NOTE 9 - XIGU LOAN RECEIVABLE AND LAND USE RIGHTS

6 Months Ended

Jun. 30, 2011

Intangible Assets Disclosure [Text Block]

NOTE 9 – XIGU LOAN RECEIVABLE AND LAND USE RIGHTS

On December 29, 2005, the Company lent RMB 554,130 ($85,735) to Xigu Village (“Village”), which was interest free and due December 29, 2008.  The Village failed to pay the loan as of December 29, 2008.  Pursuant to the loan agreement, once the Village was in default, the Company had the right to use the outstanding amount as a prepayment to its future rent obligation for this 49 mu (8.07 acre) parcel of land. The lease requires a yearly payment of RMB 10,000 ($1,547) through July, 2053. The balance due was capitalized at December 31, 2008 as land use rights and amortized over the remaining life of land use rights lease.

On October 31, 2007, the Company lent an additional RMB 1,000,000 ($154,720) to the Village. The loan was interest free and due October 31, 2010. Xigu Village failed to repay the loan as of October 31, 2010. Pursuant to the loan agreement,  if the Village was unable to repay the loan when due, the Company had  the right to offset the defaulted loan balance against future rent obligations of the Company’s newly leased second 49 mu (8.07 acre) parcel of land. The lease requires a yearly payment of RMB 10,000 ($1,547) through June 2056, the loan balance due was capitalized as land use rights and amortized over the remaining life of land use rights lease started on November 1, 2010.

As of June 30, 2011 and December 31, 2010, land use rights were as follows:

	2011			2010
	(Unaudited)
Land use rights	$	240,455		$	235,482
Less:  accumulated amortization		(26,618	)		(23,712	)
Land use rights, net	$	213,837		$	211,770

Amortization of land use rights was recorded as rent. Rent expense was $1,195 and $406 for three months ended June 30, 2011 and 2010, respectively. Rent expense was $2,376 and $812 for six months ended June 30, 2011 and 2010, respectively

The estimated annual amortization of land use rights for the next five years and thereafter is as follows as of June 30, 2011, by years:

2012	$	4,809
2013		4,809
2014		4,809
2015		4,809
2016		4,809
Thereafter		189,792
Total	$	213,837

The minimum rent payment for land leases at June 30, 2011 was as follows by years:

2012	$	3,094
2013		3,094
2014		3,094
2015		3,094
2016		3,094
Thereafter		119,136
Total	$	134,606