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CONSTRUCTION LOAN FACILITY.

12 Months Ended

Dec. 31, 2013

NOTE 9 – CONSTRUCTION LOAN FACILITY

The Company drew down an aggregate of $12,484,183 as of December 31, 2013 from a construction loan facility dated June 21, 2013. The loan facility is for an eight-year term, which commenced on July 11, 2013, the initial draw-down date. The total loan facility amount is RMB 80,000,000 (approximately $13 million) and is from the same bank that currently provides the line of credit as discussed in Note 8. The proceeds of the loan were used for and are collateralized by the construction of the Company’s new production facility and the included production line equipments and machinery. The loan currently bears interest at 7.205%, based upon 110% of the PRC government’s eight-year term rate effective on the actual draw-down date, subject to annual adjustments based on 110% of the floating rate for the same type of loan on the anniversary from the draw-down date and its subsequent anniversary dates. The loan requires interest only payments for the first two years. Beginning July 11, 2015, the balance of the principal is due in annual installments over the next six years through July 11, 2021. At December 31, 2013, the total amount available to draw by the Company is approximately $0.6 million. The Company is required to draw down the entire loan amount by December 31, 2014.

Principal payments required for the next five years as of December 31, 2013 are as follows:

Year	Amount
2014	$	-
2015		1,636,554
2016		1,636,554
2017		2,454,831
2018		2,454,831
Thereafter		4,301,413
	$	12,484,183

Fair Value of Construction Loan Facility – Based on the borrowing rates currently available to the Company for bank loans with similar terms and maturities, the carrying amounts of the construction loan facility outstanding as of December 31, 2013 approximated its fair value because the underlying instrument bears an interest rate that approximated current market rates