Statutory Reserves

9 Months Ended

Sep. 30, 2013

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. As of December 31, 2012, the Company appropriated the required maximum 50% of its registered capital to statutory reserves for Dyeing and Electric, accordingly, no additional statutory reserve is required at September 30, 2013. As of December 31, 2012, the Company had not appropriated the required maximum 50% of its registered capital to statutory reserve for Fulland Wind Energy.

For the nine months ended September 30, 2013, statutory reserve activity was as follows:

	Dyeing		Electrical		Fulland Wind Energy		Total
Balance – December 31, 2012	$	373,048	$	1,168,796	$	937,894	$	2,479,738
Addition to statutory reserves		-		-		277,306		277,306
Balance – September 30, 2013	$	373,048	$	1,168,796	$	1,215,200	$	2,757,044