Statutory Reserves

9 Months Ended

Sep. 30, 2012

NOTE 11 – STATUTORY RESERVES

The Company is required to make appropriations to reserve funds, comprising the statutory surplus reserve, statutory public welfare fund and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (the “PRC GAAP”). Appropriation to the statutory surplus reserve should be at least 10% of the after tax net income determined in accordance with the PRC GAAP until the reserve is equal to 50% of the entities’ registered capital or members’ equity. Appropriations to the statutory public welfare fund are at a minimum of 5% of the after tax net income determined in accordance with PRC GAAP. Commencing on January 1, 2006, the new PRC regulations waived the requirement for appropriating retained earnings to a welfare fund. Prior to December 31, 2009, the Company appropriated the required maximum 50% of its registered capital to statutory reserves for Dyeing and Electric.

For the nine months ended September 30, 2012, statutory reserve activity is as follows:

	Dyeing		Electric		Wuxi Fulland		Total
Balance – December 31, 2011	$	72,407	$	1,168,796	$	823,348	$	2,064,551
Addition to statutory reserves		-		-		219,301		219,301
Balance – September 30, 2012	$	72,407	$	1,168,796	$	1,042,649	$	2,283,852