabilities for Breach of Agreement
 
1. Party B shall pay the full amount of leasing fees to Party A as per Article 3 of this Agreement. Provided that Party B doesn’t pay off the full amount of leasing fees within 3 months after the payment due date, Party B will be deemed to breach the agreement. Under this condition, Party A has the right to withdraw the land contracted management right from Party B within the term of this Agreement.
 
2. Party B must not use the land for non-agricultural purposes. Under the condition of Party B causing permanent damages to the land as a result of irrational land development and use, Party A has the right to withdraw the land-contracted management right from Party B after relevant national authorities confirm the situation. Consequently, Party B is also liable for land recovery. For the part of land which is unable to recover, Party B shall pay an indemnity to Party A. Party A will not return the amount of leasing fees already paid by Party B.
 
3. Party A shall hand over the land contracted management right to Party B within the time frame provided in this Agreement. If this will not be fulfilled within 3 months after the due date for land delivery, Party A will be deemed to breach the agreement. Therefore, Party B has the right to dissolve the agreement. Party A will also be liable for any actual loss Party B suffers.
 
4. In the instance of breach of agreement where Party A interferes with and causes interruption to Party B’s production and operation to the extent that normal production and operational activities are hindered, Party B has the right to dissolve the agreement and claim for refund of the amount of leasing fees already paid to Party A. Party A will also be liable for any actual loss Party B suffers.
 
Article 5: Agreement Alteration, Dissolution and Termination
 
1. The validity of this Agreement shall not be subjective to the changes to any party. Nor shall it be altered or dissolved due to merging or demerging of any collective economic organization. This Agreement shall never be terminated at the will of any party, except for instances where this Agreement cannot be executed because the land is devastated by force majeure like natural disasters.
 
2. As a result of mutual consultation and consent, both parties may sign supplementary agreements to make corrections and supplementations to this Agreement. Wherever supplementary agreements disaccord with this Agreement, the former shall prevail.
 
3. Upon the expiration of this Agreement, Party A has the right to reclaim the contracted management right of the land. Party B should clean up all ground facilities and installations on the contracted land as per Party A’s request. Party A is entitled to take possession of these facilities and installations at its own request. If Party B intends to continue with the contracted management of the land, it will still need consult with Party A and sign new agreements all over again but with special priorities given on equal conditions.
 

 
36

 
 
4. The part of the leasing term which exceeds the national regulated term for household contracted management of land shall be deemed invalid.
 
5. Within the term of this Agreement, it will be deemed agreement termination if the land is demanded and requisitioned by the government and related agricultural infrastructures. The actual loss of Party B will be identified through mutual consultation. In this instance, neither party will be liable for the breach of agreement.
 
Article 6: Ways to Settle Contractual Disputes
 
1. In a matter of dispute, both parties should resort to mutual consultations as the way of settlement. If the dispute cannot be settled, either party can file a lawsuit to Party B’s local courts that have the jurisdiction over the matter.
 
2. Over the period of litigation, this leasing agreement shall continue to be in execution.
 
Article 7: This Agreement is signed in three copies. Each party shall keep one copy and the original contract issuer shall file one copy. The validity of the agreement start from the date of both parties signing or stamping, completion of assets replacement and official announcement.
 
Party A (stamp): The Linhai City Tengfei Fruit & Vegetable Professional Cooperative
Party A Representative (signature):
 

 
 
Party B (signature): Gansu Asia-America Trade Co., Ltd
 

 
Party B Representative (signature):
 

 
Date: 12/21/2009
 

 
 
 
 
 
 
37

 
 
Exhibit 2, Item 2
 

AGREEMENT FOR THE CIRCULATION OF LAND CONTRACTED MANAGEMENT RIGHT OF THE LINHAI CITY SITIAN FRUIT & VEGETABLE PROFESSIONAL COOPERATIVE
 

 
Party A: The Linhai City Sitian Fruit & Vegetable Professional Cooperative
 
Party B: Gansu Asia-America Trade Co., Ltd
 
In order to safeguard the lawful rights and interests of both parties, on the basis of The Contract Law of the People’s Republic of China, The Law of the People’s Republic of China on Land Contract in Rural Areas, The Measures for the Administration of Circulation of Rural Land Contracted Management Right and all other related laws and regulations, and according to The Contract for the Reclamation of Undeveloped Rural Mountain Areas signed between Party A and the village committee of Chengwai Village Taozhu County Linhai City, both parties agree to conclude this Agreement through mutual consultation and consent. It is each party’s responsibility to observe this Agreement.
 
Article 1: The Ways of Settlement, Use of Land, Term of Validity and Delivery Specifications Regarding Land Lease
 
The Conditions of the Land for Lease: Party A shall transfer the land contracted management right over the orange plantation with an area of 16000 mu (1067 hectares), located in Chengwai Village Taozhu County Linhai City, to Party B for planting economic forestry like tangerines. The plantation starts from Taozhu County in the East, Dongtou Village in the West, and stops at Jiansi Village in the North and Wukeng Village in the South.
 
Use of Land: For the purpose of planting and operating economic forestry like tangerines.
 
Term of Validity: Start from the date of complete assets replacement and official announcement to 12/31/2039 (the length of this term shall not go beyond the remaining contractual life of the land’s contracted management)
 
Delivery Specifications: The orange plantation will be delivered to Party B as is, on the day of lease.
 
Article 2: Rights and Obligations for Both Parties
 

 
 
38

 
 
For Party A:
 
1. Monitor and supervise the use of land during Party B’s contracted management, ensuring that the land is legitimately and appropriately used in line with this Agreement.
 
2. Collect leasing fees receivable from Party B according to this Agreement. Within the term of this Agreement, Party A should not raise the contract cost by any means.
 
3. Assure the independent operation of Party B, not committing acts that will infringe upon Party B’s lawful rights and interests.
 
4. Execute all-round cooperation with Party B and provide comprehensive support to them on the development and application of cutting-edge agricultural technologies.
 
             5. Ensure the uninterruptible supply of water and electricity as per this Agreement.
 
6. Party A must not re-lease the land to a third party after this Agreement takes effect.
 
For Party B:
 
1. Lawfully act the land contracted management right under the land use and term of contract agreed and specified in this Agreement. Within the term of this Agreement, Party B has the right to execute the following to its land contracted management right: leasing, selling shares, subcontracting, etc.
 
2. Party B is entitled to the profits made from the contracted management of the land and the ownership of any expanded land and purchased asset consistent with this Agreement.
 
3. Party B may build production and living facilities with functions in line with this Agreement on the contracted land.
 
4. Enjoy the right to access community facilities.
 
5. Party B must not use its land contracted management right to commit non-agricultural for-profit activities.
 
6. Party B must develop the contracted land in view of environmental protection and land conservation.
 
             7. Party B is entitled to the national preferential policies and incentives for agricultural enterprises.
 
Article 3: The Amount of Leasing Fees and Payment Methods
 
The original party A has paid in full for the land leasing fees under the agreement of leasing land contracted management right which signed with Gansu Yasheng Agribusiness Co.
 
 
 
39

 
 
Article 4: Liabilities for Breach of Agreement
 
1. Party B shall pay the full amount of leasing fees to Party A as per Article 3 of this Agreement. Provided that Party B doesn’t pay off the full amount of leasing fees within 3 months after the payment due date, Party B will be deemed to breach the agreement. Under this condition, Party A has the right to withdraw the land contracted management right from Party B within the term of this Agreement.
 
2. Party B must not use the land for non-agricultural purposes. Under the condition of Party B causing permanent damages to the land as a result of irrational land development and use, Party A has the right to withdraw the land contracted management right from Party B after relevant national authorities confirm the situation. Consequently, Party B is also liable for land recovery. For the part of land which is unable to recover, Party B shall pay an indemnity to Party A. Party A will not return the amount of leasing fees already paid by Party B.
 
3. Party A shall hand over the land contracted management right to Party B within the time frame provided in this Agreement. If this will not be fulfilled within 3 months after the due date for land delivery, Party A will be deemed to breach the agreement. Therefore, Party B has the right to dissolve the agreement. Party A will also be liable for any actual loss Party B suffers.
 
4. In the instance of breach of agreement where Party A interferes with and causes interruption to Party B’s production and operation to the extent that normal production and operational activities are hindered, Party B has the right to dissolve the agreement and claim for refund of the amount of leasing fees already paid to Party A. Party A will also be liable for any actual loss Party B suffers.
 
Article 5: Agreement Alteration, Dissolution and Termination
 
1. The validity of this Agreement shall not be subjective to the changes to any party. Nor shall it be altered or dissolved due to merging or demerging of any collective economic organization. This Agreement shall never be terminated at the will of any party, except for instances where this Agreement cannot be executed because the land is devastated by force majeure like natural disasters.
 
2. As a result of mutual consultation and consent, both parties may sign supplementary agreements to make corrections and supplementations to this Agreement. Wherever supplementary agreements disaccord with this Agreement, the former shall prevail.
 
3. Upon the expiration of this Agreement, Party A has the right to reclaim the contracted management right of the land. Party B should clean up all ground facilities and installations on the contracted land as per Party A’s request. Party A is entitled to take possession of these facilities and installations at its own request. If Party B intends to continue with the contracted management of the land, it will still need consult with Party A and sign new agreements all over again but with special priorities given on equal conditions.
 

 
40

 
 
4. The part of the leasing term which exceeds the national regulated term for household contracted management of land shall be deemed invalid.
 
5. Within the term of this Agreement, it will be deemed agreement termination if the land is demanded and requisitioned by the government and related agricultural infrastructures. The actual loss of Party B will be identified through mutual consultation. In this instance, neither party will be liable for the breach of agreement.
 
Article 6: Ways to Settle Contractual Disputes
 
1. In a matter of dispute, both parties should resort to mutual consultations as the way of settlement. If the dispute cannot be settled, either party can file a lawsuit to Party B’s local courts that have the jurisdiction over the matter.
 
2. Over the period of litigation, this leasing agreement shall continue to be in execution.
 
Article 7: This Agreement is signed in three copies. Each party shall keep one copy and the original contract issuer shall file one copy. The validity of the agreement start from the date of both parties signing or stamping, completion of assets replacement and official announcement.
 

 
Party A (stamp): The Linhai City Sitian Fruit & Vegetable Professional Cooperative
 

 
Party A Representative (signature):
 

 
Party B (signature): Gansu Asia-America Trade Co., Ltd
 

 
Party B Representative (signature):
 
Date:
 
 
 
 
41

 

Exhibit 2, Item 3
 
AGREEMENT FOR THE CIRCULATION OF LAND CONTRACTED MANAGEMENT RIGHT OF THE LINHAI CITY SITIAN FRUIT & VEGETABLE PROFESSIONAL COOPERATIVE
 

 
Party A: The Linhai City Sitian Fruit & Vegetable Professional Cooperative
 
Party B: Gansu Asia-America Trade Co., Ltd
 
In order to safeguard the lawful rights and interests of both parties, on the basis of The Contract Law of the People’s Republic of China, The Law of the People’s Republic of China on Land Contract in Rural Areas, The Measures for the Administration of Circulation of Rural Land Contracted Management Right and all other related laws and regulations, and according to The Contract for the Reclamation of Undeveloped Rural Mountain Areas signed between Party A and the village committees (Tao Zhu County) of Chengwai Village, Chengli Village and Fu Rong Village, both parties agree to conclude this Agreement through mutual consultation and consent. It is each party’s responsibility to observe this Agreement.
 
Article 1: The Ways of Settlement, Use of Land, Term of Validity and Delivery Specifications Regarding Land Lease
 
The Conditions of the Land for Lease: Party A shall transfer the land contracted management right over the broccoli plantation with an area of 24000 mu (1600 hectares), located throughout villages of Tao Zhu County (Fu Rong Village: 9500 mu (634 hectares), Chengli Village: 9200 mu (614 hectares), Chengwai Village: 5300 mu (354 hectares)), to Party B for planting vegetables like broccoli. The broccoli plantation starts from Haiti in the East, Qian Tang Village in the West, and stops at Hou Tang Village in the North, Xiang Zhuang Village in the South.
 
Use of Land: For the purpose of planting vegetables like broccoli
 
Term of Validity: Start from the date of complete assets replacement and official announcement to 12/31/2039 (the length of this term shall not go beyond the remaining contractual life of the land’s contracted management)
 
            Delivery Specifications: The broccoli plantation will be delivered to Party B as is, on the day of lease.
 
Article 2: Rights and Obligations for Both Parties
 

 
For Party A:
 
1. Monitor and supervise the use of land during Party B’s contracted management, ensuring that the land is legitimately and appropriately used in line with this Agreement.
 
 
 
42

 
 
2. Collect leasing fees receivable from Party B according to this Agreement. Within the term of this Agreement, Party A should not raise the contract cost by any means.
 
3. Assure the independent operation of Party B, not committing acts that will infringe upon Party B’s lawful rights and interests.
 
4. Execute all-round cooperation with Party B and provide comprehensive support to them on the development and application of cutting-edge agricultural technologies.
 
5. Ensure the uninterruptible supply of water and electricity as per this Agreement.
 
6. Party A must not re-lease the land to a third party after this Agreement takes effect.
 

 
For Party B:
 
1. Lawfully act the land contracted management right under the land use and term of contract agreed and specified in this Agreement. Within the term of this Agreement, Party B has the right to execute the following to its land contracted management right: leasing, selling shares, subcontracting, etc.
 
2. Party B is entitled to the profits made from the contracted management of the land and the ownership of any expanded land and purchased asset consistent with this Agreement.
 
3. Party B may build production and living facilities with functions in line with this Agreement on the contracted land.
 
4. Enjoy the right to access community facilities.
 
5. Party B must not use its land contracted management right to commit non-agricultural for-profit activities.
 
6. Party B must develop the contracted land in view of environmental protection and land conservation.
 
7. Party B is entitled to the national preferential policies and incentives for agricultural enterprises.
 
Article 3: The Amount of Leasing Fees and Payment Methods
 
The original party A has paid in full for the land leasing fees under the agreement of leasing land contracted management right which signed with Gansu Yasheng Agribusiness Co.
 
 
 
43

 
 
Article 4: Liabilities for Breach of Agreement
 
1. Party B shall pay the full amount of leasing fees to Party A as per Article 3 of this Agreement. Provided that Party B doesn’t pay off the full amount of leasing fees within 3 months after the payment due date, Party B will be deemed to breach the agreement. Under this condition, Party A has the right to withdraw the land contracted management right from Party B within the term of this Agreement.
 
2. Party B must not use the land for non-agricultural purposes. Under the condition of Party B causing permanent damages to the land as a result of irrational land development and use, Party A has the right to withdraw the land contracted management right from Party B after relevant national authorities confirm the situation. Consequently, Party B is also liable for land recovery. For the part of land which is unable to recover, Party B shall pay an indemnity to Party A. Party A will not return the amount of leasing fees already paid by Party B.
 
3. Party A shall hand over the land contracted management right to Party B within the time frame provided in this Agreement. If this will not be fulfilled within 3 months after the due date for land delivery, Party A will be deemed to breach the agreement. Therefore, Party B has the right to dissolve the agreement. Party A will also be liable for any actual loss Party B suffers.
 
4. In the instance of breach of agreement where Party A interferes with and causes interruption to Party B’s production and operation to the extent that normal production and operational activities are hindered, Party B has the right to dissolve the agreement and claim for refund of the amount of leasing fees already paid to Party A. Party A will also be liable for any actual loss Party B suffers.
 
Article 5: Agreement Alteration, Dissolution and Termination
 
1. The validity of this Agreement shall not be subjective to the changes to any party. Nor shall it be altered or dissolved due to merging or demerging of any collective economic organization. This Agreement shall never be terminated at the will of any party, except for instances where this Agreement cannot be executed because the land is devastated by force majeure like natural disasters.
 
2. As a result of mutual consultation and consent, both parties may sign supplementary agreements to make corrections and supplementations to this Agreement. Wherever supplementary agreements disaccord with this Agreement, the former shall prevail.
 
3. Upon the expiration of this Agreement, Party A has the right to reclaim the contracted management right of the land. Party B should clean up all ground facilities and installations on the contracted land as per Party A’s request. Party A is entitled to take possession of these facilities and installations at its own request. If Party B intends to continue with the contracted management of the land, it will still need consult with Party A and sign new agreements all over again but with special priorities given on equal conditions.
 
4. The part of the leasing term which exceeds the national regulated term for household contracted management of land shall be deemed invalid.
 
 
 
44

 
 
5. Within the term of this Agreement, it will be deemed agreement termination if the land is demanded and requisitioned by the government and related agricultural infrastructures. The actual loss of Party B will be identified through mutual consultation. In this instance, neither party will be liable for the breach of agreement.
 
Article 6: Ways to Settle Contractual Disputes
 
1. In a matter of dispute, both parties should resort to mutual consultations as the way of settlement. If the dispute cannot be settled, either party can file a lawsuit to Party B’s local courts that have the jurisdiction over the matter.
 
2. Over the period of litigation, this leasing agreement shall continue to be in execution.
 
Article 7: This Agreement is signed in three copies. Each party shall keep one copy and the original contract issuer shall file one copy. The validity of the agreement start from the date of both parties signing or stamping, completion of assets replacement and official announcement.
 

Party A (stamp): The Linhai City Sitian Fruit & Vegetable Professional Cooperative
Party A Representative (signature):
 
Party B (signature): Gansu Asia-America Trade Co., Ltd
 
Party B Representative (signature):
 

 

 
Date: 07/15/2015
 

 
 
 
 

 
 
45

 
 
Exhibit 2, Item 4
 

 
AGREEMENT FOR THE CIRCULATION OF LAND CONTRACTED MANAGEMENT RIGHT OF THE TAIZHOU CITY HUANG YAN HOU AO ASPARAGUS & BAMBOO PROFESSIONAL COOPERATIVE
 

 
Party A: The Taizhou City Huang Yan Hou Ao Asparagus & Bamboo Professional Cooperative
 
Party B: Gansu Asia-America Trade Co., Ltd
 
 
 
In order to safeguard the lawful rights and interests of both parties, on the basis of The Contract Law of the People’s Republic of China, The Law of the People’s Republic of China on Land Contract in Rural Areas, The Measures for the Administration of Circulation of Rural Land Contracted Management Right and all other related laws and regulations, and according to The Agreement For The Circulation Of Rural Land Contracted Management Right signed between Party A and village committees (Yu Tou County) of Hou Ao Village, Qian Ao Village, Liang Shu Shan Village and Zhou Jia Liao Village, both parties agree to conclude this Agreement through mutual consultation and consent. It is each party’s responsibility to observe this Agreement.
 
 
 
Article 1: The Ways of Settlement, Use of Land, Term of Validity and Delivery Specifications Regarding Land Lease
 
The Conditions of the Land for Lease: Party A shall transfer the land contracted management right over the moso bamboo hill with an area of 18000 mu (1200 hectares), located throughout Hou Ao Village, Qian Ao Village, Liang Shu Shan Village and Zhou Jia Liao Village of Yu Tou County Huang Yan District Tan Zhou City, to Party B for operation. 5000 mu (334 hectares) of the land is in Hou Ao Village, starting from Qian Ao Village in the East, Xian Ju Village in the West, and stopping at Zhou Jia Liao Village in the North, Bai Shi Village in the South. 5500 mu (367 hectares) is in Qian Ao Village, starting from Qian Ao Village in the East, Qian Keng Tou Village in the West, and stopping at Liang Shu Shan Village in the North, Zi Lin Shan Village in the South. 3000 mu (200 hectares) is in Liang Shu Shan Village, starting from Qian Ao Village in the East, Liang Shan Village in the West, and stopping at Liang Shu Shan Village in the North, Qian Ao Village in the South. 4500 mu (300 hectares) is in Zhou Jia Liao Village, starting from Yang Keng Village in the East, Huang Ku Zhu in the West, and stopping at Shan Tou in the North, Hou Ao Village in the South.
 
Use of Land: For the purpose of planting and operating economic forestry like moso bamboos.
 
 
 
46

 
 
Term of Validity: Start from the date of complete assets replacement and official announcement to 12/31/2039 (the length of this term shall not go beyond the remaining contractual life of the land’s contracted management)
 
Delivery Specifications: The bamboo plantation will be delivered to Party B as is, on the day of lease.
 

 
Article 2: Rights and Obligations for Both Parties
 
For Party A:
 
1. Monitor and supervise the use of land during Party B’s contracted management, ensuring that the land is legitimately and appropriately used in line with this Agreement.
 
2. Collect leasing fees receivable from Party B according to this Agreement. Within the term of this Agreement, Party A should not raise the contract cost by any means.
 
3. Assure the independent operation of Party B, not committing acts that will infringe upon Party B’s lawful rights and interests.
 
4. Execute all-round cooperation with Party B and provide comprehensive support to them on the development and application of cutting-edge agricultural technologies.
 
5. Ensure the uninterruptible supply of water and electricity as per this Agreement.
 
6. Party A must not re-lease the land to a third party after this Agreement takes effect.
 

 
For Party B:
 
1. Lawfully act the land contracted management right under the land use and term of contract agreed and specified in this Agreement. Within the term of this Agreement, Party B has the right to execute the following to its land contracted management right: leasing, selling shares, subcontracting, etc.
 
2. Party B is entitled to the profits made from the contracted management of the land and the ownership of any expanded land and purchased asset consistent with this Agreement.
 
3. Party B may build production and living facilities with functions in line with this Agreement on the contracted land.
 
4. Enjoy the right to access community facilities.
 
 
47

 
 
5. Party B must not use its land contracted management right to commit non-agricultural for-profit activities.
 
6. Party B must develop the contracted land in view of environmental protection and land conservation.
 
7. Party B is entitled to the national preferential policies and incentives for agricultural enterprises.
 
Article 3: The Amount of Leasing Fees and Payment Methods
 
The original party A has paid in full for the land leasing fees under the agreement of leasing land contracted management right which signed with Gansu Yasheng Agribusiness Co.
 
Article 4: Liabilities for Breach of Agreement
 
1. Party B shall pay the full amount of leasing fees to Party A as per Article 3 of this Agreement. Provided that Party B doesn’t pay off the full amount of leasing fees within 3 months after the payment due date, Party B will be deemed to breach the agreement. Under this condition, Party A has the right to withdraw the land contracted management right from Party B within the term of this Agreement.
 
2. Party B must not use the land for non-agricultural purposes. Under the condition of Party B causing permanent damages to the land as a result of irrational land development and use, Party A has the right to withdraw the land contracted management right from Party B after relevant national authorities confirm the situation. Consequently, Party B is also liable for land recovery. For the part of land which is unable to recover, Party B shall pay an indemnity to Party A. Party A will not return the amount of leasing fees already paid by Party B.
 
3. Party A shall hand over the land contracted management right to Party B within the time frame provided in this Agreement. If this will not be fulfilled within 3 months after the due date for land delivery, Party A will be deemed to breach the agreement. Therefore, Party B has the right to dissolve the agreement. Party A will also be liable for any actual loss Party B suffers.
 
4. In the instance of breach of agreement where Party A interferes with and causes interruption to Party B’s production and operation to the extent that normal production and operational activities are hindered, Party B has the right to dissolve the agreement and claim for refund of the amount of leasing fees already paid to Party A. Party A will also be liable for any actual loss Party B suffers.
 
Article 5: Agreement Alteration, Dissolution and Termination
 
1. The validity of this Agreement shall not be subjective to the changes to any party. Nor shall it be altered or dissolved due to merging or demerging of any collective economic organization. This Agreement shall never be terminated at the will of any party, except for instances where this Agreement cannot be executed because the land is devastated by force majeure like natural disasters.
 
 
48

 
 
2. As a result of mutual consultation and consent, both parties may sign supplementary agreements to make corrections and supplementations to this Agreement. Wherever supplementary agreements disaccord with this Agreement, the former shall prevail.
 
3. Upon the expiration of this Agreement, Party A has the right to reclaim the contracted management right of the land. Party B should clean up all ground facilities and installations on the contracted land as per Party A’s request. Party A is entitled to take possession of these facilities and installations at its own request. If Party B intends to continue with the contracted management of the land, it will still need consult with Party A and sign new agreements all over again but with special priorities given on equal conditions.
 
4. The part of the leasing term which exceeds the national regulated term for household contracted management of land shall be deemed invalid.
 
5. Within the term of this Agreement, it will be deemed agreement termination if the land is demanded and requisitioned by the government and related agricultural infrastructures. The actual loss of Party B will be identified through mutual consultation. In this instance, neither party will be liable for the breach of agreement.
 
Article 6: Ways to Settle Contractual Disputes
 
1. In a matter of dispute, both parties should resort to mutual consultations as the way of settlement. If the dispute cannot be settled, either party can file a lawsuit to Party B’s local courts that have the jurisdiction over the matter.
 
2. Over the period of litigation, this leasing agreement shall continue to be in execution.
 
Article 7: This Agreement is signed in three copies. Each party shall keep one copy and the original contract issuer shall file one copy. The validity of the agreement start from the date of both parties signing or stamping, completion of assets replacement and official announcement.
 
Party A (stamp): THE TAIZHOU CITY HUANG YAN HOU AO ASPARAGUS & BAMBOO PROFESSIONAL COOPERATIVE
Party A Representative (signature):
 
Party B (signature): Gansu Asia-America Trade Co., Ltd
 
Party B Representative (signature):
 
 
 
 
Date: 07/12/2015
 
 
 
49

 
 
Exhibit 2, Item 5
 

 
AGREEMENT FOR THE CIRCULATION OF LAND CONTRACTED MANAGEMENT RIGHT OF THE XIANJU COUNTY XIAJING GOLDEN PLUM FARMING & BREEDING PROFESSIONAL COOPERATIVE
 

 
Party A: The Xianju County Xiajing Golden Plum Farming & Breeding Professional Cooperative
 
Party B: Gansu Asia-America Trade Co., Ltd
 
In order to safeguard the lawful rights and interests of both parties, on the basis of The Contract Law of the People’s Republic of China, The Law of the People’s Republic of China on Land Contract in Rural Areas, The Measures for the Administration of Circulation of Rural Land Contracted Management Right and all other related laws and regulations, and according to The Agreement For The Circulation of Rural Land Contracted Management Right signed between Party A and the village committee of Dalei Village Guangdu Township Xianju County, both parties agree to conclude this Agreement through mutual consultation and consent. It is each party’s responsibility to observe this Agreement.
 
Article 1: The Ways of Settlement, Use of Land, Term of Validity and Delivery Specifications Regarding Land Lease
 
The Ways of Settlement: Party A shall lease the land under its contracted management to Party B through subcontracting.
 
The Conditions of the Land for Lease: Party A shall transfer the land contracted management right over the waxberry plantation with an area of 9057 mu (603.8 hectares), located in Dalei Village Guangdu Township Xianju County, to Party B for planting fruits like waxberries. This plantation starts from Xikeng Village in the East, Yaotou Village in the West, and stops at Tang’ao Village in the North and Houliao Village in the South.
 
Use of Land: For the purpose of planting fruits like waxberries.
 
Term of Validity: Effective from the date of complete assets replacement and official announcement to 12/31/2039 (the length of this term shall not go beyond the remaining contractual life of the land’s contracted management)
 
Delivery Specifications: The waxberry plantation will be delivered to Party B as is, on the day of lease.
 
Article 2: Rights and Obligations for Both Parties
 
 
 
50

 
 
For Party A:
 
1. Monitor and supervise the use of land during Party B’s contracted management, ensuring that the land is legitimately and appropriately used in line with this Agreement.
 
2. Collect leasing fees receivable from Party B according to this Agreement. Within the term of this Agreement, Party A should not raise the contract cost by any means.
 
3. Assure the independent operation of Party B, not committing acts that will infringe upon Party B’s lawful rights and interests.
 
4. Execute all-round cooperation with Party B and provide comprehensive support to them on the development and application of cutting-edge agricultural technologies.
 
5. Ensure the uninterruptible supply of water and electricity as per this Agreement.
 
6. Party A must not re-lease the land to a third party after this Agreement takes effect.
 

 
For Party B:
 
1. Lawfully act the land contracted management right under the land use and term of contract agreed and specified in this Agreement. Within the term of this Agreement, Party B has the right to execute the following to its land contracted management right: leasing, selling shares, subcontracting, etc.
 
2. Party B is entitled to the profits made from the contracted management of the land and the ownership of any expanded land and purchased asset consistent with this Agreement.
 
3. Party B may build production and living facilities with functions in line with this Agreement on the contracted land.
 
4. Enjoy the right to access community facilities.
 
5. Party B must not use its land contracted management right to commit non-agricultural for-profit activities.
 
6. Party B must develop the contracted land in view of environmental protection and land conservation.
 
7. Party B is entitled to the national preferential policies and incentives for agricultural enterprises.
 
 
 
51

 
 
Article 3: The Amount of Leasing Fees and Payment Methods
 
The original party A has paid in full for the land leasing fees under the agreement of leasing land contracted management right which signed with Gansu Yasheng Agribusiness Co.
 
Article 4: Liabilities for Breach of Agreement
 
1. Party B shall pay the full amount of leasing fees to Party A as per Article 3 of this Agreement. Provided that Party B doesn’t pay off the full amount of leasing fees within 3 months after the payment due date, Party B will be deemed to breach the agreement. Under this condition, Party A has the right to withdraw the land contracted management right from Party B within the term of this Agreement.
 
2. Party B must not use the land for non-agricultural purposes. Under the condition of Party B causing permanent damages to the land as a result of irrational land development and use, Party A has the right to withdraw the land contracted management right from Party B after relevant national authorities confirm the situation. Consequently, Party B is also liable for land recovery. For the part of land which is unable to recover, Party B shall pay an indemnity to Party A. Party A will not return the amount of leasing fees already paid by Party B.
 
3. Party A shall hand over the land contracted management right to Party B within the time frame provided in this Agreement. If this will not be fulfilled within 3 months after the due date for land delivery, Party A will be deemed to breach the agreement. Therefore, Party B has the right to dissolve the agreement. Party A will also be liable for any actual loss Party B suffers.
 
4. In the instance of breach of agreement where Party A interferes with and causes interruption to Party B’s production and operation to the extent that normal production and operational activities are hindered, Party B has the right to dissolve the agreement and claim for refund of the amount of leasing fees already paid to Party A. Party A will also be liable for any actual loss Party B suffers.
 
Article 5: Agreement Alteration, Dissolution and Termination
 
1. The validity of this Agreement shall not be subjective to the changes to any party. Nor shall it be altered or dissolved due to merging or demerging of any collective economic organization. This Agreement shall never be terminated at the will of any party, except for instances where this Agreement cannot be executed because the land is devastated by force majeure like natural disasters.
 
2. As a result of mutual consultation and consent, both parties may sign supplementary agreements to make corrections and supplementations to this Agreement. Wherever supplementary agreements disaccord with this Agreement, the former shall prevail.
 
3. Upon the expiration of this Agreement, Party A has the right to reclaim the contracted management right of the land. Party B should clean up all ground facilities and installations on the contracted land as per Party A’s request. Party A is entitled to take possession of these facilities and installations at its own request. If Party B intends to continue with the contracted management of the land, it will still need consult with Party A and sign new agreements all over again but with special priorities given on equal conditions.
 
 
 
52

 
 
4. The part of the leasing term which exceeds the national regulated term for household contracted management of land shall be deemed invalid.
 
5. Within the term of this Agreement, it will be deemed agreement termination if the land is demanded and requisitioned by the government and related agricultural infrastructures. The actual loss of Party B will be identified through mutual consultation. In this instance, neither party will be liable for the breach of agreement.
 
Article 6: Ways to Settle Contractual Disputes
 
1. In a matter of dispute, both parties should resort to mutual consultations as the way of settlement. If the dispute cannot be settled, either party can file a lawsuit to Party B’s local courts that have the jurisdiction over the matter.
 
2. Over the period of litigation, this leasing agreement shall continue to be in execution.
 
Article 7: This Agreement is signed in three copies. Each party shall keep one copy and the original contract issuer shall file one copy. The validity of the agreement start from the date of both parties signing or stamping, completion of assets replacement and official announcement.
 

 

 
Party A (stamp):
 
The Xianju County Xiajing Golden Plum Farming & Breeding Professional Cooperative
 

 
Party A Representative (signature):
 

 
Party B (signature): Gansu Asia-America Trade Co., Ltd
 
Party B Representative (signature): _____________
 
Signing Location:  Luqiao District, Taizhou City
 
Date: 07/11/2015
 

 
53

 


 
 



 











 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
54

 


Report of Independent Registered Public Accounting Firm
 

 
To the Board of Directors and Stockholders of Gansu Yasheng AGRO-INDUSTRIAL & COMMERCE GROUP Co. Ltd company,
 
We have audited the accompanying consolidated balance sheets of Yasheng AGRO-INDUSTRIAL & COMMERCE GROUP Co. Ltd Company (the Company”) as of December 31, 2014, 2013 and 2012, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Gansu Yasheng AGRO-INDUSTRIAL & COMMERCE GROUP Co. Ltd as of December 31, 2014, 2013 and 2012, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
 

Gansu Hongxin Certified Public Accountants Co., Ltd.
 
Lanzhou, China
 
 
 
 
 
 
 
 

 
55

 

Balance Sheet
 
$
$
$
 
December 31, 2014
December 31, 2013
December 31, 2012
Current assets
     
Cash and cash equivalent
1,482,866.49
1,627,458.65
1,695,472.15
Accounts receivable
911,732.31
793,337.21
789,059.46
Inventories
1,327,592.45
1,398,435.26
1,472,710.25
Prepayments
3,002,941.66
2,349,882.73
2,495,425.98
Deferred income tax assets other
     
Total Current Assets
6,725,132.91
6,169,113.85
6,452,667.84
       
Non-current assets
     
Long-term investments
     
Property, plant, and equipment
10,849,479.63
9,634,761.91
7,942,054.39
Construction in progress
30,993,174.95
25,232,914.03
17,981,355.34
Intangible assets
2,405,809,200.85
2,335,606,045.70
2,197,557,811.15
Deferred income tax assets
     
Total Assets
2,454,376,988.34
2,376,642,835.48
2,229,933,888.72
       
Current Liabilities
     
Accounts payable
18,415.46
-
-
Accrued employee compensation and benefits
63,072.13
45,707.16
42,626.82
Current maturities of long-term debt
     
Other current liabilities
23,940.10
12,687.10
14,434.01
       
Long-term Liabilities
     
long-term debt
     
Obligations under capital leases
     
Deferred income tax liabilities
     
Total Liabilities
105,427.68
58,394.27
57,060.84
       
Stockholder’s equity
     
Paid in on capital stock Common
2,758,620.69
2,768,620.12
2,685,546.10
Additional paid-in capital
263,135,806.50
264,089,619.31
256,165,460.19
Other comprehensive income
     
Retained earnings
2,188,377,133.46
2,109,726,201.78
1,971,025,821.60
Total stockholders’ equity
2,454,271,560.65
2,376,584,441.21
2,229,876,827.89
Total Equity & Liabilities
2,454,376,988.34
2,376,642,835.48
2,229,933,888.72

 
56

 
 
Statements of Income
 
2014
2013
2012
       
Sales revenue
190,536,897.98
179,885,898.08
173,021,275.25
Cost of goods sold
41,432,360.78
35,276,635.02
34,623,710.61
Gross profit
149,104,537.21
144,609,263.06
138,397,564.64
General and administrative expense
9,282,831.93
9,295,490.70
9,103,371.56
Income from operations
139,821,705.27
135,313,772.36
129,294,193.08
       
Interest revenue
254,110.75
184,198.02
116,882.62
Other income (loss), net
84,916,192.13
76,520,518.96
66,522,575.21
Income from continuing operations before income tax
224,992,008.16
212,018,489.34
195,933,650.90
Income tax
     
Income from continuing operations
224,992,008.16
212,018,489.34
195,933,650.90
Discontinued operations
     
Net income
224,992,008.16
212,018,489.34
195,933,650.90
 
Statements of Cash Flow
   
$
 
2014
2013
Cash flows from operating activities:
   
Net income
224,992,008.16
212,018,489.34
Depreciation, amortization, and other
9,009,644.84
9,024,313.74
(Gains) losses on investments and other, net
-84,916,192.13
-76,520,518.96
Accounts receivable
-119,356.62
19,817.80
Inventories
64,759.15
117,968.15
Accounts payable
-247,294.52
526,060.45
Net cash provided by operating activities
148,783,568.87
145,186,130.52
     
Cash flows from investing activities:
   
Purchases of investments
   
Proceeds from sales of investments
   
Proceeds from maturities of investments
   
Purchase of property,plant and equipment
8,590,178.57
9,622,549.85
 
 
 
57

 
 
 
   
Proceeds from sales of property and equipment
   
Other
   
Net cash used in investing activities
-8,590,178.57
-9,622,549.85
     
Cash flows from financing activities:
   
Issuances of common stock
   
Issuances of debt
   
Repayments of debt
   
Dividends paid
139,821,705.27
135,313,772.36
Other
   
Net cash used in financing activities
-139,821,705.27
-135,313,772.36
     
Effect of exchange rate changes on cash
-516,277.20
-317,821.81
     
Net increase (decrease) in cash and cash equivalents
-144,592.16
-68,013.50
Cash and cash equivalents, beginning of period
1,627,458.65
1,695,472.15
Cash and cash equivalents, end of period
1,482,866.49
1,627,458.65
 
 
 
 
 
 
 
 
 
 
 

 

 
58

 
 
Statement of Stockholders’ Equity
       
$
 
Common Stock
Additional paid-in capital
Retained Earnings
Total
Balance as of December 31 2012
2,685,546.10
256,165,460.19
1,971,025,821.60
2,229,876,827.88
Net income
   
76,520,518.96
76,520,518.96
Foreign currency translation
83,074.02
7,924,159.13
62,179,861.23
70,187,094.38
         
Balance as of December 31 2013
2,768,620.12
264,089,619.31
2,109,726,201.78
2,376,584,441.21
Net income
   
84,916,192.13
84,916,192.13
Foreign currency translation
-9,999.43
-953,812.81
-6,265,260.45
-7,229,072.69
         
Balance as of December 31 2014
2,758,620.69
263,135,806.50
2,188,377,133.46
2,454,271,560.65
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
59

 

Gansu Yasheng AGRO-INDUSTRIAL & COMMERCE GROUP Co. Ltd
Notes to Financial Statement
 
1.           Organization and nature of operations
 
Gansu Yasheng AGRO-INDUSTRIAL & COMMERCE GROUP Co. Ltd (“The Company”) was set on 5th March 1998 in China. The paid in capital is RMB 16,880,000 yuan, 100% hold by Gansu YaSheng Salt Industrial Group, Ltd. The main business of the Company including, Agricultural technology development, new product development, and processing, agricultural sideline products (excluding food wholesale), chemical products and raw materials (excluding dangerous goods) sales; livestock products sales; chemical fertilizer, agricultural film, agricultural machinery, and oil sales. Planting and selling of agricultural and forestry fruits and vegetables.
 
2.           Summary of significant accounting policies
 
(a)           Accounting standards
 
The financial statements have been prepared on a historical cost basis to reflect the financial position and results of operations of the Company in accordance with accounting principles generally accepted in the United States of America.
 
(b)           Fiscal year
 
The Company’s fiscal year ends on the 31st of December of each calendar year.
 
(c)           Use of estimates
 
The Company’s discussion and analysis of its financial condition and results of operations are based upon its financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, the Company evaluates its estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
 
(d)           Revenue recognition
 
We mainly sell products. We recognize revenue when title and risk of loss are transferred to our customers. This generally happens upon delivery of our product.
 
 
 
60

 
 
(e)           Shipping and handling costs
 
The Company records outward freight, purchasing and receiving costs in selling expenses; inspection costs and warehousing costs are recorded as general and administrative expenses.
 
(f)           Cash and cash equivalents
 
Cash and cash equivalents include cash on hand, demand deposits held by banks, and securities with maturities of three months or less. The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Cash equivalents are composed primarily of investments in money market accounts stated at cost, which approximates fair value.
 
(g)           Inventories
 
Inventories are recorded using the weighted average method and are valued at the lower of cost or market.
 
(h)           Accounts receivable, net
 
The carrying amount of accounts receivable is reduced by a valuation allowance that reflects the Company’s best estimate of the amounts that will not be collected. In addition to reviewing delinquent accounts receivable, the Company considers many factors in estimating its general allowance, including aging analysis, historical bad debt records, customer credit analysis and any specific known troubled accounts.
 
(i)           Property, plant and equipment
 
Property, plant and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets. Amortization of leasehold improvements is calculated on a straight-line basis over the life of the asset or the term of the lease, whichever is shorter. Major renewals and betterments are capitalized and depreciated; maintenance and repairs that do not extend the life of the respective assets are charged to expense as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income. Depreciation related to property and equipment used in production is reported in cost of sales. Property and equipment are depreciated over their estimated useful lives as follows:
 
Types of PPE
Depreciation period
Residual rate(%)
Buildings and improvements
30
1
Machinery and equipment
5
3
Transportation
10
3
Office equipment and others
5
3
 
 
 
61

 
 
Long-term assets of the Company are reviewed annually to assess whether the carrying value has become impaired, according to the guidelines established in Statement of Accounting Standards (SFAS) No. 144, "Accounting for the Impairment of Disposal of Long-Lived Assets." The Company also evaluates the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. No impairment of assets was recorded in the periods reported.
 
(j)           Intangible assets
 
Intangible assets consist of 20 years use right of Fruit vegetable franchise base and are recorded at cost. The cost of fruit vegetable franchise base use right was amortized over 20 years using the straight-line method.
 
(k)           Impairment of long-lived assets
 
The carrying amounts of long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to future undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell.
 
(l)           Investments
 
Investments consist primarily of less than 20% equity positions in non-marketable securities and are recorded at lower of cost or market.
 
(m)           Foreign currency translation
 
The accompanying financial statements are presented in United States (US) dollars. The functional currency is the Renminbi (RMB). The financial statements are translated into US dollars from RMB at year-end exchange rates for assets and liabilities, and weighted average exchange rates for revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. Gains and losses resulting from foreign currency translation are recorded in a separate component of shareholders’ equity. Foreign currency translation adjustments are included in accumulated other comprehensive income in the statements of shareholders’ equity for the years presented.
 
RMB is not freely convertible into the currency of other nations. All such exchange transactions must take place through authorized institutions. There is no guarantee the RMB amounts could have been, or could be, converted into US dollars at rates used in translation.
 
 
 
62

 
 
(n)           Income taxes
 
As a state-owned agricultural enterprise, the Company and all of its agricultural subsidiaries are exempted from enterprise income taxes with approval from the Gansu Provincial Bureau of Local Taxation.
 
(o)           Economic and Political Risks
 
The Company faces a number of risks and challenges as a result of having primary operations and markets in the PRC. Changing political climates in the PRC could have a significant effect on the Company's business.
 
(p)           Comprehensive income
 
Comprehensive income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. Accumulated other comprehensive income, as presented on the accompanying consolidated balance sheets, consists of mainly the cumulative foreign currency translation adjustment.
 
(q)           Recently Issued Accounting Standards
 
Recently Adopted Accounting Pronouncements
 
In December 2011, the Financial Accounting Standards Board (“FASB”) issued guidance enhancing disclosure requirements about the nature of an entity’s right to offset and related arrangements associated with its financial instruments. The new guidance requires the disclosure of the gross amounts subject to rights of set-off, amounts offset in accordance with the accounting standards followed, and the related net exposure. In January 2013, the FASB clarified that the scope of this guidance applies to derivatives, repurchase agreements, and securities lending arrangements that are either offset or subject to an enforceable master netting arrangement, or similar agreements. We have adopted this new guidance.
 
In February 2013, the FASB issued guidance on disclosure requirements for items reclassified out of accumulated other comprehensive income (“AOCI”). This new guidance requires entities to present (either on the face of the income statement or in the notes to financial statements) the effects on the line items of the income statement for amounts reclassified out of AOCI. We have adopted this new guidance.
 
In September 2011, the Financial Accounting Standards Board (“FASB”) issued guidance on testing goodwill for impairment. The new guidance provides an entity the option to first perform a qualitative assessment to determine whether it is more likely than not that the fair value of are porting unit is less than its carrying amount. If an entity determines that this is the case, it is required to perform the two-step goodwill impairment test to identify potential goodwill impairment and measure the amount of goodwill impairment loss to be recognized for that reporting unit (if any). If an entity determines that the fair value of a reporting unit is greater than its carrying amount, the two-step goodwill impairment test is not required. We adopted this new guidance.
 
 
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Recent accounting guidance not yet adopted
 
In March 2013, the FASB issued guidance on a parent’s accounting for the cumulative translation adjustment upon de-recognition of a subsidiary or group of assets within a foreign entity. This new guidance requires that the parent release any related cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. The new guidance will be effective for us beginning December 31, 2014.We do not anticipate material impacts on our financial statements upon adoption.
 
(r)           Fair Value of Financial Instruments
 
 The carrying amounts of accounts receivable, accounts payable, other liabilities, and short-term borrowings approximate their fair value due to the short-term maturity of these instruments. Long term debt approximates fair value as its interest rates approximates market interest rates
 
3.           Accounts receivable
 
Accounts receivable are recognized and carried at original invoice amount outstanding less an allowance for doubtful accounts. The activity in the Accounts Receivable was as follows:
 
December 31st
Gross Balance at end of year($)
Allowance for doubtful accounts
Net Balance at end of year($)
2012
789,059.46
0
789,059.46
2013
793,337.21
0
793,337.21
2014
911,732.31
0
911,732.31

4.           Inventories
 
The major classes of inventory: raw materials, packaging materials, products in process, finished goods, stocks, low-value consumable goods, materials in transit as well as others. The following is a breakdown of the major categories of inventories.
 
 
 
 
 
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Breakdown of Inventories                
       $
 
December 31,
2014
December 31,
2013
December 31,
2012
Chemical fertilizer
434,238.26
436,976.23
481,704.40
Agricultural Medicine
244,230.66
253,389.52
270,927.27
Biological drugs
236,171.58
218,602.70
261,987.26
Farm tools
270,661.62
346,308.78
300,247.37
Low value consumable
142,290.33
143,158.03
157,843.95
Total for the year
1,327,592.45
1,398,435.26
1,472,710.25

5.           Property, plant and equipment & depreciation
 
The major classes of property, plant and equipment include building and improvements, machinery and equipment, transportation facilities, agricultural facilities, etc. They are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The following is a breakdown of fixed assets and accumulated depreciation by fiscal year.
 
 
December 31,
2014
December 31,
2013
December 31,
2012
Buildings and improvements
6,902,663.98
6,927,684.71
4,991,239.08
Machinery and equipment
2,136,385.45
1,532,774.85
1,459,740.67
Transportation
2,580,528.71
1,508,276.61
1,411,555.24
Others
137,142.69
137,639.81
130,324.74
Total
11,756,720.83
10,106,375.98
7,992,859.72
Accumulated Depreciation
907,241.20
471,614.07
50,805.33
Total
10,849,479.63
9,634,761.91
7,942,054.39

The breakdown of construction in progress as below,
 
 
December 31,2014
December 31,2013
December 31,2012
Revetment
6,573,844.81
5,579,653.35
4,135,711.73
Ditch
9,092,092.80
7,907,490.59
5,754,033.71
Road
6,714,507.58
5,581,772.91
4,135,711.73
Breakwall
8,612,729.76
6,163,997.17
3,955,898.17
Total
30,993,174.95
25,232,914.03
17,981,355.34
 
 
 
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6.           Intangible assets
 
The intangible asset main is the 20 years use right of Fruit vegetable franchise base. The movement of the use right value as below,
 
$
December 31,2014
December 31,2013
December 31,2012
Gross
152,614,379.08
153,114,754.10
148,489,666.14
Accumulated Amortization
38,153,594.77
30,622,950.82
22,273,449.92
Change of fair value
2,290,955,310.46
2,211,927,295.08
2,069,769,415.26
Fair value of Intangible Asset
2,405,416,094.77
2,334,419,098.36
2,195,985,631.48
 
The original cost of Fruit vegetable franchise base use right is $152 million; the fair value test at the end of 2013 is $2334 million, and $2405 million at the end of 2014. The changes of fair value had been recorded into the current period profit and loss.
 
The cost of Fruit and vegetable base franchise use right is amortized over 20 years, start from April 1, 2010. By the end of 2014, the accumulated amortization is $38 million, the annual amortization amount is $7.5 million. At end of 2014, the amortized cost of the Fruit and vegetable base franchise use right is $114 million.
 
6.           China contribution plan
 
The Company participate in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the Company’s subsidiaries to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly basic compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; the Company has no further commitments beyond its monthly contribution.
 
7.           Profit appropriation
 
Pursuant to the laws applicable to China’s Enterprises, the Company must make appropriations from its after-tax profit to non-distributable reserve funds as determined by the Board of Directors. These reserve funds include a (i) general reserve, (ii) enterprise expansion fund and (iii) staff bonus and welfare fund. The general reserve fund requires annual appropriations of 10% of after-tax profit (as determined under PRC GAAP) until these reserves equal 50% of the amount of paid-in capital; the other fund appropriations are at the Company’s discretion.
 
 
 
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8.           Concentration of risks
 
The operations of the Company are substantially located in the PRC and accordingly, investing in the shares of the Company is subject to among others, the PRC’s political, economic and legal risks.
 
9.           Income taxes
 
The Company and all of its agricultural subsidiaries are exempt from income taxes in the PRC.
 
11.           Employee benefit plans
 
The Company provides the following benefits for all employees:
 
A.           Employee Welfare Fund: An amount equal to 14% of payroll is set aside by the Company for standard employee benefits. This fund is managed and controlled by the Company. All required payments current.
 
B.           Open Policy Pension: The Company pays to national and community insurance agents an amount equal to 20% of payroll. This insurance continues to cover the employee subsequent to retirement.
 
C.           Unemployment Insurance: The Company pays to the national employment administrative entities an amount equal to 1% of payroll. Any dismissed employee thereby receives a specified amount of family-support funds for a designated period.
 
D.           Housing Surplus Reserve: The Company pays to the national housing fund administrative entities an amount equal to 10% of payroll for deposit into the employees' future housing allowance accounts. The aforesaid items are for employee's benefits and should be accounted for as the Company's expenses.
 
E.           China contribution plan.
 
The Company’s subsidiaries in China participate in a government-mandated multi-employer defined contribution plan pursuant to which certain retirement, medical and other welfare benefits are provided to employees. Chinese labor regulations require the Company’s subsidiaries to pay to the local labor bureau a monthly contribution at a stated contribution rate based on the monthly basic compensation of qualified employees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; the Company has no further commitments beyond its monthly contribution.
 
14.           Segment information
 
The segments which are presented in the tables below.
 
 
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2014
2013
Revenue
   
Bamboo
10,423,704.28
10,172,447.20
Orange
90,510,858.03
83,997,000.58
Red bayberry
45,591,139.85
42,701,530.71
 Broccoli
44,011,195.82
43,014,919.59
Total
190,536,897.98
179,885,898.08
Cost
   
Bamboo
3,135,797.70
3,147,645.81
Orange
17,291,033.68
14,445,173.42
Red bayberry
9,423,635.76
6,484,435.82
Broccoli
11,581,893.64
11,199,379.97
Total
41,432,360.78
35,276,635.02
 
15.           General and Administration expense
 
The breakdown of general and administration expense as below. The Fruit vegetable franchise base had not been put into use, so its amortization cost was recorded into administration expense.
 
 
2014
2013
Salaries
752,800.85
750,752.54
Social insurance
94,736.42
92,688.69
Entertainment expense
172,554.85
172,935.04
Office expenses
28,166.63
26,917.20
Travel expenses
179,630.25
183,197.44
Communication fee
4,741.14
4,787.38
Depreciation
430,464.42
412,718.28
Amortization
7,512,144.90
7,540,528.32
Traffic expense
4,675.91
6,308.25
Others
102,916.56
104,657.56
Total
9,282,831.93
9,295,490.70
 
 
 
 
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16.           Other income
 
The initial cost for management right of forestry, fruit and vegetable base is 1.6 billion RMB.
 
As a result of valuation method measurement, for the end of 2012, the fair value of management right for forestry, fruit and vegetable base is 66,522,575.21US; for the end of 2013, the fair value of management right for forestry, fruit and vegetable base is 76,520,518.96US; for the end of 2014, the fair value of management right for forestry, fruit and vegetable base is 84,916,192.13US.
 
The measure results are approved by company and recorded into the profits and losses on the changes in fair value of the current period.
 
The miscellaneous revenues are the changes in fair value of management right of forestry, fruit and vegetable base.
 
17.           Operating leases
 
The Company has no operating leases for the periods shown.
 
18.           Subsequent Events and new Subsidiaries
 
None.
 
 
 
 
 
 
 
 
 

 
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Exhibit 4, Part 1
 
Consultation Paper on
 
The Value of Rural Land Contracted Management Right
 
Specified by
 
Gansu YaSheng Agro-Industrial and Commerce (Group) Co., Ltd.