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Property, Plant and Equipment, net

9 Months Ended

Sep. 30, 2017

Property, Plant and Equipment, net [Text Block]

7.	Property, Plant and Equipment, net

Property, plant and equipment as of December 31, 2016 and September 30, 2017 consisted of the following:

			December 31,			September 30,
			2016			2017
	Buildings	$	16,877,909		$	24,419,965
	Machinery and equipment		4,473,631			13,138,140
	Office equipment		96,655			156,888
	Motor vehicles		193,165			201,577
			21,641,360			37,916,570
	Accumulated depreciation		(1,630,457	)		(2,713,394	)
	Carrying amount	$	20,010,903		$	35,203,176

During the three months period ended September 30, 2016 and 2017, the Company incurred depreciation expense of $286,836 and $368,630, respectively.

During the nine months period ended September 30, 2016 and 2017, the Company incurred depreciation expense of $858,510 and $989,325, respectively.

The Company has not yet obtained the property ownership certificates of the buildings in its Dalian manufacturing facilities with a carrying amount of $16,178,549 and $23,310,165 as of December 31, 2016 and September 30, 2017, respectively. The Company built its facilities on the land for which it had already obtained the related land use right. The Company has submitted applications to the Chinese government for the ownership certificates on the completed buildings located on these lands. However, the application process takes longer than the Company expected and it has not obtained the certificates as of the date of this report. However, since the Company has obtained the land use right in relation to the land, the management believe the Company has legal title to the buildings thereon albeit the lack of ownership certificates. As soon as the Chinese government completes its formalities, the Company will obtain the ownership certificates. As of September 30, 2017, the Company had the permission to obtain the ownership certificate of the completed buildings, however, as the Company is in the process to obtain additional loans from Bank of Dandong which requires the Company to pledge more buildings including the constructions in progress of Dalian site, if the Company obtained the ownership certificate of the completed buildings, the remaining buildings which are still under construction in progress will not be pledged until all of the buildings complete the construction. The Company and Bank of Dandong decided to delay the acquisition of the ownership certificate of the completed buildings.

During the course of the Company’s strategic review of its operations, the Company assessed the recoverability of the carrying value of the Company’s property, plant and equipment. The impairment charge, if any, represented the excess of carrying amounts of the Company’s property, plant and equipment over the estimated discounted cash flows expected to be generated by the Company’s production facilities. The Company believes that there was no impairment of its property, plant and equipment as of December 31, 2016 and September 30, 2017.