PROPERTY, PLANT AND EQUIPMENT UNDER CAPITAL LEASES, NET

9 Months Ended

Sep. 30, 2011

PROPERTY, PLANT AND EQUIPMENT UNDER CAPITAL LEASES, NET

NOTE 6 – PROPERTY, PLANT AND EQUIPMENT UNDER CAPITAL LEASES, NET

Property, plant and equipment under capital leases, net consist of the following:

	September 30, 2011			December 31, 2010
At cost:
Buildings	$	129,494		$	-
Plant and machinery		2,455,396			-
Total		2,584,890			-
Less: Accumulated depreciation and amortization		(182,247	)		-
Net book value	$	2,402,643		$	-

The above buildings erected on parcels of land located in Shouguang, PRC, are collectively owned by local townships. The Company has not been able to obtain property ownership certificates over these buildings as the Company could not obtain land use rights certificates on the underlying parcels of land.

During the three-month period ended September 30, 2011, depreciation and amortization expense totaled $86,308, which was recorded as cost of net revenue. During the nine-month period ended September 30, 2011, depreciation and amortization expense totaled $179,261, of which $86,308 and $92,954 were recorded as cost of sales and administrative expenses respectively.

An impairment of $683,046 was made in the second quarter of 2011 and included in write-off / impairment on property, plant and equipment.