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Q2
CGYV
CHINA ENERGY RECOVERY, INC.
true
Smaller Reporting Company
2011
10-Q
This amended filing on Form 10-Q/A has been filed as part of a restatement of China Energy Recovery’s consolidated financial statements for the first, second, and third quarters of 2011. Such restatements and amendments relate only to the three month period ended March 31, 2011, three month (and six month) period ended June 30, 2011, and three month (and nine-month) period ended September 30, 2011. There are no changes to amounts for the prior comparative periods or any other periods or balance sheet dates. Specifically, such restatements and amendments are reflected in Part I, Item 1. “Unaudited Consolidated Financial Statements,” and Part I, Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q.The rationale for the restatement of certain amounts is further described in a Form 8-K filed by China Energy Recovery with the Securities and Exchange Commission on March 30, 2012. Amended disclosures are included in this Form 10-Q/A, particularly Note 2, “Restatement of Previously Issued Financial Statements.”This amendment to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011 originally filed with the Securities and Exchange Commission onAugust 15, 2011 amends and restates only those items of the previously filed Form 10-Q which have been affected by the restatement, although all items of the Form 10-Q are reproduced in this amendment. In order to preserve the nature and character of the disclosures as originally filed, no attempt has been made in this amendment to modify or update such disclosures except as required to reflect the effects of the restatement.
2011-06-30
0001208790
--12-31
4381089
241068
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
19 – Statutory Reserve</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">As
stipulated by the relevant laws and regulations applicable to
enterprises operating in the PRC, the Company and its PRC
subsidiaries and affiliates are required to make annual
appropriations to a statutory surplus reserve fund. Specifically,
the Company is required to deposit 10% of its profits after taxes,
as determined in accordance with the PRC accounting standards
applicable to the Company, to a statutory surplus reserve until
such reserve reaches 50% of the registered capital of the
Company.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
transfer to this reserve must be made before distribution of any
dividend to shareholders. For the year ended December 31, 2010, the
Company transferred $0, because its China subsidiaries incurred
losses in 2010. Statutory reserve amounted to $132,802 as of
December 31, 2010 and June 30, 2011.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
surplus reserve fund is non-distributable other than during
liquidation and can be used to fund previous years' losses, if any,
and may be utilized for business expansion or converted into share
capital by issuing new shares to existing shareholders in
proportion to their shareholding or by increasing the par value of
the shares currently held by them, provided that the remaining
reserve balance after such issue is not less than 50% of the
registered capital.  The remaining required contributions to
the statutory reserves required were approximately $8,015,475 as of
June 30, 2011.</p>
</div>
-15547
-7745886
-404127
114263
21268796
225345
307582
25649885
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
20 – Commitments and Contingencies</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<u>Capital contribution to CER Yangzhou</u></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">As
described in Note 1, CER Yangzhou has registered capital of
$20,000,000 of which $13,500,000 has been invested as of June 20,
2011; the remaining capital is scheduled to be injected before
August 28, 2011.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<u>Lease and Operation Commitments</u></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
According to the renewed and amended Leasing and Operation
Agreement (Note 1) between Shanghai Engineering and Shanghai Si
Fang, Shanghai Engineering has recorded a lease expense and
integrated management fee in the amount of $124,500 and $0 under
cost of revenue and general administrative expenses for the three
months ended June 30, 2010 and 2011, respectively;</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">For the
six months ended June 30, 2010 and 2011, Shanghai Engineering
recorded lease payment and the integrated management fees under
cost of revenue in the amount of $249,489 and $0, respectively.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Company has paid all the lease payments under this lease; therefore
there is no future lease payment under this lease as of June 30,
2011.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<u>Rental commitments</u></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On
January 1, 2009, Shanghai Engineering renewed the lease agreement
with the son of Mr. Qinghuan Wu to continue the lease of the
current office space (approximately 375 square meters) for one year
until December 31, 2010 and the monthly rental was $4,398, which is
approximately the market price in Shanghai.  After moving
into the new office space in Shanghai Zhangjiang Hi-tech Park
(“Zhangjiang”), the lease agreement terminated as of
April 30, 2011. For the three months ended June 30, 2010 and 2011,
the company incurred $13,203 and $5,170, respectively. For the six
months ended June 30, 2010 and 2011, the company incurred $26,404
and $18,373, respectively, as rental expense under the lease.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On
March 19, 2009, CER Shanghai entered into an office lease agreement
with Shanghai Zhangjiang Integrated Circuit Industrial Zone
Development Co., Ltd., to lease an office space (approximately
2,664 square meters) in the Shanghai Zhangjiang Hi-tech Park
(“Zhangjiang”), which is the new office space and the
design and engineering center of the Company in China.  The
lease is for two years from March 1, 2009 through February 28,
2011.  The Company is also required to make a security deposit
of approximately $292,613 in addition to the annual lease
payments.  Rental expenses have been recognized on a
straight-line basis. CER Shanghai also has an option to purchase
the office space. If CER Shanghai exercises the purchase option,
all the lease payments and the deposit payment made can be credited
against the purchase price and counted as a partial purchase
payment. The Company has paid the first year’s rental fee in
the amount of $146,304 and the security deposit of $292,613 in
April 2009, and has also paid the second year’s rental fee in
the amount of $851,525 in February 2010.The Company has amortized
the total rental fee using straight-line method over the 2-year
lease period. For the three months ended June 30, 2010 and 2011,
the rental expense was $124,787 and $0, respectively. For the six
months ended June 30, 2010 and 2011, the rental expense was
$249,592 and $86,311, respectively.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: right; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On
March 30, 2011, CER Shanghai exercised the purchase option with
Shanghai Zhangjiang Integrated Circuit Industrial Zone Development
Co., Ltd. The total purchase price of the building is RMB
48,526,172 (approximately $7,498,264), which represents the price
of the building. CER Shanghai paid in full by cash and bank
acceptance, as of June 30, 2011. The maturity date of the bank
acceptance shall be no later than October 10, 2011.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: center; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">This
Quarterly Report on Form 10-Q contains disclosures which are
forward-looking statements. Forward-looking statements include all
statements that do not relate solely to historical or current
facts, such as, but not limited to, the discussion of economic
conditions in market areas and their effect on revenue growth, the
discussion of our growth strategy, the potential for and effect of
future governmental regulation, fluctuation in global energy costs,
the effectiveness of our management information systems, and the
availability of financing and working capital to meet funding
requirements, and can generally be identified by the use of words
such as "may," "believe," "will," "expect," "project," "estimate,"
"anticipate," "plan" or "continue." These forward-looking
statements are based on the current plans and expectations of our
management and are subject to certain risks and uncertainties that
could cause actual results to differ materially from historical
results or those anticipated. These factors include, but are not
limited to: the general economic conditions that may affect our
customers desire or ability to invest in energy recovery systems;
the cost of raw materials; the availability of environmental
credits; the positive and adverse effect of governmental regulation
affecting energy recovery systems; our reliance on customers in
heavy industry, such as chemicals and steel production,  and
state owned or controlled enterprises; competition in the industry
of heat and energy recovery systems; the availability of and costs
associated with potential sources of financing; difficulties
associated with managing future growth; our ability to increase
manufacturing capacity to meet demand; fluctuations in currency
exchange rates; restrictions on foreign investments in China;
uncertainties associated with the Chinese legal system; the loss of
key personnel; and our ability to attract and retain new qualified
personnel.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">These
forward-looking statements speak only as of the date of this
Quarterly Report on Form 10-Q. Except as required by law, we
undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
9 – Long Term Loans</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On
February 1, 2010, the Company, through its subsidiaries, CER
Shanghai (“Borrower”) and CER Hong Kong (“Paying
Agent”), entered into a series of agreements for a loan
arrangement with two lenders (the “Loan Agreements”).
The proceeds of this loan were used for construction of the new
plant in China for the production of the Company’s
products.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
aggregate principal amount of the loan under the two Loan
Agreements is $4,000,000. The principal is due January 15, 2013,
and bears interest at the annual rate of 15.1%.  The loan
repayments are to be made three times a year starting May 15, 2010,
and are fully amortizing, such that the principal and interest will
be fully repaid at maturity. The Company will pay the sum of
$566,023 at the end of every four calendar months, commencing May
15, 2010.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On
April 15, 2011, CER paid the remaining outstanding principal due
under the $4 million long-term loan. The prepayment sum of
$2,981,244 represented the principal amount due, the prepayment
premium and the net interest due.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
According to the loan agreement provisions, as an additional
inducement to the Lender to make the Loan, CER will issue to the
Lender or its designee, on each date that an amount of principal of
the Loan is paid, shares of common stock of CER, on a restricted
basis, without registration rights, as follows:  If the
RMB exchange rate between the RMB and United States Dollar
(“USD”) is less than RMB 6.8271(the agreed upon
exchange rate on the date of the making of the Loan), such that the
value of the RMB is greater than the USD, then the difference in
the principal installment calculated at the rate of RMB and
calculated at the rate of RMB to USD on such repayment date will be
converted into a US dollar amount and divided by the closing price
of one share of common stock of CER on the OTC or stock exchange,
the result of which will represent that number of shares to be
issued to the Lender as of such date, in restricted stock. The
total number of shares due to the lenders under the terms of the
Exchange Rate Differential Payment provisions of the Loan Agreement
is 151,656, which were all issued as of June 30, 2011. There are no
derivative liabilities under the terms of the Exchange Rate
Differential Payment provisions of the Loan Agreement as of June
30, 2011 as the amount has been fully paid in April 2011.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Contemporaneously with the funding of the Loan Agreements, on
February 1, 2010, Mr. Qinghuan Wu, arranged for Haide Engineering
(Hong Kong) Limited (“Haide”), a company controlled by
Mr. Qinghuan Wu, to lend to the Company the sum of
$1,000,000.  The proceeds of this loan will be forwarded
to CER Yangzhou in the form of an investment which helped fund the
Company’s new plant in Yangzhou, China.  The loan
is an interest only loan, bearing interest at the annual rate of
9.5%, and is unsecured. The Company will pay the sum of $23,750 at
the end of every three calendar months. The principal is due in
full on January 30, 2012; hence the remaining loan is classified as
a current liability (long-term loan, current).  The loan
is unsecured and there are no guarantees of the interest or
principal. Shanghai Engineering has subordinated its loan to those
under the Loan Agreements. The Company repaid principal of $460,000
in December 2010 and the balance as of June 30, 2011 was $543,778.
The Company will pay the sum of $12,915 at the end of every three
calendar months thereafter.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
13 – Convertible Preferred Stock</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b><i><u>Series A Convertible Preferred Stock</u></i></b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On
April 15, 2008 and as a condition to closing of the Share Exchange,
CER entered into Securities Purchase Agreements with 25 accredited
investors pursuant to which CER issued and sold an aggregate of
7,874,241 units at a unit price of $1.08 (the "Financing"). Each
unit consisted of one share of CER's Series A convertible preferred
stock, par value of $0.001, and one warrant to purchase one-half of
one share of CER's common stock at an exercise price of $1.29 per
share. After the 1-for-2 reverse stock split conducted on April 16,
2008, the 7,874,241 shares of the Company’s Series A
convertible preferred stock are convertible into 3,937,121 shares
of common stock and the warrants are exercisable into 1,968,561
shares of the Company's common stock at an exercise price of $2.58
per share. The issuance costs of $1,859,902, including commissions,
legal fees and transaction expenses were taken from the proceeds.
The net proceeds were allocated between the Series A convertible
preferred stock and warrants based on their relative fair values.
As of the closing date, the fair value of Series A convertible
preferred stock was estimated at $1.68 where as the fair value of
the warrants was estimated at $0.85.  As a result, an
aggregate amount of $5,307,539 was allocated to Series A
convertible preferred stock and $1,336,739 was allocated to the
warrants. The fair value of the warrants was initially valued using
the binomial model with assumptions such as, stock price,
volatility, expected term, dividend, risk-free interest rate,
etc.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
rights, preferences and privileges with respect to the Series A
convertible preferred stock are as follows:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b><i>Voting</i></b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-INDENT: 27pt; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Holders of Series A convertible preferred stock are entitled to the
number of votes equal to the number of shares of common stock into
which such shares of preferred stock could be converted and to vote
as a single class.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b><i>Dividends</i></b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-INDENT: 27pt; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Holders of Series A convertible preferred stock are entitled to
dividends when dividends are declared for common
stockholders.  There have been no dividends declared to
date.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b><i>Liquidation</i></b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-INDENT: 27pt; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
In the event of any liquidation, dissolution or winding up of the
Company, the holders of Series A convertible preferred stock shall
be entitled to receive the amount of the original issue price per
share (as adjusted for the 1-for-2 reverse stock split) for each
share of Series A convertible preferred stock, plus all declared
and unpaid dividends.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b><i>Conversion</i></b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-INDENT: 27pt; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Each share of Series A convertible preferred stock is convertible
into common stock on a one-for-one basis, anytime at the option of
the holder. The current conversion price is $2.16 after taking into
effect the 1-for-2 reverse stock split, and the conversion price is
subject to adjustment in accordance with the anti-dilution
provisions.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-INDENT: 27pt; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
There was no beneficial conversion feature charge recognized for
the issuance of Series A convertible preferred stock on the
issuance date as the estimated fair value of the common stock is
less than the conversion price on the date of issuance.  The
Company’s common stock was quoted on the OTCBB and has been
publicly traded.  However, with the high volatility and
extremely low trading volume during the time when the Company
entered into this Financing transaction, the fair value of the
Company’s common stock as of April 15, 2008 was determined
based on the Company’s estimate relied in part on a valuation
report prepared by an  independent valuer. The estimated fair
value of the common stock was $1.55 per share.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b><i><u>Adjustment of Series A Convertible Preferred Stock
Conversion Price and Warrant Exercise Price</u></i></b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In
accordance to the anti-dilution provisions of the afore-mentioned
Financing, if the Company shall issue additional shares without
consideration or for consideration per share less than the
conversion price and/or the warrant exercise price in effect
immediately prior to the issuance, such conversion price
and exercise price shall be adjusted. </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">For the
year ended December 31, 2010, 462,963 shares of Series A
convertible preferred stock were converted into 245,098 shares of
common stock. During the six months ended June 30, 2011, no shares
of Series A convertible preferred stock were converted.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">As of
December 31, 2010 and June 30, 2011, the Company had 200,000 and
200,000 shares of Series A convertible preferred stock issued and
outstanding, respectively</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b><i><u>Series B Convertible Preferred Stock</u></i></b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In
connection with the Convertible Notes Agreement discussed in
Note 10, the Company was required to issue to the Lender one
hundred shares of Series B Preferred Stock, par value at $0.001.
The Series B preferred stock provides voting rights and the right
to appoint directors only in the event of defaults which equal or
exceed $1,000,000 in the aggregate. The Series B preferred stock is
senior to all other capital stock of the Company. The holder of the
Series B preferred stock will not be entitled to any dividends, any
liquidation preference of any kind, or any conversion right to
convert the Series B preferred stock into the Company’s
common stock.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
10 – Convertible Notes</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On May
21, 2009, the Company entered into a term loan agreement
(“Convertible Notes Agreement”) with an investment
company (the “Lender”). Pursuant to the Convertible
Notes Agreement, the lender provides term loan financing
(“Convertible Notes”) to the Company in an amount of up
to $5,000,000 within 6 months of the making, which may be
drawn from time to time, in whole or in installments, upon notice,
but once repaid shall not be subject to reborrowing. The proceeds
from this Convertible Note were used for the construction of a new
plant located in Yangzhou, China for the production of the
products, including, but not limited to, the purchase of land for
the plant, buildings, equipment and for the facilitating of
financing loans from one or more in-China banks and other
institutional lenders. Any amount borrowed will bear interest at
9.5%, payable every six months, calculated and compounded
quarterly. Each draw is due twenty-four (24) months after the draw
down date, together with any accrued and unpaid interest. The
Company drew down $5,000,000 on September 29, 2009. For the three
months ended June 30, 2010 and 2011, interest expense of $555,846
and $278,064, respectively, was incurred. For the six months ended
June 30, 2010 and 2011, interest expense of $1,111,910 and
$547,977, respectively, was incurred. The Convertible Notes could
be converted to 2,777,778 shares of common stock at the conversion
price of $1.80. In addition, the Company has issued the
Lender a five-year common stock purchase warrant
(“Commitment Warrants”) to purchase up to 1,388,889
shares of the Company’s common stock, which is that number of
shares of the Company’s common stock equal to 50% of the
principal sum of this Convertible Note divided by the conversion
price of $1.80. In connection with these Convertible Notes, the
Company issued to the Lender one hundred shares of Series B
preferred stock that provides for voting rights and the right to
appoint directors to the Company’s Board in the event of
defaults equal to or exceeding $1,000,000 in the aggregate
amount.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Lender may recall a Convertible Note after the first anniversary of
the draw down at a redemption price equal to the outstanding
principal plus any accrued and unpaid interest upon the closing by
the Company of any debt and/or equity financing (except for debt
financings with banks or institutional lenders in China), in an
amount up to 50% of the amount financed.  Additionally,
upon occurrence of certain events, the Lender can demand the entire
outstanding principal, together with any accrued and unpaid
interest to be immediately repaid in full or in
part.  The Company can also prepay the Convertible Note
at any time it desires with accrued interest and unpaid interest.
On September 13, 2010, the Lender agreed not to exercise its right
to request an early repayment prior to September 29, 2011.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
embedded conversion feature of the Convertible Notes is accounted
for as a derivative liability separately in the balance sheet in
accordance with ASC 815, <i>Derivatives and Hedging</i>, because
the conversion price is denominated in US dollars, which is a
currency other than the Company’s functional
currency.  The conversion feature accounted as a
derivative liability on the balance sheet is classified as a
current liability based on the timing of the cash flows derived
from the convertible notes. The Convertible Notes were recorded
with a discount equal to the fair value of the conversion feature
at the transaction date and were accreted to the redemption value
of the Convertible Notes from the draw down date to the earliest
redemption date using the interest method. The change in fair value
of the conversion feature of $511,329 and $32,741
were recorded in the consolidated statements of operations for
the three months ended June 30, 2010 and 2011, respectively. The
change in fair value of the conversion feature of $822,829 and
$203,916 were recorded in the consolidated statements of
operations for the six months ended June 30, 2010 and 2011,
respectively. The interest expenses recognized for accretion to the
redemption value of the Convertible Notes was $232,627 and $39,637
for the three months ended June 30, 2010 and 2011, respectively.
The interest expenses recognized for accretion to the redemption
value of the Convertible Notes was $465,255 and $76,179 for the six
months ended June 30, 2010 and 2011, respectively.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
grant value of the warrants issued in conjunction with the
Convertible Notes was treated as a commitment fee for obtaining the
Convertible Notes, and therefore the value was recorded as deferred
financing cost to be amortized over the period from grant date to
the earliest redemption date of the Convertible Notes. For the
three months ended June 30, 2010 and 2011, $204,469 and $74,352 of
deferred financing cost was amortized and charged to financial
expenses, respectively. For the six months ended June 30, 2010 and
2011, $408,938 and $148,704 of deferred financing cost was
amortized and charged to financial expenses, respectively. The
Commitment Warrants were recorded as derivative liabilities in
accordance with ASC 815, Derivatives and Hedging, because their
exercise price is denominated in US dollars, which is a currency
other than the Company’s functional currency, i.e., the RMB.
Changes in fair value of the Commitment Warrants (Note 14) for the
three and six months ended June 30, 2010 and 2011 was recorded in
the consolidated statements of operations.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On
December 31, 2010, the Company entered into a loan agreement with
the Lender to replace and continue the prior lending arrangement
which was entered into on May 21, 2009, to extend the term until
which the principal amount of $5,000,000 is due to September 29,
2012, and to change certain of the terms of the loan. The aggregate
principal amount of the loan extension is $5,000,000, and bears
interest at the annual rate of 15.1%, calculated on a monthly
compounded basis.  The principal and accrued interest are
due September 29, 2012. The loan may be prepaid by the Company,
without penalty. The loan agreement provides for the typical events
of default (which includes default in payment of any part of the
principal of or interest, performance or compliance with the
collateral agreement, assets attached or seized by any third person
and or any part of the loan agreement being declared null and void
or its enforceability being challenged), including a cross default
clause, and the Company has made various representations and given
various covenants to the lender, which includes the audit of the
Company’s annual financial statements and review of the
interim financial statements as well as the timely filing of such
statements. In the event of a default, the lender would have the
right to exercise its rights under the Class B Preferred Stock that
was issued in connection with the issuance of Convertible Notes,
which will continue with respect to the new loan. The Lender
continues to have a right of first refusal with respect to future
debt and equity fundings and a right to consent to certain debt and
equity fundings by the Company and its subsidiaries and affiliates.
As a guarantor of the payments under the loan extension, Mr. Wu,
the Chief Executive Officer of the Company, pledged 8,000,006 of
his shares in CER for the repayment of the principal due under the
loan agreement.  The pledge will only take effect when
the shares are released from its current pledge under the Long Term
loan entered into by the Company on February 1, 2010.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Company has accounted for the replacement and extension of the loan
agreement as a modification as the changes are not substantial such
that there has been no accounting extinguishment in accordance with
ASC 470 Debt – Modifications and Extinguishments. Accordingly
a new effective interest rate is determined based on the carrying
amount of the original debt and the revised cash flow of the new
loan.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Since
the loan is fixed in United States dollars, the lender will receive
compensation when the Renminbi exchange rate increases against the
US dollar as compared to the rate fixed at the borrowing date.
Accordingly, the Company has accounted for the feature as an
embedded derivative and recognized derivative liability in the
amount of $48,461 and $99,589 as of December 31, 2010 and June 30,
2011, respectively. The change in fair value of the derivative
liability of $73,182 and $51,128 was recorded in the
consolidated statements of operations for the three and six months
ended June 30, 2011, respectively.</p>
</div>
10812569
692735
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
12 –Earnings per Share</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Company reports earnings per share in accordance with the
provisions of ASC 260, <i>“Earnings Per Share”.</i>
This standard requires presentation of basic and diluted earnings
per share in conjunction with the disclosure of the methodology
used in computing such earnings per share. Basic earnings/(losses)
per share excludes dilution and is computed by dividing net income
(loss) available to common stockholders by the weighted average
common shares outstanding during the period under the two-class
method. Diluted earnings per share takes into account the potential
dilution that could occur if securities or other contracts to issue
common stock were exercised and converted into common stock. In
computing the dilutive effect of convertible securities, the number
of shares is adjusted for the additional common stock to be issued
as if the convertible securities are converted at the beginning of
the period (or at the time of issuance, if later). In computing the
dilutive effect of options and warrants, the treasury method is
used. Under this method, options and warrants are assumed to be
exercised at the beginning of the period and as if funds obtained
thereby were used to purchase common stock at the average market
price during the period. </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
following is a reconciliation of the basic and diluted earnings per
share computations for the three and six months ended June 30, 2010
and 2011:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="6">
Three months ended June 30,</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right; VERTICAL-ALIGN: top" colspan="2">
2010</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">2011<br />
Restated</td>
<td> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="FONT-WEIGHT: bold">Numerator:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 70%; FONT-WEIGHT: bold">Net
income</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">271,065</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">861,600</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Amount allocated to preferred
stockholders</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(927</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(2,934</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Net income available to common stock
holders – Basic and diluted</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">270,138</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">858,666</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="FONT-WEIGHT: bold">Denominator:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Denominator for basic earnings per
share -Weighted average common stocks outstanding</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">30,883,916</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">31,026,225</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Weighted average stock options</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">77,317</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Denominator for diluted earnings per
share</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">30,883,916</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">31,103,542</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Basic earnings per share</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">0.01</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">0.03</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Diluted earnings per share</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">0.01</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">0.03</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="6">
Six months ended June 30,</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right; VERTICAL-ALIGN: top" colspan="2">2010</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">2011<br />
Restated</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="FONT-WEIGHT: bold">Numerator:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 70%; FONT-WEIGHT: bold">Net
income</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">459,644</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">385,153</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Amount allocated to preferred
stockholders</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(2,677</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(1,314</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Net income available to common stock
holders – Basic and diluted</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">456,967</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">383,839</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="FONT-WEIGHT: bold">Denominator:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Denominator for basic earnings per
share -Weighted average common stock outstanding</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">30,809,439</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">30,979,564</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Weighted average stock options</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">77,317</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Denominator for diluted earnings per
share</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">30,809,439</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">31,056,881</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Basic earnings per share</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">0.02</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">0.01</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Diluted earnings per share</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">0.02</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">0.01</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">For the
three and six months ended June 30, 2010, warrants to purchase
3,357,450 shares of the Company’s common stock and options to
purchase 560,000 shares of its common stock, as of June 30, 2010,
were not included in the calculation of dilutive earnings per share
because of their anti-dilutive effect.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">For the
three months and six months ended June 30, 2011, convertible notes,
and warrants to purchase 120,000 shares of the company were
excluded from the diluted earnings per share calculation because of
their anti-dilutive effect.</p>
</div>
76179
365058
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
16 – Interest Expense, Net</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 85%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="6">
Three months ended June 30,</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">2010</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">2011</td>
<td> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 66%">Interest of convertible
notes</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">118,750</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">164,076</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Interest of long-term loan</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">172,139</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">59,632</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Amortization of deferred financing
cost</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">204,469</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">74,352</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Accretion of convertible notes</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">232,627</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">39,637</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Accretion of long term loan</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">17,029</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">66,055</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Expense of common stock issued</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">144,498</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Interest of short-term bank loans</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">62,721</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Bank note discount interest</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">511</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Interest capitalized</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(38,148</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Interest
income</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(62,093</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(5,743</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Total</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
644,773</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
605,739</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<table style="WIDTH: 85%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="6">
Six months ended June 30,</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">2010</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">2011</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2"> </td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2"> </td>
<td> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 66%">Interest of convertible
notes</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">237,717</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">323,094</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Interest of long-term loan</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">283,001</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">187,651</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Amortization of deferred financing
cost</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">408,938</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">148,704</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Accretion of convertible notes</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">465,255</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">76,179</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Accretion of long term loan</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">17,029</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">81,870</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Expense of common stock issued</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">184,806</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Interest of short-term bank loans</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">1,571</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">126,122</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Bank note discount interest</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">84,178</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Warrant cancellation</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(15,547</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Interest capitalized</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(41,213</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Interest
income</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(63,157</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(221,793</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Total</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
1,309,141</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
975,264</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
</div>
241068
0.01
-110018
-250738
915790
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
18 – Retirement Benefits</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">As
stipulated by the relevant laws and regulations applicable to
enterprises operating in the PRC, the Company and its PRC
subsidiaries and affiliates are required to maintain a defined
contribution retirement plan for all of its employees who are
residents of the PRC. The Company contributes to a statutory
government retirement plan approximately 22% of the base salary of
each of its employees and has no further obligations for the actual
pension payments or post-retirement benefits beyond the annual
contributions. The statutory government retirement plan is
responsible for the entire pension obligations payable for all past
and present employees.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Company made contributions of $92,962 and $46,783 for employment
benefits, including pension payments for the three months ended
June 30, 2010 and 2011, respectively. The Company made
contributions of $122,760 and $114,158 for employment benefits,
including pension payments for the six months ended June 30, 2010
and 2011, respectively.</p>
</div>
3259843
385153
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
4 – Accounts Receivable</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 24px">(a)</td>
<td>Accounts Receivable</td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">December 31,</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">June 30,</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">2010</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">2011</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 70%">Current accounts
receivable</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">7,059,935</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">7,197,345</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Subtract:
Allowance for doubtful accounts</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Current accounts receivable, net</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">7,059,935</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">7,197,345</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Current
receivables also consisted of revenue recognized in excess of
amounts billed for the EPC contracts recognized using the
percentage of completion method.  As of December 31, 2010
and June 30, 2011, the revenue recognized in excess of amounts
billed amounted to approximately $2,328,420 and $ 3,773,222,
respectively.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 24px">(b)</td>
<td>Long-term Accounts Receivable</td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Company classified accounts receivable which are to be collected
after one year as long-term accounts receivable.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
following accounts receivable consisted of receivables related to
revenue recognized in excess of amounts billed of approximately
$4,679,121 and $2,428,040 as of December 31, 2010 and June 30,
2011, respectively. These receivables have original maturities of
greater than 12 months. As of June 30, 2011, these balances include
$2,428,040 that has been classified to current receivable due to a
change in contractual term from March 2013 to March 2012.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 90%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">December 31,</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">June 30,</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">2010</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">2011</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="WIDTH: 70%">Gross</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">6,242,969</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">3,029,907</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Unearned Income</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(938,834</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Allowance for
doubtful accounts</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(625,014</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(601,867</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Total, net</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">4,679,121</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">2,428,040</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Less: Current
portion</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(2,428,040</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Total</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
4,679,121</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Contractual maturities of the long-term accounts receivables at
June 30, 2011 are summarized as follows:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 90%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">Amount</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="WIDTH: 70%">Twelve months ended June 30, 2012</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">2,428,040</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt">Twelve months ended June 30,
2013</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
601,867</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Total</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
3,029,907</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
</div>
-139883
-4679121
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
3 – Summary of Significant Accounting Policies</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
accompanying unaudited interim consolidated financial statements as
of June 30, 2011 and for the three months and six months ended June
30, 2011 and 2010 have been prepared by the Company, in accordance
with generally accepted accounting principles, or GAAP, for interim
financial reports and the instructions for Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared
under generally accepted accounting principles have been condensed
or omitted pursuant to such regulations. In the opinion of the
Company’s management, the unaudited interim consolidated
financial statements include all adjustments, consisting of normal
recurring adjustments, necessary for a fair statement of the
Company’s financial position, results of operations and cash
flows. The results of operations for the three months and six
months ended June 30, 2011 are not necessarily indicative of the
results of operations for the year ending December 31, 2011. The
balance sheet at December 31, 2010 has been derived from the
audited consolidated financial statements at that date but does not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial
statements.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
principal accounting policies adopted in the preparation of these
consolidated financial statements are set out below:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<table style="WIDTH: 100%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 24px">(a)</td>
<td>Principal of consolidation</td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
accompanying consolidated financial statements have been prepared
in accordance with generally accepted accounting principles in the
United States of America (“US GAAP”).  The
consolidated financial statements include the financial statements
of the Company, its wholly-owned subsidiaries Poise profit, CER
Hong Kong, Hi-tech, CER Shanghai, CER Yangzhou, and its variable
interest entities (“VIEs”) Shanghai
Engineering and Shanghai Environmental. All significant
inter-company transactions and balances among the Company, its
subsidiaries and VIEs are eliminated upon consolidation.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In
accordance with the Accounting Standard Codification
(“ASC”) 810-10, variable interest entities (VIEs) are
generally entities that lack sufficient equity to finance their
activities without additional financial support from other parties
or whose equity holders lack adequate decision making ability. All
VIEs with which the Company is involved must be evaluated to
determine the primary beneficiary of the risks and rewards of the
VIE. The primary beneficiary is required to consolidate the VIE for
financial reporting purposes.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Company has concluded that Shanghai Engineering is, and Shanghai
Environmental was VIEs and that the Company is the primary
beneficiary. Under the requirements of US GAAP, the Company
consolidated the financial statements of Shanghai Engineering and
Shanghai Environmental.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Under
the contractual arrangements with the VIEs, the Company has the
power to direct activities of the VIEs, and can have assets
transferred freely out of the VIEs without any restrictions.
Therefore the Company concluded that there was no asset of a
consolidated VIE that can be used only to settle obligations of the
VIE, except for registered capital and PRC statutory reserves of
the VIEs amounting to a total of $1.38 million as of June 30, 2011.
As all the consolidated VIEs are incorporated as limited liability
companies under the PRC Company Law, creditors of the VIEs do not
have recourse to the general credit of the Company for any of the
liabilities of the consolidated VIEs, which consisted of receipts
in advance of $13.35 million, accounts payable of $7.05 million,
accrued liabilities to suppliers and agents of $1.52 million, and
other accrued liabilities of $0.07 million, totaling $21.99
million. Currently there is no contractual arrangement that could
require the Company to provide additional financial support to the
consolidated VIEs. As the Company is conducting certain business in
the PRC mainly through the VIEs, the Company may provide such
support on a discretionary basis in the future, which could expose
the Company to a loss.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(b) Use
of estimates</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In
preparing financial statements in conformity with US GAAP,
management is required to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reported
periods. Significant estimates include useful lives of equipment,
allowance for doubtful accounts, deferred tax assets and the
completion percentage of the construction contracts. Actual
results could differ from those estimates.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(c)
Concentration of risk</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Company maintains cash balances at financial institutions within
the U.S. Hong Kong and PRC. Balances at financial institutions or
state owned banks within the PRC are not covered by insurance.
Balances at financial institutions within the United States are
covered by the Federal Deposit Insurance Corporation for $250,000
per depositor per institution. Balances at financial
institutions within Hong Kong are fully covered by government
provided insurance until the end of 2011.  The Company has not
experienced any losses in such accounts and believes it is not
exposed to any significant credit risks on its cash in bank
accounts.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">For the
three months ended June 30, 2010 and 2011, the Company’s five
top customers accounted for 91% and 91% of the Company's
sales, respectively. For the six months ended June 30, 2010 and
2011, the Company’s five top customers accounted for 78% and
77% of the Company's sales, respectively. Receivables from
these five top customers were 5% and 8% of total accounts
receivable at June 30, 2010 and 2011, respectively. As of December
31, 2010, the top five customers accounted for 74% of total
accounts receivables.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">For
the three months ended June 30, 2010 and 2011, the five top
suppliers accounted for approximately 50% and 57% of the Company's
purchases of raw materials, respectively. For the six months
ended June 30, 2010 and 2011, the five top suppliers accounted for
approximately 36% and 41% of the Company's purchases of raw
materials, respectively. Payables to these five suppliers were
approximately 2.3% and 9.2% of total accounts payable at June 30,
2010 and 2011, respectively. As of December 31, 2010, the top five
suppliers accounted for 26% of total accounts payables. </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Company's operations are carried out in the PRC. Accordingly, the
Company's business, financial condition and results of operations
may be influenced by the political, economic and legal environments
in the country, and by the general state of the country's economy.
The Company's operations in the PRC are subject to specific
considerations and significant risks not typically associated with
companies carrying out operations in the United States. These
include risks associated with, among others, the political,
economic and legal environments and foreign currency exchange. The
Company's results may be adversely affected by changes in
governmental policies with respect to laws and regulations,
anti-inflationary measures, currency conversion and remittance
abroad, and rates and methods of taxation, among other things.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(d)
Foreign currency translations</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
reporting currency of the Company is the U.S. dollar. Shanghai
Engineering, CER Shanghai, CER Yangzhou, and Hi-tech use the
Renminbi ("RMB") as their functional currency.  Results
of operations and cash flow are translated at average exchange
rates during the period, and assets and liabilities are translated
at the end of period exchange rates. Cash flows are also translated
at average translation rates for the period, therefore, amounts
reported on the statement of cash flows will not necessarily agree
with changes in the corresponding balances on the balance sheet.
Translation adjustments resulting from this process are included in
accumulated other comprehensive income (loss) in stockholders'
equity. Transaction gains and losses that arise from exchange rate
fluctuations from transactions denominated in a currency other than
the functional currency are included in the results of operations
as incurred. For the three months ended June 30, 2010 and 2011,
foreign currency translation income amounted to $18,568 and
$86,813, respectively. For the six months ended June 30, 2010 and
2011, foreign currency translation income amounted to $28,000 and
$307,582, respectively.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The PRC
government imposes significant exchange restrictions on fund
transfers out of the PRC that are not related to business
operations. These restrictions have not had a material impact on
the Company because it has not engaged in any significant
transactions that are subject to the restrictions.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Accumulated other comprehensive loss amounted to $410,646 and
$718,228 as of December 31, 2010 and June 30, 2011, respectively.
The balance sheet accounts with the exception of equity at December
31, 2010 and June 30, 2011 were translated at RMB6.83 to $1.00 and
RMB6.47 to $1.00 respectively.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
average translation rates applied to income and cash flow statement
amounts for the three months ended June 30, 2010 and 2011 were
RMB6.82 to $1.00 and RMB6.49 to $1.00 respectively. For the six
months ended June 30, 2010 and 2011, the average translation rates
were RMB6.82 to $1.00 and RMB6.49 to $1.00, respectively.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(e)
Cash and restricted cash</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Cash
includes cash on hand and demand deposits with banks, which are
unrestricted as to withdrawal and use, and which have original
maturities less than three months.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Restricted cash represents a cash portion of the guaranty for the
bids on contracts and is deposited in a separate bank account
subject to withdrawal restrictions controlled by the customer to
secure the Company’s performance of the project in process.
The deposit cannot be drawn or transferred by the Company until the
restriction period has expired. The Company also classified certain
cash as restricted that is not available for use in its
operations.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 (f) Notes receivable</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Notes
receivable represent trade accounts receivable due from various
customers where the customers’ banks have guaranteed the
payment of the receivables. The notes are non-interest bearing and
normally paid within three to six months. The Company has the
ability to submit a request for payment to the customer’s
bank earlier than the scheduled payment date, but will incur an
interest charge and a processing fee. </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(g)
Receivables and allowance for doubtful accounts</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Receivables include trade accounts due from the customers, and
other receivables from cash advances to employees or third parties.
Management regularly reviews aging of receivables and changes in
payment trends by its customers, and records a reserve when they
believe collection of amounts due are at risk. </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 88%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 85%">Allowance for doubtful
account, December 31, 2009</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">589,048</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Addition</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">152,960</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Write off</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(134,639</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Translation
adjustment</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
17,645</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Allowance for doubtful account,
December 31, 2010</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">625,014</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Reversal</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(37,372</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Translation
adjustment</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
14,225</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">Allowance for
doubtful account, June 30, 2011</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
601,867</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Accounts receivable which are expected to be collected after twelve
months are reclassified as long-term accounts
receivable. The Company reserved a provision for accounts
receivable balances based on the nature of the business and
accounts receivable collection history (further discussed in Note
4).</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(h)
Inventories</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Inventories are comprised of raw materials, work in progress and
finished goods and are stated at the lower of cost or market value.
Costs of work in progress include direct labor, direct materials,
and production overhead before the goods are ready for sale.
Management reviews inventories for obsolescence or cost in excess
of market value periodically. The obsolescence, if any, is recorded
as a reserve against the inventory. The cost in excess of market
value is written off and recorded as cost of revenues.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 88%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="WIDTH: 85%">Provision for inventory, December 31,
2009</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">117,126</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Addition</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">47,281</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Realized</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(74,090</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Translation
adjustment</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
2,878</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Provision for inventory, December 31, 2010</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">93,195</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Addition</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">26,141</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Realized</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(5,101</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Translation
adjustment</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
2,367</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Provision for inventory, June 30,
2011</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
116,602</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(i)
Advances on purchase</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Advances on purchases are monies advanced to outside vendors for
inventory purchases and property, plant and equipment purchases.
This amount is refundable and bears no interest.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(j)
Property, plant and equipment, net</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Property, plant and equipment are stated at cost. Depreciation is
calculated principally by use of the straight-line method over the
estimated useful lives of the related assets. Expenditures for
maintenance and repairs, which do not improve or extend the
expected useful lives of the assets, are charged to operations as
incurred, while renewals and betterments are capitalized.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Management established a 5% residual value for property, plant and
equipment. The estimated useful lives of the property, plant and
equipment are as follows:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 40%">Plants and Buildings</td>
<td style="WIDTH: 60%">20-38 years</td>
</tr>
<tr style="VERTICAL-ALIGN: top">
<td>Transportation equipment</td>
<td>3-10 years</td>
</tr>
<tr style="VERTICAL-ALIGN: top">
<td>Machinery equipment</td>
<td>5-10 years</td>
</tr>
<tr style="VERTICAL-ALIGN: top">
<td>Office equipment</td>
<td>3-5 years</td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
gain or loss on disposal of property, plant and equipment is the
difference between the net sales proceeds and the carrying amount
of the relevant assets; gains or losses, if any, are recognized in
the consolidated statement of income and other comprehensive
income. There were no disposal of assets during the three and six
months ended June 30, 2010 and 2011.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(k)
Impairment of assets</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Company assesses the carrying value of long-lived assets each
reporting period, more often when factors indicating impairment are
present, and reduces the carrying value of such assets by the
amount of the impairment. The Company determines the existence of
such impairment by measuring the expected future cash flows
(undiscounted and without interest charges) and comparing such
amount to the net asset carrying value. An impairment loss, if it
exists, is measured as the amount by which the carrying amount
of the asset exceeds the fair value of the asset. Fair value
generally means based on either quoted market price, if available,
or discounted cash flow analysis. There were no impairment of long
lived assets recognized for the three and six months ended June 30,
2010 and 2011.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 (l) Advances from customers</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Advances from customers represent amounts advanced by customers on
product or service orders. The product (service) normally is
shipped (rendered) within one year after receipt of the advance
payment, and the related sales are recognized in accordance
with the Company’s revenue recognition policy.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(m)
Income taxes</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Income
taxes are accounted for under the asset and liability method.
Deferred income taxes are recognized for temporary differences
between the tax bases of assets and liabilities and their reported
amounts in the financial statements, net operating loss carry
forwards and credits, by applying enacted statutory tax rate in the
year in which those temporary differences are expected to be
recovered or settled. Deferred tax assets are reduced by a
valuation allowance when it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
Current income taxes are provided for in accordance with the laws
of the relevant taxing authorities.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In
assessing uncertain tax positions, the Company applies a more
likely than not threshold and a two-step approach for the tax
position measurement and financial statement recognition. For the
two-step approach, the first step is to evaluate the tax position
for recognition by determining if the weight of available evidence
indicates that it is more likely than not that the position will be
sustained, including resolution of related appeals or litigation
processes, if any. The second step is to measure the tax benefit as
the largest amount that is greater than 50% likely to be realized
upon settlement.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(n)
Value added tax</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Sales
revenue represents the invoiced value of goods, net of a
value-added tax ("VAT"). All of the Company's products that are
sold in the PRC are subject to a Chinese value-added tax at a rate
of 17% of the gross sales price. This VAT may be offset by VAT paid
by the Company on raw materials and other materials included
in the cost of producing its finished product. The Company
recorded VAT payable and VAT receivable net of payments in the
financial statements. The VAT tax return is filed offsetting the
payables against the receivables.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(o)
Operation leases</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Leases
where substantially all the rewards and risks of ownership of
assets remain with the leasing company are accounted for as
operating leases. Payments made under operating leases are charged
to the statement of operation on a straight line basis over the
lease periods.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(p)
Stock based compensation</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In
accordance with ASC 718, <i>Compensation-Stock Compensation</i>,
the Company measures the cost of employee services received in
exchange for stock based compensation at the grant date fair value
of the award.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Group recognizes the stock based compensation costs, net of a
forfeiture rate, on a straight-line basis over the requisite
service period for each award.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">ASC 718
requires forfeitures to be estimated at the time of grant and
revised in subsequent periods if actual forfeitures differ from
those estimates.  There were no stock options granted in
the three and six months ended June 30, 2010. Stock options to
purchase 120,000 shares of common stock were granted to new
directors in June 2011.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Cost of
goods acquired or services received from non-employees is measured
based on the fair value of the awards issued on the measurement
date as defined in ASC 505. Awards granted to non-employees are
remeasured at each reporting date using the fair value as at each
period end. Changes in fair values between the interim reporting
dates are attributed consistent with the method used in recognizing
the original stock based compensation costs.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(q)
Shipping and handling cost</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Shipping and handling costs are included in selling, general and
administrative expenses which totaled $66,073 and $10,325 for the
three months period ended June 30, 2010 and 2011, respectively;
$109,916 and $108,373 for the six months period ended June 30, 2010
and 2011, respectively.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(r)
Revenue recognition</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Company derives revenues principally from:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 24px"> </td>
<td style="WIDTH: 24px">(a)</td>
<td>Provision of Engineering, Procurement and Construction ("EPC")
services, which are essentially turnkey contracts where the Company
provides all services in the whole construction process from
design, development, engineering, manufacturing, procurement
to installation;</td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<table style="WIDTH: 100%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 24px"> </td>
<td style="WIDTH: 24px">(b)</td>
<td>Sales of energy recovery systems; and</td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 24px"> </td>
<td style="WIDTH: 24px">(c)</td>
<td>Provision of design services.</td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Revenue
by the above categories for three and six months ended June
30, 2010 and 2011 are summarized as follows:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="6">Three months ended June
30,</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">2010</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">2011</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Revenue:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 70%">EPC contracts</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">5,626,328</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">13,516,415</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt">Product</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
1,579,813</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
4,753,411</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Totals</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
7,206,141</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
18,269,826</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="6">Six months ended June
30,</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">2010</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">2011</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Revenue:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 70%">EPC contracts</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">8,309,613</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">19,732,952</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt">Product</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
2,990,306</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
5,916,933</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Totals</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
11,299,919</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
25,649,885</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In
accordance with the accounting standard regarding performance
of construction-type and certain production-type contracts, and
long-term construction-type contracts, the Company adopted the
percentage of completion method to recognize revenues and cost of
sales for EPC contracts. EPC contracts are long-term, complex
contracts involving multiple elements, such as design,
manufacturing and installation, which all form one integral EPC
project. The energy recovery system involved in an EPC project is
highly customized to the specific customer's facilities and
essentially not transferable to any other facilities without
significant modification and cost. It would be difficult, if not
impossible, to beneficially use a single element of a specific EPC
project on a standalone basis other than in connection with the
facilities for which it was intended. EPC contracts are by
nature long-term construction-type contracts, usually lasting more
than one accounting period, and the Company is able to reasonably
estimate the progress toward completion, including contracts
revenues and contracts costs. EPC contacts specify the customers'
rights to the goods, the consideration to be paid and received, and
the terms of payment. Specifically, the Company has the right to
require a customer to make progress payments upon completion of
determined stages of the project which serve as evidence of the
customer's approval and acceptance of the work completed to date as
complying with the terms of the particular EPC contract and upon
which the company recognize the revenue.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Sales
of the Company's energy recovery systems and related products are
essentially product sales. The products consist mainly of waste
heat boilers and other related equipment manufactured according to
specific customers' specifications. Once manufactured, the Company
ships the products to its customers in their entirety in one
batch.  The Company’s service arrangement also
includes a limited warranty to its customers pursuant to which the
customers retain between 5% and 10% of the particular contract
price as retainage during the limited warranty period (usually
12-18 months). The Company generally recognizes revenues including
retainage from product sales when (i) persuasive evidence of an
arrangement exists, which is generally represented by a contract
between the Company and the customer; (ii) products are shipped;
(iii) title and risk of ownership have passed to the customer,
which generally occurs at the time of delivery; (iv) the customer
accepts the products upon quality inspection performed by them; (v)
the purchase price is agreed to between the Company and the
customer; and (vi) collectability is reasonably assured. Net
revenues represent the invoiced value of products, less returns and
discounts, and net of value-added tax.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In
providing design services, the Company designs energy recovery
systems and other related systems based on a customer's
requirements and the deliverable consists of engineering drawings.
The customer may elect to engage the Company to manufacture the
designed system or choose to present the Company's drawings to
other manufacturers for manufacturing and installation. The Company
recognizes revenues from design services when the services are
provided, the design drawings are delivered, invoices are issued
and collectability is reasonably assured. The Company generally
delivers the drawings in one batch.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 (s) Fair value of financial instruments</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
accounting standard regarding fair value of financial instruments
and related fair value measurements defines financial instruments
and requires fair value disclosures of those financial instruments.
On January 1, 2008, the Company adopted accounting standard
regarding fair value measurements, which defines fair value,
establishes a three-level valuation hierarchy for disclosures of
fair value measurement and enhances disclosures requirements for
fair value measures.  The carrying amounts reported in
the accompanying consolidated balance sheets for current assets and
current liabilities qualify as financial instruments. Management
concluded the carrying values of these financial instruments
are a reasonable estimate of fair value because of the short period
of time between the origination of such instruments and their
expected realization and the current market rates of
interest.  The three levels of valuation hierarchy are
defined as follows:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 3%"><font style="FONT-FAMILY: Wingdings">¨</font></td>
<td style="WIDTH: 9%">Level 1</td>
<td style="WIDTH: 88%">Inputs to the valuation methodology are
quoted prices (unadjusted) for identical assets or liabilities in
active markets. Fair valued assets and liabilities that are
generally included in this category are assets comprised of cash,
accounts and notes receivable, and liabilities comprised of bank
loans, accounts payable, accrued liabilities and other payables. As
of December 31, 2010 and June 30, 2011, the carrying values of
these assets and liabilities approximated their fair
values. </td>
</tr>
<tr style="VERTICAL-ALIGN: top">
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: top">
<td><font style="FONT-FAMILY: Wingdings">¨</font></td>
<td>Level 2</td>
<td>Inputs to the valuation methodology include quoted prices for
similar assets and liabilities in active markets, and inputs that
are observable for the assets or liability, either directly or
indirectly, for substantially the full term of the financial
instruments. At December 31, 2010 and June 30, 2011, the Company
did not have any fair value assets or liabilities classified as
Level 2. </td>
</tr>
<tr style="VERTICAL-ALIGN: top">
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: top">
<td><font style="FONT-FAMILY: Wingdings">¨</font></td>
<td>Level 3</td>
<td>Inputs to the valuation methodology are unobservable and
significant to the fair value. Inputs reflected management’s
best estimate of what market participants would use in pricing the
asset or liability at the measurement date. Consideration is given
to the risk inherent in the valuation technique and the risk
inherent in the inputs to the model.</td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
following table presents information about the company’s
financial liabilities classified as Level 3 as of June 30, 2011 and
December 31, 2010.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="10">Balance as of June 30,
2011</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="2">Carrying</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="10">Fair Value
Measurements</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2">Value</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="10">Using Fair Value Hierarchy</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">Level 1</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">Level 2</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">Level 3</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 40%">Derivative liability (Note
14)</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">99,589</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">-</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">-</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">99,589</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Warrant liability (Note 14)</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">401,423</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">401,423</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="10">Balance as of December
31, 2010</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="2">Carrying</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="10">Fair Value
Measurements</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2">Value</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="10">Using Fair Value Hierarchy</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">Level 1</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">Level 2</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">Level 3</td>
<td> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 40%">Derivative liability,
current (Note 14)</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">374,846</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">-</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">-</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">374,846</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Derivative liability, non-current
(Note 14)</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">48,461</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">48,461</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Warrant liability (Note 14)</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1,332,760</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1,332,760</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">A
summary of changes in Level 3 derivative and warrant liabilities
for the years ended December 31, 2010 and for the six months
ended June 30, 2011 were as follows:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="WIDTH: 85%">Balance at December 31, 2009</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">2,243,947</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Derivative liability of long term
loan, current (Note 9)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">132,470</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Derivative liability of convertible
notes (Note 10)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">48,461</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Change in fair value of warrant
liability recognized in earnings</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(40,187</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Change in fair
value of derivative liability recognized in earnings</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(628,624</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Balance at December 31, 2010</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1,756,067</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Change in fair value of warrant
liability recognized in earnings</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(915,790</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Change in fair value of derivative
liability recognized in earnings</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(323,718</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Warrant
cancellation(Note 14)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(15,547</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Balance at June 30, 2011</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
501,012</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
following presents the carrying value and the estimated fair value
of the Company’s convertible note at June 30, 2011:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 88%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="FONT-WEIGHT: bold"> </td>
<td style="TEXT-ALIGN: right; FONT-WEIGHT: bold" colspan="2">Carry
Value</td>
<td style="FONT-WEIGHT: bold"> </td>
<td style="FONT-WEIGHT: bold"> </td>
<td style="TEXT-ALIGN: right; FONT-WEIGHT: bold" colspan="2">Fair
Value</td>
<td style="FONT-WEIGHT: bold"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 70%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Convertible note</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">4,767,761</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">4,855,997</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
fair value of the convertible note is based on the market interest
rate for debt with similar terms and maturity.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(t)
Segment reporting</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Group has adopted ASC 280, Segment Reporting, for its Segment
reporting. The Group mainly operates in China and measures its
business as a single segment.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">(u)
Recent accounting pronouncements</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In
April 2011, the FASB issued ASU 2011-02 which applies to all
creditors, both public and nonpublic, that restructure receivables
that fall within the scope of Subtopic 310-40,
Receivables—Troubled Debt Restructurings by Creditors. In
evaluating whether a restructuring constitute a trouble debt
restructuring, Topic 310 clarify the guidance on a creditor’s
evaluation of whether it has granted a concession and whether a
debtor is experiencing financial difficulties. In addition, the
amendments to Topic 310 clarify that a creditor is precluded from
using the effective interest rate test in the debtor’s
guidance on restructuring of payables when evaluating whether a
restructuring constitutes a troubled debt restructuring. The
amendments in this Update are effective for the first interim or
annual period beginning on or after June 15, 2011, and should be
applied retrospectively to the beginning of the annual period of
adoption. Early adoption is permitted. The company has adopted the
guidance and the adoption does not have a significant impact on our
financial position or results of operations.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In
2011, the Financial Accounting Standards Board ("FASB") issued new
accounting guidance that amends some fair value measurement
principles and disclosure requirements. The new guidance states
that the concepts of highest and best use and valuation premise are
only relevant when measuring the fair value of nonfinancial assets
and prohibits the grouping of financial instruments for purposes of
determining their fair values when the unit of account is specified
in other guidance. The Company will adopt this accounting standard
upon its effective date for periods ending on or after December 15,
2011, and do not anticipate that this adoption will have a
significant impact on our financial position or results of
operations.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In
2011, the FASB issued new disclosure guidance related to the
presentation of the Statement of Comprehensive Income. This
guidance eliminates the current option to report other
comprehensive income and its components in the statement of changes
in equity. The Company will adopt this accounting standard upon its
effective date for periods ending on or after December 15, 2011,
and do not anticipate that this adoption will have any impact on
our financial position or results of operations.</p>
</div>
197480
21268796
1204985
21040
323718
144498
7758196
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
14 – Warrant and Derivative Liabilities</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In June
2008, the FASB issued authoritative guidance on determining whether
an instrument (or embedded feature) is indexed to an entity’s
own stock.  Under the authoritative guidance, effective
January 1, 2009, instruments, which do not have fixed settlement
provisions, are deemed to be derivative instruments.  The
conversion feature and embedded derivative of the Company’s
convertible note (described in Note 10), the related warrants and
the warrants issued in connection with the Series A convertible
preferred stock, do not have fixed settlement provisions because
their conversion and exercise prices are denominated in US dollars,
which is a currency other than the Company’s functional
currency.  Additionally, the Company was required to include
the reset provision in order to protect the holders from potential
dilution associated with future financings. In accordance with the
FASB authoritative guidance, the conversion feature and embedded
derivative of the Convertible Notes was separated from the host
contract (i.e. the Convertible Notes) and recognized as a
derivative liability in the balance sheet, and the warrants issued
in connection with the Convertible Notes and Series A preferred
stock have been recorded as warranty liabilities in the balance
sheet to be re-measured at the end of every reporting period with
changes in fair values reported in the consolidated statements of
operation and other comprehensive income. </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
derivative liabilities were valued using both the Black-Scholes and
Binomial valuation techniques with the following assumptions:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"></p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">September<br />
29,2009</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">December 31,<br />
2010</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">June 30,<br />
2011</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">(Issuance date)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Conversion feature of Convertible
Note:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 55%">Risk-free interest
rate</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">0.95</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">%</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">1.15</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">%</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">1.00</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">%</td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Expected volatility</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">79.86</td>
<td style="TEXT-ALIGN: left">%</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">51.0</td>
<td style="TEXT-ALIGN: left">%</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">36.0</td>
<td style="TEXT-ALIGN: left">%</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Expected life (in years)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">2.00 years</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">1.75 years</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">1.25 years</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Expected dividend yield</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Fair Value:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Conversion feature</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1,270,500</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">203,916</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">We
calculated the derivative liability on exchange rate based on the
following key assumptions:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td>Derivative liability from convertible notes</td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">June 30,2011</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 85%">Estimated forward
rate</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">6.3317</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Discount rate</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">0.44</td>
<td style="TEXT-ALIGN: left">%</td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Discount factor</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">0.995</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Fair value</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">99,589</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Warrants issued in connection with convertible notes;</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">May 21, 2009<br />
(Issuance date)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">December 31,<br />
2010</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">June 30, 2011</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="WIDTH: 55%">Number of shares exercisable</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">1,388,889</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">1,388,889</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">1,388,889</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Stock price</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.73</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.15</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">0.75</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Exercise price</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.8</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.8</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1.8</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Expected dividend yield</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Expected life (in years)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">5</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">3.39</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">2.89</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Risk-free interest rate</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">2.15</td>
<td style="TEXT-ALIGN: left">%</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">1.22</td>
<td style="TEXT-ALIGN: left">%</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">0.79</td>
<td style="TEXT-ALIGN: left">%</td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Expected volatility</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">70</td>
<td style="TEXT-ALIGN: left">%</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">78</td>
<td style="TEXT-ALIGN: left">%</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">83.5</td>
<td style="TEXT-ALIGN: left">%</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Fair Value:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Warrants issued in connection with
Convertible Note</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">1,387,912</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">687,182</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">334,201</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Warrants issued in connection with Series A convertible preferred
stocks:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 92%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">December 31, 2010</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">June 30, 2011</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="WIDTH: 66%">Number of shares exercisable</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">1,968,561</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">1,852,820</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Risk-free interest rate</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">0.72</td>
<td style="TEXT-ALIGN: left">%</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">0.44</td>
<td style="TEXT-ALIGN: left">%</td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Expected volatility</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">83</td>
<td style="TEXT-ALIGN: left">%</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">61</td>
<td style="TEXT-ALIGN: left">%</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Expected life (in years)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">2.29</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">1.79</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Expected dividend yield</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Fair Value:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Warrants issued in connection with
Series A convertible preferred stock</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">645,578</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">67,221</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 24px"> </td>
<td style="WIDTH: 24px">(a)</td>
<td>The risk-free interest rate is based on U.S. Treasury
securities with compatible life terms.</td>
</tr>
<tr style="VERTICAL-ALIGN: top">
<td> </td>
<td>(b)</td>
<td>Due to the short trading history of the Company’s stock,
the Company uses the volatility of comparable guideline companies
to estimate volatility.</td>
</tr>
<tr style="VERTICAL-ALIGN: top">
<td> </td>
<td>(c)</td>
<td>The expected life of the conversion feature of the notes was
based on the term of the notes and the expected life of the
warrants was determined by the expiration date of the
warrants.</td>
</tr>
<tr style="VERTICAL-ALIGN: top">
<td> </td>
<td>(d)</td>
<td>The expected dividend yield was based on the fact that the
Company has not paid dividends to common shareholders in the past
and does not expect to pay dividends to common shareholders in the
future.</td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: right; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 24px"> </td>
<td style="WIDTH: 24px">(e)</td>
<td>On March 2011, one warrant holder with the right to purchase
115,741 shares surrendered its warrant to the Company for
cancellation and abandonment of all rights thereunder.</td>
</tr>
</table>
</div>
0.01
307582
532570
1414288
12581847
-960876
97708
504941
5926036
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
8 – Short Term Bank Loans</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On
September 1, 2009, the Company borrowed $880,200 in a short-term
loan from one bank in China which matured on August 31, 2010 with a
5.841% annual interest rate. The bank loan was collateralized by
Shanghai Engineering’s leased office space, which is owned
jointly by Mr. Qinghuan Wu, the Chairman of the Board and Chief
Executive Officer of the Company, and his son. The full amount of
$880,200 was repaid on January 5, 2010.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On
November 18, 2010, CER Shanghai borrowed RMB 8,400,000
(approximately $1,260,000) for working capital purpose from
Shanghai Pudong Development Bank, Shanghai Branch. The term of the
loan is one year. The loan agreement permitted the Company to draw
down up to RMB 8,400,000 in principal amount before the end of
2010. The loan has been guaranteed by Qinghuan Wu, the
Company’s Chief Executive Officer, and Jialing Zhou, a former
director of the Company, and wife of Mr. Wu. The Company has also
pledged the receivables from Sopo. The loan agreement provides for
quarterly interest payments at an annual interest rate of 6.116%.
On November, 2010, the Company drew down RMB 8,400,000, the full
amount. The Company paid back RMB 4,900,000 as planned, leaving the
short-term loan balance of RMB 3,500,000(approximately $540,820) as
at June 30, 2011.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On
December 9, 2010, CER Yangzhou entered into a three-year, loan
facility with the Bank of China, Yizheng Branch.  The
facility is RMB 30,000,000 (approximately
$4,500,000).  The funds may be drawn down as a short term
loan used for trade financing or similar purposes.  Any
amounts due under the loan are repayable on November 24,
2013.  The loan has been guaranteed by Qinghuan Wu, the
Company’s Chief Executive Officer, Jialing Zhou, a former
director of the Company, and wife of Mr. Wu, one of the
Group’s subsidiary and one of the Group’s VIE, CER
Shanghai, and Shanghai Engineering, and Yizheng Auto Industrial
Park Investment and Development Co., Ltd. The Company has also
pledged its land use right in Yizheng. By the end of 2010, the
Company drew down RMB 21,000,000 (approximately $3,171,000)
under the facility as a short-term loan, due in one year, which
amount carries an annual interest rate of 5.838%. On June 20, 2011,
the Company drew down RMB 9,152,782 (approximately $1,414,288)
under the facility as a short-term loan, due in six months, which
amount carries an annual interest rate of 5.56%. These funds were
all used for working capital.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Interest expenses of short-term bank loans were $0 and $62,721 for
the three months ended June 30, 2010 and 2011, respectively.
Interest expenses of short-term bank loans were $1,571 and $126,122
for the six months ended June 30, 2010 and 2011, respectively.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
1 – Organization</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">China
Energy Recovery, Inc. ("CER" or the "Company"), formerly known as
MMA Media Inc. and Commerce Development Corporation Ltd., was
incorporated under the laws of the State of Maryland in May, 1998.
On February 5, 2008, the Company changed its name to China Energy
Recovery, Inc. On January 24, 2008, the Company entered into a
Share Exchange Agreement with Poise Profit International, Ltd.
("Poise Profit"), a company incorporated on November 23, 2007,
under the laws of the British Virgin Islands, and the shareholders
of Poise Profit. The share exchange transaction (the "Share
Exchange") was consummated on April 15, 2008 and Poise Profit
became a wholly-owned subsidiary of the Company. On April 16, 2008,
the Company conducted a 1-for-2 reverse stock split pursuant to
which each two shares of CER's common stock, issued and outstanding
on the record date of April 15, 2008, converted into one share of
CER's common stock. Pursuant to the Share Exchange Agreement, the
Company agreed to acquire all of the issued and outstanding shares
of Poise Profit's common stock in exchange for the issuance of
20,757,090 shares, or 81.5% of the Company's common stock on a post
1-for-2 reverse stock split basis, to the shareholders of Poise
Profit.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Poise
Profit is an off-shore holding company and has no operating
business activities. Poise Profit owns 100% of HAIE Hi-tech
Engineering (Hong Kong) Company, Limited ("Hi-tech") and CER (Hong
Kong) Holdings Limited (“CER Hong Kong”), which were
incorporated in Hong Kong on January 4, 2002 and August 13, 2008,
respectively.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Effective on January 1, 2006, Hi-tech executed a series of
contractual arrangements with Shanghai Hai Lu Kun Lun Hi-tech
Engineering Co., Ltd ("Shanghai Engineering"), established in
Shanghai in July 1999, and its shareholders, including a Consulting
Services Agreement and an Operating Agreement, through which
Hi-tech has the right to advise, consult, manage and operate
Shanghai Engineering, and collect and own all of its net profits.
Additionally, Shanghai Engineering's shareholders have assigned
their voting rights over Shanghai Engineering to Hi-tech. In order
to further reinforce Hi-tech's rights to control and operate
Shanghai Engineering, Shanghai Engineering and its shareholders
have granted Hi-tech the exclusive right and option to acquire all
of their equity interests in Shanghai Engineering. Further,
Shanghai Engineering shareholders have pledged all of their rights,
titles and interests in Shanghai Engineering to Hi-tech.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Effective on May 23, 2007, Hi-tech executed a series of contractual
arrangements with Shanghai Xin Ye Environmental Protection
Engineering Technology Co., Ltd ("Shanghai Environmental"),
incorporated in Shanghai in May, 2007 and Mr. Qinghuan Wu, the
Company’s Chief Executive Officer, Shanghai
Environmental’s sole shareholder, including a Consulting
Services Agreement and an Operating Agreement, through which
Hi-tech has the right to advise, consult, manage and operate
Shanghai Environmental, and collect and own all of its net profits.
Additionally, Mr. Wu assigned his voting rights over Shanghai
Environmental to Hi-tech. In order to further reinforce Hi-tech's
rights to control and operate Shanghai Environmental, Shanghai
Environmental and Mr. Wu have granted Hi-tech the exclusive right
and option to acquire all Mr. Wu’s equity interests in
Shanghai Environmental. Further, Mr. Wu has pledged all of his
rights, title and interest in Shanghai Environmental. Shanghai
Environmental was dissolved in June, 2010 and the registered
capital had been transferred to Shanghai Engineering
accordingly.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">All of
Shanghai Engineering’s manufacturing activities are conducted
through a Leasing and Operation Agreement, a form of cooperative
manufacturing agreement, originally effective as of May 1, 2003 and
subsequently renewed and amended with a state-owned enterprise,
Shanghai Si Fang.  Pursuant to the agreement, Shanghai Si
Fang leases a land use right, and certain buildings and fixed
assets (lease elements) in one of its subsidiaries, Vessel Works
Division, and provides management services and licenses the
“Si Fang” brand and manufacturing license (non-lease
elements) of Vessel Works Division to Shanghai
Engineering.  Because the arrangement contains both the
lease and non-lease elements, the quarterly payment is allocated
between the lease and non-lease deliverables based on their
respective fair values.  The lease elements are
classified and accounted for as operating leases and the lease
expense is recorded on a straight-line basis.  The
non-lease elements are accounted for as prepayment for management
and licensing fees and the payment is amortized on a straight-line
basis over each contractual period. In April 2011, the contractual
arrangement with Vessel Works Division was terminated.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Shanghai Engineering did not have a variable interest in Vessel
Works Division through this agreement as the arrangement was
established between Shanghai Engineering and Shanghai Si
Fang.  Shanghai Engineering did not have any contractual
or ownership interest in Vessel Works Division, and therefore,
Shanghai Engineering did not have a variable interest in Vessel
Works Division.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
arrangement, however, may have resulted in Shanghai Engineering
having a variable interest in Shanghai Si Fang, but as Shanghai Si
Fang is a state-owned enterprise that has substantive operations
other than the Lease and Operation arrangement, Shanghai
Engineering was not the primary beneficiary of Shanghai Si
Fang.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In
order to restructure the holding structure of the Company (the
“Restructuring”), on December 2, 2008, 100% of the
shares of CER Hong Kong were transferred to Poise Profit from Mr.
Qinghuan Wu and his wife, Mrs. Zhou, and all the contracts between
Hi-tech and Shanghai Engineering,  and between Hi-tech
and Shanghai Environmental were transferred to CER Hong
Kong.  Thereafter, CER Hong Kong, through its variable
interest entities located in the People's Republic of China
("PRC"), designs, develops, manufactures and markets waste heat
boilers and pressure vessels in the fields of chemical industry,
petrochemical industry, oil refinery, fine chemicals, water and
power conservancy, metallurgical, environmental protection, waste
heat utilization and power generation from waste heat recovery.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On
November 11, 2008, CER Energy Recovery (Shanghai) Co., Ltd.
(“CER Shanghai”) was incorporated in Shanghai by CER
Hong Kong. CER Shanghai’s registered capital is $5,000,000.
As of December 31, 2010, CER Hong Kong has contributed all the
registered capital. CER Shanghai is mainly engaged in the
development of energy recovery and environmental protection
technologies, and the design, installation and servicing of waste
heat recovery systems.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">CER
Energy Recovery (Yangzhou) Co., Ltd. (“CER Yangzhou”)
was incorporated on August 28, 2009 in Yangzhou by CER Hong Kong.
CER Yangzhou’s registered capital is $20,000,000 and the
contributed capital was approximately $13,500,000 as of July 31,
2011. CER Yangzhou is mainly engaged in the development and
manufacturing of waste heat recovery systems and other related
energy efficiency equipment.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">As all
the above entities are under common control, the arrangements
described above have been accounted for as a reorganization of
entities and the financial statements have been prepared as if the
reorganization had occurred retroactively. CER, Poise Profit, CER
Hong Kong, Hi-tech, Shanghai Engineering, CER Shanghai, CER
Yangzhou, and Shanghai Environmental, are collectively hereinafter
referred to as the “Group”.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
accompanying financial statements have been prepared assuming the
Company will continue as a going concern which contemplates the
realization of assets and the satisfaction of liabilities and
commitments in the normal course of business. Management intends to
raise additional funds through additional bank financing to fund
the operations. Although management continues to pursue these
plans, there is no assurance that they will be successful. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
5 – Inventories</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">As of
December 31, 2010 and June 30, 2011, inventories consist of
the following:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 90%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">December 31,</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">June 30,</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">2010</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">2011</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 70%">Raw materials</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">1,589,194</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">2,256,683</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Work in progress</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">6,837,139</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">10,756,540</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Finished
goods</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
235,467</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
211,913</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">Total
inventories</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
8,661,800</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
13,225,136</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">For the
three months ended June 30, 2010 and 2011, no accrual for inventory
provision was required. For the six months ended June 30, 2010 and
2011, management accrued inventory provision of $0 and $26,141,
respectively.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
6 –Property, plant and equipment, Net</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">As of
December 31, 2010 and June 30, 2011, property, plant and
equipment consist of the following:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 90%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">December 31,</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">June 30,</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">2010</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">2011</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 70%">Plants &
Buildings</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">-</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">19,884,654</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Machinery equipment</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">666,335</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">4,264,672</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Transportation equipment</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">395,582</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">383,911</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Office equipment</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">502,625</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">1,483,218</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Accumulated
depreciation</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(791,252</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(1,301,923</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Subtotal</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">773,290</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">24,714,532</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Construction in
progress</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
9,328,465</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
185,347</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">Property, plant
and equipment, net</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
10,101,755</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
24,899,879</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Company exercised a purchase option of the office building in
Shanghai Zhangjiang Integrated Circuit Industrial Zone in March
2011. The building is recorded at cost of RMB 48,526,172
(approximately $7,498,264) and will be depreciated over 38 years
starting from July 2011 when the building is place into
service.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Depreciation expense for the three months ended June 30, 2010 and
2011 was $57,284 and $285,040, respectively. Depreciation expense
for the six months ended June 30, 2010 and 2011 was $102,807 and
$498,415, respectively.</p>
</div>
-315395
3876148
-20095
30979564
69299
648984
641443
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
11 – Taxation</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<u>USA</u></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Company is subject to U.S. income tax at a rate of 34% on its
assessable profits. No such tax has been incurred as the Group did
not have any assessable income earned in or derived from the U.S.
during the periods presented.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><u>Hong
Kong</u></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">CER
Hong Kong subsidiaries were subject to Hong Kong profit tax at a
rate of 16.5% on their assessable profits. No Hong Kong profit tax
has been assessed as the Group did not have assessable profit that
was earned in or derived from Hong Kong subsidiaries during the
years presented.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<u>PRC</u></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The New
Enterprise Income Tax ("EIT") law was effective January 1, 2008 and
the standard EIT rate is 25%. Pursuant to the PRC tax
law, net operating losses can be carried forward 5 years to offset
future taxable income.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Pursuant to the PRC income tax laws, Shanghai Engineering is
subject to enterprise income tax at a statutory rate of 15% as a
high technology entity. Shanghai Environmental, CER Shanghai and
CER Yangzhou are subject to enterprise income tax at a statutory
rate of 25%.  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Deferred tax assets and liabilities without taking into
consideration the offsetting of balances are as follows:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">December 31,</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">June 30,</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">2010</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">2011</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td colspan="2"> </td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">Restated</td>
<td> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Deferred tax assets, non-current:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 70%">Tax loss carry
forwards</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">3,299,721</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">3,961,162</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">-Allowance for doubtful accounts and
provision for inventory</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">120,839</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">123,307</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Valuation
allowance</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(3,116,086</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(3,582,994</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt"> Subtotal</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
304,474</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
501,475</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">Total deferred
tax assets</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
304,474</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
501,475</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Deferred tax liabilities,
non-current:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Taxable temporary
difference related to derivative liabilities</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(132,698</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(78,961</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">Total deferred
tax liabilities</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
(132,698</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">)</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
(78,961</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">)</td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The net
balances of deferred tax assets and liabilities after offsetting
are as follows:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">December 31,</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">June 30,</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right; VERTICAL-ALIGN: top" colspan="2">
2010</td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="2">2011<br />
Restated</td>
<td> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Deferred tax assets, current, net</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 70%">Deferred tax assets,
non-current net</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">171,776</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">422,514</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Deferred tax liabilities, net</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On
February 22, 2008, the Ministry of Finance (“MOF”) and
the State Administration of Taxation (“SAT”) jointly
issued Cai Shui [2008] Circular 1 (“Circular 1”).
According to Article 4 of Circular 1, distributions of accumulated
profits earned by a foreign investment enterprise
(“FIE”) prior to January 1, 2008 to foreign investor(s)
in 2008 or after will be exempt from withholding tax
(“WHT”) while distribution of the profit earned by an
FIE after January 1, 2008 to its foreign investor(s) shall be
subject to WHT at a rate up to 10% (a lower rate is available under
the protection of tax treaties). Since the Company intends to
indefinitely reinvest its earnings to further expand the businesses
in mainland China, the foreign invested enterprises do not intend
to declare dividends to their immediate foreign holding companies
in the foreseeable future. As a result, if any dividends are
declared out of the cumulative retained earnings as of December 31,
2007, they should be exempt from WHT. Accumulated losses of non-US
subsidiaries as of December 31, 2010 and June 30, 2011 were
approximately $498,756 (RMB2,643,099), and $743,321 (RMB4,240,417),
respectively, and they are considered to be indefinitely
reinvested.  Accordingly, no provision has been made.
 No dividend was declared as of December 31, 2010 and June 30,
2011.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">No
provision for taxation has been made for Hi-tech, CER Hong
Kong, and CER Yangzhou for the three and six months ended June 30,
2010 and 2011, as those subsidiaries did not generate any
taxable profits during the periods.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right" colspan="6">
Three months ended June 30,</td>
<td> </td>
</tr>
<tr style="TEXT-ALIGN: right; VERTICAL-ALIGN: top">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid" colspan="2">2010</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid" colspan="2">2011<br />
Restated</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">US income tax expense</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">HK income tax expense</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; WIDTH: 70%">PRC
income tax benefit/(expense )</td>
<td style="PADDING-BOTTOM: 1pt; WIDTH: 1%"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left; WIDTH: 1%">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right; WIDTH: 12%">
(33,911</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; WIDTH: 1%">)</td>
<td style="PADDING-BOTTOM: 1pt; WIDTH: 1%"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left; WIDTH: 1%">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right; WIDTH: 12%">
2,343</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; WIDTH: 1%">
 </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">
Total  benefit (provision) for income taxes</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
(33,911</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">)</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
2,343</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="6">Six months ended June 30,</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right; VERTICAL-ALIGN: top" colspan="2">2010</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right" colspan="2">2011<br />
Restated</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">US income tax benefit</td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left">$</td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">HK income tax expense</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; WIDTH: 70%">PRC
income tax benefit (expense)</td>
<td style="PADDING-BOTTOM: 1pt; WIDTH: 1%"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left; WIDTH: 1%">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right; WIDTH: 12%">
(201,150</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; WIDTH: 1%">)</td>
<td style="PADDING-BOTTOM: 1pt; WIDTH: 1%"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left; WIDTH: 1%">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right; WIDTH: 12%">
20,095</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; WIDTH: 1%">
 </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">
Total  benefit (provision) for income taxes</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
(201,150</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">)</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
20,095</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Company is incorporated in the U.S. and incurred a net operating
loss for income tax purposes for the six months ended June 30, 2010
and 2011. The net operating loss carry forwards for the U.S. income
tax purposes is approximately $6,266,125 and $ 7,903,135 for the
six months ended June 30, 2010 and 2011, respectively, which may be
available to reduce future years' taxable income. These carry
forwards will expire, if not utilized, in 20 years. Management
believes that the realization of the benefits arising from this
loss are uncertain due to Company's limited operating history and
continuing losses for United States income tax purposes.
Accordingly, the Company has recorded $3,299,721 and $3,961,162 of
deferred tax assets as of December 31, 2010 and June 30, 2011,
respectively for these losses carry forwards. </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
valuation allowances as of December 31, 2010 and June 30, 2011 were
as follows:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 88%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2">Amount</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="WIDTH: 70%">Balance of December 31, 2009</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">1,822,225</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt">Increase</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
1,293,861</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Balance of December 31, 2010</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">3,116,086</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt">Increase</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
466,908</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Balance of June 30, 2011</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
3,582,994</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
</div>
705006
13068038
4586742
-975264
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
15 - Stock-Based Compensation</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<u>Stock Options</u></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On June
24, 2009, the Company appointed one independent director and
granted him stock options to purchase 500,000 shares of the
Company’s common stock. The options will vest and become
exercisable in eight equal installments evenly spread out
during the three year period beginning from July 1, 2009. On
September 7, 2009, the Company appointed another independent
director and granted her a stock option to purchase 60,000 shares
of the Company’s common stock. The options will vest and
become exercisable in eight equal installments evenly spread out
during the two year period beginning from October 1, 2009.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On June
7, 2011, the Board of Directors resolved to modify the Option Plan
and adjusted the exercise price of one incumbent director’s
options from $1.22 to $0.73 per share and another director’s
options from $1.58 to $0.73 per share. The Board also resolved to
accelerate the vesting period of one retired director, such that
all the shares underlying the option were deemed vested as of June
7, 2011.  The total incremental compensation cost in respect
of such acceleration and option modification is $202,106.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On June
13, 2011, with the resignation of two former directors, the Company
appointed another two directors and granted them both stock options
to purchase 60,000 shares of the Company’s common stock. The
options will vest and become exercisable in eight equal quarterly
installments evenly spread out during the two year period beginning
from July 1, 2011. Unvested options shall be terminated and
forfeited upon the termination of a holder’s director
status.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
Company used the Black-Scholes Model to value the options at the
time they were granted and revalue the options when the option
agreement terms were changed. The following table summarizes the
assumptions used in the Black-Scholes Model when calculating the
fair value of the options at the grant dates or revaluation
dates:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 50%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="BACKGROUND-COLOR: #ccffcc; VERTICAL-ALIGN: bottom">
<td style="WIDTH: 64%">Fair value per share</td>
<td style="TEXT-ALIGN: right; WIDTH: 2%"> </td>
<td style="WIDTH: 2%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 30%">0.39- $ 0.47</td>
<td style="WIDTH: 2%" nowrap="nowrap"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Expected Term(Years)</td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: right">4.00-5.56</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="BACKGROUND-COLOR: #ccffcc; VERTICAL-ALIGN: bottom">
<td>Exercise Price</td>
<td style="TEXT-ALIGN: right"> </td>
<td>$</td>
<td style="TEXT-ALIGN: right">0.73</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Expected Volatility</td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: right">72%-76</td>
<td nowrap="nowrap">%</td>
</tr>
<tr style="BACKGROUND-COLOR: #ccffcc; VERTICAL-ALIGN: bottom">
<td>Risk Free Interest Rate</td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: right">1.16%-1.82</td>
<td nowrap="nowrap">%</td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">Since
the Company does not have sufficient applicable history of employee
stock options activity, the Company uses the simplified method to
estimate the life of the options by taking the sum of the vesting
period and the contractual life and then calculating the midpoint
which is the estimated term of the options.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">For the
three months ended June 30, 2010 and 2011, the Company recognized
$35,256 and $205,815 of compensation expense, respectively. For the
six months ended June 30, 2010 and 2011, the Company recognized
$70,509 and $241,068 of compensation expense, respectively.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Following is a summary of the status of options outstanding at
June 30, 2011:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 94%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; PADDING-BOTTOM: 1pt" colspan="10" nowrap="nowrap">Outstanding Options</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; PADDING-BOTTOM: 1pt" colspan="10">Exercisable Options</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td colspan="2" nowrap="nowrap">Exercise</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap">Number</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap">Average</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap">Average</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap">Number</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap">Average</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td colspan="2" nowrap="nowrap">price</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap">remaining</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap">exercise</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap">remaining</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap">contractual</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap">Price</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap">contractual</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap">Term</td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap"> </td>
<td nowrap="nowrap"> </td>
<td> </td>
<td colspan="2" nowrap="nowrap">term</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 18%">0.73</td>
<td style="WIDTH: 1%" nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 13%">60,000</td>
<td style="WIDTH: 1%" nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 13%">0.25</td>
<td style="WIDTH: 1%" nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 1%"> </td>
<td style="WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 13%">0.73</td>
<td style="WIDTH: 1%" nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 13%">52,500</td>
<td style="WIDTH: 1%" nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 13%">0.25</td>
<td style="WIDTH: 1%" nowrap="nowrap"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>$</td>
<td style="TEXT-ALIGN: right">0.73</td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: right">500,000</td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: right">-</td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td>$</td>
<td style="TEXT-ALIGN: right">0.73</td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: right">500,000</td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: right">-</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>$</td>
<td style="TEXT-ALIGN: right">0.73</td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: right">60,000</td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: right">2</td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td>$</td>
<td style="TEXT-ALIGN: right">0.73</td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: right">-</td>
<td nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: right">2</td>
<td nowrap="nowrap"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="BORDER-BOTTOM: black 1pt solid">$</td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
0.73</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
60,000</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
2</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid">$</td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
0.73</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
2</td>
<td style="PADDING-BOTTOM: 1pt" nowrap="nowrap"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right" colspan="2">Total</td>
<td style="PADDING-BOTTOM: 2.5pt" nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
680,000</td>
<td style="PADDING-BOTTOM: 2.5pt" nowrap="nowrap"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
 </td>
<td style="PADDING-BOTTOM: 2.5pt" nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
 </td>
<td style="PADDING-BOTTOM: 2.5pt" nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
552,500</td>
<td style="PADDING-BOTTOM: 2.5pt" nowrap="nowrap"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
 </td>
<td style="PADDING-BOTTOM: 2.5pt" nowrap="nowrap"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Following is a summary of the option activity:</p>
<table style="WIDTH: 85%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="WIDTH: 83%">Outstanding as of  December 31,
2009</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">560,000</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Granted</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Forfeited</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt">Exercised</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Outstanding as of  December 31, 2010</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">560,000</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Granted</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">120,000</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Forfeited</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt">Exercised</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Outstanding as of  June 30,
2011</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
680,000</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Vested and exercisable as of  June 30, 2011</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">552,500</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
</table>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
7 – Intangible Assets</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
Intangible assets mainly represent the purchase for usage of a
parcel of land in Yangzhou, China, where the manufacturing plant is
located.  The Company has obtained the usage title of the
land in December 2009.  The land use right is recorded at
cost of $2,438,632 and is amortized over the lease term of 50 years
starting from November 2009 when it was acquired. The amortization
expense recorded for three months ended June 30, 2010 and 2011
amounted to $13,700 and $22,740, respectively. The amortization
expense recorded for six months ended June 30, 2010 and 2011
amounted to $34,101 and $34,155, respectively. The remaining
balance represents the net value of purchased software.</p>
</div>
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
17 – Related Party Transactions</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">In
2005, Shanghai Engineering entered into agreements with the son of
Mr. Qinghuan Wu to lease the office at Quyang Road, Hongkou
District, Shanghai for 5 years. For the three months ended June 30,
2010 and 2011, the Company paid $13,201 and $5,170, respectively,
as rental expense to Mr. Qinghuan Wu's son. For the six months
ended June 30, 2010 and 2011, the Company paid $26,404 and $18,373,
respectively, as rental expense to Mr. Qinghuan Wu's son. In May
2011, CER terminated the lease agreement and moved to a new
Shanghai office.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On
February 1, 2010, Mr. Qinghuan Wu, arranged for a loan from Haide,
a company controlled by Mr. Qinghuan Wu, to the Company in the sum
of $1,000,000.  The proceeds of this loan will be forwarded to
CER Yangzhou for additional paid-in capital which helped fund the
Company’s new plant in Yangzhou, China.  The loan is an
interest only loan, bearing interest at the annual rate of 9.5%,
and is unsecured. The Company will pay the sum of $23,750 at the
end of every three calendar months. The principal is due in full on
January 30, 2012, hence the remaining loan is classified as a
current liability (long-term loan, current). The loan is unsecured
and there are no guarantees of the interest or principal. The
Company repaid principal of $ 460,000 in December 2010 and the
balance as of June 30, 2011 was $543,778, after taking the exchange
rate into account.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On
January 8, 2011, CER signed a contract for the design, manufacture
and installation of a major waste heat recovery system with
Zhenjiang Kailin Clean Heat Energy Co., Ltd. (“Zhengjiang
Kailin”) of Zhenjiang City. The contract was valued at RMB
300 million (approximately $46 million), including the engineering
part of RMB 8 million (approximately $1 million), procurement part
of RMB 240 million (approximately $37 million) and construction
part of RMB 52 million (approximately $8 million). The system will
be part of a new sulfuric acid plant and is capable of producing up
to 122 tons of steam-per-hour at 485° C and 5.4 MPa from
operations at the plant.  32 percent of the project was
completed as of June 30, 2011 and is scheduled for fully completion
by the end of 2011. Transactions between CER and Zhenjiang Kailin
were presented as related party transactions because the Chairman,
Chief Executive Officer and majority shareholder of Green Asia
Resources, Inc. (“Green Asia”), the parent company of
Zhengjiang Kailin, is the owner of a significant creditor and less
than 5% shareholder of CER, our executive officers own, as a result
of a private placement and prior consulting arrangement, a small
number (less than 1%) of shares in Green Asia, and, that at the
time the contract was signed, a less than 5% shareholder of both
CER and Green Asia was a member of CER’s Board of Directors.
However, management of each company is different and the directors
at Green Asia and Zhenjiang Kailin are independent of CER, CER
confirms the contracts were negotiated and approved on an
arms-length basis. For the three and six months ended June 30,
2011, revenue earned from the contract amounted to $11,293,381 and
$13,068,038 respectively. The cost of revenue associated with the
revenue is $9,352,932 and $10,870,875 respectively; advances
received from the related party for the work under contract
amounted to $2,297,156 as of June 30, 2011.</p>
</div>
31056881
-2494539
-1140483
4691360
148704
40308
23971466
81870
37372
<div style="FONT: 10pt Times New Roman, Times, Serif">
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"><b>Note
2 – Restatement of Unaudited Consolidated Financial
Statements for three and six months ended June 30, 2011</b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">On
March 30, 2012 the Group filed a current report on Form 8-K
announcing the pending restatement of previously issued unaudited
financial information for the first, second, and third quarters of
2011. Such restatements and amendments do not affect any other
financial information for any other previous periods. Furthermore,
the full year ended December 31, 2011, for which results were
reported on Form 10-K as filed March 31, 2012, was not
impacted.</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<font style="BACKGROUND-COLOR: white; FONT: 10pt Times New Roman, Times, Serif">
The root cause of the necessary adjustments to the quarterly
interim financial information for the first three quarters of 2011
was identified during the preparation of the Group’s annual
2011 financial statements as reported in Form 10-K filed March 31,
2012. The Group determined that transaction losses resulting from
variations in foreign currency exchange rates on certain purchase
transactions denominated in U.S. dollars involving the
Group’s onshore PRC subsidiaries (which use the yuan
renminbi, or RMB as their functional currency) were incorrectly
classified as translation losses and were incorrectly included in
other comprehensive income (loss). These losses should have been
reported in the statement of operations within other income
(expense). Such transaction losses only impacted the first three
quarters of 2011 as the underlying business activity involving
purchasing of raw materials related to the Group’s
then-under-construction Yangzhou production facility started in
2011 and was substantially completed by the end of 2011. The
transaction losses arose as a result of cash advances made to
suppliers which were denominated in U.S. dollars (for an entity
whose functional currency was the Renminbi).</font> <font style="FONT: 10pt Times New Roman, Times, Serif">When equipment was later
received in satisfaction of these advances (or when unsettled
advances, which are typically settled in a few months or less, were
re-valued at the end of an accounting period) the weakening of the
U.S. dollar against the Renminbi led to an exchange
loss.</font></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<font style="BACKGROUND-COLOR: white">Adjustments, and causes
therefor, are reflected below for the consolidated balance sheet
and statement(s) of income and other comprehensive income (loss).
Adjustments to the consolidated statement of shareholders’
equity are limited to the associated effect of balance sheet and
statement of operations restated amounts and are included in the
captions for “net income” and “foreign currency
translation” in the columns marked “Restated” in
Item 1. Adjustments to the statement of cash flows are limited to
the associated effect of balance sheet and statement of operations
restated amounts and included in the captions for “net
income,” “deferred tax expense,” and
“effects of exchange rate changes in operating
activities” in the 2011 column marked “Restated”
in Item 1.</font></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif"></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b><i>Consolidated Balance Sheet Impact:</i></b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="TEXT-ALIGN: justify; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
The following table sets forth the effects on the Group’s
consolidated balance sheets:</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="FONT-WEIGHT: bold"> </td>
<td style="TEXT-ALIGN: center; FONT-WEIGHT: bold"> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="2"><b>June 30,
2011</b> </td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; FONT-WEIGHT: bold">
Previously</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: center; PADDING-BOTTOM: 1pt" colspan="2">
</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2"></td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="FONT-WEIGHT: bold"> </td>
<td style="TEXT-ALIGN: center; FONT-WEIGHT: bold">Reported</td>
<td style="FONT-WEIGHT: bold"> </td>
<td style="TEXT-ALIGN: center; FONT-WEIGHT: bold" colspan="2">
Adjustments (a)</td>
<td style="FONT-WEIGHT: bold"> </td>
<td style="FONT-WEIGHT: bold"> </td>
<td style="TEXT-ALIGN: center; FONT-WEIGHT: bold" colspan="2">
Restated</td>
<td style="FONT-WEIGHT: bold"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center; FONT-WEIGHT: bold; TEXT-DECORATION: underline">
ASSETS</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; FONT-WEIGHT: bold">CURRENT
ASSETS:</td>
<td> </td>
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="WIDTH: 55%">Cash</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 14%">3,637,519</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">-</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">3,637,519</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Restricted cash</td>
<td> </td>
<td style="TEXT-ALIGN: right">113,418</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">113,418</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Notes receivable</td>
<td> </td>
<td style="TEXT-ALIGN: right">200,876</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">200,876</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Accounts receivable, net of allowance
for doubtful accounts-third parties</td>
<td> </td>
<td style="TEXT-ALIGN: right">7,197,345</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">7,197,345</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Inventories</td>
<td> </td>
<td style="TEXT-ALIGN: right">13,225,136</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">13,225,136</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Other current assets and
receivables</td>
<td> </td>
<td style="TEXT-ALIGN: right">2,390,017</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">2,390,017</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Deferred financial cost</td>
<td> </td>
<td style="TEXT-ALIGN: right">66,919</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">66,919</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Advances on
purchases</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
36,302,215</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
36,302,215</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">Total
current assets</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
63,133,445</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
63,133,445</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="FONT-WEIGHT: bold">NON-CURRENT ASSETS:</td>
<td> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Plant and equipment, net</td>
<td> </td>
<td style="TEXT-ALIGN: right">24,899,879</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">24,899,879</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Deferred tax assets</td>
<td> </td>
<td style="TEXT-ALIGN: right">323,966</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">98,548</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">422,514</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Intangible assets</td>
<td> </td>
<td style="TEXT-ALIGN: right">2,599,862</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">2,599,862</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Long-term
accounts receivable</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">Total
non-current assets</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
27,823,707</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">98,548</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
27,922,255</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt; FONT-WEIGHT: bold">Total
Assets</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
90,957,152</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">98,548</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
91,055,700</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: center; PADDING-LEFT: 10pt; FONT-WEIGHT: bold; TEXT-DECORATION: underline">
LIABILITIES AND SHAREHOLDERS' EQUITY</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; FONT-WEIGHT: bold">CURRENT
LIABILITIES:</td>
<td> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Accounts payable</td>
<td> </td>
<td style="TEXT-ALIGN: right">15,175,244</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">15,175,244</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Accrued expenses and other
liabilities</td>
<td> </td>
<td style="TEXT-ALIGN: right">951,668</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">951,668</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Advances from customers-third
parties</td>
<td> </td>
<td style="TEXT-ALIGN: right">54,497,070</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">54,497,070</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Advances from customers-related
party</td>
<td> </td>
<td style="TEXT-ALIGN: right">2,297,156</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">2,297,156</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Taxes payable</td>
<td> </td>
<td style="TEXT-ALIGN: right">1,828,987</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">1,828,987</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Short-term bank loans</td>
<td> </td>
<td style="TEXT-ALIGN: right">5,200,028</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">5,200,028</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Derivative liability, current</td>
<td> </td>
<td style="TEXT-ALIGN: right">-</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Long-term loan,
current</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
543,778</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
543,778</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">Total
current liabilities</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
80,493,931</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
80,493,931</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="FONT-WEIGHT: bold">NON-CURRENT LIABILITIES:</td>
<td> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Warrant liability</td>
<td> </td>
<td style="TEXT-ALIGN: right">401,423</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">401,423</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Derivative liability</td>
<td> </td>
<td style="TEXT-ALIGN: right">99,589</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">99,589</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Convertible note</td>
<td> </td>
<td style="TEXT-ALIGN: right">4,767,761</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">4,767,761</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt">Long-term loan</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">
Total  non-current liabilities</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
5,268,773</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
5,268,773</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt; FONT-WEIGHT: bold">
Total  Liabilities</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
85,762,704</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
85,762,704</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; FONT-WEIGHT: bold">SHAREHOLDERS'
EQUITY:</td>
<td> </td>
<td style="TEXT-ALIGN: right"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Preferred stock($0.001 par value; 50,000,000 shares authorized,
200,000 shares issued and outstanding as of both December 31, 2010
and June 30,  2011)</td>
<td> </td>
<td style="TEXT-ALIGN: right">189</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">189</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Common stock($0.001 par value; 100,000,000  shares
authorized, 30,906,266 and  31,085,859 shares issued and
outstanding as of December 31, 2010 and June 30, 2011,
respectively)</td>
<td> </td>
<td style="TEXT-ALIGN: right">31,085</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">31,085</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td>Additional Paid-in-capital</td>
<td> </td>
<td style="TEXT-ALIGN: right">8,739,080</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">8,739,080</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Accumulated deficit</td>
<td> </td>
<td style="TEXT-ALIGN: right">(4,032,745)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(295,643</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(4,328,388</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Statutory reserves</td>
<td> </td>
<td style="TEXT-ALIGN: right">132,802</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">132,802</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Accumulated other
comprehensive income</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
324,037</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">394,191</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
718,228</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">Total
shareholders' equity</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
5,194,448</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">98,548</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
5,292,996</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt; FONT-WEIGHT: bold">Total
liabilities and shareholders' equity</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
90,957,152</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">98,548</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
91,055,700</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 24px">(a)</td>
<td>Deferred tax assets increased by $98,548 because CER Yangzhou
recognized additional deferred tax assets  for the additional
losses.</td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b><i>Consolidated Statements of Income and Other Comprehensive
Income (Loss) Impact:</i></b></p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">The
following table sets forth the effects on the Group’s
consolidated statements of income and other comprehensive income
(loss):</p>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="10">Three months ended June
30, 2011</td>
<td> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; FONT-WEIGHT: bold" colspan="2">Previously</td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: center" colspan="2"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center" colspan="2"></td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td> </td>
<td style="FONT-WEIGHT: bold"> </td>
<td style="TEXT-ALIGN: center; VERTICAL-ALIGN: top; FONT-WEIGHT: bold" colspan="2">Reported</td>
<td style="FONT-WEIGHT: bold"> </td>
<td style="FONT-WEIGHT: bold"> </td>
<td style="TEXT-ALIGN: center; FONT-WEIGHT: bold" colspan="2">
Adjustments<br />
(a) / (b)</td>
<td style="FONT-WEIGHT: bold"> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="2">
<p style="TEXT-ALIGN: center; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Restated</b></p>
<p style="TEXT-ALIGN: center; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
</td>
<td> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="FONT-WEIGHT: bold">REVENUES</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 55%">Third parties</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">6,976,445</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">-</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">6,976,445</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">
Related  party</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
11,293,381</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
11,293,381</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; FONT-WEIGHT: bold">Total revenue</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">18,269,826</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">18,269,826</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="FONT-WEIGHT: bold">COST OF REVENUES</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Third
parties</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(15,127,655</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(15,127,655</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; FONT-WEIGHT: bold">Total cost of
revenues</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(15,127,655</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(15,127,655</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
 </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
 </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; FONT-WEIGHT: bold">GROSS PROFIT</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">3,142,171</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">3,142,171</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">SELLING, GENERAL
AND  ADMINISTRATIVE EXPENSES</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(2,063,067</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">—</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(2,063,067</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">
 (LOSS)/INCOME FROM  OPERATIONS</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
1,079,104</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">—</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
1,079,104</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; FONT-WEIGHT: bold">OTHER
INCOME/(EXPENSE), NET:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Change in fair value of warrants</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">437,901</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">437,901</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Change in fair value of derivative
liabilities</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">161,501</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">161,501</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Non-operating income/(expense), net</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">60,199</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(273,709</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(213,510</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Interest
expenses, net</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(605,739</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(605,739</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">Total
other income, net</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
53,862</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">(273,709</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(219,847</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">INCOME
FROM OPERATIONS BEFORE INCOME TAXES</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
1,132,966</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">(273,709</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
859,257</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">PROVISION FOR INCOME TAXES</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(66,084</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">68,427</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">2,343</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">NET
INCOME</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
1,066,882</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">(205,282</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
861,600</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">OTHER COMPREHENSIVE INCOME/(LOSS)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Foreign currency
translation adjustment</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(186,896</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">273,709</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
86,813</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt; FONT-WEIGHT: bold">
COMPREHENSIVE INCOME</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
879,986</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">68,427</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
948,413</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>EARNINGS PER SHARE:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Basic</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
0.03</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
0.03</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Diluted</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
0.03</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
0.03</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>WEIGHTED AVERAGE SHARES OUTSTANDING:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Basic</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
31,026,225</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
31,026,225</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Diluted</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
31,103,542</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
31,103,542</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 24px">(a)</td>
<td>Non-operating income was impacted by $273,709 because of the
incorrect classification of realized foreign exchange losses,
resulting from purchasing activity denominated in a currency other
than the functional currency. The incorrect classification affected
exchange gains and losses reported in net income and foreign
currency translation adjustments reported in other comprehensive
income.</td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 24px">(b)</td>
<td>The provision for income taxes was impacted by $68,427 because
CER Yangzhou recognized additional deferred tax benefits resulting
from the additional losses.</td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
  </p>
<table style="WIDTH: 100%; BORDER-COLLAPSE: collapse; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0">
<tr style="VERTICAL-ALIGN: bottom">
<td style="FONT-WEIGHT: bold"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: center; PADDING-BOTTOM: 1pt" colspan="10">
Six months ended June 30, 2011</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td style="FONT-WEIGHT: bold"> </td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; FONT-WEIGHT: bold" colspan="2">Previously</td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold"> </td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold"> </td>
<td style="TEXT-ALIGN: center; FONT-WEIGHT: bold" colspan="2">
 </td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold"> </td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: center; FONT-WEIGHT: bold" colspan="2"></td>
<td style="PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold"> </td>
</tr>
<tr style="VERTICAL-ALIGN: bottom">
<td style="FONT-WEIGHT: bold"> </td>
<td style="FONT-WEIGHT: bold"> </td>
<td style="TEXT-ALIGN: center; VERTICAL-ALIGN: top; FONT-WEIGHT: bold" colspan="2">Reported</td>
<td style="FONT-WEIGHT: bold"> </td>
<td style="FONT-WEIGHT: bold"> </td>
<td style="TEXT-ALIGN: center; FONT-WEIGHT: bold" colspan="2">
Adjustments<br />
(a) / (b)</td>
<td style="FONT-WEIGHT: bold"> </td>
<td> </td>
<td style="TEXT-ALIGN: center" colspan="2">
<p style="TEXT-ALIGN: center; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
<b>Restated</b></p>
<p style="TEXT-ALIGN: center; MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
</td>
<td> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="FONT-WEIGHT: bold">REVENUES</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; WIDTH: 55%">Third parties</td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%">$</td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">12,581,847</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">-</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
<td style="TEXT-ALIGN: right; WIDTH: 12%">12,581,847</td>
<td style="TEXT-ALIGN: left; WIDTH: 1%"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">
Related  party</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
13,068,038</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
13,068,038</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; FONT-WEIGHT: bold">Total revenue</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">25,649,885</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">25,649,885</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="FONT-WEIGHT: bold">COST OF REVENUES</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Third
parties</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(21,268,796</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(21,268,796</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; FONT-WEIGHT: bold">Total cost of
revenues</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(21,268,796</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(21,268,796</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
 </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
 </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; FONT-WEIGHT: bold">GROSS PROFIT</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">4,381,089</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">4,381,089</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">SELLING, GENERAL
AND  ADMINISTRATIVE EXPENSES</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(3,876,148</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(3,876,148</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">
 (LOSS)/INCOME FROM  OPERATIONS</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
504,941</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
504,941</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; FONT-WEIGHT: bold">OTHER
INCOME/(EXPENSE), NET:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Change in fair value of warrants</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">915,790</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">915,790</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">Change in fair value of derivative
liabilities</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">323,718</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">-</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">323,718</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>Non-operating income/(expense), net</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(9,936</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(394,191</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(404,127</td>
<td style="TEXT-ALIGN: left">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Interest
expenses, net</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(975,264</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(975,264</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">Total
other income, net</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
254,308</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">(394,191</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(139,883</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">INCOME
FROM OPERATIONS BEFORE INCOME TAXES</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
759,249</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">(394,191</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
365,058</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">PROVISION FOR INCOME TAXES</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">(78,453</td>
<td style="TEXT-ALIGN: left">)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">98,548</td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right">20,095</td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt; FONT-WEIGHT: bold">NET
INCOME</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
680,796</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">(295,643</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
385,153</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left">OTHER COMPREHENSIVE INCOME/(LOSS)</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">Foreign currency
translation adjustment</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
(86,609</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt">)</td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 1pt">394,191</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
<td style="PADDING-BOTTOM: 1pt"> </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 1pt solid; TEXT-ALIGN: right">
307,582</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 1pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt; FONT-WEIGHT: bold">
COMPREHENSIVE INCOME</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
594,187</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">98,548</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
692,735</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>EARNINGS PER SHARE:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Basic</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
0.02</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">(0.01</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">)</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
0.01</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Diluted</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
$</td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
0.02</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">(0.01</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt">)</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
0.01</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td>WEIGHTED AVERAGE SHARES OUTSTANDING:</td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
<td> </td>
<td style="TEXT-ALIGN: left"> </td>
<td style="TEXT-ALIGN: right"> </td>
<td style="TEXT-ALIGN: left"> </td>
</tr>
<tr style="BACKGROUND-COLOR: white; VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Basic</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
30,979,564</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
30,979,564</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
<tr style="BACKGROUND-COLOR: rgb(204,255,204); VERTICAL-ALIGN: bottom">
<td style="PADDING-BOTTOM: 2.5pt">Diluted</td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
31,056,881</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="TEXT-ALIGN: right; PADDING-BOTTOM: 2.5pt">-</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
<td style="PADDING-BOTTOM: 2.5pt"> </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: left">
 </td>
<td style="BORDER-BOTTOM: black 2.5pt double; TEXT-ALIGN: right">
31,056,881</td>
<td style="TEXT-ALIGN: left; PADDING-BOTTOM: 2.5pt"> </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 24px">(a)</td>
<td>Non-operating loss decreased by $394,191 and earnings per share
decreased by $0.01 because of the incorrect classification of
realized foreign exchange losses, resulting from purchasing
activity denominated in a currency other than the functional
currency. The incorrect classification affected exchange gains and
losses reported in net income and foreign currency translation
adjustments reported in other comprehensive income. </td>
</tr>
</table>
<p style="MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif">
 </p>
<table style="WIDTH: 100%; FONT: 10pt Times New Roman, Times, Serif" cellspacing="0" cellpadding="0" align="center">
<tr style="VERTICAL-ALIGN: top">
<td style="WIDTH: 24px">(b)</td>
<td>The provision for income taxes decreased by $98,548 because CER
Yangzhou recognized additional deferred tax benefits related to the
additional losses.</td>
</tr>
</table>
</div>
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shares
iso4217:USD
iso4217:USD
shares