NOTE 8 - 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 vegetables, fruit and Chinese yew trees. The lease terms vary from 5 years to 24 years. The aggregate lease payments on these leases amount to RMB 36.8 million (approximately $5.4 million). Zhisheng Group prepaid the entire required lease amounts 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 in the 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.

Further amortization expense is as follows:

Year ending June 30:

2018	$	465,972
2019		465,972
2020		444,823
2021		212,188
2022		212,188
Thereafter		1,983,390
Total	$	3,784,533