NOTES
TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL
30, 2013
(Unaudited)
1.
ORGANIZATION AND NATURE OF OPERATION
The
accompanying condensed consolidated financial statements include the financial statements of China Botanic Pharmaceutical Inc. (“CBP”)
and its subsidiaries. CBP and its subsidiaries are collectively referred to as the “Company.”
CBP
was incorporated in the State of Nevada on August 18, 1988, originally under the corporate name of Solutions, Incorporated. It
was inactive until August 16, 1996, when it changed its corporate name to Suarro Communications, Inc, and engaged in the business of
providing internet based business services. This line of business was discontinued in 2006, and CBP became a non-operating public
company. CBP underwent a number of corporate name changes as follows:
June 1997
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ComTech Consolidation Group,
Inc
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February 1999
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E-Net Corporation
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May 1999
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E-Net Financial Corporation
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January 2000
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E-Net.Com Corporation
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February 2000
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E-Net Financial.Com Corporation
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January 2002
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Anza Capital, Inc (“Anza”)
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June 2006
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Renhuang Pharmaceuticals, Inc.
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October 2010
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China Botanic Pharmaceutical Inc.
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This
filing was prepared in November 2021. Due to the lack of accounting records for the relevant period all assets have been written off
and all liabilities have been carried forward from the Company most recent filings prior to this date on October 31, 2010.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The
Company has included all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the result
of operations for the three and six months ended April 30, 2013 and 2012. The condensed consolidated financial statements and notes thereto
should be read in conjunction with the audited financial statements and notes for the year ended October 31, 2012 included in the Company’s
Annual Report on Form 10-K. Interim results are not necessarily indicative of results for the full year due to seasonal and other factors.
This
summary of significant accounting policies of the Company is presented to assist in understanding the Company’s condensed consolidated
financial statements. The condensed consolidated financial statements and notes are representation of the Company’s management,
which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles
and have been consistently applied in the preparation of the consolidated financial statements for April 30, 2013 and October 31, 2012.
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a.
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Basis of presentation
of financial statements and Principles of Consolidation
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The
accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“US GAAP”) and are expressed in terms of US dollars.
The
condensed consolidated financial statements include the financial statements of CBP and its subsidiaries.
All
inter-company transactions and balances have been eliminated in consolidation.
FASB
ASC Topic 810, “Consolidation”, requires noncontrolling minority interests to represent the portion of earnings that
is not within the parent company’s control. The noncontrolling minority interests are required to be reported as equity instead
of as a liability on the balance sheet. In addition, this statement requires net income from noncontrolling minority interest to
be shown separately on the condensed consolidated statements of operations and comprehensive income. The Company has no noncontrolling
interest as of April 30, 2013 and October 31, 2012.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
The
accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial
statements, the Company had no cash on hand and had an accumulated deficit of $10,229,681. These factors raise substantial doubt about
the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. The
ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement
its business plan. The Company does not have any commitments for additional capital. The financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.
The
preparation of these condensed consolidated financial statements in conformity with US GAAP requires management to make estimates and
assumptions that affected the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates
of the condensed consolidated financial statements and the reported amounts of net sales and expenses during the reported periods.
Significant
estimates and assumptions by management include, among others, uncollectible accounts receivable, slow moving, obsolete and/or damaged
inventory, the carrying amount of property and equipment and intangible assets, reserve for employee benefit obligations, stock warrant
valuation, noncash rental expense and other uncertainties. Actual results may differ from these estimates. The current economic
environment has increased the degree of uncertainty inherent in these estimates and assumptions.
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d.
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Foreign currency translation
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The
Company’s principal country of operations is in PRC. The financial position and results of operations of the subsidiaries are determined
using the local currency (“Renminbi” or “RMB”) as the functional currency.
Translation
of amounts from RMB into US dollars for reporting purposes is performed by translating the results of operations denominated in foreign
currency at the weighted average rate of exchange during the reporting period. Assets and liabilities denominated in foreign currencies
at the balance sheet date are translated at the market rate of exchange ruling at that date. The registered equity capital denominated
in the functional currency is translated at the historical rate of exchange at the time of capital contribution. All translation adjustments
resulting from the translation of the financial statements into the reporting currency (US dollars) are reported as a component of accumulated
other comprehensive income in shareholders’ equity.
As
of April 30, 2013, and October 31, 2012, the exchange rates were -0-, respectively. For the three months ended April 30, 2013 and 2012,
the average exchange rates were RMB 0.00 and RMB 6.33 and the translation adjustments totaled $-0- and $810,353, respectively. For the
six months ended the average exchange rates were RMB 0.00 and RMB 6.33 and the translation adjustments totaled $-0- and $675,466, respectively
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e.
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Fair value measurements
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The
FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” clarifies the definition of fair value for financial
reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements.
Various
inputs are considered when determining the fair value of the Company’s financial instruments. The inputs or methodologies
used for valuing securities are not necessarily an indication of the risk associated with investing in these securities. These
inputs are summarized in the three broad levels listed below.
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●
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Level 1 – observable
market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets.
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●
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Level 2 – other significant
observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.).
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●
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Level 3 – significant
unobservable inputs (including the Company’s own assumptions in determining the fair value of financial instruments).
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The
Company’s adoption of FASB ASC Topic 825 did not have a material impact on the Company’s condensed consolidated financial
statements.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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e.
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Fair value measurements
(continued)
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The
carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or nonrecurring basis. Financial
assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. The
Company had no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets
and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared.
The
availability of inputs observable in the market varies from instrument to instrument and depends on a variety of factors including the
type of instrument, whether the instrument is actively traded, and other characteristics particular to the transaction. For many financial
instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market participants,
and the valuation does not require significant management discretion. For other financial instruments, pricing inputs are less observable
in the market and may require management judgment.
Revenue
is recognized in accordance with Staff Accounting Bulletin No. 104, “Revenue Recognition,” which states that revenue
should be recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the service has been
rendered; (3) the selling price is fixed or determinable; and (4) collection of the resulting receivable is reasonably assured.
Interest
income is recognized when earned, considering the average principal amounts outstanding and the interest rates applicable.
During
the three months ended April 30, 2013 and 2012, sales totaled $-0- and $23,022,385, respectively. During the six months ended April 30,
2013 and 2012, sales totaled $-0- and $51,162,476, respectively.
The
Company provided annual sales rebates to its distributors based upon sales volumes. Sales rebates are recorded as a current
liability at the time of the sale based upon the Company’s estimates of whether each customer would be entitled to rebates for
the period. At quarter end, the accrued rebate amount is adjusted to the actual amount earned and reclassified to trade receivables
in accordance with legal right of offset
3.
COMMITMENTS AND CONTINGENCIES
The
Company has various purchase commitments for materials, supplies and services incident to the ordinary conduct of business, generally
for quantities required for the Company’s business and at prevailing market prices. No material annual loss is expected from these
commitments and there are no minimum purchase commitments.
The
Company and its subsidiaries are self-insured, and they do not carry any property insurance, general liability insurance, or any other
insurance that covers the risks of their business operations. As a result, any material loss or damage to its properties or other assets,
or personal injuries arising from its business operations would have a material adverse effect on the Company’s financial condition
and operations.
The
Company is not involved in any legal matters arising in the normal course of business. While incapable of estimation, in the opinion
of the management, the individual regulatory and legal matters in which it might involve in the future are not expected to have a material
adverse effect on the Company’s financial position, results of operations, or cash flows.
(1) Operating
lease arrangements
We
currently have no lease agreement with any company.
3.
COMMITMENTS AND CONTINGENCIES (continued)
(2) Capital
commitments
On
October 12, 2009, we entered into a purchase agreement with Harbin Renhuang Pharmaceutical Stock Co. Ltd (“Renhuang Stock”)
to acquire the land use right, property and plant located at our Ah City Natural and Biopharmaceutical plant for a total consideration
of $25,448,125. Pursuant to the purchase agreement, a payment of $15,905,078 was made to Renhuang Stock in October 2009 and a payment
of $7,952,539 was made to Renhuang Stock in January 2011, with a final payment of $1,590,508 will be paid once we received all the related
title transfer documents from local government, at which time title for the assets will be transferred. According to the agreement, we
were exempted from lease payments for the underlying assets starting from May 1, 2010.
On
April 10, 2010, CBP China entered into a Purchase Agreement with Hongxiangmingyuan of Heilongjiang Yongtai Company, to acquire two office
floors for a total consideration of $6,101,920. Pursuant to the Purchase Agreement, a payment of $4,271,344 was made in April
2010 and recorded as deposits on the condensed consolidated balance sheet. Pursuant to the Purchase Agreement, final payment
of $1,830,576 is due by December 20, 2012, at which time title for the assets will be transferred.
Name
of Fixed Asset
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Purchase
Date
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Prepaid
Amount
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Remaining
Amount
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Total
Amount
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Ah City Pharmaceutical Plant
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October 2009
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$
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23,857,617
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$
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1,590,508
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$
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25,448,125
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Two Office Floor
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April
2010
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4,271,344
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1,830,576
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6,101,920
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Total
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$
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28,128,961
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$
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3,421,084
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$
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31,550,045
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In
January 2011, CBP China started its Ah City Phase Two project for Siberian Ginseng products development and industrialization and entered
into a Construction and Engineering Design Contract (the “Contract”) with Heilongjiang Medical Architecture Design Institute
(the “Institute”) for architectural design. A few payments have been made to Institute and relevant local government departments
for design and start up fees and we recorded $1,964,277 as Construction-in-progress for Ah City Phase Two project. The estimated total
investment for Ah City Phase Two is $19,086,094. In anticipation of the project proceeding, we expect to pay approximately $9,487,379
in our fiscal year 2012 and $7,634,438 in our fiscal year 2013. The project is anticipated to be finished in 2013.
Name
of Construction-in-Progress
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Start
Date
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Paid
Amount
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Remaining
Amount
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Projected
Total Amount
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Ah
City Phase Two (Siberian Ginseng Product Industrialization)
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January 2011
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$
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1,964,277
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$
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17,121,817
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$
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19,086,094
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On
January 11, 2011, CBP China entered into an Exclusive Licensing Agreement for Harbin Renhuang Pharmaceutical Co., Ltd. to Use Forest
Resources under Yichun Red Star Forestry Bureau (the “Agreement”) with Yichun Red Star Forestry Bureau of Heilongjiang Province
(the “Forestry Bureau”) which provides us with 30 years exclusive license right to use approximately 6,667 hectares of undergrowth
resources including approximately 67 hectares of Siberian Ginseng GAP cultivation base in Heilongjiang Province. Pursuant to the Agreement,
a payment of $7,952,539 was made to Forestry Bureau in January 2011, second payment of $6,362,031 was made in October 2011 and with a
final payment of $1,590,508 remaining until receive all the required material from local government authorities for a total consideration
of $15,905,078. Siberian Ginseng is a plant with medically-established anti-depressant and mood regulation qualities and is also an active
ingredient in our market-leading line of all-natural anti-depressant medications. We will be responsible for continued maintenance and
protection of wild resources to make this area a professional Siberian Ginseng base.
In
the fiscal year 2011, we purchased the following intangible assets:
Name
of Intangible Assets
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Purchase
Date
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Paid
Amount
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Remaining
Amount
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Total
Amount
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Patent of Ingredients and preparation
for Parkinson Drug
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August 2011
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$
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1,367,837
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$
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1,367,837
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$
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2,735,674
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Patent of Ingredients and preparation for XiangDousu
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August 2011
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1,351,932
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|
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1,351,932
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|
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2,703,864
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Patent of Mudouye Extract
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September 2011
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1,908,609
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|
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1,908,609
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|
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3,817,218
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Patent of Hongdoushan Extract
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September 2011
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2,401,667
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|
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2,401,667
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|
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4,803,334
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Patent of Ingredients and preparation for Jizhi Pills
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October 2011
|
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2,147,186
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|
|
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2,147,186
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|
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4,294,372
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|
Yichun Undergrowth Resource
Exclusive Using right
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|
January
2011
|
|
|
14,314,570
|
|
|
|
1,590,508
|
|
|
|
15,905,078
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|
Total
|
|
|
|
$
|
23,491,801
|
|
|
$
|
10,767,739
|
|
|
$
|
34,259,540
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3.
COMMITMENTS AND CONTINGENCIES (continued)
(2) Capital
commitments (continued)
On
January 24, 2012, the Company entered into an advertising contract with Harbin Weishi Advertising Company to advertise its products from
February 1, 2012 to April 30, 2013 as shown on the following table.
Advertising Contract
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Contract Date
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Paid Amount
|
|
|
Remaining
Amount
|
|
|
Total
Amount
|
|
|
|
|
|
US$
|
|
|
US$
|
|
|
US$
|
|
Harbin TV Weishi Advertising Company
|
|
January 2012
|
|
|
-
|
|
|
|
7,252,716
|
|
|
|
7,252,716
|
|
As
of April 30, 2013, the Company has capital commitments for purchase of Ah City Nature and Pharmaceutical Plant, two office floors, undergrowth
resources right, product patents, advertising contract and Ah City Phase Two construction-in-progress of approximately $38,563,356. The
amounts to be paid in the future years are as follows:
Year
|
|
Payment for properties
|
|
2012
|
|
$
|
27,285,163
|
|
2013
|
|
|
11,278,193
|
|
Total
|
|
$
|
38,563,356
|
|
4.
SUBSEQUENT EVENT
The
Company has been inactive since September 2012.
On
February 4, 2021, as a result of a custodianship in Clark County, Nevada, Case Number: A-20-827231-B Custodian Ventures LLC (“Custodian”)
was appointed custodian of China Botanic Pharmaceutical, Inc. (the “Company”). On the same date, Custodian appointed David
Lazar as the Company’s Chief Executive Officer, President, Secretary, Chief Financial Officer, Chief Executive Officer, and Chairman
of the Board of Directors.
David
Lazar, 30, is a private investor. Mr. Lazar has been a partner at Zenith Partners International since 2013, where he specializes in research
and development, sales, and marketing. From 2014 through 2015. Since February of 2018, Mr. Lazar has been the managing member of Custodian
Ventures LLC, where he specializes in assisting distressed public companies. Since March 2018, David has acted as the managing member
of Activist Investing LLC, which specializes in active investing in distressed public companies. David has a diverse knowledge of financial,
legal, and operations management; public company management, accounting, audit preparation, due diligence reviews, and SEC regulations.