NOTE 12– STATUTORY RESERVE

The Company is required to make appropriations to statutory 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 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. As of December 31, 2013, the Company appropriated the required maximum 50% of its registered capital to statutory reserve for Heavy Industries; accordingly, no additional statutory reserve is required for the year ended December 31, 2014. As of December 31, 2014, the Company had not appropriated the required maximum 50% of its registered capital to statutory reserve for Dyeing and Fulland Wind Energy.

For the years ended December 31, 2014 and 2013, statutory reserve activities were as follows:

	Dyeing		Heavy Industries		Fulland wind energy		Total
Balance - December 31, 2012	$	373,048	$	1,168,796	$	937,894	$	2,479,738
Addition to statutory reserve		-		-		264,982		264,982
Balance - December 31, 2013		373,048		1,168,796		1,202,876		2,744,720
Addition to statutory reserve		549,479		-		-		549,479
Balance - December 31, 2014	$	922,527	$	1,168,796	$	1,202,876	$	3,294,199