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Note 1 –Description of Business and Basis of Presentation China Valves Technology, Inc. (the “Company”), was incorporated in Nevada in August 1997. Through its direct and indirect subsidiaries, the Company focuses primarily on the development, manufacture and sale of high-quality metal valves for the electricity, petroleum, chemical, water, gas and metal industries in the People’s Republic of China (the “PRC”). The Company’s operations are headquartered in Zhengzhou, Henan Province, PRC. REPORTING ENTITIES The accompanying condensed consolidated financial statements include the following subsidiaries: <div> <table border="1" cellpadding="3" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left"> Name of entity </td> <td align="center" nowrap="nowrap" width="13%"> Place of incorporation </td> <td align="center" nowrap="nowrap" width="13%"> Ownership </td> <td align="center" nowrap="nowrap" width="13%"> Principle business </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> China Valves Technology (Changsha) Valve Co., Ltd. (“Changsha Valve”) </td> <td align="center" bgcolor="#e6efff" nowrap="nowrap" width="13%"> PRC </td> <td align="center" bgcolor="#e6efff" nowrap="nowrap" width="13%"> 100% Indirectly </td> <td align="center" bgcolor="#e6efff" nowrap="nowrap" width="13%"> Manufacturing </td> </tr> <tr valign="top"> <td align="left"> Yangzhou Rock Valve Lock Technology Co., Ltd. (“Yangzhou Rock”) </td> <td align="center" nowrap="nowrap" width="13%"> PRC </td> <td align="center" nowrap="nowrap" width="13%"> 100% Indirectly </td> <td align="center" nowrap="nowrap" width="13%"> Manufacturing </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Henan Kai Feng High Pressure Valve Co., Ltd. (“Kaifeng Valve”) </td> <td align="center" bgcolor="#e6efff" nowrap="nowrap" width="13%"> PRC </td> <td align="center" bgcolor="#e6efff" nowrap="nowrap" width="13%"> 100% Indirectly </td> <td align="center" bgcolor="#e6efff" nowrap="nowrap" width="13%"> Manufacturing </td> </tr> <tr valign="top"> <td align="left"> Zhengzhou City ZD Valve., Ltd. (“ZD Valve”) </td> <td align="center" nowrap="nowrap" width="13%"> PRC </td> <td align="center" nowrap="nowrap" width="13%"> 100% Indirectly </td> <td align="center" nowrap="nowrap" width="13%"> Manufacturing </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Tai Zhou Tai De Valve Co., Ltd. (“Taide Valve”) </td> <td align="center" bgcolor="#e6efff" nowrap="nowrap" width="13%"> PRC </td> <td align="center" bgcolor="#e6efff" nowrap="nowrap" width="13%"> 100% Indirectly </td> <td align="center" bgcolor="#e6efff" nowrap="nowrap" width="13%"> Manufacturing </td> </tr> <tr valign="top"> <td align="left"> Shanghai PudongHanwei Valve Co., Ltd. (“Hanwei Valve”) </td> <td align="center" nowrap="nowrap" width="13%"> PRC </td> <td align="center" nowrap="nowrap" width="13%"> 100% Indirectly </td> <td align="center" nowrap="nowrap" width="13%"> Manufacturing </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Henan Tonghai Fluid Equipment Co., Ltd. </td> <td align="center" bgcolor="#e6efff" nowrap="nowrap" width="13%"> PRC </td> <td align="center" bgcolor="#e6efff" nowrap="nowrap" width="13%"> 100% Indirectly </td> <td align="center" bgcolor="#e6efff" nowrap="nowrap" width="13%"> Holding Company </td> </tr> <tr valign="top"> <td align="left"> China Valves Technology Holdings Co., Ltd. (formerly China Fluid Equipment Holdings Limited) </td> <td align="center" nowrap="nowrap" width="13%"> Hong Kong </td> <td align="center" nowrap="nowrap" width="13%"> 100% Directly </td> <td align="center" nowrap="nowrap" width="13%"> Holding Company </td> </tr> </table> </div>

Note 2 – Summary of significant accounting policies RESTATEMENT The presentation of certain line items presented on the consolidated financial statements and the relevant notes for the year ended September 30,2011 have been restated to correct the under accrued Value Added Tax for the year ended September 30,2011. The restatement made the Company’s previously reported cost of sales in the consolidated statements of income for the year ended September 30,2011 increase $2,670,688 and the income and other tax payables in the consolidated balance sheet as of September 30,2011 increased $2,670,688. The retained earnings in the consolidated balance sheet and consolidated statements of stockholders’ equity as of September 30,2011 decreased $2,670,688.The restatement has no effect for the cash flow for the year ended September 30,2011 and the quarter ended March 31, 2012. Currently, the Company is still evaluating the quarterly financial impact for the year ended September 30, 2012. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements of the Company and its wholly owned subsidiaries (collectively referred to herein as the “Company”) have been prepared in accordance with generally accepted accounting principles in the United States of America for interim consolidated financial information. Accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements. In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the operating results for the three and six months ended March 31, 2012 have been made. It is suggested that these condensed consolidated financial statements be read in conjunction with the audited financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended September 30, 2011. The Company follows the same accounting policies in preparation of interim reports. Results for the interim periods presented are not necessarily indicative of the results that might be expected for the entire fiscal year. USE OF ESTIMATES The preparation of consolidated financial statements in conformity with US GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of fixed assets; the allowance for doubtful accounts; the fair value determination of financial and equity instruments, realizability of inventories; the recoverability of goodwill, intangible assets, land use right, plant and equipment; and accruals for income tax uncertainties and other contingencies. The current economic environment has increased the degree of uncertainty inherent in those estimates and assumptions. FOREIGN CURRENCY TRANSLATIONS AND TRANSACTIONS The Renminbi (“RMB”) of the People’s Republic of China has been determined to be the Company’s functional currency. The Company uses the U.S. dollar for financial reporting purposes. For those entities whose currency is other than the US dollar, all assets and liabilities are translated into U.S. dollars at the exchange rate on the balance sheet date; shareholders’ equity is translated at historical rates and items in the statements of income and of cash flows are translated at the average rate for the period. Because cash flows are translated based on the average translation rate, amounts related to assets and liabilities reported in the statement of cash flows will not necessarily agree with changes in the corresponding balances in the balance sheet. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of shareholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. REVENUE RECOGNITION The Company recognizes revenue in accordance with Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605, Revenue Recognition, when persuasive evidence of an arrangement exists, the price is fixed or determinable, collection is reasonably assured and delivery of products has occurred or services have been rendered. These criteria are generally satisfied at the time of delivery for domestic sales when risk of loss and title passes to the customer. For international sales, the revenue recognition criteria are generally satisfied under Freight on Board (“FOB”) terms, in which the Company’s responsibility ends once the goods clear the port of shipment. Revenues presented on the consolidated statements of operations and comprehensive income is net of a value-added tax (“VAT”) taxes. The Company allows its customers to retain 5% to 10% of the contract prices as retainage during the warranty period, usually 12 or 24 months after the products were put into use, to guarantee product quality. Retainage is considered as a payment term included as a part of the contract price, and recognized as revenue based upon delivery of products. Due to nature of the retainage, the Company’s policy is to take into revenue the full value of the contract without VAT, including any retainage, as it performs against the contact since the Company has experienced insignificant warranty claims historically resulting in the Company having to repair or exchange a defective product. Due to the infrequency and insignificant amount of warranty claims, the ability to collect retainage is reasonably assured and is recognized at the time of delivery. The Company also provides services to some of its sales agents and distributors. The Company recognizes revenue on these services once a contract is signed and the services have been rendered. WARRANTIES The Company typically provides warranty for all of its products and provides replacement or credit to its customers who are not satisfied with the products for a period of one year from the date of shipment. The Company has not established reserve funds for potential customer claims because, historically, the Company has not experienced significant customer complaints about its products. The Company believes that its customer support teams, quality assurance team and manufacturing monitoring procedures will continue to keep claims at a level that does not support a need for a reserve. The Company reviews customer claims on a monthly basis and may establish a reserve when necessary. VALUE ADDED TAX (“VAT”) All China-based enterprises are subject to a VAT imposed by the PRC government on their domestic product sales. The output VAT is charged to customers who purchase goods from the Company and the input VAT is paid when the Company purchases goods from its vendors. Input VAT rates are 17% for the purchasing activities conducted by the Company. Output VAT rate is 17% for all products. The input VAT can be offset against the output VAT. The VAT payable or recoverable balance presented on the consolidated balance sheets represents either the input VAT less than or larger than the output VAT. COST OF GOODS SOLD Cost of goods sold consists primarily of direct material costs, direct labor costs, direct depreciation and related direct expenses attributable to the production of the products. Inbound shipping and handling costs and purchasing are included in direct material costs. Manufacturing overhead includes expenses such as indirect labor, depreciation as it relates to the cost of production, rent, utilities, receiving costs, and equipment maintenance and repairs. SHIPPING AND HANDLING COSTS Shipping and handling costs incurred for shipping of finished products to customers are included in selling expense and totaled $224,527 and $130,801for the three months ended March 31, 2012, and 2011, respectively;$469,168 and $516,457 for the six months ended March 31, 2012 and 2011, respectively. ADVERTISING EXPENSES Advertising costs are expensed when incurred and are included in selling, general and administrative expenses, which amounted to $30,189 and $27,870 for the three months ended March 31, 2012, and 2011, respectively;$88,971 and $114,618 for the six months ended March 31, 2012 and 2011, respectively. RESEARCH AND DEVELOPMENT COSTS Research and development costs are expensed as incurred. The costs of material and equipment that are acquired or constructed for research and development activities and which have alternative future uses, either in research and development, marketing, or sales, are classified as property and equipment and depreciated over their estimated useful lives. CASH AND CASH EQUIVALENTS The Company considers all highly-liquid investments with maturity of three months or less to be cash equivalents. The Company maintains its cash accounts at creditworthy financial institutions and closely monitors the movements of its cash positions. RESTRICTED CASH The Company’s restricted cash consists of cash in the bank as security for its exported products, security deposits for contract performance, notes payable and cash held in escrow to pay for certain investor relations expenses. For restricted cash held in bank, the restriction is released after the customers have received and inspected the products. The Company has notes payable outstanding with various banks and is required to keep certain amounts on deposit that are subject to withdrawal restrictions. Cash held in escrow is expensed as incurred. ACCOUNTS RECEIVABLES The Company’s business operations are conducted in the PRC by selling on various payment terms. The Company regularly evaluates and monitors the creditworthiness of each of its customers in accordance with the prevailing practice in the valve industry and based on general economic conditions in China. The Company maintains a general policy of providing allowance for doubtful accounts as follows: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left"> Aging of Accounts Receivables </td> <td align="center" nowrap="nowrap" width="15%"> Allowance Percentage </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> With 12 months </td> <td align="center" bgcolor="#e6efff" nowrap="nowrap" width="15%"> - </td> </tr> <tr valign="top"> <td align="left"> 12-24months </td> <td align="center" width="15%"> 5% </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> 24-36months </td> <td align="center" bgcolor="#e6efff" width="15%"> 25% </td> </tr> <tr valign="top"> <td align="left"> Above 36months </td> <td align="center" width="15%"> 100% </td> </tr> </table> Management reviews its receivables on a quarterly basis to determine if the allowance for doubtful accounts is adequate. An estimate for doubtful accounts is recorded when collection of the full amount is no longer probable. Known bad debts are written off against the allowance for doubtful accounts when identified. The Company’s existing reserve is consistent with its historical experience and considered adequate by management. INVENTORIES Inventories are stated at the lower of cost or market determined using the weighted average method which approximates cost and estimated net realizable value. Cost of work in progress and finished goods comprise direct material, direct production costs and an allocated portion of production overhead costs based on normal operating capacity. The Company provides a reserve for estimated inventory obsolescence or excess quantities on hand equal to the difference between the cost of the inventory and its estimated realizable value. The future estimated realizable value of inventory is generally based on the historical usage of such inventory. The Company ages its inventory with no recent demand and applies various valuation factors based on the last demand from customers for such material. If future conditions cause a reduction in the Company’s current estimate of realizable value, due to a decrease in customer demand, a drop in commodity prices or other market-related factors that may influence demand for particular products, additional provisions may be required. In addition, the Company also reviews most recent quotes from vendors and compares with the carrying value of its inventory. If carrying amount of raw materials exceeds prices available at the balance sheet date, then the excess amount is directly written off and included in cost of the goods sold. Semi-finished products are work-in-process (“WIP”) inventory at the finishing stages of production. These products that are awaiting final assembly have similar physical shape to finished goods. The Company differentiates these products from WIP for inventory management purposes. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded at cost and are stated net of accumulated depreciation. Depreciation expense is determined using the straight-line method over the estimated useful lives of the assets, as follows: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left"> </td> <td align="center" nowrap="nowrap" width="15%"> Estimated Useful </td> </tr> <tr valign="top"> <td align="left"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="15%"> Economic Life </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Buildings and improvement </td> <td align="center" bgcolor="#e6efff" nowrap="nowrap" width="15%"> 10-30 years </td> </tr> <tr valign="top"> <td align="left"> Machinery and equipment </td> <td align="center" nowrap="nowrap" width="15%"> 5-10 years </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Office furniture and equipment </td> <td align="center" bgcolor="#e6efff" nowrap="nowrap" width="15%"> 5 years </td> </tr> <tr valign="top"> <td align="left"> Motor Vehicles </td> <td align="center" nowrap="nowrap" width="15%"> 8-10 years </td> </tr> </table> Maintenance and repairs are charged directly to expense as incurred, whereas improvements and renewals are generally capitalized in their respective property accounts. When an item is retired or otherwise disposed of, the cost and applicable accumulated depreciation are removed and the resulting gain or loss is recognized and reflected as a line item in statements of income before income from operations. Construction in progress represents direct costs of construction as well as acquisition and design fees incurred. Capitalization of these costs ceases and the construction in progress is transferred to property, plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. Interest incurred during the period required to complete the construction is capitalized into construction in progress. All other interest is expensed as incurred. No depreciation is provided until construction is completed and the asset is ready for its intended use. Maintenance, repairs and minor renewals are charged directly to expenses as incurred. Major additions and betterments to property and equipment are capitalized. INTANGIBLE ASSETS Intangible assets consist of patents, software and land use rights. Patents are being amortized over 5-20 years as management believes those are the estimated useful life of the patents currently owned by the Company. Software is amortized over 10 years, its estimated useful life. According to the laws of the PRC, the government owns all the land in the PRC. Companies or individuals are authorized to possess and use the land only through the land use rights granted by the government. The land use rights represent cost of the rights to use the land in respect of properties located in the PRC. Land use rights are carried at cost and amortized on a straight-line basis over the period of rights of 46.4 -50 years. IMPAIRMENT OF LONG-LIVED ASSETS The Company, in accordance with ASC 360, Property, Plant and Equipment, reviews for impairment of long-lived assets and certain identifiable intangibles whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability is determined by comparing projected undiscounted cash flows associated with such assets to the related carrying value. An impairment loss would be recognized when estimated discounted future cash flows expected to result from the use of the asset and its eventual disposition is less than its carrying amount. The Company performed impairment review on its long-lived assets.For the products manufactured by certain equipment that did not meet the customer’s needs any more, the Company determined that the equipment was technically obsolete and needed to be replaced with new equipment to meet the customer’s current and future needs. $0 and $0 impairment losses were recognized for the three month periods ended March 31, 2012 and 2011, respectively;$0and $1,341,962 for the six months ended March 31, 2012 and 2011, respectively. RETIREMENT AND OTHER POST RETIREMENT BENEFITS Full-time employees of the Company in the PRC participate in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require the Company to make contributions to the government for these benefits based on certain percentages of the employees’ salaries. The Company accounts for the mandated defined contribution plan under the vested benefit obligations approach based on the guidance of ASC 715, Compensation—Retirement Benefits. The total amounts for such employee benefits which were expensed were $519,997 and $729,489 for the three month periods ended March 31, 2012 and 2011, respectively;$1,072,752 and $1,169,631 for the six months ended March 31, 2012 and 2011, respectively. INCOME TAXES The Company follows ASC 740, Income Taxes, which require the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The Company adopted ASC 740-10-25, which provides criteria for the recognition, measurement, presentation and disclosure of uncertain tax position. The Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company did not recognize any additional liabilities for uncertain tax positions as a result of the implementation of ASC 740-10-25. COMPREHENSIVE INCOME The Company adopted ASC 220, Comprehensive Income, which establishes standards for reporting and presentation of comprehensive income and its components in a full set of general-purpose financial statements. The Company has chosen to report comprehensive income in the statements of operations and comprehensive income. Comprehensive income is comprised of net income and all changes to stockholders’ equity except those due to investments by owners and distributions to owners. CONCENTRATIONS OF CREDIT RISK AND RISK FACTORS Environment— The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, restrictions on currency conversion and remittance abroad, and rates and methods of taxation, among other things. Bank Deposits— Ce rtain financial instruments may subject the Company to concentration of credit risk. The Company maintains bank deposits within state-owned banks within the PRC, Hong Kong and the United States. Balances at financial institutions of state owned banks within the PRC are not covered by insurance. As of March 31, 2012 and September 30, 2011, the Company’s cash and restricted cash balances, totaling $15,049,854and $29,508,367 respectively were not covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risks on its cash in bank accounts. Trade Accounts Receivable —Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers dispersed across diverse markets and generally short payment terms. Credit is extended based on an evaluation of the customer’s financial condition and collateral generally is not required. The Company evaluates the collectability of accounts receivable based on a combination of factors. In cases where the Company is aware of circumstances that may impair a specific customer’s ability to meet its financial obligations subsequent to the original sale, the Company will record a specific allowance against amounts due, and thereby reduce the net recognized receivable to the amount the Company reasonably believes will be collected.  There is no customer individually with over 10% of accounts receivable balance as of March 31, 2012 and 2011. Revenues —Substantially all of the Company’s revenues are derived from sales of valves in the PRC. Any significant decline in market acceptance of the Company’s products could impair our ability to operate effectively. Five major customers represented approximately 24% and 30% of the Company’s total sales for the three months ended March 31, 2012 and 2011, respectively;16% and 13% of the Company’s total sales for the six -month ended March 31, 2012 and 2011.Sales from the largest customer accounted for 8% and 12% of total sales for the three months ended March 31, 2012 and 2011, respectively;7% and 4% of the Company’s total sales for the six -month periods ended March 31, 2012 and 2011 FAIR VALUE OF FINANCIAL INSTRUMENTS ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC 820 establishes three levels of inputs that may be used to measure fair value: Level 1—Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company holds. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis. Level 2—Valuation based on quoted prices in markets that are not active for which all significant inputs are observable, either directly or indirectly. Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement. The Company adopted ASC 820, Fair Value Measurements and Disclosures, on January 1, 2008 for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. The Company has not adopted ASC 820 for nonfinancial assets and nonfinancial liabilities, as these items are not recognized at fair value on a recurring basis. The adoption of ASC 820 for all financial assets and liabilities did not have any impact on the Company’s consolidated financial statements and the Company does not expect to have any impact on the Company’s consolidated financial statements if ASC 820 for nonfinancial assets and liabilities is adopted. Financial instruments include cash and cash equivalents, restricted cash, accounts receivables, prepayments and other receivables, investments, short term borrowings from banks, accounts payable and accrued expenses and other payables. The carrying amounts of cash and cash equivalents, restricted cash, accounts receivable, prepayments and other receivables, investments, short -term loans, accounts payable and accrued expenses approximate their fair value due to the short-term maturities of these instruments. OTHER INVESTMENTS The Company invested in China Perfect Machinery Industry Co., Ltd. in 1996 and Kaifeng Commercial Bank in 1997. The Company owns approximately 0.0955% of China Perfect Machinery Industry Co. Ltd. and approximately 1.6% of Kaifeng Commercial Bank. The Company does not have the ability to exercise control over the investee companies and the investments have been recorded under the cost method. These long term investments amounted to $825,610 and $815,066 as of March 31, 2012 and September 30, 2011, respectively. There has been no change in the carrying value since initial investment, other than the effects of translation difference. The Company evaluates potential impairment whenever events or changes in circumstances indicate that the carrying amount of the investments may not be recoverable. For investments carried at cost, the Company recognizes impairment in the event that the carrying value of the investment exceeds the Company’s proportionate share of the net book value of the investee. As of March 31, 2012, management believes no impairment charge is necessary. CUSTOMER DEPOSITS Customer deposits represent amounts advanced by customers on product orders. The product normally is shipped within six months after receipt of the advance payment and the related sale is recognized in accordance with the Company’s revenue recognition policy. As of March 31, 2012 and September 30, 2011, customer deposits amounted to $ 13,221,098 and $11,139,936, respectively. STOCK COMPENSATION The Company receives employee and certain non-employee services in exchange for (a) equity instruments of the Company or (b) liabilities that are based on the fair value of the Company’s equity instruments or that may be settled by the issuance of such equity instruments. The Company accounts for stock compensation expense under the fair value recognition provisions of the ASC 718, which requires companies to estimate the fair value of share-based payment awards on the date of grant using an option pricing model. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In April 2011, the FASB issued ASU No. 2011-03, Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements (ASU 2011-03), intended to improve financial reporting of repurchase agreements and refocus the assessment of effective control on a transferor’s contractual rights and obligations rather than practical ability to perform those rights and obligations. The guidance in ASU 2011-03 is effective for the first interim or annual period beginning on or after December 15, 2011. The Company does not expect the adoption of ASU 2011-03 to have a significant impact on its consolidated financial statements. In May 2011, the FASB issued ASU No. 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU 2011-04). ASU 2011-04 represents the converged guidance of the FASB and the International Accounting Standards Board (IASB) on fair value measurement. A variety of measures are included in the update intended to either clarify existing fair value measurement requirements, change particular principles requirements for measuring fair value or for disclosing information about fair value measurements. For many of requirements, the FASB does not intend to change the application of existing requirements under Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements. ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011 and early application is not permitted. The Company is evaluating the impact adoption of ASU 2011-04 and does not expect the adoption of ASU 2011-04 will have significant impact on its consolidated financial statements. In July 2011, the FASB issued accounting guidance on disclosures about the credit quality of financing receivables and the allowance for credit losses. The guidance expands disclosures for the allowance for credit losses and financing receivables by requiring entities to disclose information at disaggregated levels. It also requires disclosure of credit quality indicators, past due information and modifications of financing receivables. The Company does not expect the adoption of this guidance to have a significant impact on its consolidated financial statements. In September 2011, the FASB issued Intangibles – Goodwill and Other (Topic 350) – Testing Goodwill for Impairment (ASU No. 2011-08), which amends ASC 350 to first assess qualitative factors before performing the quantitative goodwill impairment testing. The ASU provides the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the results of the qualitative analysis indicate it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, the quantitative two-step impairment test, which is required under current U.S. GAAP, would not be necessary. The ASU is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The implementation of the ASU is not expected to have a material impact on the Company’s financial statements.

Note 5 –Property, plant and equipment, net Property, plant and equipment consist of the following: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left">   </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> March 31, 2012 </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> September 30,2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left">   </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Buildings and improvements </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  23,930,507 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  23,592,085 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Machinery and equipment </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 29,228,816 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 27,934,105 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Motor vehicles </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 2,963,772 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 2,925,919 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Office equipment </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 1,687,005 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 1,665,384 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Construction in progress </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 132,395 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 165,511 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Total </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 57,942,495 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 56,283,004 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Less: Accumulated depreciation </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> (18,675,490 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> ) </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> (16,090,368 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> ) </td> </tr> <tr valign="top"> <td align="left"> Property plant and equipment, net </td> <td align="left" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="1%"> $ </td> <td align="right" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="12%">  39,267,005 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="1%"> $ </td> <td align="right" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="12%">  40,192,636 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> </table> Depreciation expenses were$1,301,451 and $1,282,428 for the three months ended March 31, 2012 and 2011, respectively; $2,571,204 and $2,855,240 for the six months ended March 31, 2012 and 2011, respectively. Certain buildings with an aggregate carrying value of $1,513,061 and $1,522,456 were pledged as collateral for bank loans as of March 31, 2012 and September 30, 2011respectively.

Note 6 – Goodwill Goodwill represents the excess of cost of an acquisition business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination at the date of the acquisition. Goodwill for impairment has been tested annually, or whenever events or circumstances indicate that it is more likely than not that the fair value of a reporting unit is below its carrying amount. The Company determines the reporting units based on following factors: a. it engages in business activities from which it may earn revenues and incur expenses; b. its operating results are regularly reviewed by the Company’s chief operating decision makers to make decisions about resources to be allocated to the segment and assess its performance; and c. its discrete financial information is available. No impairment loss was incurred for the three months ended March 31, 2012and 2011 based on the Company’s estimation; No impairment loss was incurred for the six months ended March 31, 2012and 2011 based on the Company’s estimation. A significant amount of judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include current period operating or cash flow losses combined with a historical of operating or cash flow losses, a projection or forecast that demonstrates continuing operating or cash flow losses, a significant adverse change in AR collection and unanticipated technology revolution in valves industry, among others. The Company performs its annual impairment review of goodwill every year at September 30 and when a triggering event occurs between annual impairment tests. The goodwill impairment test is a two-step test. Under the first step, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit, and the Company must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation, and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed. A summary of changes in the Company’s goodwill was as follows: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left">   </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Goodwill </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Balance, September 30, 2011 </td> <td align="left" bgcolor="#e6efff" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" width="12%">  33,976,186 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Foreign currency translation adjustment </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 439,555 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Balance, March 31, 2012 </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 3px double rgb(0, 0, 0);" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 3px double rgb(0, 0, 0);" width="12%">  34,415,741 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> </table> The goodwill was generated from the acquisitions of a number of companies engaged in production of valves in China. According to ASC805 “Business Combinations”, the acquisition of these businesses should be treated as acquisition of a business. Any excess of the purchase prices over the estimated fair values of the net assets acquired is recorded as goodwill. In 2004, the Company acquired two companies engaged in the production of valves. The Company recognized approximately $21 million goodwill representing the excess of cost of an acquisition business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination at the date of the acquisition. On April 8, 2010, the Company acquired 100% of Hanwei Valve and recognized approximately $11 million goodwill representing the excess of cost of an acquisition business over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed in a business combination at the date of the acquisition. The goodwill recognized in conjunction with the acquisition of Hanwei Valve represents intangible values that Hanwei Valve has built over its more than 16 years of history, which do not qualify for separate recognition. These values include but are not limited to: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr> <td width="5%"> </td> <td valign="top" width="5%"> i) </td> <td> Expected synergies from combining operations of the Company’s operating subsidiaries and Hanwei Valve; </td> </tr> <tr> <td width="5%"> </td> <td width="5%"> </td> <td> </td> </tr> <tr> <td width="5%"> </td> <td valign="top" width="5%"> ii) </td> <td> The experienced work force; </td> </tr> <tr> <td width="5%"> </td> <td width="5%"> </td> <td> </td> </tr> <tr> <td width="5%"> </td> <td valign="top" width="5%"> iii) </td> <td> Proprietary technologies related to certain products; and </td> </tr> <tr> <td width="5%"> </td> <td width="5%"> </td> <td> </td> </tr> <tr> <td width="5%"> </td> <td valign="top" width="5%"> iv) </td> <td> The proprietary manufacturing processes. </td> </tr> </table> The Company has six operating subsidiaries as reporting units included in continuing operations as of March 31, 2012, among which three reporting units had goodwill. The following table represents goodwill of the three subsidiaries as of March 31, 2012 and September 30, 2011, respectively. <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left"> (in thousands) </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> March 31, 2012 </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> September 30, 2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (Unaudited) </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Kaifeng Valve </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  10,783 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  10,783 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> ZD Valve </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 10,029 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 10,029 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Hanwei Valve </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 11,046 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 11,046 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Foreign currency translation adjustment </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 2,558 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 2,118 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr> <td bgcolor="#e6efff"> </td> <td bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Total </td> <td align="left" valign="bottom" width="1%"> $ </td> <td align="right" valign="bottom" width="12%">  34,416 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> $ </td> <td align="right" valign="bottom" width="12%">  33,976 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> </table> As at March 31, 2012, the Company updated its goodwill impairment tests because the market capitalization is significantly below the carrying value of its net assets. The result is that the fair values of our reporting units are substantially in excess of their carry values. Therefore, the management believed no goodwill was subject to the risk of impairment. The management believe the difference between the market capitalization and the carrying value of our net assets is to due (a) a control premium that should be applied to the market capitalization in determining the fair value of the entire Company and (b) a temporary decline in the stock price suffered by Chinese companies that are public in the U.S. as a result of negative press surrounding accounting practices and reverse mergers of certain Chinese companies.

Note 7 - Intangible assets, net Intangible assets consist of the following: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left">   </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> March 31, 2012 </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> September 30, 2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left">   </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Patents </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  2,801,618 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  2,765,836 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Software </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 2,084,227 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 1,850,982 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Land use rights </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 20,278,187 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 20,019,196 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Total </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 25,164,032 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 24,636,014 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Less: Accumulated amortization: </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Patents </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> (405,245 </td> <td align="left" valign="bottom" width="2%"> ) </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> (307,061 </td> <td align="left" valign="bottom" width="2%"> ) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Software </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> (553,132 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> ) </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> (442,451 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> ) </td> </tr> <tr valign="top"> <td align="left"> Land use rights </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> (1,202,190 </td> <td align="left" valign="bottom" width="2%"> ) </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> (972,494 </td> <td align="left" valign="bottom" width="2%"> ) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Total accumulated amortization </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> (2,160,567 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> ) </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> (1,722,006 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> ) </td> </tr> <tr valign="top"> <td align="left"> Intangibles, net: </td> <td align="left" valign="bottom" width="1%"> </td> <td align="left" valign="bottom" width="12%"> </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="left" valign="bottom" width="12%"> </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Patents </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 2,396,373 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 2,458,775 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Software </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 1,531,095 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 1,408,531 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Land use rights </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="12%"> 19,075,997 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="12%"> 19,046,702 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Intangible asstes, net </td> <td align="left" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="1%"> $ </td> <td align="right" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="12%">  23,003,465 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="1%"> $ </td> <td align="right" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="12%">  22,914,008 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> </table> Amortization expense was$220,636 and $193,191 for the three months ended March31, 2012 and 2011, respectively; $423,578 and $382,782 for the six months ended March 31, 2012 and 2011, respectively. Certain land use rights with an aggregate carrying value of $5,900,322 and $5,894,995 were pledged as collateral for short-term bank loans as of March 31, 2012 and September 30, 2011 respectively.

Note 8 – Loans <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left"> SHORT-TERM LOANS: </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> March </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> September 30, </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left">   </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 31, 2012 </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left">   </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Bank of Communications , Changsha branch, due December 2012, annum interest at 7.872%, pledged by Changsha Valve’s land use rights </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  633,693 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  625,600 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> China Everbright Bank, Changsha branch, due June 2012, annum interest at 7.572%, pledged by Changsha Valve’s land use rights and buildings </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 950,540 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 938,400 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> China Citic Bank, Zhengzhou branch, due December 2012 annum interest at 8.528%, guaranteed by Kaifeng High-pressure valve steel casting Iron Co., Ltd. </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 4,752,701 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 3,128,000 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> </table> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left"> Unrelated third parties, due on demand, annum interest rate range from 0% to 10.000%, and unsecured </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 995,223 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 982,511 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#E6EFFF"> Local Bureau of Finance, Kaifeng City, due on demand, non-interest bearing and unsecured </td> <td align="left" bgcolor="#E6EFFF" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#E6EFFF" valign="bottom" width="12%"> 850,157 </td> <td align="left" bgcolor="#E6EFFF" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#E6EFFF" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#E6EFFF" valign="bottom" width="12%"> 839,299 </td> <td align="left" bgcolor="#E6EFFF" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Total short-term loans </td> <td align="left" style="border-top-style: solid; border-top-width: 1px; border-bottom-style: solid; border-bottom-width: 1px;" valign="bottom" width="1%"> $ </td> <td align="right" style="border-top-style: solid; border-top-width: 1px; border-bottom-style: solid; border-bottom-width: 1px;" valign="bottom" width="12%">  8,182,314 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" style="border-top-style: solid; border-top-width: 1px; border-bottom-style: solid; border-bottom-width: 1px;" valign="bottom" width="1%"> $ </td> <td align="right" style="border-top-style: solid; border-top-width: 1px; border-bottom-style: solid; border-bottom-width: 1px;" valign="bottom" width="12%">  6,513,810 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> </table> Interest expense incurred for the three months ended March 31, 2012 and 2011 amounted to$122,081 and $57,670, respectively; the six months ended March 31, 2012 and 2011 amounted to$212,722 and $76,378, respectively. For the three months ended March 31, 2012 and 2011, $0 and $0 interest expense was capitalized for assets, respectively; and for the six months ended March 31, 2012 and 2011, $0 and $60,152 interest expense was capitalized for assets, respectively. As of March 31, 2012, there are no restrictive covenants related to the loans stated above.

Note 9 – Statutory reserves The laws and regulations of the PRC require that before a foreign invested enterprise can legally distribute profits, it must first satisfy all tax liabilities, provide for losses in previous years, and make allocations, in proportions determined at the discretion of the board of directors, to the statutory reserve. The statutory reserves include the surplus reserve fund. The Company is required to transfer 10% of its net income, as determined in accordance with the PRC accounting rules and regulations, to a statutory surplus reserve fund until such reserve balance reaches 50% of the Company’s registered capital. The transfer to this reserve must be made before distribution of any dividends to shareholders. The Company had $11,460,305 and $11,224,490 statutory reserves as of and March 31, 2012 and September 30, 2011, respectively. The surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 50% of the registered capital.

Note 10 – Commitments and contingencies The Company’s subsidiary, ZD Valve entered into a lease agreement for a manufacturing plant and office space with Zhengzhou Cheng Long Corporation, a related party, from January 1, 2008 to December 31, 2008. The lease agreement was subsequently extended to December 31, 2012. In 2009, ZD Valve made leasehold improvements to its leased manufacturing plant in the amount of $615,260, which has been used as rental payments for the following two years. As of March 31, 2012, the prepaid rental had been fully amortized as rental expense and a new lease contract has been signed at annual rental of $212,466 for three years. The Company’s subsidiary, Tonghai entered into a lease agreement for an office space with Jia Hong Yao, an unrelated party, from September 20, 2009 to September 19, 2014 with annual lease payments of $230,493. For the three months ended March 31, 2012 and 2011, total lease expense, including amounts included in cost of sales and administrative expenses, were totally $125,870 and $284,965, respectively; for the six months ended March 31, 2012 and 2011,were totally $302,211 and $447,067, respectively. The future minimum lease payments at March 31, 2012, are as follows: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left"> </td> <td align="left" width="1%"> </td> <td align="center" width="12%"> Amount </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Year ending March 31, 2013 </td> <td align="left" bgcolor="#e6efff" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" width="12%">  260,183 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Year ending March 31, 2014 </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 260,183 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Year ending March 31, 2015 </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 189,934 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Year ending March 31, 2016 and thereafter </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 6,601 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Total </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 3px double rgb(0, 0, 0);" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 3px double rgb(0, 0, 0);" width="12%">  716,901 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> </table> Contingency On February 4, 2011, a plaintiff filed a purported class action naming the Company, its Chairman and certain present and former senior executives as defendants, asserting claims for certain violations of the securities laws and seeking unspecified damages. The complaint, which was styled Donald Foster, et al. v. China Valves Technology, Inc., et al. , was filed in the U.S. District Court for the Southern District of New York. Several substantially identical complaints were subsequently filed in the same court. On or about June 29, 2011, the Court consolidated the three cases referenced above and appointed Bristol Investment Fund, LTD (“Bristol”) as lead plaintiff. In the consolidation order the Court renamed the case In re China Valves Technology Securities Litigation . On August 29, 2011, Bristol filed a consolidated class action complaint, which named additional defendants including an individual shareholder of the Company and the Company’s auditor. The Company and the individual defendants filed a motion to dismiss the consolidated complaint in the class action on November 21, 2011. The briefing on the motion to dismiss is complete, and the parties are waiting for the Court either to set a hearing date for oral argument on the motion or to rule on the motion. Discovery continues to be stayed pending resolution of the motion. The consolidated complaint purports to assert claims on behalf of a purported class of persons and entities who purchased shares of the Company’s common stock at allegedly artificially high prices during the period between December 1, 2009 and January 13, 2011 and who suffered damages as a result of such purchases. The allegations in the consolidated complaint relate to the Company’s acquisitions of Able Delight and Hanwei Valves and include allegations regarding the Company’s financial statements and press releases. The complaint alleges, among other things, that the Company’s statements about the nature and quality of the Company’s acquisition of Able Delight were materially false and misleading and that the Company’s statements failed to describe the role in the transaction of an alleged related party. In addition, the complaint alleges that the Company’s statements about the Hanwei Valves acquisition were materially false and misleading because they failed to disclose the alleged involvement of certain related parties and allegedly misdescribed the transaction as a purchase of assets rather than as a purchase of an entity. The Company intends to contest the allegations and to defend itself vigorously. On September 14, 2011, a plaintiff filed an action, derivatively and on behalf of the Company, naming its Chairman and certain senior executives as defendants, and naming the Company as a nominal defendant. The complaint, which is styled Gervat v. Fang et al. , was filed in the U.S. District Court for the Southern District of New York, and asserts claims for breach of fiduciary duty, gross mismanagement, and other common law claims, and seeks unspecified damages. On October 11, 2011, the plaintiff filed an Amended Complaint with substantially similar claims. The parties have stipulated to a scheduling order that would stay all proceedings in the derivative action pending resolution by the Court of the defendants’ motion to dismiss the class action consolidated complaint. Nevertheless, there is possibility that a loss may have been incurred from above class actions. In accordance with ASC Topic 450, no loss contingency was accrued as of March31, 2012 since the possible loss or range of loss cannot be reasonable estimated.

Note 11 – Related party transactions The Company had the following significant related party balances as of March31, 2012 and September 30, 2011, respectively: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left">   </td> <td align="left" width="1%">  </td> <td align="center" nowrap="nowrap" width="12%"> March 31, </td> <td align="center" nowrap="nowrap" width="2%">  </td> <td align="center" nowrap="nowrap" width="1%">  </td> <td align="center" nowrap="nowrap" width="12%"> September 30, </td> <td align="left" width="2%">  </td> </tr> <tr valign="top"> <td align="left">   </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%">  </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 2012 </td> <td align="center" nowrap="nowrap" width="2%">  </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%">  </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 2011 </td> <td align="left" width="2%">  </td> </tr> <tr valign="top"> <td align="left">   </td> <td align="left" width="1%">  </td> <td align="center" nowrap="nowrap" width="12%"> (Unaudited) </td> <td align="center" nowrap="nowrap" width="2%">  </td> <td align="center" nowrap="nowrap" width="1%">  </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="left" width="2%">  </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Advances on inventory purchase - related party, the Casting Company </td> <td align="left" bgcolor="#e6efff" width="1%">  </td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%">  </td> <td align="left" bgcolor="#e6efff" width="1%">  </td> <td align="right" bgcolor="#e6efff" width="12%"> 1,552,123 </td> <td align="left" bgcolor="#e6efff" width="2%">  </td> </tr> <tr valign="top"> <td align="left"> Accounts payable – related party, payable to Zhengzhou Tonghai Trade </td> <td align="left" width="1%">  </td> <td align="right" width="12%"> - </td> <td align="left" width="2%">  </td> <td align="left" width="1%">  </td> <td align="right" width="12%"> (783,148 </td> <td align="left" width="2%"> ) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Accounts payable – related party: Kaifeng Zhenghe Northern Song Porcelain Art Co., Ltd. </td> <td align="left" bgcolor="#e6efff" width="1%">  </td> <td align="right" bgcolor="#e6efff" width="12%"> - </td> <td align="left" bgcolor="#e6efff" width="2%">  </td> <td align="left" bgcolor="#e6efff" width="1%">  </td> <td align="right" bgcolor="#e6efff" width="12%"> (3,323 </td> <td align="left" bgcolor="#e6efff" width="2%"> ) </td> </tr> <tr valign="top"> <td align="left"> Other payable: cash advance from officers, unsecured, interest-free, due on demand </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%">  </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> (1,030,121 </td> <td align="left" width="2%"> ) </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%">  </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> (94,226 </td> <td align="left" width="2%"> ) </td> </tr> </table> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left" bgcolor="#E6EFFF"> Total </td> <td align="left" bgcolor="#E6EFFF" style="border-bottom: 3px double rgb(0, 0, 0);" width="1%"> $ </td> <td align="right" bgcolor="#E6EFFF" style="border-bottom: 3px double rgb(0, 0, 0);" width="12%">  (1,030,121 </td> <td align="left" bgcolor="#E6EFFF" width="2%"> ) </td> <td align="left" bgcolor="#E6EFFF" style="border-bottom: 3px double rgb(0, 0, 0);" width="1%">  </td> <td align="right" bgcolor="#E6EFFF" style="border-bottom: 3px double rgb(0, 0, 0);" width="12%"> 671,426 </td> <td align="left" bgcolor="#E6EFFF" width="2%">  </td> </tr> </table> The Company had the following significant related party transactions for the three and six months periods ended March 31, 2012 and 2011, respectively: (1)On August 26, 2008, Kaifeng Valve purchased some land use rights and real estate from Kaifeng High-Pressure Valve Steel Casting Co., Ltd(the “ Casting Company”), a company controlled by the Company’s chairman, Mr. Siping Fang, through the issuance of 2,750,000 shares of the Company’s common stock at $3.576 per share. On April 11, 2009, Kaifeng Valve and the Casting Company entered into a leasing agreement pursuant to which the Casting Company leased back the portion of the Real Estate used at an annual rental of $400,000 for a period of two years starting on April 1, 2009. The lease agreement was automatically extended for one more year when no disagreement was raised as of April 1, 2011. For the three months period ended March 31, 2012 and 2011, total rental income from the Casting Company amount to $100,000 and $100,000, respectively. For the six months period ended March 31, 2012 and 2011, total rental income from the Casting Company amount to $200,000 and $200,000, respectively. (2)The Company also purchases raw material, such as castings, from and sells scrap metals and valves to the Casting Company. Total raw material purchase from the related party amounted to $500,106 and $5,420,032 for the three months ended March 31, 2012 and 2011, respectively;$1,163,838 and $6,790,354 for the six months ended March 31, 2012 and 2011, respectively. The Company also sold a total of $5,592million and $0 million of valves to the Casting Company for the three months ended March 31, 2012 and 2011, respectively,$36,972 million and $2,240 million for the six months ended March 31, 2012 and 2011, respectively. (3)The Company makes finished goods and raw material purchases from and valve sales to related party -Zhengzhou Tonghai Trade Co., Ltd, which is established by an officer of the Company. Total valve purchases from Zhengzhou Tonghai Trade Co., Ltd amounted to $1,000,745 and $5,929,325 for the three months ended March 31, 2012 and 2011, respectively; $2,213,799 and $7,401,117 for the six months ended March 31, 2012 and 2011, respectively. Total valve sales to Zhengzhou Tonghai Trade Co., Ltd amounted to $11,101 and $127,775 for the three months ended March 31, 2012 and 2011, respectively; $31,955 and $704,328 for the six months ended March 31, 2012 and 2011, respectively.

Note 12 – Stock compensation On April 27, 2011, the Compensation Committee of the Board of Directors approved the grant of restricted stock to three directors and three officers of the Company. On May 1, 2011, the Company entered into a restricted stock grant agreement with each of the directors. Pursuant to the Stock Grant Agreement, the Company granted 25,000 shares of restricted stock to each of Mr. William Haus, Mr. Peter Li and Mr. Zengbiao Yu, independent directors of the Company. The restricted stock granted vested immediately on May 1, 2011. On May 16, 2011, the Company entered into the Stock Grant Agreement with three officers of the Company. Pursuant to the Stock Grant Agreement, the Company granted 500,000 shares of restricted stock to Mr. Jianbao Wang, the Company’s Chief Executive Officer, 250,000 shares to Mr. Gang Wei, the Company’s Chief Financial Officer, and 125,000 shares to Mr. Renrui Tang, the Company’s Vice President of Finance. 125,000 shares of Mr. Jianbao Wang’s restricted stock vested immediately on May 16, 2011. The remaining shares for Mr. Jianbao Wang and all restricted shares for Mr. Gang Wei and Mr. Renrui Tang will vest in three equal installments over a three-year period starting from January 1, 2012, subject to performance criteria set forth by the Board and the Compensation Committee. As of January 13, 2012, 125,000 shares of Mr.Jianbao Wang’ restricted stock,83,333 shares of Mr.Gang Wei’s restricted stock and 41,667 shares of Mr.Renrui Tang’s restricted stock were vested. For the three months ended March 31, 2012 and 2011, $153,103 and $9,111 were recorded as compensation expense in the Company’s income statements, respectively. For the six months ended March 31, 2012 and 2011, $700,603 and $41,282 were recorded as compensation expense in the Company’s income statements, respectively. The following is a summary of the stock options activity: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left">   </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="10%"> Number of </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="10%"> Weighted-Average </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="10%"> Aggregate </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left">   </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="10%"> Options </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="10%"> Exercise </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="10%"> Intrinsic </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left">   </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="10%"> Outstanding </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="10%"> Price </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="10%"> Value </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Outstanding at October 1, 2011 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="10%"> 50,000 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="10%">  6.90 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="10%">  - </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Granted </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="10%"> - </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="10%"> - </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="10%"> - </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Forfeited </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="10%"> - </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="10%"> - </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="10%"> - </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Exercised </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="10%"> - </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="10%"> - </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="10%"> - </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Outstanding at March 31, 2012 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="10%"> 50,000 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="10%"> 6.90 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="10%"> - </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Exercisable at March 31,2012 </td> <td align="left" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="10%"> 50,000 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="10%"> 6.90 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="10%"> - </td> <td align="left" valign="bottom" width="2%"> </td> </tr> </table> Following is a summary of the status of options outstanding at March 31, 2012: Outstanding and Exercisable Options <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left"> </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> Average </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> Remaining </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Exercise Price </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> Number </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> Contractual </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> Life </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> $6.00 </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 27,500 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 2.50 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> $8.00 </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 22,500 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 1.90 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Total </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 3px double rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 3px double rgb(0, 0, 0);" width="12%"> 50,000 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 2.23 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> </table> There is no aggregate intrinsic value of exercisable shares as of March 31, 2012.

Note 13 - Earnings per Share The Company reports earnings per share in accordance with the provisions of the accounting standard regarding ASC260 "Earnings per Share." This accounting standard requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution (using the treasury stock method) that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. Common stock equivalents represent the dilutive effect of the assumed exercise of the outstanding stock options and warrants, using the treasury stock method, at either the beginning of the respective period presented or the date of issuance, whichever is later, and only if the common stock equivalents are considered dilutive based upon the Company’s net income (loss) position at the calculation date. The following is a reconciliation of the basic and diluted earnings per share computation for the three and six months ended March 31, 2012 and 2011: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left">   </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" width="27%"> Three months ended March 31, </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Basic earnings per share </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> 2012 </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> 2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left">   </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Net income attributable to holders of common shares </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 1,770,636 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  7,569,446 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Basic weighted average number of common shares outstanding </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 36,083,940 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 35,623,376 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Basic earnings per share </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  0.05 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  0.21 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> </table> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left">   </td> <td align="left" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" width="27%"> Three months ended March 31, </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Dilutive earnings per share </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> 2012 </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> 2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left">   </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Net income attributable to holders of common shares </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  1,770,636 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  7,569,446 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Basic weighted average number of common shares outstanding </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 36,083,940 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 35,623,376 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Warrants </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Stock compensation </td> <td align="left" valign="bottom" width="1%"> </td> <td align="left" valign="bottom" width="12%"> </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="left" valign="bottom" width="12%"> </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Dilutive weighted average number of common shares outstanding </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 36,083,940 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 35,678,277 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Dilutive earnings per share </td> <td align="left" valign="bottom" width="1%"> </td> <td align="left" valign="bottom" width="12%"> </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="left" valign="bottom" width="12%"> </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff">   </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  0.05 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  0.21 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> </table> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left">   </td> <td align="left" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" width="27%"> Six months ended March 31, </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Basic earnings per share </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> 2012 </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> 2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left">   </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Net income attributable to holders of common shares </td> <td align="left" bgcolor="#e6efff" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" width="12%">  9,969,894 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" width="12%">  13,977,605 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> </table> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left"> Basic weighted average number of common shares outstanding </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 35,976,211 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 35,132,917 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#E6EFFF"> Basic earnings per share </td> <td align="left" bgcolor="#E6EFFF" width="1%"> $ </td> <td align="right" bgcolor="#E6EFFF" width="12%">  0.28 </td> <td align="left" bgcolor="#E6EFFF" width="2%"> </td> <td align="left" bgcolor="#E6EFFF" width="1%"> $ </td> <td align="right" bgcolor="#E6EFFF" width="12%">  0.40 </td> <td align="left" bgcolor="#E6EFFF" width="2%"> </td> </tr> </table> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left">   </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" width="27%"> Six months ended March 31, </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Dilutive earnings per share </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> 2012 </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> 2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left">   </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Net income attributable to holders of common shares </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  9,969,894 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  13,977,605 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Basic weighted average number of common shares outstanding </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 35,976,211 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 35,132,917 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Warrants </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Stock compensation </td> <td align="left" valign="bottom" width="1%"> </td> <td align="left" valign="bottom" width="12%"> </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="left" valign="bottom" width="12%"> </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Dilutive weighted average number of common shares outstanding </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 35,976,211 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 35,216,138 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Dilutive earnings per share </td> <td align="left" valign="bottom" width="1%"> $ </td> <td align="right" valign="bottom" width="12%"> 0.28 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> $ </td> <td align="right" valign="bottom" width="12%"> 0.40 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> </table> No options in the three and six months ended March 31, 2012. The 50,000 option shares granted to its independent directors and 500,000 restricted stock granted to its officers in 2012 were anti-dilutive for the three and six months ended March 31, 2012 as the average stock price was lower than the exercise prices. No dilution of shares from options or restricted stocks for the three and six months ended March 31, 2011

Note 14 – Segment reporting The Company sells valves which are used by customers in various industries. The production process, class of customer, selling practice and distribution process are the same for all valves. The Company’s chief operating decision-makers (i.e. chief executive officer and his direct reports) review financial information presented on a consolidated basis, accompanied by disaggregated information about revenues by product lines for purposes of allocating resources and evaluating financial performance. There are no segment managers who are held accountable for operations, operating results and plans for levels or components below the consolidated unit level. Based on qualitative and quantitative criteria established by the accounting standard regarding “Disclosures about Segments of an Enterprise and Related Information”, the Company considers itself to be operating within one reportable segment. In accordance with the enterprise-wide disclosure requirements of the accounting standard, the Company’s net revenue from external customers by main product lines (based upon primary markets defined by the Chinese Valve Industry Association) and by geographic areas is as follows (unaudited): <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left"> (in thousands) </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" width="27%"> Three Months Ended March 31, </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> 2012 </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> 2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" width="27%"> (Unaudited) </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Power Supply </td> <td align="left" bgcolor="#e6efff" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" width="12%">  7,282 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" width="12%">  12,646 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Petrochemical and Oil </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 9,986 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 13,945 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Water Supply </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 5,874 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 8,059 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Metallurgy </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 1,551 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> </td> <td align="right" width="12%"> 1,608 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Other </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 13,721 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="right" bgcolor="#e6efff" width="12%"> 5,696 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Total sales revenue </td> <td align="left" width="1%"> $ </td> <td align="right" width="12%">  38,413 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> $ </td> <td align="right" width="12%">  41,954 </td> <td align="left" width="2%"> </td> </tr> </table> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left"> (in thousands) </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" width="27%"> Three Months Ended March 31, </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> 2012 </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> 2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" width="27%"> (Unaudited) </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Domestic sales in the PRC </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  35,305 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  39,720 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> International sales </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 3,108 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 2,234 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Total sales revenue </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  38,413 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  41,954 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> </table> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left"> (in thousands) </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" width="27%"> Six Months Ended March 31, </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> 2012 </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> 2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" width="27%"> (Unaudited) </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Power Supply </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  20,307 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  25,811 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Petrochemical and Oil </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 31,024 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 32,234 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Water Supply </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 13,402 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 17,137 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Metallurgy </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 4,944 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 4,371 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Other </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 24,455 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 14,730 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Total sales revenue </td> <td align="left" valign="bottom" width="1%"> $ </td> <td align="right" valign="bottom" width="12%">  94,132 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> $ </td> <td align="right" valign="bottom" width="12%">  94,283 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> </table> <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left"> (in thousands) </td> <td align="left" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" width="27%"> Six Months Ended March 31, </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> 2012 </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> 2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> </td> <td align="left" width="1%"> </td> <td align="center" colspan="4" nowrap="nowrap" width="27%"> (Unaudited) </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Domestic sales in the PRC </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  87,679 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  89,870 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> International sales </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 6,453 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 4,413 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Total sales revenue </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  94,132 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  94,283 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> </table>

Note 3 – Accounts receivable, net Accounts receivable consists of the following: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left">   </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> March 31, 2012 </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> September 30, 2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left">   </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Total accounts receivable </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  165,284,335 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  134,290,696 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Allowance for bad debts </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> (8,134,227 </td> <td align="left" valign="bottom" width="2%"> ) </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> (4,052,398 </td> <td align="left" valign="bottom" width="2%"> ) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Accounts receivable, net </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 157,150,108 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 130,238,298 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Accounts receivable – non-current retainage </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> (4,484,135 </td> <td align="left" valign="bottom" width="2%"> ) </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> (5,724,024 </td> <td align="left" valign="bottom" width="2%"> ) </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Accounts receivable (including related party) – current </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="12%">  152,665,973 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="12%">  124,514,274 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> </table> As of March 31, 2012 and September 30, 2011, retainage held by customers included in the Company’s accounts receivable was as follows: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left">   </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> March 31, 2012 </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> September 30, 2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left">   </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Retainage </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="left" bgcolor="#e6efff" width="12%"> </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" width="1%"> </td> <td align="left" bgcolor="#e6efff" width="12%"> </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Current </td> <td align="left" width="1%"> $ </td> <td align="right" width="12%">  18,800,086 </td> <td align="left" width="2%"> </td> <td align="left" width="1%"> $ </td> <td align="right" width="12%">  13,854,814 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Non-current </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 4,484,135 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> 5,724,024 </td> <td align="left" bgcolor="#e6efff" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Total retainage </td> <td align="left" style="border-bottom: 3px double rgb(0, 0, 0);" width="1%"> $ </td> <td align="right" style="border-bottom: 3px double rgb(0, 0, 0);" width="12%">  23,284,221 </td> <td align="left" width="2%"> </td> <td align="left" style="border-bottom: 3px double rgb(0, 0, 0);" width="1%"> $ </td> <td align="right" style="border-bottom: 3px double rgb(0, 0, 0);" width="12%">  19,578,838 </td> <td align="left" width="2%"> </td> </tr> </table> The following represents the changes in the allowance for doubtful accounts: <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left">   </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> March 31, 2012 </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> September 30,2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left">   </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Balance, beginning of the period </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  4,052,398 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  998,739 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Additions to the reserve </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 4,020,804 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 2,974,399 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Foreign currency translation adjustment </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 61,025 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 79,260 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Balance, end of the period </td> <td align="left" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="1%"> $ </td> <td align="right" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="12%">  8,134,227 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="1%"> $ </td> <td align="right" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="12%">  4,052,398 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> </table>

Note 4 – Inventories, net <table border="0" cellpadding="0" cellspacing="0" style="border-color: black; font-size: 10pt; border-collapse: collapse;" width="100%"> <tr valign="top"> <td align="left">   </td> <td align="left" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> March 31, 2012 </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="1%"> </td> <td align="center" nowrap="nowrap" style="border-bottom: 1px solid rgb(0, 0, 0);" width="12%"> September 30,2011 </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left">   </td> <td align="left" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="center" nowrap="nowrap" width="2%"> </td> <td align="center" nowrap="nowrap" width="1%"> </td> <td align="center" nowrap="nowrap" width="12%"> (unaudited) </td> <td align="left" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Raw materials </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  7,592,385 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> $ </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%">  5,438,464 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Work-in-progress </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 9,486,444 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 9,088,975 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Finished goods </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 11,059,774 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" valign="bottom" width="12%"> 8,613,573 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Semi-finished products </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 1,871,458 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 1,417,185 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Inventory in transit </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> 1,705,007 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left"> Total </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 30,010,061 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" valign="bottom" width="1%"> </td> <td align="right" valign="bottom" width="12%"> 26,263,204 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> <tr valign="top"> <td align="left" bgcolor="#e6efff"> Less: Inventory allowance </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> (1,959,843 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> ) </td> <td align="left" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="1%"> </td> <td align="right" bgcolor="#e6efff" style="border-bottom: 1px solid rgb(0, 0, 0);" valign="bottom" width="12%"> (2,394,319 </td> <td align="left" bgcolor="#e6efff" valign="bottom" width="2%"> ) </td> </tr> <tr valign="top"> <td align="left"> Inventories, net </td> <td align="left" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="1%"> $ </td> <td align="right" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="12%">  28,050,218 </td> <td align="left" valign="bottom" width="2%"> </td> <td align="left" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="1%"> $ </td> <td align="right" style="border-bottom: 3px double rgb(0, 0, 0);" valign="bottom" width="12%">  23,868,885 </td> <td align="left" valign="bottom" width="2%"> </td> </tr> </table> As of March 31, 2012 and September 30, 2011, the management of the Company estimated its inventories at the lower of cost or market, determined on a weighted average method, or net realizable value. Per the estimation, the Company recognized $1,959,843 and $2,394,319 inventory allowance for slow moving inventory as of March 31, 2012 and September 30, 2011, respectively, most of which were slow moving commodity valves produced for general usage whose technical specification was obsolete. The Company recognized $0 and $213,229 inventory impairment loss as cost of sales for the three months periods ended March 31, 2012 and 2011, respectively; $0 and $920,065 inventory impairment loss as cost of sales for the six months periods ended March 31, 2012 and 2011, respectively. During the six months periods ended March 31, 2012, the Company disposed some of slow moving inventories, which made the inventory allowance decrease $434,476 as of March 31, 2012.