Note 12 - Income Taxes

12 Months Ended

Apr. 30, 2014

Notes

Note 12 - Income Taxes

NOTE 12 - INCOME TAXES

We account for income taxes under ASC 740, “Expenses – Income Taxes”. ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry forwards. ASC 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets.

Our subsidiaries in the PRC are governed by the Income Tax Law of the People’s Republic of China concerning Foreign Investment Enterprises and Foreign Enterprises and local income tax laws (the PRC Income Tax Law”). Pursuant to the PRC Income Tax Law, our PRC subsidiaries are subject to tax at a maximum statutory rate of 25% (inclusive of state and local income taxes).

The components of loss before income tax consisted of the following:

	Fiscal Years Ended April 30,
	2014	2013
U.S. Operations	$      (376,973)	$   (1,947,072
Chinese Operations	(2,688,848)	(2,063,656
Total	$   (3,065,821)	$   (4,010,728

The table below summarizes the reconciliation of our income tax provision (benefit) computed at the statutory U.S. Federal rate and the actual tax provision:

	Fiscal Years Ended April 30,
	2014	2013
Income tax benefit at federal statutory rate	$   (1,042,379)	$   (1,351,000
State income taxes, net of federal benefit	(122,633)	(159,000
Permanent differences	56,553	541,000
U.S. tax rate in excess of foreign tax rate	349,550	264,000
Valuation allowances	758,909	742,000
Tax provision	$                     0	$          37,000

We have a net operating loss (“NOL”) carry forward for U.S. income tax purposes aggregating approximately $7,500,000 at April 30, 2014 expiring through the year 2034. subject to the Internal Revenue Code Section 382, which places a limitation on the amount of taxable income that can be offset by net operating losses after a change in ownership. In addition, to U.S. NOL’s, we have a PRC NOL for our Chinese operations as of April 30, 2014 of approximately $15,300,000, that expires in 2019.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Included in the deferred tax asset is the aforementioned NOL and the tax benefit associated with the issuance of stock-based compensation. The realization of the deferred tax assets is dependent on future taxable income, in addition to the exercise of stock options; we are not able to predict if such future taxable income will be more likely than not sufficient to utilize the benefit. As such, we do not believe the benefit is more likely than not to be realized and we recognize a full valuation allowance for those deferred tax assets. Our deferred tax assets as of April 30, 2014 and 2013 are as follows:

	Fiscal Years Ended April 30,
	2014	2013
Deferred tax assets from NOL carry forwards	$     6,700,000	$     5,900,000
Total deferred tax asset	6,700,000	5,900,000
Valuation allowance	(6,700,000)	(5,900,000
Deferred tax asset, net of allowance	$                     0	$                     0