Note 3 - Operating Leases

12 Months Ended

Mar. 31, 2018

Notes

Note 3 - Operating Leases

NOTE 3 – OPERATING LEASES

On October 1, 2011, the Company entered into an agreement with Shandong Yongchuntang Group Co., Ltd. ("Shandong Yongchuntang") for the lease of one automobile. The lease term is from October 1, 2011 to September 30, 2021. The total lease payment of RMB131,468 (approximately USD21,000) was paid in full upon signing the lease agreement and is being amortized over the life of the lease.

On June 20, 2013, the Company entered into a Farmland Leasing Agreement with Shiqiao Village for the lease of 2,000 mu (approximately 790.74 acres) farmland for the development of the acer truncatum bunge planting bases. The lease term is from July 1, 2013 to June 30, 2043. The lease payment is RMB1,000 (approximately USD159) per mu annually and is paid every five years in advance. The first lease payment was for the rents of the first five years in the amount of RMB10,000,000 (approximately USD1.6 million), which was paid on July 10, 2013. On March 8, 2017, the Company returned 120 mu (approximately 47.44 acres) of the leased farmland to the lessor because the lessor needed to use the farmland for a strategic development project that is led by the local government. Based on the March 8, 2017 agreement between the Company and the lessor, the Company's remaining prepaid lease of RMB180,000 (approximately USD28,600) for the 120 mu (approximately 47.44 acres)  farmland will be used to reduce the next prepayment on the lease. The acer truncatum bunge plants on the 120 mu (approximately 47.44 acres)   farmland were moved to a nearby location. As of March 31, 2018, the total leased farmland in Shiquiao Village is 1880 mu (approximately 743.29 acres).

On March 1, 2014, the Company entered into a Farmland Leasing Agreement with Zhongce No.4 Village for the lease of 200 mu (approximately 79.07 acres) farmland for the development of the acer truncatum bunge planting bases. The lease term is from March 1, 2014 to February 28, 2044. The lease payment is RMB1,000 (approximately USD159) per mu annually and is paid every five years in advance. The first lease payment was for the rents of the first five years in the amount of RMB1,000,000 (approximately USD159,000), which was paid on March 10, 2014.  On April 1, 2017, the Company entered an agreement with Zhongce No.4 Village to terminate the lease for the 200 mu (approximately 79.07 acres) farmland because the parcel of farmland was recalled by local government for building a new urban district. Based on the agreement, the Company received the refund of all the remaining prepaid lease payment of RMB 383,333 (approximately USD58,000) as well as a compensation of RMB 2,400,000 (approximately USD360,000) from the government for the early termination of the lease.  (See Note 6).

On January 7, 2015, the Company entered into a Farmland Leasing Agreement with Shandong Wanziyuan Tourism Development Co. to lease 2,000 mu (approximately 790.74 acres) farmland for the development of the acer truncatum bunge planting bases. The lease term is from January 15, 2015 to December 31, 2029. The lease payment is RMB1,000 (approximately USD159) per mu annually and is paid every five years in advance. The first lease payment was for the rents of the first five years in the amount of RMB10,000,000 (approximately USD1.6 million), which was paid on January 8, 2015.

On July 2, 2015, the Company entered into a Farmland Leasing Agreement with Zhongce Shen Village for the lease of 2,000 mu (approximately 790.74 acres) farmland for the development of the acer truncatum bunge planting bases. The lease term is from July 2, 2015 to July 2, 2029. The lease payment is RMB1,000 (approximately USD159) per mu annually and is paid every five years in advance. The first lease payment was for the rents of the first five years in the amount of RMB10,000,000 (approximately USD1.6 million), which was paid on July 3, 2015.

The Company accounts for the lease agreements as operating leases in accordance to ASC 840-10-25-37, which requires the lessee to account for the lease as a capital lease, if land is the sole item of property leased and either the transfer-of-ownership criterion in paragraph 840-10-25-1(a) or the bargain-purchase-option criterion in paragraph 840-10-25-1(b) is met. Otherwise, the lessee shall account for the lease as an operating lease. Per ASC 840-2-25-1, rent is charged to expense by lessees over the lease term.

The components of prepaid lease were as follows:

	As of March 31,
	2018				2017
	Current portion		Long-term		Current portion		Long-term
Shiqiao Village – 1880 mu	$	103,370	$	-	$	289,884	$	72,471
Shandong Wanziyuan – 2000 mu		318,061		238,546		289,884		507,298
Zhongce No. 4 Village – 200 mu		-		-		28,989		26,573
Zhongce Shen Village – 2000 mu		318,061		397,576		289,884		652,240
Total prepaid land lease		739,492		636,122		898,641		1,258,582
Shandong Yongchuntang - Automobile		2,091		5,227		1,906		6,670
Total prepaid lease	$	741,583	$	641,349	$	900,547	$	1,265,252

The prepaid lease is amortized over prepaid period based on straight-line method. The lease expenses for the years ended March 31, 2018 and 2017 were $884,950 and $923,380, respectively.