PROVISION FOR INCOME TAXES

12 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

PROVISION FOR INCOME TAXES

NOTE O - PROVISION FOR INCOME TAXES

Deferred income taxes are determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes are measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

Deferred tax assets consist of the following at: 

	June 30,
	2015			2014
Timing difference related to inventory provisions	$	-		$	1,231
Net operating losses		3,371,958			2,567,252
Valuation allowance		(3,371,958	)		(2,567,252	)
Deferred income tax asset	$	-		$	1,231

The deferred tax asset is the result of an inventory provision and related reserve. Under Chinese tax laws, the Company are not entitled to a deduction for the provision until the inventory is completely discarded. Accordingly, the liability has been recorded offset by a deferred tax asset representing a timing difference.

The Company has a net operating loss carry forward as follows: 

	June 30,
	2015		2014
China	$	9,290,901	$	7,361,710
United States		4,196,931		2,907,296
	$	13,487,832	$	10,269,006

The operating losses are available to offset future taxable income. The China net operating loss carryforwards can only be carried forward for five years. The Company does not file a consolidated tax return in China. Therefore, the profitability of the individual Chinese companies will determine the utilization of the carryforward losses. During the year ended June 30, 2015, net operating losses of $658,668 relating to the Company’s Chinese operations expired. The U.S. carryforward losses are available to offset future taxable income for the succeeding 20 years and commence expiring in the year 2027.

The components of income before taxes are as follows: 

	For the Year Ended June 30,
	2015				2014
China	$	(2,614,859	)	$	(3,630,972	)
United States		(1,289,635	)		(1,130,950	)
	$	(3,904,494	)	$	(4,761,922	)

The provision for income taxes consists of the following:

	For the Year Ended June 30,
	2015		2014
China	$	-	$	-
United States		-		-
	$	-	$	-

A reconciliation of the Company’s effective tax rate as a percentage of income before taxes and Federal statutory rate for the years ended June 30, 2015 and 2014 respectively, is as follows:

	June 30,
	2015			2014
Federal statutory rate		(34.0	)%		(34.0	)%
State income taxes, net of federal benefit		3.3			3.3
Valuation allowance		30.7			30.7
Earnings taxed at other than United States statutory rate		-			-
Effective tax rate		-	%		-	%