NOTE 7 - PREPAID LEASES

One of the Company’s controlled subsidiaries, Zhisheng Group entered into several farmland lease contracts with farmer cooperatives to lease farmland in order to plant and grow organic vegetable, fruit and Chinese yew trees. The lease term varies from 5 years to 24 years. The aggregate lease payments on these leases amounted to RMB 36.8 million (approximately $5.54 million). Zhisheng Group paid off the entire required lease amount plus transfer fees at the beginning of the lease.

These leases are accounted for as operating leases and will be amortized each year on a straight-line basis over the lease terms. The amortization expense is initially recorded as work in process under inventory account during the growing period and then transferred to harvested crops costs at the time of harvest and then allocated to cost of sales when they are sold.

The prepaid leases consist of the following:

	June 30, 2016		June 30, 2015
Current	$	478,565	$	521,235
Non-current		3,860,327		4,719,320
Total	$	4,338,892	$	5,240,555

Further amortization expense is as follows:

Twelve months ending June 30:

2017	$	478,565
2018		475,304
2019		475,304
2020		475,304
2021		475,304
Thereafter		1,959,111
Total	$	4,338,892