Note 5. Investment in Beijing RainEarth
The investment in Beijing RainEarth, net, consists
|Fair value of 32,000,000 shares of RainEarth Inc.
|Common Stock issued to designated party of Beijing
|RainEarth pursuant to Business Cooperation Agreement
|dated March 25, 2009
The $640,000 fair value of the 32,000,000
shares of RainEarth Inc. common stock was determined using a $0.02 estimated price per share. No trades occurred in the Company’s
shares of Common Stock from July 14, 2008 to April 2, 2009. On April 3, 2009, 2,500 shares traded at $0.55 per share and on October
29, 2009, 27,000 shares traded at prices ranging from $0.017 to $0.0175 per share.
From March 25, 2009 to April 30, 2010,
the investment was amortized using the straight line method over the 20 years contract term of the Business Cooperation Agreement.
On March 25, 2009, the Company entered
into a Business Cooperation Agreement (the “Agreement”) with Beijing RainEarth to jointly conduct a Hollow Fiber Membrane
Materials application and manufacturing business. The Agreement provided for the Company to provide marketing and consulting services
to Beijing RainEarth and to take actions to raise up to $20,000,000 for Beijing RainEarth. The Agreement also provided for the
payment of consulting services fees to the Company equal to 60% of Beijing RainEarth’s quarterly revenues after deduction
of direct operating costs, expenses and taxes. The term of the Agreement was 20 years. Pursuant to the Agreement, the Company
issued 32,000,000 newly issued shares of its Common Stock (representing approximately 61.5% of the 52,000,000 issued and outstanding
shares after the issuance) to a designated party of Beijing RainEarth.
For the years ended April 30, 2012 and 2011 and for the
period March 14, 2006 (inception) to April 30, 2012, the Company did not receive or accrue any consulting services fees from Beijing
In the three months ended April 30,
2010, the Company and Beijing RainEarth verbally agreed to terminate the Business Cooperation Agreement. As a result, the Company
wrote off the remaining $604,756 unamortized balance of its investment in Beijing RainEarth at April 30, 2010 and recognized an
impairment charge of $604,756 in operations for the three months ended April 30, 2010.
In August 2010, the Company and Beijing
RainEarth executed a termination of Agreement whereby the Business Cooperation Agreement was terminated in writing.