INCOME TAXES

The income tax (provision) benefit for the nine months and three months ended March 31, 2014 and 2013, are as follows:

	For the nine months ended March 31,				For the three months ended March 31,
	2014		2013		2014		2013

Current
USA	$	(34,659)	$	-	$	(34,659)	$	24,100
China		(122)		-		(122)		-
		(34,781)		-		(34,781)		24,100
Deferred
USA		40,700		(64,500)		35,967		(9,500)
China		-		-		-		-
		40,700		(64,500)		35,967		(9,500)
Total	$	5,919	$	(64,500)	$	1,186	$	14,600

Deferred tax assets are comprised of the following:

	March 31,		June 30,
	2014		2013

Allowance for doubtful accounts (A)	$	208,000	$	301,000
Stock-based compensation		408,000		307,000
Net operating loss		842,000		443,000
Total deferred tax assets		1,458,000		1,051,000
Valuation allowance (A)		(1,312,200)		(945,900)
Deferred tax assets, net - long-term (A)	$	145,800	$	105,100

Note (A): Net balance was not significant, therefore, considered as part of long-term portion

Operations in the US have incurred a cumulative net operating loss of approximately $1,605,124 as of March 31, 2014, 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, stock compensation expenses and net operating loss amounting to $208,000, $408,000 and $842,000 have been recorded respectively. 90% of the deferred tax assets balance has been provided as valuation allowance as of March 31, 2014 based on management’s estimate of realizability.