The Company’s Chinese subsidiaries are governed by the Income Tax Law of the People’s Republic of China concerning private-run enterprises, which are generally subject to tax at a statutory rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments.

The reconciliation of income tax at the U.S. statutory rate to the Company’s effective tax rate is as follows:

	Year Ended June 30,
	2013		2012

Tax at U.S. Statutory rate	$	(6,051,716)	$	(5,557,214)
Tax rate difference between China and U.S.		541,696		(46,623)
Change in Valuation Allowance		1,852,280		276,931
Net operating loss expired		1,786,650		1,868,334
Stock and option compensation		50,892		108,918
Impairment loss on goodwill		1,820,198		3,349,654
Effective tax rate	$	-	$	-

	Year Ended June 30,
	2013		2012

Current	$	-	$	-
Deferred - U.S.		(176,469)		(393,763)
Deferred – China		(1,532,812)		116,832
Valuation allowance - U.S.		176,469		393,763
Valuation allowance – China		1,532,812		(116,832)
Total	$	-	$	-

The tax effects of temporary differences that give rise to the Company’s net deferred tax asset as of June 30, 2013 and 2012 are as follows:


	2013		2012

Net operating loss carryforward - China	$	2,930,676	$	1,863,405
Net operating loss carryforward - US		1,614,106		1,437,637
Allowance for doubtful accounts		427,752		532,913
Others		672,369		101,667
		5,644,903		3,935,622
Less: valuation allowance- U.S.		(1,614,106)		(1,437,637)
valuation allowance- China.		(4,030,797)		(2,497,985)
Deferred tax assets	$	-	$	-

As of June 30, 2013, the Company has a full valuation allowance for its deferred tax asset balance related to China and the US. The Company restated the prior year financial statements to provide a full valuation allowance for deferred tax assets. The Company’s loss carry forwards for the past 5 years are a significant amount of the deferred tax assets and due to certain negative indicators that were present as of June 30, 2012, the Company determined it was appropriate under US GAAP to restate the prior year financial statements and provide a 100% valuation allowance for the deferred tax assets.

For the year ended June 30, 2013 and 2012, the Company did not have any interest and penalties associated with tax positions. As of June 30, 2013 and 2012, the Company did not have any significant unrecognized uncertain tax positions.