Ziyang Ceramics Corp

NOTE 15 - EARNINGS PER SHARE

On January 27, 2012, our common stock effected a 400 to 1 reverse split. As a result of the reverse stock split, each 400 shares of our common stock issued and outstanding, or held as treasury shares, immediately prior to the effective date of the reverse stock split became one share of our common stock on the effective date of the reverse stock split. No fractional shares of common stock were issued to any shareholder in connection with the reverse stock split and all fractional shares which might have otherwise be issuable as a result of the reverse stock split were rounded up to the nearest whole share.

Pursuant to ASC Section 260-10-45, basic income (loss) per common share is computed by dividing income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted income (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the income of the company, subject to anti-dilution limitations.

In conjunction with the Ziyang Ceramics reverse acquisition of June 30, 2011, we issued two convertible promissory notes to Ziyang Ceramics former shareholders and to China Direct Investments, Inc. on June 30, 2011, that were convertible into 7,369,966 shares and 1,538,223 shares of our common stock, respectively. Conversion was effective on January 27, 2012. As a result, these shares were included in the calculation of basic and diluted earnings per share.

        For the three and six months ended June 30, 2012, outstanding warrants to purchase common stock, which could have resulted in the issuance of 131,194 additional common shares were anti-dilutive as the exercise price of the warrants exceeded the average market price of our stock and, accordingly, has not been included in the earnings per share calculation for the three and six months ended June 30, 2012