INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2012

INCOME TAXES (Tables)

Current Taxes

Under current tax law in the PRC, the Company is and will be subject to the following enterprise income tax rates:

	Enterprise Income Tax Rate
Year
2013	15%
2014 and after	25%

Provision For Income Taxes

The provision for income taxes consisted of the following:

	Years Ended December 31,
	2012	2011
Current	$    1,414,171	$    3,458,568
Deferred	(430,250)	(16,213)
Total income tax expense	$       983,921	$    3,442,355

Effective Income Tax Rate Reconciliation.

Following is a reconciliation of income taxes calculated at the federal statutory rate to the provision for income taxes:

	Years Ended December 31,
	2012	2011
Tax at statutory rate of 25%	$    1,400,395	$    5,677,999
Non-deductible stock-based compensation from
current and prior years	149,644	261,122
Effect of tax holiday	(655,947)	(2,330,566)
Other, primarily the effect of US tax rates	(70,471)	-
Change in valuation allowance	160,300	(166,200)
Income tax expense	$       983,921	$    3,442,355

Deferred Tax Assets and Liabilities.

The temporary differences which give rise to the deferred income tax assets and liability are as follows:

	December 31,
	2012	2011
Deferred income tax assets:
Allowance for doubtful trade receivables	$       664,492	$       530,461
Allowance for doubtful other receivables	7,482	5,838
Inventory obsolescence reserve	265,498	-
Expenses not deductible in current year	30,200	29,927
Share based compensation	45,777	172,911
U.S. net operating loss carry forwards	905,669	618,236
Total deferred income tax assets	1,919,118	1,357,373
Valuation allowance	(951,447)	(791,147)
Net deferred income tax asset	$       967,671	$       566,226
Deferred income tax liability:
Intangible assets	$         95,963	$       128,909