NOTE 15

STATUTORY RESERVES

The Company is required to make appropriations to reserve funds, comprising the statutory surplus reserve, statutory public welfare fund and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (the “PRC GAAP”). Appropriation to the statutory surplus reserve should be at least 10% of the after tax net income determined in accordance with the PRC GAAP until the reserve is equal to 50% of the entities’ registered capital or members’ equity. In accordance with the Chinese Company Law, the Company allocated 10% of income after taxes to the statutory surplus reserve for the years ended December 31, 2013, 2012 and 2011. For the years ended December 31, 2013, 2012 and 2011, statutory reserve activity is as follows:

Balance – January 1, 2011	$	7,556,187
Addition to statutory reserves		2,862,289
Balance – December 31, 2011		10,418,476
Addition to statutory reserves		4,148,370
Balance – December 31, 2012		14,566,846
Addition to statutory reserves		4,156,990
Balance – December 31, 2013	$	18,723,836