2.4.0.8007 - Disclosure - Summary of Significant Accounting Policiestruefalsefalse1falsefalsefalseContext_6ME__30-Jun-2013http://www.sec.gov/CIK0001452011duration2013-01-01T00:00:002013-06-30T00:00:001true1us-gaap_AccountingPoliciesAbstractus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsexbrli:stringItemTypestringfalse02false2us-gaap_SignificantAccountingPoliciesTextBlockus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalseverboseLabel1falsefalsefalse00<div style="text-align: justify; text-indent: 0pt; display: block;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</font></div><div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Basis of Preparation</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">The Company’s unaudited condensed consolidated financial statements as of June 30, 2013 and for the three and six months ended June 30, 2013 and 2012 have been stated in US dollars and prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial statements and with instructions to Form 10-Q pursuant to the rules and regulations of Securities and Exchange Act of 1934, as amended (the “Exchange Act”) and Article 8-03 of Regulation S-X under the Exchange Act. In the opinion of our management, we have included all adjustments (consisting only of normal recurring adjustments) considered necessary in order to make the financial statements not misleading.  Operating results for the three and six months ended June 30, 2013 are not indicative of the results that may be expected for the fiscal year ending December 31, 2013. The condensed consolidated balance sheet information as of December 31, 2012 was derived from the audited consolidated financial statements included in the Form 10-K. These unaudited condensed financial statements and related notes should be read in conjunction with our audited annual financial statements for the year ended December 31, 2012 included in our Form 10-K filed with the Securities and Exchange Commission on April 15, 2013.</font></div><div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;"> </font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Basis of consolidation</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">These unaudited condensed consolidated financial statements include the financial statements of the Company and its subsidiaries (the “Group''). All inter-company balances and transactions within the Group have been eliminated.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"> </font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Use of Estimates</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">In preparing these unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. These accounts and estimates include, but are not limited to, the valuation of the amount due from related parties, the net realizable value of inventories, the estimation of useful lives of property and equipment and intangible assets, and the value of warrants. Actual results could differ from those estimates.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Concentrations of Credit Risk</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, accounts receivable and amounts due from related parties. The Company places its cash with financial institutions with high-credit ratings and quality. The Company maintains bank accounts in the PRC, Hong Kong and the United States. In addition, the Company conducts periodic reviews of the related party financial conditions and payment practices. The Company has not experienced losses related to these concentrations in the past.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Concentrations of Customers and Suppliers</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Substantially all of the Company’s revenue is generated from buyers in mainland China.  All the Company’s suppliers are located in mainland China.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">For the six months ended June 30, 2013, we had no customer that accounted for more than 10% of our consolidated
revenues.  For the six months ended June 30, 2012, the three largest customers accounted for 8.8%, 8.7% and 6.3% of consolidated revenues.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">For the six months ended June 30, 2013, we had three suppliers that accounted for 14.4%, 11.2%, and 10.7% of our total raw material purchase.  For the six months ended June 30, 2012, the three largest suppliers accounted for 16.0%, 12.3% and 10.9% of our total raw material purchase.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: left; text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;" valign="top" width="78%">
<div style="text-align: left; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Cash and Cash Equivalents</font></div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">The Company considers all highly liquid investments with initial maturities of three months or less to be cash equivalents.</font></div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Trade and Other Receivables</font></div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">The Company periodically assesses its accounts receivable for collectability on a specific identification basis. If collectability of an account becomes unlikely, an allowance is recorded for that doubtful account. Once collection efforts have been exhausted, the account receivable is written off against the allowance. The Company does not require collateral for trade or other accounts receivable.</font></div>
</td>
</tr>
</table>
<div> </div>
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr>
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Inventories</font></div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Inventories are stated at the lower of cost or net realizable value. Cost is determined using the weighted average method. The cost of inventories includes the purchase cost and other costs incurred in bringing the inventories to their present location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.</font></div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">As of June 30, 2013 and December 31, 2012, the Company’s provision for slow-moving or defective inventories amounted to $42,824 and $41,962, respectively.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Prepayments</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div align="justify" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Prepayments represent cash paid in advance to suppliers for purchases of raw materials.  During the past two years, as cost of raw materials continued to rise, it has become a common practice in our industry to secure supplies of raw material and to lock in prices by entering into year-long agreements with major suppliers and prepay projected
usage.  In anticipation of a new manufacturing facility starting up and launching of a new product category of premix additives in 2013, we have increased our prepayments substantially in the 4th quarter of 2012. During the first six months of 2013, only a small portion of the prepayments were used due to two reasons:  (1) Decline in sales because of overall market condition led to slower consumption of raw materials.  (2) Kanghui, the raw material trading company and WFOE, began taking on more procurement and reselling to other operating subsidiaries.  The prepayments were made mainly by the other operating companies in 2012 and cannot be used by Kanghui.  In the third quarter, we will begin analyzing each supplier’s prepayment balances and start collecting estimated unused amounts.  We obtained either formally or informally intelligence of our suppliers’ financial condition and continuously monitor their status.  Based on our experience, we anticipate that the prepayments are fully realizable and any unused amounts are fully collectible.</font></font></div></div>
<div style="text-align: justify;"> </div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Property, Plant and Equipment</font></div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Property and equipment are stated at cost less accumulated depreciation. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use.</font></div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Depreciation of property and equipment is calculated using the straight-line method over their estimated useful lives. The estimated useful lives are as follows:</font></div>
</td>
</tr>
</table>
</div>
<div style="text-indent: 0pt; display: block;"> </div>
<div align="center">
<table style="width: 50%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr bgcolor="#cceeff">
<td valign="middle" width="19%">
<div align="center" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Buildings</font></div>
</td>
<td valign="middle" width="19%">
<div align="center" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">15-20 years</font></div>
</td>
</tr>
<tr bgcolor="white">
<td valign="middle" width="19%">
<div align="center" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Plant and machinery</font></div>
</td>
<td valign="middle" width="19%">
<div align="center" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">3-20 years</font></div>
</td>
</tr>
<tr bgcolor="#cceeff">
<td valign="middle" width="19%">
<div align="center" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Motor vehicle</font></div>
</td>
<td valign="middle" width="19%">
<div align="center" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">10 years</font></div>
</td>
</tr>
<tr bgcolor="white">
<td valign="middle" width="19%">
<div align="center" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Office equipment</font></div>
</td>
<td valign="middle" width="19%">
<div align="center" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">3-10 years</font></div>
</td>
</tr>
</table>
</div>
<div style="text-indent: 0pt; display: block;"> </div>
<div>
<table style="width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr>
<td valign="top" width="78%">
<div align="justify" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Expenditures for additions, major renewals and betterments are capitalized and expenditures for maintenance and repairs are charged to expense as incurred.</font></div>
</td>
</tr>
</table>
</div>
<div style="text-indent: 0pt; display: block;"> </div>
<div>
<table style="width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr>
<td valign="top" width="78%">
<div align="justify" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Upon sale or disposition, the applicable amounts of asset cost and accumulated depreciation are removed from the accounts and the net amount less the proceeds from disposal is charged or credited to income.</font></div>
</td>
</tr>
<tr>
<td valign="top" width="78%">
<div align="justify" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"> </font></div>
<div align="justify" style="text-indent: 0pt; display: block; margin-left: 0pt;
margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Intangible Asset</font></div>
</td>
</tr>
</table>
</div>
<div style="text-indent: 0pt; display: block;"> </div>
<div>
<table style="width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr>
<td valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">The intangible asset primarily represented two land use rights and internally developed production technology, and they are recorded at cost less accumulated amortization.</font></font></div>
<div><font style="display: inline; font-family: times new roman; font-size: 10pt;"> </font></div>
<div><font style="display: inline; font-family: times new roman; font-size: 10pt;">According to the laws of China, land in the PRC is owned by the government and cannot be sold to an individual or company. However, the government grants the users a land use right to use the land. The land use rights granted to the Company are being amortized using the straight-line method over the lease term of fifty years.</font></div>
<div align="justify" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"> </font></div>
<div align="justify" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">During the second quarter of 2012, we acquired from an agriculture research institute the exclusive right to commercialize a new production technology and manufacturing process.   We began amortization of the intangible asset in the third quarter of 2012 over a useful life of three years.</font></div>
</td>
</tr>
</table>
<div> </div>
<table style="width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr>
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Impairment of Long-lived Assets</font></div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company recognizes impairment of long-lived assets in the event that the net book values of such assets exceed the future undiscounted cash flows attributable to such assets.  There were no impairments of long-lived assets for the periods presented.</font></div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Statutory Reserves</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">In accordance with the relevant laws and regulations of the PRC and the articles of associations of the Company, Guangzhou Tanke is required to allocate 10% of its net income reported in the PRC statutory accounts, after offsetting any prior years’ losses, to statutory reserve, on an annual basis. When the balance of such reserve reaches 50% of the respective registered capital of the subsidiaries, any further allocation is optional.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">As of June 30, 2013 and December 31, 2012, the statutory reserves of the subsidiary already reached 50% of the registered capital of the subsidiary and, as a result, the Company did not allocate additional amounts to its statutory reserves.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">The statutory surplus reserves can be used to offset prior years’ losses, if any, and may be converted into registered capital, provided that the remaining balances of the reserve after such conversion is not less than 25% of registered capital. The statutory surplus reserve is non-distributable.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"> </font></div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Revenue Recognition</font></div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 605-10, Revenue Recognition, and SEC Staff Accounting Bulletin No.104. Pursuant to these pronouncements, revenue is recognized when all of the following criteria are met:</font></div>
<div style="text-align: justify; text-indent: 0pt; display:
block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"> </font></div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">- Persuasive evidence of an arrangement exists;</font></div>
</td>
</tr>
<tr>
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">- Delivery has occurred or services have been rendered;</font></div>
</td>
</tr>
<tr>
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">- The seller's price to the buyer is fixed or determinable; and</font></div>
</td>
</tr>
<tr>
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">- Collectability is reasonably assured.</font></div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">The Company’s revenue is mainly generated through the wholesale and retail sale of livestock feed including organic trace mineral additives, functional regulation additives, herbal medicinal additives and raw materials. Before the Company recognizes revenue on these product sales, written purchase orders and contracts are received in advance of all shipments of goods to customers. For sales within the Company’s own province, delivery is made by Company employees. Such delivery occurs on the same day as shipment. For delivery outside the province, shipment is made through a separate logistics company that assumes the risk of loss. Revenue is recognized upon shipment of goods to the customers. The Company typically does not incur bad debt losses because this type of loss is deducted from the salesperson’s compensation, thereby mitigating a portion of the loss to the Company. Therefore, collectability is reasonably assured.</font></div></td>
</tr>
<tr>
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div align="justify" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"> </font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Revenue is presented net of sales returns, which are not significant. However, the Company continually performs analyses of returns and records a provision at the time of sale if necessary. As of June 30, 2013 and December 31, 2012, it was determined that potential returns and allowances were not material so the Company did not record a provision for returns. The Company reviews this estimate regularly and adjusts it if conditions change.</font></font></div>
</div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">For technical service provided to third parties, revenue is recognized when the service is rendered.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Cost of Goods Sold</font></div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Cost of revenue consists primarily of material cost, labor cost, rent of land allocated to production, overhead associated with the manufacturing process and directly related expenses.</font></div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Research and Development Costs</font></div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Research and development costs are charged to expense as incurred and are included in operating expenses after partially
offset by grants from government sponsored projects.  </font></div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"> </font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Value Added Tax</font></div>
</td>
</tr>
<tr>
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"> </font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">In accordance with the relevant tax laws in the PRC, VAT is levied on the invoiced value of sales and is payable by the purchaser. The Company is required to remit the VAT it collects to the tax authority, but may deduct the VAT it has paid on eligible purchases. The difference between the amounts collected and paid is presented as VAT recoverable or payable balance on the balance sheet.</font></div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Income Taxes</font></div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"> </font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">The Company uses the asset and liability method of accounting for income taxes pursuant to ASC 740, ”Income Tax”. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and loss carry forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"> </font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">As of the end of June 30, 2013, an income tax liability of $1,915,712 was accrued based on an ongoing discussion among the local tax authority, the city government officials of Huadu, and Guangzhou Tanke, concerning income taxes owed during the years from 2009 to 2012.   We have the full support of the local government and tax authority to quickly resolve this issue and the amount accrued should be sufficient to cover all late taxes plus any potential interest and penalty.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block;">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Management believes that there are no uncertain tax positions requiring accrual or disclosure in accordance with ASC 740-10, <font style="font-style: italic; display: inline;">Income Taxes.</font></font></div>
</div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"> </font></div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Comprehensive Income (Loss)</font></div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify;">
<table style="text-align: justify; width: 100%; font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0">
<tr style="text-align: justify;">
<td style="text-align: justify;" valign="top" width="78%">
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Comprehensive income (loss) is defined to include all changes in equity except those resulting from net income or loss, investments by owners and distributions to owners. The Company’s only component of other comprehensive income (loss) is the foreign currency translation adjustment.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
</td>
</tr>
</table>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Earnings per share (EPS)</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div align="justify" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family:
times new roman; font-size: 10pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Earnings per share is calculated in accordance with ASC 260-10 which requires the Company to calculate net income (loss) per share based on basic and diluted net income (loss) per share, as defined. Basic EPS excludes dilution and is computed by dividing net income (loss) by the weighted average number of shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock.  Warrants and convertible notes were not included in the diluted EPS calculation because their impact was anti-dilutive as the market value of the Company’s common stock is below the conversion and exercise prices.</font></font></div>
<div style="text-indent: 0pt; display: block;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"> </font></div>
</div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Commitments and Contingencies</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-indent: 0pt; margin-left: 0pt; margin-right: 0pt;" ><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Foreign Currency Translation</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">The Company, its subsidiaries and VIE maintain financial statements in the functional currency of each entity. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income (loss) for the respective periods.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">The financial statements of each entity are prepared using the functional currency, and have been translated into United States dollars (“US$” or “$”). Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates for the period. Stockholders’ equity is translated at historical exchange rates. Any translation adjustments are included as a foreign exchange adjustment in other comprehensive income, a component of stockholders’ equity.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;">
<div align="justify" style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"> </font></div>
<font style="display: inline; font-family: times new roman; font-size: 10pt;">RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Financial Instruments</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, due to/from related parties, notes payable, other payable and accrued liabilities and income tax payable approximate their fair values due to the short-term nature of these items. The carrying amounts of long-term borrowings approximate the fair value based on the Company’s expected borrowing rate for debt with similar remaining maturities and comparable risk.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;"> </font></div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Convertible notes are not carried at fair value due to the discounts for warrants and the beneficial conversion feature. As the interest on these notes approximates market interest, the fair value is their face value of $7,509,232.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">It is management’s opinion that the Company is not exposed to significant interest, price or credit risks arising from these financial instruments.</font></div>
<div style="text-align: justify; text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;">Recent Accounting Updates</font></div>
<div style="text-align: justify;
text-indent: 0pt; display: block;"> </div>
<div style="text-align: justify; text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;"><font style="display: inline; font-family: times new roman; font-size: 10pt;">Management does not believe that any recently issued, but not yet effective accounting pronouncements would have a material impact on the accompanying financial statements.</font></div>falsefalsefalsenonnum:textBlockItemTypenaThe entire disclosure for all significant accounting policies of the reporting entity.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18780-107790
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18726-107790
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18861-107790
Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18743-107790
Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section 50
-Paragraph 5
-URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18854-107790
false0falseSummary of Significant Accounting PoliciesUnKnownUnKnownUnKnownUnKnowntruefalsefalseSheethttp://tankebioscience.com/role/SummaryOfSignificantAccountingPolicies12