14. Loans payable

6 Months Ended

Jun. 30, 2011

14.	Loans payable:

	(a)	Short term bank loans

		As needed, the Company borrows funds in the form of short term bank loans payable to fund its capital projects and supplement its working capital requirements. The carrying value of short term bank loans payable as of June 30, 2011 and December 31, 2010 is shown in the following table. The fair value of these bank loans payable approximates their carrying values.

	Annual
	Interest		June 30,		December 31,
Due Dates	Rates		2011		2010
			(unaudited)		(audited)
January 25, 2011 (1)	5.842	%	$	—	$	2,268,673
March 14, 2011 (4)	5.310	%		—		1,482,198
March 28, 2011 (3)	5.841	%		—		756,224
April 11, 2011 (4)	0.000	%		—		756,224
June 10, 2011 (4)	0.000	%		—		468,859
September 15, 2011 (2)(4)	5.841	%		928,361		907,468
October 13, 2011 (4)	5.841	%		309,454		302,489
October 15, 2011 (4)	5.310	%		634,380		620,103
November 4, 2011 (4)	5.841	%		309,454		302,489
January 17, 2012 (5)	8.715	%		1,547,269		—
February 26, 2012 (4)	6.060	%		1,516,324		—
March 16, 2012 (3)	6.363	%		773,635		—
May 17, 2012 (4)	6.060	%		773,635		—
June 9, 2012 (4)	6.363	%		479,653		—

			$	7,272,165	$	7,864,727


	(1)	The assets of an unrelated third party are pledged as collateral for this loan (see note 4).

	(2)	The assets of Jinyatai are pledged as collateral for this loan (see note 4).

	(3)	These loans are secured by accounts receivable of the Company.

	(4)	These loans are secured by property and equipment of the Company

	(5)	This loan is payable to a local credit cooperative of which the Company owns 7.81% (see note 7).

14.	Loans payable (continued):

	(b)	Long term bank loans

		The carrying value of long term bank loans payable as of June 30, 2011 and December 31, 2010 is shown in the following table. The fair value of these bank loans payable approximates their carrying values.

	Annual
	Interest		June 30,		December 31,
Due Dates	Rates		2011		2010
			(unaudited)		(audited)
October 21, 2012 (4)	5.400	%	$	1,818,042	$	1,777,129
November 30, 2012 (1)	0.000	%		39,150		35,694
December 10, 2012 (4)	5.400	%		502,862		491,545
August 8, 2013 (4)	5.400	%		1,547,269		1,512,447
August 8, 2013 (4)	5.400	%		464,181		453,734
September 12, 2013 (4)	5.400	%		928,361		907,468
October 9, 2013 (4)	5.400	%		1,547,269		1,512,447
October 14, 2013 (4)	5.400	%		928,361		907,468
November 30, 2013 (1)	0.000	%		34,068		31,069
April 20, 2014 (2)	0.000	%		65,429		59,665
December 31, 2014 (3)(4)	5.760	%		3,403,992		3,327,384

			$	11,278,984	$	11,016,050


	(1)	The Company recognized a discount on the face value of the loans at inception to adjust the carrying value to the fair value. Fair value was calculated using the net present value of the loans, at an assumed interest rate of 14%, being the estimated cost of capital for the Company for unsecured borrowings. The amount of the discounts, being $40,865, was recorded as a reduction to the carrying value of the bank loan in a prior period. The discounts are being amortized over the life of the loans using the effective interest method, with interest expense being recorded as an expense in the related period. The Company recognized interest expense to amortize the discounts in the amount of $4,866 and $4,042 in the six months ended June 30, 2011 and 2010, respectively, and $2,503 and $2,164 in the three months ended June 30, 2011 and 2010, respectively. The carrying value of the loans as of June 30, 2011 and December 31, 2010 as shown in the table above was $73,218 and $66,763, respectively, comprised of face value of $95,621 and $93,469, respectively, net of unamortized discount of $22,403 and $26,706, respectively. These loans are unsecured.
	(2)	This instrument is a non interest bearing loan from a local government authority. As such, the Company recognized a discount on the face value of the loans at inception to adjust the carrying value to the fair value. Fair value was calculated using the net present value of the loans, at an assumed interest rate of 14%. The amount of the discount, being $41,716, was recorded as a reduction to the carrying value of the bank in the year ended December 31, 2010. The discount is being amortized over the life of the loan using the effective interest method, with interest expense being recorded as an expense in the related period. The Company recognized interest expense to amortize the discount in the amount of $4,344 and $1,291 in the six months ended June 30, 2011 and 2010, respectively, and $2,234 and $1,291 in the three months ended June 30, 2011 and 2010, respectively. The carrying value of the loan as of June 30, 2011 and December 31, 2010 as shown in the table above was $65,429 and $59,665, respectively, comprised of face value of $99,629 and $97,387, respectively, net of unamortized discount of $34,200 and $37,722, respectively. The loan is unsecured.
	(3)	The assets of an unrelated third party are pledged as collateral for this loan (see note 4)
	(4)	These loans are secured by property and equipment of the Company

14.	Loans payable (continued):

	(c)	Convertible loan

		On March 1, 2010, the Company issued unsecured debentures in the aggregate principal amount of $650,000 to 11 investors. The Company received net proceeds of $555,000, which were designated to pay legal, accounting, and other costs associated with the Reverse Merger Transaction and the Financing. The debentures bore interest at a rate of 15% per annum, and matured on the earlier of September 30, 2010 or the completion of a financing of at least $10,000,000 by the Company. The debentures are not convertible at inception because the conversion price is based upon the offering price of subsequent financings. Once the subsequent financing occurs and the conversion price is known, the debenture is convertible into a fixed number of shares. The Company evaluated the conversion option embedded in the convertible debentures under the guidance of ASC 815, Derivatives and Hedging. The debentures met the definition of conventional convertible for purposes of applying the exemption. The definition of conventional contemplates a limitation on the number of shares issuable under the arrangement. In this case, there is a limitation on the number of shares issuable due to a fixed conversion price. Therefore, the debentures are conventional convertible and the conversion option does not require bifurcation and liability classification.

		In connection with the Financing, the Company committed to issue an aggregate of 650,000 shares of the Company’s common stock, which was granted on a basis of one (1) share for one dollar ($1.00) of Debentures, upon completion of a public offering. Due to the governing laws of the Peoples Republic of China, foreign ownership in the operating company is not allowed. Accordingly, this commitment could not be fulfilled until the Company affected a transaction where the issuance of shares could be accomplished. As a result, no value was attributed to this commitment at inception. This commitment was reassessed at each reporting date until such time that it was more likely than not that a reverse merger transaction would occur and the fair value of the commitment could be measured.

		At inception, the Company recorded the debentures at a value of $555,000, being the face value of $650,000, less commissions paid of $95,000. The commissions were amortized over the life of the debentures to interest expense. The Company recorded an expense to amortize the commissions in the amount of $95,000 in the year ended December 31, 2010.

		Prior to closing of the Reverse Merger Transaction, the Company assessed the fair value of the commitment to issue 650,000 shares of the newly formed public entity. The commitment was satisfied through the issuance of 988 ordinary shares of Dynamic Ally immediately prior to completion of the Reverse Merger Transaction, which were then exchanged for 650,000 common shares of the Company on closing of the Reverse Merger Transaction, at which time the commitment was satisfied in full. The Company recorded a charge to interest expense in the amount of $165,431 in the fourth quarter of 2010 to reflect the estimated fair value of the shares. The estimated fair value of the shares was calculated using a Capitalization of Earnings methodology, which falls under the “income approach” methodology of valuing assets and liabilities. Fair value under the Capitalization of Earnings methodology is derived by discounting the expected future income streams of the business by the expected rate of return of the business. This discounted present value methodology evolves into a capitalization of earnings method when the expected future income streams are constant. The Company believes this methodology best estimates fair value of the shares because the shares encompassed substantially lesser rights than shares sold by the Company in the November 2010 and March 2011 offerings, most notably lack of registration rights penalties and attached warrants, and therefore could not be valued using pricing from those offerings.

14.	Loans payable (continued):

	(c)	Convertible loan (continued)

		The debentures matured unpaid on September 30, 2010. Because of the default on repayment of the loan, the debentures plus accrued interest became immediately due and payable in cash on September 30, 2010, and the interest rate from September 30, 2010 until repayment increased from 15% to 20% per annum, calculated on a daily basis. On November 10, 2010, in connection with the closing of the Reverse Merger Transaction and the Financing, the notes were satisfied in full as follows: (i) principal in the amount of $549,984 was converted at the option of certain of the holders into 366,656 shares of common stock of Parkview and was recorded at the value of the shares on the conversion date, (ii) principal in the amount of $100,016 was repaid in cash, and (iii) interest of $72,493 was paid in cash. No commitment remained as of June 03, 2011 or December 31, 2010 related to the debentures.

ANHUI TAIYANG POULTRY CO INC 10-Q/A