7. INCOME TAXES

The income tax (provision) benefit for the quarter ended September 30, 2013 and 2012 are as follows:

	For the three months ended September 30,
	2013		2012

Current
USA	$	-	$	(24,200)
China		-		-
		-		(24,200)
Deferred
USA		22,500		(133,000)
China		-		-
		22,500		(133,000)
Total	$	22,500	$	(157,200)

Deferred tax assets are comprised of the following:

	September 30,		June 30,
	2013		2013

Allowance for doubtful accounts	$	301,000	$	301,000
Stock-based compensation		307,000		307,000
Net operating loss		668,000		443,000
Total deferred tax assets		1,276,000		1,051,000
Valuation allowance		1,148,400		945,900
Deferred tax assets, net-Long term	$	127,600	$	105,100

Operations in the USA have incurred a cumulative net operating loss of approximately $1,434,000 as of September 30, 2013, which may be available to reduce future taxable income. This carry-forward will expire if not utilized by 2034. Other deferred tax assets relating to the allowance for doubtful accounts and stock compensation expenses amounting to $301,000 and $307,000 have been recorded respectively. 90% of the deferred tax assets balance has been provided as valuation allowance as of September 30, 2013 based on management’s estimate of realizability.