15. Commitments A. Operating lease commitments The Company leases cars from the Company s shareholder, Mr. Xinfeng Nie. The impact to the Company s results of operations, in the form of lease expense, for the nine and twelve months ended September 30, 2011 and December 31, 2010, were $40,349 and $13,234, respectively. The Company s lease contract with the related party calls for operating lease commitments as follows: For the nine months ending September 30: Fiscal Years Commitments 2011 $ 23,764 2012 54,146 2013 54,146 2014 54,146 2015 40,610 $ 226,812 The Company leases offices from various outside parties. The impact to the Company s results of operations, in the form of rent expense, for the nine and twelve months ended September 30, 2011 and December 31, 2010, were $38,433 and $13,930, respectively. The Company does not have long term contractual agreements with such outside parties. Lease contracts are renegotiated individually on a year-to-year basis. The Company s current lease contracts with the outside parties call for an operating lease commitment as follows: For the ninse months ending September 30: Fiscal Year Commitment 2011 $ 10,315 2012 12,443 $ 22,758 B. Statutory reserve commitment In accordance with PRC laws, statutory reserve refers to the appropriation from net income, to the account statutory reserve, to be used for future company development, recovery of losses, and increase of capital, as approved, to expand production or operations. Under the applicable PRC laws, a PRC enterprise operating at a profit must appropriate, on an annual basis, an amount equal to 10% of its profit until the reserve reaches 50% of its registered capital. At September 30, 2011, Ding Neng Bio-tech has appropriated sufficient fund to the statutory reserve account. September 30, 2011 December 31, 2010 PRC subsidiaries registered capital - Ding Neng Bio-tech $ 2,920,298 $ 953,340 Statutory reserve ceiling based on 50% of PRC registered capital 1,460,149 476,670 Less: Retained earnings appropriated to statutory reserv