Note 10 - Foreign Operations
Substantially all of the
Companys operations are carried out and all of its assets are located in the PRC. Accordingly, the Companys business,
financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC. The
Companys business may be influenced by changes in governmental policies with respect to laws and regulations, monetary policies,
anti-inflationary measures, currency fluctuation and remittances and methods of taxation, among other things.
Dividends and Reserves
Under the laws of the PRC,
net income after taxation can only be distributed as dividends after appropriation has been made for the following: (i) cumulative
prior years losses, if any; (ii) allocations to the Statutory Surplus Reserve of at least 10% of net income
after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Companys registered
capital; (iii) allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Companys
Statutory Common Welfare Fund, which is established for the purpose of providing employee facilities and other collective
benefits to employees in PRC; and (iv) allocations to any discretionary surplus reserve, if approved by stockholders.
As of December 31, 2011,
the Company had no Statutory Surplus Reserve and the Statutory Common Welfare Fund established
and segregated in retained earnings.