10-Q

U. S. Securities and Exchange Commission

Washington, D. C. 20549

FORM 10-Q

[X]     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

             For the quarterly period ended December 31, 2012

[   ]    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File No. 0-53254

JINZANGHUANG TIBET PHARMACEUTICALS, INC. (Name of Registrant in its Charter)
Delaware	26-2443288
(State of Other Jurisdiction of incorporation or organization)	(I.R.S.) Employer I.D. No.)
Leling Economic Development Zone, Kaiyuan East Blvd., Dezhou,  Shandong Province, P.R. China 253600
(Address of Principal Executive Offices)

Issuer's Telephone Number: 86-534-2111-962

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X]  No [    ]     

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)  Yes [X]    No [    ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  Yes [ ]   No [X]  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One)  

Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting company [X]

APPLICABLE ONLY TO CORPORATE ISSUERS:  Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date:

February 13, 2013

Common Voting Stock: 50,665,063

JINZANGHUANG TIBET PHARMACEUTICALS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE FISCAL QUARTER ENDED DECEMBER 31, 2012

TABLE OF CONTENTS

		Page No
Part I	Financial Information
Item 1.	Financial Statements (unaudited):
	Condensed Consolidated Balance Sheets – December 31, 2012 and June 30, 2012	2
	Condensed Consolidated Statements of Operations and Comprehensive Income
	for the Three and Six Months Ended December 31, 2012 and 2011	3
	Condensed Consolidated Statements of Cash Flows – for the
	Six Months Ended December 31, 2012 and 2011	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and
	Results of Operations	13
Item 3	Quantitative and Qualitative Disclosures about Market Risk	18
Item 4.	Controls and Procedures	18
Part II	Other Information
Item 1.	Legal Proceedings	19
Items 1A.	Risk Factors	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3.	Defaults upon Senior Securities	19
Item 4.	Mine Safety Disclosures	19
Item 5.	Other Information	19
Item 6.	Exhibits	19

JINZANGHUANG TIBET PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
	December 31,		June 30,
	2012		2012
CURRENT ASSETS:
Cash	$	13,766,353	$	8,584,928
Accounts receivable		1,369,372		899,957
Prepaid expenses and other current assets		22,636		3,997
Deferred tax assets		-		10,974
TOTAL CURRENT ASSETS		15,158,361		9,499,856
Property and equipment, net of accumulated depreciation		396,294		403,477
Intangible assets, net of accumulated amortization		187,775		188,612
TOTAL  ASSETS	$	15,742,430	$	10,091,945
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Due to related party	$	36,843	$	36,630
Accrued expenses and other current liabilities		908,456		595,669
TOTAL CURRENT LIABILITIES AND TOTAL LIABILITIES		945,299		632,299
EQUITY:
Common stock, $0.001 par value, 300,000,000 shares authorized, 50,665,063 and 40,665,063 shares issued and outstanding at December 31, 2012 and June 30, 2012, respectively		50,665		40,665
Additional paid-in capital		2,254,427		1,264,427
Retained earnings		11,528,721		7,493,615
Accumulated other comprehensive income		275,018		189,704
TOTAL STOCKHOLDERS' EQUITY		14,108,831		8,988,411
NON-CONTROLLING INTERESTS		688,300		471,235
TOTAL EQUITY		14,797,131		9,459,646
TOTAL LIABILITIES AND EQUITY	$	15,742,430	$	10,091,945

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

JINZANGHUANG TIBET PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Unaudited)
	Three months Ended December 31,		Six months Ended December 31,
	2012	2011	2012	2011

REVENUE	$	4,044,432	$	2,659,182	$	7,378,766	$	5,223,765
COST OF REVENUE
Cost of services		632,540		441,349		1,146,249		675,181
Business and sales related tax		226,726		148,830		413,686		278,142
		859,266		590,179		1,559,934		953,323
GROSS PROFIT		3,185,166		2,069,003		5,818,832		4,270,442
OPERATING EXPENSES
General and administrative expenses		90,930		72,514		161,590		187,153
OPERATING INCOME		3,094,235		1,996,489		5,657,242		4,083,289
OTHER INCOME
Interest income		9,771		6,348		18,368		7,402
OPERATING INCOME		3,104,007		2,002,837		5,675,610		4,090,691
INCOME TAX		786,004		397,729		1,427,958		873,295
NET INCOME		2,318,003		1,605,108		4,247,653		3,217,396
LESS: NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		116,254		74,695		212,548		157,371
NET INCOME ATTRIBUTABLE TO THE COMPANY		2,201,748		1,530,413		4,035,105		3,060,025
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain, net of tax		115,890		56,457		89,832		128,076
COMPREHENSIVE INCOME		2,317,639		1,586,870		4,124,938		3,188,101
LESS: OTHER COMPREHENSIVE INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS		5,820		2,823		4,518		7,516
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY	$	2,311,818	$	1,584,047	$	4,120,420	$	3,180,585
Basic and diluted earnings per common share	$	0.04	$	0.04	$	0.08	$	0.08
Weighted average number of shares outstanding		50,665,063		40,665,063		48,980,280		40,665,063

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

JINZANGHUANG TIBET PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
	SIX MONTHS ENDED DECEMBER 31,
	2012			2011
OPERATING ACTIVITIES:
Net income	$	4,247,653		$	3,217,396
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		11,671			11,300
Changes in operating assets and liabilities:
Accounts receivable		(463,773	)		(408,616	)
Contract deposit		-			149,106
Prepaid expense		(18,614	)		-
Deferred tax assets		10,974			-
Accrued expenses and other current liabilities		308,760			(422	)
NET CASH PROVIDED BY OPERATING ACTIVITIES		4,096,671			2,968,764
FINANCING  ACTIVITIES:
Shares Issued		1,000,000			-
Proceeds from related party loan		-			7,507
NET CASH PROVIDED BY FINANCING ACTIVITIES		1,000,000			7,507
EFFECT OF EXCHANGE RATE ON CASH		84,754			96,097
INCREASE IN CASH & AND CASH EQUIVALENTS		5,181,425			3,072,368
CASH & CASH EQUIVALENTS, BEGINNING BALANCE		8,584,928			2,176,655
CASH & CASH EQUIVALENTS, ENDING BALANCE	$	13,766,353		$	5,249,023
Supplemental disclosures:
Cash paid for income tax	$	1,139,610		$	482,943
Cash paid for interest	$	-		$	-

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

JINZANGHUANG TIBET PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

(Unaudited)

1              BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES

Business description

Jinzanghuang Tibet Pharmaceuticals, Inc. (“the Company”) is engaged in providing consulting services to facilitate the distribution of Tibetan pharmaceutical and nutraceutical products in the People’s Republic of China (“PRC”).  The Company’s operations are carried out through Beijing Taibodekang Consulting Co., Ltd. (“BTC”) and Leling Jinzanghuang Biotech Co., Ltd. (Leling JZH).

On January 12, 2009 the Company  acquired all of the outstanding capital stock of Tibet Medicine, Inc. (“TMI”), a Delaware corporation, in exchange for 36,401,462 shares of its common stock issued to the shareholders of TMI, representing 89.6% of the issued and outstanding shares of the Company. TMI was organized under the laws of Delaware on September 4, 2008 and is the 100% owner of the registered capital of BTC. BTC is a Wholly Foreign Owned Entity that was organized under the laws of the People’s Republic of China on December 5, 2008. For accounting purposes, the above transaction was accounted for as a reverse merger. TMI became the surviving entity for accounting purposes, whereas the Company is recognized as the surviving entity for legal purposes.

On January 4, 2009, BTC entered into four ten-year agreements (the “Entrusted Management Agreements”) with Leling JZH, which was incorporated under the laws of PRC as a limited liability company on November 20, 2008, and with the registered equity holders of Leling JZH.  Three of the agreements were amended as of July 24, 2009.  The purpose of these agreements is to transfer to BTC full responsibility for the management of Leling JZH, as well as 95% of the financial benefits that arise from the business of Leling JZH. As a result, BTC now has control over the business of Leling JZH and is considered a variable interest entity.  For that reason, the results of operations of Leling JZH have been included with the Company’s condensed consolidated financial statements.

 Basis of presentation

The unaudited consolidated financial statements presented herein include the accounts of Jinzanghuang Tibet Pharmaceuticals, Inc., its wholly owned subsidiary (BTC) and variable interest entity (Leling JZH).  All inter-company transactions and balances among the Company and its subsidiaries are eliminated upon consolidation.  In the opinion of management, all adjustments and normal recurring accruals considered necessary for a fair statement of the results for the period have been included.

The accompanying consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and are presented in U.S. Dollars.

Uses of estimates in the preparation of financial statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during each reporting period.  Actual results could differ from those estimates.

Variable Interest Entity

Effective January 1, 2009, the Consolidation Topic ASC 810-10-45-16 revised the accounting treatment for non-controlling minority interests of partially-owned subsidiaries.  Non-controlling minority interests represent the allocation of earnings to the VIE owners who are not at risk for the majority of losses of the VIE, which have been accounted for by using the consolidation method of accounting.

5

JINZANGHUANG TIBET PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

(Unaudited)

1              BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Variable Interest Entity (Continued)

The accounts of Leling JZH have been consolidated with the accounts of the Company because Leling JZH is a variable interest entity with respect to Beijing Taibodekang, which is a wholly-owned subsidiary of the Company.  Beijing Taibodekang has a contractual obligation to provide management services to Leling JZH, and the management of the operations of Leling JZH is carried out by Company personnel in fulfillment of that obligation.  Beijing Taibodekang also has a contractual obligation to reimburse Leling JZH for any losses incurred as a result of the operations of Leling JZG, and the Company’s principal shareholders caused funds to be contributed to Leling JZG during the years ended June 30, 2010 and 2009 in satisfaction of that obligation.  The carrying amount and classification of Leling JZH’s assets and liabilities included in the Condensed Consolidated Balance Sheets are as follows:

	December 31, 2012		June 30, 2012
Total current assets	$	15,079,919	$	9,418,343
Total assets		15,663,989		10,010,432
Total current liabilities		13,691,003		8,261,531
Total liabilities		13,691,003		8,261,531

The amounts shown in the above table include $12,788,098 of intercompany payables as of December 31, 2012 and $7,671,854 of intercompany payables as of June 30, 2012 that have been eliminated in consolidating Leling JZH with the Company.

The Consulting Agreement between Leling Jinzanghuang and Beijing Taibodekang requires that, in payment for the consulting services provided by Beijing Taibodekang, Leling Jinzanghuang will pay fees to Beijing Taibodekang equal to:

● 10,000 RMB per month, plus

● 95% of the annual net profit of Leling Jinzanghuang.

The Consulting Agreement also provides, however, that Beijing Taibodekang will reimburse Leling Jinzanghuang for the amount of any net loss incurred by Leling Jinzanghuang during the period when it is managed by Beijing Taibodekang.

Revenue recognition

The Company recognizes revenue from provision of services to sauna stores based on units of the sauna store’s product usage, which is the contractual method of determining the right to revenue. The revenue is recognized at 35% or 40% of sauna stores’ revenue from sale of Shandong JZH products. The percentage is depending on the location of the sauna store.  Payments are made to the Company directly from the sauna stores a month after the end of the month in which the sales occurred.

Cash

The Company maintains cash with financial institutions in the People’s Republic of China (“PRC”) which are not insured or otherwise protected.  Should any of these institutions holding the Company’s cash become insolvent, or if the Company is unable to withdraw funds for any reason, the Company could lose the cash on deposit with that institution.

6

JINZANGHUANG TIBET PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

(Unaudited)

1              BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Accounts Receivable

Accounts receivable represent receivables from customers. Reserves for bad debts are based on a combination of current sales, historical charge-offs and specific accounts identified as high risk. Uncollectible accounts receivable are charged against the allowance for doubtful accounts when all reasonable efforts to collect the amounts due have been exhausted. Such allowances, if any, would be recorded in the period the impairment is identified. There is no bad debt expense recorded during the six months ended December 31, 2012 or the year ended June 30, 2012. The balance of allowance for bad debts was $0 and $0 ended December 31, 2012 and June 30, 2012, respectively. The accounts receivable balance as of December 31, 2012 is in compliance with the Company’s credit terms.

Property and equipment

Property and equipment are recorded at cost. Depreciation is provided in amounts sufficient to amortize the cost of the related assets over their useful lives using the straight line method.

Long-Lived Assets and Other Acquired Intangible Assets

The Company reviews property and equipment and certain identifiable intangibles for impairment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If property and equipment and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair market value. The Company did not record any impairments during the six months ended December 31, 2012

Income tax

The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires the Company to use the assets and liability method of accounting for income taxes. Under the assets and liability method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between financial statement carrying amounts and the tax bases of existing assets and liabilities and operating loss and tax credit carry forward. Under this accounting standard, the effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized.

ASC 740-10, Accounting for Uncertainty in Income Taxes, defines uncertainty in income taxes, and the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.

Enterprise income tax

Under the Provisional Regulations of PRC Concerning Income Tax on Enterprises promulgated by the PRC, income tax is payable by enterprises at a rate of 25% of their taxable income.

7

JINZANGHUANG TIBET PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

(Unaudited)

1              BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Business Taxes and Sales-related Taxes

Pursuant to the tax law and regulations of PRC, Leling JZH is obligated to pay 5% of revenue for business taxes, and 7% and 4% (5% effective in May, 2011) of the annual business taxes paid as tax on maintaining and building cities and education additional fee, both of which belong to sales-related taxes. Sales-related taxes are recorded when revenue is recognized. For the three months ended December 31, 2012 and 2011, business taxes and sales-related taxes were $226,726 and $148,830, respectively. For the six months ended December 31, 2012 and 2011, business taxes and sales-related taxes were $413,686 and $278,142, respectively.

.

Stock-based compensation

The Company records stock-based compensation in accordance with the guidance in ASC Topic 718 which requires the Company to recognize expense related to the fair value of its share-based compensation. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method.

Currency translation

Since the Company operates primarily in the PRC, the Company’s functional currency is the Chinese Yuan (“RMB”).  The Company’s financial statements have been translated into the reporting currency, the United States Dollar (“USD”). Assets and liabilities of the Company are translated at the prevailing exchange rate at each reporting period end date. Contributed capital accounts are translated using the historical rate of exchange when capital is injected. Income and expense accounts are translated at the average rate of exchange during the reporting period. Translation adjustments resulting from translation of these condensed consolidated financial statements are reflected as accumulated other comprehensive income in stockholders’ equity.

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation.

Statement of Cash Flows

In accordance with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the Company’s condensed consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the condensed consolidated balance sheet.

Fair value of financial instruments

The Company adopted the provisions of Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other then quoted prices that are observable, and inputs derived from or corroborated by observable market data.

8

JINZANGHUANG TIBET PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

(Unaudited)

1              BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair value of financial instruments (Continued)

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The carrying amounts reported in the consolidated balance sheets for cash, due to related party, and accrued expenses, approximate their fair market value based on the short-term maturity of these instruments. The Company did not identify any other assets or liabilities that are required to be presented in the consolidated balance sheets at fair value in accordance with ASC 820.

Earnings per share

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period.  Diluted earnings per share is computed similar to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.  There are no such additional common shares available for dilution purposes as of December 31, 2012 and June 30, 2012.

New Accounting Pronouncements

In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.”  This ASU does not change the current requirements for reporting net income or other comprehensive income in financial statements.  However, this guidance requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component.  In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.  For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts.  For public entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2012.  For nonpublic entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2013.  Early adoption is permitted.  The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

In July 2012, the FASB issued ASU 2012-02, “Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment.” This ASU simplifies how entities test indefinite-lived intangible assets for impairment, which improves consistency in impairment testing requirements among long-lived asset categories. These amended standards permit an assessment of qualitative factors to determine whether it is more likely than not that the fair value of indefinite-lived intangible assets is less than their carrying value. For assets in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, these amended standards eliminate the requirement to perform quantitative impairment testing as outlined in the previously issued standards. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.  Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

2             RELATED PARTY TRANSACTIONS

As of December 31, 2012, the Company has an aggregate of $36,843 in “due to related party” for expenses paid by a related party on behalf of the Company.  This is unsecured, bears no interest and is due on demand.  

3             PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consists of the following:

	December 31,2012		June 30,2012
Buildings	$	434,492	$	431,785
Office equipment		17,993		17,881
		452,485		449,666
Less: accumulated depreciation		56,191		46,189
Property, plant and equipment, net	$	396,294	$	403,477

9

JINZANGHUANG TIBET PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

(Unaudited)

             PROPERTY AND EQUIPMENT, NET (CONTINUED)

Depreciation expense charged to operations was $9,662 and $ 9,063 for the six months ended December 31, 2012 and 2011, respectively.

4              INTANGIBLE ASSETS, NET

Intangible assets, net, consist of the following:

	December 31,2012		June 30,2012
Land use right	$	201,893	$	200,636
Software		3,023		3,004
		204,916		203,640
Less: accumulated amortization		17,141		15,028
Intangible assets, net	$	187,775	$	188,612

Amortization expense charged to operations was $2,009 and $2,237 for the six months ended December, 2012 and 2011, respectively.

The future minimum amortization expense charged to operations for the coming years is as follows:

Years ending June 30:
2013	$	2,019
2014		4,038
2015		4,038
2016		4,038
2017		4,038
Remaining operating lease payments		169,604
Total future minimum operating lease payments	$	187,775

5             ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

	December 31, 2012		June 30, 2012
Accrued payroll	$	19,233	$	16,445
Taxes payable		859,640		550,028
Accrued expenses		27,528		24,905
Other payables		2,055		4,292
Accrued expenses and other current liabilities	$	908,456	$	595,669

10

JINZANGHUANG TIBET PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

(Unaudited)

6              INCOME TAX

Taxes payable consisted of the following:

	December 31,2012		June 30,2012
Income tax payable	$	777,362	$	493,394
Property and land taxes payable		7,584		7,538
Business taxes payable		69,901		45,946
City and supplement taxes		4,793		3,150
		859,640		550,028

The provision for income taxes is summarized as follows:

	Six months ended		Six months ended
	December 31,2012		December 31,2011
Current provision	$	1,427,958	$	873,295
Deferred provision		-		-
Total	$	1,427,958	$	873,295

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate:

	Six months ended			Six months ended
	December 31,2012			December 31,2011
U.S. statutory rates		35	%		35	%
Foreign income not recognized in the U.S.		-35	%		-35	%
PRC statutory rates		25	%		25	%
Effective tax rates		25	%		25	%

7              COMMITMENTS AND CONTINGENCIES

(a)        Operating lease commitment

The Company leases buildings under non-cancelable operating lease agreements. Based on the current rental lease agreements, the future minimum rental payments required for the coming years are as follows:

Years ending June 30:
2013	$	764
2014		1,527
Remaining operating lease payments		2,291
Total future minimum operating lease payments	$	4,582

11

JINZANGHUANG TIBET PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2012

(Unaudited)

7              COMMITMENTS AND CONTINGENCIES (CONTINUED)

(b)        Vulnerability due to Operations in PRC

The Company’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC.  Although the PRC government has been pursuing economic reform policies for more than twenty years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRCs political, economic and social conditions.  There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective.

Substantially all of the Company’s business is transacted in RMB, which is not freely convertible.  The Peoples Bank of China or other banks are authorized to buy and sell foreign currencies at the exchange rates quoted by the Peoples Bank of China.  Approval of foreign currency payments by the Peoples Bank of China or other institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts.

Since the Company has its operations in the PRC, all of its revenues will be settled in RMB, not U.S. Dollars. Due to certain restrictions on currency exchanges that exist in the PRC, the Company’s ability to use revenue generated in RMB to pay any dividend payments to its shareholders outside of China may be limited.

12

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Statements: No Assurances Intended

In addition to historical information, this Quarterly Report contains forward-looking statements, which are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans to,” “estimates,” “projects,” or similar expressions. These forward-looking statements represent Management’s belief as to the future of Jinzanghuang Tibet Pharmaceuticals, Inc.  Whether those beliefs become reality will depend on many factors that are not under Management’s control.  Many risks and uncertainties exist that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in the section 1A,entitled “Risk Factors,” in the Company’s Annual Report on Form 10-K for the year ended June 30, 2012. Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.

Accounting for Variable Interest

Jinzanghuang Tibet Pharmaceuticals, Inc. is a holding company whose only asset is an indirect 100% ownership interest in Beijing Taibodekang Management Consulting Co., Ltd. (“Beijing Taibodekang”), a Wholly Foreign Owned Entity organized under the laws of the People’s Republic of China on December 5, 2008.  On January 4, 2009, Beijing Taibodekang entered into four agreements with LelingJinzanghuang Biotech Co. Ltd. (“LelingJinzanghuang”) and with the equity owners in LelingJinzanghuang.  Three of the agreements were amended as of July 24, 2009.  Collectively, the agreements provide Beijing Taibodekang exclusive control over the business of LelingJinzanghuang.  The relationship is one that is generally identified as “entrusted management.”

The entrusted management agreements further provide that, in exchange for the management and marketing services to be provided by Beijing Taibodekang, LelingJinzanghuang will pay to Beijing Taibodekang a service fee equal to 10,000 RMB per month plus 95% of the net profits generated by LelingJinzanghuang.  To date, in order to make funds available to funds the growth of LelingJinzanghuang, LelingJinzanghuang has not made any payment to Beijing Taibodekang.  Accordingly, $11,779,229 has been accrued on the balance sheet of LelingJinzanghuang as of December 31, 2012 as due to Beijing Taibodekang pursuant to the Exclusive Technical Service and Consulting Agreement.

The accounting effect of the entrusted management agreements between Beijing Taibodekang and LelingJinzanghuang is to cause the balance sheets and financial results of LelingJinzanghuang to be consolidated with those of Beijing Taibodekang, with respect to which LelingJinzanghuang is now a variable interest entity.  Since the parties to the Entrusted Management Agreements were both controlled by Xue Bangyi, who is CEO of both Beijing Taibodekang and LelingJinzanghuang, the financial statements included in this report reflect the consolidation of the results of operations and cash flows of LelingJinzanghuang since its inception.

The entrusted management agreements may not be as effective in providing Jinzanghuang Tibet Pharmaceuticals with operational control over LelingJinzanghuang as would direct ownership. Our entitlement to the benefits of the business of LelingJinzanghuang depends on our ability to enforce the agreements between our subsidiary, Beijing Taibodekang, and LelingJinzanghuang.  If a dispute arose between those entities that could not be resolved amicably, we would have to resort to a court or arbitration tribunal in the People’s Republic of China to secure our rights with respect to LelingJinzanghuang.  We are not aware, however, of a body of reported decisions regarding the enforceability of agreements of this sort under the laws of the PRC.  It is possible, therefore, that the Chinese tribunal would decide that the agreements were not enforceable, either as a matter of national policy or for some other reason.  If that were to occur, Jinzanghuang Tibet Pharmaceuticals, Inc. would have no business operations or assets, and its outstanding common stock would be essentially worthless.  The fact that Xue Bangyi is the CEO and principal owner of both Jinzanghuang Tibet Pharmaceuticals and LelingJinzanghuang makes the prospect of such a dispute remote, but not inconceivable.

13

 Outline of Our Business

Since its formation, LelingJinzanghuang has been involved in the distribution of Tibetan pharmaceutical and nutraceutical products manufactured by Shandong Jinzanghuang, the primary equity owner of which is Xue Bangyi.   LelingJinzanghuang served as a distributor of those products until October 2010, when it suspended its distribution operations.  Since October 2010 LelingJinzanghuang has been exclusively engaged in providing advisory services to sauna stores that purchase sauna care products from Shandong Jinzanghuang.

On October 8, 2010, LelingJinzanghuang entered into an agency agreement with Shenyang Jintao Technology Co., Ltd. (“Jintao”), pursuant to which Jintao has introduced 158 sauna stores to LelingJinzanghuang. Shandong Jinzanghuang sells its Tibetan medicine products to the sauna stores and LelingJinzanghuang provides training service to each store to coach the store’s employees in methods of integrating the Shandong Jinzanghuang products into the sauna service. LelingJinzanghuang has paid Jintao a fee, ranging from RMB 8,000 ($1,269) to RMB 9,000 ($1,425) for each store Jintao has introduced.

The contract among LelingJinzanghuang, Shandong Jinzanghuang and the sauna store provides that the store will purchase products, as needed, directly from Shandong Jinzanghuang.  In compensation for LelingJinzanghuang’s advisory services, the sauna store pays LelingJinzanghuang a fee equal to a percentage of the resale price charged by the sauna store to its customers for the Shandong Jinzanghuang products. The fee is either 35% or 40% of the resale price, depending on the location of the sauna store. At each month end, each store sends a usage record to LelingJinzanghuang. LelingJinzanghuang also makes a physical inventory count quarterly to compare remaining inventory with the quantity delivered by Shandong Jinzanghuang.

This business model provides LelingJinzanghuang with a revenue stream for which it incurs very little direct cost, as the product manufacture and distribution is entirely the responsibility of Shandong Jinzanghuang. In addition, entry into this new market did not force us to incur significant start-up costs, as we have used the same employees and same facilities for the sauna market as carried on our prior product distribution activities.

Results of Operations

The following tables present selected financial information derived from the condensed consolidated statements of operations included in this Report.

	For the three months ended December 31				Change
	2012		2011		Amount		%
Revenue	$	4,044,432	$	2,659,182	$	1,385,250		52.1	%
Cost of revenue		859,266		590,179		269,087		45.6	%
Gross profit		3,185,166		2,069,003		1,116,163		53.9	%
Operating expenses		90,930		72,514		18,416		25.4	%
Operating income		3,094,235		1,996,489		1,097,746		55.0	%
Net income		2,318,003		1,605,108		712,895		44.4	%

	For the six months ended December 31				Change
	2012		2011		Amount			%
Revenue	$	7,378,766	$	5,223,765	$	2,155,001			41.3	%
Cost of revenue		1,559,934		953,323		606,611			63.6	%
Gross profit		5,818,832		4,270,442		1,548,390			36.3	%
Operating expenses		161,590		187,153		(25,563	)		(13.66	%)
Operating income		5,657,242		4,083,289		1,573,953			38.5	%
Net income		4,247,653		3,217,396		1,030,257			32.0	%

14

Revenue

Our sauna store program began in October 2010 with a trial group of 50 sauna stores.  By June 30, 2011, the end of our 2011 fiscal year, the program had grown to 150 stores.  Revenue growth increased from quarter to quarter, roughly in proportion to the growth in number of stores, except that the third quarter in 2011 was particularly profitable.  This occurred because the Chinese Spring Festival, which occurs during that quarter, affords most Chinese workers from one to two weeks of vacation, during which time the sauna stores experienced a sharp increase in business.

Since July 1, 2011 we have added only 54 more sauna stores, and have retained the original 150. Our revenue has grown consistently from quarter to quarter. The increase has been primarily caused by a marked increase in per store revenue, which we attribute to growing awareness of our product line. As a result, during the three months ended December 31, 2012, our revenue from the sauna stores program was $4,044,432, an increase of $1,385,250, or 52%, from $2,659,182 recorded during the three months ended December 31, 2011. The increase was due in part to the addition of 46 stores that joined the program the first half year of fiscal 2013.  However, if per store revenue had remained flat, those 46 additional stores would have added only $774,180 to our revenue.  The remainder of the increase in revenue, therefore, was attributable to the increase in per store revenue from the second quarter of fiscal 2012 to the second quarter of fiscal 2013.

The following table shows the elements that have contributed to the growth in our revenue in the past six fiscal quarters.

	Fiscal 2012				Fiscal 2013
	Q1	Q2	Q3	Q4	Q1	Q2
Service fees from sauna stores	2,564,583	2,659,182	2,712,438	2,716,812	3,334,334	4,044,432
Quantity of sauna stores	158	158	158	158	196	204
Average revenue per store	16,232	16,830	17,167	17,195	17,012	19,826

We held our market steady at 158 stores throughout the last fiscal year and only recently expanded modestly because we recognize that the greatest danger to the success of our business plan would be careless growth. We selected sauna stores carefully after March 2011 and added 46 stores in the first half year of fiscal 2013. With a client base of 204 stores, we are able to analyze the effectiveness of our marketing program, our product offerings, our management controls, and our financial systems, and to rectify shortcomings in any of those areas. We have been careful to assure that demand for our products has never exceeded supply; that our clients can rely on the timely delivery of their orders. Our goal is to optimize the relationship we have with these 204stores, then use these sauna stores as the foundation on which our business will grow.

Gross profit

The dedication of our business to the sauna store program has resulted in high gross margin.  Because we have no cost of goods sold, our cost of sales is almost entirely direct labor and business taxes. As a result, during both the three and the six month periods ended December 31, 2012, we realized gross margin of 78.8%.  Our revenue during the six months ended December 31, 2011 yielded a gross margin of 81.8%. The primary reason for the lower level gross margin ratio in fiscal 2013 has been the expense related to bringing 46 new stores into the program.  

Operating expenses

The Company’s general and administrative expenses remain relatively stable, despite the rapid growth of our revenue.  General and administrative expenses increased by 25% from the second quarter of fiscal 2012 to the second quarter of fiscal 2013, and decreased by 14% from the first half of fiscal 2012 to the first half of fiscal 2013.  General and administrative expenses for the second quarter of fiscal 2013, however, represented only 2% of revenue, indicative of our very efficient operations.  Most of our general and administrative are office expenses, including wages of our administrative personnel. The fact that we are able to increase revenue while maintaining modest general and administrative expenses reflects the low costs involved in the sauna service business, where Shandong JZH and our agent provide most of the marketing services.

15

After deducting the aforesaid operating expenses from our gross profit, the Company recorded $3,094,235 in operating income for the three months ended December 31, 2012, an increase of 55%, compared with the three months ended December 31, 2011.  For the six months ended December 31, 2012 our operating income was $5,657,242, an increase of 38.5% compared with the six months ended December 31, 2011.

Net income

Our Chinese operating entity, LelingJinzanghuang, is subject to tax in China at the statutory rate of 25% of income calculated in accordance with Chinese accounting principles. Accordingly, for the three and six months ended December 31, 2012 we accrued income tax expense of $786,004 and $1,427,958 respectively.  After deducting those accruals, the Company reported net income of $2,318,003 and $4,247,653 for the three and six month periods ended December 31, 2012. Net income for the three months ended December 31, 2012 was 44% greater than in the comparable prior year quarter; for the six month period our net income increased by 32%.

The entrusted management agreements assign to Beijing Taibodekang only 95% of the net profit generated from LelingJinzanghuang.  For that reason, we deducted a “non-controlling interest” of $116,254 before recognizing net income attributable to the Company on our Consolidated Statements of Operations and Comprehensive Income for the three months ended December 31, 2012, and a non-controlling interest of $212,548 for the six month period then ended.  After that deduction and taking into account the income and expenses incurred by the parent corporation, our net income attributable to the Company for the three months ended December 31, 2012 was $2,201,748 ($.04 per share), an increase of 44% from the second quarter of fiscal 2012.  Net income attributable to the Company for the six month period ended December 31, 2012 was $4,035,105 ($.08 per share), an increase of 32% from the first half of fiscal 2012.

Comprehensive income

 Our business operates primarily in Chinese Renminbi, but we report our results in our SEC filings in U.S. Dollars.  The conversion of our accounts from RMB to Dollars results in translation adjustments.  While our net income is added to the retained earnings on our balance sheet; the translation adjustments are added to a line item on our balance sheet labeled “accumulated other comprehensive income,” since they are more reflective of changes in the relative values of U.S. and Chinese currencies than of the success of our business.  During the three and six months ended December 31, 2012, the effect of converting our financial results to Dollars was to add $115,890 and $89,832, respectively, to our accumulated other comprehensive income.

Liquidity and Capital Resources

To date, our operations have been funded by contributions to capital by our founders and by the net cash provided by our operations.  Currently, our cash flow from operations is sufficient to sustain our operations without outside financing, with the singular exception that on occasion we borrow dollars from our affiliates to pay expenses we incur in the U.S., so as to avoid the efforts involved in converting RMB to dollars for this purpose.  As a result, at December 31, 2012 we had no bank debt and only a $36,843 obligation to a related party. At the same time, we had $13,766,353 in cash at December 31, 2012 as well as net working capital totaling $14,213,062, an increase of $5,345,505 since our last fiscal year ended on June 30, 2012.  We supplemented our cash reserves on July 31, 2012 by selling ten million shares of our common stock for a total of $1,000,000. So our capital resources are more than sufficient to fund our operations for the coming year as they are currently structured.

During the six months ended December 31, 2012, our operating activities provided $4,096,671 in net cash, compared to $2,968,764 in net cash during the six months ended December 31, 2011, an increase of $1,127,907 or 38%.  The net cash provided in the recent period was slightly lower than our net income for the six months ended December 31, 2012 due to the $463,773 increase in accounts receivable during the period. Net cash provided by operating activities in six months ended December 31, 2011 was slightly lower than our net income for the six months ended December 31, 2011 for the same reason.

16

Over the long term, our expectation is that we will utilize our capital resources as well as any additional investments that we secure in order to expand our presence in the market for Tibetan medicine.  At the present time, however, we are able to operate profitably without significant additional investment.  Moreover, our observation of the equity markets indicates that we would be unlikely to obtain financing on favorable terms at this time.  Accordingly, our near term plan is to continue the program that we initiated during the past year, utilizing the resources available to us.

The most significant risk to our liquidity comes from our relationship with Shandong Jinzanghuang.  The high operating margins and growing profitability that we have achieved in recent periods is a result of that relationship, in which a single business - the business of delivering Tibetan medicine products to sauna stores - has been divided between two entities: Shandong Jinzanghuang, which bears the expenses of manufacturing and distributing the products, and LelingJinzanghuang, which receives a sizeable portion of the revenue from the business in exchange for consulting services only.  If it were to occur that, for financial or any other reason, Shandong Jinzanghuang became unable to deliver the products required by the sauna stores, LelingJinzanghuang would be required to devote its financial resources to developing an alternative source for the products - otherwise the business would fail.  For this reason, we consider our cash reserves to be both the means of expansion as well as a security against any disruption in our business caused by our affiliate.

Restrictions on Dividends and Other Cash Transfers

All of our business operations are carried out by LelingJinzanghuang, our variable interest entity in China.  In the future, in order for the U.S. parent corporation to pay dividends to our shareholders from the earnings obtained in China, we will have to transfer funds from LelingJinzanghuang to Beijing Taibodekang, our Chinese subsidiary, and then to Jinzanghuang Tibet Pharmaceuticals, our U.S. parent corporation. Our ability to transfer funds from Beijing Taibodekang to Jinzanghuang Tibet Pharmaceuticals in this manner will limited by two factors:

● Statutory Reserves.  The Company Law of the PRC applicable to Chinese companies with foreign ownership provides that net income can be distributed as dividends only after:  

a. Cumulative prior years’ losses have been recouped;  

b. 10% of after tax income has been allocated to a statutory surplus reserve until the reserve amounts to 50% of the company’s registered capital; and  

c. Allocations have been made to the discretionary surplus reserve, if such a reserve is approved at the meeting of the equity owners.  

● Currency Conversion.  The Chinese Yuan (Renminbi) is not freely convertible into Dollars.  The State Administration of Foreign Exchange (“SAFE”) administers foreign exchange dealings and requires that they be conducted though designated financial institutions.  Foreign Invested Enterprises, such as Beijing Taibodekang, may purchase foreign currency from designated financial institutions in connection with current account transactions, including profit repatriation.  However, the procedures required in order to effect such purchases can significantly delay a transfer of funds to the U.S.  

These factors will limit the amount of funds that we can transfer from Beijing Taibodekang to our U.S. parent company and may delay any such transfer, with resulting effect on the ability of the U.S. parent to pay dividends to its shareholders. It should be noted, moreover, that to date LelingJinzanghuang has not made any payment to Beijing Taibodekang, despite the provisions of the entrusted management agreements that promise 95% of net profits to Beijing Taibodekang.  The amount due from LelingJinzanghuang to Beijing Taibodekang has been recorded on their inter-company accounts as a payable due to Beijing Taibodekang; however no interest or penalty or other compensation is being accrued as a result of the failure of LelingJinzanghuang to make the payments due.  Rather, it is management’s plan for the foreseeable future that LelingJinzanghuang will make payments to Beijing Taibodekang to the extent necessary for Beijing Taibodekang to pay its ongoing expenses, and may also make payment to Beijing Taibodekang to pay the expenses of our U.S. parent company if we find that procedure more convenient than borrowing dollars from related parties.  LelingJinzanghuang will retain all other income to fund the growth of LelingJinzanghuang.

17

Finally, it should be noted that, upon repatriation of earnings of Beijing Taibodekang to the United States, those earnings may become subject to United States federal and state income taxes.  We have not accrued any U.S. federal or state tax liability on the undistributed earnings of our foreign subsidiary because those funds are intended to be indefinitely reinvested in our international operations.  Accordingly, taxes imposed upon repatriation of those earnings to the U.S. may reduce the net worth of the Company.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.

ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.   CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.  The term “disclosure controls and procedures” (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within required time periods. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

The Company’s management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this quarterly report (the “Evaluation Date”). That evaluation disclosed that the Company has material defects in its disclosure controls and procedures. Specifically they determined that there is a lack of expertise in U.S. GAAP among the Company’s management personnel. They also determined that the size of the Company’s accounting staff and low number of supervisory personnel prevented an appropriate segregation of accounting functions.  Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, such controls and procedures were not effective.

Management will continue to monitor the performance of its disclosure controls and procedures.  At present, the nature of our operations minimizes the complexity of our accounting. For that reason, management has no present plan to implement a significant upgrade to its accounting staff. However, as our business grows and the complexity of our accounting operations increases, we will take appropriate action to assure that our disclosure controls and procedures are adequate.

Changes in Internal Controls.  The term “internal control over financial reporting” (defined in SEC Rule 13a-15(f)) refers to the process of a company that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated any changes in the Company’s internal control over financial reporting that occurred during the fiscal quarter covered by this report, and they have concluded that there was no change to the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

18

PART II   -   OTHER INFORMATION

Item 1.	Legal Proceedings
	None.
Item 1A	Risk Factors
	There have been no material changes from the risk factors included in our Annual Report on Form 10-K for the year ended June 30, 2012.
Item 2	Unregistered Sale of Securities and Use of Proceeds
	(a) Unregistered sales of equity securities
	The Company did not effect any unregistered sales of equity securities during the 2nd quarter of fiscal 2013.
	(c) Purchases of equity securities
	The Company did not repurchase any of its equity securities that were registered under Section 12 of the Securities Exchange Act during the 2nd quarter of fiscal 2013.
Item 3.	Defaults Upon Senior Securities.
	None.
Item 4.	Mine Safety Disclosures.
	Not Applicable.
Item 5.	Other Information.
	None.
Item 6.	Exhibits
31.1	Rule 13a-14(a) Certification – CEO
31.2	Rule 13a-14(a) Certification – CFO
32	Rule 13a-14(b) Certification

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

	JINZANGHUANG TIBET PHARMACEUTICALS, INC.
Date: February 13, 2013	By: /s/ Xue Bangyi
	Xue Bangyi, Chief Executive Officer
	By: /s/ Eva Deng
	Eva Deng, Chief Financial Officer, Chief Accounting Officer

19

EX-31.1

EXHIBIT 31.1

Rule 13a-14(a) Certification

	I, Xue Bangyi, certify that:
	1.	I have reviewed this quarterly report on Form 10-Q of Jinzanghuang Tibet Pharmaceuticals, Inc.;
	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
made, not misleading with respect to the period covered by this quarterly report;
	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this report;
	4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
		a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material informa­tion relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
		b)  Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
		c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
		d)  Disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
	5.	The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the equivalent functions):
		a. All significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
		b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

February 13, 2013	/s/ Xue Bangyi
	Xue Bangyi
	Chief Executive Officer

EX-31.2

EXHIBIT 31.2

Rule 13a-14(a) Certification

	I, Eva Deng, certify that:
	1.	I have reviewed this quarterly report on Form 10-Q of Jinzanghuang Tibet Pharmaceuticals, Inc.;
	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances
made, not misleading with respect to the period covered by this quarterly report;
	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in this report;
	4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e))
and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
		a)  Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material informa­tion relating to
the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
		b)  Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
		c)  Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and
		d)  Disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
	5.	The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the equivalent functions):
		a. All significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process,
summarize and report financial information; and
		b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

February 13, 2013	/s/ Eva Deng
	Eva Deng
	Chief Financial Officer

EX-32

EXHIBIT 32

Rule 13a-14(b) Certification

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officers of Jinzanghuang Tibet Pharmaceuticals, Inc. (the “Company”) certify that:

1.           The Quarterly Report on Form 10-Q of the Company for the quarter ended December 31, 2012 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and

2.           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 13, 2013	/s/ Xue Bangyi
	Xue Bangyi, Chief Executive Officer

February 13, 2013	/s/ Eva Deng
	Eva Deng, Chief Financial Officer

This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

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2 Related Party Transactions (Details) (USD $)	Dec. 31, 2012	Jun. 30, 2012
Due to related party	$ 36,843	$ 36,630

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6 Income Tax: Schedule Of Reconciliation Of Effective Tax Rate (Details)	3 Months Ended	6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
U.S. Statutory rates	35.00%	35.00%
Foreign income not recognized in the U.S.	(35.00%)	(35.00%)
PRC statutory rates	25.00%	25.00%
Effective tax rate	25.00%	25.00%

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6 Income Tax: Schedule Of Income Taxes Payable (Details) (USD $)	Dec. 31, 2012	Jun. 30, 2012
Income tax payable	$ 777,362	$ 493,394
Property and land taxes payable	7,584	7,538
Business taxes payable	69,901	45,946
City and supplement taxes	4,793	3,150
Taxes Payable	$ 859,640	$ 550,028

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6 Income Tax: Schedule Of Income Tax Provision (Tables)

6 Months Ended

Dec. 31, 2012

Tables/Schedules

Schedule Of Income Tax Provision

	Six months ended		Six months ended
	December 31,2012		December 31,2011
Current provision	$	1,427,958	$	873,295
Deferred provision		-		-
Total	$	1,427,958	$	873,295

786,004  Total numbers are pulling from 3 month and 6 month income statement element.  Adding these numbers because they are not on income statement.  Client is askjng for them to be added.

397,729

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1 Business Description and Significant Accounting Policies: Earnings Per Share (Policies)

6 Months Ended

Dec. 31, 2012

Policies

Earnings Per Share

Earnings per share

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period.  Diluted earnings per share is computed similar to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.  There are no such additional common shares available for dilution purposes as of December 31, 2012 and June 30, 2012.

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4 Intangible Assets, Net: Schedule of Intangible Assets and Goodwill (Details) (USD $)	Dec. 31, 2012	Jun. 30, 2012
Land Use Right	$ 201,893	$ 200,636
Software	3,023	3,004
Finite-Lived Intangible Assets, Gross	204,916	203,640
Finite-Lived Intangible Assets, Accumulated Amortization	17,141	15,028
Intangible assets, net of accumulated amortization	$ 187,775	$ 188,612

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1 Business Description and Significant Accounting Policies (Details) (USD $)	Dec. 31, 2012	Jun. 30, 2012
Variable interest Entity intercompany payables	$ 12,788,098	$ 7,671,854

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6 Income Tax: Schedule Of Income Tax Provision (Details) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Current income tax provision	$ 786,004	$ 397,729	$ 1,427,958	$ 873,295
INCOME TAX	$ 786,004	$ 397,729	$ 1,427,958	$ 873,295

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4 Intangible Assets, Net

6 Months Ended

Dec. 31, 2012

Notes

4 Intangible Assets, Net

4              INTANGIBLE ASSETS, NET

Intangible assets, net, consist of the following:

	December 31,2012		June 30,2012
Land use right	$	201,893	$	200,636
Software		3,023		3,004
		204,916		203,640
Less: accumulated amortization		17,141		15,028
Intangible assets, net	$	187,775	$	188,612

Amortization expense charged to operations was $2,009 and $2,237 for the six months ended December, 2012 and 2011, respectively.

The future minimum amortization expense charged to operations for the coming years is as follows:

Years ending June 30:
2013	$	2,019
2014		4,038
2015		4,038
2016		4,038
2017		4,038
Remaining operating lease payments		169,604
Total future minimum operating lease payments	$	187,775

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4 Intangible Assets, Net (Details) (USD $)	6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Amortization expense charged to operations	$ 2,009	$ 2,237

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4 Intangible Assets, Net: Schedule of Intangible Assets and Goodwill (Tables)

6 Months Ended

Dec. 31, 2012

Tables/Schedules

Schedule of Intangible Assets and Goodwill

	December 31,2012		June 30,2012
Land use right	$	201,893	$	200,636
Software		3,023		3,004
		204,916		203,640
Less: accumulated amortization		17,141		15,028
Intangible assets, net	$	187,775	$	188,612

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3 Property and Equipment, Net: ScheduleOfPropertyPlantAndEquipment (Tables)

6 Months Ended

Dec. 31, 2012

Tables/Schedules

ScheduleOfPropertyPlantAndEquipment

	December 31,2012		June 30,2012
Buildings	$	434,492	$	431,785
Office equipment		17,993		17,881
		452,485		449,666
Less: accumulated depreciation		56,191		46,189
Property, plant and equipment, net	$	396,294	$	403,477

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4 Intangible Assets, Net: Schedule of Finite-Lived Intangible Assets, Future Amortization Expense (Details) (USD $)	6 Months Ended
	Dec. 31, 2012
Future Amortization Expense, Year One	$ 2,019
Future Amortization Expense, Year Two	4,038
Future Amortization Expense, Year Three	4,038
Future Amortization Expense, Year Four	4,038
Future Amortization Expense, Year Five	4,038
Future Amortization Expense, after Year Five	169,604
Total future minimum operating lease payments	$ 187,775

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4 Intangible Assets, Net: Schedule of Finite-Lived Intangible Assets, Future Amortization Expense (Tables)

6 Months Ended

Dec. 31, 2012

Tables/Schedules

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

Years ending June 30:
2013	$	2,019
2014		4,038
2015		4,038
2016		4,038
2017		4,038
Remaining operating lease payments		169,604
Total future minimum operating lease payments	$	187,775

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5 Accrued Expenses and Other Current Liabilities: Schedule of Accrued Liabilities (Tables)

6 Months Ended

Dec. 31, 2012

Tables/Schedules

Schedule of Accrued Liabilities

	December 31, 2012		June 30, 2012
Accrued payroll	$	19,233	$	16,445
Taxes payable		859,640		550,028
Accrued expenses		27,528		24,905
Other payables		2,055		4,292
Accrued expenses and other current liabilities	$	908,456	$	595,669

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3 Property and Equipment, Net

6 Months Ended

Dec. 31, 2012

Notes

3 Property and Equipment, Net

3             PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consists of the following:

	December 31,2012		June 30,2012
Buildings	$	434,492	$	431,785
Office equipment		17,993		17,881
		452,485		449,666
Less: accumulated depreciation		56,191		46,189
Property, plant and equipment, net	$	396,294	$	403,477

Depreciation expense charged to operations was $9,662 and $ 9,063 for the six months ended December 31, 2012 and 2011, respectively.

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6 Income Tax: Schedule Of Income Taxes Payable (Tables)

6 Months Ended

Dec. 31, 2012

Tables/Schedules

Schedule Of Income Taxes Payable

	December 31,2012		June 30,2012
Income tax payable	$	777,362	$	493,394
Property and land taxes payable		7,584		7,538
Business taxes payable		69,901		45,946
City and supplement taxes		4,793		3,150
		859,640		550,028

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3 Property and Equipment, Net: ScheduleOfPropertyPlantAndEquipment (Details) (USD $)	Dec. 31, 2012	Jun. 30, 2012
Buildings and Improvements, Gross	$ 434,492	$ 431,785
Office Equipment	17,993	17,881
Property, Plant and Equipment, Gross	452,485	449,666
Property, Plant and Equipment, Other, Accumulated Depreciation	56,191	46,189
Property and equipment, net of accumulated depreciation	$ 396,294	$ 403,477

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CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2012	Jun. 30, 2012
Cash	$ 13,766,353	$ 8,584,928
Accounts receivable	1,369,372	899,957
Prepaid expenses and other current assets	22,636	3,997
Deferred tax assets		10,974
TOTAL CURRENT ASSETS	15,158,361	9,499,856
Property and equipment, net of accumulated depreciation	396,294	403,477
Intangible assets, net of accumulated amortization	187,775	188,612
TOTAL ASSETS	15,742,430	10,091,945
Due to related party	36,843	36,630
Accrued expenses and other current liabilities	908,456	595,669
TOTAL CURRENT LIABILITIES AND TOTAL LIABILITIES	945,299	632,299
Common stock, $0.001 par value, 300,000,000 shares authorized, 50,665,063 and 40,665,063 shares issued and outstanding at December 31, 2012 and June 30, 2012, respectively	50,665	40,665
Additional paid-in capital	2,254,427	1,264,427
Retained earnings	11,528,721	7,493,615
Accumulated other comprehensive income	275,018	189,704
TOTAL STOCKHOLDERS' EQUITY OF THE COMPANY	14,108,831	8,988,411
Non-controlling interests	688,300	471,235
TOTAL STOCKHOLDERS' EQUITY	14,797,131	9,459,646
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 15,742,430	$ 10,091,945

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5 Accrued Expenses and Other Current Liabilities: Schedule of Accrued Liabilities (Details) (USD $)	Dec. 31, 2012	Jun. 30, 2012
Accrued Payroll	$ 19,233	$ 16,445
Taxes Payable	859,640	550,028
Accrued expenses	27,528	24,905
Other Payables	2,055	4,292
Accrued expenses and other current liabilities	$ 908,456	$ 595,669

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1 Business Description and Significant Accounting Policies

6 Months Ended

Dec. 31, 2012

Notes

1 Business Description and Significant Accounting Policies

1              BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES

Business description

Jinzanghuang Tibet Pharmaceuticals, Inc. (“the Company”) is engaged in providing consulting services to facilitate the distribution of Tibetan pharmaceutical and nutraceutical products in the People’s Republic of China (“PRC”).  The Company’s operations are carried out through Beijing Taibodekang Consulting Co., Ltd. (“BTC”) and Leling Jinzanghuang Biotech Co., Ltd. (Leling JZH).

On January 12, 2009 the Company  acquired all of the outstanding capital stock of Tibet Medicine, Inc. (“TMI”), a Delaware corporation, in exchange for 36,401,462 shares of its common stock issued to the shareholders of TMI, representing 89.6% of the issued and outstanding shares of the Company. TMI was organized under the laws of Delaware on September 4, 2008 and is the 100% owner of the registered capital of BTC. BTC is a Wholly Foreign Owned Entity that was organized under the laws of the People’s Republic of China on December 5, 2008. For accounting purposes, the above transaction was accounted for as a reverse merger. TMI became the surviving entity for accounting purposes, whereas the Company is recognized as the surviving entity for legal purposes.

On January 4, 2009, BTC entered into four ten-year agreements (the “Entrusted Management Agreements”) with Leling JZH, which was incorporated under the laws of PRC as a limited liability company on November 20, 2008, and with the registered equity holders of Leling JZH.  Three of the agreements were amended as of July 24, 2009.  The purpose of these agreements is to transfer to BTC full responsibility for the management of Leling JZH, as well as 95% of the financial benefits that arise from the business of Leling JZH. As a result, BTC now has control over the business of Leling JZH and is considered a variable interest entity.  For that reason, the results of operations of Leling JZH have been included with the Company’s condensed consolidated financial statements.

Basis of presentation

The unaudited consolidated financial statements presented herein include the accounts of Jinzanghuang Tibet Pharmaceuticals, Inc., its wholly owned subsidiary (BTC) and variable interest entity (Leling JZH).  All inter-company transactions and balances among the Company and its subsidiaries are eliminated upon consolidation.  In the opinion of management, all adjustments and normal recurring accruals considered necessary for a fair statement of the results for the period have been included.

The accompanying consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and are presented in U.S. Dollars.

Uses of estimates in the preparation of financial statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during each reporting period.  Actual results could differ from those estimates.

Variable Interest Entity

Effective January 1, 2009, the Consolidation Topic ASC 810-10-45-16 revised the accounting treatment for non-controlling minority interests of partially-owned subsidiaries.  Non-controlling minority interests represent the allocation of earnings to the VIE owners who are not at risk for the majority of losses of the VIE, which have been accounted for by using the consolidation method of accounting.

The accounts of Leling JZH have been consolidated with the accounts of the Company because Leling JZH is a variable interest entity with respect to Beijing Taibodekang, which is a wholly-owned subsidiary of the Company.  Beijing Taibodekang has a contractual obligation to provide management services to Leling JZH, and the management of the operations of Leling JZH is carried out by Company personnel in fulfillment of that obligation.  Beijing Taibodekang also has a contractual obligation to reimburse Leling JZH for any losses incurred as a result of the operations of Leling JZG, and the Company’s principal shareholders caused funds to be contributed to Leling JZG during the years ended June 30, 2010 and 2009 in satisfaction of that obligation.  The carrying amount and classification of Leling JZH’s assets and liabilities included in the Condensed Consolidated Balance Sheets are as follows:

	December 31, 2012		June 30, 2012
Total current assets	$	15,079,919	$	9,418,343
Total assets		15,663,989		10,010,432
Total current liabilities		13,691,003		8,261,531
Total liabilities		13,691,003		8,261,531

The amounts shown in the above table include $12,788,098 of intercompany payables as of December 31, 2012 and $7,671,854 of intercompany payables as of June 30, 2012 that have been eliminated in consolidating Leling JZH with the Company.

The Consulting Agreement between Leling Jinzanghuang and Beijing Taibodekang requires that, in payment for the consulting services provided by Beijing Taibodekang, Leling Jinzanghuang will pay fees to Beijing Taibodekang equal to:

· 10,000 RMB per month, plus

· 95% of the annual net profit of Leling Jinzanghuang.

The Consulting Agreement also provides, however, that Beijing Taibodekang will reimburse Leling Jinzanghuang for the amount of any net loss incurred by Leling Jinzanghuang during the period when it is managed by Beijing Taibodekang.

Revenue recognition

The Company recognizes revenue from provision of services to sauna stores based on units of the sauna store’s product usage, which is the contractual method of determining the right to revenue. The revenue is recognized at 35% or 40% of sauna stores’ revenue from sale of Shandong JZH products. The percentage is depending on the location of the sauna store.  Payments are made to the Company directly from the sauna stores a month after the end of the month in which the sales occurred.

Cash

The Company maintains cash with financial institutions in the People’s Republic of China (“PRC”) which are not insured or otherwise protected.  Should any of these institutions holding the Company’s cash become insolvent, or if the Company is unable to withdraw funds for any reason, the Company could lose the cash on deposit with that institution.

Accounts Receivable

Accounts receivable represent receivables from customers. Reserves for bad debts are based on a combination of current sales, historical charge-offs and specific accounts identified as high risk. Uncollectible accounts receivable are charged against the allowance for doubtful accounts when all reasonable efforts to collect the amounts due have been exhausted. Such allowances, if any, would be recorded in the period the impairment is identified. There is no bad debt expense recorded during the six months ended December 31, 2012 or the year ended June 30, 2012. The balance of allowance for bad debts was $0 and $0 ended December 31, 2012 and June 30, 2012, respectively. The accounts receivable balance as of December 31, 2012 is in compliance with the Company’s credit terms.

Property and equipment

Property and equipment are recorded at cost. Depreciation is provided in amounts sufficient to amortize the cost of the related assets over their useful lives using the straight line method.

Long-Lived Assets and Other Acquired Intangible Assets

The Company reviews property and equipment and certain identifiable intangibles for impairment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If property and equipment and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair market value. The Company did not record any impairments during the six months ended December 31, 2012

Income tax

The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires the Company to use the assets and liability method of accounting for income taxes. Under the assets and liability method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between financial statement carrying amounts and the tax bases of existing assets and liabilities and operating loss and tax credit carry forward. Under this accounting standard, the effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized.

ASC 740-10, Accounting for Uncertainty in Income Taxes, defines uncertainty in income taxes, and the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.

Enterprise income tax

Under the Provisional Regulations of PRC Concerning Income Tax on Enterprises promulgated by the PRC, income tax is payable by enterprises at a rate of 25% of their taxable income.

Business Taxes and Sales-related Taxes

Pursuant to the tax law and regulations of PRC, Leling JZH is obligated to pay 5% of revenue for business taxes, and 7% and 4% (5% effective in May, 2011) of the annual business taxes paid as tax on maintaining and building cities and education additional fee, both of which belong to sales-related taxes. Sales-related taxes are recorded when revenue is recognized. For the three months ended December 31, 2012 and 2011, business taxes and sales-related taxes were $226,726 and $148,830, respectively. For the six months ended December 31, 2012 and 2011, business taxes and sales-related taxes were $413,686 and $278,142, respectively.

Stock-based compensation

The Company records stock-based compensation in accordance with the guidance in ASC Topic 718 which requires the Company to recognize expense related to the fair value of its share-based compensation. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method.

Currency translation

Since the Company operates primarily in the PRC, the Company’s functional currency is the Chinese Yuan (“RMB”).  The Company’s financial statements have been translated into the reporting currency, the United States Dollar (“USD”). Assets and liabilities of the Company are translated at the prevailing exchange rate at each reporting period end date. Contributed capital accounts are translated using the historical rate of exchange when capital is injected. Income and expense accounts are translated at the average rate of exchange during the reporting period. Translation adjustments resulting from translation of these condensed consolidated financial statements are reflected as accumulated other comprehensive income in stockholders’ equity.

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation.

Statement of Cash Flows

In accordance with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the Company’s condensed consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the condensed consolidated balance sheet.

Fair value of financial instruments

The Company adopted the provisions of Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other then quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The carrying amounts reported in the consolidated balance sheets for cash, due to related party, and accrued expenses, approximate their fair market value based on the short-term maturity of these instruments. The Company did not identify any other assets or liabilities that are required to be presented in the consolidated balance sheets at fair value in accordance with ASC 820.

Earnings per share

Basic earnings per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period.  Diluted earnings per share is computed similar to basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.  There are no such additional common shares available for dilution purposes as of December 31, 2012 and June 30, 2012.

New Accounting Pronouncements

In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.”  This ASU does not change the current requirements for reporting net income or other comprehensive income in financial statements.  However, this guidance requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component.  In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.  For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts.  For public entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2012.  For nonpublic entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2013.  Early adoption is permitted.  The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

In July 2012, the FASB issued ASU 2012-02, “Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment.” This ASU simplifies how entities test indefinite-lived intangible assets for impairment, which improves consistency in impairment testing requirements among long-lived asset categories. These amended standards permit an assessment of qualitative factors to determine whether it is more likely than not that the fair value of indefinite-lived intangible assets is less than their carrying value. For assets in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, these amended standards eliminate the requirement to perform quantitative impairment testing as outlined in the previously issued standards. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.  Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

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7 Commitments and Contingencies: Schedule of Future Minimum Rental Payments for Operating Leases (Tables)

6 Months Ended

Dec. 31, 2012

Tables/Schedules

Schedule of Future Minimum Rental Payments for Operating Leases

Years ending June 30:
2013	$	764
2014		1,527
Remaining operating lease payments		2,291
Total future minimum operating lease payments	$	4,582

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1 Business Description and Significant Accounting Policies: Stock-based Compensation (Policies)

6 Months Ended

Dec. 31, 2012

Policies

Stock-based Compensation

Stock-based compensation

The Company records stock-based compensation in accordance with the guidance in ASC Topic 718 which requires the Company to recognize expense related to the fair value of its share-based compensation. This eliminates accounting for share-based compensation transactions using the intrinsic value and requires instead that such transactions be accounted for using a fair-value-based method.

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1 Business Description and Significant Accounting Policies: Schedule of Variable Interest Entities (Details) (USD $)	Dec. 31, 2012	Jun. 30, 2012
Variable interest Entity Consolidated Carrying amount assets current	$ 15,079,919	$ 9,418,343
Variable Interest Entity, Consolidated, Carrying Amount, Assets	15,663,989	10,010,432
Variable interest Entity Consolidated Carrying amount liabilities current	13,691,003	8,261,531
Variable Interest Entity, Consolidated, Carrying Amount, Liabilities	$ 13,691,003	$ 8,261,531

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1 Business Description and Significant Accounting Policies: Fair Value of Financial Instruments (Policies)

6 Months Ended

Dec. 31, 2012

Policies

Fair Value of Financial Instruments

Fair value of financial instruments

The Company adopted the provisions of Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other then quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The carrying amounts reported in the consolidated balance sheets for cash, due to related party, and accrued expenses, approximate their fair market value based on the short-term maturity of these instruments. The Company did not identify any other assets or liabilities that are required to be presented in the consolidated balance sheets at fair value in accordance with ASC 820.

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2 Related Party Transactions

6 Months Ended

Dec. 31, 2012

Notes

2 Related Party Transactions

2             RELATED PARTY TRANSACTIONS

As of December 31, 2012, the Company has an aggregate of $36,843 in “due to related party” for expenses paid by a related party on behalf of the Company.  This is unsecured, bears no interest and is due on demand.  

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CONSOLIDATED BALANCE SHEETS PARENTHETICAL (USD $)	Dec. 31, 2012	Jun. 30, 2012
Common stock par value	$ 0.001	$ 0.001
Common stock shares authorized	300,000,000	300,000,000
Common stock shares issued	50,665,063	40,665,063
Common stock shares outstanding	50,665,063	40,665,063

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1 Business Description and Significant Accounting Policies: Cash (Policies)

6 Months Ended

Dec. 31, 2012

Policies

Cash

Cash

The Company maintains cash with financial institutions in the People’s Republic of China (“PRC”) which are not insured or otherwise protected.  Should any of these institutions holding the Company’s cash become insolvent, or if the Company is unable to withdraw funds for any reason, the Company could lose the cash on deposit with that institution.

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Document and Entity Information	3 Months Ended
	Dec. 31, 2012	Feb. 13, 2013
Document and Entity Information
Entity Registrant Name	JINZANGHUANG TIBET PHARMACEUTICALS, INC.
Document Type	10-Q
Document Period End Date	Dec. 31, 2012
Amendment Flag	false
Entity Central Index Key	0000910832
Current Fiscal Year End Date	--06-30
Entity Common Stock, Shares Outstanding		50,665,063
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2

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1 Business Description and Significant Accounting Policies: Accounts Receivable (Policies)

6 Months Ended

Dec. 31, 2012

Policies

Accounts Receivable

Accounts Receivable

Accounts receivable represent receivables from customers. Reserves for bad debts are based on a combination of current sales, historical charge-offs and specific accounts identified as high risk. Uncollectible accounts receivable are charged against the allowance for doubtful accounts when all reasonable efforts to collect the amounts due have been exhausted. Such allowances, if any, would be recorded in the period the impairment is identified. There is no bad debt expense recorded during the six months ended December 31, 2012 or the year ended June 30, 2012. The balance of allowance for bad debts was $0 and $0 ended December 31, 2012 and June 30, 2012, respectively. The accounts receivable balance as of December 31, 2012 is in compliance with the Company’s credit terms.

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (USD $)	3 Months Ended		6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011
Total Revenue	$ 4,044,432	$ 2,659,182	$ 7,378,766	$ 5,223,765
Cost of services	632,540	441,349	1,146,249	675,181
Business and sales related tax cost of revenue	226,726	148,830	413,686	278,142
Total Costs of Revenue	859,266	590,179	1,559,934	953,323
GROSS PROFIT	3,185,166	2,069,003	5,818,832	4,270,442
General and administrative expenses	90,930	72,514	161,590	187,153
OPERATING INCOME	3,094,235	1,996,489	5,657,242	4,083,289
Interest income	9,771	6,348	18,368	7,402
INCOME BEFORE INCOME TAX	3,104,007	2,002,837	5,675,610	4,090,691
INCOME TAX	786,004	397,729	1,427,958	873,295
NET INCOME	2,318,003	1,605,108	4,247,653	3,217,396
LESS: NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS	116,254	74,695	212,548	157,371
NET INCOME ATTRIBUTABLE TO THE COMPANY	2,201,748	1,530,413	4,035,105	3,060,025
Foreign currency translation gain, net of tax	115,890	56,457	89,832	128,076
COMPREHENSIVE INCOME	2,317,639	1,586,870	4,124,938	3,188,101
LESS: OTHER COMPREHENSIVE INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS	5,820	2,823	4,518	7,516
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY	$ 2,311,818	$ 1,584,047	$ 4,120,420	$ 3,180,585
Basic and diluted earnings per common share	$ 0.04	$ 0.04	$ 0.08	$ 0.08
Weighted average number of shares outstanding	50,665,063	40,665,063	48,980,280	40,665,063

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7 Commitments and Contingencies

6 Months Ended

Dec. 31, 2012

Notes

7 Commitments and Contingencies

7              COMMITMENTS AND CONTINGENCIES

(a)        Operating lease commitment

The Company leases buildings under non-cancelable operating lease agreements. Based on the current rental lease agreements, the future minimum rental payments required for the coming years are as follows:

Years ending June 30:
2013	$	764
2014		1,527
Remaining operating lease payments		2,291
Total future minimum operating lease payments	$	4,582

(b)        Vulnerability due to Operations in PRC

The Company’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC.  Although the PRC government has been pursuing economic reform policies for more than twenty years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRCs political, economic and social conditions.  There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective.

Substantially all of the Company’s business is transacted in RMB, which is not freely convertible.  The Peoples Bank of China or other banks are authorized to buy and sell foreign currencies at the exchange rates quoted by the Peoples Bank of China.  Approval of foreign currency payments by the Peoples Bank of China or other institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts.

Since the Company has its operations in the PRC, all of its revenues will be settled in RMB, not U.S. Dollars. Due to certain restrictions on currency exchanges that exist in the PRC, the Company’s ability to use revenue generated in RMB to pay any dividend payments to its shareholders outside of China may be limited.

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6 Income Tax

6 Months Ended

Dec. 31, 2012

Notes

6 Income Tax

6              INCOME TAX

Taxes payable consisted of the following:

	December 31,2012		June 30,2012
Income tax payable	$	777,362	$	493,394
Property and land taxes payable		7,584		7,538
Business taxes payable		69,901		45,946
City and supplement taxes		4,793		3,150
		859,640		550,028

The provision for income taxes is summarized as follows:

	Six months ended		Six months ended
	December 31,2012		December 31,2011
Current provision	$	1,427,958	$	873,295
Deferred provision		-		-
Total	$	1,427,958	$	873,295

786,004  Total numbers are pulling from 3 month and 6 month income statement element.  Adding these numbers because they are not on income statement.  Client is askjng for them to be added.

397,729

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate:

	Six months ended	Six months ended
	December 31,2012	December 31,2011
U.S. statutory rates	35%	35%
Foreign income not recognized in the U.S.	-35%	-35%
PRC statutory rates	25%	25%
Effective tax rates	25%	25%

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1 Business Description and Significant Accounting Policies: Currency Translation (Policies)

6 Months Ended

Dec. 31, 2012

Policies

Currency Translation

Currency translation

Since the Company operates primarily in the PRC, the Company’s functional currency is the Chinese Yuan (“RMB”).  The Company’s financial statements have been translated into the reporting currency, the United States Dollar (“USD”). Assets and liabilities of the Company are translated at the prevailing exchange rate at each reporting period end date. Contributed capital accounts are translated using the historical rate of exchange when capital is injected. Income and expense accounts are translated at the average rate of exchange during the reporting period. Translation adjustments resulting from translation of these condensed consolidated financial statements are reflected as accumulated other comprehensive income in stockholders’ equity.

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation.

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1 Business Description and Significant Accounting Policies: Property and Equipment (Policies)

6 Months Ended

Dec. 31, 2012

Policies

Property and Equipment

Property and equipment

Property and equipment are recorded at cost. Depreciation is provided in amounts sufficient to amortize the cost of the related assets over their useful lives using the straight line method.

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1 Business Description and Significant Accounting Policies: Variable Interest Entity (Policies)

6 Months Ended

Dec. 31, 2012

Policies

Variable Interest Entity

Variable Interest Entity

Effective January 1, 2009, the Consolidation Topic ASC 810-10-45-16 revised the accounting treatment for non-controlling minority interests of partially-owned subsidiaries.  Non-controlling minority interests represent the allocation of earnings to the VIE owners who are not at risk for the majority of losses of the VIE, which have been accounted for by using the consolidation method of accounting.

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1 Business Description and Significant Accounting Policies: Basis of Presentation (Policies)

6 Months Ended

Dec. 31, 2012

Policies

Basis of Presentation

Basis of presentation

The unaudited consolidated financial statements presented herein include the accounts of Jinzanghuang Tibet Pharmaceuticals, Inc., its wholly owned subsidiary (BTC) and variable interest entity (Leling JZH).  All inter-company transactions and balances among the Company and its subsidiaries are eliminated upon consolidation.  In the opinion of management, all adjustments and normal recurring accruals considered necessary for a fair statement of the results for the period have been included.

The accompanying consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) and are presented in U.S. Dollars.

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1 Business Description and Significant Accounting Policies: Uses of Estimates in The Preparation of Financial Statements (Policies)

6 Months Ended

Dec. 31, 2012

Policies

Uses of Estimates in The Preparation of Financial Statements

Uses of estimates in the preparation of financial statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during each reporting period.  Actual results could differ from those estimates.

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1 Business Description and Significant Accounting Policies: Revenue Recognition (Policies)

6 Months Ended

Dec. 31, 2012

Policies

Revenue Recognition

Revenue recognition

The Company recognizes revenue from provision of services to sauna stores based on units of the sauna store’s product usage, which is the contractual method of determining the right to revenue. The revenue is recognized at 35% or 40% of sauna stores’ revenue from sale of Shandong JZH products. The percentage is depending on the location of the sauna store.  Payments are made to the Company directly from the sauna stores a month after the end of the month in which the sales occurred.

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6 Income Tax: Schedule Of Reconciliation Of Effective Tax Rate (Tables)

6 Months Ended

Dec. 31, 2012

Tables/Schedules

Schedule Of Reconciliation Of Effective Tax Rate

	Six months ended	Six months ended
	December 31,2012	December 31,2011
U.S. statutory rates	35%	35%
Foreign income not recognized in the U.S.	-35%	-35%
PRC statutory rates	25%	25%
Effective tax rates	25%	25%

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1 Business Description and Significant Accounting Policies: Income Tax (Policies)

6 Months Ended

Dec. 31, 2012

Policies

Income Tax

Income tax

The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires the Company to use the assets and liability method of accounting for income taxes. Under the assets and liability method, deferred income taxes are recognized for the tax consequences of temporary differences by applying enacted statutory tax rates applicable to future years to differences between financial statement carrying amounts and the tax bases of existing assets and liabilities and operating loss and tax credit carry forward. Under this accounting standard, the effect on deferred income taxes of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recognized if it is more likely than not that some portion, or all of, a deferred tax asset will not be realized.

ASC 740-10, Accounting for Uncertainty in Income Taxes, defines uncertainty in income taxes, and the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50 percent likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met.

Enterprise income tax

Under the Provisional Regulations of PRC Concerning Income Tax on Enterprises promulgated by the PRC, income tax is payable by enterprises at a rate of 25% of their taxable income.

Business Taxes and Sales-related Taxes

Pursuant to the tax law and regulations of PRC, Leling JZH is obligated to pay 5% of revenue for business taxes, and 7% and 4% (5% effective in May, 2011) of the annual business taxes paid as tax on maintaining and building cities and education additional fee, both of which belong to sales-related taxes. Sales-related taxes are recorded when revenue is recognized. For the three months ended December 31, 2012 and 2011, business taxes and sales-related taxes were $226,726 and $148,830, respectively. For the six months ended December 31, 2012 and 2011, business taxes and sales-related taxes were $413,686 and $278,142, respectively.

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1 Business Description and Significant Accounting Policies: New Accounting Pronouncements (Policies)

6 Months Ended

Dec. 31, 2012

Policies

New Accounting Pronouncements

New Accounting Pronouncements

In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.”  This ASU does not change the current requirements for reporting net income or other comprehensive income in financial statements.  However, this guidance requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component.  In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period.  For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts.  For public entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2012.  For nonpublic entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2013.  Early adoption is permitted.  The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

In July 2012, the FASB issued ASU 2012-02, “Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment.” This ASU simplifies how entities test indefinite-lived intangible assets for impairment, which improves consistency in impairment testing requirements among long-lived asset categories. These amended standards permit an assessment of qualitative factors to determine whether it is more likely than not that the fair value of indefinite-lived intangible assets is less than their carrying value. For assets in which this assessment concludes it is more likely than not that the fair value is more than its carrying value, these amended standards eliminate the requirement to perform quantitative impairment testing as outlined in the previously issued standards. The guidance is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.  Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

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7 Commitments and Contingencies: Schedule of Future Minimum Rental Payments for Operating Leases (Details) (USD $)	Dec. 31, 2012
Operating Leases, Future Minimum Payments Due, Next Twelve Months	$ 764
Operating Leases, Future Minimum Payments, Due in Rolling Year Two	1,527
Operating Leases, Future Minimum Payments, Due Thereafter	2,291
Operating Leases, Future Minimum Payments Due	$ 4,582

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3 Property and Equipment, Net (Details) (USD $)	6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Depreciation Expense	$ 9,662	$ 9,063

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CONSOLIDATED STATEMENTS OF CASH FLOW (USD $)	6 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Net income	$ 4,247,653	$ 3,217,396
Depreciation and amortization	11,671	11,300
Change in accounts receivable	(463,773)	(408,616)
Change in contract deposit		149,106
Change in prepaid expense	(18,614)
Change in Deferred tax assets	10,974
Change in accrued expenses and other current liabilities	308,760	(422)
NET CASH PROVIDED BY OPERATING ACTIVITIES	4,096,671	2,968,764
Shares Issued	1,000,000
Proceeds from related party, loan		7,507
NET CASH PROVIDED BY FINANCING ACTIVITIES	1,000,000	7,507
EFFECT OF EXCHANGE RATE ON CASH	84,754	96,097
INCREASE IN CASH & CASH EQUIVALENTS	5,181,425	3,072,368
CASH & CASH EQUIVALENTS, BEGINNING BALANCE	8,584,928	2,176,655
CASH & CASH EQUIVALENTS, ENDING BALANCE	13,766,353	5,249,023
Cash paid for income tax	1,139,610	482,943
Cash paid for interest

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5 Accrued Expenses and Other Current Liabilities

6 Months Ended

Dec. 31, 2012

Notes

5 Accrued Expenses and Other Current Liabilities

5             ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

	December 31, 2012		June 30, 2012
Accrued payroll	$	19,233	$	16,445
Taxes payable		859,640		550,028
Accrued expenses		27,528		24,905
Other payables		2,055		4,292
Accrued expenses and other current liabilities	$	908,456	$	595,669

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1 Business Description and Significant Accounting Policies: Schedule of Variable Interest Entities (Tables)

6 Months Ended

Dec. 31, 2012

Tables/Schedules

Schedule of Variable Interest Entities

	December 31, 2012		June 30, 2012
Total current assets	$	15,079,919	$	9,418,343
Total assets		15,663,989		10,010,432
Total current liabilities		13,691,003		8,261,531
Total liabilities		13,691,003		8,261,531

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1 Business Description and Significant Accounting Policies: Accounts Receivable (Details) (USD $)	Dec. 31, 2012	Jun. 30, 2012
Allowance for Doubtful Accounts Receivable	$ 0	$ 0

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1 Business Description and Significant Accounting Policies: Long-lived Assets and Other Acquired Intangible Assets (Policies)

6 Months Ended

Dec. 31, 2012

Policies

Long-lived Assets and Other Acquired Intangible Assets

Long-Lived Assets and Other Acquired Intangible Assets

The Company reviews property and equipment and certain identifiable intangibles for impairment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If property and equipment and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds its fair market value. The Company did not record any impairments during the six months ended December 31, 2012