10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

¨	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended June 30, 2013

or
¨	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period from ______ to ______.

Commission File Number 001-34394

SKYSTAR BIO-PHARMACEUTICAL COMPANY

(Exact name of small business issuer as specified in its charter)

Nevada	33-0901534
(State or other jurisdiction of	(I.R.S. employer
incorporation or organization)	identification number)

4/F Building B, Chuangye Square, No. 48 Keji Road,

Gaoxin District, Xi’an, Shaanxi Province, P.R. China

(Address of principal executive offices and zip code)

(8629) 8819-3188

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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 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 Filer  ¨	Accelerated Filer  ¨
Non-accelerated filer  ¨	Smaller Reporting Company  x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).      Yes  ¨     No  x

As of August 12, 2013, the Registrant had 7,604,800 shares of common stock outstanding.

SKYSTAR BIO-PHARMACEUTICAL COMPANY

FORM 10-Q

INDEX

		Page No.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
PART I.  FINANCIAL INFORMATION		4
Item 1.	Condensed Consolidated Financial Statements	4
	Condensed Consolidated Balance Sheets as of June 30, 2013 (unaudited) and December 31, 2012	4
	Condensed Consolidated Statements of Comprehensive Income for the Three Months and Six Months Ended June 30, 2013 and 2012 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012 (unaudited)	6
	Condensed Consolidated Statement of Changes in Equity for the Six Months Ended June 30, 2013 (unaudited)	7
	Notes to the Condensed Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 4.	Controls and Procedures	38
PART II.  OTHER INFORMATION		39
Item 5.	Other Information	39
Item 6.	Exhibits	40
SIGNATURES		41

2

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements. All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. Forward-looking statements usually contain the words “estimate,” “anticipate,” “believe,” “expect,” or similar expressions, and are subject to numerous known and unknown risks and uncertainties. In evaluating such statements, prospective investors should carefully review various risks and uncertainties identified in this Report, including the matters set forth under the captions “Risk Factors” and in our other SEC filings. These risks and uncertainties could cause our actual results to differ materially from those indicated in the forward-looking statements.

Although forward-looking statements in this Quarterly Report on Form 10-Q reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the heading “Risks Relating to Our Business” contained in Form 10-K for the year ended December 31, 2012, as well as those discussed elsewhere in this Quarterly Report. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report. We file reports with the SEC. You can read and copy any materials we file with the SEC at the SEC’s Public Reference Room, 100 F. Street, NE, Washington, D.C. 20549 on official business days during the hours of 10 a.m. to 3 p.m. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including the Company.

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Quarterly Report. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this Quarterly Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

3

PART I.  FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2013 (Unaudited)		December 31, 2012
ASSETS
CURRENT ASSETS:
Cash	$	6,312,367	$	11,321,848
Restricted cash		81,000		-
Accounts receivable, net of allowance for doubtful accounts of $552,764 and    $247,269 as of June 30, 2013 (Unaudited) and December 31, 2012, respectively		11,932,235		10,010,796
Inventories		26,500,125		22,962,209
Deposits, prepaid expenses and other receivables		2,543,351		2,839,850
Prepayments to suppliers		32,360,468		23,438,735
Loans receivable		194,400		1,078,827
Total current assets		79,923,946		71,652,265
PROPERTY, PLANT AND EQUIPMENT, NET		28,848,808		28,867,816
CONSTRUCTION-IN-PROGRESS		9,038,656		8,691,360
OTHER ASSETS:
Long-term prepayments		1,072,167		1,050,327
Long-term prepayments for acquisitions		181,440		177,744
Intangible assets, net		5,306,659		5,319,831
Total other assets		6,560,266		6,547,902
Total assets	$	124,371,676	$	115,759,343
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1,551,941	$	4,017,530
Other payables and accrued expenses		4,448,667		4,374,047
Short-term loans		10,530,000		4,443,600
Deposits from customers		2,012,453		1,621,061
Taxes payable		1,379,353		1,950,757
Due to related parties		1,108,188		798,925
Total current liabilities		21,030,602		17,205,920
OTHER LIABILITIES:
Long-term loan		-		1,269,600
Deferred government grant		599,400		1,063,290
Purchase option liability		-		5,600
Total other liabilities		599,400		2,338,490
Total liabilities		21,630,002		19,544,410
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS’ EQUITY
Preferred stock, $0.001 par value, 50,000,000 shares authorized, No Series “A”    shares authorized. 48,000,000 Series “B” shares authorized. No Series “B”    shares issued and outstanding		-		-
Common stock, $0.001 par value, 40,000,000 shares authorized, 7,604,800 shares    issued and outstanding as of June 30, 2013 (Unaudited) and December 31, 2012		7,605		7,605
Paid-in capital		37,021,085		37,021,085
Statutory reserves		5,897,298		5,897,298
Retained earnings		48,978,910		44,515,296
Accumulated other comprehensive income		10,836,776		8,773,649
Total shareholders’ equity		102,741,674		96,214,933
Total liabilities and shareholders’ equity	$	124,371,676	$	115,759,343

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

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SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012

(Unaudited)

	For Three Months Ended June30,				For Six Months Ended June30,
	2013		2012		2013		2012
REVENUE, NET	$	11,335,145	$	8,870,848	$	16,865,886	$	16,797,185
COST OF REVENUE		5,377,824		3,746,938		8,308,710		7,390,596
GROSS PROFIT		5,957,321		5,123,910		8,557,176		9,406,589
OPERATING EXPENSES:
Research and development		92,926		330,532		93,387		334,186
Selling expenses		629,337		670,567		947,173		1,376,183
General and administrative		688,810		1,834,280		1,900,083		2,939,715
Total operating expenses		1,411,073		2,835,379		2,940,643		4,650,084
INCOME FROM OPERATIONS		4,546,248		2,288,531		5,616,533		4,756,505
OTHER INCOME (EXPENSE):
Other income (expense), net		(3,662)		2,238		(3,849)		55,998
Interest (expense), net		(96,082)		(25,929)		(136,629)		(179,541)
Change in fair value of warrant/purchase option liability		1,134		16,800		5,600		22,400
Total other (expense), net		(98,610)		(6,891)		(134,878)		(101,143)
INCOME BEFORE PROVISION FOR INCOME TAXES		4,447,638		2,281,640		5,481,655		4,655,362
PROVISION FOR INCOME TAXES		696,757		582,774		1,018,041		1,051,742
NET INCOME		3,750,881		1,698,866		4,463,614		3,603,620
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustment		1,512,244		123,715		2,063,127		682,472
COMPREHENSIVE INCOME	$	5,263,125	$	1,822,581	$	6,526,741	$	4,286,092
EARNINGS PER SHARE:
Basic	$	0.49	$	0.23	$	0.59	$	0.48
Diluted	$	0.49	$	0.23	$	0.59	$	0.48
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic		7,615,719		7,461,227		7,614,721		7,454,837
Diluted		7,615,719		7,461,227		7,614,721		7,454,837

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

5

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012
(Unaudited)

	Six months ended June 30,
	2013		2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	4,463,614	$	3,603,620
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		630,522		635,856
Amortization		122,478		200,570
Provision for doubtful accounts		297,164		101,246
Change in fair value of warrant/purchase option liability		(5,600)		(22,400)
Loss on sale of office equipment		1,740		-
Common stock to be issued to related parties for compensation		8,680		56,817
Common stock issued under 2010 stock incentive plan		-		981,094
Change in operating assets and liabilities
Accounts receivable		(1,992,249)		(7,381,238)
Inventories		(3,027,946)		1,678,678
Deposits, prepaid expenses and other receivables		332,707		649,485
Prepayments to supppliers		(8,344,799)		(7,121,001)
Accounts payable		(2,675,933)		1,614,377
Other payables and accrued expenses		144,475		99,033
Deposits from customers		353,886		(38,170)
Taxes payable		(605,471)		2,778,594
Deferred government grants		(641,120)		(317,320)
Net cash used in operating activities		(10,937,852)		(2,480,759)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments of long-term prepayments		-		(349,464)
Refund of long-term prepayments		-		475,980
Loan to third parties		-		(1,942,963)
Repayment of loans from third parties		897,232		-
Placement of restricted cash		(80,140)		-
Purchases of property, plant and equipment		(4,008)		(127,531)
Proceeds from sale of plant and equipment		160		-
Payments on construction-in-progress		(10,931)		(79,806)
Net cash (used in) provided by investing activities		802,313		(2,023,784)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans		8,815,400		63,464
Repayment of short-term loans		(2,885,040)		(666,372)
Repayment of long-term loan		(1,282,240)		-
Due to related parties		303,328		280,901
Net cash (used in) provided by financing activities		4,951,448		(322,007)
EFFECT OF EXCHANGE RATE CHANGES ON CASH		174,610		119,563
DECREASE IN CASH		(5,009,481)		(4,706,987)
CASH, beginning of period		11,321,848		7,048,968
CASH, end of period	$	6,312,367	$	2,341,981
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	$	304,766	$	309,010
Cash paid for income taxes	$	328,574	$	88,054
Non-cash investing and financing activities
Long-term prepayment transferred to construction-in-progress	$	-	$	666,372
Construction-in-progress transferred to property, plant and equipment	$	-	$	3,630
Shares issued to settle payables to related parties	$	-	$	199,239

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

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SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2013

(UNAUDITED)

											Accumulated
							Retained earnings				other
	Common stock				Paid-in		Statutory				comprehensive
	Shares		Amount		capital		reserves		Unrestricted		income		Total
BALANCE, January 1,     2013		7,604,800	$	7,605	$	37,021,085	$	5,897,298	$	44,515,296	$	8,773,649	$	96,214,933
Foreign currency translation		-		-		-		-		-		2,063,127		2,063,127
Net income		-		-		-		-		4,463,614		-		4,463,614
BALANCE, June 30, 2013		7,604,800	$	7,605	$	37,021,085	$	5,897,298	$	48,978,910	$	10,836,776	$	102,741,674

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

7

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 1 - ORGANIZATION

Organization and description of business

Skystar Bio-Pharmaceutical Company (“Skystar” or the “Company”) was incorporated in Nevada on September 24, 1998. Since its acquisition on November 7, 2005 of Skystar Bio-Pharmaceutical (Cayman) Holdings Co., Ltd. (“Skystar Cayman”), a Cayman Islands company, the Company has been engaged in the research, development, production, marketing, and sales of veterinary healthcare and medical care products. All current operations of the Company are in the People’s Republic of China (“China” or the “PRC”).

All of the Company’s operations are carried out by its subsidiaries in China and Xi’an Tianxing Bio-Pharmaceutical Co., Limited (“Xi’an Tianxing”), a PRC joint stock company that the Company controls through contractual arrangements originally between Skystar Cayman and Xi’an Tianxing. On March 10, 2008, the Company entered into a series of agreements transferring all of the rights and obligations of Skystar Cayman under the contractual arrangements to Sida Biotechnology (Xi’an) Co., Ltd. (“Sida”), a PRC company. Sida is the wholly owned subsidiary of Fortunate Time International Limited (“Fortunate Time”), a Hong Kong company and wholly owned subsidiary of Skystar Cayman. Xi’an Tianxing also has a wholly owned subsidiary, Shanghai Siqiang Biotechnological Co., Ltd. (“Shanghai Siqiang”), a PRC company.

On September 18, 2009, Skystar Bio-Pharmaceutical Inc. (“Skystar California”) was incorporated in California and became a wholly owned subsidiary of Skystar. On December 20, 2010, Skystar California was dissolved.

On April 21, 2010, Kunshan Sikeda Biotechnology Co., Ltd. (“Kunshan Sikeda”) was incorporated in Kunshan, Jiangsu Province, China with a registered capital of $81,000 (RMB 500,000), of which Xi’an Tianxing and Sida each contributed $40,500 (RMB 250,000). Kunshan Sikeda is jointly owned by Xi’an Tianxing and Sida. On July 31, 2013, Kunshan Sikeda was dissolved.

On May 7, 2010, Fortunate Time formed Skystar Biotechnology (Kunshan) Co., Limited (“Skystar Kunshan”) in Kunshan, Jiangsu Province, China with a registered capital of $15,000,000, of which $2,250,000 was paid by Fortunate Time in cash, and of which the remaining $12,750,000 is required to be invested in the future. Skystar Kunshan was formed in connection with an acquisition of assets to meet part of the registered capital requirements, and was intended to be a micro-organism manufacturing facility for the Company once the acquisition was complete. The asset acquisition was completed in September 2011.

On August 11, 2010, Sida became the parent company of Skystar Biotechnology (Jingzhou) Co., Limited (“Skystar Jingzhou”), a company established in Jingzhou, Hubei Province, China on February 5, 2010, with registered capital of approximately $4.2 million (RMB 26,000,000), of which approximately $3.8 million (RMB 23,480,000) was paid. On July 5, 2012, Sida paid up the remaining capital of $0.4 million (RMB 2,520,000).

On March 15, 2011, Xi’an Tianxing formed Xi’an Sikaida Bio-products Co., Ltd. (“Xi’an Sikaida”) with a registered capital of approximately $1,620,000 (RMB 10,000,000) paid by Xi’an Tianxing.

Hereinafter, Skystar, Skystar Cayman, Fortunate Time, Sida, Xi’an Tianxing, Skystar Kunshan, Kunshan Sikeda, Skystar Jingzhou, Shanghai Siqiang, and Xi’an Sikaida are sometimes collectively referred to as the “Company”.

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (“U.S. GAAP”) applicable to interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (which include all significant normal and recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The accompanying results of operations are not necessarily indicative of the operating results that may be expected for the entire year ending December 31, 2013. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes thereto of the Company, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the Securities and Exchange Commission (“SEC”).

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SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Principles of consolidation

The accompanying condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The consolidated financial statements include the financial statements of the Company, its wholly-owned subsidiaries, and its variable interest entities (“VIEs”).  All significant inter-company transactions and balances between the Company, its subsidiaries, and its VIEs have been eliminated in consolidation.

The Company has evaluated the relationship with Xi’an Tianxing and Xi’an Tianxing’s wholly owned subsidiaries, Xi’an Sikaida and Shanghai Siqiang. As a result of the contractual arrangements which obligate Sida to absorb all of the risk of loss from Xi’an Tianxing’s activities and enable Sida to receive all of its expected residual returns, the Company is the primary beneficiary of these VIEs and thus it accounts for Xi’an Tianxing, Xi’an Sikaida and Shanghai Siqiang as VIEs under the Financial Accounting Standards Board’s (“FASB”) interpretation on consolidation of variable interest entities. Accordingly, the Company consolidates the results, assets, and liabilities of Xi’an Tianxing. Xi’an Sikaida and Shanghai Siqiang.

Use of estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The level of uncertainty in estimates and assumptions increases with the length of time to complete the underlying transactions. Actual results may differ from these estimates in amounts that may be material to the consolidated financial statements and accompanying notes. Significant estimates and assumptions made by the Company are used for, but not limited to the allowance for uncollectible receivables, obsolescence reserve against inventory, useful lives of property, plant and equipment and intangible assets, assumptions used in assessing impairment for long-lived assets and the fair value for derivative instruments.

Foreign currency translation

The Company uses the United States dollar (“U.S. dollar”) for financial reporting purposes and the Chinese Renminbi (“RMB”) as its functional currency. The Company’s subsidiaries and VIEs maintain their books and records in their functional currency, being the primary currency of the economic environment in which their operations are conducted.

The Company translates the subsidiaries’ and VIEs’ assets and liabilities into U.S. dollars using the applicable exchange rates prevailing at the balance sheet dates, and the statements of comprehensive income and cash flows are translated at average exchange rates during the reporting period. As a result, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the subsidiaries’ and VIEs’ financial statements are recorded as accumulated other comprehensive income.

The quotation of the exchange rates does not imply free convertibility of RMB to other foreign currencies. All foreign exchange transactions continue to take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rate quoted by the People’s Bank of China.

Approval of foreign currency payments by the People’s Bank of China or other institutions requires submitting a payment application form together with invoices, shipping documents, and signed contracts. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Fair values of financial instruments

ASC Topic 820, Fair Value Measurement and Disclosures , defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy, which requires classification based on observable and unobservable inputs when measuring fair value. Certain current assets and current liabilities are financial instruments.  Management believes their carrying amounts are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and, if applicable, their current interest rates are equivalent to interest rates currently available. The three levels of valuation hierarchy are defined as follows:

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SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

· Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

· Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

· Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2013 and December 31, 2012:

	Carrying Value at June 30, 2013		Fair Value Measurement at June 30, 2013
			Level 1		Level 2		Level 3
Purchase option liability	$	—	$	—	$	—	$	—

	Carrying Value at December 31,		Fair Value Measurement at December 31, 2012
	2012		Level 1		Level 2		Level 3
Purchase option liability	$	5,600	$	—	$	5,600	$	—

Below is the reconciliation for the purchase option liability changes from December 31, 2012 to June 30, 2013:

Balance, December 31, 2012	$	5,600
Change in fair value		(5,600)
Balance, June 30, 2013	$	—

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SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Revenue recognition

Revenue of the Company is primarily derived from the sales of veterinary healthcare and medical care products in China. Sales are recognized when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectability is reasonably assured. Sales are presented net of value added tax (“VAT”). No estimated allowance for sales returns is reflected in these consolidated financial statements as sales returns historically have been insignificant.

There are two types of sales upon which revenue is recognized:

a.	Credit sales: revenue is recognized when the products have been delivered to the customers.
b.	Full payment before delivery: Cash received is recorded as “deposits from customers” and revenue is recognized when the products have been delivered to the customers.

The Company’s revenue and cost of revenue by product line were as follows:

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Revenue
Micro-organism	$	4,031,113	$	4,002,206	$	5,698,295	$	7,137,246
Veterinary Medications		6,292,573		2,458,714		9,739,290		5,467,301
Feed Additives		514,161		1,267,061		800,449		2,301,833
Vaccines		497,298		1,142,867		627,852		1,890,805
Total Revenue		11,335,145		8,870,848		16,865,886		16,797,185
Cost of Revenue
Micro-organism		1,179,499		1,169,412		1,766,916		2,076,252
Veterinary Medications		3,740,498		1,399,006		5,846,014		3,191,654
Feed Additives		399,883		1,032,139		614,520		1,882,023
Vaccines		57,944		146,381		81,260		240,667
Total Cost of Revenue		5,377,824		3,746,938		8,308,710		7,390,596
Gross Profit	$	5,957,321	$	5,123,910	$	8,557,176	$	9,406,589

Cash

Cash includes currency on hand, demand deposits with banks, and liquid investments with an original maturity of three months or less.

Accounts receivable

Accounts receivable is stated at cost less an allowance for uncollectible accounts, as needed. The Company uses the aging method to estimate the allowance for anticipated uncollectible receivable balances. Under the aging method, a bad debt percentage is estimated by management based on historical experience and current economic climate.  The resulting percentage is applied to customers’ balances categorized by the number of months the underlying invoices have remained outstanding. At each reporting period, the allowance balance is adjusted to reflect the amount computed as a result of the aging method. When facts subsequently become available to indicate that the allowance provided requires an adjustment, a corresponding adjustment is made to the allowance account as a change in estimate. The ultimate collection of the Company’s accounts receivable may take one year. Delinquent account balances are reserved after management determines that the likelihood of collection is not probable, and known bad debts are written-off against the allowance for doubtful accounts when identified.

Inventories

Inventories are stated at the lower of cost as determined on a weighted-average basis, or market. Inventories include purchases and related costs incurred in bringing the inventories to their present location and condition. Management reviews inventories for obsolescence and cost in excess of net realizable value and records a reserve against the inventory and additional cost of goods sold when the carrying value exceeds net realizable value.

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SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for maintenance and repairs that do not improve or extend the useful lives of the assets are charged to operations as incurred, while renewals and betterments are capitalized. Gains and losses on disposals are included in the results of operations. Estimated useful lives of the assets are as follows:

	Estimated useful life
Buildings and improvements	10-40 years
Machinery and equipment	5-10 years
Office equipment and furniture	5-10 years
Vehicles	5-10 years

Management assesses the carrying value of property, plant and equipment annually or more often when factors indicating impairment are present, and reduce the carrying value of such assets by the amount of the impairment. The Company determines the existence of such impairment by measuring the expected future cash flows (undiscounted) and comparing such amount to the net asset carrying value. An impairment loss, if it exists, is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Based on its review, management believes that, as of June 30, 2013 and December 31, 2012, there was no impairment of its property, plant and equipment.

Construction-in-progress

Construction-in-progress includes direct costs of construction of a factory building. Interest incurred during the period of construction, if significant, is capitalized. All other interest is expensed as incurred. Construction-in-progress is not depreciated until such time as the asset is completed and put into service.

Intangible assets

Land use rights — Land use rights represent the amounts paid to acquire a long-term interest to utilize the land underlying the Company’s facilities. This type of arrangement is common for the use of land in the PRC. Land use rights are amortized on the straight-line method over the contractual lease terms.  The land use right granted to the Company’s Huxian facility was for 50 years.  The land use right granted to the Company’s Jingzhou facility was 30 years. The land use right granted to the Company’s Kunshan facility was for 41 years.

Technological know-how — Purchased technological know-how includes confidential formulas, manufacturing processes, and technical and procedural manuals, and is amortized using the straight-line method over an estimated useful life of between five to eleven years that reflects the period over which such confidential formulas, manufacturing processes, and technical and procedural manuals are kept confidential by the Company as agreed between the Company and the selling parties.

Impairment of intangible assets — the Company evaluates the carrying value of intangible assets at least annually when factors indicating impairment are present. The Company determines the existence of such impairment by measuring the estimated future cash flows (undiscounted) and comparing such amount to the net asset carrying value. If the undiscounted cash flow estimated to be generated by any such intangible asset is less than its carrying amount, a loss is recognized based on the amount by which the carrying amount exceeds the intangible asset’s fair market value. Loss on intangible assets to be disposed of is determined in a similar manner, except that fair market values are reduced by the cost of disposal. Based on its review, the Company believes that, as of June 30, 2013 and December 31, 2012, there was no impairment of its intangible assets.

Comprehensive income

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Accumulated other comprehensive income is comprised of the foreign currency translation adjustments.

Shipping and handling costs

Shipping and handling costs related to costs of goods sold are included in selling expenses, which totaled $443,640 and $463,630 for the three months ended June 30, 2013 and 2012, respectively, and $647,489 and $847,333 for the six months ended June 30, 2013 and 2012, respectively.

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SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Advertising costs

Advertising costs are charged to selling expenses as incurred. Advertising costs were insignificant for both the three months and six months ended June 30, 2013 and 2012, respectively.

Research and development costs

Research and development costs are charged to expenses as incurred and include salaries, professional fees, and technical support fees related to such efforts.

Income taxes

The Company accounts for income taxes using an asset and liability method.  Under this 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 the financial statement carrying amounts and the tax bases of existing assets and liabilities. 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.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. As of June 30, 2013 and December 31, 2012, there are no unrecognized tax benefits, and the Company does not expect a significant change in tax benefits in the next 12 months.  Penalties and interest levied by taxing authorities, if any, are classified as income tax expense in the year incurred. No significant penalties or interest relating to income taxes have been incurred during the three months and six months ended June 30, 2013 and 2012.

According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational or other errors made by the taxpayer or the withholding agent.  The statute of limitations extends to five years under special circumstances. In the case of transfer pricing issues, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. Accordingly, the income tax returns of the Company’s PRC operating subsidiaries for the years ended December 31, 2007 through 2012 are open to examination by the PRC state and local tax authorities.

Stock-based compensation

The Company records and reports stock-based compensation by measuring the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period during which services are received. Stock compensation for stock granted to non-employees is determined as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably measured.

Earnings per share

Basic earnings per share is based upon the weighted-average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares, including convertible preferred shares, warrants and stock options were converted or exercised. Further, the method requires that stock dividends or stock splits be accounted for retroactively if the stock dividends or stock splits occur during the period or after the end of the period but before the release of the financial statements, by considering it outstanding for the entirety of each period presented. Diluted earnings per share is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

Related parties

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of such principal owners and management, and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

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SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Operating segments

While the chief operating decision-makers monitor the revenue streams of the various products lines, operations are managed and financial performance is evaluated on a Company-wide basis. Product lines are aggregated into one as operating results for all product lines are similar. Accordingly, all of the major product lines (micro-organism, veterinary medicine, feed additives and vaccines) are considered by management to be aggregated in one reportable operating segment.

As the Company primarily generates its revenues from customers in the PRC, no geographical segments are presented.

Recently issued accounting pronouncements

In February 2013, the FASB issued Accounting Standards Update No. 2013-02 Comprehensive Income (Topic 220): The objective of this update is to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments in this update seek to attain that objective by requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. generally accepted accounting principles (GAAP) to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is reclassified to a balance sheet account (for example, inventory) instead of directly to income or expense in the same reporting period. For public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2012. The adoption of the provisions in this update did not have a significant impact on the Company’s consolidated financial statements.

In March 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-05, Foreign Currency Matters, (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (ASU 2013-05), to resolve a diversity in accounting for the cumulative translation adjustment of foreign currency upon derecognition of a foreign subsidiary or group of assets. ASU 2013-05 requires the parent to apply the guidance in Subtopic 830-30 to release any related cumulative translation adjustment into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. Further, ASU 2013-05 clarified that the parent should apply the guidance in subtopic 810-10 if there is a sale of an investment in a foreign entity, including both (1) events that result in the loss of a controlling financial interest in a foreign entity and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date. Accordingly, the cumulative translation adjustment should be released into net income upon the occurrence of those events. ASU 2013-05 is effective prospectively for the Company in our first quarter of fiscal 2014, with early adoption permitted. The Company does not expect ASU 2013-05 to have a significant impact on its consolidated results of operations and financial condition.

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Income Taxes (Topic 740)(ASU 2013-11). The amendments in this update provide guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. These amendments provide that an unrecognized tax benefit, or a portion thereof, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The Company does not expect ASU 2013-11 to have a significant impact on its consolidated results of operations and financial condition.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

14

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 3 - CONCENTRATIONS AND CREDIT RISK

The Company’s operations are all carried out in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic, and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Financial instruments which subject the Company to concentration of credit risk consist of cash and accounts receivable. Balances at financial institutions or state-owned banks within the PRC are not covered by insurance. The Company has not experienced any losses in such accounts. The Company provides unsecured credit terms for sales to certain customers. As a result, there are credit risks with the accounts receivable balances. The Company constantly re-evaluates the credit worthiness of customers buying on credit and maintains an allowance for doubtful accounts.

For the three months and six months ended June 30, 2013 and 2012, all of the Company’s sales occurred in the PRC. No major customers accounted for more than 10% of the Company’s total revenues. All accounts receivable at June 30, 2013 and December 31, 2012 are from customers located in the PRC.

The Company’s six largest vendors accounted for approximately 73% and 87% of the Company’s total purchases, respectively, for the three months ended June 30, 2013 and 2012. The Company’s six largest vendors accounted for approximately 73% and 86% of the Company’s total purchases, respectively, for the six months ended June 30, 2013 and 2012.

No product accounted for more than 10% of the Company’s total revenues for the three months and six months ended June 30, 2013. The Company had one product that accounted for 13% and 17% of the Company’s total revenues for the three months and six months ended June 30, 2012, respectively.

Note 4 - ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following:

	June 30, 2013		December 31, 2012
Accounts receivable	$	12,484,999	$	10,258,065
Allowance for doubtful accounts		(552,764)		(247,269)
Accounts receivable, net	$	11,932,235	$	10,010,796

The following table presents the movement of the allowance for doubtful accounts:

Balance, January 1, 2013	$	247,269
Addition		353,652
Recovery		(56,487)
Translation adjustment		8,330
Balance, June 30, 2013	$	552,764

15

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 5 – INVENTORIES

Inventories consist of the following:

	June 30, 2013		December 31, 2012
Raw materials	$	23,509,591	$	20,428,757
Packing materials		266,940		220,078
Work-in-process		26,368		219
Finished goods		2,625,622		2,243,226
Other		71,604		69,929
Total	$	26,500,125	$	22,962,209

Note 6 - DEPOSITS, PREPAID EXPENSES AND OTHER RECEIVABLES

Deposits, prepaid expenses and other receivables are comprised of the following:

	June 30, 2013		December 31,  2012
Prepaid income taxes	$	400,092	$	1,263,845
Other prepayments		668,193		828,676
Deposits placed with guarantors (note 14)		526,500		198,375
Interest receivable (note 7)		231,316		-
Other receivables		717,250		548,954
Total	$	2,543,351	$	2,839,850

Note 7 – PREPAYMENTS TO SUPPLIERS

Prepayments to suppliers are comprised of the following:

	June 30, 2013		December 31,  2012
Prepayments for raw materials	$	31,147,947	$	23,053,753
Prepayments for packaging materials		1,212,521		384,982
Total	$	32,360,468	$	23,438,735

As part of the Company’s strategy to reduce inventory costs, the Company maintains a balance for prepayments to suppliers in order to secure favorable pricing for raw materials.  As inventory is received throughout the period, this balance will fluctuate with the business operations.

Starting from January 1, 2013, the Company began to charge two major suppliers interest at an annual rate of 2.0% on these prepayments for raw materials. As of June 30, 2013, prepayments to these two suppliers were $22,229,360. For the three months ended June 30, 2013 and 2012, $109,967 and $Nil, respectively, of interest income was recognized on these prepayments. For the six months ended June 30, 2013 and 2012, $228,860 and $Nil, respectively, of interest income was recognized on these prepayments. The unpaid interest balance of $228,860 was included in “Deposits, prepaid expenses and other receivables” (note 6).

16

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 8 - PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consist of the following:

	June 30, 2013		December 31, 2012
Buildings and improvements	$	27,775,811	$	27,210,008
Machinery and equipment		6,015,476		5,876,467
Office equipment and furniture		333,128		332,653
Vehicles		605,633		593,296
Total		34,730,048		34,012,424
Less: accumulated depreciation		(5,881,240)		(5,144,608)
Plant and equipment, net	$	28,848,808	$	28,867,816

Depreciation expense was $316,961 and $292,727 for the three months ended June 30, 2013 and 2012, respectively. Depreciation expense was $630,522 and $635,856 for the six months ended June 30, 2013 and 2012, respectively.

As of June 30, 2013 and December 31, 2012, property, plant and equipment with a carrying amount of $20,271,490 and $2,180,382, respectively, were pledged against the Company’s short-term and long-term loans.

Note 9 - CONSTRUCTION-IN-PROGRESS

Construction-in-progress (“CIP”) relates to facilities being built in Xi’an, Jingzhou and Kunshan.

Xi’an facility

Xi’an Tianxing has a vaccine facility and animal laboratory being built in Huxian, Xi’an.

In 2011, the Company started two projects at the vaccine facility to modify air filtration, water treatment, and other facility changes based on recommendations by outside experts hired by the Company to advise on the GMP qualification process for the vaccine facility. As of June 30, 2013, this vaccine facility had a total construction-in-progress of $2,446,879 (RMB 15,104,191). On September 20 and 21, 2012, China’s Ministry of Agriculture (“MOA”) physically inspected this new facility and deemed the facility GMP compliant. Following physical inspection, the MOA’s inspection team recommended that the Office of the Working Committee proceed with Stage 2 of its GMP certification process. The Company expects the GMP certification process to be completed by the third quarter of 2013.

In 2011, the Company started a facility improvement project in the amount of approximately $324,000 (RMB 2,000,000) for the Huxian Animal Laboratory. The facility is a supporting project to the Huxian vaccine facility and is currently in Stage 2 of its GMP certification process. The Company expects the GMP certification process to be completed by the third quarter of 2013.

Jingzhou facility

In 2011, the Company started a facility improvement project to expand veterinary medicine production capacity at the Jingzhou facility. The project includes plant construction and water supply and drainage and has an estimated total cost of $1,701,000 (RMB 10,500,000). The Company expects the project will be completed by the end of the fourth quarter of 2013.

Kunshan facility

In 2011, the Company started a supporting project at the Kunshan micro-organism facility that includes the construction and installation of plumbing, sewer, electrical, HVAC, fire protection and alarm system, drainage, office, lab, road construction, parking, and landscaping. As of June 30, 2012, the construction and installation were completed, inspected and accepted.

No depreciation is provided for construction-in-progress until such time as the assets are completed and placed into service.

17

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 9 - CONSTRUCTION-IN-PROGRESS (Continued)

The construction projects the Company was in the progress of completing are as follows:

	Total in CIP as of
Project	June 30, 2013		Estimated Cost to Complete		Estimated Total Cost		Estimated Completion Date
Xi'an vaccine facility	$	2,446,879	$	-	$	2,446,879	Third quarter of 2013
Xi'an animal laboratory		324,000		-		324,000	Third quarter of 2013
Kunshan micro-organism facility		5,066,871		-		5,066,871	Completed (1)
Jingzhou veterinary medication facility		1,200,906		500,094		1,701,000	Fourth quarter of 2013
Total	$	9,038,656	$	500,094	$	9,538,750

(1) As of June 30, 2013, the supporting project at the Kunshan facility was completed, inspected and accepted. However, the construction-in-progress of $5,066,871 has not been transferred to property, plant and equipment as the Kunshan micro-organism facility was not operational at this point.

As of June 30, 2013 and December 31, 2012, the Company had construction in progress amounting to $9,038,656 and $8,691,360, respectively. No interest expense had been capitalized for construction in progress for the three months and six months ended June 30, 2013 and 2012 as management determined the amount of capitalized interest would be insignificant.

Note 10 – RESTRICTED CASH

On June 13, 2013, the Company obtained a one year loan of $810,000 (RMB 5,000,000) from Industrial and Commercial Bank of China (ICBC) Songzi Branch. The Company is required to keep 10% of the loan or $81,000 (RMB 500,000) with the bank as collateral (note 14).

Note 11 - LONG-TERM PREPAYMENTS

Long-term prepayments consist of the following:

	June 30, 2013		December 31, 2012
Prepayments for R&D project	$	362,880	$	355,488
Construction deposits		385,510		377,657
Deposits for equipment purchase and land use rights		317,699		311,227
Deposits for other		6,078		5,955
Long-term prepayments	$	1,072,167	$	1,050,327
Long-term prepayments for acquisitions	$	181,440	$	177,744

As of June 30, 2013 and December 31, 2012, deposits for potential acquisitions totaled $181,440 and $177,744, respectively, all of which was held by an unrelated third party engaged to facilitate potential acquisition projects.

18

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 12 – INTANGIBLE ASSETS

Intangible assets consist of the following:

	June 30, 2013		December 31, 2012
Land use rights	$	4,900,502	$	4,800,677
Technological know-how		2,268,000		2,221,800
Patents		324,000		317,400
Total		7,492,502		7,339,877
Less: accumulated amortization		(2,185,843)		(2,020,046)
Intangible assets, net	$	5,306,659	$	5,319,831

For the three months ended June 30, 2013 and 2012, amortization expense for intangibles assets amounted to $61,606 and $100,197, respectively. For the six months ended June 30, 2013 and 2012, amortization expense for intangibles assets amounted to $122,478 and $200,570, respectively.

Amortization expense expected for the next five years and thereafter is as follows:

Years ending December 31,	Amount
2013	$	123,792
2014		247,584
2015		247,584
2016		247,584
2017		247,584
Thereafter		4,192,531
Total	$	5,306,659

As of June 30, 2013 and December 31, 2012, land use rights with a carrying amount of $1,540,765 and $1,199,456, respectively, were pledged against the Company’s short-term loans.

Note 13 – LOANS RECEIVABLE

In November 2010, the Company provided an unsecured non-interest bearing loan to Xi’an Tiantai Investment, Ltd., the Company’s acquisition advisor, in the amount of $194,400 (RMB 1,200,000) for two years from November 26, 2010 through November 25, 2012. On January 1, 2012, the Company changed this loan to an unsecured interest bearing loan at an annual interest rate of 12.0% for eighteen months from January 1, 2012 to June 30, 2013. On June 28, 2013, the Company extended this loan for another six months from July 1, 2013 to December 31, 2013. On August 13, 2013, the entire loan was repaid.

On April 1, 2012, the Company provided a secured interest bearing loan to Shaanxi Jiali Pharmaceutical Co., Ltd., an unrelated third party, in the amount of $798,000 (RMB 5,000,000) at an annual interest rate of 12.0% for eight months from April 1, 2012 through November 30, 2012. This loan receivable was secured by an irrecoverable corporate guarantee from Xi’an Lantech Pharmaceutical Co. Ltd., an unrelated third party. On December 1, 2012, the Company extended this loan for another five months from December 1, 2012 to April 30, 2013. On May 8, 2013, the entire loan was repaid.

As of June 30, 2013 and December 31, 2012, the Company had other unsecured non-interest bearing loans in the amount of $Nil and $94,887 respectively, due from the Company’s employees and unrelated third parties.

Interest income earned on these loans amounted to $13,392 and $5,823 for the three months ended June 30, 2013 and 2012, respectively. Interest income earned on these loans amounted to $43,596 and $11,540 for the six months ended June 30, 2013 and 2012, respectively.

19

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 14 – SHORT-TERM AND LONG-TERM LOANS

On June 27, 2012, the Company entered into a line of credit agreement with Industrial and Commercial Bank of China (ICBC) Songzi Branch that allows the Company to borrow up to RMB 3,000,000. This line of credit agreement expires on June 18, 2013. The Company withdrew $478,800 (RMB 3,000,000) on July 3, 2012 at an annual interest rate determined by using the People's Bank of China floating benchmark lending rate over the same period plus 30% of that rate, which was 7.8% at June 30, 2013. This loan is secured by the Company’s buildings and land use rights in Jingzhou, Hubei Province. On June 18, 2013, the loans were fully repaid.

On August 13, 2012, the Company obtained fifteen six-month loans with Xi'an High-tech Zone Guoxin Microcredit Ltd. for a total amount of $2,380,500 (RMB 15,000,000) to meet short-term cash needs. Each loan is in the amount of $158,700 (RMB 1,000,000) at an annual interest rate of 22.4%. These loans are guaranteed by Sida. On February 5, 2013, the loans were fully repaid.

On August 27, 2012, the Company obtained a one year loan with Chang’an Bank for $1,620,000 (RMB 10,000,000) at an annual interest rate determined by using the People's Bank of China floating benchmark lending rate over the same period plus 30% of that rate, which was 7.8% at June 30, 2013. This loan is guaranteed by Xi’an Taixin Investment Guarantee Co., Ltd. For this guarantee, the Company is required to pay $32,400 (RMB 200,000) of fees to Xi’an Taixin Investment Guarantee Co., Ltd. and 12.5% of the loan or $202,500 (RMB 1,250,000) is required to be kept by Xi’an Taixin Investment Guarantee Co., Ltd. to serve as collateral until the loan is repaid. This loan is also personally guaranteed by the Company’s Chairman and CEO.

On January 16, 2013, the Company obtained a one year loan with Industrial Bank Co. Ltd. Xi’an branch for $4,860,000 (RMB 30,000,000) at an annual interest rate of 6.6%. This loan is secured by the Company’s land use rights and manufacturing plant located in Huxian County. This loan is also personally guaranteed by the Company’s Chairman and CEO and his wife.

On April 16, 2013, the Company obtained a one year loan from May 27, 2013 to May 26, 2014 with Postal Savings Bank of China Xi’an Branch for $3,240,000 (RMB 20,000,000) at an annual interest rate determined by using the People's Bank of China floating benchmark lending rate over the same period plus 20% of that rate, which was 7.2% at June 30, 2013. This loan is guaranteed by Xi’an Investment and Financing Guarantee Co., Ltd. For this guarantee, the Company is required to pay $58,320 (RMB 360,000) of fees to Xi’an Investment and Financing Guarantee Co., Ltd. and 10% of the loan or $324,000 (RMB 2,000,000) is required to be kept by Xi’an Investment and Financing Guarantee Co., Ltd. to serve as collateral until the loan is repaid. This loan is secured by the Company’s office buildings located in Xi’an, Shaanxi Province and the manufacturing equipment in Huxian County. The Company’s Chairman and CEO, his wife, and two other company’s managers have provided personal guarantees to Xi’an Investment and Financing Guarantee Co., Ltd. for the repayment of the loan.

On June 13, 2013, the Company obtained a one year loan from June 20, 2013 to June 19, 2014 with Industrial and Commercial Bank of China (ICBC) Songzi Branch for $810,000 (RMB 5,000,000) at an annual interest rate determined by using the People's Bank of China floating benchmark lending rate over the same period plus 30% of that rate, which was 7.8% at June 30, 2013. The Company is required to keep 10% of the loan or $81,000 (RMB 500,000) with the bank as collateral (note 10). This loan is secured by the Company’s buildings and land use rights in Jingzhou, Hubei Province.

Outstanding short-term loans consisted of the following:

	June 30, 2013				December 31, 2012					Interest
Bank	Amt RMB		Amt USD		Amt RMB		Amt USD		Due Date	Rate
ICBC Songzi Branch		-	$	-		3,000,000	$	476,100	06/18/13		(1)
Xi'an High-tech Zone Guoxin Microcredit Ltd.		-		-		15,000,000		2,380,500	02/12/13		22.400	%
Chang’an Bank		10,000,000		1,620,000		10,000,000		1,587,000	08/26/13		(1)
Industrial Bank Co. Ltd. Xi’an branch		30,000,000		4,860,000		-		-	01/15/14		6.600	%
Postal Savings Bank of China Xi’an Branch		20,000,000		3,240,000		-		-	05/26/14		(2)
ICBC Songzi Branch		5,000,000		810,000		-		-	06/19/14		(1)
Total		65,000,000	$	10,530,000		28,000,000	$	4,443,600

(1)	People's Bank of China floating benchmark lending rate over the same period plus 30%, which was 7.8% at June 30, 2013.
(2)	People's Bank of China floating benchmark lending rate over the same period plus 20%, which was 7.2% at June 30, 2013.

20

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 14 – SHORT-TERM AND LONG-TERM LOANS (Continued)

Long-term loan

On September 17, 2012, the Company entered into a two-year line of credit agreement with Shaanxi Agricultural Yanta Credit Union that allows the Company to borrow up to RMB 8,000,000. This line of credit agreement expires September 20, 2014. The Company withdrew $1,276,800 (RMB 8,000,000) on September 26, 2012 at an annual interest rate of 9.446%. The interest rate is determined annually by using the People's Bank of China floating benchmark lending rate over the same period plus the lender’s floating rate. The new interest rate becomes effective on December 21 of each year. This line of credit is secured by the Company’s office buildings located in Xi’an City. This line of credit is also personally guaranteed by the Company’s Chairman and CEO and his wife. On May 9, 2013, the loans were fully repaid.

Outstanding long-term loan consisted of the following:

June 30, 2013

December 31, 2012

Interest

Bank

Amt RMB

Amt USD

Amt RMB

Amt USD

Due Date

Rate

Shaanxi Agricultural Yanta Credit Union

-

-

8,000,000

$

1,269,600

09/20/14

9.446

%

Interest expense incurred and associated with the short-term and long-term loans amounted to $123,340 and $156,427 for the three months ended June 30, 2013 and 2012, respectively. Interest expense incurred and associated with the short-term and long-term loans amounted to $304,766 and $309,010 for the six months ended June 30, 2013 and 2012, respectively, none of which has been capitalized as part of construction-in-progress in 2013 and 2012, respectively.

Note 15 - DEFERRED GOVERNMENT GRANT

The subsidies for Good Manufacturing Practice projects were granted by Shaanxi provincial government and Xi’an municipal government which may require the subsidies to be repaid. As of June 30, 2013 and December 31, 2012, the subsidies were RMB 2,500,000, equivalent to $405,000 and $396,750, respectively.

The subsidies granted by Xi’an City Science and Technology Bureau and Xi’an City High-Tech Industrial Development Zone are required to be used exclusively for the fish disease multi associated anti-idiotypic monoclonal antibody vaccine project during the development period from January 2012 through December 2014. As of June 30, 2013 and December 31, 2012, 70% of the subsidies or RMB 4,200,000, equivalent to $680,400 and $666,540 respectively had been received and $486,000 (RMB 3,000,000) and nil has been expensed on this project and were accounted for as an offset against deferred government grant as of June 30, 2013 and December 31, 2012, respectively.

On June 3, 2003 and January 16, 2006, the Company received payment from China Gao Xin Investment Group Company of $641,120 (RMB 4,000,000) and $160,280 (RMB 1,000,000), respectively. The Company repaid $160,280 (RMB 1,000,000) on December 7, 2010, $480,840 (RMB 3,000,000) in 2012 and the remaining balance of $160,280 (RMB 1,000,000) on January 30 and February 28, 2013.

21

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 16 - CAPITAL TRANSACTIONS

On March 30, 2010, the Company agreed to issue 2,500 shares of common stock to a non-executive director in exchange for services unrelated to his services as a director at the fair market value of $11.74 per share based on the closing price on March 30, 2010. On April 16, 2010, the Company entered into another agreement to grant 10,000 shares of common stock to that director for his one year service from April 1, 2010. The closing price per share on the grant date was $10.61. The common stock compensation vests in four equal quarterly installments of 2,500 shares. Shares owed were accrued at the end of each quarter at the fair market value on the grant date of $10.61 per share. On August 31, 2011, the Company entered into another agreement to grant 36,000 shares of common stock to that director for his one year service from April 1, 2011. The closing price per share on the grant date was $2.58. The common stock compensation vests in four equal quarterly installments of 9,000 shares. Shares owed were accrued at the end of each quarter at the fair market value on the grant date of $2.58 per share. Currently, the Company is working on completing the contract with this director for his service beginning April 1, 2012. As of June 30, 2013 and December 31, 2012, nil shares were to be issued to this non-executive director.

On May 26, 2009, the Company agreed to issue 5,556 shares of common stock to a director at the beginning of each term of his directorship. The trading value of the common stock on May 26, 2009 was $4.50 per share. In accordance with the agreement between the Company and this director, this director must continue to serve as a member of the Board until his successor is duly elected and qualified in order to receive the shares. As of June 30, 2013 and December 31, 2012, 5,556 shares to be issued to this non-executive director were included in the accrued expenses and amounted to $25,002.

On July 29, 2011, the Company entered into a one-year employment agreement with its CFO. Under the agreement, he is entitled to receive an aggregate 8,000 shares of common stock, 4,000 shares of which shall be issuable on the 6 month anniversary and the remaining 4,000 shares of which shall be issuable on the 12 month anniversary. The closing price per share on the grant date was $4.20. On July 29, 2012, the Company entered into another one-year employment agreement with the CFO. Under the agreement, he is entitled to receive an aggregate 8,000 shares of common stock, vested in four equal quarterly installments of 2,000 shares. The closing price per share of the stock on the next business day of the grant date was $2.17. On July 29, 2013, the Company entered into another one-year employment agreement with the CFO. Under the agreement, he is entitled to receive an aggregate 8,000 shares of common stock, vested in four equal quarterly installments of 2,000 shares. The closing price per share of the stock on the grant date was $1.37. As of June 30, 2013 and December 31, 2012, 6,000 shares and 2,000 shares to be issued to this executive were included in the accrued expenses and amounted to $13,020 and $$4,340, respectively.

Equity Compensation Plan

On December 8, 2009, the Company’s board of directors approved a stock incentive plan for officers, directors, employees and consultants entitled the “Skystar Bio-Pharmaceutical Company 2010 Stock Incentive Plan” (the “2010 Plan”). The maximum number of shares that may be issued under the 2010 Plan is 700,000 shares of common stock. The 2010 Plan was approved by the Company’s stockholders on December 31, 2009, and awards may be granted thereunder until December 7, 2019. On May 4, 2012, the Board approved common stock grants in the total amount of 442,881 shares to the Company’s employees and members of the Board of Directors, all of which grants were made pursuant to the terms and provisions of the Plan. As of June 30, 2013 and December 31, 2012, there are 247,119 shares of the Company’s common stock remaining available for future issuance under the Plan.

A summary of changes in the Company’s non-vested shares for the three months follows:

	Non-vested Shares
Non-vested at January 1, 2013		6,000
Granted		-
Vested		(4,000)
Forfeited		-
Non-vested at June 30, 2013		2,000

As of June 30, 2013, there was $4,340 of total unrecognized compensation cost related to non-vested shares granted.  The total fair value of shares vested during the three months ended June 30, 2013 and 2012 was $4,340 and $Nil, respectively, based on the closing price of the Company’s common stock on the grant date. The total fair value of shares vested during the six months ended June 30, 2013 and 2012 was $8,680 and $40,020, respectively, based on the closing price of the Company’s common stock on the grant date.

22

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 16 - CAPITAL TRANSACTIONS (Continued)

Purchase Options

In connection with the 2009 equity offering, the Company granted 140,000 common stock purchase options to five designees of the Underwriters with a vesting date of June 30, 2010. The options are exercisable from June 30, 2010 to June 30, 2014, and each option is exercisable for one share of the Company’s common stock at an exercise price at $8.11 per share. All options were provided for services performed. As of June 30, 2013 and December 31, 2012, 140,000 common stock purchase options remained outstanding.

Outstanding purchase options do not trade in an active securities market, and as such, the Company estimates the fair value of these warrants and purchase options using the Black-Scholes Option Pricing Model (“Black-Scholes Model”) using the following assumptions:

	Purchase Options – (1)
	June 30, 2013			December 31, 2012
Stock price	$	1.28		$	1.60
Exercise price	$	8.11		$	8.11
Annual dividend yield		-			-
Expected term (years)		1.00			1.50
Risk-free interest rate		0.15	%		0.16	%
Expected volatility		60	%		73	%

(1) As of June 30, 2013 and December 31, 2012, 140,000 purchase options with an exercise price of $8.11 were outstanding.

Expected volatility is based on historical volatility. Historical volatility was computed using daily pricing observations for recent periods that correspond to the term of the warrants. The Company believes this method produces an estimate that is representative of future volatility over the expected term of these warrants and purchase options. The Company has no reason to believe future volatility over the expected remaining life of these warrants and purchase options is likely to differ materially from historical volatility. The expected life is based on the remaining term of the warrants and purchase options. The risk-free interest rate is based on U.S. Treasury securities according to the remaining term of the warrants and purchase options.

As required by the FASB’s accounting standards, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Depending on the nature and the terms of the transaction, the fair values of the warrant/purchase option liability were modeled using a series of techniques, including closed-form analytic formula, such as the Black-Scholes Model, which does not entail material subjectivity because the methodology employed does not necessitate significant judgment, and the pricing inputs are observed from actively quoted markets.

The fair value of the 140,000 purchase options outstanding as of June 30, 2013 and December 31, 2012 was determined using the Black-Scholes Model, utilizing level 2 inputs, and the change was recorded in earnings. The Company recognized gains of $1,134 and $15,800 from the change in fair value of derivative liability for the three months ended June 30, 2013 and 2012, respectively. The Company recognized gains of $5,600 and $22,400 from the change in fair value of derivative liability for the six months ended June 30, 2013 and 2012, respectively.

Following is an activity summary of the Company’s outstanding purchase options:

	Number of purchase options		Weighted – average exercise price		Weighted-average remaining contractual term (Year)
Outstanding at January 1, 2013		140,000	$	8.11		1.50
Granted		-		-
Forfeited		-		-
Exercised		-		-
Outstanding at June 30, 2013		140,000	$	8.11		1.00
Exercisable at June 30, 2013		140,000	$	8.11		1.00

23

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 17 - STATUTORY RESERVES

Statutory reserves represent restricted retained earnings. Based on the legal formation of the entities, all PRC entities are required to set aside 10% of net income as reported in their statutory accounts on an annual basis to the statutory surplus reserve fund. Once the total statutory surplus reserve reaches 50% of the entity’s registered capital, further appropriations are discretionary. The statutory surplus reserve can be used to increase the entity’s registered capital (upon approval by relevant government authorities) and eliminate its future losses under PRC regulatory requirements (upon a resolution by the board of directors). The statutory surplus reserve is not distributable to shareholders except in the event of liquidation.

Appropriations to the above statutory reserves are accounted for as a transfer from unrestricted earnings to statutory reserves. There are no legal requirements in the PRC to fund these statutory reserves by the transfer of cash to any restricted accounts, and as such, the Company has not transferred any cash to these accounts. These reserves are not distributable as cash dividends.

Note 18 – TAXES

Skystar is subject to United States federal income tax. Skystar Cayman is a tax-exempt company incorporated in the Cayman Islands. Fortune Time did not have any assessable profits arising in or derived from Hong Kong for the three and six months ended June 30, 2013 and 2012, and accordingly no provision for Hong Kong profits tax was made in these periods.

The Company’s subsidiaries and VIEs are subject to the PRC’s Enterprise Income Tax. Pursuant to the PRC Income Tax Laws, Enterprise Income Tax is generally imposed at a statutory rate of 25%. Xi’an Tianxing has been approved as a new technology enterprise, and under PRC Income Tax Laws is entitled to a preferential tax rate of 15%.

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the three and six months ended June 30, 2013 and 2012:

	For the three months ended June 30,						For the six months ended June 30,
	2013			2012			2013			2012
U.S. Statutory rate		34.0	%		34.0	%		34.0	%		34.0	%
Foreign income not recognized in the U.S.		(34.0)			(34.0)			(34.0)			(34.0)
China income tax rate		25.0			25.0			25.0			25.0
China income tax exemption		(10.0)			(10.0)			(10.0)			(10.0)
Stock-based compensation		-			6.8			-			3.3
Other item (1)		0.7			3.7			3.6			4.3
Total provision for income taxes		15.7	%		25.5	%		18.6	%		22.6	%

(1) Other items are primarily for operating expenses (income) incurred by Skystar that are not deductible (taxable) in the PRC, expenses incurred by other subsidiaries that are not deductible on the consolidated level, the difference of taxable income under US GAAP rather than Chinese GAAP, and the difference of Enterprise Income Tax imposed at a statutory rate of 25% rather than preferential tax rate of 15% on the income from the subsidiaries other than Xi’an Tianxing, which resulted in an increase in the effective tax rate of 0.7% and 3.7% for the three months ended June 30, 2013 and 2012, respectively, and an increase in the effective tax rate of 3.6% and 4.3% for the six months ended June 30, 2013 and 2012, respectively.

Other items consisted of the following:

	For the three months ended June 30,						For the six months ended June 30,
	2013			2012			2013			2012
Income taxed at Chinese statutory rate of 25%		(1.3)	%		1.2	%		0.1	%		0.4	%
Valuation allowance on tax loss		0.7			0.4			1.7			1.7
Non-deductible operating expenses		1.3			2.1			1.8			2.2
Total other items		0.7	%		3.7	%		3.6	%		4.3	%

24

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 18 – TAXES (Continued)

Taxes payable consisted of the following:

	June 30, 2013		December 31, 2012
Income taxes	$	92,328	$	279,680
Value added taxes		1,117,386		1,409,762
Other taxes		169,639		261,315
Total	$	1,379,353	$	1,950,757

As of June 30, 2013 and December 31, 2012, the estimated net operating loss carry forwards of Skystar for U.S. income tax purposes amounted to $6,105,419 and $5,896,749, which may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, beginning in 2027 and through 2031. As of June 30, 2013 and December 31, 2012, the estimated net operating loss carry forwards of Skystar for PRC income tax purposes amounted to $4,138,403 and $3,467,227, which may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, beginning in 2013 and through 2018. Management believes that the realization of the benefits arising from this loss appears to be uncertain due to the Company’s limited operating history and continuing losses for U.S. income tax purposes. Accordingly, the Company has provided a 100% valuation allowance at June 30, 2013 and December 31, 2012. As of June 30, 2013 and December 31, 2012, the valuation allowance on tax loss of Skystar was $2,075,843 and $2,004,895, respectively, and that of PRC subsidiaries was $1,034,601 and $866,807. The Company’s management reviews this valuation allowance periodically and makes adjustments as necessary. As of June 30, 2013 and December 31, 2012, the Company has no other deferred tax amounts.

The Company did not provide for deferred income taxes and foreign withholding taxes on the cumulative undistributed earnings of foreign subsidiaries as of June 30, 2013 and December 31, 2012 of approximately $41.3 million and $35.6 million, respectively. The cumulative undistributed earnings of foreign subsidiaries were included in consolidated retained earnings and will continue to be indefinitely reinvested in international operations.  Accordingly, no provision has been made for U.S. deferred taxes or applicable withholding taxes, related to future repatriation of these earnings, nor is it practicable to estimate the amount of income taxes that would have to be provided if management concluded that such earnings will be remitted in the future.

Note 19 - EARNINGS PER SHARE

The following is the calculation of earnings per share:

	For the three months ended June 30,				For the six months ended June 30,
	2013		2012		2013		2012
Net income	$	3,750,881	$	1,698,866	$	4,463,614	$	3,603,620
Weighted average shares used in basic and diluted computation		7,615,719		7,461,227		7,614,721		7,454,837
Earnings per share:
Basic	$	0.49	$	0.23	$	0.59	$	0.48
Diluted	$	0.49	$	0.23	$	0.59	$	0.48

For the three and six months ended June 30, 2013 and 2012, the outstanding 140,000 options were excluded from the diluted earnings per share calculation as they are anti-dilutive as the average stock price was less than the exercise prices of the options.

For the three and six months ended June 30, 2013, the outstanding 2,000 non-vested shares were excluded from the diluted earnings per share calculation as they were anti-dilutive. For the three and six months ended June 30, 2012, the outstanding 623 non-vested shares were excluded from the diluted earnings per share calculation as they were anti-dilutive.

25

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 20 - RELATED PARTY TRANSACTIONS AND ARRANGEMENTS

Amounts receivable from and payable to related parties are summarized as follows:

	June 30, 2013		December 31, 2012
Shares to be issued to related parties (Note 16)
Mark D. Chen – non-executive director	$	25,002	$	25,002
Bing Mei – CFO		13,020		4,340
Total	$	38,022	$	29,342
Amounts due to (from) related parties
Weibing Lu – CEO (1)	$	693,309	$	608,282
Scott Cramer – non-executive director and shareholder (2)		275,865		138,169
Officers, shareholders and other related parties (3)		139,014		52,474
Total	$	1,108,188	$	798,925

(1) As of June 30, 2013 and December 31, 2012, the Company had unpaid reimbursement, compensation, and advances for business expenses due to Weibing Lu valued at $693,309 and $608,282, respectively.

(2) As of June 30, 2013 and December 31, 2012, the Company had unpaid reimbursement and compensation due to Scott Cramer valued at $275,865 and $138,169, respectively.

(3) The amounts due to officers, shareholders and other related parties at June 30, 2013 and December 31, 2012 include unpaid reimbursement and compensation and, advances to other related parties for business expenses.

Also refer to Notes 14, 16 and 21 for other related party transactions and arrangements.

26

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 21 - COMMITMENTS AND CONTINGENCIES

(a) Lease commitments

The Company recognizes lease expense on the straight-line basis over the term of the lease.

The Company entered into a tenancy agreement for the lease of factory premises of Xi’an Tianxing in Sanqiao for a period of ten years from October 1, 2004 to December 31, 2014. The annual rent for the factory premises is subject to a 10% increase every two years starting October 1, 2009. As of June 30, 2013, the annual rent for the factory premises was approximately $20,671 (RMB 127,600).

The Company leased office space in Xi’an from Mr. Weibing Lu, the Company’s Chairman and CEO, for a period of five years from January 1, 2007 to December 31, 2011, with an annual rent of approximately $26,827 (RMB 165,600). In January 2012, the Company renewed the lease with Mr. Lu for another 5 years from January 1, 2012 to December 31, 2016 at a rent of approximately $29,160 (RMB 180,000) per year.

The Company also entered into a tenancy agreement with Mr. Weibing Lu for the lease of Shanghai Siqiang’s office in Shanghai for a period of ten years from August 1, 2007 to August 1, 2017 with an annual rent of approximately $23,328 (RMB 144,000).

The Company entered into a one year tenancy agreement for an office lease in Kunshan, Jiangsu Province from April 15, 2011 to April 14, 2012 with an annual rent of approximately $3,110 (RMB 19,200). On April 15, 2012, the Company entered into a six-month tenancy agreement for this office from April 15, 2012 to October 14, 2012 with six-month rent of approximately $1,686 (RMB 10,405). On October 15, 2012, the Company entered into a another six-month tenancy agreement for this office from October 15, 2012 to April 14, 2013 with a six-month rent of approximately $1,686 (RMB 10,405). On April 15, 2013, the Company entered into a another one-year tenancy agreement for this office from April 15, 2013 to April 14, 2014 with a one-year rent of approximately $3,813 (RMB 23,536).

The Company entered into a tenancy agreement for the lease of warehouse premises in Xi’an for a period of three years from July 20, 2011 to July 19, 2014 with an annual rent of approximately $38,070 (RMB 235,000) subject to a 10% increase every two years starting July 20, 2013.

The minimum future lease payments for the next five years and thereafter are as follows:

Period	Unrelated third parties		Related parties		Total
Year ending December 31, 2013	$	33,675	$	26,244	$	59,919
Year ending December 31, 2014		40,578		52,488		93,066
Year ending December 31, 2015		-		52,488		52,488
Year ending December 31, 2016		-		52,488		52,488
Year ending December 31, 2017 and thereafter		-		13,608		13,608
Total	$	74,253	$	197,316	$	271,569

Rental expense to unrelated third parties for the three months ended June 30, 2013 and 2012 amounted to $15,597 and $15,385, respectively. Rental expense to unrelated third parties for the six months ended June 30, 2013 and 2012 amounted to $30,868 and $30,542, respectively.

Rental expense to related parties for the three months ended June 30, 2013 and 2012 amounted to $13,060 and $12,840, respectively. Rental expense to related parties for the six months ended June 30, 2013 and 2012 amounted to $25,965 and $25,703, respectively.

27

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 21 - COMMITMENTS AND CONTINGENCIES (Continued)

 (b) Legal proceedings

From time to time, the Company is involved in legal matters arising in the ordinary course of business. Management currently is not aware of any legal matters or pending litigation that would have a significant effect on the Company’s consolidated financial statements as of June 30, 2013.

In May 2007, Andrew Chien filed suit against the Company, R. Scott Cramer, Steve Lowe, David Wassung and Weibing Lu in United States District Court for the District of Connecticut, alleging causes of action for violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. On July 17, 2008, in a decision that is now published, the court granted defendants’ motion to dismiss and subsequently dismissed the lawsuit, entering judgment on behalf of the defendants. Chien appealed the dismissal. Defendants filed a post judgment motion for sanctions against Chien. On February 5, 2009, the court found the action filed by Chien to have been frivolous, and to have constituted a “substantial” violation of Rule 11, and imposed monetary sanctions on both Chien and his former attorney. Chien appealed the award of sanctions. All appeals, including the one referenced below concerning Chien’s second lawsuit, were subsequently consolidated. The Court of Appeals issued a Mandate upholding the decision granting defendant’s motion to dismiss and found that the District Court did not “abuse its discretion” in issuing sanctions against Chien in light of the circumstances and facts on record. This Mandate was entered on or about November 8, 2010.

Andrew Chien, proceeding pro se (i.e., he represented himself without an attorney), filed his second lawsuit against the Company, R. Scott Cramer, Steve Lowe, David Wassung and Weibing Lu in Connecticut Superior Court (which was removed to U.S. District Court) alleging causes of action similar to those alleged in his federal complaint described above as well as state law causes of action. The court held that all claims asserted against the defendants were barred and failed to state a claim on a multiplicity of grounds, including on the basis of res judicata. Defendants filed a second Motion for Sanctions under Rule 11 and the PSLRA, which was granted. Chien appealed the dismissal. The Court of Appeals for the Second Circuit consolidated all of Chien’s appeals from both of his lawsuits. On November 8, 2010, the Court of Appeals affirmed the dismissals and the awards of sanctions. On January 22, 2011, Chien filed a petition with the Supreme Court of the United States, appealing the lower court’s ruling. The Supreme Court denied review of the petition.

Andrew Chien, again proceeding pro se, commenced his third lawsuit against the Company, Scott Cramer, Steve Lowe, David Wassung, Weibing Lu (and also Weinberg & Company, P.A., Moore Stephens Wirth Frazer & Torbet, LLP, Frazer Frost, LLP, Crowe Horwath LLP, Richardson & Patel LLP, Kevin K. Leung, Harvey Kesner, and Jody M. Borrelli) alleging the same facts and circumstances as set forth in the above two matters, although adding the aforementioned accountants and lawyers as defendants to the claims. The matter commenced on August 8, 2011, and shortly thereafter was removed to U.S. District Court. On October 5, 2011, the court dismissed the entire action as to all defendants. As in the two previous lawsuits, sanctions were issued against Chien. Moreover, the District Court issued an order prohibiting Chien from filing any more lawsuits against the defedentants without prior approval from the court. Chien appealed the Court’s ruling to the United States Court of Appeals for the Second Circuit, where all defendants have filed motions to dismiss.

The United States Court of Appeals for the Second Circuit recently affirmed the judgments and orders of the United States District Court and dismissed all of Mr. Chien’s pending appeals.

Although the Second Circuit declined to issue sanctions against Chien, it expressly warned Chien “that the continued filing of duplicative, vexatious, or frivolous appeals regarding issues already resolved by this Court may result in the imposition of sanctions, including a leave-to-file sanction requiring Chien to obtain permission from this Court prior to filing further submissions in this Court.” Mr. Chien has filed a petition for writs of certiorari with the Supreme Court of the United States. The Supreme Court has not yet acted on Chien’s petitions.

(c)  Ownership of leasehold property

In 2005, a shareholder contributed a leasehold office building as additional capital of Xi’an Tianxing. However, as of June 30, 2013, title of this leasehold property, with a carrying amount of $359,640 (RMB 2,220,000), has not passed to the Company. The Company does not believe there are any legal barriers for the shareholder to transfer the ownership to the Company. However, in the event that the Company fails to obtain the ownership certificate for the leasehold property, there is a risk that we may be required to vacate the building. Management believes that this possibility is remote, and, as such, no provision has been made in the consolidated financial statements for this potential occurrence.

28

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 21 - COMMITMENTS AND CONTINGENCIES (Continued)

(d) R&D project

In 2008, Xi’an Tianxing contracted with Northwestern Agricultural Technology University to work jointly on an R&D project concerning the application of nano-technology in the prevention of major milk cow disease. The total projected budget for this project is approximately $648,000 (RMB 4,000,000), which is to be paid according to completed stages of the project. The project reached trial stage in September 2009. As of June 30, 2013, the Company incurred approximately $567,000 (RMB 3,500,000) of cumulative expenses relating to this project.

In 2009, Xi’an Tianxing contracted with the Fourth Military Medical University to jointly work on an R&D project on fish diseases linked immunosorbent detection kit and fish diseases multi-linked monoclonal antibody therapeutic agents. The contracted amount for this project is approximated $972,000 (RMB 6,000,000). As of June 30, 2013, the Company has incurred approximately $842,400 (RMB 5,200,000) of cumulative expenses relating to this project.

During the first quarter of 2011, Xi’an Tianxing contracted with the Fourth Military Medical University to jointly work on an R&D project to develop new treatment and diagnosis method for Mycoplasmal pneumonia of swine. The project term is from January 2011 through September 2013. The cost to the Company for the initial phase is approximately $324,000 (RMB 2,000,000). As of June 30, 2013, the Company has incurred approximately $243,000 (RMB 1,500,000).

During the second quarter of 2012, Xi’an Tianxing contracted with the Fourth Military Medical University to jointly work on an R&D project of ring disease and pseudo-rabies specific transfer factor and blue-ear disease and Mycoplasma pneumoniae disease specific transfer factor to enhance the livestock and poultry's own immuneforce and prevent the onset of conventional disease. The project term is from April 2012 through March 2013. The cost to the Company for the project is approximately $50,220 (RMB 310,000). As of June 30, 2013, the project was completed and the Company incurred the budgeted expenses of approximately $50,220 (RMB 310,000).

During the fourth quarter of 2012, Xi’an Tianxing launched eight in-house R&D projects as set forth in the following table. As of June 30, 2013, the Company incurred all the budget expenses and these projects were still under development.

During the second quarter of 2013, Xi’an Tianxing launched an R&D project to develop monoclonal antibody vaccine to prevent common fish skin disease. The cost to the Company for this project is approximately $567,000 (RMB 3,500,000). As of June 30, 2013, the Company has incurred $486,000 (RMB 3,000,000) and this project is still under development.

In addition, the Company also launched various R&D projects on veterinary products formula adjustment, pet drug development and fermentation engineering design and development, and lab tests. As of June 30, 2013, approximately $1,118,392 (RMB 6,903,656) has been incurred related to these projects and lab tests.

29

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2013

(Unaudited)

Note 21 - COMMITMENTS AND CONTINGENCIES (Continued)

(d) R&D project (Continued)

R&D projects are summarized as follows:

Project	Amount incurred as of 06/30/2013		Amount expected to be incurred		Total amount of project
Project with Northwestern Agricultural Technology University
Application of nano-technology in the prevention of major milk cow disease	$	567,000	$	81,000	$	648,000
Project with the Fourth Military Medical University
Fish diseases linked immunosorbent detection kit and fish diseases multi-linked monoclonal antibody therapeutic agents		842,400		129,600		972,000
New treatment and diagnosis method for Mycoplasmal pneumonia of swine		243,000		81,000		324,000
Transfer factor test		50,220		-		50,220
In-house R&D projects in 2012
Oral liquid products R&D and field trials		162,000		-		162,000
Powder for injection products R&D and field trials		162,000		-		162,000
Vitamin E injection product development		81,000		-		81,000
Anthelmintic product development		81,000		-		81,000
Three disease grams product development		81,000		-		81,000
Premixes class product development		81,000		-		81,000
Bulk powder products development		81,000		-		81,000
Livestock and fish diseases immunoassay kit development		405,000		-		405,000
In-house R&D projects in 2013
Fish monoclonal antibody vaccine		486,000		81,000		567,000
Other projects for veterinary products formula adjustment, pet drug development and fermentation engineering design and development and lab tests		1,118,392		16,200		1,134,592
Total	$	4,441,012	$	388,800	$	4,829,812

All payments made for R&D projects have been expensed as incurred.

(e) Registered capital commitment

Skystar Kunshan’s remaining registered capital of $12,750,000 was originally required to be invested by May 7, 2012. On July 25, 2012, the Company received the approval of extension for payment of the remaining registered capital but a new due date has not been specified by the government.

(f) Construction-in-progress capital commitment

In 2011, Skystar Jingzhou started a facility improvement project to expand veterinary medicine production capacity at its facility. The project contract has an estimated total cost of $1,701,000 (RMB 10,500,000). As of June 30, 2013, the facility had incurred construction-in-progress of $1,200,906 (RMB 7,413,000) and the estimated cost to complete is $500,094 (RMB 3,087,000). The Company expects the project will be completed by the end of the fourth quarter of 2013.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

We were incorporated in Nevada on September 24, 1998. We are a holding company that, through our wholly owned subsidiaries in China, including Skystar Bio Technology (Jingzhou) Co. (“Skystar Jingzhou”), and a variable interest entity (“VIE”), Xi’an Tianxing Bio-Pharmaceutical Co., Ltd. (“Xi’an Tianxing”), researches, develops, manufactures, and distributes veterinary health care and medical care products in the People’s Republic of China (“PRC”).

All of our operations are carried out by our subsidiaries in China and Xi’an Tianxing, which the Company controls through contractual arrangements between Xi’an Tianxing and Sida Biotechnology (Xi’an) Co., Ltd. (“Sida”), the wholly owned subsidiary of Fortunate Time International Limited, the wholly owned subsidiary of Skystar Bio-Pharmaceutical (Cayman) Holdings Co., Ltd. (“Skystar Cayman”), which became our wholly owned subsidiary in 2005. Such contractual arrangements are necessary to comply with PRC laws limiting foreign ownership of certain companies. Through these contractual arrangements, we have the ability to substantially influence Xi’an Tianxing’s daily operations and financial affairs, appoint its senior executives, and approve all matters requiring shareholder approval. As a result of these contractual arrangements, which enable us to control Xi’an Tianxing, we are considered the primary beneficiary of Xi’an Tianxing.

In addition to Xi’an Tianxing, Skystar Jingzhou also manufactures and distributes veterinary medicines, including aquaculture medicines in China. Skystar Jingzhou is a wholly owned subsidiary of the Company’s Sida entity. It was formed with the August 2010 acquisition of a veterinary medicine manufacturing facility in Hubei Province, China.

On August 21, 2007, Xi’an Tianxing invested $81,000 (RMB 500,000) to establish Shanghai Siqiang Biotechnological Company Limited (‘Shanghai Siqiang’). Xi’an Tianxing is the 100% shareholder. Shanghai Siqiang serves as a research and development center for Xi’an Tianxing to engage in research, development, production and sales of feed additives and veterinary disease diagnosis equipments.

Our financial statements are prepared in U.S. Dollars and in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).  See “Exchange Rates” below for information regarding the exchanges rates at which Renminbi (“RMB”) were translated into U.S. Dollars (“USD”) at various pertinent dates and for pertinent periods.

Critical Accounting Policies

In preparing the consolidated financial statements in accordance with U.S. GAAP, we make estimates and assumptions about the effect of matters that are inherently uncertain and may change in subsequent periods.  The resulting accounting estimates will, by definition, vary from the related actual results.  We consider the following to be the most critical accounting policies:

Principles of consolidation

The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The consolidated financial statements include the financial statements of our company, our wholly-owned subsidiaries, and our VIEs.  All significant inter-company transactions and balances between our company, its subsidiaries, and its VIEs have been eliminated in consolidation.

We have evaluated the relationship with Xi’an Tianxing and Xi’an Tianxing’s wholly owned subsidiaries, Xi’an Sikaida and Shanghai Siqiang. As a result of the contractual arrangements which obligate Sida to absorb all of the risk of loss from Xi’an Tianxing’s activities and enable Sida to receive all of its expected residual returns, the Company accounts for Xi’an Tianxing, Xi’an Sikaida and Shanghai Siqiang as VIEs under the Financial Accounting Standards Board’s (“FASB”) interpretation on consolidation of variable interest entities. Accordingly, the Company consolidates the results, assets, and liabilities of Xi’an Tianxing, Xi’an Sikaida and Shanghai Siqiang.

Revenue recognition

Our revenue is primarily from the sales of veterinary healthcare and medical care products in China. Sales are recognized when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectability is reasonably assured. Sales are presented net of value added tax (“VAT”). No estimated allowance for sales returns is reflected in these consolidated financial statements as sales returns are de minimus based on historical experience.

There are two types of sales upon which revenue is recognized:

a. Credit sales: revenue is recognized when the products have been delivered to the customers.

b. Full payment before delivering: revenue is recognized when the products have been delivered to the customers.  

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Accounts receivable

Accounts receivable is stated at cost less an allowance for uncollectible accounts, as needed. We use the aging method to estimate the allowance for anticipated uncollectible receivable balances. Under the aging method, a bad debt percentage determined by management, based on historical experience and current economic climate, is applied to customers’ balances categorized by the number of months the underlying invoices have remained outstanding. At each reporting period, the allowance balance is adjusted to reflect the amount computed as a result of the aging method. When facts subsequently become available to indicate that the allowance provided requires an adjustment, a corresponding adjustment is made to the allowance account as a change in estimate. The ultimate collection of our accounts receivable may take one year. Delinquent account balances are reserved after management determines that the likelihood of collection is not probable, and known bad debts are written-off against the allowance for doubtful accounts when identified.

Stock based compensation

We record and report stock-based compensation by measuring the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period during which services are received. Stock compensation for stock granted to non-employees is determined as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably measured.

Recently Issued Accounting Pronouncements

See Item 1 of Part I, “Notes to the Condensed Consolidated Financial Statements — Note 2 – Summary of Significant Accounting Policies — Recently Issued Accounting Pronouncements.”

Results of Operations – Three Months ended June 30, 2013 and 2012

The following table summarizes our results of operations for the three months ended June 30, 2013 and 2012.

	Three Months Ended June 30,
	2013					2012
	Amount		% of total revenue			Amount		% of total revenue
Revenue	$	11,335,145		100.0	%	$	8,870,848		100.0	%
Gross Profit	$	5,957,321		52.6	%	$	5,123,910		57.8	%
Operating Expenses	$	1,411,073		12.4	%	$	2,835,379		32.0	%
Income from Operations	$	4,546,248		40.1	%	$	2,288,531		25.8	%
Other Income (Expense)	$	(98,610)		(0.9)	%	$	(6,891)		(0.1)	%
Income Tax Expenses	$	696,757		6.2	%	$	582,774		6.6	%
Net Income	$	3,750,881		33.1	%	$	1,698,866		19.2	%

Revenues.  All of our revenues are derived from the sale of veterinary healthcare and medical care products in the PRC.  For the three months ended June 30, 2013, we had revenues of $11,335,145 as compared to revenues of $8,870,848 for the three months ended June 30, 2012, an increase of $2,464,297 or 27.8%.  We generate revenue from sales of four product lines: veterinary medications, micro-organism, feed additives, and vaccines.  The selling prices of our products decreased 2.2% on average in the three months ended June 30, 2013 compared to the same period of 2012. The increase in revenue was primarily due to the increase of sales volume.

Revenue — Veterinary Medications. Revenue from sales of our veterinary medications increased by $3,833,859 or 155.9%, from $2,458,714 for the three months ended June 30, 2012 to $6,292,573 for the three months ended June 30, 2013. This increase was primarily as a result of resumed veterinary medication production at the Huxian facility. During the second quarter, as the outbreaks of avian influenza virus and swine fever were under control, the Chinese animal husbandry industry began to pick up and veterinary drug demand increased accordingly. Following the renewal of our GMP certificate and the resumption of production at Huxian facility, we increased our marketing and sales efforts to strengthen customer relationships and recruit new customers. We have two veterinary medication plants located in Huxian and Jingzhou, with Huxian historically being our main facility. Of the total revenues from veterinary medications during the three months ended June 30, 2013, approximately 82.2% of total revenue resulted from the sale of products from the Huxian facility. The revenue from sales of veterinary medication products was the largest revenue contributor for the entire company and contributed 55.5% of total revenue during the three months ended June 30, 2013. The selling prices of our veterinary medication products for the three months ended June 30, 2013 decreased approximately 4.0% on average from last year. The increase in revenue was primarily due to the increase of sales volume.

Revenue — Micro-Organism. Revenue from sales of our micro-organism products increased by $28,907 or 0.7% from $4,002,206 for the three months ended June 30, 2012 to $4,031,113 for the three months ended June 30, 2013. This slight increase was primarily due to the stabilized market demand for poultry products in China as the negative impact of avian influenza virus wound down resulting in the market for non-drug feed additives rebounding. Currently, we have a micro-organism plant located in Sanqiao. The selling prices of our micro-organism products for the three months ended June 30, 2013 increased approximately 0.2% on average from last year. The increase in revenue was mainly due to the increase of sales volume.

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Revenue — Feed Additives. Revenue from sales of our feed additives product line decreased by $752,900 or 59.4% from $1,267,061 for the three months ended June 30, 2012 to $514,161 for the three months ended June 30, 2013. The decrease was primarily the result of our limited sales resources for the feed additive products this year. Last year, due to the temporary suspension of veterinary medication production at Huxian facility for its GMP recertification, we were able to temporarily shift some veterinary medication sales forces to the feed additive product line resulting in significantly increased feed additive sales. Currently, we have a feed additive plant located in Sanqiao. The selling prices of our feed additives products for the three months ended June 30, 2013 have not materially changed on average from last year. The decrease in revenue was primarily due to the decrease of sales volume.

Revenue — Vaccines. Revenue from sales of our vaccines decreased by $645,569 or 56.5% from $1,142,867 for the three months ended June 30, 2012 to $497,298 for the three months ended June 30, 2013. The decrease was primarily the result of our limited sales resources for vaccine products this year. We completed the construction of a new vaccine facility at our Huxian plant in 2010. On September 20 and 21, 2012, MOA physically inspected this new facility and deemed the facility GMP compliant. Following physical inspection, the MOA’s inspection team recommended that the Office of the Working Committee proceed with Stage 2 of its GMP certification process. The Company expects the GMP certification process to be completed by the third quarter of 2013, and to commence production shortly thereafter. The selling prices of our vaccine products increased approximately 0.2% on average for the three months ended June 30, 2013 compared to those in 2012. The decrease in revenue was primarily due to the decrease of sales volume.

Cost of Sales.  Cost of sales was $5,377,824 for the three months ended June 30, 2013, as compared to $3,746,938 for the three months ended June 30, 2012, an increase of $1,630,886 or 43.5%, as a result of increased the veterinary medication sales. For the three months ended June 30, 2013, raw material costs comprised the majority or approximately 78.1% of total cost of sales, packing material costs comprised approximately 17.3% of the total cost of sales, and labor costs and manufacturing overhead comprised approximately 4.6% of the total cost of sales. The decreased gross margins for the three months ended June 30, 2013 was mainly because the majority of our revenue during the three months came from the less profitable veterinary medications product line as we resumed the veterinary medication production at the Huxian facility.

Cost of Sales — Veterinary Medications.   Cost of sales of our veterinary medications product line increased from $1,399,006 for the three months ended June 30, 2012 to $3,740,498 for the three months ended June 30, 2013, an increase of $2,341,492 or 167.4%.  This increase was mainly due to the increase in corresponding sales as a result of resumed production at the Huxian veterinary medications facility during the second quarter of 2013. Cost of sales of veterinary medications product line comprised 69.6% of total cost of sales for the three months ended June 30, 2013.

Cost of Sales — Micro-Organism.   Cost of sales of our micro-organism product line increased from $1,169,412 for the three months ended June 30, 2012 to $1,179,499 for the three months ended June 30, 2013, an increase of $10,087 or 0.9%.  This moderate increase was mainly due to the corresponding slightly increased sales.

Cost of Sales — Feed Additives.   Cost of sales of our feed additives product line decreased from $1,032,139 for the three months ended June 30, 2012 to $399,883 for the three months ended June 30, 2013, a decrease of $632,256 or 61.3%.  This decrease in cost of sales was mainly due to the corresponding decrease in feed additive sales.

Cost of Sales — Vaccines.   Cost of sales of our vaccines product line decreased from $146,381 for the three months ended June 30, 2012 to $57,944 for the three months ended June 30, 2013, a decrease of $88,437 or 60.4%.  This decrease was the result of the corresponding decrease of vaccine product sales.

Operating Expenses

	Three Months Ended June 30,
	2013					2012
	Amount		% of total revenue			Amount		% of total revenue
Operating Expenses
Research and Development Costs	$	92,926		0.8	%	$	330,532		3.7	%
Selling Expenses	$	629,337		5.5	%	$	670,567		7.6	%
General and Administrative Expenses	$	688,810		6.1	%	$	1,834,280		20.7	%
Total Operating Expenses	$	1,411,073		12.4	%	$	2,835,379		32.0	%

Research and Development Costs.  Research and development costs totaled $92,926 for the three months ended June 30, 2013 as compared to $330,532 for the three months ended June 30, 2012, a decrease of $237,606 or 71.9%. The decrease was primarily due to newly launched R&D projects of $480,840 undertaken during the second quarter of 2013 to develop vaccine to prevent common fish skin disease being offset against the government grant.

Selling Expenses.  Selling expenses totaled $629,337 for the three months ended June 30, 2013 as compared to $670,567 for the three months ended June 30, 2012, a decrease of $41,230 or 6.2%.  This decrease is mainly due to the drop of sales commission costs as the result of the new commission structure for our sales personnel after the Huxian facility resumed operation.

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General and Administrative Expenses.  General and administrative expenses totaled $688,810 for the three months ended June 30, 2013 as compared to $1,834,280 for the three months ended June 30, 2012, a decrease of $1,145,470 or 62.5%. The higher G&A expense in 2012 was mainly due to the stock based compensation expense of $992,107 for the stock grants on May 4, 2012 to the Company’s employees and members of the Board of Directors, all of which grants were made pursuant to the terms and provisions of the 2010 Stock Incentive Plan. In addition, reduced bad debt expense also contributed to the decrease of G&A expense during the second quarter.

Other Expenses. Other net expenses were $98,610 for the three months ended June 30, 2013 as compared to $6,891 for the three months ended June 30, 2012, an increase of $91,719 or 1,331.0%. The increase was primarily due to the fees charged by Xi’an Investment and Financing Guarantee Co., Ltd. to guarantee the new loan from the Postal Savings Bank of China that we obtained in May 2013.

Provision for Income Taxes. Income tax expenses were $696,757 for the three months ended June 30, 2013 as compared to $582,774 for the three months ended June 30, 2012, an increase of $113,983 or 19.6%, representing an effective tax rate of 15.7% and 25.5% for the three months ended June 30, 2013 and 2012, respectively. For the three months ended June 30, 2013 and 2012, Xi’an Tianxing was subject to a preferential income tax rate of 15% while other PRC subsidiaries were subject to statutory tax rate of 25%. For the three months ended June 30, 2013 and 2012, Xi’an Tianxing contributed the majority of consolidated profits in China.

Results of Operations – Six Months ended June 30, 2012 and 2011

The following table summarizes our results of operations for the six months ended June 30, 2013 and 2012.

	Six Months Ended June 30,
	2013					2012
	Amount		% of  total  revenue			Amount		% of total revenue
Revenue	$	16,865,886		100.0	%	$	16,797,185		100.0	%
Gross Profit	$	8,557,176		50.7	%	$	9,406,589		56.0	%
Operating Expenses	$	2,940,643		17.4	%	$	4,650,084		27.7	%
Income from Operations	$	5,616,533		33.3	%	$	4,756,505		28.3	%
Other Income (Expenses)	$	(134,878)		(0.8)	%	$	(101,143)		(0.6)	%
Income Tax Expenses	$	1,018,041		6.0	%	$	1,051,742		6.3	%
Net Income	$	4,463,614		26.5	%	$	3,603,620		21.5	%

Revenues.   All of our revenues are derived from the sale of veterinary healthcare and medical care products in the PRC.  For the six months ended June 30, 2013, we had revenues of $16,865,886 as compared to revenues of $16,797,185 for the six months ended June 30, 2012, an increase of $68,701 or 0.4%.  We generate revenue from sales of four product lines: veterinary medications, micro-organism, feed additives, and vaccines.  The selling prices of our products decreased 0.3% on average in the six months ended June 30, 2013 compared to the same period of 2012. The increase in revenue was primarily due to the increase of sales volume.

Revenue — Veterinary Medications. Revenue from sales of our veterinary medications increased by $4,271,989 or 78.1% from $5,467,301 for the six months ended June 30, 2012 to $9,739,290 for the six months ended June 30, 2013. The increase of revenue was primarily due to resumed production at the Huxian plant and our increased marketing and sales efforts during the first half of 2013. The revenue from sales of veterinary medication products was the largest revenue contributor for the entire company and contributed 57.7% of total revenue during the six months ended June 30, 2013. The selling prices of our veterinary medication products for the six months ended June 30, 2013 decreased approximately 0.6% on average from the same period of last year. The increase in revenue was primarily due to the increase of sales volume.

Revenue — Micro-Organism. Revenue from sales of our micro-organism products decreased by $1,438,951 or 20.2% from $7,137,246 for the six months ended June 30, 2012 to $5,698,295 for the six months ended June 30, 2013. The decrease was primarily due to weak market demand for micro-organism products in the first quarter. The selling prices of our micro-organism products for the six months ended June 30, 2013 increased approximately 0.1% on average from the same period of last year. The decrease in revenue was mainly due to the decrease of sales volume.

Revenue — Feed Additives. Revenue from sales of our feed additives product line decreased by $1,501,384 or 65.2% from $2,301,833 for the six months ended June 30, 2012 to $800,449 for the six months ended June 30, 2013. The decrease was primarily due to weak market demand for feed additive products in the first quarter and our limited sales resources for the feed additive product line this year. The selling prices of our feed additives products for the six months ended June 30, 2013 have not changed meaningfully on average from last year. The decrease in revenue was primarily due to the decrease of sales volume.

Revenue — Vaccines. Revenue from sales of our vaccines decreased by $1,262,953 or 66.8% from $1,890,805 for the six months ended June 30, 2012 to $627,852 for the six months ended June 30, 2013. The decrease was primarily due to weak market demand for vaccine products in the first quarter and our limited sales resources for the vaccine product line this year. The selling prices of our vaccine products increased approximately 0.2% on average for the six months ended June 30, 2013 compared to those in the same period of 2011. The decrease in revenue was primarily due to the decrease of sales volume.

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Cost of Sales.  Cost of sales was $8,308,710 for the six months ended June 30, 2013, as compared to $7,390,596 for the six months ended June 30, 2012, an increase of $918,114 or 12.4%, as a result of the increased sales of our veterinary medications product line after we resumed production at the Huxian facility . For the six months ended June 30, 2013, raw material costs comprised the majority or approximately 77.4% of total cost of sales, packing material costs comprised approximately 16.4% of total cost of sales, and labor costs and manufacturing overhead comprised approximately 6.2% of the total cost of sales. The decreased gross margins was mainly because the majority of our revenue growth during the first half year came from the less profitable veterinary medications product lines.

Cost of Sales — Veterinary Medications.   Cost of sales of our veterinary medications product line increased from $3,191,654 for the six months ended June 30, 2012 to $5,846,014 for the six months ended June 30, 2013, an increase of $2,654,360 or 83.2%.  This increase was mainly due to the increase in corresponding sales as a result of resumed production at the Huxian facility during the first half of 2013. Cost of sales of veterinary medications product line comprised 70.4% of the total cost of sales for the six months ended June 30, 2013.

Cost of Sales — Micro-Organism.   Cost of sales of our micro-organism product line decreased from $2,076,252 for the six months ended June 30, 2012 to $1,766,916 for the six months ended June 30, 2013, a decrease of $309,336 or 14.9%.  This decrease was mainly due to the corresponding decreased sales.

Cost of Sales — Feed Additives.   Cost of sales of our feed additives product line decreased from $1,882,023 for the six months ended June 30, 2012 to $614,520 for the six months ended June 30, 2013, a decrease of $1,267,503 or 67.4%.  This decrease was mainly due to the corresponding decreased sales.

Cost of Sales — Vaccines.   Cost of sales of our vaccines product line decreased from $240,667 for the six months ended June 30, 2012 to $81,260 for the six months ended June 30, 2013, a decrease of $159,407 or 66.2%.  This decrease was mainly due to the corresponding decreased sales.

The following table summarizes our operating expense for the six months ended June 30, 2013 and 2012.

	Six Months Ended June 30,
	2013					2012
	Amount		% of total revenue			Amount		% of total revenue
Operating Expenses
Research and Development Costs	$	93,387		0.5	%	$	334,186		2.0	%
Selling Expenses	$	947,173		5.6	%	$	1,376,183		8.2	%
General and Administrative Expenses	$	1,900,083		11.3	%	$	2,939,715		17.5	%
Total Operating Expenses	$	2,940,643		17.4	%	$	4,650,084		27.7	%

Research and Development Costs.  Research and development costs totaled $93,387 for the six months ended June 30, 2013 as compared to $334,186 for the six months ended June 30, 2012, a decrease of $240,799 or 72.1%. The decrease was primarily due to new R&D efforts of $480,840 undertaken during the first half of 2013 to develop vaccine to prevent common fish skin disease being offset against the government grant.

Selling Expenses.  Selling expenses totaled $947,173 for the six months ended June 30, 2013 as compared to $1,376,183 for the six months ended June 30, 2012, a decrease of $429,010 or 31.2%.  This decrease is mainly due to the drop of shipping and handling costs as the result of reduced sales in the first quarter. Shipping and handling costs totaled $647,489 and $847,333 for the six months ended June 30, 2013 and 2012, respectively, a decrease of $199,844 or 23.6%. Sales commissions and salaries expenses also decreased $129,384 or 43.3% and $63,424 or 56.4%, respectively, as we introduced a new compensation package to our sales personnel that was based more on sales commission but less fixed salaries to provide more incentives for generating sales and the new commission structure to our sales personnel after Huxian facility resumed operation.

General and Administrative Expenses.  General and administrative expenses totaled $1,900,083 for the six months ended June 30, 2013 as compared to $2,939,715 for the six months ended June 30, 2012, a decrease of $1,039,632 or 35.4%. The higher G&A expenses last year were mainly due to the stock based compensation expense of $1,037,911 for the stock grants on May 4, 2012 pursuant to the 2010 Stock Incentive Plan.

Other Expenses. Other net expenses were $134,878 for the six months ended June 30, 2013 as compared to $101,143 for the six months ended June 30, 2012, an increase of $33,735 or 33.4%. The increase was primarily due to (i) increase in interest expenses and finance charge of approximately $91,000 mainly in relation to the new loan from the Postal Savings Bank of China that we obtained in May 2013 and a receipt of interest subsidy from the government of approximately $129,000 during the first half of 2012; (ii) decrease in other income of approximately $60,000; (iii) decrease in gain on fair value change of derivative liability of approximately $17,000; offset by: (iv) increase in interest income of approximately $263,000 that we charged on the long outstanding prepayments to our two major vendors.

35

Provision for Income Taxes. Income tax expenses were $1,018,041 for the six months ended June 30, 2013 as compared to $1,051,742 for the six months ended June 30, 2012, a decrease of $33,701 or 3.2%, representing an effective tax rate of 18.6% and 22.6% for the six months ended June 30, 2013 and 2012, respectively. For the six months ended June 30, 2013 and 2012, Xi’an Tianxing was subject to a preferential income tax rate of 15% while other PRC subsidiaries were subject to statutory tax rate of 25%. For the six months ended June 30, 2013 and 2012, Xi’an Tianxing contributed the majority of consolidated profits in China.

Liquidity

For the six months ended June 30, 2013, we used $10,937,852 of cash in operating activities, as compared to cash used in operating activities of $2,480,759 for the six months ended June 30, 2012. The major operating activities that provided cash for the six months ended June 30, 2013 were net income of $4,463,614. The major operating activities that used cash for the six months ended June 30, 2013 were an increase in accounts receivable of $1,992,249, an increase in inventory of $3,027,946, an increase in prepayment to suppliers of $8,344,799, and a decrease in accounts payable of $2,675,933. The inflation rate in China accelerated more than expected to 2.7% in June 2013. We will monitor the market situation closely and continue the strategy of prepaying our suppliers to ensure the supply of raw materials at relatively lower cost levels. As of June 30, 2013, we had 73 suppliers as compared to 63 suppliers as of June 30, 2012 to which we made advances to secure our raw material needs and to obtain favorable pricing. We will continue to closely manage these advances to balance the need for lower materials cost and sufficient cash flow.

Cash provided by investing activities for the six months ended June 30, 2013 was $802,313, as compared to cash used in investing activities of $2,023,784 for the six months ended June 30, 2012. Cash provided by investing activities for the six months ended June 30, 2013 was primarily the result of collection of loans to third parties of $897,232.

Cash provided by financing activities for the six months ended June 30, 2013 was $4,951,448, as compared to cash used in financing activities of $322,007 for the six months ended June 30, 2012. Cash provided by financing activities for the six months ended June 30, 2013 was primarily the result of proceeds from short-term loans of $8,815,400. Cash used in financing activities for the six months ended June 30, 2013 was primarily the result of repayment of short-term and long-term loans of $4,167,280.

As of June 30, 2013, we had unrestricted cash of $6,312,367. Our total current assets were $79,923,946, and our total current liabilities were $21,030,602, which resulted in a net working capital of $58,893,344.

Capital Resources

We finance our ongoing operating activities by using funds from our operations and external credit or financing arrangements. We routinely monitor current and expected operational requirements and financial market conditions to evaluate the use of available financing sources. We secured $8,815,400 in short-term loans and repaid $4,167,280 of short-term and long-term loans during the six months ended June 30, 2013. Considering our existing working capital position and our ability to access debt funding sources, we believe that our operations and borrowing resources are sufficient to provide for our current and foreseeable capital requirements to support our ongoing operations for at least next twelve months.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1 – 3 years		3 – 5 years		More than 5 years
R&D Project Obligation	$	388,800	$	388,800	$	-	$	-	$	—
Construction-in-progress Obligation		500,094		500,094		-		-		-
Operating Lease Obligations		271,569		59,919		145,554		66,096		-
Total	$	1,160,463	$	948,813	$	145,554	$	66,096	$	-

In addition to the contractual obligations listed above, we have a future registered capital commitment related to our subsidiary Skystar Kunshan. Skystar Kunshan has a registered capital of $15,000,000, of which we invested $2,250,000 in cash. The remaining $12,750,000 of capital was originally required to be invested prior to May 7, 2012. On July 25, 2012, the Company received the approval of extension for payment of the remaining registered capital but a new due date has not been specified by the government.

36

Short-term loans

	June 30, 2013				December 31, 2012					Interest
Bank	Amt RMB		Amt USD		Amt RMB		Amt USD		Due Date	Rate
ICBC Songzi Branch		-	$	-		3,000,000	$	476,100	06/18/13	(1)
Xi'an High-tech Zone Guoxin Microcredit Ltd.		-		-		15,000,000		2,380,500	02/12/13	22.400	%
Chang’an Bank		10,000,000		1,620,000		10,000,000		1,587,000	08/26/13	(1)
Industrial Bank Co. Ltd. Xi’an branch		30,000,000		4,860,000		-		-	01/15/14	6.600	%
Postal Savings Bank of China Xi’an Branch		20,000,000		3,240,000					05/26/14	(2)
ICBC Songzi Branch		5,000,000		810,000					06/19/14	(1)
Total		65,000,000	$	10,530,000		28,000,000	$	4,443,600

(1)	People's Bank of China floating benchmark lending rate over the same period plus 30%, which was 7.8% at June 30, 2013.
(2)	People's Bank of China floating benchmark lending rate over the same period plus 20%, which was 7.2% at June 30, 2013.

Long-term loan:

June 30, 2013

December 31, 2012

Interest

Bank

Amt RMB

Amt USD

Amt RMB

Amt USD

Due Date

Rate

Shaanxi Agricultural Yanta Credit Union

-

-

8,000,000

$

1,269,600

09/20/14

9.446

%

We fully repaid the long-term loans on May 9, 2013.

Off-Balance Sheet Arrangements

We do not have any outstanding financial guarantees or commitments to guarantee the payment obligations of any third parties.  We have not entered into any derivative contracts that are indexed to our shares and classified as stockholders’ equity or that are not reflected in our consolidated financial statements.  Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity, or market risk support to such entity.  We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk, or credit support to us or engages in leasing, hedging, or research and development services with us.

Exchange Rate

Our operating subsidiaries in China maintain their books and records in Renminbi (“RMB”), the currency of China. In general, for consolidation purposes, we translate the subsidiaries’ assets and liabilities into US Dollars using the applicable exchange rates prevailing at the balance sheet date, and the statement of comprehensive income is translated at average exchange rates during the reporting period. Adjustments resulting from the translation of the financial statements of the Company’s Chinese subsidiaries are recorded as accumulated other comprehensive income.

The exchange rates used to translate amounts in RMB into US Dollars for the purposes of preparing the consolidated financial statements or otherwise stated in this MD&A were as follows:

	June 30, 2013	December 31, 2012
Assets and liabilities	1 RMB = 0.1620 USD	1 RMB = 0.1587 USD

	Six Months Ended June 30,
	2013	2012
Statements of operations and cash flows	1 RMB = 0.1603 USD	1 RMB = 0.1587 USD 7

Inflation

China's inflation rate rose by more than expected in June, accelerating to 2.7% as increasing food prices remained the main driving force of inflation. While the headline inflation number was above analysts' expectations, it remains below the government's target figure of 3.5%. Analysts cautioned that demand remained weak and growth in Chinese economy may have slowed further. For the three and six months ended June 30, 2013, we were able to secure favorable pricing by prepaying certain suppliers to lock in prices ahead of time. As a result, we did not experience as much cost pressure as evidenced in the spot market prices of raw materials. To take precautions to minimize the negative impact of cost increases that erode our profit margin, we will continue the practice of prepayments to suppliers.

37

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”), performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), which are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the Commission’s rules and forms, and that such information is accumulated and communicated to our management, to allow timely decisions regarding required disclosure.

Based on the evaluation, the Certifying Officers concluded that, as of June 30, 2013, our disclosure controls and procedures were not effective due to an ongoing material weakness related to the lack of accounting personnel with an appropriate level of knowledge, experience, and training in the application of U.S. GAAP.

For the six months ended June 30, 2013, aside from the remediation measures that we initiated in the previous year, we engaged a third party consulting firm to adequately address and to assist in remediation of the identified material weakness. This consulting firm is a global leading provider of consulting and internal audit services and the only consulting firm represented on the COSO advisory board guiding the development of a conceptual framework on Enterprise Risk Management. With such additional external assistance, we are in the process of improving our accounting policies and procedures manual in accordance to US GAAP, and are going to provide proper training on the manual for our accounting team and continue to standardize our accounting treatments in compliance with US GAAP, especially non-routine transactions, and improve our accounting team’s US GAAP competence.

Due to scheduling conflicts and staffing shortages, we were not able to implement these steps and measures during the first half of 2013, but intend to complete the project during the second half of 2013 and to conduct quarterly assessments of the state of the Company’s financial reporting measures and systems.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

38

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, the Company is involved in legal matters arising in the ordinary course of business. Management currently is not aware of any legal matters or pending material litigation that would have a significant effect on the Company’s consolidated financial statements as of June 30, 2013.

In May 2007, Andrew Chien filed suit against the Company, R. Scott Cramer, Steve Lowe, David Wassung and Weibing Lu in United States District Court for the District of Connecticut, alleging causes of action for violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. On July 17, 2008, in a decision that is now published, the court granted defendants’ motion to dismiss and subsequently dismissed the lawsuit, entering judgment on behalf of the defendants. Chien appealed the dismissal. Defendants filed a post judgment motion for sanctions against Chien. On February 5, 2009, the court found the action filed by Chien to have been frivolous, and to have constituted a “substantial” violation of Rule 11, and imposed monetary sanctions on both Chien and his former attorney. Chien appealed the award of sanctions. All appeals, including the one referenced below concerning Chien’s second lawsuit, were subsequently consolidated. The Court of Appeals issued a Mandate upholding the decision granting defendant’s motion to dismiss and found that the District Court did not “abuse its discretion” in issuing sanctions against Chien in light of the circumstances and facts on record. This Mandate was entered on or about November 8, 2010.

Andrew Chien, proceeding pro se (i.e., he represented himself without an attorney), filed his second lawsuit against the Company, R. Scott Cramer, Steve Lowe, David Wassung and Weibing Lu in Connecticut Superior Court (which was removed to U.S. District Court) alleging causes of action similar to those alleged in his federal complaint described above as well as state law causes of action. The court held that all claims asserted against the defendants were barred and failed to state a claim on a multiplicity of grounds, including on the basis of res judicata. Defendants filed a second Motion for Sanctions under Rule 11 and the PSLRA, which was granted. Chien appealed the dismissal. The Court of Appeals for the Second Circuit consolidated all of Chien’s appeals from both of his lawsuits. On November 8, 2010, the Court of Appeals affirmed the dismissals and the awards of sanctions. On January 22, 2011, Chien filed a petition with the Supreme Court of the United States, appealing the lower court’s ruling. The Supreme Court denied review of the petition.

Andrew Chien, again proceeding pro se, commenced his third lawsuit against the Company, Scott Cramer, Steve Lowe, David Wassung, Weibing Lu (and also Weinberg & Company, P.A., Moore Stephens Wirth Frazer & Torbet, LLP, Frazer Frost, LLP, Crowe Horwath LLP, Richardson & Patel LLP, Kevin K. Leung, Harvey Kesner, and Jody M. Borrelli) alleging the same facts and circumstances as set forth in the above two matters, although adding the aforementioned accountants and lawyers as defendants to the claims. The matter commenced on August 8, 2011, and shortly thereafter was removed to U.S. District Court. On October 5, 2011, the court dismissed the entire action as to all defendants. As in the two previous lawsuits, sanctions were issued against Chien. Moreover, the District Court issued an order prohibiting Chien from filing any more lawsuits against the defedentants without prior approval from the court. Chien appealed the Court’s ruling to the United States Court of Appeals for the Second Circuit, where all defendants have filed motions to dismiss.

The United States Court of Appeals for the Second Circuit recently affirmed the judgments and orders of the United States District Court and dismissed all of Mr. Chien’s pending appeals.

Although the Second Circuit declined to issue sanctions against Chien, it expressly warned Chien “that the continued filing of duplicative, vexatious, or frivolous appeals regarding issues already resolved by this Court may result in the imposition of sanctions, including a leave-to-file sanction requiring Chien to obtain permission from this Court prior to filing further submissions in this Court.” Mr. Chien has filed a petition for writs of certiorari with the Supreme Court of the United States. The Supreme Court has not yet acted on Chien’s petitions.

Other than the above described legal proceedings, the Company is not aware of any other legal matters or pending material litigation in which any director, officer, or any owner of record or beneficial owner of more than five percent of any class of voting securities of the Company, or any affiliate of any such director, officer, affiliate of the Company, or security holder, is a party adverse to the Company or has a material adverse interest to the Company. No provision has been made in the consolidated financial statements for the above contingencies.

ITEM 5. OTHER INFORMATION

On July 29, 2013, the Company approved the renewal of the Company’s employment agreement with its Chief Financial Officer, Bing Mei, for another 12 month period on the same terms and provisions as previously disclosed, with the following exception: Mr. Mei’s base salary was set at $200,000 commencing on July 29, 2013.

39

ITEM 6. EXHIBITS

Exh. No.	Description
3.1	Articles of Incorporation, as amended  (2)
3.2	Bylaws, as amended (1)
31.1	Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
31.2	Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 *
32.1	Certifications of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
32.2	Certifications of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase
101.DEF*	XBRL Taxonomy Extension Definition Linkbase
101.LAB*	XBRL Taxonomy Extension Label Linkbase
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase

_________________________________________________

*  Filed herewith.

(1)  Incorporated by reference from the Registrant’s Current Report on Form 8-K filed on July 15, 2008.

(2) Incorporated by reference from Registrant’s Quarter Report on Form 10-Q filed on November 15, 2010.

40

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	SKYSTAR BIO-PHARMACEUTICAL COMPANY
August 14, 2013	By:	/s/ Weibing Lu
		Weibing Lu
		Chief Executive Officer
		(Principal Executive Officer)

August 14, 2013	By:	/s/ Bing Mei
		Bing Mei
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

41

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Weibing Lu, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Skystar Bio-Pharmaceutical Company;

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 under which such statements were made, not misleading with respect to the period covered by this 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 officer(s) 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 control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we 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 control over financial reporting, or caused such internal control 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 control 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 registrant’s 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 function):

a) All significant deficiencies and material weakness 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.

Date: August 14, 2013	/s/ Weibing Lu
	Weibing Lu, Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bing Mei, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Skystar Bio-Pharmaceutical Company;

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 under which such statements were made, not misleading with respect to the period covered by this 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 officer(s) 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 control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we 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 control over financial reporting, or caused such internal control 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 control 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 registrant’s 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 function):

a) All significant deficiencies and material weakness 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.

Date: August 14, 2013	/s/ Bing Mei
	Bing Mei, Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Skystar Bio-Pharmaceutical Company, (the “Company”) on Form 10-Q for the quarter ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Weibing Lu, Chief Executive Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13 (a) or 15 (d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company at the dates and for the periods indicated.

	/s/ Weibing Lu
August 14, 2013	Weibing Lu Chief Executive Officer

A signed original 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.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Skystar Bio-Pharmaceutical Company, (the “Company”) on Form 10-Q for the quarter ended June 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Bing Mei, Chief Financial Officer of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13 (a) or 15 (d), as applicable, of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company at the dates and for the periods indicated.

	/s/ Bing Mei
August 14, 2013	Bing Mei Chief Financial Officer

A signed original 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.

XML

COMMITMENTS AND CONTINGENCIES (Details 1)	Jun. 30, 2013 USD ($)	Jun. 30, 2013 Project With Northwestern Agricultural Technology University [Member] USD ($)	Jun. 30, 2013 Project With Northwestern Agricultural Technology University [Member] CNY	Dec. 31, 2008 Project With Northwestern Agricultural Technology University [Member] USD ($)	Dec. 31, 2008 Project With Northwestern Agricultural Technology University [Member] CNY	Jun. 30, 2013 Project With Fourth Military Medical University One [Member] USD ($)	Jun. 30, 2013 Project With Fourth Military Medical University One [Member] CNY	Dec. 31, 2009 Project With Fourth Military Medical University One [Member] USD ($)	Dec. 31, 2009 Project With Fourth Military Medical University One [Member] CNY	Jun. 30, 2013 Project With Fourth Military Medical University Two [Member] USD ($)	Jun. 30, 2013 Project With Fourth Military Medical University Two [Member] CNY	Jun. 30, 2013 Project With Fourth Military Medical University Three [Member] USD ($)	Jun. 30, 2013 In House R And D Project One [Member] USD ($)	Jun. 30, 2013 In House R And D Project Two [Member] USD ($)	Jun. 30, 2013 In House Rand D Project Three [Member] USD ($)	Jun. 30, 2013 In House R And D Project Four [Member] USD ($)	Jun. 30, 2013 In House R and D Project Five [Member] USD ($)	Jun. 30, 2013 In House R and D Project Six [Member] USD ($)	Jun. 30, 2013 In House R and D Project Seven [Member] USD ($)	Jun. 30, 2013 In House R and D Project Eight [Member] USD ($)	Jun. 30, 2013 In House R and D Project Nine [Member] USD ($)	Jun. 30, 2013 Other In House R and D Projects [Member] USD ($)
Commitments And Contingencies [Line Items]
Amount incurred as of 06/30/2013	$ 4,441,012	$ 567,000	3,500,000			$ 842,400	5,200,000			$ 243,000	1,500,000	$ 50,220	$ 162,000	$ 162,000	$ 81,000	$ 81,000	$ 81,000	$ 81,000	$ 81,000	$ 405,000	$ 486,000	$ 1,118,392
Amount expected to be incurred	388,800	81,000		648,000	4,000,000	129,600		972,000	6,000,000	81,000		0	0	0	0	0	0	0	0	0	81,000	16,200
Total amount of project	$ 4,829,812	$ 648,000				$ 972,000				$ 324,000	2,000,000	$ 50,220	$ 162,000	$ 162,000	$ 81,000	$ 81,000	$ 81,000	$ 81,000	$ 81,000	$ 405,000	$ 567,000	$ 1,134,592

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STATUTORY RESERVES (Details Textual)	Jun. 30, 2013
Statutory Reserves [Line Items]
Percentage Of Net Income To Be Set Aside On Annual Basis To Statutory Surplus Reserve Fund	10.00%
Maximum Percentage Of Statutory Surplus Reserve Over Entity's Registered Capital	50.00%

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TAXES (Details 1)	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012		Jun. 30, 2013		Jun. 30, 2012
Income Tax Disclosure [Line Items]
Income taxed at Chinese statutory rate of 25%	(1.30%)		1.20%		0.10%		0.40%
Valuation allowance on tax loss	0.70%		0.40%		1.70%		1.70%
Non-deductible operating expenses	1.30%		2.10%		1.80%		2.20%
Total other items	0.70%	[1]	3.70%	[1]	3.60%	[1]	4.30%	[1]

[1] Other items are primarily for operating expenses (income) incurred by Skystar that are not deductible (taxable) in the PRC, expenses incurred by other subsidiaries that are not deductible on the consolidated level, the difference of taxable income under US GAAP rather than Chinese GAAP, and the difference of Enterprise Income Tax imposed at a statutory rate of 25% rather than preferential tax rate of 15% on the income from the subsidiaries other than Xi’an Tianxing, which resulted in an increase in the effective tax rate of 0.7% and 3.7% for the three months ended June 30, 2013 and 2012, respectively, and an increase in the effective tax rate of 3.6% and 4.3% for the six months ended June 30, 2013 and 2012, respectively.

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LONG-TERM PREPAYMENTS

6 Months Ended

Jun. 30, 2013

Long Term Prepayments Disclosure [Abstract]

Long Term Prepayments Disclosure [Text Block]

Note 11 - LONG-TERM PREPAYMENTS

Long-term prepayments consist of the following:

	June 30, 2013		December 31, 2012
Prepayments for R&D project	$	362,880	$	355,488
Construction deposits		385,510		377,657
Deposits for equipment purchase and land use rights		317,699		311,227
Deposits for other		6,078		5,955
Long-term prepayments	$	1,072,167	$	1,050,327
Long-term prepayments for acquisitions	$	181,440	$	177,744

As of June 30, 2013 and December 31, 2012, deposits for potential acquisitions totaled $181,440 and $177,744, respectively, all of which was held by an unrelated third party engaged to facilitate potential acquisition projects.

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INVENTORIES (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Inventory [Line Items]
Raw materials	$ 23,509,591	$ 20,428,757
Packing materials	266,940	220,078
Work-in-process	26,368	219
Finished goods	2,625,622	2,243,226
Other	71,604	69,929
Total	$ 26,500,125	$ 22,962,209

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
REVENUE, NET	$ 11,335,145	$ 8,870,848	$ 16,865,886	$ 16,797,185
COST OF REVENUE	5,377,824	3,746,938	8,308,710	7,390,596
GROSS PROFIT	5,957,321	5,123,910	8,557,176	9,406,589
OPERATING EXPENSES:
Research and development	92,926	330,532	93,387	334,186
Selling expenses	629,337	670,567	947,173	1,376,183
General and administrative	688,810	1,834,280	1,900,083	2,939,715
Total operating expenses	1,411,073	2,835,379	2,940,643	4,650,084
INCOME FROM OPERATIONS	4,546,248	2,288,531	5,616,533	4,756,505
OTHER INCOME (EXPENSE):
Other income (expense), net	(3,662)	2,238	(3,849)	55,998
Interest (expense), net	(96,082)	(25,929)	(136,629)	(179,541)
Change in fair value of warrant/purchase option liability	1,134	16,800	5,600	22,400
Total other (expense), net	(98,610)	(6,891)	(134,878)	(101,143)
INCOME BEFORE PROVISION FOR INCOME TAXES	4,447,638	2,281,640	5,481,655	4,655,362
PROVISION FOR INCOME TAXES	696,757	582,774	1,018,041	1,051,742
NET INCOME	3,750,881	1,698,866	4,463,614	3,603,620
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustment	1,512,244	123,715	2,063,127	682,472
COMPREHENSIVE INCOME	$ 5,263,125	$ 1,822,581	$ 6,526,741	$ 4,286,092
EARNINGS PER SHARE:
Basic (in dollars per share)	$ 0.49	$ 0.23	$ 0.59	$ 0.48
Diluted (in dollars per share)	$ 0.49	$ 0.23	$ 0.59	$ 0.48
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic (in shares)	7,615,719	7,461,227	7,614,721	7,454,837
Diluted (in shares)	7,615,719	7,461,227	7,614,721	7,454,837

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ACCOUNTS RECEIVABLE, NET

6 Months Ended

Jun. 30, 2013

Accounts Receivable Disclosure [Abstract]

Accounts Receivable Disclosure [Text Block]

Note 4 - ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following:

	June 30, 2013		December 31, 2012
Accounts receivable	$	12,484,999	$	10,258,065
Allowance for doubtful accounts		(552,764)		(247,269)
Accounts receivable, net	$	11,932,235	$	10,010,796

The following table presents the movement of the allowance for doubtful accounts:

Balance, January 1, 2013	$	247,269
Addition		353,652
Recovery		(56,487)
Translation adjustment		8,330
Balance, June 30, 2013	$	552,764

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TAXES

6 Months Ended

Jun. 30, 2013

Taxes Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 18 – TAXES

Skystar is subject to United States federal income tax. Skystar Cayman is a tax-exempt company incorporated in the Cayman Islands. Fortune Time did not have any assessable profits arising in or derived from Hong Kong for the three and six months ended June 30, 2013 and 2012, and accordingly no provision for Hong Kong profits tax was made in these periods.

The Company’s subsidiaries and VIEs are subject to the PRC’s Enterprise Income Tax. Pursuant to the PRC Income Tax Laws, Enterprise Income Tax is generally imposed at a statutory rate of 25%. Xi’an Tianxing has been approved as a new technology enterprise, and under PRC Income Tax Laws is entitled to a preferential tax rate of 15%.

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the three and six months ended June 30, 2013 and 2012:

	For the three months ended June 30,						For the six months ended June 30,
	2013			2012			2013			2012
U.S. Statutory rate		34.0	%		34.0	%		34.0	%		34.0	%
Foreign income not recognized in the U.S.		(34.0)			(34.0)			(34.0)			(34.0)
China income tax rate		25.0			25.0			25.0			25.0
China income tax exemption		(10.0)			(10.0)			(10.0)			(10.0)
Stock-based compensation		-			6.8			-			3.3
Other item (1)		0.7			3.7			3.6			4.3
Total provision for income taxes		15.7	%		25.5	%		18.6	%		22.6	%

(1) Other items are primarily for operating expenses (income) incurred by Skystar that are not deductible (taxable) in the PRC, expenses incurred by other subsidiaries that are not deductible on the consolidated level, the difference of taxable income under US GAAP rather than Chinese GAAP, and the difference of Enterprise Income Tax imposed at a statutory rate of 25% rather than preferential tax rate of 15% on the income from the subsidiaries other than Xi’an Tianxing, which resulted in an increase in the effective tax rate of 0.7% and 3.7% for the three months ended June 30, 2013 and 2012, respectively, and an increase in the effective tax rate of 3.6% and 4.3% for the six months ended June 30, 2013 and 2012, respectively.

Other items consisted of the following:

	For the three months ended June 30,						For the six months ended June 30,
	2013			2012			2013			2012
Income taxed at Chinese statutory rate of 25%		(1.3)	%		1.2	%		0.1	%		0.4	%
Valuation allowance on tax loss		0.7			0.4			1.7			1.7
Non-deductible operating expenses		1.3			2.1			1.8			2.2
Total other items		0.7	%		3.7	%		3.6	%		4.3	%

Taxes payable consisted of the following:

	June 30, 2013		December 31, 2012
Income taxes	$	92,328	$	279,680
Value added taxes		1,117,386		1,409,762
Other taxes		169,639		261,315
Total	$	1,379,353	$	1,950,757

As of June 30, 2013 and December 31, 2012, the estimated net operating loss carry forwards of Skystar for U.S. income tax purposes amounted to $6,105,419 and $5,896,749, which may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, beginning in 2027 and through 2031. As of June 30, 2013 and December 31, 2012, the estimated net operating loss carry forwards of Skystar for PRC income tax purposes amounted to $4,138,403 and $3,467,227, which may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, beginning in 2013 and through 2018. Management believes that the realization of the benefits arising from this loss appears to be uncertain due to the Company’s limited operating history and continuing losses for U.S. income tax purposes. Accordingly, the Company has provided a 100% valuation allowance at June 30, 2013 and December 31, 2012. As of June 30, 2013 and December 31, 2012, the valuation allowance on tax loss of Skystar was $2,075,843 and $2,004,895, respectively, and that of PRC subsidiaries was $1,034,601 and $866,807. The Company’s management reviews this valuation allowance periodically and makes adjustments as necessary. As of June 30, 2013 and December 31, 2012, the Company has no other deferred tax amounts.

The Company did not provide for deferred income taxes and foreign withholding taxes on the cumulative undistributed earnings of foreign subsidiaries as of June 30, 2013 and December 31, 2012 of approximately $41.3 million and $35.6 million, respectively. The cumulative undistributed earnings of foreign subsidiaries were included in consolidated retained earnings and will continue to be indefinitely reinvested in international operations.  Accordingly, no provision has been made for U.S. deferred taxes or applicable withholding taxes, related to future repatriation of these earnings, nor is it practicable to estimate the amount of income taxes that would have to be provided if management concluded that such earnings will be remitted in the future.

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LOANS RECEIVABLE (Details Textual)	3 Months Ended		6 Months Ended
	Jun. 30, 2013 USD ($)	Jun. 30, 2012 USD ($)	Jun. 30, 2013 USD ($)	Jun. 30, 2012 USD ($)	Dec. 31, 2012 USD ($)	Apr. 02, 2012 Unrelated Parties [Member] USD ($)	Apr. 02, 2012 Unrelated Parties [Member] CNY	Nov. 30, 2010 Xian Tinantal Investment [Member] USD ($)	Nov. 30, 2010 Xian Tinantal Investment [Member] CNY
Loans Receivables [Line Items]
Notes, Loans and Financing Receivable, Net, Current	$ 194,400		$ 194,400		$ 1,078,827	$ 798,000	5,000,000
Interest Rate						12.00%	12.00%	12.00%	12.00%
Loans Receivable, Net								194,400	1,200,000
Investment Income, Interest	13,392	5,823	43,596	11,540
Non Interest Bearing Unsecured Debt	$ 0		$ 0		$ 94,887

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PREPAYMENTS TO SUPPLIERS (Details Textual) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Payments To Suppliers [Line Items]
Unpaid interest income on prepayments to suppliers	$ 109,967	$ 0	$ 228,860	$ 0
Payments to Suppliers			22,229,360		0
Interest Rate Charged Annually On Prepayment On Raw Material			2.00%
Unpaid Balance To Supplier	$ 228,860		$ 228,860

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INTANGIBLE ASSETS

6 Months Ended

Jun. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets Disclosure [Text Block]

Note 12 – INTANGIBLE ASSETS

Intangible assets consist of the following:

	June 30, 2013		December 31, 2012
Land use rights	$	4,900,502	$	4,800,677
Technological know-how		2,268,000		2,221,800
Patents		324,000		317,400
Total		7,492,502		7,339,877
Less: accumulated amortization		(2,185,843)		(2,020,046)
Intangible assets, net	$	5,306,659	$	5,319,831

For the three months ended June 30, 2013 and 2012, amortization expense for intangibles assets amounted to $61,606 and $100,197, respectively. For the six months ended June 30, 2013 and 2012, amortization expense for intangibles assets amounted to $122,478 and $200,570, respectively.

Amortization expense expected for the next five years and thereafter is as follows:

Years ending December 31,	Amount
2013	$	123,792
2014		247,584
2015		247,584
2016		247,584
2017		247,584
Thereafter		4,192,531
Total	$	5,306,659

As of June 30, 2013 and December 31, 2012, land use rights with a carrying amount of $1,540,765 and $1,199,456, respectively, were pledged against the Company’s short-term loans.

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COMMITMENTS AND CONTINGENCIES (Details Textual)							3 Months Ended		6 Months Ended		3 Months Ended		6 Months Ended								6 Months Ended				6 Months Ended									6 Months Ended						0 Months Ended								1 Months Ended		6 Months Ended
	Jun. 30, 2013 USD ($)	May 07, 2012 Skystar Biotechnology (Kunshan) Co., Limited [Member] USD ($)	Jun. 30, 2013 Skystar Biotechnology (Jingzhou) Co., Limited [Member] USD ($)	Jun. 30, 2013 Skystar Biotechnology (Jingzhou) Co., Limited [Member] CNY	Dec. 31, 2011 Skystar Biotechnology (Jingzhou) Co., Limited [Member] USD ($)	Dec. 31, 2011 Skystar Biotechnology (Jingzhou) Co., Limited [Member] CNY	Jun. 30, 2013 Related Parties [Member] USD ($)	Jun. 30, 2012 Related Parties [Member] USD ($)	Jun. 30, 2013 Related Parties [Member] USD ($)	Jun. 30, 2012 Related Parties [Member] USD ($)	Jun. 30, 2013 Unrelated Third Parties [Member] USD ($)	Jun. 30, 2012 Unrelated Third Parties [Member] USD ($)	Jun. 30, 2013 Unrelated Third Parties [Member] USD ($)	Jun. 30, 2012 Unrelated Third Parties [Member] USD ($)	Jun. 30, 2013 Mr Weibing Lu [Member] USD ($)	Jun. 30, 2013 Mr Weibing Lu [Member] CNY	Jun. 30, 2013 Project With Northwestern Agricultural Technology University [Member] USD ($)	Jun. 30, 2013 Project With Northwestern Agricultural Technology University [Member] CNY	Dec. 31, 2008 Project With Northwestern Agricultural Technology University [Member] USD ($)	Dec. 31, 2008 Project With Northwestern Agricultural Technology University [Member] CNY	Jun. 30, 2013 Project With Fourth Military Medical University One [Member] USD ($)	Jun. 30, 2013 Project With Fourth Military Medical University One [Member] CNY	Dec. 31, 2009 Project With Fourth Military Medical University One [Member] USD ($)	Dec. 31, 2009 Project With Fourth Military Medical University One [Member] CNY	Jun. 30, 2013 Project With Fourth Military Medical University Two [Member] USD ($)	Jun. 30, 2013 Project With Fourth Military Medical University Two [Member] CNY	Jun. 30, 2013 Ceftiofur Sodium For Injection Project [Member] USD ($)	Jun. 30, 2013 Ceftiofur Sodium For Injection Project [Member] CNY	Jun. 30, 2013 Veterinary Products Formula Adjustment Pet Drug Development and Fermentation Engineering Design and Development Project [Member] USD ($)	Jun. 30, 2013 Veterinary Products Formula Adjustment Pet Drug Development and Fermentation Engineering Design and Development Project [Member] CNY	Jun. 30, 2013 In House R and D Project Eight [Member] USD ($)	Jun. 30, 2013 Xian Tianxing [Member] USD ($)	Jun. 30, 2013 Xian Tianxing [Member] CNY	Jun. 30, 2013 Sanqiao Factory Premises [Member] USD ($)	Jun. 30, 2013 Sanqiao Factory Premises [Member] CNY	Jun. 30, 2013 Xian Office Space [Member] USD ($)	Jun. 30, 2013 Xian Office Space [Member] CNY	Jun. 30, 2013 Shanghai Siqiangs Office Space [Member] USD ($)	Jun. 30, 2013 Shanghai Siqiangs Office Space [Member] CNY	Apr. 15, 2013 Kunshan Office [Member] USD ($)	Apr. 15, 2013 Kunshan Office [Member] CNY	Oct. 15, 2012 Kunshan Office [Member] USD ($)	Oct. 15, 2012 Kunshan Office [Member] CNY	Apr. 15, 2012 Kunshan Office [Member] USD ($)	Apr. 15, 2012 Kunshan Office [Member] CNY	Apr. 15, 2011 Kunshan Office [Member] USD ($)	Apr. 15, 2011 Kunshan Office [Member] CNY	Jul. 20, 2011 Xian Warehouse Premises [Member] USD ($)	Jul. 20, 2011 Xian Warehouse Premises [Member] CNY	Jun. 30, 2013 Tianxings Office Space [Member] USD ($)	Jun. 30, 2013 Tianxings Office Space [Member] CNY
Commitments And Contingencies [Line Items]
Description of Lessee Leasing Arrangements, Operating Leases															Mr. Lu for another 5 years from January 1, 2012 to December 31, 2016	Mr. Lu for another 5 years from January 1, 2012 to December 31, 2016					The project term is from January 2011 through September 2013	The project term is from January 2011 through September 2013			The project term is from April 2012 through March 2013.	The project term is from April 2012 through March 2013.								The Company entered into a tenancy agreement for the lease of factory premises of Xi’an Tianxing in Sanqiao for a period of ten years from October 1, 2004 to December 31, 2014. The annual rent for the factory premises is subject to a 10% increase every two years starting October 1, 2009	The Company entered into a tenancy agreement for the lease of factory premises of Xi’an Tianxing in Sanqiao for a period of ten years from October 1, 2004 to December 31, 2014. The annual rent for the factory premises is subject to a 10% increase every two years starting October 1, 2009	a period of five years from January 1, 2007 to December 31, 2011	a period of five years from January 1, 2007 to December 31, 2011	a tenancy agreement with Mr. Weibing Lu for the lease of Shanghai Siqiangs office in Shanghai for a period of ten years from August 1, 2007 to August 1, 2017	a tenancy agreement with Mr. Weibing Lu for the lease of Shanghai Siqiangs office in Shanghai for a period of ten years from August 1, 2007 to August 1, 2017	another one-year tenancy agreement for this office from April 15, 2013 to April 14, 2014	another one-year tenancy agreement for this office from April 15, 2013 to April 14, 2014	Company entered into a another six-month tenancy agreement for this office from October 15, 2012 to April 14, 2013	Company entered into a another six-month tenancy agreement for this office from October 15, 2012 to April 14, 2013	tenancy agreement for this office from April 15, 2012 to October 14, 2012	tenancy agreement for this office from April 15, 2012 to October 14, 2012	one year tenancy agreement for an office lease in Kunshan, Jiangsu Province from April 15, 2011 to April 14, 2012	one year tenancy agreement for an office lease in Kunshan, Jiangsu Province from April 15, 2011 to April 14, 2012	tenancy agreement for the lease of warehouse premises in Xian for a period of three years from July 20, 2011 to July 19, 2014	tenancy agreement for the lease of warehouse premises in Xian for a period of three years from July 20, 2011 to July 19, 2014
Lease Expiration Date																																								Apr. 14, 2014	Apr. 14, 2014	Apr. 14, 2013	Apr. 14, 2013	Oct. 14, 2012	Oct. 14, 2012	Apr. 14, 2012	Apr. 14, 2012	Jul. 19, 2014	Jul. 19, 2014
Operating Leases, Rent Expense							$ 13,060	$ 12,840	$ 25,965	$ 25,703	$ 15,597	$ 15,385	$ 30,868	$ 30,542	$ 29,160	180,000																		$ 20,671	127,600	$ 26,827	165,600	$ 23,328	144,000	$ 3,813	23,536	$ 1,686	10,405	$ 1,686	10,405	$ 3,110	19,200	$ 38,070	235,000	$ 359,640	2,220,000
Clinical Research Stage																					50,220	310,000
Amount incurred as of 06/30/2013	4,441,012		1,200,906	7,413,000													567,000	3,500,000			842,400	5,200,000			243,000	1,500,000					405,000	486,000	3,000,000
Amount expected to be incurred	388,800		500,094	3,087,000	1,701,000	10,500,000											81,000		648,000	4,000,000	129,600		972,000	6,000,000	81,000		567,000	3,500,000	1,118,392	6,903,656	0
Investment Obligation Capital		12,750,000
Research and Development, Expense Expected To Be Incurred	$ 4,829,812																$ 648,000				$ 972,000				$ 324,000	2,000,000					$ 405,000

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3)	6 Months Ended
	Jun. 30, 2013
Building and Building Improvements [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	10 years
Building and Building Improvements [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	40 years
Machinery and Equipment [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	5 years
Machinery and Equipment [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	10 years
Office equipment and furniture [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	5 years
Office equipment and furniture [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	10 years
Vehicles [Member] | Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	5 years
Vehicles [Member] | Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Life	10 years

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TAXES (Details Textual) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Income Tax Disclosure [Line Items]
Foreign Income Tax Statutory Rate			25.00%
Foreign Preferential Tax Rate			15.00%
Effective Income Tax Rate Reconciliation, Nondeductible Expense	0.70%	3.70%	3.60%	4.30%
Percentage Of Valuation Allowance			100.00%		100.00%
Operating Loss Carryforwards, Valuation Allowance	$ 2,075,843		$ 2,075,843		$ 2,004,895
Undistributed Earnings Of Foreign Subsidiaries	41,300,000		41,300,000		35,600,000
U S Income Tax [Member]
Income Tax Disclosure [Line Items]
Operating Loss Carryforwards	6,105,419		6,105,419		5,896,749
Operating Loss Carryforwards, Limitations on Use			These carry forwards will expire, if not utilized, beginning in 2027 and through 2031
P R C Income Tax [Member]
Income Tax Disclosure [Line Items]
Operating Loss Carryforwards	4,138,403		4,138,403		3,467,227
Operating Loss Carryforwards, Valuation Allowance	$ 1,034,601		$ 1,034,601		$ 866,807
Operating Loss Carryforwards, Limitations on Use			These carry forwards will expire, if not utilized, beginning in 2013 and through 2018

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PROPERTY, PLANT AND EQUIPMENT, NET (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Buildings and improvements	$ 27,775,811	$ 27,210,008
Machinery and equipment	6,015,476	5,876,467
Office equipment and furniture	333,128	332,653
Vehicles	605,633	593,296
Total	34,730,048	34,012,424
Less: accumulated depreciation	(5,881,240)	(5,144,608)
Plant and equipment, net	$ 28,848,808	$ 28,867,816

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SHORT-TERM AND LONG-TERM LOANS (Tables)

6 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Schedule Of Outstanding Short-Term Loans [Table Text Block]

Outstanding short-term loans consisted of the following:

	June 30, 2013				December 31, 2012					Interest
Bank	Amt RMB		Amt USD		Amt RMB		Amt USD		Due Date	Rate
ICBC Songzi Branch		-	$	-		3,000,000	$	476,100	06/18/13		(1)
Xi'an High-tech Zone Guoxin Microcredit Ltd.		-		-		15,000,000		2,380,500	02/12/13		22.400	%
Chang’an Bank		10,000,000		1,620,000		10,000,000		1,587,000	08/26/13		(1)
Industrial Bank Co. Ltd. Xi’an branch		30,000,000		4,860,000		-		-	01/15/14		6.600	%
Postal Savings Bank of China Xi’an Branch		20,000,000		3,240,000		-		-	05/26/14		(2)
ICBC Songzi Branch		5,000,000		810,000		-		-	06/19/14		(1)
Total		65,000,000	$	10,530,000		28,000,000	$	4,443,600

(1)	People's Bank of China floating benchmark lending rate over the same period plus 30%, which was 7.8% at June 30, 2013.
(2)	People's Bank of China floating benchmark lending rate over the same period plus 20%, which was 7.2% at June 30, 2013.

Schedule Of Outstanding Long Term Loans [Table Text Block]

Outstanding long-term loan consisted of the following:

June 30, 2013

December 31, 2012

Interest

Bank

Amt RMB

Amt USD

Amt RMB

Amt USD

Due Date

Rate

Shaanxi Agricultural Yanta Credit Union

-

-

8,000,000

$

1,269,600

09/20/14

9.446

%

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 21 - COMMITMENTS AND CONTINGENCIES

(a)  Lease commitments

The Company recognizes lease expense on the straight-line basis over the term of the lease.

The Company entered into a tenancy agreement for the lease of factory premises of Xi’an Tianxing in Sanqiao for a period of ten years from October 1, 2004 to December 31, 2014. The annual rent for the factory premises is subject to a 10% increase every two years starting October 1, 2009. As of June 30, 2013, the annual rent for the factory premises was approximately $20,671 (RMB 127,600).

The Company leased office space in Xi’an from Mr. Weibing Lu, the Company’s Chairman and CEO, for a period of five years from January 1, 2007 to December 31, 2011, with an annual rent of approximately $26,827 (RMB 165,600). In January 2012, the Company renewed the lease with Mr. Lu for another 5 years from January 1, 2012 to December 31, 2016 at a rent of approximately $29,160 (RMB 180,000) per year.

The Company also entered into a tenancy agreement with Mr. Weibing Lu for the lease of Shanghai Siqiang’s office in Shanghai for a period of ten years from August 1, 2007 to August 1, 2017 with an annual rent of approximately $23,328 (RMB 144,000).

The Company entered into a one year tenancy agreement for an office lease in Kunshan, Jiangsu Province from April 15, 2011 to April 14, 2012 with an annual rent of approximately $3,110 (RMB 19,200). On April 15, 2012, the Company entered into a six-month tenancy agreement for this office from April 15, 2012 to October 14, 2012 with six-month rent of approximately $1,686 (RMB 10,405). On October 15, 2012, the Company entered into a another six-month tenancy agreement for this office from October 15, 2012 to April 14, 2013 with a six-month rent of approximately $1,686 (RMB 10,405). On April 15, 2013, the Company entered into a another one-year tenancy agreement for this office from April 15, 2013 to April 14, 2014 with a one-year rent of approximately $3,813 (RMB 23,536).

The Company entered into a tenancy agreement for the lease of warehouse premises in Xi’an for a period of three years from July 20, 2011 to July 19, 2014 with an annual rent of approximately $38,070 (RMB 235,000) subject to a 10% increase every two years starting July 20, 2013.

The minimum future lease payments for the next five years and thereafter are as follows:

Period	Unrelated third parties		Related parties		Total
Year ending December 31, 2013	$	33,675	$	26,244	$	59,919
Year ending December 31, 2014		40,578		52,488		93,066
Year ending December 31, 2015		-		52,488		52,488
Year ending December 31, 2016		-		52,488		52,488
Year ending December 31, 2017 and thereafter		-		13,608		13,608
Total	$	74,253	$	197,316	$	271,569

Rental expense to unrelated third parties for the three months ended June 30, 2013 and 2012 amounted to $15,597 and $15,385, respectively. Rental expense to unrelated third parties for the six months ended June 30, 2013 and 2012 amounted to $30,868 and $30,542, respectively.

Rental expense to related parties for the three months ended June 30, 2013 and 2012 amounted to $13,060 and $12,840, respectively. Rental expense to related parties for the six months ended June 30, 2013 and 2012 amounted to $25,965 and $25,703, respectively.

 (b)  Legal proceedings

From time to time, the Company is involved in legal matters arising in the ordinary course of business. Management currently is not aware of any legal matters or pending litigation that would have a significant effect on the Company’s consolidated financial statements as of June 30, 2013.

In May 2007, Andrew Chien filed suit against the Company, R. Scott Cramer, Steve Lowe, David Wassung and Weibing Lu in United States District Court for the District of Connecticut, alleging causes of action for violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934. On July 17, 2008, in a decision that is now published, the court granted defendants’ motion to dismiss and subsequently dismissed the lawsuit, entering judgment on behalf of the defendants. Chien appealed the dismissal. Defendants filed a post judgment motion for sanctions against Chien. On February 5, 2009, the court found the action filed by Chien to have been frivolous, and to have constituted a “substantial” violation of Rule 11, and imposed monetary sanctions on both Chien and his former attorney. Chien appealed the award of sanctions. All appeals, including the one referenced below concerning Chien’s second lawsuit, were subsequently consolidated. The Court of Appeals issued a Mandate upholding the decision granting defendant’s motion to dismiss and found that the District Court did not “abuse its discretion” in issuing sanctions against Chien in light of the circumstances and facts on record. This Mandate was entered on or about November 8, 2010.

Andrew Chien, proceeding pro se (i.e., he represented himself without an attorney), filed his second lawsuit against the Company, R. Scott Cramer, Steve Lowe, David Wassung and Weibing Lu in Connecticut Superior Court (which was removed to U.S. District Court) alleging causes of action similar to those alleged in his federal complaint described above as well as state law causes of action. The court held that all claims asserted against the defendants were barred and failed to state a claim on a multiplicity of grounds, including on the basis of res judicata. Defendants filed a second Motion for Sanctions under Rule 11 and the PSLRA, which was granted. Chien appealed the dismissal. The Court of Appeals for the Second Circuit consolidated all of Chien’s appeals from both of his lawsuits. On November 8, 2010, the Court of Appeals affirmed the dismissals and the awards of sanctions. On January 22, 2011, Chien filed a petition with the Supreme Court of the United States, appealing the lower court’s ruling. The Supreme Court denied review of the petition.

Andrew Chien, again proceeding pro se, commenced his third lawsuit against the Company, Scott Cramer, Steve Lowe, David Wassung, Weibing Lu (and also Weinberg & Company, P.A., Moore Stephens Wirth Frazer & Torbet, LLP, Frazer Frost, LLP, Crowe Horwath LLP, Richardson & Patel LLP, Kevin K. Leung, Harvey Kesner, and Jody M. Borrelli) alleging the same facts and circumstances as set forth in the above two matters, although adding the aforementioned accountants and lawyers as defendants to the claims. The matter commenced on August 8, 2011, and shortly thereafter was removed to U.S. District Court. On October 5, 2011, the court dismissed the entire action as to all defendants. As in the two previous lawsuits, sanctions were issued against Chien. Moreover, the District Court issued an order prohibiting Chien from filing any more lawsuits against the defedentants without prior approval from the court. Chien appealed the Court’s ruling to the United States Court of Appeals for the Second Circuit, where all defendants have filed motions to dismiss.

The United States Court of Appeals for the Second Circuit recently affirmed the judgments and orders of the United States District Court and dismissed all of Mr. Chien’s pending appeals.

Although the Second Circuit declined to issue sanctions against Chien, it expressly warned Chien “that the continued filing of duplicative, vexatious, or frivolous appeals regarding issues already resolved by this Court may result in the imposition of sanctions, including a leave-to-file sanction requiring Chien to obtain permission from this Court prior to filing further submissions in this Court.” Mr. Chien has filed a petition for writs of certiorari with the Supreme Court of the United States. The Supreme Court has not yet acted on Chien’s petitions.

(c)  Ownership of leasehold property

In 2005, a shareholder contributed a leasehold office building as additional capital of Xi’an Tianxing. However, as of June 30, 2013, title of this leasehold property, with a carrying amount of $359,640 (RMB 2,220,000), has not passed to the Company. The Company does not believe there are any legal barriers for the shareholder to transfer the ownership to the Company. However, in the event that the Company fails to obtain the ownership certificate for the leasehold property, there is a risk that we may be required to vacate the building. Management believes that this possibility is remote, and, as such, no provision has been made in the consolidated financial statements for this potential occurrence.

(d) R&D project

In 2008, Xi’an Tianxing contracted with Northwestern Agricultural Technology University to work jointly on an R&D project concerning the application of nano-technology in the prevention of major milk cow disease. The total projected budget for this project is approximately $648,000 (RMB 4,000,000), which is to be paid according to completed stages of the project. The project reached trial stage in September 2009. As of June 30, 2013, the Company incurred approximately $567,000 (RMB 3,500,000) of cumulative expenses relating to this project.

In 2009, Xi’an Tianxing contracted with the Fourth Military Medical University to jointly work on an R&D project on fish diseases linked immunosorbent detection kit and fish diseases multi-linked monoclonal antibody therapeutic agents. The contracted amount for this project is approximated $972,000 (RMB 6,000,000). As of June 30, 2013, the Company has incurred approximately $842,400 (RMB 5,200,000) of cumulative expenses relating to this project.

During the first quarter of 2011, Xi’an Tianxing contracted with the Fourth Military Medical University to jointly work on an R&D project to develop new treatment and diagnosis method for Mycoplasmal pneumonia of swine. The project term is from January 2011 through September 2013. The cost to the Company for the initial phase is approximately $324,000 (RMB 2,000,000). As of June 30, 2013, the Company has incurred approximately $243,000 (RMB 1,500,000).

During the second quarter of 2012, Xi’an Tianxing contracted with the Fourth Military Medical University to jointly work on an R&D project of ring disease and pseudo-rabies specific transfer factor and blue-ear disease and Mycoplasma pneumoniae disease specific transfer factor to enhance the livestock and poultry's own immuneforce and prevent the onset of conventional disease. The project term is from April 2012 through March 2013. The cost to the Company for the project is approximately $50,220 (RMB 310,000). As of June 30, 2013, the project was completed and the Company incurred the budgeted expenses of approximately $50,220 (RMB 310,000).

During the fourth quarter of 2012, Xi’an Tianxing launched eight in-house R&D projects as set forth in the following table. As of June 30, 2013, the Company incurred all the budget expenses and these projects were still under development.

During the second quarter of 2013, Xi’an Tianxing launched an R&D project to develop monoclonal antibody vaccine to prevent common fish skin disease. The cost to the Company for this project is approximately $567,000 (RMB 3,500,000). As of June 30, 2013, the Company has incurred $486,000 (RMB 3,000,000) and this project is still under development.

In addition, the Company also launched various R&D projects on veterinary products formula adjustment, pet drug development and fermentation engineering design and development, and lab tests. As of June 30, 2013, approximately $1,118,392 (RMB 6,903,656) has been incurred related to these projects and lab tests.

(d) R&D project (Continued)

R&D projects are summarized as follows:

Project	Amount incurred as of 06/30/2013		Amount expected to be incurred		Total amount of project
Project with Northwestern Agricultural Technology University
Application of nano-technology in the prevention of major milk cow disease	$	567,000	$	81,000	$	648,000
Project with the Fourth Military Medical University
Fish diseases linked immunosorbent detection kit and fish diseases multi-linked monoclonal antibody therapeutic agents		842,400		129,600		972,000
New treatment and diagnosis method for Mycoplasmal pneumonia of swine		243,000		81,000		324,000
Transfer factor test		50,220		-		50,220
In-house R&D projects in 2012
Oral liquid products R&D and field trials		162,000		-		162,000
Powder for injection products R&D and field trials		162,000		-		162,000
Vitamin E injection product development		81,000		-		81,000
Anthelmintic product development		81,000		-		81,000
Three disease grams product development		81,000		-		81,000
Premixes class product development		81,000		-		81,000
Bulk powder products development		81,000		-		81,000
Livestock and fish diseases immunoassay kit development		405,000		-		405,000
In-house R&D projects in 2013
Fish monoclonal antibody vaccine		486,000		81,000		567,000
Other projects for veterinary products formula adjustment, pet drug development and fermentation engineering design and development and lab tests		1,118,392		16,200		1,134,592
Total	$	4,441,012	$	388,800	$	4,829,812

All payments made for R&D projects have been expensed as incurred.

(e) Registered capital commitment

Skystar Kunshan’s remaining registered capital of $12,750,000 was originally required to be invested by May 7, 2012. On July 25, 2012, the Company received the approval of extension for payment of the remaining registered capital but a new due date has not been specified by the government.

(f) Construction-in-progress capital commitment

In 2011, Skystar Jingzhou started a facility improvement project to expand veterinary medicine production capacity at its facility. The project contract has an estimated total cost of $1,701,000 (RMB 10,500,000). As of June 30, 2013, the facility had incurred construction-in-progress of $1,200,906 (RMB 7,413,000) and the estimated cost to complete is $500,094 (RMB 3,087,000). The Company expects the project will be completed by the end of the fourth quarter of 2013.

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RELATED PARTY TRANSACTIONS AND ARRANGEMENTS

6 Months Ended

Jun. 30, 2013

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Note 20 - RELATED PARTY TRANSACTIONS AND ARRANGEMENTS

Amounts receivable from and payable to related parties are summarized as follows:

	June 30, 2013		December 31, 2012
Shares to be issued to related parties (Note 16)
Mark D. Chen – non-executive director	$	25,002	$	25,002
Bing Mei – CFO		13,020		4,340
Total	$	38,022	$	29,342
Amounts due to (from) related parties
Weibing Lu – CEO (1)	$	693,309	$	608,282
Scott Cramer – non-executive director and shareholder (2)		275,865		138,169
Officers, shareholders and other related parties (3)		139,014		52,474
Total	$	1,108,188	$	798,925

(1) As of June 30, 2013 and December 31, 2012, the Company had unpaid reimbursement, compensation, and advances for business expenses due to Weibing Lu valued at $693,309 and $608,282, respectively.

(2) As of June 30, 2013 and December 31, 2012, the Company had unpaid reimbursement and compensation due to Scott Cramer valued at $275,865 and $138,169, respectively.

(3) The amounts due to officers, shareholders and other related parties at June 30, 2013 and December 31, 2012 include unpaid reimbursement and compensation and, advances to other related parties for business expenses.

Also refer to Notes 14, 16 and 21 for other related party transactions and arrangements.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) (USD $)	6 Months Ended
	Jun. 30, 2013
Purchase Option Liability [Line Items]
Balance, beginning of year	$ 5,600
Change in fair value	(5,600)
Balance, end of year	$ 0

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PROPERTY, PLANT AND EQUIPMENT, NET (Tables)

6 Months Ended

Jun. 30, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

Property, plant and equipment consist of the following:

	June 30, 2013		December 31, 2012
Buildings and improvements	$	27,775,811	$	27,210,008
Machinery and equipment		6,015,476		5,876,467
Office equipment and furniture		333,128		332,653
Vehicles		605,633		593,296
Total		34,730,048		34,012,424
Less: accumulated depreciation		(5,881,240)		(5,144,608)
Plant and equipment, net	$	28,848,808	$	28,867,816

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TAXES (Tables)

6 Months Ended

Jun. 30, 2013

Taxes Disclosure [Abstract]

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

The following table reconciles the U.S. statutory rates to the Company’s effective tax rate for the three and six months ended June 30, 2013 and 2012:

	For the three months ended June 30,						For the six months ended June 30,
	2013			2012			2013			2012
U.S. Statutory rate		34.0	%		34.0	%		34.0	%		34.0	%
Foreign income not recognized in the U.S.		(34.0)			(34.0)			(34.0)			(34.0)
China income tax rate		25.0			25.0			25.0			25.0
China income tax exemption		(10.0)			(10.0)			(10.0)			(10.0)
Stock-based compensation		-			6.8			-			3.3
Other item (1)		0.7			3.7			3.6			4.3
Total provision for income taxes		15.7	%		25.5	%		18.6	%		22.6	%

(1) Other items are primarily for operating expenses (income) incurred by Skystar that are not deductible (taxable) in the PRC, expenses incurred by other subsidiaries that are not deductible on the consolidated level, the difference of taxable income under US GAAP rather than Chinese GAAP, and the difference of Enterprise Income Tax imposed at a statutory rate of 25% rather than preferential tax rate of 15% on the income from the subsidiaries other than Xi’an Tianxing, which resulted in an increase in the effective tax rate of 0.7% and 3.7% for the three months ended June 30, 2013 and 2012, respectively, and an increase in the effective tax rate of 3.6% and 4.3% for the six months ended June 30, 2013 and 2012, respectively.

Income Tax Rate Reconciliation Other Adjustments [Table Text Block]

Other items consisted of the following:

	For the three months ended June 30,						For the six months ended June 30,
	2013			2012			2013			2012
Income taxed at Chinese statutory rate of 25%		(1.3)	%		1.2	%		0.1	%		0.4	%
Valuation allowance on tax loss		0.7			0.4			1.7			1.7
Non-deductible operating expenses		1.3			2.1			1.8			2.2
Total other items		0.7	%		3.7	%		3.6	%		4.3	%

Schedule Of Taxas Payable [Table Text Block]

Taxes payable consisted of the following:

	June 30, 2013		December 31, 2012
Income taxes	$	92,328	$	279,680
Value added taxes		1,117,386		1,409,762
Other taxes		169,639		261,315
Total	$	1,379,353	$	1,950,757

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Significant Accounting Policies [Line Items]
Shipping, Handling and Transportation Costs	$ 443,640	$ 463,630	$ 647,489	$ 847,333
Land Use Right [Member] | Huxian Facility [Member]
Significant Accounting Policies [Line Items]
Finite-Lived Intangible Asset, Useful Life			50 years
Land Use Right [Member] | Jingzhou Facility [Member]
Significant Accounting Policies [Line Items]
Finite-Lived Intangible Asset, Useful Life			30 years
Land Use Right [Member] | Kunshan Facility [Member]
Significant Accounting Policies [Line Items]
Finite-Lived Intangible Asset, Useful Life			41 years

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INVENTORIES (Tables)

6 Months Ended

Jun. 30, 2013

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

Inventories consist of the following:

	June 30, 2013		December 31, 2012
Raw materials	$	23,509,591	$	20,428,757
Packing materials		266,940		220,078
Work-in-process		26,368		219
Finished goods		2,625,622		2,243,226
Other		71,604		69,929
Total	$	26,500,125	$	22,962,209

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INTANGIBLE ASSETS (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Finite-Lived Intangible Assets [Line Items]
Total	$ 7,492,502	$ 7,339,877
Less: accumulated amortization	(2,185,843)	(2,020,046)
Intangible assets, net	5,306,659	5,319,831
Land Use Rights [Member]
Finite-Lived Intangible Assets [Line Items]
Total	4,900,502	4,800,677
Technical Know How [Member]
Finite-Lived Intangible Assets [Line Items]
Total	2,268,000	2,221,800
Patents [Member]
Finite-Lived Intangible Assets [Line Items]
Total	$ 324,000	$ 317,400

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CAPITAL TRANSACTIONS (Details)	6 Months Ended
	Jun. 30, 2013
Nonvested shares [Line Items]
Non-vested at Beginning	6,000
Granted	0
Vested	(4,000)
Forfeited	0
Non-vested at Ending	2,000

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LONG-TERM PREPAYMENTS (Details Textual) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Long Tem Prepayments [Line Items]
Deposits for potential acquisitions	$ 181,440	$ 177,744

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COMMITMENTS AND CONTINGENCIES (Tables)

6 Months Ended

Jun. 30, 2013

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases [Table Text Block]

The minimum future lease payments for the next five years and thereafter are as follows:

Period	Unrelated third parties		Related parties		Total
Year ending December 31, 2013	$	33,675	$	26,244	$	59,919
Year ending December 31, 2014		40,578		52,488		93,066
Year ending December 31, 2015		-		52,488		52,488
Year ending December 31, 2016		-		52,488		52,488
Year ending December 31, 2017 and thereafter		-		13,608		13,608
Total	$	74,253	$	197,316	$	271,569

Schedule Of Researchanddevelopment Project Costs [Table Text Block]

R&D projects are summarized as follows:

Project	Amount incurred as of 06/30/2013		Amount expected to be incurred		Total amount of project
Project with Northwestern Agricultural Technology University
Application of nano-technology in the prevention of major milk cow disease	$	567,000	$	81,000	$	648,000
Project with the Fourth Military Medical University
Fish diseases linked immunosorbent detection kit and fish diseases multi-linked monoclonal antibody therapeutic agents		842,400		129,600		972,000
New treatment and diagnosis method for Mycoplasmal pneumonia of swine		243,000		81,000		324,000
Transfer factor test		50,220		-		50,220
In-house R&D projects in 2012
Oral liquid products R&D and field trials		162,000		-		162,000
Powder for injection products R&D and field trials		162,000		-		162,000
Vitamin E injection product development		81,000		-		81,000
Anthelmintic product development		81,000		-		81,000
Three disease grams product development		81,000		-		81,000
Premixes class product development		81,000		-		81,000
Bulk powder products development		81,000		-		81,000
Livestock and fish diseases immunoassay kit development		405,000		-		405,000
In-house R&D projects in 2013
Fish monoclonal antibody vaccine		486,000		81,000		567,000
Other projects for veterinary products formula adjustment, pet drug development and fermentation engineering design and development and lab tests		1,118,392		16,200		1,134,592
Total	$	4,441,012	$	388,800	$	4,829,812

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SHORT-TERM AND LONG-TERM LOANS (Details 1)					1 Months Ended		12 Months Ended
	Jun. 30, 2013 USD ($)	Jun. 30, 2013 CNY	Dec. 31, 2012 USD ($)	Dec. 31, 2012 CNY	Sep. 17, 2012 Shaanxi Agricultural Yanta Credit Union One [Member] USD ($)	Sep. 17, 2012 Shaanxi Agricultural Yanta Credit Union One [Member] CNY	Dec. 31, 2012 Shaanxi Agricultural Yanta Credit Union One [Member] USD ($)	Dec. 31, 2012 Shaanxi Agricultural Yanta Credit Union One [Member] CNY	Jun. 30, 2013 Shaanxi Agricultural Yanta Credit Union One [Member] USD ($)	Jun. 30, 2013 Shaanxi Agricultural Yanta Credit Union One [Member] CNY
Debt Instrument [Line Items]
Bank Loans	$ 10,530,000	65,000,000	$ 4,443,600	28,000,000	$ 1,276,800	8,000,000	$ 1,269,600	8,000,000	$ 0	0
Due Date					Sep. 20, 2014	Sep. 20, 2014	Sep. 20, 2014	Sep. 20, 2014
Interest Rate					9.446%	9.446%	9.446%	9.446%

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EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 19 - EARNINGS PER SHARE

The following is the calculation of earnings per share:

	For the three months ended June 30,				For the six months ended June 30,
	2013		2012		2013		2012
Net income	$	3,750,881	$	1,698,866	$	4,463,614	$	3,603,620
Weighted average shares used in basic and diluted computation		7,615,719		7,461,227		7,614,721		7,454,837
Earnings per share:
Basic	$	0.49	$	0.23	$	0.59	$	0.48
Diluted	$	0.49	$	0.23	$	0.59	$	0.48

For the three and six months ended June 30, 2013 and 2012, the outstanding 140,000 options were excluded from the diluted earnings per share calculation as they are anti-dilutive as the average stock price was less than the exercise prices of the options.

For the three and six months ended June 30, 2013, the outstanding 2,000 non-vested shares were excluded from the diluted earnings per share calculation as they were anti-dilutive. For the three and six months ended June 30, 2012, the outstanding 623 non-vested shares were excluded from the diluted earnings per share calculation as they were anti-dilutive.

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CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (USD $)	Total	Common Stock [Member]	Paid-In Capital [Member]	Retained Earnings Statutory Reserves [Member]	Retained Earnings Unrestricted [Member]	Accumulated Other Comprehensive Income [Member]
BALANCE at Dec. 31, 2012	$ 96,214,933	$ 7,605	$ 37,021,085	$ 5,897,298	$ 44,515,296	$ 8,773,649
BALANCE (in shares) at Dec. 31, 2012		7,604,800
Foreign currency translation	2,063,127	0	0	0	0	2,063,127
Net income	4,463,614	0	0	0	4,463,614	0
BALANCE at Jun. 30, 2013	$ 102,741,674	$ 7,605	$ 37,021,085	$ 5,897,298	$ 48,978,910	$ 10,836,776
BALANCE (in shares) at Jun. 30, 2013		7,604,800

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (“U.S. GAAP”) applicable to interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (which include all significant normal and recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The accompanying results of operations are not necessarily indicative of the operating results that may be expected for the entire year ending December 31, 2013. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes thereto of the Company, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the Securities and Exchange Commission (“SEC”).

Principles of consolidation

The accompanying condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The consolidated financial statements include the financial statements of the Company, its wholly-owned subsidiaries, and its variable interest entities (“VIEs”).  All significant inter-company transactions and balances between the Company, its subsidiaries, and its VIEs have been eliminated in consolidation.

The Company has evaluated the relationship with Xi’an Tianxing and Xi’an Tianxing’s wholly owned subsidiaries, Xi’an Sikaida and Shanghai Siqiang. As a result of the contractual arrangements which obligate Sida to absorb all of the risk of loss from Xi’an Tianxing’s activities and enable Sida to receive all of its expected residual returns, the Company is the primary beneficiary of these VIEs and thus it accounts for Xi’an Tianxing, Xi’an Sikaida and Shanghai Siqiang as VIEs under the Financial Accounting Standards Board’s (“FASB”) interpretation on consolidation of variable interest entities. Accordingly, the Company consolidates the results, assets, and liabilities of Xi’an Tianxing. Xi’an Sikaida and Shanghai Siqiang.

Use of estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The level of uncertainty in estimates and assumptions increases with the length of time to complete the underlying transactions. Actual results may differ from these estimates in amounts that may be material to the consolidated financial statements and accompanying notes. Significant estimates and assumptions made by the Company are used for, but not limited to the allowance for uncollectible receivables, obsolescence reserve against inventory, useful lives of property, plant and equipment and intangible assets, assumptions used in assessing impairment for long-lived assets and the fair value for derivative instruments.

Foreign currency translation

The Company uses the United States dollar (“U.S. dollar”) for financial reporting purposes and the Chinese Renminbi (“RMB”) as its functional currency. The Company’s subsidiaries and VIEs maintain their books and records in their functional currency, being the primary currency of the economic environment in which their operations are conducted.

The Company translates the subsidiaries’ and VIEs’ assets and liabilities into U.S. dollars using the applicable exchange rates prevailing at the balance sheet dates, and the statements of comprehensive income and cash flows are translated at average exchange rates during the reporting period. As a result, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the subsidiaries’ and VIEs’ financial statements are recorded as accumulated other comprehensive income.

The quotation of the exchange rates does not imply free convertibility of RMB to other foreign currencies. All foreign exchange transactions continue to take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rate quoted by the People’s Bank of China.

Approval of foreign currency payments by the People’s Bank of China or other institutions requires submitting a payment application form together with invoices, shipping documents, and signed contracts. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Fair values of financial instruments

ASC Topic 820, Fair Value Measurement and Disclosures , defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy, which requires classification based on observable and unobservable inputs when measuring fair value. Certain current assets and current liabilities are financial instruments.  Management believes their carrying amounts are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and, if applicable, their current interest rates are equivalent to interest rates currently available.  The three levels of valuation hierarchy are defined as follows:

· Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

· Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

· Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2013 and December 31, 2012:

	Carrying Value at June 30, 2013		Fair Value Measurement at June 30, 2013
			Level 1		Level 2		Level 3
Purchase option liability	$	—	$	—	$	—	$	—

	Carrying Value at December 31,		Fair Value Measurement at December 31, 2012
	2012		Level 1		Level 2		Level 3
Purchase option liability	$	5,600	$	—	$	5,600	$	—

Below is the reconciliation for the purchase option liability changes from December 31, 2012 to June 30, 2013:

Balance, December 31, 2012	$	5,600
Change in fair value		(5,600)
Balance, June 30, 2013	$	—

Revenue recognition

Revenue of the Company is primarily derived from the sales of veterinary healthcare and medical care products in China. Sales are recognized when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectability is reasonably assured. Sales are presented net of value added tax (“VAT”). No estimated allowance for sales returns is reflected in these consolidated financial statements as sales returns historically have been insignificant.

There are two types of sales upon which revenue is recognized:

a.	Credit sales: revenue is recognized when the products have been delivered to the customers.
b.	Full payment before delivery: Cash received is recorded as “deposits from customers” and revenue is recognized when the products have been delivered to the customers.

The Company’s revenue and cost of revenue by product line were as follows:

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Revenue
Micro-organism	$	4,031,113	$	4,002,206	$	5,698,295	$	7,137,246
Veterinary Medications		6,292,573		2,458,714		9,739,290		5,467,301
Feed Additives		514,161		1,267,061		800,449		2,301,833
Vaccines		497,298		1,142,867		627,852		1,890,805
Total Revenue		11,335,145		8,870,848		16,865,886		16,797,185
Cost of Revenue
Micro-organism		1,179,499		1,169,412		1,766,916		2,076,252
Veterinary Medications		3,740,498		1,399,006		5,846,014		3,191,654
Feed Additives		399,883		1,032,139		614,520		1,882,023
Vaccines		57,944		146,381		81,260		240,667
Total Cost of Revenue		5,377,824		3,746,938		8,308,710		7,390,596
Gross Profit	$	5,957,321	$	5,123,910	$	8,557,176	$	9,406,589

Cash

Cash includes currency on hand, demand deposits with banks, and liquid investments with an original maturity of three months or less.

Accounts receivable

Accounts receivable is stated at cost less an allowance for uncollectible accounts, as needed. The Company uses the aging method to estimate the allowance for anticipated uncollectible receivable balances. Under the aging method, a bad debt percentage is estimated by management based on historical experience and current economic climate.  The resulting percentage is applied to customers’ balances categorized by the number of months the underlying invoices have remained outstanding. At each reporting period, the allowance balance is adjusted to reflect the amount computed as a result of the aging method. When facts subsequently become available to indicate that the allowance provided requires an adjustment, a corresponding adjustment is made to the allowance account as a change in estimate. The ultimate collection of the Company’s accounts receivable may take one year. Delinquent account balances are reserved after management determines that the likelihood of collection is not probable, and known bad debts are written-off against the allowance for doubtful accounts when identified.

Inventories

Inventories are stated at the lower of cost as determined on a weighted-average basis, or market. Inventories include purchases and related costs incurred in bringing the inventories to their present location and condition. Management reviews inventories for obsolescence and cost in excess of net realizable value and records a reserve against the inventory and additional cost of goods sold when the carrying value exceeds net realizable value.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for maintenance and repairs that do not improve or extend the useful lives of the assets are charged to operations as incurred, while renewals and betterments are capitalized. Gains and losses on disposals are included in the results of operations. Estimated useful lives of the assets are as follows:

	Estimated useful life
Buildings and improvements	10-40 years
Machinery and equipment	5-10 years
Office equipment and furniture	5-10 years
Vehicles	5-10 years

Management assesses the carrying value of property, plant and equipment annually or more often when factors indicating impairment are present, and reduce the carrying value of such assets by the amount of the impairment. The Company determines the existence of such impairment by measuring the expected future cash flows (undiscounted) and comparing such amount to the net asset carrying value. An impairment loss, if it exists, is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Based on its review, management believes that, as of June 30, 2013 and December 31, 2012, there was no impairment of its property, plant and equipment.

Construction-in-progress

Construction-in-progress includes direct costs of construction of a factory building. Interest incurred during the period of construction, if significant, is capitalized. All other interest is expensed as incurred. Construction-in-progress is not depreciated until such time as the asset is completed and put into service.

Intangible assets

Land use rights — Land use rights represent the amounts paid to acquire a long-term interest to utilize the land underlying the Company’s facilities. This type of arrangement is common for the use of land in the PRC. Land use rights are amortized on the straight-line method over the contractual lease terms.  The land use right granted to the Company’s Huxian facility was for 50 years.  The land use right granted to the Company’s Jingzhou facility was 30 years. The land use right granted to the Company’s Kunshan facility was for 41 years.

Technological know-how — Purchased technological know-how includes confidential formulas, manufacturing processes, and technical and procedural manuals, and is amortized using the straight-line method over an estimated useful life of between five to eleven years that reflects the period over which such confidential formulas, manufacturing processes, and technical and procedural manuals are kept confidential by the Company as agreed between the Company and the selling parties.

Impairment of intangible assets — the Company evaluates the carrying value of intangible assets at least annually when factors indicating impairment are present. The Company determines the existence of such impairment by measuring the estimated future cash flows (undiscounted) and comparing such amount to the net asset carrying value. If the undiscounted cash flow estimated to be generated by any such intangible asset is less than its carrying amount, a loss is recognized based on the amount by which the carrying amount exceeds the intangible asset’s fair market value. Loss on intangible assets to be disposed of is determined in a similar manner, except that fair market values are reduced by the cost of disposal. Based on its review, the Company believes that, as of June 30, 2013 and December 31, 2012, there was no impairment of its intangible assets.

Comprehensive income

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Accumulated other comprehensive income is comprised of the foreign currency translation adjustments.

Shipping and handling costs

Shipping and handling costs related to costs of goods sold are included in selling expenses, which totaled $443,640 and $463,630 for the three months ended June 30, 2013 and 2012, respectively, and $647,489 and $847,333 for the six months ended June 30, 2013 and 2012, respectively.

Advertising costs

Advertising costs are charged to selling expenses as incurred. Advertising costs were insignificant for both the three months and six months ended June 30, 2013 and 2012, respectively.

Research and development costs

Research and development costs are charged to expenses as incurred and include salaries, professional fees, and technical support fees related to such efforts.

Income taxes

The Company accounts for income taxes using an asset and liability method.  Under this 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 the financial statement carrying amounts and the tax bases of existing assets and liabilities. 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.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. As of June 30, 2013 and December 31, 2012, there are no unrecognized tax benefits, and the Company does not expect a significant change in tax benefits in the next 12 months.  Penalties and interest levied by taxing authorities, if any, are classified as income tax expense in the year incurred.  No significant penalties or interest relating to income taxes have been incurred during the three months and six months ended June 30, 2013 and 2012.

According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational or other errors made by the taxpayer or the withholding agent.  The statute of limitations extends to five years under special circumstances. In the case of transfer pricing issues, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. Accordingly, the income tax returns of the Company’s PRC operating subsidiaries for the years ended December 31, 2007 through 2012 are open to examination by the PRC state and local tax authorities.

Stock-based compensation

The Company records and reports stock-based compensation by measuring the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period during which services are received. Stock compensation for stock granted to non-employees is determined as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably measured.

Earnings per share

Basic earnings per share is based upon the weighted-average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares, including convertible preferred shares, warrants and stock options were converted or exercised. Further, the method requires that stock dividends or stock splits be accounted for retroactively if the stock dividends or stock splits occur during the period or after the end of the period but before the release of the financial statements, by considering it outstanding for the entirety of each period presented. Diluted earnings per share is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

Related parties

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of such principal owners and management, and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

Operating segments

While the chief operating decision-makers monitor the revenue streams of the various products lines, operations are managed and financial performance is evaluated on a Company-wide basis.  Product lines are aggregated into one as operating results for all product lines are similar.  Accordingly, all of the major product lines (micro-organism, veterinary medicine, feed additives and vaccines) are considered by management to be aggregated in one reportable operating segment.

As the Company primarily generates its revenues from customers in the PRC, no geographical segments are presented.

Recently issued accounting pronouncements

In February 2013, the FASB issued Accounting Standards Update No. 2013-02 Comprehensive Income (Topic 220): The objective of this update is to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments in this update seek to attain that objective by requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. generally accepted accounting principles (GAAP) to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is reclassified to a balance sheet account (for example, inventory) instead of directly to income or expense in the same reporting period. For public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2012. The adoption of the provisions in this update did not have a significant impact on the Company’s consolidated financial statements.

In March 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-05, Foreign Currency Matters, (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (ASU 2013-05), to resolve a diversity in accounting for the cumulative translation adjustment of foreign currency upon derecognition of a foreign subsidiary or group of assets. ASU 2013-05 requires the parent to apply the guidance in Subtopic 830-30 to release any related cumulative translation adjustment into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. Further, ASU 2013-05 clarified that the parent should apply the guidance in subtopic 810-10 if there is a sale of an investment in a foreign entity, including both (1) events that result in the loss of a controlling financial interest in a foreign entity and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date. Accordingly, the cumulative translation adjustment should be released into net income upon the occurrence of those events. ASU 2013-05 is effective prospectively for the Company in our first quarter of fiscal 2014, with early adoption permitted. The Company does not expect ASU 2013-05 to have a significant impact on its consolidated results of operations and financial condition.

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Income Taxes (Topic 740)(ASU 2013-11). The amendments in this update provide guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. These amendments provide that an unrecognized tax benefit, or a portion thereof, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The Company does not expect ASU 2013-11 to have a significant impact on its consolidated results of operations and financial condition.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

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INVENTORIES

6 Months Ended

Jun. 30, 2013

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

Note 5 – INVENTORIES

Inventories consist of the following:

	June 30, 2013		December 31, 2012
Raw materials	$	23,509,591	$	20,428,757
Packing materials		266,940		220,078
Work-in-process		26,368		219
Finished goods		2,625,622		2,243,226
Other		71,604		69,929
Total	$	26,500,125	$	22,962,209

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CAPITAL TRANSACTIONS (Details 1) (USD $)	6 Months Ended		12 Months Ended
	Jun. 30, 2013		Dec. 31, 2012
Purchase Options [Line Items]
Stock price	$ 1.28	[1]	$ 1.60	[1]
Exercise price	$ 8.11	[1]	$ 8.11	[1]
Annual dividend yield	0.00%	[1]	0.00%	[1]
Expected term (years)	1 year	[1]	1 year 6 months	[1]
Risk-free interest rate	0.15%	[1]	0.16%	[1]
Expected volatility	60.00%	[1]	73.00%	[1]

[1] As of June 30, 2013 and December 31, 2012, 140,000 purchase options with an exercise price of $8.11 were outstanding.

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CONCENTRATIONS AND CREDIT RISK

6 Months Ended

Jun. 30, 2013

Risks and Uncertainties [Abstract]

Concentration Risk Disclosure [Text Block]

Note 3 - CONCENTRATIONS AND CREDIT RISK

The Company’s operations are all carried out in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic, and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Financial instruments which subject the Company to concentration of credit risk consist of cash and accounts receivable. Balances at financial institutions or state-owned banks within the PRC are not covered by insurance. The Company has not experienced any losses in such accounts. The Company provides unsecured credit terms for sales to certain customers. As a result, there are credit risks with the accounts receivable balances. The Company constantly re-evaluates the credit worthiness of customers buying on credit and maintains an allowance for doubtful accounts.

For the three months and six months ended June 30, 2013 and 2012, all of the Company’s sales occurred in the PRC. No major customers accounted for more than 10% of the Company’s total revenues. All accounts receivable at June 30, 2013 and December 31, 2012 are from customers located in the PRC.

The Company’s six largest vendors accounted for approximately 73% and 87% of the Company’s total purchases, respectively, for the three months ended June 30, 2013 and 2012. The Company’s six largest vendors accounted for approximately 73% and 86% of the Company’s total purchases, respectively, for the six months ended June 30, 2013 and 2012.

No product accounted for more than 10% of the Company’s total revenues for the three months and six months ended June 30, 2013. The Company had one product that accounted for 13% and 17% of the Company’s total revenues for the three months and six months ended June 30, 2012, respectively.

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EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2013

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

The following is the calculation of earnings per share:

	For the three months ended June 30,				For the six months ended June 30,
	2013		2012		2013		2012
Net income	$	3,750,881	$	1,698,866	$	4,463,614	$	3,603,620
Weighted average shares used in basic and diluted computation		7,615,719		7,461,227		7,614,721		7,454,837
Earnings per share:
Basic	$	0.49	$	0.23	$	0.59	$	0.48
Diluted	$	0.49	$	0.23	$	0.59	$	0.48

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies [Policy Text Block]

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (“U.S. GAAP”) applicable to interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (which include all significant normal and recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows for all periods presented have been made. The accompanying results of operations are not necessarily indicative of the operating results that may be expected for the entire year ending December 31, 2013. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes thereto of the Company, which are included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the Securities and Exchange Commission (“SEC”).

Consolidation, Policy [Policy Text Block]

Principles of consolidation

The accompanying condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The consolidated financial statements include the financial statements of the Company, its wholly-owned subsidiaries, and its variable interest entities (“VIEs”).  All significant inter-company transactions and balances between the Company, its subsidiaries, and its VIEs have been eliminated in consolidation.

The Company has evaluated the relationship with Xi’an Tianxing and Xi’an Tianxing’s wholly owned subsidiaries, Xi’an Sikaida and Shanghai Siqiang. As a result of the contractual arrangements which obligate Sida to absorb all of the risk of loss from Xi’an Tianxing’s activities and enable Sida to receive all of its expected residual returns, the Company is the primary beneficiary of these VIEs and thus it accounts for Xi’an Tianxing, Xi’an Sikaida and Shanghai Siqiang as VIEs under the Financial Accounting Standards Board’s (“FASB”) interpretation on consolidation of variable interest entities. Accordingly, the Company consolidates the results, assets, and liabilities of Xi’an Tianxing. Xi’an Sikaida and Shanghai Siqiang.

Use of Estimates, Policy [Policy Text Block]

Use of estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The level of uncertainty in estimates and assumptions increases with the length of time to complete the underlying transactions. Actual results may differ from these estimates in amounts that may be material to the consolidated financial statements and accompanying notes. Significant estimates and assumptions made by the Company are used for, but not limited to the allowance for uncollectible receivables, obsolescence reserve against inventory, useful lives of property, plant and equipment and intangible assets, assumptions used in assessing impairment for long-lived assets and the fair value for derivative instruments.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

Foreign currency translation

The Company uses the United States dollar (“U.S. dollar”) for financial reporting purposes and the Chinese Renminbi (“RMB”) as its functional currency. The Company’s subsidiaries and VIEs maintain their books and records in their functional currency, being the primary currency of the economic environment in which their operations are conducted.

The Company translates the subsidiaries’ and VIEs’ assets and liabilities into U.S. dollars using the applicable exchange rates prevailing at the balance sheet dates, and the statements of comprehensive income and cash flows are translated at average exchange rates during the reporting period. As a result, amounts related to assets and liabilities reported on the consolidated statements of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the subsidiaries’ and VIEs’ financial statements are recorded as accumulated other comprehensive income.

The quotation of the exchange rates does not imply free convertibility of RMB to other foreign currencies. All foreign exchange transactions continue to take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rate quoted by the People’s Bank of China.

Approval of foreign currency payments by the People’s Bank of China or other institutions requires submitting a payment application form together with invoices, shipping documents, and signed contracts. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Fair Value of Financial Instruments, Policy [Policy Text Block]

Fair values of financial instruments

ASC Topic 820, Fair Value Measurement and Disclosures , defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy, which requires classification based on observable and unobservable inputs when measuring fair value. Certain current assets and current liabilities are financial instruments.  Management believes their carrying amounts are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and, if applicable, their current interest rates are equivalent to interest rates currently available.  The three levels of valuation hierarchy are defined as follows:

· Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

· Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

· Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2013 and December 31, 2012:

	Carrying Value at June 30, 2013		Fair Value Measurement at June 30, 2013
			Level 1		Level 2		Level 3
Purchase option liability	$	—	$	—	$	—	$	—

	Carrying Value at December 31,		Fair Value Measurement at December 31, 2012
	2012		Level 1		Level 2		Level 3
Purchase option liability	$	5,600	$	—	$	5,600	$	—

Below is the reconciliation for the purchase option liability changes from December 31, 2012 to June 30, 2013:

Balance, December 31, 2012	$	5,600
Change in fair value		(5,600)
Balance, June 30, 2013	$	—

Revenue Recognition, Policy [Policy Text Block]

Revenue recognition

Revenue of the Company is primarily derived from the sales of veterinary healthcare and medical care products in China. Sales are recognized when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectability is reasonably assured. Sales are presented net of value added tax (“VAT”). No estimated allowance for sales returns is reflected in these consolidated financial statements as sales returns historically have been insignificant.

There are two types of sales upon which revenue is recognized:

a.	Credit sales: revenue is recognized when the products have been delivered to the customers.
b.	Full payment before delivery: Cash received is recorded as “deposits from customers” and revenue is recognized when the products have been delivered to the customers.

The Company’s revenue and cost of revenue by product line were as follows:

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Revenue
Micro-organism	$	4,031,113	$	4,002,206	$	5,698,295	$	7,137,246
Veterinary Medications		6,292,573		2,458,714		9,739,290		5,467,301
Feed Additives		514,161		1,267,061		800,449		2,301,833
Vaccines		497,298		1,142,867		627,852		1,890,805
Total Revenue		11,335,145		8,870,848		16,865,886		16,797,185
Cost of Revenue
Micro-organism		1,179,499		1,169,412		1,766,916		2,076,252
Veterinary Medications		3,740,498		1,399,006		5,846,014		3,191,654
Feed Additives		399,883		1,032,139		614,520		1,882,023
Vaccines		57,944		146,381		81,260		240,667
Total Cost of Revenue		5,377,824		3,746,938		8,308,710		7,390,596
Gross Profit	$	5,957,321	$	5,123,910	$	8,557,176	$	9,406,589

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash

Cash includes currency on hand, demand deposits with banks, and liquid investments with an original maturity of three months or less.

Receivables, Policy [Policy Text Block]

Accounts receivable

Accounts receivable is stated at cost less an allowance for uncollectible accounts, as needed. The Company uses the aging method to estimate the allowance for anticipated uncollectible receivable balances. Under the aging method, a bad debt percentage is estimated by management based on historical experience and current economic climate.  The resulting percentage is applied to customers’ balances categorized by the number of months the underlying invoices have remained outstanding. At each reporting period, the allowance balance is adjusted to reflect the amount computed as a result of the aging method. When facts subsequently become available to indicate that the allowance provided requires an adjustment, a corresponding adjustment is made to the allowance account as a change in estimate. The ultimate collection of the Company’s accounts receivable may take one year. Delinquent account balances are reserved after management determines that the likelihood of collection is not probable, and known bad debts are written-off against the allowance for doubtful accounts when identified.

Inventory, Policy [Policy Text Block]

Inventories

Inventories are stated at the lower of cost as determined on a weighted-average basis, or market. Inventories include purchases and related costs incurred in bringing the inventories to their present location and condition. Management reviews inventories for obsolescence and cost in excess of net realizable value and records a reserve against the inventory and additional cost of goods sold when the carrying value exceeds net realizable value.

Property, Plant and Equipment, Policy [Policy Text Block]

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Expenditures for maintenance and repairs that do not improve or extend the useful lives of the assets are charged to operations as incurred, while renewals and betterments are capitalized. Gains and losses on disposals are included in the results of operations. Estimated useful lives of the assets are as follows:

	Estimated useful life
Buildings and improvements	10-40 years
Machinery and equipment	5-10 years
Office equipment and furniture	5-10 years
Vehicles	5-10 years

Management assesses the carrying value of property, plant and equipment annually or more often when factors indicating impairment are present, and reduce the carrying value of such assets by the amount of the impairment. The Company determines the existence of such impairment by measuring the expected future cash flows (undiscounted) and comparing such amount to the net asset carrying value. An impairment loss, if it exists, is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Based on its review, management believes that, as of June 30, 2013 and December 31, 2012, there was no impairment of its property, plant and equipment.

Construction In Progress Policy [Policy Text Block]

Construction-in-progress

Construction-in-progress includes direct costs of construction of a factory building. Interest incurred during the period of construction, if significant, is capitalized. All other interest is expensed as incurred. Construction-in-progress is not depreciated until such time as the asset is completed and put into service.

Goodwill and Intangible Assets, Intangible Assets, Policy [Policy Text Block]

Intangible assets

Land use rights — Land use rights represent the amounts paid to acquire a long-term interest to utilize the land underlying the Company’s facilities. This type of arrangement is common for the use of land in the PRC. Land use rights are amortized on the straight-line method over the contractual lease terms.  The land use right granted to the Company’s Huxian facility was for 50 years.  The land use right granted to the Company’s Jingzhou facility was 30 years. The land use right granted to the Company’s Kunshan facility was for 41 years.

Technological know-how — Purchased technological know-how includes confidential formulas, manufacturing processes, and technical and procedural manuals, and is amortized using the straight-line method over an estimated useful life of between five to eleven years that reflects the period over which such confidential formulas, manufacturing processes, and technical and procedural manuals are kept confidential by the Company as agreed between the Company and the selling parties.

Impairment of intangible assets — the Company evaluates the carrying value of intangible assets at least annually when factors indicating impairment are present. The Company determines the existence of such impairment by measuring the estimated future cash flows (undiscounted) and comparing such amount to the net asset carrying value. If the undiscounted cash flow estimated to be generated by any such intangible asset is less than its carrying amount, a loss is recognized based on the amount by which the carrying amount exceeds the intangible asset’s fair market value. Loss on intangible assets to be disposed of is determined in a similar manner, except that fair market values are reduced by the cost of disposal. Based on its review, the Company believes that, as of June 30, 2013 and December 31, 2012, there was no impairment of its intangible assets.

Comprehensive Income, Policy [Policy Text Block]

Comprehensive income

Comprehensive income is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Accumulated other comprehensive income is comprised of the foreign currency translation adjustments.

Shipping and Handling Cost, Policy [Policy Text Block]

Shipping and handling costs

Shipping and handling costs related to costs of goods sold are included in selling expenses, which totaled $443,640 and $463,630 for the three months ended June 30, 2013 and 2012, respectively, and $647,489 and $847,333 for the six months ended June 30, 2013 and 2012, respectively.

Advertising Costs, Policy [Policy Text Block]

Advertising costs

Advertising costs are charged to selling expenses as incurred. Advertising costs were insignificant for both the three months and six months ended June 30, 2013 and 2012, respectively.

Research and Development Expense, Policy [Policy Text Block]

Research and development costs

Research and development costs are charged to expenses as incurred and include salaries, professional fees, and technical support fees related to such efforts.

Income Tax, Policy [Policy Text Block]

Income taxes

The Company accounts for income taxes using an asset and liability method.  Under this 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 the financial statement carrying amounts and the tax bases of existing assets and liabilities. 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.

A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. As of June 30, 2013 and December 31, 2012, there are no unrecognized tax benefits, and the Company does not expect a significant change in tax benefits in the next 12 months.  Penalties and interest levied by taxing authorities, if any, are classified as income tax expense in the year incurred.  No significant penalties or interest relating to income taxes have been incurred during the three months and six months ended June 30, 2013 and 2012.

According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational or other errors made by the taxpayer or the withholding agent.  The statute of limitations extends to five years under special circumstances. In the case of transfer pricing issues, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion. Accordingly, the income tax returns of the Company’s PRC operating subsidiaries for the years ended December 31, 2007 through 2012 are open to examination by the PRC state and local tax authorities.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

Stock-based compensation

The Company records and reports stock-based compensation by measuring the cost of services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost is recognized over the period during which services are received. Stock compensation for stock granted to non-employees is determined as the fair value of the consideration received or the fair value of equity instruments issued, whichever is more reliably measured.

Earnings Per Share, Policy [Policy Text Block]

Earnings per share

Basic earnings per share is based upon the weighted-average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares, including convertible preferred shares, warrants and stock options were converted or exercised. Further, the method requires that stock dividends or stock splits be accounted for retroactively if the stock dividends or stock splits occur during the period or after the end of the period but before the release of the financial statements, by considering it outstanding for the entirety of each period presented. Diluted earnings per share is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

Related Party [Policy Text Block]

Related parties

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of such principal owners and management, and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

Operating Segments [Policy Text Block]

Operating segments

While the chief operating decision-makers monitor the revenue streams of the various products lines, operations are managed and financial performance is evaluated on a Company-wide basis.  Product lines are aggregated into one as operating results for all product lines are similar.  Accordingly, all of the major product lines (micro-organism, veterinary medicine, feed additives and vaccines) are considered by management to be aggregated in one reportable operating segment.

As the Company primarily generates its revenues from customers in the PRC, no geographical segments are presented.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently issued accounting pronouncements

In February 2013, the FASB issued Accounting Standards Update No. 2013-02 Comprehensive Income (Topic 220): The objective of this update is to improve the reporting of reclassifications out of accumulated other comprehensive income. The amendments in this update seek to attain that objective by requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. generally accepted accounting principles (GAAP) to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. This would be the case when a portion of the amount reclassified out of accumulated other comprehensive income is reclassified to a balance sheet account (for example, inventory) instead of directly to income or expense in the same reporting period. For public entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2012. The adoption of the provisions in this update did not have a significant impact on the Company’s consolidated financial statements.

In March 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-05, Foreign Currency Matters, (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (ASU 2013-05), to resolve a diversity in accounting for the cumulative translation adjustment of foreign currency upon derecognition of a foreign subsidiary or group of assets. ASU 2013-05 requires the parent to apply the guidance in Subtopic 830-30 to release any related cumulative translation adjustment into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. Further, ASU 2013-05 clarified that the parent should apply the guidance in subtopic 810-10 if there is a sale of an investment in a foreign entity, including both (1) events that result in the loss of a controlling financial interest in a foreign entity and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date. Accordingly, the cumulative translation adjustment should be released into net income upon the occurrence of those events. ASU 2013-05 is effective prospectively for the Company in our first quarter of fiscal 2014, with early adoption permitted. The Company does not expect ASU 2013-05 to have a significant impact on its consolidated results of operations and financial condition.

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Income Taxes (Topic 740)(ASU 2013-11). The amendments in this update provide guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. These amendments provide that an unrecognized tax benefit, or a portion thereof, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The Company does not expect ASU 2013-11 to have a significant impact on its consolidated results of operations and financial condition.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

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DEPOSITS, PREPAID EXPENSES AND OTHER RECEIVABLES (Tables)

6 Months Ended

Jun. 30, 2013

Deposits and Prepaid Expenses Disclosure [Abstract]

Schedule Of Deposits and Prepaid Expenses [Table Text Block]

Deposits, prepaid expenses and other receivables are comprised of the following:

	June 30, 2013		December 31,  2012
Prepaid income taxes	$	400,092	$	1,263,845
Other prepayments		668,193		828,676
Deposits placed with guarantors (note 14)		526,500		198,375
Interest receivable (note 7)		231,316		-
Other receivables		717,250		548,954
Total	$	2,543,351	$	2,839,850

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DEFERRED GOVERNMENT GRANT (Details Textual)			6 Months Ended		12 Months Ended		0 Months Ended
	Jun. 30, 2013 USD ($)	Dec. 31, 2012 USD ($)	Jun. 30, 2013 Xian Municipal Government [Member] USD ($)	Jun. 30, 2013 Xian Municipal Government [Member] CNY	Dec. 31, 2012 Xian Municipal Government [Member] USD ($)	Dec. 31, 2012 Xian Municipal Government [Member] CNY	Jan. 16, 2006 China Go Xin Investment Group [Member] USD ($)	Jan. 16, 2006 China Go Xin Investment Group [Member] CNY	Jun. 03, 2003 China Go Xin Investment Group [Member] USD ($)	Jun. 03, 2003 China Go Xin Investment Group [Member] CNY	Feb. 28, 2013 China Go Xin Investment Group [Member] USD ($)	Feb. 28, 2013 China Go Xin Investment Group [Member] CNY	Jan. 30, 2013 China Go Xin Investment Group [Member] USD ($)	Jan. 30, 2013 China Go Xin Investment Group [Member] CNY	Dec. 31, 2012 China Go Xin Investment Group [Member] USD ($)	Dec. 31, 2012 China Go Xin Investment Group [Member] CNY	Dec. 07, 2010 China Go Xin Investment Group [Member] USD ($)	Dec. 07, 2010 China Go Xin Investment Group [Member] CNY
Deferred Government Grant [Line Items]
Proceeds From Government Subsidies			$ 405,000	2,500,000	$ 396,750	2,500,000
Repayments Of Government Subsidies			680,400	4,200,000	666,540	4,200,000
Percentage Repayment Of Government Subsidies			70.00%	70.00%	70.00%	70.00%
Proceeds From Demand Payment							160,280	1,000,000	641,120	4,000,000
Other payables and accrued expenses	$ 4,448,667	$ 4,374,047	$ 486,000	3,000,000							$ 160,280	1,000,000	$ 160,280	1,000,000	$ 480,840	3,000,000	$ 160,280	1,000,000

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INTANGIBLE ASSETS (Tables)

6 Months Ended

Jun. 30, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets [Table Text Block]

Intangible assets consist of the following:

	June 30, 2013		December 31, 2012
Land use rights	$	4,900,502	$	4,800,677
Technological know-how		2,268,000		2,221,800
Patents		324,000		317,400
Total		7,492,502		7,339,877
Less: accumulated amortization		(2,185,843)		(2,020,046)
Intangible assets, net	$	5,306,659	$	5,319,831

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Amortization expense expected for the next five years and thereafter is as follows:

Years ending December 31,	Amount
2013	$	123,792
2014		247,584
2015		247,584
2016		247,584
2017		247,584
Thereafter		4,192,531
Total	$	5,306,659

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SHORT-TERM AND LONG-TERM LOANS (Details Textual)	3 Months Ended		6 Months Ended					0 Months Ended		1 Months Ended		6 Months Ended			6 Months Ended		12 Months Ended				1 Months Ended		12 Months Ended								12 Months Ended						0 Months Ended		1 Months Ended		6 Months Ended
	Jun. 30, 2013 USD ($)	Jun. 30, 2012 USD ($)	Jun. 30, 2013 USD ($)	Jun. 30, 2012 USD ($)	Jun. 30, 2013 CNY	Dec. 31, 2012 USD ($)	Dec. 31, 2012 CNY	Jul. 03, 2012 Industrial and Commercial Bank Of China Songzi Branch [Member] USD ($)	Jul. 03, 2012 Industrial and Commercial Bank Of China Songzi Branch [Member] CNY	Jun. 30, 2013 Industrial and Commercial Bank Of China Songzi Branch [Member] USD ($)	Jun. 30, 2013 Industrial and Commercial Bank Of China Songzi Branch [Member] CNY	Jun. 30, 2013 Industrial and Commercial Bank Of China Songzi Branch [Member] USD ($)	Jun. 30, 2013 Industrial and Commercial Bank Of China Songzi Branch [Member] CNY	Jun. 13, 2013 Industrial and Commercial Bank Of China Songzi Branch [Member]	Jun. 30, 2013 Changan Bank [Member] USD ($)	Jun. 30, 2013 Changan Bank [Member] CNY	Dec. 31, 2012 Changan Bank [Member] USD ($)	Dec. 31, 2012 Changan Bank [Member] CNY	Aug. 27, 2012 Changan Bank [Member] USD ($)	Aug. 27, 2012 Changan Bank [Member] CNY	Sep. 17, 2012 Shaanxi Agricultural Yanta Credit Union One [Member] USD ($)	Sep. 17, 2012 Shaanxi Agricultural Yanta Credit Union One [Member] CNY	Dec. 31, 2012 Shaanxi Agricultural Yanta Credit Union One [Member] USD ($)	Dec. 31, 2012 Shaanxi Agricultural Yanta Credit Union One [Member] CNY	Jun. 30, 2013 Shaanxi Agricultural Yanta Credit Union One [Member] USD ($)	Jun. 30, 2013 Shaanxi Agricultural Yanta Credit Union One [Member] CNY	Jun. 13, 2013 Industrial and Commercial Bank Of China [Member] USD ($)	Jun. 13, 2013 Industrial and Commercial Bank Of China [Member] CNY	Jan. 16, 2013 Industrial and Commercial Bank Of China [Member] USD ($)	Jan. 16, 2013 Industrial and Commercial Bank Of China [Member] CNY	Dec. 31, 2012 Xian High Tech Zone Guoxin Microcredit Ltd [Member] USD ($)	Dec. 31, 2012 Xian High Tech Zone Guoxin Microcredit Ltd [Member] CNY	Jun. 30, 2013 Xian High Tech Zone Guoxin Microcredit Ltd [Member] USD ($)	Jun. 30, 2013 Xian High Tech Zone Guoxin Microcredit Ltd [Member] CNY	Aug. 13, 2012 Xian High Tech Zone Guoxin Microcredit Ltd [Member] USD ($)	Aug. 13, 2012 Xian High Tech Zone Guoxin Microcredit Ltd [Member] CNY	Apr. 16, 2013 Xian Taixin Investment Guarantee Co Ltd [Member] USD ($)	Apr. 16, 2013 Xian Taixin Investment Guarantee Co Ltd [Member] CNY	Aug. 27, 2012 Xian Taixin Investment Guarantee Co Ltd [Member] USD ($)	Aug. 27, 2012 Xian Taixin Investment Guarantee Co Ltd [Member] CNY	Jun. 30, 2013 Postal Savings Bank Of China Xi [Member] USD ($)	Jun. 30, 2013 Postal Savings Bank Of China Xi [Member] CNY
Short Term And Long Term [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity																						8,000,000
Bank Loans	10,530,000		10,530,000		65,000,000	4,443,600	28,000,000	478,800	3,000,000	810,000	5,000,000	810,000	5,000,000		1,620,000	10,000,000	1,587,000	10,000,000	1,620,000	10,000,000	1,276,800	8,000,000	1,269,600	8,000,000	0	0	810,000	5,000,000	4,860,000	30,000,000	2,380,500	15,000,000	0	0	158,700	1,000,000	58,320	360,000	202,500	1,250,000	3,240,000	20,000,000
Interest Rate								7.80%	7.80%	7.80%	7.80%	7.80%	7.80%	10.00%	7.80%	7.80%					9.446%	9.446%	9.446%	9.446%					6.60%	6.60%	22.40%	22.40%			22.40%	22.40%	10.00%	10.00%	12.50%	12.50%	7.20%	7.20%
Cash paid for interest	123,340	156,427	304,766	309,010
Fee Paid For Loan Guarantee										$ 81,000	500,000																										$ 324,000	2,000,000	$ 32,400	200,000
Due Date								Jun. 18, 2013	Jun. 18, 2013						Aug. 26, 2013	Aug. 26, 2013	Aug. 26, 2013	Aug. 26, 2013			Sep. 20, 2014	Sep. 20, 2014	Sep. 20, 2014	Sep. 20, 2014							Feb. 12, 2013	Feb. 12, 2013
Debt Instrument, Description of Variable Rate Basis								People's Bank of China floating benchmark lending rate over the same period plus 30% of that rate	People's Bank of China floating benchmark lending rate over the same period plus 30% of that rate			People's Bank of China floating benchmark lending rate over the same period plus 30% of that rate	People's Bank of China floating benchmark lending rate over the same period plus 30% of that rate		People's Bank of China floating benchmark lending rate over the same period plus 30% of that rate	People's Bank of China floating benchmark lending rate over the same period plus 30% of that rate																									People's Bank of China floating benchmark lending rate over the same period plus 20% of that rate	People's Bank of China floating benchmark lending rate over the same period plus 20% of that rate

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PREPAYMENTS TO SUPPLIERS (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Payments To Suppliers [Line Items]
Prepayments for raw materials	$ 31,147,947	$ 23,053,753
Prepayments for packaging materials	1,212,521	384,982
Total	$ 32,360,468	$ 23,438,735

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CONCENTRATIONS AND CREDIT RISK (Details Textual)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Supplier Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	73.00%	87.00%	73.00%	86.00%
Product Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	10.00%	13.00%	10.00%	17.00%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Purchase option liability	$ 0	$ 5,600
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Purchase option liability	0	0
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Purchase option liability	0	5,600
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Purchase option liability	$ 0	$ 0

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CONDENSED CONSOLIDATED BALANCE SHEETS [Parenthetical] (USD $)	Jun. 30, 2013	Dec. 31, 2012
Allowance for doubtful accounts	$ 552,764	$ 247,269
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	50,000,000	50,000,000
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	40,000,000	40,000,000
Common stock, shares issued	7,604,800	7,604,800
Common stock, shares outstanding	7,604,800	7,604,800
Series A Preferred Stock [Member]
Preferred stock, shares authorized	0	0
Series B Preferred Stock [Member]
Preferred stock, shares authorized	48,000,000	48,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0

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PROPERTY, PLANT AND EQUIPMENT, NET

6 Months Ended

Jun. 30, 2013

Property, Plant and Equipment [Abstract]

Property and Equipment, Net [Text Block]

Note 8 - PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consist of the following:

	June 30, 2013		December 31, 2012
Buildings and improvements	$	27,775,811	$	27,210,008
Machinery and equipment		6,015,476		5,876,467
Office equipment and furniture		333,128		332,653
Vehicles		605,633		593,296
Total		34,730,048		34,012,424
Less: accumulated depreciation		(5,881,240)		(5,144,608)
Plant and equipment, net	$	28,848,808	$	28,867,816

Depreciation expense was $316,961 and $292,727 for the three months ended June 30, 2013 and 2012, respectively. Depreciation expense was $630,522 and $635,856 for the six months ended June 30, 2013 and 2012, respectively.

As of June 30, 2013 and December 31, 2012, property, plant and equipment with a carrying amount of $20,271,490 and $2,180,382, respectively, were pledged against the Company’s short-term and long-term loans.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 4,463,614	$ 3,603,620
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation	630,522	635,856
Amortization	122,478	200,570
Provision for doubtful accounts	297,164	101,246
Change in fair value of warrant/purchase option liability	(5,600)	(22,400)
Loss on sale of office equipment	1,740	0
Common stock to be issued to related parties for compensation	8,680	56,817
Common stock issued under 2010 stock incentive plan	0	981,094
Change in operating assets and liabilities
Accounts receivable	(1,992,249)	(7,381,238)
Inventories	(3,027,946)	1,678,678
Deposits, prepaid expenses and other receivables	332,707	649,485
Prepayments to suppliers	(8,344,799)	(7,121,001)
Accounts payable	(2,675,933)	1,614,377
Other payables and accrued expenses	144,475	99,033
Deposits from customers	353,886	(38,170)
Taxes payable	(605,471)	2,778,594
Deferred government grants	(641,120)	(317,320)
Net cash used in operating activities	(10,937,852)	(2,480,759)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments of long-term prepayments	0	(349,464)
Refund of long-term prepayments	0	475,980
Loan to third parties	0	(1,942,963)
Repayment of loans from third parties	897,232	0
Placement of restricted cash	(80,140)	0
Purchases of property, plant and equipment	(4,008)	(127,531)
Proceeds from sale of plant and equipment	160	0
Payments on construction-in-progress	(10,931)	(79,806)
Net cash (used in) provided by investing activities	802,313	(2,023,784)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans	8,815,400	63,464
Repayment of short-term loans	(2,885,040)	(666,372)
Repayment of long-term loan	(1,282,240)	0
Due to related parties	303,328	280,901
Net cash (used in) provided by financing activities	4,951,448	(322,007)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	174,610	119,563
DECREASE IN CASH	(5,009,481)	(4,706,987)
CASH, beginning of period	11,321,848	7,048,968
CASH, end of period	6,312,367	2,341,981
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest	304,766	309,010
Cash paid for income taxes	328,574	88,054
Non-cash investing and financing activities
Long-term prepayment transferred to construction-in-progress	0	666,372
Construction-in-progress transferred to property, plant and equipment	0	3,630
Shares issued to settle payables to related parties	$ 0	$ 199,239

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PROPERTY, PLANT AND EQUIPMENT, NET (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Depreciation	$ 316,961	$ 292,727	$ 630,522	$ 635,856
Property, Plant and Equipment Pledged Against Loan	$ 20,271,490		$ 20,271,490		$ 2,180,382

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Jun. 30, 2013	Dec. 31, 2012
ASSETS
Cash	$ 6,312,367	$ 11,321,848
Restricted cash	81,000	0
Accounts receivable, net of allowance for doubtful accounts of $552,764 and $247,269 as of June 30, 2013 (Unaudited) and December 31, 2012, respectively	11,932,235	10,010,796
Inventories	26,500,125	22,962,209
Deposits, prepaid expenses and other receivables	2,543,351	2,839,850
Prepayments to suppliers	32,360,468	23,438,735
Loans receivable	194,400	1,078,827
Total current assets	79,923,946	71,652,265
PROPERTY, PLANT AND EQUIPMENT, NET	28,848,808	28,867,816
CONSTRUCTION-IN-PROGRESS	9,038,656	8,691,360
OTHER ASSETS:
Long-term prepayments	1,072,167	1,050,327
Long-term prepayments for acquisitions	181,440	177,744
Intangible assets, net	5,306,659	5,319,831
Total other assets	6,560,266	6,547,902
Total assets	124,371,676	115,759,343
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable	1,551,941	4,017,530
Other payables and accrued expenses	4,448,667	4,374,047
Short-term loans	10,530,000	4,443,600
Deposits from customers	2,012,453	1,621,061
Taxes payable	1,379,353	1,950,757
Due to related parties	1,108,188	798,925
Total current liabilities	21,030,602	17,205,920
OTHER LIABILITIES:
Long-term loan	0	1,269,600
Deferred government grant	599,400	1,063,290
Purchase option liability	0	5,600
Total other liabilities	599,400	2,338,490
Total liabilities	21,630,002	19,544,410
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, $0.001 par value, 50,000,000 shares authorized, No Series “A” shares authorized. 48,000,000 Series “B” shares authorized. No Series “B” shares issued and outstanding	0	0
Common stock, $0.001 par value, 40,000,000 shares authorized, 7,604,800 shares issued and outstanding as of June 30, 2013 (Unaudited) and December 31, 2012	7,605	7,605
Paid-in capital	37,021,085	37,021,085
Statutory reserves	5,897,298	5,897,298
Retained earnings	48,978,910	44,515,296
Accumulated other comprehensive income	10,836,776	8,773,649
Total shareholders' equity	102,741,674	96,214,933
Total liabilities and shareholders' equity	$ 124,371,676	$ 115,759,343

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ACCOUNTS RECEIVABLE, NET (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Schedule of Financing Receivable [Line Items]
Accounts receivable	$ 12,484,999	$ 10,258,065
Allowance for doubtful accounts	(552,764)	(247,269)
Accounts receivable, net	$ 11,932,235	$ 10,010,796

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TAXES (Details 2) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Income Tax Disclosure [Line Items]
Income taxes	$ 92,328	$ 279,680
Value added taxes	1,117,386	1,409,762
Other taxes	169,639	261,315
Total	$ 1,379,353	$ 1,950,757

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CAPITAL TRANSACTIONS (Details Textual) (USD $)	3 Months Ended		6 Months Ended				0 Months Ended	3 Months Ended		6 Months Ended				1 Months Ended			1 Months Ended	0 Months Ended	1 Months Ended				6 Months Ended	12 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Dec. 31, 2012	Dec. 31, 2010	Dec. 08, 2009 Equity Compensation Plan 2010 [Member]	Jun. 30, 2013 Equity Compensation Plan 2010 [Member]	Jun. 30, 2012 Equity Compensation Plan 2010 [Member]	Jun. 30, 2013 Equity Compensation Plan 2010 [Member]	Jun. 30, 2012 Equity Compensation Plan 2010 [Member]	Dec. 31, 2012 Equity Compensation Plan 2010 [Member]	May 04, 2012 Equity Compensation Plan 2010 [Member]	Mar. 30, 2010 Non Executive Director [Member]	Jun. 30, 2013 Non Executive Director [Member]	Dec. 31, 2012 Non Executive Director [Member]	Aug. 31, 2011 Director [Member]	Apr. 16, 2010 Director [Member]	May 26, 2009 Director [Member]	Jul. 29, 2013 Chief Financial Officer [Member]	Jul. 29, 2012 Chief Financial Officer [Member]	Jul. 29, 2011 Chief Financial Officer [Member]	Jun. 30, 2013 Chief Financial Officer [Member]	Dec. 31, 2012 Chief Financial Officer [Member]
Capital Transaction [Line Items]
Share Based Compensation Arrangement By Share Based Payment Award Award Requisite Service Period1														2,500			36,000	10,000	5,556	8,000	8,000	8,000
Fair Market Value Per Common Share														$ 11.74			$ 2.58	$ 10.61	$ 4.50			$ 4.20
Closing Market Price Per Common Share																	$ 2.58	$ 10.61		$ 1.37	$ 2.17
Share Based Compensation, Number Of Shares Vest In Each Quarterly																	9,000	2,500
Share Based Compensation Number Of Share Issuable In Twelve Months Anniversary																						4,000
Share Based Compensation Number Of Share Issuable In Six Months Anniversary																						4,000
Share Based Compensation Number Of Share Issuable In Quarter																				2,000	2,000
Common Stock Purchase Options Exercise Price						$ 8.11
Common Stock Purchase Options Outstanding	140,000		140,000		140,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant								247,119		247,119		247,119	442,881
Accrued expenses															$ 25,002	$ 25,002							$ 13,020	$ 4,340
Stock Issued During Period, Shares, New Issues							700,000																6,000	2,000
Unrecognized Compensation Cost								4,340		4,340
Change in fair value of warrant/purchase option liability	1,134	16,800	5,600	22,400
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value								$ 4,340	$ 0	$ 8,680	$ 40,020

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Jun. 30, 2013

Accounting Policies [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2013 and December 31, 2012:

	Carrying Value at June 30, 2013		Fair Value Measurement at June 30, 2013
			Level 1		Level 2		Level 3
Purchase option liability	$	—	$	—	$	—	$	—

	Carrying Value at December 31,		Fair Value Measurement at December 31, 2012
	2012		Level 1		Level 2		Level 3
Purchase option liability	$	5,600	$	—	$	5,600	$	—

Schedule Of Reconciliation For Warrant Or Purchase Option Liabilities [Table Text Block]

Below is the reconciliation for the purchase option liability changes from December 31, 2012 to June 30, 2013:

Balance, December 31, 2012	$	5,600
Change in fair value		(5,600)
Balance, June 30, 2013	$	—

Schedule Of Revenues And Cost Of Revenues By Product Line [Table Text Block]

The Company’s revenue and cost of revenue by product line were as follows:

	Three months ended June 30,				Six months ended June 30,
	2013		2012		2013		2012
Revenue
Micro-organism	$	4,031,113	$	4,002,206	$	5,698,295	$	7,137,246
Veterinary Medications		6,292,573		2,458,714		9,739,290		5,467,301
Feed Additives		514,161		1,267,061		800,449		2,301,833
Vaccines		497,298		1,142,867		627,852		1,890,805
Total Revenue		11,335,145		8,870,848		16,865,886		16,797,185
Cost of Revenue
Micro-organism		1,179,499		1,169,412		1,766,916		2,076,252
Veterinary Medications		3,740,498		1,399,006		5,846,014		3,191,654
Feed Additives		399,883		1,032,139		614,520		1,882,023
Vaccines		57,944		146,381		81,260		240,667
Total Cost of Revenue		5,377,824		3,746,938		8,308,710		7,390,596
Gross Profit	$	5,957,321	$	5,123,910	$	8,557,176	$	9,406,589

Schedule Of Estimated Useful Lives Of Assets [Table Text Block]

Estimated useful lives of the assets are as follows:

	Estimated useful life
Buildings and improvements	10-40 years
Machinery and equipment	5-10 years
Office equipment and furniture	5-10 years
Vehicles	5-10 years

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STATUTORY RESERVES

6 Months Ended

Jun. 30, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 17 - STATUTORY RESERVES

Statutory reserves represent restricted retained earnings. Based on the legal formation of the entities, all PRC entities are required to set aside 10% of net income as reported in their statutory accounts on an annual basis to the statutory surplus reserve fund. Once the total statutory surplus reserve reaches 50% of the entity’s registered capital, further appropriations are discretionary. The statutory surplus reserve can be used to increase the entity’s registered capital (upon approval by relevant government authorities) and eliminate its future losses under PRC regulatory requirements (upon a resolution by the board of directors). The statutory surplus reserve is not distributable to shareholders except in the event of liquidation.

Appropriations to the above statutory reserves are accounted for as a transfer from unrestricted earnings to statutory reserves. There are no legal requirements in the PRC to fund these statutory reserves by the transfer of cash to any restricted accounts, and as such, the Company has not transferred any cash to these accounts. These reserves are not distributable as cash dividends.

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ORGANIZATION (Details Textual)	Apr. 21, 2010 Xian Tianxing [Member] USD ($)	Apr. 21, 2010 Xian Tianxing [Member] CNY	May 07, 2010 Kunshan Sikeda Biotechnology Co Ltd [Member] USD ($)	Apr. 21, 2010 Kunshan Sikeda Biotechnology Co Ltd [Member] USD ($)	Apr. 21, 2010 Kunshan Sikeda Biotechnology Co Ltd [Member] CNY	Mar. 15, 2011 Xian Sikaida Bio-products Co., Ltd. [Member] USD ($)	Mar. 15, 2011 Xian Sikaida Bio-products Co., Ltd. [Member] CNY	Jul. 05, 2012 Skystar Biotechnology (Jingzhou) Co., Limited [Member] USD ($)	Jul. 05, 2012 Skystar Biotechnology (Jingzhou) Co., Limited [Member] CNY	Feb. 05, 2010 Skystar Biotechnology (Jingzhou) Co., Limited [Member] USD ($)	Feb. 05, 2010 Skystar Biotechnology (Jingzhou) Co., Limited [Member] CNY
Organization [Line Items]
Capital	$ 40,500	250,000	$ 15,000,000	$ 81,000	500,000	$ 1,620,000	10,000,000			$ 4,200,000	26,000,000
Equity Method Investments										3,800,000	23,480,000
Equity Method Investments Future Commitment								400,000	2,520,000
Capital Required to be Well Capitalized			12,750,000
Capital Contribution In Cash			$ 2,250,000

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TAXES (Details)	3 Months Ended				6 Months Ended
	Jun. 30, 2013		Jun. 30, 2012		Jun. 30, 2013		Jun. 30, 2012
Income Tax Disclosure [Line Items]
U.S. Statutory rate	34.00%		34.00%		34.00%		34.00%
Foreign income not recognized in the U.S.	(34.00%)		(34.00%)		(34.00%)		(34.00%)
China income tax rate	25.00%		25.00%		25.00%		25.00%
China income tax exemption	(10.00%)		(10.00%)		(10.00%)		(10.00%)
Stock-based compensation	0.00%		6.80%		0.00%		3.30%
Other item (1)	0.70%	[1]	3.70%	[1]	3.60%	[1]	4.30%	[1]
Total provision for income taxes	15.70%		25.50%		18.60%		22.60%

[1] Other items are primarily for operating expenses (income) incurred by Skystar that are not deductible (taxable) in the PRC, expenses incurred by other subsidiaries that are not deductible on the consolidated level, the difference of taxable income under US GAAP rather than Chinese GAAP, and the difference of Enterprise Income Tax imposed at a statutory rate of 25% rather than preferential tax rate of 15% on the income from the subsidiaries other than Xi’an Tianxing, which resulted in an increase in the effective tax rate of 0.7% and 3.7% for the three months ended June 30, 2013 and 2012, respectively, and an increase in the effective tax rate of 3.6% and 4.3% for the six months ended June 30, 2013 and 2012, respectively.

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DEPOSITS, PREPAID EXPENSES AND OTHER RECEIVABLES (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Deposits and Prepaid Expenses [Line Items]
Prepaid income taxes	$ 400,092	$ 1,263,845
Other prepayments	668,193	828,676
Deposits placed with guarantors (note 14)	526,500	198,375
Interest receivable (note 7)	231,316	0
Other receivables	717,250	548,954
Total	$ 2,543,351	$ 2,839,850

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INTANGIBLE ASSETS (Details 1) (USD $)	Dec. 31, 2012
Intangible Assets Future Amortization Expense [Line Items]
2013	$ 123,792
2014	247,584
2015	247,584
2016	247,584
2017	247,584
Thereafter	4,192,531
Total	$ 5,306,659

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CAPITAL TRANSACTIONS (Tables)

6 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Schedule of Nonvested Share Activity [Table Text Block]

A summary of changes in the Company’s non-vested shares for the three months follows:

	Non-vested Shares
Non-vested at January 1, 2013		6,000
Granted		-
Vested		(4,000)
Forfeited		-
Non-vested at June 30, 2013		2,000

Schedule of Stockholders' Equity Note, Warrants or Rights [Table Text Block]

Outstanding purchase options do not trade in an active securities market, and as such, the Company estimates the fair value of these warrants and purchase options using the Black-Scholes Option Pricing Model (“Black-Scholes Model”) using the following assumptions:

	Purchase Options – (1)
	June 30, 2013			December 31, 2012
Stock price	$	1.28		$	1.60
Exercise price	$	8.11		$	8.11
Annual dividend yield		-			-
Expected term (years)		1.00			1.50
Risk-free interest rate		0.15	%		0.16	%
Expected volatility		60	%		73	%

(1) As of June 30, 2013 and December 31, 2012, 140,000 purchase options with an exercise price of $8.11 were outstanding.

Schedule Of Share Based Compensation Warrants and Purchase Options Activity [Table Text Block]

Following is an activity summary of the Company’s outstanding purchase options:

	Number of purchase options		Weighted – average exercise price		Weighted-average remaining contractual term (Year)
Outstanding at January 1, 2013		140,000	$	8.11		1.50
Granted		-		-
Forfeited		-		-
Exercised		-		-
Outstanding at June 30, 2013		140,000	$	8.11		1.00
Exercisable at June 30, 2013		140,000	$	8.11		1.00

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CONSTRUCTION-IN-PROGRESS (Tables)

6 Months Ended

Jun. 30, 2013

Construction In Progress Disclosure [Abstract]

Schedule Of Construction In Progress [Table Text Block]

The construction projects the Company was in the progress of completing are as follows:

	Total in CIP as of
Project	June 30, 2013		Estimated Cost to Complete		Estimated Total Cost		Estimated Completion Date
Xi'an vaccine facility	$	2,446,879	$	-	$	2,446,879	Third quarter of 2013
Xi'an animal laboratory		324,000		-		324,000	Third quarter of 2013
Kunshan micro-organism facility		5,066,871		-		5,066,871	Completed (1)
Jingzhou veterinary medication facility		1,200,906		500,094		1,701,000	Fourth quarter of 2013
Total	$	9,038,656	$	500,094	$	9,538,750

(1) As of June 30, 2013, the supporting project at the Kunshan facility was completed, inspected and accepted. However, the construction-in-progress of $5,066,871 has not been transferred to property, plant and equipment as the Kunshan micro-organism facility was not operational at this point.

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LONG-TERM PREPAYMENTS (Tables)

6 Months Ended

Jun. 30, 2013

Long Term Prepayments Disclosure [Abstract]

Schedule Of Long Term Prepayments [Table Text Block]

Long-term prepayments consist of the following:

	June 30, 2013		December 31, 2012
Prepayments for R&D project	$	362,880	$	355,488
Construction deposits		385,510		377,657
Deposits for equipment purchase and land use rights		317,699		311,227
Deposits for other		6,078		5,955
Long-term prepayments	$	1,072,167	$	1,050,327
Long-term prepayments for acquisitions	$	181,440	$	177,744

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PREPAYMENTS TO SUPPLIERS

6 Months Ended

Jun. 30, 2013

Prepayments For Raw Materials Purchasing [Abstract]

Prepayments For Raw Materials Purchasing [Text Block]

Note 7 – PREPAYMENTS TO SUPPLIERS

Prepayments to suppliers are comprised of the following:

	June 30, 2013		December 31,  2012
Prepayments for raw materials	$	31,147,947	$	23,053,753
Prepayments for packaging materials		1,212,521		384,982
Total	$	32,360,468	$	23,438,735

As part of the Company’s strategy to reduce inventory costs, the Company maintains a balance for prepayments to suppliers in order to secure favorable pricing for raw materials.  As inventory is received throughout the period, this balance will fluctuate with the business operations.

Starting from January 1, 2013, the Company began to charge two major suppliers interest at an annual rate of 2.0% on these prepayments for raw materials. As of June 30, 2013, prepayments to these two suppliers were $22,229,360. For the three months ended June 30, 2013 and 2012, $109,967 and $Nil, respectively, of interest income was recognized on these prepayments. For the six months ended June 30, 2013 and 2012, $228,860 and $Nil, respectively, of interest income was recognized on these prepayments. The unpaid interest balance of $228,860 was included in “Deposits, prepaid expenses and other receivables” (note 6).

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LONG-TERM PREPAYMENTS (Details) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Long Tem Prepayments [Line Items]
Prepayments for R&D project	$ 362,880	$ 355,488
Construction deposits	385,510	377,657
Deposits for equipment purchase and land use rights	317,699	311,227
Deposits for other	6,078	5,955
Long-term prepayments	1,072,167	1,050,327
Long-term prepayments for acquisitions	$ 181,440	$ 177,744

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ACCOUNTS RECEIVABLE, NET (Tables)

6 Months Ended

Jun. 30, 2013

Accounts Receivable Disclosure [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

Accounts receivable consisted of the following:

	June 30, 2013		December 31, 2012
Accounts receivable	$	12,484,999	$	10,258,065
Allowance for doubtful accounts		(552,764)		(247,269)
Accounts receivable, net	$	11,932,235	$	10,010,796

Schedule Of Movement In Allowance For Doubtful Accounts [Table Text Block]

The following table presents the movement of the allowance for doubtful accounts:

Balance, January 1, 2013	$	247,269
Addition		353,652
Recovery		(56,487)
Translation adjustment		8,330
Balance, June 30, 2013	$	552,764

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RELATED PARTY TRANSACTIONS AND ARRANGEMENTS (Tables)

6 Months Ended

Jun. 30, 2013

Related Party Transactions [Abstract]

Schedule of Related Party Transactions [Table Text Block]

Amounts receivable from and payable to related parties are summarized as follows:

	June 30, 2013		December 31, 2012
Shares to be issued to related parties (Note 16)
Mark D. Chen – non-executive director	$	25,002	$	25,002
Bing Mei – CFO		13,020		4,340
Total	$	38,022	$	29,342
Amounts due to (from) related parties
Weibing Lu – CEO (1)	$	693,309	$	608,282
Scott Cramer – non-executive director and shareholder (2)		275,865		138,169
Officers, shareholders and other related parties (3)		139,014		52,474
Total	$	1,108,188	$	798,925

(1) As of June 30, 2013 and December 31, 2012, the Company had unpaid reimbursement, compensation, and advances for business expenses due to Weibing Lu valued at $693,309 and $608,282, respectively.

(2) As of June 30, 2013 and December 31, 2012, the Company had unpaid reimbursement and compensation due to Scott Cramer valued at $275,865 and $138,169, respectively.

(3) The amounts due to officers, shareholders and other related parties at June 30, 2013 and December 31, 2012 include unpaid reimbursement and compensation and, advances to other related parties for business expenses.

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RESTRICTED CASH

6 Months Ended

Jun. 30, 2013

Restricted Cash and Investments, Current [Abstract]

Restricted Assets Disclosure [Text Block]

Note 10 – RESTRICTED CASH

On June 13, 2013, the Company obtained a one year loan of $810,000 (RMB 5,000,000) from Industrial and Commercial Bank of China (ICBC) Songzi Branch. The Company is required to keep 10% of the loan or $81,000 (RMB 500,000) with the bank as collateral (note 14).

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CAPITAL TRANSACTIONS (Details 2) (USD $)	6 Months Ended
	Jun. 30, 2013
Purchase Options [Line Items]
Outstanding, Number of warrants/purchase options, beginning balance	140,000
Granted, Number of warrants/purchase options	0
Forfeited, Number of warrants/purchase options	0
Exercised, Number of warrants/purchase options	0
Outstanding, Number of warrants/purchase options, ending balance	140,000
Exercisable at June 30, 2013, Number of warrants/purchase options	140,000
Outstanding, Weighted - average exercise price, beginning balance	$ 8.11
Granted, Weighted - average exercise price	$ 0
Forfeited, Weighted - average exercise price	$ 0
Exercised, Weighted - average exercise price	$ 0
Outstanding, Weighted - average exercise price, ending balance	$ 8.11
Exercisable at June 30, 2013, Weighted - average exercise price	$ 8.11
Weighted- average remaining contractual term, outstanding (Year), beginning	1 year 6 months
Weighted- average remaining contractual term, Outstanding (Year) (Ending)	1 year
Exercisable at June 30, 2013, Weighted - average remaining contractual term (Year)	1 year

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DEPOSITS, PREPAID EXPENSES AND OTHER RECEIVABLES

6 Months Ended

Jun. 30, 2013

Deposits and Prepaid Expenses Disclosure [Abstract]

Deposits and Prepaid Expenses Disclosure [Text Block]

Note 6 - DEPOSITS, PREPAID EXPENSES AND OTHER RECEIVABLES

Deposits, prepaid expenses and other receivables are comprised of the following:

	June 30, 2013		December 31,  2012
Prepaid income taxes	$	400,092	$	1,263,845
Other prepayments		668,193		828,676
Deposits placed with guarantors (note 14)		526,500		198,375
Interest receivable (note 7)		231,316		-
Other receivables		717,250		548,954
Total	$	2,543,351	$	2,839,850

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ORGANIZATION

6 Months Ended

Jun. 30, 2013

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 1 - ORGANIZATION

Organization and description of business

Skystar Bio-Pharmaceutical Company (“Skystar” or the “Company”) was incorporated in Nevada on September 24, 1998. Since its acquisition on November 7, 2005 of Skystar Bio-Pharmaceutical (Cayman) Holdings Co., Ltd. (“Skystar Cayman”), a Cayman Islands company, the Company has been engaged in the research, development, production, marketing, and sales of veterinary healthcare and medical care products. All current operations of the Company are in the People’s Republic of China (“China” or the “PRC”).

All of the Company’s operations are carried out by its subsidiaries in China and Xi’an Tianxing Bio-Pharmaceutical Co., Limited (“Xi’an Tianxing”), a PRC joint stock company that the Company controls through contractual arrangements originally between Skystar Cayman and Xi’an Tianxing. On March 10, 2008, the Company entered into a series of agreements transferring all of the rights and obligations of Skystar Cayman under the contractual arrangements to Sida Biotechnology (Xi’an) Co., Ltd. (“Sida”), a PRC company. Sida is the wholly owned subsidiary of Fortunate Time International Limited (“Fortunate Time”), a Hong Kong company and wholly owned subsidiary of Skystar Cayman. Xi’an Tianxing also has a wholly owned subsidiary, Shanghai Siqiang Biotechnological Co., Ltd. (“Shanghai Siqiang”), a PRC company.

On September 18, 2009, Skystar Bio-Pharmaceutical Inc. (“Skystar California”) was incorporated in California and became a wholly owned subsidiary of Skystar. On December 20, 2010, Skystar California was dissolved.

On April 21, 2010, Kunshan Sikeda Biotechnology Co., Ltd. (“Kunshan Sikeda”) was incorporated in Kunshan, Jiangsu Province, China with a registered capital of $81,000 (RMB 500,000), of which Xi’an Tianxing and Sida each contributed $40,500 (RMB 250,000). Kunshan Sikeda is jointly owned by Xi’an Tianxing and Sida. On July 31, 2013, Kunshan Sikeda was dissolved.

On May 7, 2010, Fortunate Time formed Skystar Biotechnology (Kunshan) Co., Limited (“Skystar Kunshan”) in Kunshan, Jiangsu Province, China with a registered capital of $15,000,000, of which $2,250,000 was paid by Fortunate Time in cash, and of which the remaining $12,750,000 is required to be invested in the future. Skystar Kunshan was formed in connection with an acquisition of assets to meet part of the registered capital requirements, and was intended to be a micro-organism manufacturing facility for the Company once the acquisition was complete. The asset acquisition was completed in September 2011.

On August 11, 2010, Sida became the parent company of Skystar Biotechnology (Jingzhou) Co., Limited (“Skystar Jingzhou”), a company established in Jingzhou, Hubei Province, China on February 5, 2010, with registered capital of approximately $4.2 million (RMB 26,000,000), of which approximately $3.8 million (RMB 23,480,000) was paid. On July 5, 2012, Sida paid up the remaining capital of $0.4 million (RMB 2,520,000).

On March 15, 2011, Xi’an Tianxing formed Xi’an Sikaida Bio-products Co., Ltd. (“Xi’an Sikaida”) with a registered capital of approximately $1,620,000 (RMB 10,000,000) paid by Xi’an Tianxing.

Hereinafter, Skystar, Skystar Cayman, Fortunate Time, Sida, Xi’an Tianxing, Skystar Kunshan, Kunshan Sikeda, Skystar Jingzhou, Shanghai Siqiang, and Xi’an Sikaida are sometimes collectively referred to as the “Company”.

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ACCOUNTS RECEIVABLE, NET (Details 1) (USD $)	6 Months Ended
	Jun. 30, 2013
Schedule of Financing Receivable [Line Items]
Beginning of year	$ 247,269
Addition	353,652
Recovery	(56,487)
Translation adjustment	8,330
End of year	$ 552,764

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Revenues
Total Revenues	$ 11,335,145	$ 8,870,848	$ 16,865,886	$ 16,797,185
Cost of Revenues
Total Cost of Revenues	5,377,824	3,746,938	8,308,710	7,390,596
Gross Profit	5,957,321	5,123,910	8,557,176	9,406,589
Micro Organism [Member]
Revenues
Total Revenues	4,031,113	4,002,206	5,698,295	7,137,246
Cost of Revenues
Total Cost of Revenues	1,179,499	1,169,412	1,766,916	2,076,252
Veterinary Medications [Member]
Revenues
Total Revenues	6,292,573	2,458,714	9,739,290	5,467,301
Cost of Revenues
Total Cost of Revenues	3,740,498	1,399,006	5,846,014	3,191,654
Feed Additives [Member]
Revenues
Total Revenues	514,161	1,267,061	800,449	2,301,833
Cost of Revenues
Total Cost of Revenues	399,883	1,032,139	614,520	1,882,023
Vaccines [Member]
Revenues
Total Revenues	497,298	1,142,867	627,852	1,890,805
Cost of Revenues
Total Cost of Revenues	$ 57,944	$ 146,381	$ 81,260	$ 240,667

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EARNINGS PER SHARE (Details Textual)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Employee Stock Option [Member]
Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	140,000	140,000	140,000	140,000
Non Vested Shares [Member]
Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	2,000	623	2,000	623

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PREPAYMENTS TO SUPPLIERS (Tables)

6 Months Ended

Jun. 30, 2013

Prepayments For Raw Materials Purchasing [Abstract]

Prepayments For Raw Materials Purchasing [Table Text Block]

Prepayments to suppliers are comprised of the following:

	June 30, 2013		December 31,  2012
Prepayments for raw materials	$	31,147,947	$	23,053,753
Prepayments for packaging materials		1,212,521		384,982
Total	$	32,360,468	$	23,438,735

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EARNINGS PER SHARE (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012
Earnings Per Share [Line Items]
Net income	$ 3,750,881	$ 1,698,866	$ 4,463,614	$ 3,603,620
Weighted average shares used in basic and diluted computation	7,615,719	7,461,227	7,614,721	7,454,837
Earnings per share:
Basic (in dollars per share)	$ 0.49	$ 0.23	$ 0.59	$ 0.48
Diluted (in dollars per share)	$ 0.49	$ 0.23	$ 0.59	$ 0.48

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INTANGIBLE ASSETS (Details Textual) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013	Jun. 30, 2012	Jun. 30, 2013 Use Rights [Member]	Dec. 31, 2012 Use Rights [Member]
Intangible Assets [Line Items]
Amortization	$ 61,606	$ 100,197	$ 122,478	$ 200,570
Real Estate and Accumulated Depreciation, Carrying Amount of Land					$ 1,540,765	$ 1,199,456

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CONSTRUCTION-IN-PROGRESS (Details)			6 Months Ended					6 Months Ended
	Jun. 30, 2013 USD ($)	Dec. 31, 2012 USD ($)	Jun. 30, 2013 Xi' Vaccine Facility [Member] USD ($)	Jun. 30, 2013 Xi' Animal Laboratory [Member] USD ($)	Dec. 31, 2011 Jingzhou Facility [Member] USD ($)	Dec. 31, 2011 Jingzhou Facility [Member] CNY	Jun. 30, 2013 Kunshan Facility [Member] USD ($)	Jun. 30, 2013 Kunshan Micro Organism Facility [Member] USD ($)		Jun. 30, 2013 Jingzhou Veterinary Medication Facility [Member] USD ($)
Construction In Progress [Line Items]
Total in CIP as of June, 30 2013	$ 9,038,656	$ 8,691,360	$ 2,446,879	$ 324,000	$ 1,701,000	10,500,000	$ 5,066,871	$ 5,066,871	[1]	$ 1,200,906
Estimate Cost to Complete	500,094		0	0				0	[1]	500,094
Estimated Total Cost	$ 9,538,750		$ 2,446,879	$ 324,000				$ 5,066,871	[1]	$ 1,701,000
Estimated Completion Date			Third quarter of 2013	Third quarter of 2013				Completed (1)	[1]	Fourth quarter of 2013

[1] As of June 30, 2013, the supporting project at the Kunshan facility was completed, inspected and accepted. However, the construction-in-progress of $5,066,871 has not been transferred to property, plant and equipment as the Kunshan micro-organism facility was not operational at this point.

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RELATED PARTY TRANSACTIONS AND ARRANGEMENTS (Details) (USD $)	6 Months Ended		12 Months Ended
	Jun. 30, 2013		Dec. 31, 2012
Related Party Transaction [Line Items]
Shares to be issued to related parties	$ 38,022		$ 29,342
Amounts due to (from) related parties	1,108,188		798,925
Mark d. Chen - Non-Executive Director [Member]
Related Party Transaction [Line Items]
Shares to be issued to related parties	25,002		25,002
Weibing Lu - Ceo [Member]
Related Party Transaction [Line Items]
Amounts due to (from) related parties	693,309	[1]	608,282	[1]
Scott Cramer - Non-Executive Director And Shareholder [Member]
Related Party Transaction [Line Items]
Amounts due to (from) related parties	275,865	[2]	138,169	[2]
Officer, Shareholder And Other Related Party [Member]
Related Party Transaction [Line Items]
Amounts due to (from) related parties	139,014	[3]	52,474	[3]
Bing Mei Cfo [Member]
Related Party Transaction [Line Items]
Shares to be issued to related parties	$ 13,020		$ 4,340

[1] As of June 30, 2013 and December 31, 2012, the Company had unpaid reimbursement, compensation, and advances for business expenses due to Weibing Lu valued at $693,309 and $608,282, respectively.

[2] As of June 30, 2013 and December 31, 2012, the Company had unpaid reimbursement and compensation due to Scott Cramer valued at $275,865 and $138,169, respectively.

[3] The amounts due to officers, shareholders and other related parties at June 30, 2013 and December 31, 2012 include unpaid reimbursement and compensation and, advances to other related parties for business expenses.

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LOANS RECEIVABLE

6 Months Ended

Jun. 30, 2013

Receivables [Abstract]

Loans Receivable Disclosure [Text Block]

Note 13 – LOANS RECEIVABLE

In November 2010, the Company provided an unsecured non-interest bearing loan to Xi’an Tiantai Investment, Ltd., the Company’s acquisition advisor, in the amount of $194,400 (RMB 1,200,000) for two years from November 26, 2010 through November 25, 2012. On January 1, 2012, the Company changed this loan to an unsecured interest bearing loan at an annual interest rate of 12.0% for eighteen months from January 1, 2012 to June 30, 2013. On June 28, 2013, the Company extended this loan for another six months from July 1, 2013 to December 31, 2013. On August 13, 2013, the entire loan was repaid.

On April 1, 2012, the Company provided a secured interest bearing loan to Shaanxi Jiali Pharmaceutical Co., Ltd., an unrelated third party, in the amount of $798,000 (RMB 5,000,000) at an annual interest rate of 12.0% for eight months from April 1, 2012 through November 30, 2012. This loan receivable was secured by an irrecoverable corporate guarantee from Xi’an Lantech Pharmaceutical Co. Ltd., an unrelated third party. On December 1, 2012, the Company extended this loan for another five months from December 1, 2012 to April 30, 2013. On May 8, 2013, the entire loan was repaid.

As of June 30, 2013 and December 31, 2012, the Company had other unsecured non-interest bearing loans in the amount of $Nil and $94,887 respectively, due from the Company’s employees and unrelated third parties.

Interest income earned on these loans amounted to $13,392 and $5,823 for the three months ended June 30, 2013 and 2012, respectively. Interest income earned on these loans amounted to $43,596 and $11,540 for the six months ended June 30, 2013 and 2012, respectively.

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CONSTRUCTION-IN-PROGRESS

6 Months Ended

Jun. 30, 2013

Construction In Progress Disclosure [Abstract]

Construction In Progress Disclosure [Text Block]

Note 9 - CONSTRUCTION-IN-PROGRESS

Construction-in-progress (“CIP”) relates to facilities being built in Xi’an, Jingzhou and Kunshan.

Xi’an facility

Xi’an Tianxing has a vaccine facility and animal laboratory being built in Huxian, Xi’an.

In 2011, the Company started two projects at the vaccine facility to modify air filtration, water treatment, and other facility changes based on recommendations by outside experts hired by the Company to advise on the GMP qualification process for the vaccine facility. As of June 30, 2013, this vaccine facility had a total construction-in-progress of $2,446,879 (RMB 15,104,191). On September 20 and 21, 2012, China’s Ministry of Agriculture (“MOA”) physically inspected this new facility and deemed the facility GMP compliant. Following physical inspection, the MOA’s inspection team recommended that the Office of the Working Committee proceed with Stage 2 of its GMP certification process. The Company expects the GMP certification process to be completed by the third quarter of 2013.

In 2011, the Company started a facility improvement project in the amount of approximately $324,000 (RMB 2,000,000) for the Huxian Animal Laboratory. The facility is a supporting project to the Huxian vaccine facility and is currently in Stage 2 of its GMP certification process. The Company expects the GMP certification process to be completed by the third quarter of 2013.

Jingzhou facility

In 2011, the Company started a facility improvement project to expand veterinary medicine production capacity at the Jingzhou facility. The project includes plant construction and water supply and drainage and has an estimated total cost of $1,701,000 (RMB 10,500,000). The Company expects the project will be completed by the end of the fourth quarter of 2013.

Kunshan facility

In 2011, the Company started a supporting project at the Kunshan micro-organism facility that includes the construction and installation of plumbing, sewer, electrical, HVAC, fire protection and alarm system, drainage, office, lab, road construction, parking, and landscaping. As of June 30, 2012, the construction and installation were completed, inspected and accepted.

No depreciation is provided for construction-in-progress until such time as the assets are completed and placed into service.

The construction projects the Company was in the progress of completing are as follows:

	Total in CIP as of
Project	June 30, 2013		Estimated Cost to Complete		Estimated Total Cost		Estimated Completion Date
Xi'an vaccine facility	$	2,446,879	$	-	$	2,446,879	Third quarter of 2013
Xi'an animal laboratory		324,000		-		324,000	Third quarter of 2013
Kunshan micro-organism facility		5,066,871		-		5,066,871	Completed (1)
Jingzhou veterinary medication facility		1,200,906		500,094		1,701,000	Fourth quarter of 2013
Total	$	9,038,656	$	500,094	$	9,538,750

(1) As of June 30, 2013, the supporting project at the Kunshan facility was completed, inspected and accepted. However, the construction-in-progress of $5,066,871 has not been transferred to property, plant and equipment as the Kunshan micro-organism facility was not operational at this point.

As of June 30, 2013 and December 31, 2012, the Company had construction in progress amounting to $9,038,656 and $8,691,360, respectively. No interest expense had been capitalized for construction in progress for the three months and six months ended June 30, 2013 and 2012 as management determined the amount of capitalized interest would be insignificant.

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SHORT-TERM AND LONG-TERM LOANS (Details)					6 Months Ended		12 Months Ended				1 Months Ended		12 Months Ended				12 Months Ended						12 Months Ended						6 Months Ended						6 Months Ended				6 Months Ended
	Jun. 30, 2013 USD ($)	Jun. 30, 2013 CNY	Dec. 31, 2012 USD ($)	Dec. 31, 2012 CNY	Jun. 30, 2013 Changan Bank [Member] USD ($)	Jun. 30, 2013 Changan Bank [Member] CNY	Dec. 31, 2012 Changan Bank [Member] USD ($)	Dec. 31, 2012 Changan Bank [Member] CNY	Aug. 27, 2012 Changan Bank [Member] USD ($)	Aug. 27, 2012 Changan Bank [Member] CNY	Sep. 17, 2012 Shaanxi Agricultural Yanta Credit Union One [Member] USD ($)	Sep. 17, 2012 Shaanxi Agricultural Yanta Credit Union One [Member] CNY	Dec. 31, 2012 Shaanxi Agricultural Yanta Credit Union One [Member] USD ($)	Dec. 31, 2012 Shaanxi Agricultural Yanta Credit Union One [Member] CNY	Jun. 30, 2013 Shaanxi Agricultural Yanta Credit Union One [Member] USD ($)	Jun. 30, 2013 Shaanxi Agricultural Yanta Credit Union One [Member] CNY	Dec. 31, 2012 Icbc Songzi Branch One [Member] USD ($)		Dec. 31, 2012 Icbc Songzi Branch One [Member] CNY		Jun. 30, 2013 Icbc Songzi Branch One [Member] USD ($)	Jun. 30, 2013 Icbc Songzi Branch One [Member] CNY	Dec. 31, 2012 Xian High Tech Zone Guoxin Microcredit Ltd [Member] USD ($)	Dec. 31, 2012 Xian High Tech Zone Guoxin Microcredit Ltd [Member] CNY	Jun. 30, 2013 Xian High Tech Zone Guoxin Microcredit Ltd [Member] USD ($)	Jun. 30, 2013 Xian High Tech Zone Guoxin Microcredit Ltd [Member] CNY	Aug. 13, 2012 Xian High Tech Zone Guoxin Microcredit Ltd [Member] USD ($)	Aug. 13, 2012 Xian High Tech Zone Guoxin Microcredit Ltd [Member] CNY	Jun. 30, 2013 Icbc Songzi Branch Two [Member] USD ($)		Jun. 30, 2013 Icbc Songzi Branch Two [Member] CNY		Dec. 31, 2012 Icbc Songzi Branch Two [Member] USD ($)	Dec. 31, 2012 Icbc Songzi Branch Two [Member] CNY	Jun. 30, 2013 Industrial Bank Co Ltd Xian Branch [Member] USD ($)	Jun. 30, 2013 Industrial Bank Co Ltd Xian Branch [Member] CNY	Dec. 31, 2012 Industrial Bank Co Ltd Xian Branch [Member] USD ($)	Dec. 31, 2012 Industrial Bank Co Ltd Xian Branch [Member] CNY	Jun. 30, 2013 Postal Savings Bank of China Xi’an Branch [Member] USD ($)		Jun. 30, 2013 Postal Savings Bank of China Xi’an Branch [Member] CNY		Dec. 31, 2012 Postal Savings Bank of China Xi’an Branch [Member] USD ($)	Dec. 31, 2012 Postal Savings Bank of China Xi’an Branch [Member] CNY
Short-term Debt [Line Items]
Bank Loans	$ 10,530,000	65,000,000	$ 4,443,600	28,000,000	$ 1,620,000	10,000,000	$ 1,587,000	10,000,000	$ 1,620,000	10,000,000	$ 1,276,800	8,000,000	$ 1,269,600	8,000,000	$ 0	0	$ 476,100		3,000,000		$ 0	0	$ 2,380,500	15,000,000	$ 0	0	$ 158,700	1,000,000	$ 810,000		5,000,000		$ 0	0	$ 4,860,000	30,000,000	$ 0	0	$ 3,240,000		20,000,000		$ 0	0
Due Date					Aug. 26, 2013	Aug. 26, 2013	Aug. 26, 2013	Aug. 26, 2013			Sep. 20, 2014	Sep. 20, 2014	Sep. 20, 2014	Sep. 20, 2014			Jun. 18, 2013		Jun. 18, 2013				Feb. 12, 2013	Feb. 12, 2013					Jun. 19, 2014		Jun. 19, 2014				Jan. 15, 2014	Jan. 15, 2014			May 26, 2014		May 26, 2014
Interest Rate					7.80%	7.80%					9.446%	9.446%	9.446%	9.446%				[1]		[1]			22.40%	22.40%			22.40%	22.40%		[1]		[1]			6.60%	6.60%				[2]		[2]

[1] People's Bank of China floating benchmark lending rate over the same period plus 30%, which was 7.8% at June 30, 2013.

[2] People's Bank of China floating benchmark lending rate over the same period plus 20%, which was 7.2% at June 30, 2013.

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CAPITAL TRANSACTIONS

6 Months Ended

Jun. 30, 2013

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 16 - CAPITAL TRANSACTIONS

On March 30, 2010, the Company agreed to issue 2,500 shares of common stock to a non-executive director in exchange for services unrelated to his services as a director at the fair market value of $11.74 per share based on the closing price on March 30, 2010. On April 16, 2010, the Company entered into another agreement to grant 10,000 shares of common stock to that director for his one year service from April 1, 2010. The closing price per share on the grant date was $10.61. The common stock compensation vests in four equal quarterly installments of 2,500 shares. Shares owed were accrued at the end of each quarter at the fair market value on the grant date of $10.61 per share. On August 31, 2011, the Company entered into another agreement to grant 36,000 shares of common stock to that director for his one year service from April 1, 2011. The closing price per share on the grant date was $2.58. The common stock compensation vests in four equal quarterly installments of 9,000 shares. Shares owed were accrued at the end of each quarter at the fair market value on the grant date of $2.58 per share. Currently, the Company is working on completing the contract with this director for his service beginning April 1, 2012. As of June 30, 2013 and December 31, 2012, nil shares were to be issued to this non-executive director.

On May 26, 2009, the Company agreed to issue 5,556 shares of common stock to a director at the beginning of each term of his directorship. The trading value of the common stock on May 26, 2009 was $4.50 per share. In accordance with the agreement between the Company and this director, this director must continue to serve as a member of the Board until his successor is duly elected and qualified in order to receive the shares. As of June 30, 2013 and December 31, 2012, 5,556 shares to be issued to this non-executive director were included in the accrued expenses and amounted to $25,002.

On July 29, 2011, the Company entered into a one-year employment agreement with its CFO. Under the agreement, he is entitled to receive an aggregate 8,000 shares of common stock, 4,000 shares of which shall be issuable on the 6 month anniversary and the remaining 4,000 shares of which shall be issuable on the 12 month anniversary. The closing price per share on the grant date was $4.20. On July 29, 2012, the Company entered into another one-year employment agreement with the CFO. Under the agreement, he is entitled to receive an aggregate 8,000 shares of common stock, vested in four equal quarterly installments of 2,000 shares. The closing price per share of the stock on the next business day of the grant date was $2.17. On July 29, 2013, the Company entered into another one-year employment agreement with the CFO. Under the agreement, he is entitled to receive an aggregate 8,000 shares of common stock, vested in four equal quarterly installments of 2,000 shares. The closing price per share of the stock on the grant date was $1.37. As of June 30, 2013 and December 31, 2012, 6,000 shares and 2,000 shares to be issued to this executive were included in the accrued expenses and amounted to $13,020 and $$4,340, respectively.

Equity Compensation Plan

On December 8, 2009, the Company’s board of directors approved a stock incentive plan for officers, directors, employees and consultants entitled the “Skystar Bio-Pharmaceutical Company 2010 Stock Incentive Plan” (the “2010 Plan”). The maximum number of shares that may be issued under the 2010 Plan is 700,000 shares of common stock. The 2010 Plan was approved by the Company’s stockholders on December 31, 2009, and awards may be granted thereunder until December 7, 2019. On May 4, 2012, the Board approved common stock grants in the total amount of 442,881 shares to the Company’s employees and members of the Board of Directors, all of which grants were made pursuant to the terms and provisions of the Plan. As of June 30, 2013 and December 31, 2012, there are 247,119 shares of the Company’s common stock remaining available for future issuance under the Plan.

A summary of changes in the Company’s non-vested shares for the three months follows:

	Non-vested Shares
Non-vested at January 1, 2013		6,000
Granted		-
Vested		(4,000)
Forfeited		-
Non-vested at June 30, 2013		2,000

As of June 30, 2013, there was $4,340 of total unrecognized compensation cost related to non-vested shares granted.  The total fair value of shares vested during the three months ended June 30, 2013 and 2012 was $4,340 and $Nil, respectively, based on the closing price of the Company’s common stock on the grant date. The total fair value of shares vested during the six months ended June 30, 2013 and 2012 was $8,680 and $40,020, respectively, based on the closing price of the Company’s common stock on the grant date.

Purchase Options

In connection with the 2009 equity offering, the Company granted 140,000 common stock purchase options to five designees of the Underwriters with a vesting date of June 30, 2010. The options are exercisable from June 30, 2010 to June 30, 2014, and each option is exercisable for one share of the Company’s common stock at an exercise price at $8.11 per share. All options were provided for services performed. As of June 30, 2013 and December 31, 2012, 140,000 common stock purchase options remained outstanding.

Outstanding purchase options do not trade in an active securities market, and as such, the Company estimates the fair value of these warrants and purchase options using the Black-Scholes Option Pricing Model (“Black-Scholes Model”) using the following assumptions:

	Purchase Options – (1)
	June 30, 2013			December 31, 2012
Stock price	$	1.28		$	1.60
Exercise price	$	8.11		$	8.11
Annual dividend yield		-			-
Expected term (years)		1.00			1.50
Risk-free interest rate		0.15	%		0.16	%
Expected volatility		60	%		73	%

(1) As of June 30, 2013 and December 31, 2012, 140,000 purchase options with an exercise price of $8.11 were outstanding.

Expected volatility is based on historical volatility. Historical volatility was computed using daily pricing observations for recent periods that correspond to the term of the warrants. The Company believes this method produces an estimate that is representative of future volatility over the expected term of these warrants and purchase options. The Company has no reason to believe future volatility over the expected remaining life of these warrants and purchase options is likely to differ materially from historical volatility. The expected life is based on the remaining term of the warrants and purchase options. The risk-free interest rate is based on U.S. Treasury securities according to the remaining term of the warrants and purchase options.

As required by the FASB’s accounting standards, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Depending on the nature and the terms of the transaction, the fair values of the warrant/purchase option liability were modeled using a series of techniques, including closed-form analytic formula, such as the Black-Scholes Model, which does not entail material subjectivity because the methodology employed does not necessitate significant judgment, and the pricing inputs are observed from actively quoted markets.

The fair value of the 140,000 purchase options outstanding as of June 30, 2013 and December 31, 2012 was determined using the Black-Scholes Model, utilizing level 2 inputs, and the change was recorded in earnings. The Company recognized gains of $1,134 and $15,800 from the change in fair value of derivative liability for the three months ended June 30, 2013 and 2012, respectively. The Company recognized gains of $5,600 and $22,400 from the change in fair value of derivative liability for the six months ended June 30, 2013 and 2012, respectively.

Following is an activity summary of the Company’s outstanding purchase options:

	Number of purchase options		Weighted – average exercise price		Weighted-average remaining contractual term (Year)
Outstanding at January 1, 2013		140,000	$	8.11		1.50
Granted		-		-
Forfeited		-		-
Exercised		-		-
Outstanding at June 30, 2013		140,000	$	8.11		1.00
Exercisable at June 30, 2013		140,000	$	8.11		1.00

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SHORT-TERM AND LONG-TERM LOANS

6 Months Ended

Jun. 30, 2013

Debt Disclosure [Abstract]

Short-term Debt [Text Block]

Note 14 – SHORT-TERM AND LONG-TERM LOANS

On June 27, 2012, the Company entered into a line of credit agreement with Industrial and Commercial Bank of China (ICBC) Songzi Branch that allows the Company to borrow up to RMB 3,000,000. This line of credit agreement expires on June 18, 2013. The Company withdrew $478,800 (RMB 3,000,000) on July 3, 2012 at an annual interest rate determined by using the People's Bank of China floating benchmark lending rate over the same period plus 30% of that rate, which was 7.8% at June 30, 2013. This loan is secured by the Company’s buildings and land use rights in Jingzhou, Hubei Province. On June 18, 2013, the loans were fully repaid.

On August 13, 2012, the Company obtained fifteen six-month loans with Xi'an High-tech Zone Guoxin Microcredit Ltd. for a total amount of $2,380,500 (RMB 15,000,000) to meet short-term cash needs. Each loan is in the amount of $158,700 (RMB 1,000,000) at an annual interest rate of 22.4%. These loans are guaranteed by Sida. On February 5, 2013, the loans were fully repaid.

On August 27, 2012, the Company obtained a one year loan with Chang’an Bank for $1,620,000 (RMB 10,000,000) at an annual interest rate determined by using the People's Bank of China floating benchmark lending rate over the same period plus 30% of that rate, which was 7.8% at June 30, 2013. This loan is guaranteed by Xi’an Taixin Investment Guarantee Co., Ltd. For this guarantee, the Company is required to pay $32,400 (RMB 200,000) of fees to Xi’an Taixin Investment Guarantee Co., Ltd. and 12.5% of the loan or $202,500 (RMB 1,250,000) is required to be kept by Xi’an Taixin Investment Guarantee Co., Ltd. to serve as collateral until the loan is repaid. This loan is also personally guaranteed by the Company’s Chairman and CEO.

On January 16, 2013, the Company obtained a one year loan with Industrial Bank Co. Ltd. Xi’an branch for $4,860,000 (RMB 30,000,000) at an annual interest rate of 6.6%. This loan is secured by the Company’s land use rights and manufacturing plant located in Huxian County. This loan is also personally guaranteed by the Company’s Chairman and CEO and his wife.

On April 16, 2013, the Company obtained a one year loan from May 27, 2013 to May 26, 2014 with Postal Savings Bank of China Xi’an Branch for $3,240,000 (RMB 20,000,000) at an annual interest rate determined by using the People's Bank of China floating benchmark lending rate over the same period plus 20% of that rate, which was 7.2% at June 30, 2013. This loan is guaranteed by Xi’an Investment and Financing Guarantee Co., Ltd. For this guarantee, the Company is required to pay $58,320 (RMB 360,000) of fees to Xi’an Investment and Financing Guarantee Co., Ltd. and 10% of the loan or $324,000 (RMB 2,000,000) is required to be kept by Xi’an Investment and Financing Guarantee Co., Ltd. to serve as collateral until the loan is repaid. This loan is secured by the Company’s office buildings located in Xi’an, Shaanxi Province and the manufacturing equipment in Huxian County. The Company’s Chairman and CEO, his wife, and two other company’s managers have provided personal guarantees to Xi’an Investment and Financing Guarantee Co., Ltd. for the repayment of the loan.

On June 13, 2013, the Company obtained a one year loan from June 20, 2013 to June 19, 2014 with Industrial and Commercial Bank of China (ICBC) Songzi Branch for $810,000 (RMB 5,000,000) at an annual interest rate determined by using the People's Bank of China floating benchmark lending rate over the same period plus 30% of that rate, which was 7.8% at June 30, 2013. The Company is required to keep 10% of the loan or $81,000 (RMB 500,000) with the bank as collateral (note 10). This loan is secured by the Company’s buildings and land use rights in Jingzhou, Hubei Province.

Outstanding short-term loans consisted of the following:

	June 30, 2013				December 31, 2012					Interest
Bank	Amt RMB		Amt USD		Amt RMB		Amt USD		Due Date	Rate
ICBC Songzi Branch		-	$	-		3,000,000	$	476,100	06/18/13		(1)
Xi'an High-tech Zone Guoxin Microcredit Ltd.		-		-		15,000,000		2,380,500	02/12/13		22.400	%
Chang’an Bank		10,000,000		1,620,000		10,000,000		1,587,000	08/26/13		(1)
Industrial Bank Co. Ltd. Xi’an branch		30,000,000		4,860,000		-		-	01/15/14		6.600	%
Postal Savings Bank of China Xi’an Branch		20,000,000		3,240,000		-		-	05/26/14		(2)
ICBC Songzi Branch		5,000,000		810,000		-		-	06/19/14		(1)
Total		65,000,000	$	10,530,000		28,000,000	$	4,443,600

(1)	People's Bank of China floating benchmark lending rate over the same period plus 30%, which was 7.8% at June 30, 2013.
(2)	People's Bank of China floating benchmark lending rate over the same period plus 20%, which was 7.2% at June 30, 2013.

Long-term loan

On September 17, 2012, the Company entered into a two-year line of credit agreement with Shaanxi Agricultural Yanta Credit Union that allows the Company to borrow up to RMB 8,000,000. This line of credit agreement expires September 20, 2014. The Company withdrew $1,276,800 (RMB 8,000,000) on September 26, 2012 at an annual interest rate of 9.446%. The interest rate is determined annually by using the People's Bank of China floating benchmark lending rate over the same period plus the lender’s floating rate. The new interest rate becomes effective on December 21 of each year. This line of credit is secured by the Company’s office buildings located in Xi’an City. This line of credit is also personally guaranteed by the Company’s Chairman and CEO and his wife. On May 9, 2013, the loans were fully repaid.

Outstanding long-term loan consisted of the following:

June 30, 2013

December 31, 2012

Interest

Bank

Amt RMB

Amt USD

Amt RMB

Amt USD

Due Date

Rate

Shaanxi Agricultural Yanta Credit Union

-

-

8,000,000

$

1,269,600

09/20/14

9.446

%

Interest expense incurred and associated with the short-term and long-term loans amounted to $123,340 and $156,427 for the three months ended June 30, 2013 and 2012, respectively. Interest expense incurred and associated with the short-term and long-term loans amounted to $304,766 and $309,010 for the six months ended June 30, 2013 and 2012, respectively, none of which has been capitalized as part of construction-in-progress in 2013 and 2012, respectively.

XML

Document And Entity Information	6 Months Ended
	Jun. 30, 2013	Aug. 12, 2013
Document Information [Line Items]
Entity Registrant Name	SKYSTAR BIO-PHARMACEUTICAL CO
Entity Central Index Key	0001076939
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	SKBI
Entity Common Stock, Shares Outstanding		7,604,800
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2013
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2013

XML

RELATED PARTY TRANSACTIONS AND ARRANGEMENTS (Details Textual) (USD $)	Jun. 30, 2013	Dec. 31, 2012
Scott Cramer Non Executive Director and Shareholder [Member]
Related Party Transaction [Line Items]
Due to Related Parties, Total	$ 275,865	$ 138,169
Weibing Lu - Ceo [Member]
Related Party Transaction [Line Items]
Due to Related Parties, Total	$ 693,309	$ 608,282

XML

DEFERRED GOVERNMENT GRANT

6 Months Ended

Jun. 30, 2013

Deferred Government Grant Disclosure [Abstract]

Deferred Government Grant Disclosure [Text Block]

Note 15 - DEFERRED GOVERNMENT GRANT

The subsidies for Good Manufacturing Practice projects were granted by Shaanxi provincial government and Xi’an municipal government which may require the subsidies to be repaid. As of June 30, 2013 and December 31, 2012, the subsidies were RMB 2,500,000, equivalent to $405,000 and $396,750, respectively.

The subsidies granted by Xi’an City Science and Technology Bureau and Xi’an City High-Tech Industrial Development Zone are required to be used exclusively for the fish disease multi associated anti-idiotypic monoclonal antibody vaccine project during the development period from January 2012 through December 2014. As of June 30, 2013 and December 31, 2012, 70% of the subsidies or RMB 4,200,000, equivalent to $680,400 and $666,540 respectively had been received and $486,000 (RMB 3,000,000) and nil has been expensed on this project and were accounted for as an offset against deferred government grant as of June 30, 2013 and December 31, 2012, respectively.

On June 3, 2003 and January 16, 2006, the Company received payment from China Gao Xin Investment Group Company of $641,120 (RMB 4,000,000) and $160,280 (RMB 1,000,000), respectively. The Company repaid $160,280 (RMB 1,000,000) on December 7, 2010, $480,840 (RMB 3,000,000) in 2012 and the remaining balance of $160,280 (RMB 1,000,000) on January 30 and February 28, 2013.

XML

RESTRICTED CASH (Details Textual)	Jun. 30, 2013 USD ($)	Jun. 30, 2013 CNY	Dec. 31, 2012 USD ($)	Dec. 31, 2012 CNY	Jun. 13, 2013 Industrial and Commercial Bank Of China [Member] USD ($)	Jun. 13, 2013 Industrial and Commercial Bank Of China [Member] CNY	Jan. 16, 2013 Industrial and Commercial Bank Of China [Member] USD ($)	Jan. 16, 2013 Industrial and Commercial Bank Of China [Member] CNY
Restricted Cash and Cash Equivalents Items [Line Items]
Bank Loans	$ 10,530,000	65,000,000	$ 4,443,600	28,000,000	$ 810,000	5,000,000	$ 4,860,000	30,000,000
Restricted Cash and Cash Equivalents	$ 81,000		$ 0		$ 81,000	500,000
Restricted Cash Percentage					10.00%	10.00%

XML

CONSTRUCTION-IN-PROGRESS (Details Textual)	Jun. 30, 2013 USD ($)	Dec. 31, 2012 USD ($)	Jun. 30, 2013 Huxian Vaccine Facility [Member] USD ($)	Jun. 30, 2013 Huxian Vaccine Facility [Member] CNY	Dec. 31, 2011 Huxian Animal Laboratory [Member] USD ($)	Dec. 31, 2011 Huxian Animal Laboratory [Member] CNY	Dec. 31, 2011 Jingzhou Facility [Member] USD ($)	Dec. 31, 2011 Jingzhou Facility [Member] CNY	Jun. 30, 2013 Kunshan Facility [Member] USD ($)	Jun. 30, 2013 Kunshan Micro Organism Facility [Member] USD ($)
Construction In Progress [Line Items]
Total in cost in progress	$ 9,038,656	$ 8,691,360	$ 2,446,879	15,104,191	$ 324,000	2,000,000	$ 1,701,000	10,500,000	$ 5,066,871	$ 5,066,871	[1]

[1] As of June 30, 2013, the supporting project at the Kunshan facility was completed, inspected and accepted. However, the construction-in-progress of $5,066,871 has not been transferred to property, plant and equipment as the Kunshan micro-organism facility was not operational at this point.

XML

COMMITMENTS AND CONTINGENCIES (Details) (USD $)	Dec. 31, 2012
Future Minimum Payments [Line Items]
Year ending December 31, 2013	$ 59,919
Year ending December 31, 2014	93,066
Year ending December 31, 2015	52,488
Year ending December 31, 2016	52,488
Year ending December 31, 2017 and thereafter	13,608
Total	271,569
Unrelated Third Parties [Member]
Future Minimum Payments [Line Items]
Year ending December 31, 2013	33,675
Year ending December 31, 2014	40,578
Year ending December 31, 2015	0
Year ending December 31, 2016	0
Year ending December 31, 2017 and thereafter	0
Total	74,253
Related Parties [Member]
Future Minimum Payments [Line Items]
Year ending December 31, 2013	26,244
Year ending December 31, 2014	52,488
Year ending December 31, 2015	52,488
Year ending December 31, 2016	52,488
Year ending December 31, 2017 and thereafter	13,608
Total	$ 197,316