NOTE—10 INCOME TAXES

NFEC is registered in the State of Delaware and is subject to the tax laws of United States of America.

As of June 30, 2014, the operation in the United States of America incurred $3,090,759 of cumulative net operating losses which can be carried forward to offset future taxable income. The net operating loss carryforwards begin to expire in 2033, if unutilized. The Company has provided for a full valuation allowance against the deferred tax assets of $1,050,858 on the expected future tax benefits from the net operating loss carryforwards as the management believes it is more likely than not that these assets will not be realized in the future.

The Company’s subsidiaries operating in the PRC are subject to the Corporate Income Tax Law of the People’s Republic of China at a unified income tax rate of 25%. The reconciliation of income tax rate to the effective income tax rate for the six months ended June 30, 2014 and 2013 is as follows:

	Six months ended June 30,
	2014			2013

(Loss) income before income taxes from PRC operation	$	(275,766)		$	120,384
Statutory income tax rate		25	%		25	%
Income tax expense at statutory rate		68,942			30,096
Effect from non-deductible items		(60,430)			41,230
Tax adjustments		1,608			(38,219)

Income tax expense	$	10,120		$	33,107