Note 7 - Other Receivables

3 Months Ended

Sep. 30, 2012

Note 7 - Other Receivables:

Note 7 - Other Receivables

NOTE 7 - OTHER RECEIVABLES

At September 30, 2012 and December 31, 2011, the Company had other receivables of $5,250,009 (including $4,170,699 from Wuhai Likang) and $0, respectively.

Wuhai Likang is a major supplier and strategic partner to the Company. The Company has a large demand for a raw material which is produced from Wuhai Likang’s waste recycling project. Due to the need for this raw material, the Company made advances to Wuhai Likang’s to support its waste recycling project which ultimately benefits the Company. As of December 31, 2010, the Company has made advances totaling $1,567,337 to provide operating funds to Wuhai Likang. The portion of such advances to provide operating funds to Wuhai Likang was classified as due from related party as of December 31, 2010 pending approval of the acquisition. Wuhai Likang orally agreed to pay back the advances received from us by offsetting our accounts payable to Wuhai Likang for future purchase of raw materials Wuhai Likang to provide to us. Also, Wuhai Likang agreed to pay back the advances without requiring us to purchase raw materials in the coming years when its cash position permits it to pay back its liabilities. Based on our review of the account, management believes the other receivables are collectible.

As of December 31, 2011, government approval for this acquisition was not completed. Due to the existing shareholders of Wuhai Likang increased capital contribution, the Company’s ownership in Wuhai Likang decreased to approximately 9.18% and influence over Wuhai Likang has been reduced, the Company’s management has determined that Wuhai Likang is not deemed a related party. Accordingly, the due from related party of $1,567,337 as of December 31, 2010 (of which, $729,231 has been reclassified into investment in 2011-see Note 6) and the additional approximately $2.84 million advances made during 2011, have been classified as other receivables as of December 31, 2011. In the nine months ended September 30, 2012, the Company advanced an additional $442,100 to Wuhai Likang. The advance to Wuhai Likang was guaranteed by Wuhai LiKang’s 52,249 square meters in land, 22,360 square meters in building and $751,474 in equipment.