(7) Loans Payable

Short-term bank loans

		September 30, 2011		December 31, 2010
Industrial & Commercial Bank of China	(a)	$	-	$	1,966,182
Industrial & Commercial Bank of China	(b)		-		907,468
Industrial & Commercial Bank of China	(c)		2,034,907		-
Industrial & Commercial Bank of China	(d)		782,656		-
Total short-term bank loans		$	2,817,563	$	2,873,650

(a)

During year 2009 and up to May 2010, the Industrial & Commercial Bank of China provided two loans, which were secured by certain manufacturing equipment of the Company. The Company paid off one of the loans in May 2010. The remaining loan balance was in the amount of $1,966,182 as of December 31, 2010. The interest was payable monthly at the fixed rate of 5.841% per annum for the remaining loan, which was due and paid off at maturity on January 11, 2011.

(b)

On July 28, 2010, the Company obtained from the Industrial & Commercial Bank of China a new accounts receivable factoring facility with a maximum credit limit of $907,468 as of December 31, 2010. Under the factoring agreement, the bank has recourse against the Company if the receivables, which remain in the Company’s books at all times, are not fully collected. The term of the factoring facility expired on July 18, 2011 and carried an interest rate of 5.31% per annum. The Company paid off the outstanding factoring facility balance on July 19, 2011.

(c)

On March 16, 2011, the Company obtained from the Industrial & Commercial Bank of China another accounts receivable factoring facility with a maximum credit limit of $2,034,907 as of September 30, 2011. Under the factoring agreement, the bank has recourse against the Company if the receivables, which remain in the Company’s books at all times, are not fully collected. The term of the factoring facility expires on February 27, 2012 and carries an interest rate of 6.4236% per annum, which is 106% of the prime rate for the loan set forth by the People’s Bank of China at the time of funding.

(d)

On August 18, 2011, the Company obtained from the Industrial & Commercial Bank of China a new accounts receivable factoring facility with a maximum credit limit of $782,656 as of September 30, 2011. Under the factoring agreement, the bank has recourse against the Company if the receivables, which remain in the Company’s books at all times, are not fully collected. The term of the factoring facility expires on August 15, 2012 and carries an interest rate of 8.023% per annum.

As of September 30, 2011 and December 31, 2010, short-term borrowing comprised secured bank loans of $2,817,563 and $2,873,650, respectively, and no unsecured bank loans. The factoring facility was secured by essentially all of the Company’s accounts receivable in the amount of $2,560,793 and $1,876,770 as of September 30, 2011 and December 31, 2010, respectively.

As of September 30, 2011 and December 31, 2010, the Company had no unutilized credit facility with the banks. The average short-term borrowing rates for the nine months ended September 30, 2011 and 2010 were approximately 6.07% and 5.81%, respectively. The average short-term borrowing rates for the three months ended September 30, 2011 and 2010 were approximately 6.46% and 5.71%, respectively.

Long-term loan from credit union

As of December 31, 2010, loan payable to Rural Credit Cooperative of Xushui County, amounted to $2,008,530. The loan is guaranteed by an unrelated third party company. The entire principal is due and payable at maturity on September 16, 2011 and thus the entire principal amount was reclassified as current portion of long-term loan and recorded under current liabilities as of December 31, 2010. Interest is paid monthly at the rate of 0.774% per month.

On March 31, 2011 the Company prepaid the entire principal and accrued interest of the Rural Credit Cooperative of Xushui County loan and entered into a new three-year term loan agreement with Xushui County Rural Credit Union for $1,541,833. The new loan is guaranteed by an independent third party. Interest payment is due quarterly and bears the rate of 0.72% per month.

On June 10, 2011 the Company entered into a new term loan agreement with the Xushui County Rural Credit Union for $4,116,772. The new loan is secured by its manufacturing equipment of $10,122,779 and will mature on June 9, 2013. Interest payment is due quarterly and bears the rate of 0.72% per month.

Total interest expenses for the short-term bank loans and long-term loan for the three months ended September 30, 2011 and 2010 was $178,685 and $80,362, respectively. For the nine months ended September 30, 2011 and 2010, the interest expenses for the short-term bank loans and long term loan were $319,874 and $302,578, respectively. The Company’s secured loans were secured by its manufacturing equipment of $10,122,779 and $4,928,033 as of September 30, 2011 and December 31, 2010 respectively.

Future maturities of short term and long term loans payable were as follows as of September 30, 2011:

September 30,	Amount
2012	$	2,817,563
2013		4,116,772
2014		1,541,833
	$	8,476,168