10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended March 31, 2014

	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 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 May 9, 2014, 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		3
PART I.  FINANCIAL INFORMATION		4
Item 1.	Condensed Consolidated Financial Statements	4
	Condensed Consolidated Balance Sheets as of March 31, 2014 (unaudited) and December 31, 2013	4
	Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2014 and 2013 (unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013 (unaudited)	6
	Condensed Consolidated Statement of Shareholders’ Equity for the Three Months Ended March 31, 2014 (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	28
Item 4.	Controls and Procedures	33
PART II.  OTHER INFORMATION		34
Item 6.	Exhibits	39
SIGNATURES		40

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. We undertake no obligation to update or publicly announce revisions to any forward-looking statements to reflect future events or developments.

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 10K for the year ended December 31, 2013, 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

	March 31,
	2014 (Unaudited)		December 31, 2013
ASSETS
CURRENT ASSETS:
Cash	$	6,848,905	$	8,142,296
Accounts receivable, net of allowance for doubtful accounts of $960,578 (Unaudited) and $602,243 as of March 31, 2014 and December 31, 2013, respectively		12,663,549		11,009,498
Inventories		25,265,783		25,903,586
Deposits, prepaid expenses and other receivables		1,608,405		2,134,163
Prepayments to suppliers		40,541,475		41,061,144
Loans receivable		1,046,835		-
Deferred tax assets		403,372		364,425
Total current assets		88,378,324		88,615,112
PROPERTY, PLANT AND EQUIPMENT, NET		30,417,653		28,269,155
CONSTRUCTION-IN-PROGRESS		6,470,772		9,284,947
OTHER ASSETS:
Long-term prepayments		4,592,751		4,633,614
Long-term prepayments for acquisitions		-		183,344
Intangible assets, net		5,130,454		5,237,255
Total other assets		9,723,205		10,054,213
Total assets	$	134,989,954	$	136,223,427
LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	4,615,614	$	3,303,531
Other payable and accrued expenses		6,551,419		6,467,605
Short-term loans		5,680,500		10,640,500
Deposits from customers		1,991,907		1,877,211
Taxes payable		2,852,844		1,315,486
Due to related parties		1,962,238		1,361,548
Total current liabilities		23,654,522		24,965,881
OTHER LIABILITIES:
Deferred government grant		795,270		802,130
Purchase option liability		78,960		62,440
Total other liabilities		874,230		864,570
Total liabilities		24,528,752		25,830,451
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 March 31, 2014 (Unaudited) and December 31, 2013		7,605		7,605
Paid-in capital		37,690,867		37,631,142
Statutory reserves		5,952,692		5,952,692
Retained earnings		55,965,604		54,990,154
Accumulated other comprehensive income		10,844,434		11,811,383
Total shareholders’ equity		110,461,202		110,392,976
Total liabilities and shareholders’ equity	$	134,989,954	$	136,223,427

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 ENDED MARCH 31, 2014 AND 2013

(Unaudited)

	Three Months Ended  March 31,
	2014			2013
REVENUE, net	$	6,832,588		$	5,530,741
COST OF REVENUE		4,009,403			2,930,886
GROSS PROFIT		2,823,185			2,599,855
OPERATING EXPENSES:
Research and development costs		4,213			461
Selling expenses		370,208			317,836
General and administrative expenses		1,276,417			1,211,273
Total operating expenses		1,650,838			1,529,570
INCOME FROM OPERATIONS		1,172,347			1,070,285
OTHER INCOME (EXPENSE):
Other income (expense), net		154,919			(187	)
Interest income		170,665			148,845
Interest expense		(75,934	)		(189,392	)
Change in fair value of purchase option liability		(16,520	)		4,466
Total other income (expense), net		233,130			(36,268	)
INCOME BEFORE PROVISION FOR INCOME TAXES		1,405,477			1,034,017
PROVISION FOR INCOME TAXES		430,027			321,284
NET INCOME		975,450			712,733
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment		(966,949	)		550,883
COMPREHENSIVE INCOME	$	8,501		$	1,263,616
EARNINGS PER SHARE:
Basic	$	0.13		$	0.09
Diluted	$	0.13		$	0.09
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic		7,676,268			7,613,712
Diluted		7,700,734			7,613,712

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 CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013
(Unaudited)

	Three months ended  March 31,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	975,450		$	712,733
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation		400,291			313,561
Amortization		62,477			60,872
Provision for doubtful accounts		366,218			351,534
Share based compensation		59,725			4,340
Change in fair value of purchase option liability		16,520			(4,466	)
Deferred tax assets		(42,380	)		-
Change in operating assets and liabilities
Accounts receivable		(2,127,566	)		(1,725,889	)
Inventories		419,398			(557,269	)
Deposits, prepaid expenses and other receivables		513,005			292,476
Prepayments to suppliers		169,771			(9,696,136	)
Accounts payable		1,350,410			1,023,288
Other payables and accrued expenses		135,167			(339,030	)
Deferred government grants		-			(159,320	)
Deposits from customers		131,733			28,061
Taxes payable		1,560,250			(288,655	)
Due to related parties		606,813			201,325
Net cash provided by (used in) operating activities		4,597,282			(9,782,575	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Refund of long-term prepayments		184,387			-
Loans to third parties		(1,054,704	)		-
Payments on construction-in-progress		(53,195	)		-
Net cash used in investing activities		(923,512	)		-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans		-			4,779,600
Repayment of short-term loans		(4,905,600	)		(2,389,800	)
Net cash (used in) provided by financing activities		(4,905,600	)		2,389,800
EFFECT OF EXCHANGE RATE CHANGES ON CASH		(61,561	)		50,421
DECREASE IN CASH		(1,293,391	)		(7,342,354	)
CASH, beginning of period		8,142,296			11,321,848
CASH, end of period	$	6,848,905		$	3,979,494
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income tax	$	-		$	-
Cash paid for interest	$	129,129		$	181,426
Non-cash investing activities
Construction-in-progress transferred to property, plant and equipment	$	2,787,566		$	-

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

6

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2014

(UNAUDITED)

											Accumulated
							Retained earnings				other
	Common stock				Paid-in		Statutory				comprehensive
	Shares		Amount		capital		reserves		Unrestricted		income			Total
BALANCE, January 1, 2014		7,604,800	$	7,605	$	37,631,142	$	5,952,692	$	54,990,154	$	11, 811,383		$	110,392,976
Foreign currency translation		-		-		-		-		-		(966,949	)		(966,949	)
Share based compensation		-		-		59,725		-		-		-			59,725
Net income		-		-		-		-		975,450		-			975,450
BALANCE, March 31, 2014		7,604,800	$	7,605	$	37,690,867	$	5,952,692	$	55,965,604	$	10,844,434		$	110,461,202

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

MARCH 31, 2014

(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 $81,150 (RMB 500,000), of which Xi’an Tianxing and Sida each contributed $40,575 (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. On March 26, 2014, the Company received the government approval of extension for payment of the remaining registered capital of $12,750,000 by May 6, 2015. 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) paid by Sida.

On March 15, 2011, Xi’an Tianxing formed Xi’an Sikaida Bio-products Co., Ltd. (“Xi’an Sikaida”) with a registered capital of approximately $1,623,000 (RMB 10,000,000 ) paid by Xi’an Tianxing.

Hereinafter, Skystar, Skystar Cayman, Fortunate Time, Sida, Xi’an Tianxing, Skystar Kunshan, 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, 2014. 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, 2013 filed with the Securities and Exchange Commission (“SEC”).

8

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 doubtful accounts, 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.

9

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 March 31, 2014 and December 31, 2013:

	Carrying Value at March 31,		Fair Value Measurement at March 31, 2014
	2014		Level 1		Level 2		Level 3
Purchase option liability	$	78,960	$	—	$	78,960	$	—

	Carrying Value at December 31,		Fair Value Measurement at December 31, 2013
	2013		Level 1		Level 2		Level 3
Purchase option liability	$	62,440	$	—	$	62,440	$	—

Below is the reconciliation for the purchase option liability changes from January 1, 2014 to March 31, 2014:

Balance, January 1, 2014	$	62,440
Change in fair value		16,520
Balance, March 31, 2014	$	78,960

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.

Cash

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

Accounts receivable

Accounts receivable are stated at cost, net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses, if any, resulting from the failure of customers to make required payments. The Company reviews the accounts receivable on a periodic basis and makes allowances where there is doubt as to the collectibility of individual balances. In evaluating the collectibility of individual receivable balances, the Company considers many factors, including the age of the balance, the customer’s payment history, its current credit-worthiness and current economic trends.

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 write-down against the inventory and additional cost of goods sold when the carrying value exceeds net realizable value.

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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	Shorter of lease term or 10-40 years
Machinery and equipment	5-10 years
Office equipment and furniture	3-10 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 reduces 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 March 31, 2014 and December 31, 2013, there was no impairment of its property, plant and equipment.

Construction-in-progress

Construction-in-progress includes direct costs of construction of factory buildings. 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 —Intangible assets are evaluated at least annually for impairment if events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets by comparing the asset's estimated fair value with its carrying value, based on cash flow methodology. Based on its review, the Company believes that, as of March 31, 2014 and December 31, 2013, 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, and totaled $192,048 and $203,849 for the three months ended March 31, 2014 and 2013, respectively.

Advertising costs

Advertising costs are charged to selling expenses as incurred. Advertising costs were insignificant for both the quarters ended March 31, 2014 and 2013, respectively.

Research and development costs

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

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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 March 31, 2014 and December 31, 2013, 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 ended March 31, 2014 and 2013.

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, 2008 through 2013 are open to examination by the PRC state and local tax authorities.

Government grants

The Company’s subsidiaries in China receive government subsidies from local Chinese government agencies in accordance with relevant Chinese government policies. In general, the Company presents the government subsidies received as part of other income unless the subsidies received are earmarked to compensate for a specific expense, which have been accounted for by offsetting the specific expense, such as research and development expense or interest expenses. Unearned government subsidies received are deferred for recognition until the criteria for such recognition could be met.

For research and development expenses, the Company matches and offsets the government grants with the expenses of the research and development activities as specified in the grant approval document in the corresponding period when such expenses are incurred.

No government grants were offset against the finance costs for the three months ended March 31, 2014 and 2013.

Government grants of $154,902 and $nil were received and recognized as other income during the three months ended March 31, 2014 and 2013.

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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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.

Reclassification

Certain amounts included in the 2013 consolidated statements of comprehensive income has been reclassified to conform to the 2014 financial statement presentation as follows;

The Company has separately presented interest income of $148,845 on the face of consolidated statements of comprehensive income for the period ended March 31, 2013, instead of presenting it net of interest expenses.

As a result of such reclassification, interest expense, net for the three months ended March 31, 2014, has changed from $40,547 to $189,392.

The change in due to related parties of $201,325 was classified into cash flows from financing activities in the Company’s condensed consolidated statements of cash flows for the three months ended March 31, 2013. The Company has reclassified this amount as component of cash flows to operating activities.

As a result of such reclassification, net cash provided by financing activities for the three months ended March 31, 2013 has changed from $2,591,125 to $2,389,800 and net cash used in operating activities has changed from $9,983,900 to $9,782,575.

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Recently issued accounting pronouncements

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. The Company adopted ASU 2013-05 prospectively in its first quarter of fiscal 2014, and it did not 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 adopted ASU 2013-11 effective January 1, 2014 and it did not 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.

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, prepayments to suppliers and others. 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 customers and places unsecured prepayments for purchase to suppliers. As a result, there are credit risks with the accounts receivable and prepayments to suppliers .

For the three months ended March 31, 2014 and 2013, 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 March 31, 2014 and December 31, 2013 are from customers located in the PRC.

The Company’s six largest vendors accounted for approximately 71% and 72% of the Company’s total purchases, respectively, for the three months ended March 31, 2014 and 2013, respectively. No other vendors accounted for more than 10% of the Company’s total purchases. As of March 31, 2014 and December 31, 2013, prepayments of $32,801,071 and $32,094,767 were made to the six largest vendors, respectively, for raw materials and packing materials purchases.

The Company had one product that accounted for 32% and 16% of the Company’s total revenues for the three months ended March 31, 2014 and 2013, respectively. No other products accounted for more than 10% of the Company’s total sales.

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Note 4 - ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following:

	March 31, 2014			December 31, 2013
Accounts receivable	$	13,624,127		$	11,611,741
Allowance for doubtful accounts		(960,578	)		(602,243	)
Accounts receivable, net	$	12,663,549		$	11,009,498

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

Balance, January 1, 2014	$	602,243
Addition		366,218
Recovery		—
Translation adjustment		(7,883	)
Balance, March 31, 2014	$	960,578

Note 5 – INVENTORIES

Inventories consist of the following:

	March 31, 2014		December 31, 2013
Raw materials	$	21,970,441		23,001,461
Packing materials		350,799		396,067
Work-in-process		152,884		23,140
Finished goods		2,717,505		2,409,083
Other		74,154		73,835
Total	$	25,265,783		25,903,586

No write-down of inventories was recorded for the three months ended March 31, 2014 and 2013.

Note 6 - DEPOSITS, PREPAID EXPENSES AND OTHER RECEIVABLES

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

	March 31, 2014		December 31,  2013
Other prepayments	$	365,055	$	478,144
Deposits placed with guarantors (note 13)		486,900		491,100
Interest receivable (notes 7 and 12)		168,718		497,844
Other receivables		587,732		667,075
Total	$	1,608,405	$	2,134,163

Note 7 – PREPAYMENTS TO SUPPLIERS

Prepayments to suppliers are comprised of the following:

	March 31, 2014		December 31,  2013
Prepayments for raw materials	$	39,438,992	$	39,937,944
Prepayments for packaging materials		1,102,483		1,123,200
Total	$	40,541,475	$	41,061,144

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 the unused prepayments for raw materials. Starting from January 1, 2014, in addition to these two major suppliers, the Company began to charge another supplier interest at an annual rate of 2.0% on the unused prepayments for raw materials. As of March 31, 2014 and December 31, 2013, prepayments to these suppliers were $32,199,192 and $31,953,084, respectively. For the three months ended March 31, 2014 and 2013, $162,205 and $118,182, respectively, of interest income was recognized on these prepayments. The unpaid interest balance of $160,995 and $497,844 as of March 31, 2014 and December 31, 2013, respectively, was included in “Deposits, Prepaid Expenses and Other Receivables” (note 6).

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Note 8 - PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consist of the following:

	March 31, 2014			December 31, 2013
Buildings and improvements	$	28,033,999		$	27,703,872
Machinery and equipment		8,261,929			6,093,533
Office equipment and furniture		334,800			337,688
Vehicles		606,755			611,989
Total		37,237,483			34,747,082
Less: accumulated depreciation		(6,819,830	)		(6,477,927	)
Plant and equipment, net	$	30,417,653		$	28,269,155

Depreciation expense was $400,291 and $313,561 for the three months ended March 31, 2014 and 2013, respectively.

As of March 31, 2014 and December 31, 2013, property, plant and equipment with a carrying amount of $3,191,746 and $19,969,335, 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 Good Manufacturing Practices (“GMP”) qualification process for the vaccine facility. In September 2012, the China’s Ministry of Agriculture (“MOA”) physically inspected this 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.  On December 26, 2013, the MOA granted the GMP certificate for this new facility which is valid for five years, and the facility started to launch trial production in the quarter ended March 31, 2014. Vaccine facility of $2,462,966 was transferred to property, plant and equipment during the three months ended March 31, 2014. The facility is currently in the process of applying for individual product permits from the government. The Company expects to complete the application and launch the normal production in the second half of 2014.

In 2011, the Company started a facility improvement project in the amount of approximately $324,600 for the Huxian Animal Laboratory. The facility is a supporting project to the Huxian vaccine facility. The project was completed and passed GMP inspection in December 2013. The cost of the animal laboratory of $324,600 was transferred to property, plant and equipment during the three months ended March 31, 2014. The Company expects this facility to become operational once the Huxian vaccine facility launches its manufacturing in the second half of 2014.

Jingzhou facility

In 2011, the Company started a facility improvement project to expand the 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 $1,704,150, of which $1,203,130 had been incurred as of March 31, 2014. Due to the revision in the project blueprint to comply with GMP requirements, the project was temporarily halted. The Company expects the project will be resumed in the second quarter of 2014 and be completed by the end of the fourth quarter of 2014.

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 December 31, 2013, the construction and installation of these facilities were completed, inspected and accepted. However, the construction-in-progress of $5,267,642 has not been transferred to property, plant and equipment as the Kunshan micro-organism facility was not operational at this point. During the third quarter of 2013, the Company contracted with an unrelated third party to purchase machinery and equipment at a total consideration of approximately $7,303,500, of which $3,482,958 was paid and was included in “Long-term prepayments” (note 10) as of March 31, 2014. The Company expects the purchase and installation of this equipment will be completed by the end of the third quarter of 2014.

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

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

	Total in CIP as of
Project	March 31, 2014		Estimated Cost to Complete		Estimated Total Cost		Estimated Completion Date
Jingzhou veterinary medication facility	$	1,203,130	$	501,020	$	1,704,150	Fourth quarter of 2014
Kunshan micro-organism facility		5,267,642		7,241,039		12,508,681	Construction - completed, Installation of machinery and equipment – Third quarter of 2014
Total	$	6,470,772	$	7,742,059	$	14,212,831

As of March 31, 2014 and December 31, 2013, the Company had construction in progress amounting to $6,470,772 and $9,284,947, respectively. Interest expense of $53,195 and $nil has been capitalized for construction in progress for the three months ended March 31, 2014 and 2013, respectively.

Note 10 - LONG-TERM PREPAYMENTS

Long-term prepayments consist of the following:

	March 31, 2014		December 31, 2013
Deposits for equipment purchase and land use rights	$	3,836,884	$	3,871,228
Construction deposits		386,224		366,688
Prepayments for R&D project		363,552		389,556
Deposits for other		6,091		6,142
Long-term prepayments	$	4,592,751	$	4,633,614
Long-term prepayments for acquisitions	$	-	$	183,344

As of March 31, 2014 and December 31, 2013, deposits for potential acquisitions totaled $Nil and $183,344, respectively, all of which was held by an unrelated third party engaged to facilitate potential acquisition projects.  

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Note 11 – INTANGIBLE ASSETS

Intangible assets consist of the following:

	March 31, 2014			December 31, 2013
Land use rights	$	4,909,577		$	4,951,927
Technological know-how		2,596,800			2,619,200
Total		7,506,377			7,571,127
Less: accumulated amortization		(2,375,923	)		(2,333,872	)
Intangible assets, net	$	5,130,454		$	5,237,255

For the three months ended March 31, 2014 and 2013, the amortization expense for intangibles amounted to $62,477 and $60,872, respectively.

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

Years ending December 31,	Amount
2014	$	186,032
2015		248,042
2016		248,042
2017		248,042
2018		248,042
Thereafter		3,952,254
Total	$	5,130,454

As of March 31, 2014 and December 31, 2013, land use rights with a carrying amount of $1,136,461 and $1,529,960, respectively, were pledged against the Company’s short-term loans.

Note 12 – LOANS RECEIVABLE

On January 2, 2014, the Company entered a loan agreement with Shaanxi Feilong Logistics Co., Ltd., (“Feilong”), the Company’s major logistics provider, to lend up to $1,298,400 (RMB 8,000,000) to Feilong. This loan agreement expires on May 31, 2014 with an annual interest rate of 6%. During the three months ended March 31, 2014, Feilong borrowed a total amount of $1,046,835 (RMB 6,450,000) from the Company.  Interest income earned on this unsecured loan amounted to $7,781 for the three months ended March 31, 2014. The unpaid interest balance of $7,723 as of March 31, 2014 was included in “Deposits, Prepaid Expenses and Other Receivables” (note 6).

Note 13 – SHORT-TERM LOANS

On January 16, 2013, the Company obtained a one year loan with Industrial Bank Co. Ltd. Xi’an branch for $4,869,000 (RMB 30,000,000) at an annual interest rate of 6.6%. This loan was secured by the Company’s land use rights and manufacturing plant located in Huxian County. This loan was also personally guaranteed by the Company’s Chairman and CEO and his wife. On January 15, 2014, the loan was fully repaid.

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 $3,246,000 (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 March 31, 2014. This loan is guaranteed by Xi’an Investment and Financing Guarantee Co., Ltd. For this guarantee, the Company is required to pay $58,158 (RMB 360,000) of fees to Xi’an Investment and Financing Guarantee Co., Ltd. and 10% of the loan or $324,600 (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 $811,500 (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 March 31, 2014. The Company is originally required to keep 10% of the loan or $81,150 (RMB 500,000) with the bank as collateral. During the fourth quarter of 2013, the collateral was waived. This loan is secured by the Company’s buildings and land use rights in Jingzhou, Hubei Province.

On September 10, 2013, the Company entered into a loan agreement with its Chairman and CEO. Under the agreement, the Chairman and CEO obtained a one year personal bank loan from September 12, 2013 to September 11, 2014 with Bank of Beijing of $1,623,000 (RMB 10,000,000) and lent the entire loan proceeds to the Company. The interest and repayment terms of the loan from the Chairman and CEO are identical to those of the personal bank loan. The annual interest rate is determined by using the prime rate over the same period plus 30% of that rate, which was 7.8% at the date that the loan was issued. The Company agrees to bear all the costs and expenses associated with the personal bank loan. The personal bank loan is guaranteed by Xi’an Investment and Financing Guarantee Co., Ltd. For this guarantee, the CEO is required to (i) pay $29,434 (RMB 180,000) of fees to Xi’an Investment and Financing Guarantee Co., Ltd. This cost has been paid and recorded as an expense of the Company using the effective interest method for the three months ended March 31, 2014; and (ii) place 10% of the loan or $162,300 (RMB 1,000,000) at Xi’an Investment and Financing Guarantee Co., Ltd. to serve as collateral until the loan is repaid. The Company had placed such a deposit with Xi’an Investment and Financing Guarantee Co., Ltd. as of March 31, 2014. The personal bank loan is also secured by the Chairman and CEO’s real estate properties and the Company’s office buildings and machineries located in Xi’an.

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On April 14, 2014, the Company entered into a six-month Banker’s Acceptance agreement with Chang’an Bank for $7,790,400 (RMB 48,000,000) at a six-month interest rate of 3%. The Banker’s Acceptance was issued on April 21, 2014 and secured by pledged deposits placed with Chang’an Bank of $3,895,200 (RMB 24,000,000), and the Company’s land use rights and manufacturing plant located in Huxian County with a carrying value of $16,811,260 as of March 31, 2014. This Banker’s Acceptance was also personally guaranteed by the Company’s Chairman and CEO and his wife. The fee to cash the Banker’s Acceptance is 0.05% of the face value of this Banker’s Acceptance or $3,895 (RMB 24,000). Pursuant to this Bank’s Acceptance, loans of $7,790,400 (RMB 48,000,000) were drawn down as of April 21, 2014.

Outstanding short-term loans consisted of the following:

	March 31, 2014				December 31, 2013					Interest
Bank	Amt RMB		Amt USD		Amt RMB		Amt USD		Due Date	Rate
Industrial Bank Co. Ltd. Xi’an Branch		-	$	-		30,000,000	$	4,911,000	01/15/14		6.60	%
Postal Savings Bank of China Xi’an Branch		20,000,000		3,246,000		20,000,000		3,274,000	05/26/14		(2	)
ICBC Songzi Branch		5,000,000		811,500		5,000,000		818,500	06/19/14		(1	)
Related-party Individual – Chairman and CEO		10,000,000		1,623,000		10,000,000		1,637,000	09/11/14		7.8	%
Total		35,000,000	$	5,680,500		65,000,000	$	10,640,500

(1)	People's Bank of China floating benchmark lending rate over the same period plus 30%, which was 7.8% at March 31, 2014.
(2)	People's Bank of China floating benchmark lending rate over the same period plus 20%, which was 7.2% at March 31, 2014.

Interest expense incurred and associated with the short-term loans amounted to $129,129 and $189,392 for the three months ended March 31, 2014 and 2013, respectively, $53,195 and $nil of which has been capitalized as part of construction-in-progress in 2014 and 2013, respectively.

Note 14 - 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 March 31, 2014 and December 31, 2013, the subsidies were RMB 2,500,000, equivalent to $405,750 and $409,250, 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 March 31, 2014 and December 31, 2013, 70% of the subsidies or RMB 4,200,000, equivalent to $681,660 and $687,540, respectively had been received and RMB 3,000,000 equivalent to $486,900 and $491,100 has been expensed on this project and were accounted for as an offset against deferred government grant as of March 31, 2014 and December 31, 2013, respectively.

The interest subsidies granted by Xi’an municipal government were required to be used exclusively for the chicken coccidia vaccine project in the third quarter of 2013. As of March 31, 2014 and December 31, 2013, the subsidies of RMB 1,200,000, equivalent to $194,760 and $196,440 had been received and nil has been expensed on this project.

Note 15 - CAPITAL TRANSACTIONS

Stock-based compensation

On March 31, 2012, the Company entered into an agreement with a non-executive director to grant him an aggregate 28,000 shares of restricted common stock each year under the Company’s 2010 Stock Incentive Plan, vested in four equal quarterly installments of 7,000 shares. The closing price per share of the stock on the next business day of each of the grant date in 2012 and 2013 was $2.95 and $1.73 respectively. The Board of Directors approved his agreement with the Company on March 10, 2014. As of March 31, 2014 and December 31, 2013, 56,000 shares and 49,000 shares, respectively, were vested and 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, which runs from May 26, 2013 to May 25, 2014. 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. The closing price per share of the stock on the next business day of each of the grant date in 2012 and 2013 was $2.39 and $1.20 respectively. As of March 31, 2014 and December 31, 2013, 11,112 shares were vested and to be issued to this non-executive director.

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On July 29, 2011, the Company entered into a one-year employment agreement with its CFO effective July 29, 2011. 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 effective July 29, 2012. 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 effective July 29, 2013. 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 in 2013 and 2012 was $1.37 and $2.17 respectively. The Board of Directors ratified and approved the CFO’s employment agreement with the Company on March 10, 2014. As of March 31, 2014 and December 31, 2013, 12,000 shares and 10,000 shares were vested and to be issued to this executive, respectively.

The Company entered into a five-year employment agreement with its Chief Executive Officer on May 5, 2008. After the agreement was expired on December 31, 2013, the Company renewed the employment agreement with its Chief Executive Officer for another five year period effective January 1, 2014. Under the agreement, he is entitled to receive an aggregate 50,000 shares of common stock , vested in four equal quarterly installments of 12,500 shares. The closing price per share of the stock on the next business day of each of the grant date in 2014 was $3.59. The Board of Directors ratified and approved the CEO’s employment agreement with the Company on March 10, 2014. As of March 31, 2014, 12,500 shares were vested and to be issued to this executive.

The Company recorded $59,725 and $4,340 share based compensation for the three months ended March 31, 2014 and 2013, 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 March 31, 2014 and December 31, 2013, there are 247,119 shares of the Company’s common stock remaining available for future issuance under the Plan. As of March 31, 2014 and December 31, 2013, there are 91,612 shares and 70,112 shares, respectively, vested pending to be issued.

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

	Non-vested Shares
Non-vested at January 1, 2013		6,000
Granted		69,556
Vested		(62,556	)
Forfeited		-
Non-vested at December 31, 2013		13,000
Granted		50,000
Vested		(21,500	)
Forfeited		-
Non-vested at March 31, 2014		41,500

As of March 31, 2014, there was $138,198 of total unrecognized compensation cost related to non-vested shares granted.  The total fair value of shares vested during the three months ended March 31, 2014 and 2013 was $59,725 and $4,340, respectively, based on the closing price of the Company’s common stock on the next business day of the grant date.

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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 March 31, 2014 and December 31, 2013, 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 purchase options using the Black-Scholes Option Pricing Model (“Black-Scholes Model”) using the following assumptions: 

	Purchase Options
	March 31, 2014			December 31, 2013
Stock price	$	6.56		$	3.51
Exercise price	$	8.11		$	8.11
Annual dividend yield		-			-
Expected term (years)		0.25			0.50
Risk-free interest rate		0.05	%		0.10	%
Expected volatility		80	%		125	%
Option value	$	0.56		$	0.45

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 purchase options is likely to differ materially from historical volatility. The expected life is based on the remaining term of the purchase options. The risk-free interest rate is based on U.S. Treasury securities according to the remaining term of the 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 March 31, 2014 and December 31, 2013 was determined using the Black-Scholes Model, utilizing level 2 inputs, and the change was recorded in earnings. The Company recognized a loss of $16,520 and a gain of $4,466 from the change in fair value of derivative liability for the three months ended March 31, 2014 and 2013, 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, 2014		140,000	$	8.11		0.50
Granted		-		-
Forfeited		-		-
Exercised		-		-
Outstanding at March 31, 2014		140,000	$	8.11		0.25
Exercisable at March 31, 2014		140,000	$	8.11		0.25

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Note 16 - 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 17 – TAXES

Provision for income taxes consisted of the following:

	Three months ended March 31,
PRC income taxes	2014			2013
Current	$	472,407		$	321,284
Deferred		(42,380	)		-
Total	$	430,027		$	321,284

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 months ended March 31, 2014 and 2013, 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 months ended March 31, 2014 and 2013:

	Three Months ended March 31,
	2014			2013
U.S. statutory rate		34.0	%		34.0	%
Foreign income not recognized in the U.S.		(34.0	)		(34.0	)
China income tax rate		25.0			25.0
China income tax exemption		(10.0	)		(10.0	)
Other items (1)		15.6			16.1
Total provision for income taxes		30.6	%		31.1	%

(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 15.6% and 16.1% for the three months ended March 31, 2014 and 2013, respectively.   Other items consisted of the following:

	Three Months ended March 31,
	2014			2013
Income taxed at Chinese statutory rate of 25%		1.3	%		1.0	%
Valuation allowance on tax loss		8.3			9.9
Share based compensation		0.6			0.1
Non-deductible operating expenses		5.4			5.1
Total other items		15.6	%		16.1	%

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Taxes payable consisted of the following:

	March 31, 2014		December 31, 2013
Income taxes	$	1,126,025	$	662,811
Value added taxes		1,526,475		576,603
Other taxes		200,344		76,072
Total	$	2,852,844	$	1,315,486

As of March 31, 2014 and December 31, 2013, the estimated net operating loss carry forwards of Skystar for U.S. income tax purposes amounted to $5,069,380 and $4,917,108, which may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, beginning in 2025 and through 2033. As of March 31, 2014 and December 31, 2013, the estimated net operating loss carry forwards of Skystar for PRC income tax purposes amounted to $5,039,534 and $4,572,233, which may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, through 2018. Management believes that the realization of the arising from this loss appears to be uncertain due to the Company’s limited operating history and continuing losses for U.S. and PRC income tax purposes. Accordingly, the Company has provided a 100% valuation allowance at March 31, 2014 and December 31, 2013. As of March 31, 2014 and December 31, 2013, the valuation allowance on the tax loss of Skystar was $1,723,589 and $1,671,817, respectively, and that of PRC subsidiaries was $1,259,883 and $1,142,813, respectively. The Company’s management reviews this valuation allowance periodically and makes adjustments as necessary. As of March 31, 2014, the Company had deferred tax assets amounting to $403,372, in respect of accrued expenses of $163,227 and an allowance on doubtful accounts of $240,145. As of December 31, 2013, the Company had deferred tax assets amounting to $364,425, in respect of accrued expenses of $213,865 and an allowance on doubtful accounts of $150,560.

The Company did not provide for deferred income taxes and foreign withholding taxes on the cumulative undistributed earnings of foreign subsidiaries as of March 31, 2014 and December 31, 2013 of approximately $52.9 million and $50.9 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 18 - EARNINGS PER SHARE

The following is the calculation of earnings per share:

	Three months ended March 31,
	2014		2013
Net income	$	975,450	$	712,733
Weighted average shares used in basic computation		7,676,268		7,613,712
Effect of dilutive potential non-vested common shares		24,466		-
Weighted average shares used in diluted computation		7,700,734		7,613,712
Earnings per share:
Basic	$	0.13	$	0.09
Diluted	$	0.13	$	0.09

For the three months ended March 31, 2014, 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 months ended March 31, 2013, the outstanding 140,000 options and 4,000 non-vested shares were excluded from the diluted earnings per share calculation as they are anti-dilutive.

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Note 19 - RELATED PARTY TRANSACTIONS AND ARRANGEMENTS

Amounts payable to related parties are summarized as follows:

	March 31, 2014		December 31, 2013
Amounts due to related parties
Weibing Lu – CEO (1)	$	1,155,155	$	857,012
Bing Mei – CFO (3)		92,209		41,283
Scott Cramer – non-executive director and shareholder (2)		530,349		300,203
Directors, shareholders and other related parties (4)		184,525		163,050
Total	$	1,962,238	$	1,361,548

(1) As of March 31, 2014 and December 31, 2013, the Company had unpaid reimbursement, compensation, and advances for business expenses due to Weibing Lu valued at $1,155,155 and $857,012, respectively.

(2) As of March 31, 2014 and December 31, 2013, the Company had unpaid reimbursement and compensation due to Scott Cramer valued at $530,349 and $300,203, respectively. On March 10, 2014, the Board of Directors, including all of the independent members of the Board, reviewed and approved the terms of Mr. Cramer’s Consulting Services Agreement with the Company pursuant to which the Company would continue employing him as its US representative in consideration of (i) a quarterly cash fee of $7,500, (ii) 7,000 restricted shares of the Company’s common stock issuable on a quarterly basis pursuant to the Company’s 2010 Stock Incentive Plan (note 15), and (iii) reimbursement of out of pocket expenses.  In addition, Mr. Cramer agreed to pay certain invoices of the Company to its vendors (and the Company agreed to reimburse Mr. Cramer) in the form of a no interest bearing loan in the aggregate amount of approximately $250,000.

(3)	As of March 31, 2014 and December 31, 2013, the Company had unpaid reimbursement and compensation due to Bing Mei valued at $92,209 and $41,283, respectively.
(4)	The amounts due to directors, shareholders and other related parties at March 31, 2014 and December 31, 2013 include unpaid reimbursement and advances to other related parties for business expenses.

Also refer to Notes 13, 15 and 20 for other related party transactions and arrangements.

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Note 20 - 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 March 31, 2014, the annual rent for the factory premises was approximately $22,780 (RMB 140,360).

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. 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 $29,214 (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 $23,371 (RMB 144,000).

The Company entered into a one year tenancy agreement for an office lease in Kunshan, Jiangsu Province from October 15, 2012 to April 14, 2013 with a six-month rent of approximately $1,689 (RMB 10,405). On April 15, 2013, the Company entered into an another one-year tenancy agreement for this office from April 15, 2013 to April 14, 2014 with a one-year rent of approximately $3,820 (RMB 23,536). On April 17, 2014, the Company entered into an another one-year tenancy agreement for this office from April 15, 2014 to April 14, 2015 with a one-year rent of approximately $3,820 (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 $38,141 (RMB 235,000) subject to a 10% increase every two years starting July 20, 2013. As of March 31, 2014, the annual rent for the warehouse premises was approximately $41,955 (RMB 258,500).

The Company entered into a tenancy agreement for the lease of a sales office in Jingzhou, Hubei Province for a period of five years from April 18, 2012 to April 17, 2017 with an annual rent of approximately $8,764 (RMB 54,000) for the first three years subject to increase during last two years.

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, 2014	$	25,761	$	46,742	$	72,503
Year ending December 31, 2015		8,764		52,585		61,349
Year ending December 31, 2016		8,764		52,585		61,349
Year ending December 31, 2017 and thereafter		2,191		13,633		15,824
Total	$	45,480	$	165,545	$	211,025

Rental expense to unrelated third parties for the three months ended March 31, 2014 and 2013 amounted to $18,921 and $15,271, respectively. Rental expense to related parties for the three months ended March 31, 2014 and 2013 amounted to $13,245 and $12,905, 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 condensed consolidated financial statements as of March 31, 2014.

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.

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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.” The Supreme Court of the United States denied Chien’s petition for writs of certiorari.

(c) 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 $649,200 (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 March 31, 2014, the Company has incurred approximately $568,050 (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 $973,800 (RMB 6,000,000). As of March 31, 2014, the Company has incurred approximately $843,960 (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 $324,600 (RMB 2,000,000). As of March 31, 2014, the project was extended for clinical trials and the Company has incurred approximately $243,450 (RMB 1,500,000). The project is expected to be completed by the end of 2015.

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 March 31, 2014, 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 $568,050 (RMB 3,500,000). As of March 31, 2014, the Company has incurred $486,900 (RMB 3,000,000) and this project is still under development.

During the third quarter of 2013, Xi’an Tianxing launched an R&D project to develop livestock and avian disease multi-joint yolk antibody therapeutic agents and contracted with Lantian County Chicken Farm to test the effect of its developed agents. The project is expected to be completed by the end of 2014. The total projected budget for this project is approximately $714,120 (RMB 4,400,000). As of March 31, 2014, the Company has incurred $324,600 (RMB 2,000,000) 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, fermentation engineering design and development, GMP inspection trial production tests and lab tests. As of March 31, 2014, $1,665,948 (RMB 10,264,620) has been incurred related to these projects and lab tests.

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R&D projects are summarized as follows:

Project	Amount incurred as of 03/31/2014		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	$	568,050	$	81,150	$	649,200
Project with the Fourth Military Medical University
Fish diseases linked immunosorbent detection kit and fish diseases Multi-linked monoclonal antibody therapeutic agents		843,960		129,840		973,800
New treatment and diagnosis method for Mycoplasmal pneumonia of swine		243,450		81,150		324,600
In-house R&D projects during 2012:
Oral liquid products R&D and field trials		162,300		-		162,300
Powder for injection products R&D and field trials		162,300		-		162,300
Vitamin E injection product development		81,150		-		81,150
Anthelmintic product development		81,150		-		81,150
Three disease grams product development		81,150		-		81,150
Premixes class product development		81,150		-		81,150
Bulk powder products development		81,150		-		81,150
Livestock and fish diseases immunoassay kit development		405,750		-		405,750
In-house R&D projects during 2013:
Fish monoclonal antibody vaccine		486,900		81,150		568,050
Livestock and avian disease multi-joint yolk antibody therapeutic agents		324,600		389,520		714,120
Other projects for veterinary products formula adjustment, pet drug development, fermentation engineering design and development, GMP inspection trial production tests and other lab tests		1,665,948		16,230		1,682,178
Total	$	5,269,008	$	779,040	$	6,048,048

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

(d) Registered capital commitment:

Skystar Kunshan’s remaining registered capital of $12,750,000 was originally required to be invested by May 7, 2012. On March 26, 2014, the Company received the approval of extension for payment of the remaining registered capital to May 6, 2015.

(e) Capital commitment

The Company’s commitments for capital expenditure as of March 31, 2014 are as follows:

Contracted but not accrued for:
Purchase of machinery and construction (Note 9)	$	4,321,562

Note 21 – SEGEMENT INFORMATION

The Company currently engages in one business segment, the research, development, production, marketing and sales of veterinary healthcare and medical care products. The Company’s revenues and cost of revenues by product line were as follows:

	Three Months Ended March 31,
	2014		2013
Revenues
Micro-organism	$	1,521,165	$	1,667,182
Veterinary Medications		4,844,968		3,446,717
Feed Additives		330,537		286,288
Vaccines		135,918		130,554
Total Revenues	$	6,832,588	$	5,530,741
Cost of Revenues
Micro-organism	$	683,784	$	587,417
Veterinary Medications		3,033,027		2,105,516
Feed Additives		220,148		214,637
Vaccines		72,444		23,316
Total Cost of Revenues		4,009,403		2,930,886
Gross Profit	$	2,823,185	$	2,599,855

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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 Biotechnology (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 (“Fortune Time”), 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 $81,150 (RMB 500,000) to establish Shanghai Siqiang Biotechnological Co. Ltd. (”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 equipment.

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. On March 26, 2014, the Company received the government approval of extension for payment of the remaining registered capital of $12,750,000 by May 6, 2015. 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 March 15, 2011, Xi’an Tianxing formed Xi’an Sikaida Bio-products Co., Ltd. (“Xi’an Sikaida”) with a registered capital of approximately $1,623,000 (RMB 10,000,000 ) paid by Xi’an Tianxing.

We rely on a combination of trademark, copyright and trade secret protection laws in China and other jurisdictions, as well as confidentiality procedures and contractual provisions to protect our intellectual property and our brand. On September 23, 2009, we purchased an exclusive aquaculture vaccine technology from and signed a collaborative research and development agreement with China’s Fourth Military Medical University (“FMMU”) for approximately $1.2 million (RMB 8 million), granting us exclusive rights to sell and market the aquaculture vaccine through 2020. The patent on this acquired technology expired in December 2011. However, we retain know-how for the production line for the vaccine. In collaboration with FMMU, we in a position to produce the first vaccine in China designed to prevent and treat certain bacterial infection and diseases in marine life without causing harmful side effects. Based on the vaccine’s first-to-market status, the Ministry of Agriculture (“MOA”) has issued a Grade I Veterinary Certificate for our vaccine. In addition, in 2013 and 2014, we filed 4 additional patent applications with the PRC SIPO, all of which are currently in the review stage of the patent application. We intend to seek other licenses or apply for exclusivity as necessary in order to protect our rights, and we also enter into confidentiality, non-compete and invention assignment agreements with our employees and consultants and nondisclosure agreements with third parties. Skywing, Stardove, Tian Xing, Hao Shou Yi, and the Chinese characters that transliterate as “Jia Teng Jun,” “Jia Teng”, “Lan Yuan Kang”, “Bao Li Jian”, and “Bi Ke Ting” are our registered trademarks in the PRC .

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 unaudited 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 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.

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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: Cash received is recorded as “deposits from customers” and revenue is recognized when the products have been delivered to the customers.

Accounts receivable

Accounts receivable are stated at cost, net of an allowance for doubtful accounts. We maintain allowances for doubtful accounts for estimated losses, if any, resulting from the failure of customers to make required payments. We review the accounts receivable on a periodic basis and makes allowances where there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, we consider many factors, including the age of the balance, the customer’s payment history, its current credit-worthiness and current economic trends.

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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 March 31, 2014 and 2013

The following table summarizes our results of operations for the three months ended March 31, 2014 and 2013.

	Three Months Ended March 31,
	2014					2013
	Amount		% of total revenue			Amount			% of total revenue
Revenue	$	6,832,588		100.0	%	$	5,530,741			100.0	%
Gross Profit	$	2,823,185		41.3	%	$	2,599,855			47.0	%
Operating Expenses	$	1,650,838		24.2	%	$	1,529,570			27.6	%
Income from Operations	$	1,172,347		17.2	%	$	1,070,285			19.4	%
Other Income (Expense)	$	233,130		3.4	%	$	(36,268	)		(0.7	)%
Income Tax Expenses	$	430,027		6.3	%	$	321,284			5.8	%
Net Income	$	975,450		14.3	%	$	712,733			12.9	%

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 March 31, 2014, we had revenues of $6,832,588 as compared to revenues of $5,530,741 for the three months ended March 31, 2013, an increase of $1,301,847 or 23.5%.  We generate revenue from sales of four product lines: veterinary medications, micro-organism, feed additives, and vaccines.  The selling prices of our products decreased about 0.3% on average in the three months ended March 31, 2014 compared to the same period of 2013. 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 $1,398,251 or 40.6%, from $3,446,717 for the three months ended March 31, 2013 to $4,844,968 for the three months ended March 31, 2014. After passing the GMP re-certification of our Huxian facility in September 2012, we were eligible to renew our expired veterinary medication product permits and submit applications for new product permits. The increase of revenue was primarily as a result of more veterinary medication product permits received for manufacturing. We have two veterinary medications 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 March 31, 2014, approximately 84.2% of total revenue resulted from the sale of products from the Huxian facility. The selling prices of our veterinary medication products for the three months ended March 31, 2014 decreased approximately 0.4% 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 decreased by $146,017 or 8.8% from $1,667,182 for the three months ended March 31, 2013 to $1,521,165 for the three months ended March 31, 2014. The decrease was primarily due to the weak market demand for healthcare probiotics products because meat prices declined in the first quarter, which discouraged farmers from increasing their livestock farming. Currently, we have a micro-organism plant located in Sanqiao. The selling prices of our micro-organism products for the three months ended March 31, 2014 have not materially changed on average from 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 increased by $44,249 or 15.5% from $286,288 for the three months ended March 31, 2013 to $330,537 for the three months ended March 31, 2014. The increase was primarily the result of our increased sales efforts despite the weak market demand for additives products. Currently, we have a feed additive plant located in Sanqiao. The selling prices of our feed additives products for the three months ended March 31, 2014 have not materially changed on average from last year. The increase in revenue was primarily due to the increase of sales volume.

Revenue — Vaccines. Revenue from sales of our vaccines increased by $5,365 or 4.1% from $130,554 for the three months ended March 31, 2013 to $135,919 for the three months ended March 31, 2014. We completed the construction of a new vaccine facility at our Huxian plant in 2010. In September 2012, the Ministry of Agriculture (“MOA”) physically inspected this facility and deemed the facility GMP compliant. On December 26, 2013, China's MOA granted the GMP certificate for this new facility. The Company expects to commence production at this new facility in the third quarter of this year. The selling prices of our vaccine products have not materially changed on average for the three months ended March 31, 2014 from last year.

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Cost of Sales.   Cost of sales was $4,009,403 for the three months ended March 31, 2014, as compared to $2,930,886 for the three months ended March 31, 2013, an increase of $1,078,517 or 36.8%, as a result of increased sales of our product lines except micro-organism products. For the three months ended March 31, 2014, raw material costs comprised the majority or approximately 81.8% of the total cost of sales, packing material costs comprised approximately 10.7% of the total cost of sales, and labor costs and manufacturing overhead comprised approximately7.5% of the total cost of sales. The decreased gross margins for the three months ended March 31, 2014 were mainly because the majority of our revenue during the three months came from our less profitable veterinary medications product line, while the relatively high profitable micro-organism line reduced their production, and therefore sales due to the weak demand during the quarter, as described above.

Cost of Sales — Veterinary Medications.   Cost of sales of our veterinary medications product line increased from $2,105,516 for the three months ended March 31, 2013 to $3,033,027 for the three months ended March 31, 2014, an increase of $927,511 or 44.1%.  This increase was mainly due to the increase in corresponding sales.

Cost of Sales — Micro-Organism.   Cost of sales of our micro-organism product line increased from $587,417 for the three months ended March 31, 2013 to $683,784 for the three months ended March 31, 2014, an increase of $96,367 or 16.4%.  This increase was mainly due to the changes in the production formula aimed to improve the product’s efficacy for some of our micro-organism products, which increased our unit raw material cost to produce these micro-organism products.

Cost of Sales — Feed Additives.   Cost of sales of our feed additives product line increased from $214,637 for the three months ended March 31, 2013 to $220,148 for the three months ended March 31, 2014, an increase of $5,511 or 2.6%.  This increase in cost of sales was mainly due to the corresponding increase in feed additives sales. However, the changes in the production formula and better quality of the raw materials used in production helped us to partially offset the increase of cost of sales during the first quarter.

Cost of Sales — Vaccines.   Cost of sales of our vaccines product line increased from $23,316 for the three months ended March 31, 2013 to $72,444 for the three months ended March 31, 2014, an increase of $49,128 or 210.7%.  This increase in cost of sales was mainly due to increased overhead incurred to complete and following the completion of the new vaccine plant during the quarter ended March 31, 2014.

Operating Expenses

	Three Months Ended March 31,
	2014					2013
	Amount		% of total revenue			Amount		% of total revenue
Operating Expenses
Research and Development Costs	$	4,213		0.1	%	$	461		0.0	%
Selling Expenses	$	370,208		5.4	%	$	317,836		5.7	%
General and Administrative Expenses	$	1,276,417		18.7	%	$	1,211,273		21.9	%
Total Operating Expenses	$	1,650,838		24.2	%	$	1,529,570		27.6	%

Research and Development Costs.  Research and development costs totaled $4,213 for the three months ended March 31, 2014 as compared to $461 for the three months ended March 31, 2013, an increase of $3,752 or 813.9%. R&D costs were insignificant for both the first quarter of 2014 and 2013 as there was no significant R&D effort undertaken during the first quarter because of the Chinese New Year.

Selling Expenses.  Selling expenses totaled $370,208 for the three months ended March 31, 2014 as compared to $317,836 for the three months ended March 31, 2013, an increase of $52,372 or 16.5%.  This increase is mainly due to the increase of sales travel and commission costs as the result of increased sales in the first quarter. Sales travel expenses and commission expenses increased $20,123 or 423.1% and $45,302 or 70.9%, respectively, as we increased our sales efforts in the first quarter of 2014. Shipping and handling costs totaled $192,048 and $203,849 for the three months ended March 31, 2014 and 2013, respectively, a decrease of $11,801 or 5.8%, which partially offset the increase of sales travel and commission expenses in the first quarter.

General and Administrative Expenses.  General and administrative expenses totaled $1,276,417 for the three months ended March 31, 2014 as compared to $1,211,273 for the three months ended March 31, 2013, an increase of $65,144 or 5.1%. The increase was primarily due to an increase in salaries by $70,478 and stock based compensation expenses by $55,385. Under the new employment agreement with the Company’s CEO effective January 1, 2014, he is entitled to receive an aggregate 50,000 shares of common stock each year. During the quarter ended March 31, 2014, share based compensation expenses of $44,875 were incurred in relation to this grant to the Company’s CEO.

Other Income (Expenses). Other net income was $233,130 for the three months ended March 31, 2014 as compared to other net expenses of $36,268 for the three months ended March 31, 2013, an increase in other income of $269,398. This increase was largely due to our increased interest income earned on prepayments to suppliers and government subsidies received in the first quarter of 2014.

Provision for Income Taxes. Income tax expenses were $430,027 for the three months ended March 31, 2014 as compared to $321,284 for the three months ended March 31, 2013, an increase of $108,743 or 33.8%, representing an effective tax rate of 30.6% and 31.1% for the three months ended March 31, 2014 and 2013, respectively. For the three months ended March 31, 2014 and 2013, 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 March 31, 2014 and 2013, Xi’an Tianxing contributed the majority of the consolidated profits in China. Excluding the valuation on tax losses incurred by the Company and its PRC subsidiaries and non-deductible expenses, the effective tax rate was 16.3% and 16.0% for the three months ended March 31, 2014 and 2013, respectively.

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Liquidity

For the three months ended March 31, 2014, cash provided by operating activities was $4,597,282, as compared to cash used in operating activities of $9,782,575 for the three months ended March 31, 2013. The major operating activities that provided cash for the three months ended March 31, 2014 were net income (excluding non-cash expenses such as depreciation, amortization, etc) of $1,880,681, a decrease in deposits, prepaid expenses and other receivables of $513,005, an increase in taxes payable of $1,560,250, an increase in accounts payable of $1,350,410 and an increase in due to related parties of $606,813. The major operating activities that used cash for the three months ended March 31, 2014 were an increase in accounts receivable of $2,127,566. China's inflation rate was 2.4% in March 2014, well below the 3.5% target set by the Chinese government, which indicates a stable outlook for prices. 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 March 31, 2014, we had 74 suppliers as compared to 75 suppliers as of December 31, 2013 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 used in investing activities for the three months ended March 31, 2014 was $923,512, as compared $Nil for the three months ended March 31, 2013. Cash used in investing activities for the three months ended March 31, 2014 was primarily the result of a loan to third parties of $1,054,704, which is due for repayment on May 31, 2014.

Cash used in financing activities for the three months ended March 31, 2014 was $4,905,600, as compared to cash provided by financing activities of $2,389,800 for the three months ended March 31, 2013. Cash used in financing activities for the three months ended March 31, 2014 was the result of the repayment of a short-term loan of $4,905,600.

As of March 31, 2014, we had cash of $6,848,905. Our total current assets were $88,378,324, and our total current liabilities were $23,654,522, which resulted in a net working capital of $64,723,802.

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 repaid a $4,905,600 short-term loan during the three months ended March 31, 2014. 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	$	779,040	$	779,040	$	-	$	-	$	-
Construction-in-progress Obligation		4,321,562		4,321,562
Operating Lease Obligations		211,025		87,840		115,393		7,792		-
Total	$	5,311,627	$	5,188,442	$	115,393	$	7,792	$	-

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 March 26, 2014, we received the approval of extension for payment of the remaining registered capital by May 6, 2015.

Short-term loans:

	March 31, 2014				December 31, 2013					Interest
Bank	Amt RMB		Amt USD		Amt RMB		Amt USD		Due Date	Rate
Industrial Bank Co. Ltd. Xi’an Branch		-	$	-		30,000,000	$	4,911,000	01/15/14		6.60	%
Postal Savings Bank of China Xi’an Branch		20,000,000		3,246,000		20,000,000		3,274,000	05/26/14		(2	)
ICBC Songzi Branch		5,000,000		811,500		5,000,000		818,500	06/19/14		(1	)
Related-party Individual – Chairman and CEO		10,000,000		1,623,000		10,000,000		1,637,000	09/11/14		7.8	%
Total		35,000,000	$	5,680,500		65,000,000	$	10,640,500

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(1)	People's Bank of China floating benchmark lending rate over the same period plus 30%, which was 7.8% at March 31, 2014.
(2)	People's Bank of China floating benchmark lending rate over the same period plus 20%, which was 7.2% at March 31, 2014.

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:

	March 31, 2014	December 31, 2013
Assets and liabilities	1 RMB = 0.1623 USD	1 RMB = 0.1637 USD

	Three Months Ended March 31,
	2014	2013
Statements of operations and cash flows	1 RMB = 0.1635 USD	1 RMB = 0.1593 USD

Inflation

China's annual inflation was 2.4% in March 2014. While inflation is below the government’s full-year target of 3.5% points there is room for more stimulus to support a slowing economy, Chinese Premier Li Keqiang has indicated he wants to limit such measures. The slowing economy is likely to continue for the rest of 2014. For the three months ended March 31, 2014, 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.

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 March 31, 2014, 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.

Since the foregoing weaknesses we identified, we carried out a number of measures to address and remediate these weaknesses related to the insufficient number of our U.S. reporting accounting and finance personnel and overall lack of requisite experience in U.S. GAAP. As a result, the Company saw a steady improvement in its internal controls over financial reporting as evidenced by a gradually decreasing number and significance of adjustments proposed by the Company’s independent auditors during their periodical financial reviews and noticeable improvement in the accounting staff’s abilities to handle U.S. GAAP-based reporting. Although we believe that we achieved significant progress in addressing the identified material weaknesses, in our view, such efforts have not yet yielded the results required to fully remediate the material weaknesses. In 2013 (aside from continuing the remediation measures that we initiated in the previous years) we engaged a third party consulting firm to assist us 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 have been and are in the process of improving our accounting policies and procedures manual in accordance to U.S. 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 U.S. GAAP, especially non-routine transactions, and improve our accounting team’s U.S. GAAP competence. In September 2013, this third party consulting firm completed its initial field work at our main administrative offices in China and helped us develop a draft of a new accounting policies and procedures manual in accordance to U.S. GAAP. We intend to complete the project by no later than the end of 2014 and will conduct quarterly assessments of the state of the Company’s financial reporting measures and systems, as a whole.

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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. 

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 litigation that would have a significant effect on the Company’s condensed consolidated financial statements as of March 31, 2014.

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.” The Supreme Court of the United States denied Chien’s petition for writs of certiorari.

ITEM 1A. RISK FACTORS

Except as set forth below, there were no material changes from the risk factors as previously disclosed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2013.

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Risks Relating to Our Business

Our products will be adversely affected if we are unable to protect proprietary rights or operate without infringing the proprietary rights of others.

The profitability of our products will depend in part on our ability to obtain and maintain patents, licenses and preserve trade secrets during the period our intellectual property remains exclusive and proprietary. We must also operate without infringing the proprietary rights of third parties and without third parties circumventing our rights. The patent positions of bio-pharmaceutical and biotechnology enterprises, including ours, are uncertain and involve complex legal and factual questions for which important legal principles are largely unresolved. In addition, the scope of the originally claimed subject matter in a patent application can be significantly reduced before a patent is issued. The biotechnology patent situation outside the U.S. is uncertain, is currently undergoing review and revision in many countries, and may not protect our intellectual property rights to the same extent as the laws of the U.S. Because patent applications are maintained in secrecy in some cases, we cannot be certain that we or our licensors are the first creators of inventions described in our pending patent applications or patents or the first to file patent applications for such inventions.

We rely on a combination of trademark, copyright and trade secret protection laws in China and other jurisdictions, as well as confidentiality procedures and contractual provisions to protect our intellectual property and brand. In September 2009, we purchased an exclusive aquaculture vaccine technology from and signed a collaborative research and development agreement with China’s Fourth Military Medical University (“FMMU”) for approximately $1.2 million (RMB 8 million), granting us exclusive rights to sell and market the aquaculture vaccine through 2020. The patent on this acquired technology expired in December 2011. However, we retain know-how for the production line for the vaccine. In collaboration with FMMU, we intend to produce the first vaccine in China designed to prevent and treat certain bacterial infection and diseases in marine life without causing harmful side effects. Based on the vaccine’s first-to-market status, the MOA has issued a Grade I Veterinary Certificate for our vaccine. In addition, in 2013 and 2014, we filed four additional patent applications with the PRC SIPO all of which are currently in the review stage of the patent application. We provide no assurance that the know-how will be sufficient to protect the underlying technologies or that any of the currently filed patent applications will be approved by the appropriate authorities.

Other companies may independently develop similar products and design around any patented products we develop. We cannot assure you that:

• any of our patent applications will result in the issuance of patents;

• we will develop additional patentable products;

• patents we have been issued will provide us with any competitive advantages;

• the patents of others will not impede our ability to do business; or

• third parties will not be able to circumvent our patents

A number of pharmaceutical, biotechnology, research and academic companies and institutions have developed technologies, filed patent applications or received patents on technologies that may relate to our business. If these technologies, applications or patents conflict with ours, the scope of our current or future patents could be limited or our patent applications could be denied. Our business may be adversely affected if competitors independently develop competing technologies, especially if we do not obtain, or obtain only narrow, patent protection. If patents that cover our activities are issued to other companies, we may not be able to obtain licenses at a reasonable cost, or at all; develop our technology; or introduce, manufacture or sell the products we have planned.

Patent litigation is becoming widespread in the biotechnology industry. Such litigation may affect our efforts to form collaborations, to conduct research or development, to conduct clinical testing or to manufacture or market any products under development. There are no assurances that our patents would be held valid or enforceable by a court or that a competitor’s technology or product would be found to infringe our patents in the event of patent litigation. Our business could be materially affected by an adverse outcome to such litigation. Similarly, we may need to participate in interference proceedings declared by the U.S. Patent and Trademark Office or equivalent international authorities to determine priority of invention. We could incur substantial costs and devote significant management resources to defend our patent position or to seek a declaration that another company’s patents are invalid.

Much of our know-how and technology may not be patentable, though it may constitute trade secrets. Collaborators, advisors or consultants may dispute the ownership of proprietary rights to our technology, for example by asserting that they developed the technology independently. There are no assurances that we will be able to meaningfully protect our trade secrets. We cannot assure you that any of our existing confidentiality agreements with employees, consultants, advisors or collaborators will provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure.

Risks Related to Our Corporate Structure

Chinese laws and regulations governing our businesses and the validity of certain of our contractual arrangements are uncertain. If we are found to be in violation, we could be subject to sanctions. In addition, changes in such Chinese law and regulations may materially and adversely affect our business.

If the Chinese government determines that these contractual arrangements do not comply with applicable regulations, our business could be adversely affected.

We conduct our bio-pharmaceutical business through Xi’an Tianxing by means of contractual arrangements. Xi’an Tianxing holds the licenses and approvals necessary to operate our business in China. We have contractual arrangements with Xi’an Tianxing and its stockholders that allow us to substantially control Xi’an Tianxing. We cannot assure you, however, that we will be able to enforce these contracts.

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Although we believe we comply with current Chinese regulations, and have been advised by our PRC counsel that in their opinion, the structure for operating our business in China (including our corporate structure and contractual arrangements with Xi’an Tianxing) complies with all applicable PRC laws, rules and regulations, and does not violate, breach, contravene or otherwise conflict with any applicable PRC laws, rules or regulations, we cannot assure you that the Chinese government would agree that these operating arrangements comply with Chinese licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future, in particular that the Chinese government does not restrict foreign investment in bio-pharmaceutical business in China. If the Chinese government determines that we do not comply with applicable law, it could revoke our business and operating licenses, require us to discontinue or restrict our operations, restrict our right to collect revenues, require us to restructure our operations, impose additional conditions or requirements with which we may not be able to comply, impose restrictions on our business operations or on our customers, or take other regulatory or enforcement actions against us that could be harmful to our business.

Because we rely on the consulting services agreement with Xian Tianxing for our revenue, the termination of this agreement will severely and detrimentally affect our continuing business viability under our current corporate structure.

We are a holding company and currently we rely for our revenues on dividends payments from Sida after it receives payments from Xi’an Tianxing pursuant to the consulting services agreement which forms a part of the contractual arrangements between Sida and Xi’an Tianxing. The consulting services agreement may be terminated by written notice of Sida or Xi’an Tianxing in the event that: (a) one party causes a material breach of the agreement; (b) one party becomes bankrupt, insolvent, is the subject of proceedings or arrangements for liquidation or dissolution, ceases to carry on business, or becomes unable to pay its debts as they become due; (c) Sida terminates its operations; (d) Xi’an Tianxing’s business license or any other license or approval for its business operations is terminated, cancelled or revoked; or (e) circumstances arise which would materially and adversely affect the performance or the objectives of the agreement. While we are currently not aware of any event or reason that may cause the consulting services agreement to terminate, we cannot assure you that such an event or reason will not occur in the future. In the event that the consulting services agreement is terminated, this may have a severe and detrimental effect on our continuing business viability under our current corporate structure, which in turn may affect the value of your investment.

If PRC authorities determine that the agreements that establish the structure for operating our business in China do not comply with applicable PRC laws and regulations, we could be subject to severe penalties.

We are a Nevada company and, as such, we are classified as a foreign enterprise under PRC laws, and our PRC entities, Sida and Skystar Kunshan, are foreign-invested enterprises under PRC laws. Sida controlled Xi’an Tianxing via contractual agreements. We rely on Xi’an Tianxing to hold and maintain the licenses necessary to operate bio-pharmaceutical business in China.

We cannot assure you that the PRC government will agree that these contractual arrangements comply with existing PRC laws and regulations or with PRC laws and regulations that may be adopted in the future. PRC laws and regulations governing the validity of these contractual arrangements are uncertain and the relevant government authorities have broad discretion in interpreting these laws and regulations.

If the corporate structure and contractual arrangements through which we conduct our business in China were found to be in violation of any existing or future PRC laws or regulations, or such arrangement is determined as illegal or invalid by the PRC court, arbitral tribunal or regulatory authorities, or if we fail to obtain or maintain any of the required permits or approvals under our contractual arrangements, the relevant regulatory authorities, would have broad discretion in dealing with such violations and imposing relevant actions, which actions could include:

• revoking or refusing to grant or renew the business and operating licenses required to conduct our operations in China;

• restricting or prohibiting transactions between Sida and Xi’an Tianxing; 

• imposing fines or other requirements which we may find difficult or impossible to comply with;

• requiring us to alter our ownership structure or operations; and

• restricting or prohibiting the use of any proceeds from our offering to finance our business and operations in China.

The imposition of any of these penalties could result in a material adverse effect on our ability to conduct our business in China, which may have a material adverse effect on our results of operations and financial condition. If any of our contractual arrangements through which we conduct our business are determined to violate any existing or future PRC laws and regulations, we may no longer be able to consolidate the financial results of Xi’an Tianxing, through which substantially all of our operations are conducted, into our consolidated financial statements.

Our contractual arrangements with Xi’an Tianxing and its shareholders may not be as effective in providing operational control as direct ownership. Any failure by Xi’an Tianxing and its shareholders to perform their obligations under the contractual arrangements with us may have a material adverse effect on our business and financial condition.

Under the current contractual arrangements, we rely on the performance by Xi’an Tianxing and its shareholders of their obligations under the contracts to exercise control over Xi’an Tianxing. Xi’an Tianxing and its shareholders may fail to take certain actions required for our business or follow our instructions despite their contractual obligations to do so. If Xi’an Tianxing or its shareholders fail to perform their obligations under the contractual arrangements with us, we may have to restructure our business operations, and/or incur substantial costs and resources to enforce our rights under the contracts and rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief and claiming damages, which may not be effective. If the shareholders of Xi’an Tianxing were to refuse to transfer their equity interests in these entities to us or our designee(s) when and if we request so, or if they were otherwise to act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations, or they may bring claims against us to demand their economic interests and exercise other rights in Xi’an Tianxing by virtue of the fact that they are direct or indirect equity holders of Xi’an Tianxing. PRC laws and regulations governing the validity of our contractual arrangements are uncertain and PRC government authorities, including courts, have broad discretions in interpreting these laws and regulations.

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All of the material agreements under our contractual arrangements are governed by PRC laws and provide for the resolution of disputes arising from or in connection with the agreements through arbitration in the PRC. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal system in the PRC is not as developed as that of certain other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. Under PRC laws, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would incur additional expenses and may cause delay. In the event we are unable to enforce our contractual arrangements, we may not be able to exercise effective control over Xi’an Tianxing, and our ability to conduct our business may be materially and adversely affected.

The shareholders of Xi’an Tianxing may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition. We do not have any arrangements in place to address such potential conflicts.

Weibing Lu, our Chief Executive Officer, is also the Chief Financial Officer and Chairman of the board of directors of Xi’an Tianxing. Mr. Wei Wen, who is Xi’an Tianxing’s Vice-General Manager and director, is a member of board of directors. Conflicts of interests between their respective duties to our Company and Xi’an Tianxing may arise. As our directors and executive officer (in the case of Mr. Lu), they have a duty of loyalty and care to us under U.S. law when there are any potential conflicts of interests between us and Xi’an Tianxing. We cannot assure you, however, that when conflicts of interest arise, each one of them will act completely in our interests or that conflicts of interests will be resolved in our favor. For example, they may determine that it is in Xi’an Tianxing’s interests to sever the contractual arrangements with Sida, irrespective of the effect such action may have on us. In addition, any one of them could violate his or her legal duties by diverting business opportunities from us to others, thereby affecting the amount of payment Xi’an Tianxing is obligated to remit to us under the consulting services agreement.

We may lose the ability to use and enjoy assets held by Xi’an Tianxing that are important to the operation of our business if Xi’an Tianxing declares bankruptcy or become subject to dissolution or liquidation proceedings.

Xi’an Tianxing holds certain assets that are important to our business operations, such as the intellectual property rights of intangible assets. Although the option agreements entered into by and among Sida, Xi’an Tianxing and its respective shareholders contains terms that specifically obligate the shareholders of our variable interest entities to ensure the valid existence of Sida and that Xi’an Tianxingmay not be voluntarily liquidated without our prior consent, in the event the shareholders breach this obligation and voluntarily liquidate Xi’an Tianxing, or if Xi’an Tianxing declares bankruptcy, and all or part of their assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business operations, which could materially and adversely affect our business, financial condition and results of operations. Furthermore, if Xi’an Tianxing undergoes a voluntary or involuntary liquidation proceeding, its shareholders or unrelated third-party creditors may claim rights to some or all of its assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

Risks Related to PRC Laws

PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident beneficial owners to personal liability and limit our ability to acquire PRC companies or to inject capital into our PRC entities, limit our PRC entities’ ability to distribute profits to us or otherwise materially and adversely affect us.

The State Administration of Foreign Exchange (“SAFE”), issued the Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents to Engage in Financing and Round-trip Investment via Overseas Special Purpose Vehicles (“SAFE Circular No. 75”), and a series of implementation rules and guidance, requiring PRC residents, including both legal persons and natural persons, to register with the relevant local branch of SAFE before establishing or acquiring control over any company outside of China, referred to as an offshore special purpose company, for the purpose of raising funds from overseas to acquire assets of, or equity interest in, PRC companies. In addition, any PRC resident that is a beneficial owner of an offshore special purpose company is required to amend his or her registration with the local branch of SAFE, with respect to that offshore special purpose company in connection with any increase or decrease in its capital, transfer of shares, merger, division, equity investment or creation of any security interest over any assets located in China. Any failure to comply with the above registration requirements could result in our PRC entities being prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to their offshore parent companies, offshore parent companies being restricted in their ability to contribute additional capital into their PRC entities and may also subject the relevant PRC entities and PRC residents to penalties under PRC foreign exchange administration regulations.

We have requested PRC residents who we know hold direct or indirect interests in our company to make necessary applications, filings and amendments as required under SAFE Circular No. 75 and other related rules. However, our founders, Mr. Lu Weibing and Mr. Wen Wei who are subject to SAFE Circular No. 75 have not completed registrations with the local branch of SAFE as required by SAFE Circular No. 75 because our PRC counsel believes that Mr. Lu Weibing and Mr. Wen Wei do not need to complete such registration due to completion of restructuring prior to effective date of SAFE Circular No. 75. In addition, we may not be informed of the identities of all of the PRC residents holding direct or indirect interests in our Company, and we cannot provide any assurance that these PRC residents will obtain all necessary registrations or comply with other requirements under SAFE Circular No. 75 or other related rules. Any failure or inability by such individuals to comply with SAFE regulations may subject us to fines or legal sanctions, such as restrictions on our cross-border investment activities or our direct PRC entities’ ability to distribute dividends to, or obtain foreign-exchange-denominated loans from, our company or prevent us from making distributions or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.

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The approval of the China Securities Regulatory Commission may be required in connection with the global offering, and, if required, we cannot assure you that we will be able to obtain such approval.

On August 8, 2006, six PRC regulatory agencies, including the China Securities Regulatory Commission (“CSRC”), promulgated the Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors (“M&A Rules”), which became effective on September 8, 2006 and was amended on June 22, 2009. This regulation, among other things, requires offshore special purpose vehicles, or SPVs, formed for the purpose of an overseas listing and controlled by PRC companies or individuals, to obtain CSRC approval prior to listing their securities on an overseas stock exchange. The application of this regulation remains unclear. Our PRC counsel has advised us that, based on their understanding if the current PRC law, rules, and regulations:

• we established our PRC entities by means of direct investment other than by merger and acquisition of any equity interest or assets of a PRC domestic company owned by PRC companies and/or PRC individuals as defined under the M&A Rules that are our beneficial owners after the effective date of the M&A Rules;

• the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours under this Prospectus Supplement are subject to this regulation;

• given that no provision in this regulation clearly classified contractual arrangements as a type of transaction subject to its regulation, we are not required to submit an application to the CSRC for its approval.

Because there has been no official interpretation or clarification of M&A Rules since its adoption, there is uncertainty as to how this regulation will be interpreted or implemented. If it is determined that the CSRC approval is required for the offering, we may face sanctions by the CSRC or other PRC regulatory agencies for failure to seek the CSRC approval for the offering. These sanctions may include fines and penalties on our operations in the PRC, delays or restrictions on the repatriation of the proceeds from the offering into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our PRC entities, or other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospectus, as well as the trading price of the common stock.

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ITEM 6. EXHIBITS

Exh. No.	Description
3.1	Articles of Incorporation, as amended  (2)
3.2	Bylaws, as amended (1)
10.1	Employment Agreement between Skystar Bio-Pharmaceutical Company and Weibing Lu (3)
10.2	Employment Agreement between Skystar Bio-Pharmaceutical Company and Bing Mei (3)
10.3	Consulting Services Agreement with R. Scott Cramer dated March 10, 2013 *
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.

** In accordance with Regulation S-T, the XBRL-related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”

(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.

(3) Incorporated by reference from Registrant’s Current Report on Form 8-K filed on March 13, 2014.

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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
May 15, 2014	By:	/s/ Weibing Lu
		Weibing Lu
		Chief Executive Officer
		(Principal Executive Officer)

May 15, 2014	By:	/s/ Bing Mei
		Bing Mei
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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EX-10.3

Exhibit 10.3

 CONSULTING SERVICES AGREEMENT

This CONSULTING SERVICES AGREEMENT (this “Agreement”), is dated as of March 10, 2014, 2013, by and between Skystar Bio-Pharmaceutical Company, a Nevada corporation (the “Company”), and R. Scott Cramer, an individual, whose address is 800 N. Maitland Ave., Suite 204, Maitland, Fl 32751 (the “Consultant”). The Company and the Consultant are collectively referred to herein as the “Parties.”

RECITALS:

WHEREAS, the Consultant is currently a member of the Company’s Board of Directors (the “Board”), a position he has held since October 2001, and has been separately and additionally acting as the United States Representative of the Company (the “Representative”) since November 2006; and

WHEREAS, the Parties previously entered into an agreement setting forth the terms for the services of the Consultant as the Representative (“Prior Consulting Agreement”), which agreement expired on March 31, 2012; and

WHEREAS, the Consultant, pursuant to an oral understanding with the Company, continued his services to the Company as the Representative under certain terms since March 31, 2012 without a written renewal of the Prior Consulting Agreement or other written agreement; and

WHEREAS, the Parties desire to amend, in part, and restate the Prior Consulting Agreement with certain amendments and memorialize the terms and conditions for the Consultant’s services as the Representative as set forth in this Agreement, with the intent to supersede any prior understanding, agreements and arrangements by and between the parties.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual agreements herein contained and for other good and valuable consideration, the Parties hereto agree as follows:

1. Continuing Services as the Representative.

1.1          Services Prior to This Agreement. The Parties understand and agree that this Agreement is intended to cover Consultant’s services provided to the Company during the term from April 1, 2012 through the date hereof.

1.2          Continued Services. The Consultant shall continue to act as the Representative upon the terms and conditions set forth hereinafter, and in such capacity, shall provide such services as set forth on attached Annex A and such other services as may be assigned to him from time to time by the Company’s Chief Executive Officer (collectively the “Services”). As the Representative, the Consultant shall report to the Chief Executive Officer during the Term (as defined in Section 3.1) of this Agreement.

2.           Compensation. As compensation for the Services during the Term (as defined in Section 3.1) pursuant to this Agreement, the Consultant shall be compensated as follows:

2.1          Cash Fee. The Company shall pay the Consultant a fee of $7,500.00 every three calendar months. The first installment of this fee shall have been paid on [on the first business day following the end of each three month period]. Payment will be made to the Consultant via wire transfer, and the Company shall be responsible for any applicable wire transfer fees.

2.2          Equity Compensation. The Company shall issue to the Consultant 7,000 restricted shares of common stock every three calendar months under the Company’s 2010 Stock Incentive Plan pursuant to the terms of a Restricted Stock Award Agreement in the form attached hereto as Exhibit A (the “Restricted Stock Agreement”). The first installment of these shares shall be so issued no later than March 31, 2014 or as soon as practicable by the Company after the execution of this Agreement and subsequent issuances shall be on the last trade day of each fiscal quarter.

2.3          Expenses. The Company shall reimburse the Consultant for all reasonable business expenses incurred by the Consultant during the Term hereunder upon presentation by the Consultant of such documentation and records as the Company shall request from time to time require, provided that any expense in excess of $500.00 shall require the prior written approval of the Company.

2.4          Compensation for Directorship. The Consultant presently serves on the Board as a Director. The Consultant acknowledges that while this Agreement is in effect, the Consultant may be entitled to any additional compensation as a Director and any such compensation, if due, shall be covered by a separate agreement.

3.           Term and Termination.

3.1          Term. The term of this Agreement is commenced on the date of this Agreement and shall continue until terminated as provided herein (the “Term”).

3.2          Termination upon Death. If the Consultant dies during the Term, this Agreement shall thereupon terminate, except that the Company shall pay to the estate of the Consultant any accrued and unpaid fee due the Consultant pursuant to Section 2.1 hereof, as well as such number of shares as provided pursuant to Section 2.2 hereof, and all previously accrued but unpaid expense reimbursements under Section 2.3 at the time of the Consultant’s death.

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3.3          Termination upon Disability. The Company may terminate this Agreement upon ten (10) days’ written notice if, for a continuous or accumulated period of forty-five (45) days during the Term, the Consultant is prevented from discharging the Services due to any physical or mental disability. With the exception of the covenants included in Section 4 below, upon such termination, the obligations of the Consultant and the Company under this Agreement shall immediately cease. In the event of a termination pursuant to this section, the Consultant shall be entitled to receive any accrued and unpaid amounts earned pursuant to Section 2.1 hereof, as well as such number of shares as provided pursuant to Section 2.2 hereof, and all previously accrued but unpaid expense reimbursements under Section 2.3 at the time of termination.

3.4          Termination for Cause. The Company reserves the right to terminate this Agreement if the Consultant willfully breaches or habitually neglects the Services that he is required to perform under the terms of this Agreement, or if the Consultant commits such acts of dishonesty, fraud, misrepresentation, gross negligence, or willful misconduct as would prevent the effective performance of the Services or which results in material harm to the Company or its business. The Company may terminate this Agreement for cause by giving written notice of termination to the Consultant. With the exception of the covenants included in Sections 4 and 5 below, upon the date of delivery of the written notice of such termination, the obligations of the Consultant and the Company under this Agreement shall immediately cease. Such termination shall be without prejudice to any other remedy to which the Company may be entitled either at law, in equity, or under this Agreement. In the event of a termination pursuant to this section, the Consultant shall be entitled to receive any accrued and unpaid amounts earned pursuant to Section 2.1 hereof pro rata through the date of such termination. The Company shall also pay to the Consultant all previously accrued but unpaid expense reimbursements under Section 2.3 at the time of termination. 

3.5          Termination without Cause. The Company may terminate this Agreement upon not less than thirty (30) days’ written notice by the Company to the Consultant. With the exception of the covenants included in Sections 4 and 5 below, upon such termination the obligations of the Consultant and the Company under this Agreement shall immediately cease. In the event of a termination pursuant to this section, the Consultant shall be entitled to receive any accrued and unpaid amounts earned pursuant to Section 2.1 hereof, as well as such number of shares as provided pursuant to Section 2.2 hereof, and all previously accrued but unpaid expense reimbursements under Section 2.3 at the time of termination.

3.6          Termination by the Consultant. The Consultant may terminate this Agreement upon not less than thirty (30) days’ written notice by the Consultant to the Company.

4.           Confidential Information.

4.1          Confidential Information. The Consultant acknowledges that:

4.1.1      As a result of his association with the Company pursuant to this Agreement and otherwise, the Consultant may obtain secret and confidential information concerning the business of the Company and its subsidiaries and affiliates (collectively, the “Group”), including, without limitation, trade secrets and any information concerning products, processes, formulas, designs, inventions (whether or not patentable or registrable under copyright or similar laws, and whether or not reduced to practice), discoveries, concepts, ideas, improvements, techniques, methods, research, development and test results, specifications, data, know-how, software, formats, marketing plans and analyses, business plans and analyses, strategies, forecasts, and customer and supplier identities, characteristics, and agreements (“Confidential Information”). In addition, the Consultant may become aware of business opportunities that may be beneficial to the Group, including, but not limited, opportunities to acquire or purchase, or, except for Permitted Competitive Investments (as defined in Section 4.4), otherwise make equity or debt investments in, companies primarily involved in a Competitive Business (“Corporate Opportunities”), during the Term, whether in the course of performing the Services or otherwise, and that such Corporate Opportunities shall considered to be business opportunities of the Group.

4.1.2      The Group will suffer substantial damage which will be difficult to compute if, during the Term or thereafter, the Consultant should divulge Confidential Information.

4.1.3      The provisions of this Agreement are reasonable and necessary for the protection of the business of the Group.

4.2          Protection of Confidential Information. The Consultant agrees that he will not at any time, either during the Term of this Agreement or thereafter, divulge to any person or entity any Confidential Information obtained or learned by him as a result of his Services to the Company, except (i) in the course of performing the Services, (ii) to the extent that any such information is in the public domain other than as a result of the Consultant’s breach of any of his obligations hereunder, (iii) where required to be disclosed by court order, subpoena, or other government process, or (iv) if such disclosure is made without the Consultant’s knowing intent to cause material harm to the Group. If the Consultant shall be required to make disclosure pursuant to the provisions of clause (iii) of the preceding sentence, the Consultant promptly, but in no event more than 24 hours after learning of such subpoena, court order, or other government process, shall notify, by personal delivery or by electronic means, confirmed by mail, the Company and, at the Company’s expense, the Consultant shall: (a) take reasonably necessary and lawful steps required by the Group to defend against the enforcement of such subpoena, court order, or other government process, and (b) permit the Group to intervene and participate with counsel of its choice in any proceeding relating to the enforcement thereof.

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4.3          Return of Confidential Documents. Upon termination of this Agreement, the Consultant will promptly deliver to the Group all memoranda, correspondence, notes, records, reports, manuals, drawings, blue-prints, and other documents (and all copies thereof) relating to the business of the Group and all property associated therewith that he may then possess or have under his control during the course of performing the Services, whether prepared by the Consultant or others.

4.4          Competition. During the Term and terminating one year after the Consultant ceases to serve on the Board, the Consultant, without the prior written permission of the Company, shall not for any reason whatsoever, (i) enter into the employ of or render any services to any person, firm or corporation engaged in any business which is in competition with the Group’s principal existing business at the time of termination (“Competitive Business”); (ii) engage in any Competitive Business as an individual, partner, shareholder, creditor, director, officer, principal, agent, employee, trustee consultant, or advisor or in any other relationship or capacity; (iii) employ, or have or cause any other person or entity to employ, any person who was employed by the Group at the time of termination of this Agreement; or (iv) solicit, interfere with, or endeavor to entice away from the Group, for the benefit of a Competitive Business, any of its customers. Notwithstanding the foregoing, (i) the Consultant shall not be precluded from investing and managing the investment of, his or his family’s assets in the securities of any corporation or other business entity that is engaged in a Competitive Business if such securities are traded on a national stock exchange or quoted on the over-the-counter market and if such investment does not result in his beneficially owning, at any time, more than 2% of any class of the publicly traded equity securities of such Competitive Business (“Permitted Competitive Investment”); and (ii) during the Term of this Agreement and terminating one year after the Consultant ceases to serve on the Board (except for investments in a class of securities trading on public markets), the Consultant: (a) shall be prohibited from taking for himself personally any Corporate Opportunities, and (b) shall refer to the Company for consideration (before any other party) any and all Corporate Opportunities that arise during the Term of this Agreement or for a period of one year thereafter. If the Company determines not to exploit any Corporate Opportunity, the Company shall determine what, if anything, should be done with such opportunity. The Consultant shall not be entitled to any compensation, as a finder or otherwise, if either the Company or the Consultant introduces such opportunity to other persons, it being understood that any such compensation shall be paid to the Company.

4.5          Remedies for the Company. If the Consultant commits a breach of any of the provisions of Section 4.2 or 4.4, the Company shall have the right:

4.5.1      to have the provisions of this Agreement specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed by the Consultant that the services being rendered hereunder to the Company are of a special, unique and extraordinary character and that any breach or threatened breach will cause irreparable injury to the Group and that money damages will not provide an adequate remedy to the Group;

4.5.2      to require the Consultant to account for and pay over to the Company all monetary damages determined by a non-appealable decision by a court of law to have been suffered by the Group as the result of any actions constituting a breach of any of the provisions of Section 4.2 or 4.4, and the Consultant hereby agrees to account for and pay over such damages to the Company; and

4.5.3      to not perform any obligation owed to the Consultant under this Agreement, to the fullest extent permitted by law. The Company shall also have the right, to the fullest extent permitted by law, to adjust any amount due and owing or to be due and owing to the Consultant, whether under this Agreement or any other agreement between the Company and the Consultant in order to satisfy any losses to the Group as a result of Consultant’s breach.

4.6         Violation of Covenant. If the Consultant shall violate any covenant contained in Section 4.4, the duration of such covenant so violated shall be automatically extended for a period of time equal to the period of such violation.

5.           The Consultant’s Representations. The Consultant represents that the entering into and performance of this Agreement by will not violate any law, rule, regulation, order, contract, or agreement to which the Consultant is a party or is bound or affected.

6.           Miscellaneous Provisions.

6.1          Independent Contractor Status. The Parties acknowledge and agree that the Consultant’s relationship with the Company is that of independent contractor and not that of an employee. Nothing in this Agreement is intended to create or will be deemed to create or constitute a joint venture or partnership between the Company and the Consultant.

6.2          Taxes. The Consultant will be responsible for the payment of all withholding, payroll, and other taxes payable in respect of the payments received by the Consultant under this Agreement and hereby agrees to indemnify and hold the Company harmless from any obligation or penalty arising from the failure to pay such taxes.

6.3          Notices. All notices provided for in this Agreement shall be in writing, and shall be deemed to have been duly given when delivered personally to the party to receive the same, when delivered via overnight courier providing for next day delivery service (“Overnight Courier”), when transmitted by facsimile (electronic receipt confirmed), or when mailed first class postage prepaid, by certified mail, return receipt requested, addressed to the party to receive the same at his or its address set forth below, or such other address as the party to receive the same shall have specified by written notice given in the manner provided for in this Section 6.3. All notices shall be deemed to have been given: (a) as of the date of personal delivery, (b) the first business day after delivery via Overnight Courier, (c) on the electronically confirmed date of receipt during business hours of the facsimile transmittal (or the following business day if the facsimile is received after 5:30 p.m. Pacific Time), or (d) three calendar days after the date of deposit (postage pre-paid) with the U.S. Postal Service if delivered via first class or certified mail.

3

If to the Consultant: R. Scott Cramer 800 N. Maitland Ave. Suite 204 Maitland, FL 32789-2225

If to the Company: Skystar Bio-Pharmaceutical Company Room 10601, Jiezuo Plaza No. 4, Fenghui Road South Gaoxin District, Xian Province, PRC Attn: Weibing Lu

6.4         Survival Provisions. The provisions of Sections 4 and 5, and any provisions relating to payments owed to the Consultant after termination of this Agreement, shall survive termination of this Agreement for any reason.

6.5         Entire Agreement. This Agreement sets forth the entire agreement of the Parties relating to the Services of the Consultant and is intended to supersede all prior negotiations, understandings, and agreements, whether oral or written. No provisions of this Agreement may be waived or changed except by writing by the party against whom such waiver or change is sought to be enforced. The failure of any party to require performance of any provision hereof or thereof shall in no manner affect the right at a later time to enforce such provision.

6.6         Governing Law. All questions with respect to the construction of this Agreement, and the rights and obligations of the parties hereunder, shall be determined in accordance with the law of the State of Delaware applicable to agreements made and to be performed entirely in the State of Nevada. Any disputes, claims, or causes of action by one party against the other arising out of, in related to or concerning this Agreement shall be commenced and maintained in any state or federal court located in the State of Nevada, and the Consultant hereby submits to the jurisdiction and venue of any such court.

6.7         Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns of the Company. This Agreement shall not be assignable by the Consultant, but shall inure to the benefit of and be binding upon the Consultant’s heirs and legal representatives.

6.8         Severability. It is the desire and intent of the parties that the terms, provisions, covenants, and remedies contained in this Agreement shall be enforceable to the fullest extent permitted by law. If any such term, provision, covenant, or remedy of this Agreement or the application thereof to any person or circumstances shall, to any extent, be construed to be invalid or unenforceable in whole or in part, then such term, provision, covenant, or remedy shall be construed in a manner so as to permit its enforceability under the applicable law, to the fullest extent permitted by law. In any case, the remaining provisions of the Agreement and the application thereof to any person or circumstance other than those to which they have been held invalid or unenforceable, shall remain valid and in full force and effect.

[Remainder of Page Intentionally Blank]

4

IN WITNESS WHEREOF, the parties have executed this Consulting Services Agreement as of the date first above written.

COMPANY			CONSULTANT
SKYSTAR BIO-PHARMACEUTICAL COMPANY			R. Scott Cramer
By:	/s/ Weibing Lu	By:	/s/ R. Scott Cramer
	Weibing Lu		R. Scott Cramer
Title:	Chief Executive Officer

5

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: May 15, 2014	/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: May 15, 2014	/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 March 31, 2014 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
May 15, 2014	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 March 31, 2014 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
May 15, 2014	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

CAPITAL TRANSACTIONS (Tables)

3 Months Ended

Mar. 31, 2014

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 year follows:

	Non-vested Shares
Non-vested at January 1, 2013		6,000
Granted		69,556
Vested		(62,556)
Forfeited		-
Non-vested at December 31, 2013		13,000
Granted		50,000
Vested		(21,500)
Forfeited		-
Non-vested at March 31, 2014		41,500

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 purchase options using the Black-Scholes Option Pricing Model (“Black-Scholes Model”) using the following assumptions: 

	Purchase Options
	March 31, 2014			December 31, 2013
Stock price	$	6.56		$	3.51
Exercise price	$	8.11		$	8.11
Annual dividend yield		-			-
Expected term (years)		0.25			0.50
Risk-free interest rate		0.05	%		0.10	%
Expected volatility		80	%		125	%
Option value	$	0.56		$	0.45

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, 2014		140,000	$	8.11		0.50
Granted		-		-
Forfeited		-		-
Exercised		-		-
Outstanding at March 31, 2014		140,000	$	8.11		0.25
Exercisable at March 31, 2014		140,000	$	8.11		0.25

XML

DEPOSITS, PREPAID EXPENSES AND OTHER RECEIVABLES (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Deposits and Prepaid Expenses [Line Items]
Other prepayments	$ 365,055	$ 478,144
Deposits placed with guarantors (note 13)	486,900	491,100
Interest receivable (notes 7 and 12)	168,718	497,844
Other receivables	587,732	667,075
Total	$ 1,608,405	$ 2,134,163

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2)	3 Months Ended
	Mar. 31, 2014
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	3 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

XML

CAPITAL TRANSACTIONS (Details)	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Nonvested shares [Line Items]
Non-vested at January 1, 2013	13,000	6,000
Granted	50,000	69,556
Vested	(21,500)	(62,556)
Forfeited	0	0
Non-vested at Ending	41,500	13,000

XML

PREPAYMENTS TO SUPPLIERS (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Payments To Suppliers [Line Items]
Prepayments for raw materials	$ 39,438,992	$ 39,937,944
Prepayments for packaging materials	1,102,483	1,123,200
Total	$ 40,541,475	$ 41,061,144

XML

TAXES (Details 3) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Income Tax Disclosure [Line Items]
Income taxes	$ 1,126,025	$ 662,811
Value added taxes	1,526,475	576,603
Other taxes	200,344	76,072
Total	$ 2,852,844	$ 1,315,486

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Purchase option liability	$ 78,960	$ 62,440
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	78,960	62,440
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Purchase option liability	$ 0	$ 0

XML

PREPAYMENTS TO SUPPLIERS (Tables)

3 Months Ended

Mar. 31, 2014

Prepayments For Raw Materials Purchasing [Abstract]

Prepayments For Raw Materials Purchasing [Table Text Block]

Prepayments to suppliers are comprised of the following:

	March 31, 2014		December 31, 2013
Prepayments for raw materials	$	39,438,992	$	39,937,944
Prepayments for packaging materials		1,102,483		1,123,200
Total	$	40,541,475	$	41,061,144

XML

TAXES (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
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	15.60%	16.10%
Operating Loss Carryforwards, Valuation Allowance	$ 1,723,589		$ 1,671,817
Undistributed Earnings Of Foreign Subsidiaries	52,900,000		50,900,000
Deferred Tax Assets, Net	403,372		364,425
Accrued Liabilities, Current	163,227		213,865
Allowance for Doubtful Accounts Receivable	240,145		150,560
U S Income Tax [Member]
Income Tax Disclosure [Line Items]
Operating Loss Carryforwards	5,069,380		4,917,108
P R C Income Tax [Member]
Income Tax Disclosure [Line Items]
Operating Loss Carryforwards	5,039,534		4,572,233
Operating Loss Carryforwards, Valuation Allowance	$ 1,259,883		$ 1,142,813

XML

CAPITAL TRANSACTIONS (Details Textual) (USD $)	3 Months Ended		12 Months Ended				0 Months Ended	3 Months Ended	12 Months Ended				3 Months Ended		12 Months Ended		1 Months Ended			1 Months Ended	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Jun. 30, 2010	Mar. 31, 2014 Fair Value, Inputs, Level 2 [Member]	Dec. 31, 2013 Fair Value, Inputs, Level 2 [Member]	Dec. 08, 2009 Equity Compensation Plan 2010 [Member]	Mar. 31, 2014 Equity Compensation Plan 2010 [Member]	Dec. 31, 2013 Equity Compensation Plan 2010 [Member]	Mar. 31, 2013 Equity Compensation Plan 2010 [Member]	May 04, 2012 Equity Compensation Plan 2010 [Member]	Mar. 31, 2014 Non Executive Director [Member]	Mar. 31, 2014 Non Executive Director [Member] Equity Compensation Plan 2010 [Member]	Mar. 31, 2012 Non Executive Director [Member] Equity Compensation Plan 2010 [Member]	Dec. 31, 2013 Non Executive Director [Member] Equity Compensation Plan 2010 [Member]	Mar. 31, 2013 Non Executive Director [Member] Equity Compensation Plan 2010 [Member]	May 26, 2009 Director [Member]	Dec. 31, 2013 Director [Member]	Dec. 31, 2012 Director [Member]	Jul. 29, 2011 Chief Financial Officer [Member]	Mar. 31, 2014 Chief Financial Officer [Member]	Dec. 31, 2013 Chief Financial Officer [Member]	Dec. 31, 2012 Chief Financial Officer [Member]	Mar. 31, 2014 Chief Executive Officer [Member]
Capital Transaction [Line Items]
Share Based Compensation Arrangement By Share Based Payment Award Award Requisite Service Period1														28,000			5,556			8,000
Fair Market Value Per Common Share														$ 2.95		$ 1.73				$ 4.20
Closing Market Price Per Common Share																		$ 1.20	$ 2.39	$ 2.17	$ 3.59	$ 1.37	$ 2.17
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
Common Stock Purchase Options Exercise Price				$ 8.11
Common Stock Purchase Options Outstanding	140,000		140,000	140,000				247,119	247,119
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant											442,881	11,112
Stock Issued During Period, Shares, New Issues							700,000						56,000		49,000					2,000	12,000	10,000
Unrecognized Compensation Cost								$ 138,198
Change in fair value of purchase option liability	(16,520)	4,466
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized					140,000	140,000		59,725		4,340											50,000
Share Based Compensation Arrangement By Share Based Payment Award, Number Of Shares Expected to Vest	12,500																							12,500
Share-based Compensation, Total	$ 59,725	$ 4,340
Share-Based Compensation Arrangement By Share-Based Payment Award, Equity Instruments Other Than Options, Vested In Period	21,500		62,556					91,612	70,112					7,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross	0																			8,000

XML

PROPERTY, PLANT AND EQUIPMENT, NET (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Buildings and improvements	$ 28,033,999	$ 27,703,872
Machinery and equipment	8,261,929	6,093,533
Office equipment and furniture	334,800	337,688
Vehicles	606,755	611,989
Total	37,237,483	34,747,082
Less: accumulated depreciation	(6,819,830)	(6,477,927)
Plant and equipment, net	$ 30,417,653	$ 28,269,155

XML

TAXES (Details 1)	3 Months Ended
	Mar. 31, 2014		Mar. 31, 2013
Income Tax Disclosure [Line Items]
U.S. statutory rate	34.00%		34.00%
Foreign income not recognized in the U.S.	(34.00%)		(34.00%)
China income tax rate	25.00%		25.00%
China income tax exemption	(10.00%)		(10.00%)
Other items (1)	15.60%	[1]	16.10%	[1]
Total provision for income taxes	30.60%		31.10%

[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 15.6% and 16.1% for the three months ended March 31, 2014 and 2013, respectively.

XML

COMMITMENTS AND CONTINGENCIES (Details 2) (USD $)	3 Months Ended
	Mar. 31, 2014
Contracted but not accrued for:
Purchase of machinery and construction (Note 9)	$ 4,321,562

XML

EARNINGS PER SHARE (Details Textual)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Employee Stock Option [Member]
Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	140,000	140,000
Non Vested Shares [Member]
Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount		4,000

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COMMITMENTS AND CONTINGENCIES (Details Textual)			3 Months Ended																		0 Months Ended	1 Months Ended								3 Months Ended		0 Months Ended		1 Months Ended		3 Months Ended	1 Months Ended	0 Months Ended					1 Months Ended					3 Months Ended
	Mar. 31, 2014 USD ($)	May 07, 2012 Skystar Biotechnology (Kunshan) Co., Limited [Member] USD ($)	Mar. 31, 2014 Related Parties [Member] USD ($)	Mar. 31, 2013 Related Parties [Member] USD ($)	Mar. 31, 2014 Unrelated Third Parties [Member] USD ($)	Mar. 31, 2013 Unrelated Third Parties [Member] USD ($)	Mar. 31, 2014 Project With Northwestern Agricultural Technology University [Member] USD ($)	Mar. 31, 2014 Project With Northwestern Agricultural Technology University [Member] CNY	Mar. 31, 2014 Project With Fourth Military Medical University One [Member] USD ($)	Mar. 31, 2014 Project With Fourth Military Medical University One [Member] CNY	Dec. 31, 2009 Project With Fourth Military Medical University One [Member] USD ($)	Dec. 31, 2009 Project With Fourth Military Medical University One [Member] CNY	Mar. 31, 2014 Project With Fourth Military Medical University Two [Member] USD ($)	Mar. 31, 2014 Project With Fourth Military Medical University Two [Member] CNY	Sep. 30, 2013 Project With Fourth Military Medical University Two [Member] USD ($)	Sep. 30, 2013 Project With Fourth Military Medical University Two [Member] CNY	Mar. 31, 2014 Veterinary Products Formula Adjustment Pet Drug Development and Fermentation Engineering Design and Development Project [Member] USD ($)	Mar. 31, 2014 Veterinary Products Formula Adjustment Pet Drug Development and Fermentation Engineering Design and Development Project [Member] CNY	Dec. 31, 2008 Project With Fourth Military Medical University [Member] USD ($)	Dec. 31, 2008 Project With Fourth Military Medical University [Member] CNY	Apr. 15, 2013 Jingzhou [Member]	Apr. 18, 2012 Jingzhou [Member] USD ($)	Apr. 18, 2012 Jingzhou [Member] CNY	Mar. 31, 2014 Lantian County Chicken Farm [Member] USD ($)	Mar. 31, 2014 Lantian County Chicken Farm [Member] CNY	Mar. 31, 2014 Project With Fourth Military Medical University Three [Member] USD ($)	Mar. 31, 2014 Project With Fourth Military Medical University Three [Member] CNY	Jun. 30, 2013 Project With Fourth Military Medical University Three [Member] USD ($)	Jun. 30, 2013 Project With Fourth Military Medical University Three [Member] CNY	Mar. 31, 2014 Sanqiao Factory Premises [Member] USD ($)	Mar. 31, 2014 Sanqiao Factory Premises [Member] CNY	Jan. 01, 2007 Shanghai Siqiangs Office Space [Member] Mr Weibing Lu [Member] USD ($)	Jan. 01, 2007 Shanghai Siqiangs Office Space [Member] Mr Weibing Lu [Member] CNY	Jan. 31, 2012 Shanghai Siqiangs Office Space [Member] Mr Weibing Lu [Member] USD ($)	Jan. 31, 2012 Shanghai Siqiangs Office Space [Member] Mr Weibing Lu [Member] CNY	Mar. 31, 2014 Shanghai Siqiangs Office Space [Member] Mr Weibing Lu [Member]	Apr. 17, 2014 Kunshan Office [Member]	Apr. 15, 2013 Kunshan Office [Member]	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. 17, 2012 Kunshan Office [Member] USD ($)	Apr. 17, 2012 Kunshan Office [Member] CNY	Jul. 20, 2011 Kunshan Office [Member]	Jul. 20, 2011 Xian Warehouse Premises [Member] USD ($)	Jul. 20, 2011 Xian Warehouse Premises [Member] CNY	Mar. 31, 2014 Xian Warehouse Premises [Member] USD ($)	Mar. 31, 2014 Xian Warehouse Premises [Member] CNY
Commitments And Contingencies [Line Items]
Description of Lessee Leasing Arrangements, Operating Leases																					Company entered into a tenancy agreement for the lease of a sales office in Jingzhou, Hubei Province for a period of five years from April 18, 2012 to April 17, 2017									Company entered into a tenancy agreement for the lease of factory premises of Xian 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	Company entered into a tenancy agreement for the lease of factory premises of Xian 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					Company also entered into 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	Company entered into an another one-year tenancy agreement for this office from April 15, 2014 to April 14, 2015	Company entered into an another one-year tenancy agreement for this office from April 15, 2013 to April 14, 2014	Company entered into a one year tenancy agreement for an office lease in Kunshan, Jiangsu Province from October 15, 2012 to April 14, 2013	Company entered into a one year tenancy agreement for an office lease in Kunshan, Jiangsu Province from October 15, 2012 to April 14, 2013						Company entered into a tenancy agreement for the lease of warehouse premises in Xian for a period of three years from July 20, 2011 to July 19, 2014	Company entered into a tenancy agreement for the lease of warehouse premises in Xian for a period of three years from July 20, 2011 to July 19, 2014	subject to a 10% increase every two years starting July 20, 2013	subject to a 10% increase every two years starting July 20, 2013
Lease Expiration Date																					Apr. 17, 2017									Dec. 31, 2014	Dec. 31, 2014					Aug. 01, 2017	Apr. 14, 2015	Apr. 14, 2014	Apr. 14, 2013	Apr. 14, 2013					Jul. 19, 2014
Operating Leases, Rent Expense			$ 13,245	$ 12,905	$ 18,921	$ 15,271																$ 8,764	54,000							$ 22,780	140,360	$ 23,371	144,000	$ 29,214	180,000				$ 1,689	10,405	$ 3,820	23,536	$ 3,820	23,536		$ 38,141	235,000	$ 41,955	258,500
Clinical Research Stage													324,600	2,000,000
INCOME BEFORE PROVISION FOR INCOME TAXES	5,269,008						568,050	3,500,000	843,960	5,200,000			243,450	1,500,000												486,900	3,000,000
Amount expected to be incurred	779,040						81,150		129,840		973,800	6,000,000	81,150		324,600	2,000,000	1,665,948	10,264,620	649,200	4,000,000				714,120	4,400,000			568,050	3,500,000
Investment Obligation Capital		$ 12,750,000

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TAXES (Details 2)	3 Months Ended
	Mar. 31, 2014		Mar. 31, 2013
Income Tax Disclosure [Line Items]
Income taxed at Chinese statutory rate of 25%	1.30%		1.00%
Valuation allowance on tax loss	8.30%		9.90%
Share based compensation	0.60%		0.10%
Non-deductible operating expenses	5.40%		5.10%
Total other items	15.60%	[1]	16.10%	[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 15.6% and 16.1% for the three months ended March 31, 2014 and 2013, respectively.

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CAPITAL TRANSACTIONS (Details 1) (Purchase Options [Member], USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Purchase Options [Member]
Purchase Options [Line Items]
Stock price	$ 6.56	$ 3.51
Exercise price	$ 8.11	$ 8.11
Annual dividend yield	0.00%	0.00%
Expected term (years)	3 months	6 months
Risk-free interest rate	0.05%	0.10%
Expected volatility	80.00%	125.00%
Option value	$ 0.56	$ 0.45

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RELATED PARTY TRANSACTIONS AND ARRANGEMENTS

3 Months Ended

Mar. 31, 2014

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Note 19 - RELATED PARTY TRANSACTIONS AND ARRANGEMENTS

Amounts payable to related parties are summarized as follows:

	March 31, 2014		December 31, 2013
Amounts due to related parties
Weibing Lu – CEO (1)	$	1,155,155	$	857,012
Bing Mei – CFO (3)		92,209		41,283
Scott Cramer – non-executive director and shareholder (2)		530,349		300,203
Directors, shareholders and other related parties (4)		184,525		163,050
Total	$	1,962,238	$	1,361,548

(1) As of March 31, 2014 and December 31, 2013, the Company had unpaid reimbursement, compensation, and advances for business expenses due to Weibing Lu valued at $1,155,155 and $857,012, respectively.

(2) As of March 31, 2014 and December 31, 2013, the Company had unpaid reimbursement and compensation due to Scott Cramer valued at $530,349 and $300,203, respectively. On March 10, 2014, the Board of Directors, including all of the independent members of the Board, reviewed and approved the terms of Mr. Cramer’s Consulting Services Agreement with the Company pursuant to which the Company would continue employing him as its US representative in consideration of (i) a quarterly cash fee of $7,500, (ii) 7,000 restricted shares of the Company’s common stock issuable on a quarterly basis pursuant to the Company’s 2010 Stock Incentive Plan (note 15), and (iii) reimbursement of out of pocket expenses.  In addition, Mr. Cramer agreed to pay certain invoices of the Company to its vendors (and the Company agreed to reimburse Mr. Cramer) in the form of a no interest bearing loan in the aggregate amount of approximately $250,000.

(3)	As of March 31, 2014 and December 31, 2013, the Company had unpaid reimbursement and compensation due to Bing Mei valued at $92,209 and $41,283, respectively.
(4)	The amounts due to directors, shareholders and other related parties at March 31, 2014 and December 31, 2013 include unpaid reimbursement and advances to other related parties for business expenses.

Also refer to Notes 13, 15 and 20 for other related party transactions and arrangements.

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CONCENTRATIONS AND CREDIT RISK (Details Textual) (USD $)			3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2014 Supplier Concentration Risk [Member]	Mar. 31, 2013 Supplier Concentration Risk [Member]	Mar. 31, 2014 Product Concentration Risk [Member]	Mar. 31, 2013 Product Concentration Risk [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage			71.00%	72.00%	32.00%	16.00%
Due To Related Parties, Current	$ 1,962,238	$ 1,361,548			$ 32,801,071	$ 32,094,767

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RELATED PARTY TRANSACTIONS AND ARRANGEMENTS (Tables)

3 Months Ended

Mar. 31, 2014

Related Party Transactions [Abstract]

Schedule of Related Party Transactions [Table Text Block]

Amounts payable to related parties are summarized as follows:

	March 31, 2014		December 31, 2013
Amounts due to related parties
Weibing Lu – CEO (1)	$	1,155,155	$	857,012
Bing Mei – CFO (3)		92,209		41,283
Scott Cramer – non-executive director and shareholder (2)		530,349		300,203
Directors, shareholders and other related parties (4)		184,525		163,050
Total	$	1,962,238	$	1,361,548

(1) As of March 31, 2014 and December 31, 2013, the Company had unpaid reimbursement, compensation, and advances for business expenses due to Weibing Lu valued at $1,155,155 and $857,012, respectively.

(2) As of March 31, 2014 and December 31, 2013, the Company had unpaid reimbursement and compensation due to Scott Cramer valued at $530,349 and $300,203, respectively. On March 10, 2014, the Board of Directors, including all of the independent members of the Board, reviewed and approved the terms of Mr. Cramer’s Consulting Services Agreement with the Company pursuant to which the Company would continue employing him as its US representative in consideration of (i) a quarterly cash fee of $7,500, (ii) 7,000 restricted shares of the Company’s common stock issuable on a quarterly basis pursuant to the Company’s 2010 Stock Incentive Plan (note 15), and (iii) reimbursement of out of pocket expenses.  In addition, Mr. Cramer agreed to pay certain invoices of the Company to its vendors (and the Company agreed to reimburse Mr. Cramer) in the form of a no interest bearing loan in the aggregate amount of approximately $250,000.

(3)	As of March 31, 2014 and December 31, 2013, the Company had unpaid reimbursement and compensation due to Bing Mei valued at $92,209 and $41,283, respectively.
(4)	The amounts due to directors, shareholders and other related parties at March 31, 2014 and December 31, 2013 include unpaid reimbursement and advances to other related parties for business expenses.

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TAXES (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Income Tax Disclosure [Line Items]
Current	$ 472,407	$ 321,284
Deferred	(42,380)	0
Total	$ 430,027	$ 321,284

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INTANGIBLE ASSETS (Tables)

3 Months Ended

Mar. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

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

Intangible assets consist of the following:

	March 31, 2014		December 31, 2013
Land use rights	$	4,909,577	$	4,951,927
Technological know-how		2,596,800		2,619,200
Total		7,506,377		7,571,127
Less: accumulated amortization		(2,375,923)		(2,333,872)
Intangible assets, net	$	5,130,454	$	5,237,255

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
2014	$	186,032
2015		248,042
2016		248,042
2017		248,042
2018		248,042
Thereafter		3,952,254
Total	$	5,130,454

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ACCOUNTS RECEIVABLE, NET (Details 1) (USD $)	3 Months Ended
	Mar. 31, 2014
Schedule of Financing Receivable [Line Items]
Balance, January 1, 2014	$ 602,243
Addition	366,218
Recovery	0
Translation adjustment	(7,883)
Balance, March 31, 2014	$ 960,578

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SHORT-TERM LOANS (Details)									3 Months Ended						3 Months Ended								3 Months Ended								3 Months Ended
	Mar. 31, 2014 USD ($)	Mar. 31, 2014 CNY	Dec. 31, 2013 USD ($)	Dec. 31, 2013 CNY	Apr. 16, 2013 USD ($)	Apr. 16, 2013 CNY	Apr. 14, 2014 Changan Bank [Member] USD ($)	Apr. 14, 2014 Changan Bank [Member] CNY	Mar. 31, 2014 Industrial Bank Co Ltd Xian Branch [Member] USD ($)	Mar. 31, 2014 Industrial Bank Co Ltd Xian Branch [Member] CNY	Dec. 31, 2013 Industrial Bank Co Ltd Xian Branch [Member] USD ($)	Dec. 31, 2013 Industrial Bank Co Ltd Xian Branch [Member] CNY	Jan. 16, 2013 Industrial Bank Co Ltd Xian Branch [Member] USD ($)	Jan. 16, 2013 Industrial Bank Co Ltd Xian Branch [Member] CNY	Mar. 31, 2014 Postal Savings Bank of China Xi'an Branch [Member] USD ($)		Mar. 31, 2014 Postal Savings Bank of China Xi'an Branch [Member] CNY		Dec. 31, 2013 Postal Savings Bank of China Xi'an Branch [Member] USD ($)		Dec. 31, 2013 Postal Savings Bank of China Xi'an Branch [Member] CNY		Mar. 31, 2014 Icbc Songzi Branch Two [Member] USD ($)		Mar. 31, 2014 Icbc Songzi Branch Two [Member] CNY		Dec. 31, 2013 Icbc Songzi Branch Two [Member] USD ($)		Dec. 31, 2013 Icbc Songzi Branch Two [Member] CNY		Mar. 31, 2014 Related-party Individual - Chairman and CEO [Member] USD ($)	Mar. 31, 2014 Related-party Individual - Chairman and CEO [Member] CNY	Dec. 31, 2013 Related-party Individual - Chairman and CEO [Member] USD ($)	Dec. 31, 2013 Related-party Individual - Chairman and CEO [Member] CNY
Short-term Debt [Line Items]
Bank Loans	$ 5,680,500	35,000,000	$ 10,640,500	65,000,000	$ 324,600	2,000,000	$ 7,790,400	48,000,000	$ 0	0	$ 4,911,000	30,000,000	$ 4,869,000	30,000,000	$ 3,246,000	[1]	20,000,000	[1]	$ 3,274,000	[1]	20,000,000	[1]	$ 811,500	[2]	5,000,000	[2]	$ 818,500	[2]	5,000,000	[2]	$ 1,623,000	10,000,000	$ 1,637,000	10,000,000
Due Date									Jan. 15, 2014	Jan. 15, 2014					May 26, 2014	[1]	May 26, 2014	[1]					Jun. 19, 2014	[2]	Jun. 19, 2014	[2]					Sep. 11, 2014	Sep. 11, 2014
Interest Rate							3.00%	3.00%	6.60%	6.60%			6.60%	6.60%																	7.80%	7.80%

[1] People's Bank of China floating benchmark lending rate over the same period plus 20%, which was 7.2% at March 31, 2014.

[2] People's Bank of China floating benchmark lending rate over the same period plus 30%, which was 7.8% at March 31, 2014.

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LONG-TERM PREPAYMENTS (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Long Tem Prepayments [Line Items]
Deposits for equipment purchase and land use rights	$ 3,836,884	$ 3,871,228
Construction deposits	386,224	366,688
Prepayments for R&D project	363,552	389,556
Deposits for other	6,091	6,142
Long-term prepayments	4,592,751	4,633,614
Long-term prepayments for acquisitions	$ 0	$ 183,344

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) (USD $)	3 Months Ended
	Mar. 31, 2014
Purchase Option Liability [Line Items]
Balance, January 1, 2014	$ 62,440
Change in fair value	16,520
Balance, March 31, 2014	$ 78,960

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CONCENTRATIONS AND CREDIT RISK

3 Months Ended

Mar. 31, 2014

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, prepayments to suppliers and others. 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 customers and places unsecured prepayments for purchase to suppliers. As a result, there are credit risks with the accounts receivable and prepayments to suppliers .

For the three months ended March 31, 2014 and 2013, 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 March 31, 2014 and December 31, 2013 are from customers located in the PRC.

The Company’s six largest vendors accounted for approximately 71% and 72% of the Company’s total purchases, respectively, for the three months ended March 31, 2014 and 2013, respectively. No other vendors accounted for more than 10% of the Company’s total purchases. As of March 31, 2014 and December 31, 2013, prepayments of $32,801,071 and $32,094,767 were made to the six largest vendors, respectively, for raw materials and packing materials purchases.

The Company had one product that accounted for 32% and 16% of the Company’s total revenues for the three months ended March 31, 2014 and 2013, respectively. No other products accounted for more than 10% of the Company’s total sales.

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LONG-TERM PREPAYMENTS (Details Textual) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Long Tem Prepayments [Line Items]
Long-term prepayments for acquisitions	$ 0	$ 183,344

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COMMITMENTS AND CONTINGENCIES (Tables)

3 Months Ended

Mar. 31, 2014

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, 2014	$	25,761	$	46,742	$	72,503
Year ending December 31, 2015		8,764		52,585		61,349
Year ending December 31, 2016		8,764		52,585		61,349
Year ending December 31, 2017 and thereafter		2,191		13,633		15,824
Total	$	45,480	$	165,545	$	211,025

Schedule Of Research and Development Project Costs [Table Text Block]

R&D projects are summarized as follows:

Project	Amount incurred as of 03/31/2014		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	$	568,050	$	81,150	$	649,200
Project with the Fourth Military Medical University
Fish diseases linked immunosorbent detection kit and fish diseases Multi-linked monoclonal antibody therapeutic agents		843,960		129,840		973,800
New treatment and diagnosis method for Mycoplasmal pneumonia of swine		243,450		81,150		324,600
In-house R&D projects during 2012:
Oral liquid products R&D and field trials		162,300		-		162,300
Powder for injection products R&D and field trials		162,300		-		162,300
Vitamin E injection product development		81,150		-		81,150
Anthelmintic product development		81,150		-		81,150
Three disease grams product development		81,150		-		81,150
Premixes class product development		81,150		-		81,150
Bulk powder products development		81,150		-		81,150
Livestock and fish diseases immunoassay kit development		405,750		-		405,750
In-house R&D projects during 2013:
Fish monoclonal antibody vaccine		486,900		81,150		568,050
Livestock and avian disease multi-joint yolk antibody therapeutic agents		324,600		389,520		714,120
Other projects for veterinary products formula adjustment, pet drug development, fermentation engineering design and development, GMP inspection trial production tests and other lab tests		1,665,948		16,230		1,682,178
Total	$	5,269,008	$	779,040	$	6,048,048

Long-term Purchase Commitment [Table Text Block]

The Company’s commitments for capital expenditure as of March 31, 2014 are as follows:

Contracted but not accrued for:
Purchase of machinery and construction (Note 9)	$	4,321,562

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

3 Months Ended

Mar. 31, 2014

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 March 31, 2014 and December 31, 2013:

	Carrying Value at March 31,		Fair Value Measurement at March 31, 2014
	2014		Level 1		Level 2		Level 3
Purchase option liability	$	78,960	$	—	$	78,960	$	—

	Carrying Value at December 31,		Fair Value Measurement at December 31, 2013
	2013		Level 1		Level 2		Level 3
Purchase option liability	$	62,440	$	—	$	62,440	$	—

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

Below is the reconciliation for the purchase option liability changes from January 1, 2014 to March 31, 2014:

Balance, January 1, 2014	$	62,440
Change in fair value		16,520
Balance, March 31, 2014	$	78,960

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	Shorter of lease term or 10-40 years
Machinery and equipment	5-10 years
Office equipment and furniture	3-10 years
Vehicles	5-10 years

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Basis of Accounting, Policy [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, 2014. 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, 2013 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 doubtful accounts, 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 March 31, 2014 and December 31, 2013:

	Carrying Value at March 31,		Fair Value Measurement at March 31, 2014
	2014		Level 1		Level 2		Level 3
Purchase option liability	$	78,960	$	—	$	78,960	$	—

	Carrying Value at December 31,		Fair Value Measurement at December 31, 2013
	2013		Level 1		Level 2		Level 3
Purchase option liability	$	62,440	$	—	$	62,440	$	—

Below is the reconciliation for the purchase option liability changes from January 1, 2014 to March 31, 2014:

Balance, January 1, 2014	$	62,440
Change in fair value		16,520
Balance, March 31, 2014	$	78,960

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.

Cash and Cash Equivalents, Policy [Policy Text Block]

Cash

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

Receivables, Policy [Policy Text Block]

Accounts receivable

Accounts receivable are stated at cost, net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses, if any, resulting from the failure of customers to make required payments. The Company reviews the accounts receivable on a periodic basis and makes allowances where there is doubt as to the collectibility of individual balances. In evaluating the collectibility of individual receivable balances, the Company considers many factors, including the age of the balance, the customer’s payment history, its current credit-worthiness and current economic trends.

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 write-down 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	Shorter of lease term or 10-40 years
Machinery and equipment	5-10 years
Office equipment and furniture	3-10 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 reduces 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 March 31, 2014 and December 31, 2013, 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 factory buildings. 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 —Intangible assets are evaluated at least annually for impairment if events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets by comparing the asset's estimated fair value with its carrying value, based on cash flow methodology. Based on its review, the Company believes that, as of March 31, 2014 and December 31, 2013, 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, and totaled $192,048 and $203,849 for the three months ended March 31, 2014 and 2013, 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 quarters ended March 31, 2014 and 2013, respectively.

Research and Development Expense, Policy [Policy Text Block]

Research and development costs

Research and development costs are charged to expense 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 March 31, 2014 and December 31, 2013, 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 ended March 31, 2014 and 2013.

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, 2008 through 2013 are open to examination by the PRC state and local tax authorities.

Government Grants [Policy Text Block]

Government grants

The Company’s subsidiaries in China receive government subsidies from local Chinese government agencies in accordance with relevant Chinese government policies. In general, the Company presents the government subsidies received as part of other income unless the subsidies received are earmarked to compensate for a specific expense, which have been accounted for by offsetting the specific expense, such as research and development expense or interest expenses. Unearned government subsidies received are deferred for recognition until the criteria for such recognition could be met.

For research and development expenses, the Company matches and offsets the government grants with the expenses of the research and development activities as specified in the grant approval document in the corresponding period when such expenses are incurred.

No government grants were offset against the finance costs for the three months ended March 31, 2014 and 2013.

Government grants of $154,902 and $nil were received and recognized as other income during the three months ended March 31, 2014 and 2013.

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.

Reclassification, Policy [Policy Text Block]

Reclassification

Certain amounts included in the 2013 consolidated statements of comprehensive income has been reclassified to conform to the 2014 financial statement presentation as follows;

The Company has separately presented interest income of $148,845 on the face of consolidated statements of comprehensive income for the period ended March 31, 2013, instead of presenting it net of interest expenses.

As a result of such reclassification, interest expense, net for the three months ended March 31, 2014, has changed from $40,547 to $189,392.

The change in due to related parties of $201,325 was classified into cash flows from financing activities in the Company’s condensed consolidated statements of cash flows for the three months ended March 31, 2013. The Company has reclassified this amount as component of cash flows to operating activities.

As a result of such reclassification, net cash provided by financing activities for the three months ended March 31, 2013 has changed from $2,591,125 to $2,389,800 and net cash used in operating activities has changed from $9,983,900 to $9,782,575.

New Accounting Pronouncements, Policy [Policy Text Block]

Recently issued accounting pronouncements

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. The Company adopted ASU 2013-05 prospectively in its first quarter of fiscal 2014, and it did not 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 adopted ASU 2013-11 effective January 1, 2014 and it did not 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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PREPAYMENTS TO SUPPLIERS (Details Textual) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Payments To Suppliers [Line Items]
Unpaid interest income on prepayments to suppliers	$ 162,205	$ 118,182
Payments to Suppliers	32,199,192		31,953,084
Interest Rate Charged Annually On Prepayment On Raw Material	2.00%		2.00%
Unpaid Balance To Supplier	$ 160,995		$ 497,844

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SEGEMENT INFORMATION (Tables)

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

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

	Three Months Ended March 31,
	2014		2013
Revenues
Micro-organism	$	1,521,165	$	1,667,182
Veterinary Medications		4,844,968		3,446,717
Feed Additives		330,537		286,288
Vaccines		135,918		130,554
Total Revenues	$	6,832,588	$	5,530,741
Cost of Revenues
Micro-organism	$	683,784	$	587,417
Veterinary Medications		3,033,027		2,105,516
Feed Additives		220,148		214,637
Vaccines		72,444		23,316
Total Cost of Revenues		4,009,403		2,930,886
Gross Profit	$	2,823,185	$	2,599,855

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ACCOUNTS RECEIVABLE, NET (Tables)

3 Months Ended

Mar. 31, 2014

Accounts Receivable Disclosure [Abstract]

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

Accounts receivable consisted of the following:

	March 31, 2014		December 31, 2013
Accounts receivable	$	13,624,127	$	11,611,741
Allowance for doubtful accounts		(960,578)		(602,243)
Accounts receivable, net	$	12,663,549	$	11,009,498

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, 2014	$	602,243
Addition		366,218
Recovery		—
Translation adjustment		(7,883)
Balance, March 31, 2014	$	960,578

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INVENTORIES (Tables)

3 Months Ended

Mar. 31, 2014

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

Inventories consist of the following:

	March 31, 2014		December 31, 2013
Raw materials	$	21,970,441		23,001,461
Packing materials		350,799		396,067
Work-in-process		152,884		23,140
Finished goods		2,717,505		2,409,083
Other		74,154		73,835
Total	$	25,265,783		25,903,586

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2014

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, 2014. 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, 2013 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 doubtful accounts, 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 March 31, 2014 and December 31, 2013:

	Carrying Value at March 31,		Fair Value Measurement at March 31, 2014
	2014		Level 1		Level 2		Level 3
Purchase option liability	$	78,960	$	—	$	78,960	$	—

	Carrying Value at December 31,		Fair Value Measurement at December 31, 2013
	2013		Level 1		Level 2		Level 3
Purchase option liability	$	62,440	$	—	$	62,440	$	—

Below is the reconciliation for the purchase option liability changes from January 1, 2014 to March 31, 2014:

Balance, January 1, 2014	$	62,440
Change in fair value		16,520
Balance, March 31, 2014	$	78,960

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.

Cash

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

Accounts receivable

Accounts receivable are stated at cost, net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses, if any, resulting from the failure of customers to make required payments. The Company reviews the accounts receivable on a periodic basis and makes allowances where there is doubt as to the collectibility of individual balances. In evaluating the collectibility of individual receivable balances, the Company considers many factors, including the age of the balance, the customer’s payment history, its current credit-worthiness and current economic trends.

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 write-down 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	Shorter of lease term or 10-40 years
Machinery and equipment	5-10 years
Office equipment and furniture	3-10 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 reduces 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 March 31, 2014 and December 31, 2013, there was no impairment of its property, plant and equipment.

Construction-in-progress

Construction-in-progress includes direct costs of construction of factory buildings. 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 —Intangible assets are evaluated at least annually for impairment if events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets by comparing the asset's estimated fair value with its carrying value, based on cash flow methodology. Based on its review, the Company believes that, as of March 31, 2014 and December 31, 2013, 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, and totaled $192,048 and $203,849 for the three months ended March 31, 2014 and 2013, respectively.

Advertising costs

Advertising costs are charged to selling expenses as incurred. Advertising costs were insignificant for both the quarters ended March 31, 2014 and 2013, respectively.

Research and development costs

Research and development costs are charged to expense 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 March 31, 2014 and December 31, 2013, 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 ended March 31, 2014 and 2013.

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, 2008 through 2013 are open to examination by the PRC state and local tax authorities.

Government grants

The Company’s subsidiaries in China receive government subsidies from local Chinese government agencies in accordance with relevant Chinese government policies. In general, the Company presents the government subsidies received as part of other income unless the subsidies received are earmarked to compensate for a specific expense, which have been accounted for by offsetting the specific expense, such as research and development expense or interest expenses. Unearned government subsidies received are deferred for recognition until the criteria for such recognition could be met.

For research and development expenses, the Company matches and offsets the government grants with the expenses of the research and development activities as specified in the grant approval document in the corresponding period when such expenses are incurred.

No government grants were offset against the finance costs for the three months ended March 31, 2014 and 2013.

Government grants of $154,902 and $nil were received and recognized as other income during the three months ended March 31, 2014 and 2013.

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.

Reclassification

Certain amounts included in the 2013 consolidated statements of comprehensive income has been reclassified to conform to the 2014 financial statement presentation as follows;

The Company has separately presented interest income of $148,845 on the face of consolidated statements of comprehensive income for the period ended March 31, 2013, instead of presenting it net of interest expenses.

As a result of such reclassification, interest expense, net for the three months ended March 31, 2014, has changed from $40,547 to $189,392.

The change in due to related parties of $201,325 was classified into cash flows from financing activities in the Company’s condensed consolidated statements of cash flows for the three months ended March 31, 2013. The Company has reclassified this amount as component of cash flows to operating activities.

As a result of such reclassification, net cash provided by financing activities for the three months ended March 31, 2013 has changed from $2,591,125 to $2,389,800 and net cash used in operating activities has changed from $9,983,900 to $9,782,575.

Recently issued accounting pronouncements

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. The Company adopted ASU 2013-05 prospectively in its first quarter of fiscal 2014, and it did not 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 adopted ASU 2013-11 effective January 1, 2014 and it did not 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)

3 Months Ended

Mar. 31, 2014

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:

	March 31, 2014		December 31, 2013
Other prepayments	$	365,055	$	478,144
Deposits placed with guarantors (note 13)		486,900		491,100
Interest receivable (notes 7 and 12)		168,718		497,844
Other receivables		587,732		667,075
Total	$	1,608,405	$	2,134,163

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RELATED PARTY TRANSACTIONS AND ARRANGEMENTS (Details Textual) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Related Party Transaction [Line Items]
Share-Based Compensation Arrangement By Share-Based Payment Award, Equity Instruments Other Than Options, Grants In Period	50,000	69,556
Scott Cramer Non Executive Director and Shareholder [Member]
Related Party Transaction [Line Items]
Due to Related Parties, Total	$ 530,349	$ 300,203
Weibing Lu - Ceo [Member]
Related Party Transaction [Line Items]
Due to Related Parties, Total	1,155,155	857,012
Bing Mei Cfo [Member]
Related Party Transaction [Line Items]
Due to Related Parties, Total	92,209	41,283
US Representative [Member]
Related Party Transaction [Line Items]
Professional Fees	7,500
Reimbursement Payable	$ 250,000
Share-Based Compensation Arrangement By Share-Based Payment Award, Equity Instruments Other Than Options, Grants In Period	7,000

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TAXES (Tables)

3 Months Ended

Mar. 31, 2014

Taxes Disclosure [Abstract]

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

Provision for income taxes consisted of the following:

	Three months ended March 31,
PRC income taxes	2014		2013
Current	$	472,407	$	321,284
Deferred		(42,380)		-
Total	$	430,027	$	321,284

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 months ended March 31, 2014 and 2013:

	Three Months ended March 31,
	2014		2013
U.S. statutory rate	34.0	%	34.0	%
Foreign income not recognized in the U.S.	(34.0)		(34.0)
China income tax rate	25.0		25.0
China income tax exemption	(10.0)		(10.0)
Other items (1)	15.6		16.1
Total provision for income taxes	30.6	%	31.1	%

(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 15.6% and 16.1% for the three months ended March 31, 2014 and 2013, respectively.

Income Tax Rate Reconciliation Other Adjustments [Table Text Block]

 

Other items consisted of the following:

	Three Months ended March 31,
	2014		2013
Income taxed at Chinese statutory rate of 25%	1.3	%	1.0	%
Valuation allowance on tax loss	8.3		9.9
Share based compensation	0.6		0.1
Non-deductible operating expenses	5.4		5.1
Total other items	15.6	%	16.1	%

Schedule Of Taxes Payable [Table Text Block]

Taxes payable consisted of the following:

	March 31, 2014		December 31, 2013
Income taxes	$	1,126,025	$	662,811
Value added taxes		1,526,475		576,603
Other taxes		200,344		76,072
Total	$	2,852,844	$	1,315,486

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INVENTORIES (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Inventory [Line Items]
Raw materials	$ 21,970,441	$ 23,001,461
Packing materials	350,799	396,067
Work-in-process	152,884	23,140
Finished goods	2,717,505	2,409,083
Other	74,154	73,835
Total	$ 25,265,783	$ 25,903,586

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CAPITAL TRANSACTIONS (Details 2) (USD $)	3 Months Ended	12 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Purchase Options [Line Items]
Number of options purchase, Outstanding, 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
Number of options purchase, Outstanding, ending balance	140,000	140,000
Exercisable at March 31, 2014, Number of warrants/purchase options	140,000
Outstanding, Weighted - average exercise price, beginning balance	$ 8.11
Weighted Average Exercise Price Of Warrants And Purchase Options Granted Number	$ 0
Forfeited, Weighted - average exercise price	$ 0
Weighted Average Exercise Price Of Warrants And Purchase Options Exercised Number	$ 0
Outstanding, Weighted - average exercise price, ending balance	$ 8.11	$ 8.11
Exercisable at March 31, 2014, Weighted - average exercise price	$ 8.11
Weighted- average remaining contractual term, outstanding (Year)	3 months	6 months
Exercisable at March 31, 2014, Weighted - average remaining contractual term (Year)	3 months

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CONDENSED CONSOLIDATED BALANCE SHEETS(USD ($))	Mar. 31, 2014	Dec. 31, 2013
CURRENT ASSETS:
Cash	$ 6,848,905	$ 8,142,296
Accounts receivable, net of allowance for doubtful accounts of $960,578 (Unaudited) and $602,243 as of March 31, 2014 and December 31, 2013, respectively	12,663,549	11,009,498
Inventories	25,265,783	25,903,586
Deposits, prepaid expenses and other receivables	1,608,405	2,134,163
Prepayments to suppliers	40,541,475	41,061,144
Loans receivable	1,046,835	0
Deferred tax assets	403,372	364,425
Total current assets	88,378,324	88,615,112
PROPERTY, PLANT AND EQUIPMENT, NET	30,417,653	28,269,155
CONSTRUCTION-IN-PROGRESS	6,470,772	9,284,947
OTHER ASSETS:
Long-term prepayments	4,592,751	4,633,614
Long-term prepayments for acquisitions	0	183,344
Intangible assets, net	5,130,454	5,237,255
Total other assets	9,723,205	10,054,213
Total assets	134,989,954	136,223,427
CURRENT LIABILITIES:
Accounts payable	4,615,614	3,303,531
Other payable and accrued expenses	6,551,419	6,467,605
Short-term loans	5,680,500	10,640,500
Deposits from customers	1,991,907	1,877,211
Taxes payable	2,852,844	1,315,486
Due to related parties	1,962,238	1,361,548
Total current liabilities	23,654,522	24,965,881
OTHER LIABILITIES:
Deferred government grant	795,270	802,130
Purchase option liability	78,960	62,440
Total other liabilities	874,230	864,570
Total liabilities	24,528,752	25,830,451
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 March 31, 2014 (Unaudited) and December 31, 2013	7,605	7,605
Paid-in capital	37,690,867	37,631,142
Statutory reserves	5,952,692	5,952,692
Retained earnings	55,965,604	54,990,154
Accumulated other comprehensive income	10,844,434	11,811,383
Total shareholders’ equity	110,461,202	110,392,976
Total liabilities and shareholders’ equity	$ 134,989,954	$ 136,223,427

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ORGANIZATION (Details Textual)	Apr. 21, 2010 Xian Tianxing [Member] USD ($)	Apr. 21, 2010 Xian Tianxing [Member] CNY	Apr. 21, 2010 Kunshan Sikeda Biotechnology Co Ltd [Member] USD ($)	Apr. 21, 2010 Kunshan Sikeda Biotechnology Co Ltd [Member] CNY	May 07, 2010 Skystar Biotechnology (Kunshan) Co., Limited [Member] USD ($)	Mar. 15, 2011 Xian Sikaida Bio-products Co., Ltd. [Member] USD ($)	Mar. 15, 2011 Xian Sikaida Bio-products Co., Ltd. [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	$ 40,575	250,000	$ 81,150	500,000	$ 15,000,000	$ 1,623,000	10,000,000	$ 4,200,000	26,000,000
Capital Required to be Well Capitalized					12,750,000
Capital Contribution In Cash					$ 2,250,000

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CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' 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, 2013	$ 110,392,976	$ 7,605	$ 37,631,142	$ 5,952,692	$ 54,990,154	$ 11,811,383
BALANCE (in shares) at Dec. 31, 2013		7,604,800
Foreign currency translation	(966,949)	0	0	0	0	(966,949)
Share based compensation	59,725	0	59,725	0	0	0
Net income	975,450	0	0	0	975,450	0
BALANCE at Mar. 31, 2014	$ 110,461,202	$ 7,605	$ 37,690,867	$ 5,952,692	$ 55,965,604	$ 10,844,434
BALANCE (in shares) at Mar. 31, 2014		7,604,800

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CONSTRUCTION-IN-PROGRESS (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Construction In Progress [Line Items]
Total in CIP as of March 31,2014	$ 6,470,772	$ 9,284,947
Estimate Cost to Complete	7,742,059
Estimated Total Cost	14,212,831
Jingzhou Veterinary Medication Facility [Member]
Construction In Progress [Line Items]
Total in CIP as of March 31,2014	1,203,130
Estimate Cost to Complete	501,020
Estimated Total Cost	1,704,150
Estimated Completion Date	Fourth quarter of 2014
Kunshan Micro Organism Facility [Member]
Construction In Progress [Line Items]
Total in CIP as of March 31,2014	5,267,642	5,267,642
Estimate Cost to Complete	7,241,039
Estimated Total Cost	$ 12,508,681
Estimated Completion Date	Construction - completed, Installation of machinery and equipment – Third quarter of 2014

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CONSTRUCTION-IN-PROGRESS (Tables)

3 Months Ended

Mar. 31, 2014

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	March 31, 2014		Estimated Cost to Complete		Estimated Total Cost		Estimated Completion Date
Jingzhou veterinary medication facility	$	1,203,130	$	501,020	$	1,704,150	Fourth quarter of 2014
Kunshan micro-organism facility		5,267,642		7,241,039		12,508,681	Construction - completed, Installation of machinery and equipment – Third quarter of 2014
Total	$	6,470,772	$	7,742,059	$	14,212,831

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INTANGIBLE ASSETS (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014 Use Rights [Member]	Dec. 31, 2013 Use Rights [Member]
Intangible Assets [Line Items]
Amortization	$ 62,477	$ 60,872
Real Estate and Accumulated Depreciation, Carrying Amount of Land			$ 1,136,461	$ 1,529,960

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STATUTORY RESERVES

3 Months Ended

Mar. 31, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 16 - 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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LONG-TERM PREPAYMENTS (Tables)

3 Months Ended

Mar. 31, 2014

Long Term Prepayments Disclosure [Abstract]

Schedule Of Long Term Prepayments [Table Text Block]

Long-term prepayments consist of the following:

	March 31, 2014		December 31, 2013
Deposits for equipment purchase and land use rights	$	3,836,884	$	3,871,228
Construction deposits		386,224		366,688
Prepayments for R&D project		363,552		389,556
Deposits for other		6,091		6,142
Long-term prepayments	$	4,592,751	$	4,633,614
Long-term prepayments for acquisitions	$	-	$	183,344

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EARNINGS PER SHARE

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 18 - EARNINGS PER SHARE

The following is the calculation of earnings per share:

	Three months ended March 31,
	2014		2013
Net income	$	975,450	$	712,733
Weighted average shares used in basic computation		7,676,268		7,613,712
Effect of dilutive potential non-vested common shares		24,466		-
Weighted average shares used in diluted computation		7,700,734		7,613,712
Earnings per share:
Basic	$	0.13	$	0.09
Diluted	$	0.13	$	0.09

For the three months ended March 31, 2014, 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 months ended March 31, 2013, the outstanding 140,000 options and 4,000 non-vested shares were excluded from the diluted earnings per share calculation as they are anti-dilutive.

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SHORT-TERM LOANS (Details Textual)	3 Months Ended											1 Months Ended						3 Months Ended	0 Months Ended		3 Months Ended					0 Months Ended		3 Months Ended			0 Months Ended		3 Months Ended		0 Months Ended			0 Months Ended		3 Months Ended
	Mar. 31, 2014 USD ($)	Dec. 31, 2013 CNY	Mar. 31, 2013 USD ($)	Mar. 31, 2014 CNY	Dec. 31, 2013 USD ($)	Apr. 16, 2013 USD ($)	Apr. 16, 2013 CNY	Apr. 21, 2014 Bankers Acceptance [Member] USD ($)	Apr. 21, 2014 Bankers Acceptance [Member] CNY	Apr. 14, 2014 Bankers Acceptance [Member] USD ($)	Apr. 14, 2014 Bankers Acceptance [Member] CNY	Apr. 30, 2014 Subsequent Event [Member] USD ($)	Apr. 30, 2014 Subsequent Event [Member] CNY	Apr. 21, 2014 Subsequent Event [Member] USD ($)	Apr. 21, 2014 Subsequent Event [Member] CNY	Apr. 14, 2014 Subsequent Event [Member] USD ($)	Apr. 14, 2014 Subsequent Event [Member] CNY	Mar. 31, 2014 Construction in Progress [Member] USD ($)	Jun. 13, 2013 Industrial and Commercial Bank Of China Songzi Branch [Member] USD ($)	Jun. 13, 2013 Industrial and Commercial Bank Of China Songzi Branch [Member] CNY	Mar. 31, 2014 Industrial and Commercial Bank Of China Songzi Branch [Member]	Dec. 31, 2013 Industrial and Commercial Bank Of China Songzi Branch [Member] USD ($)	Dec. 31, 2013 Industrial and Commercial Bank Of China Songzi Branch [Member] CNY	Apr. 14, 2014 Changan Bank [Member] USD ($)	Apr. 14, 2014 Changan Bank [Member] CNY	Jun. 13, 2013 Industrial and Commercial Bank Of China [Member] USD ($)	Jun. 13, 2013 Industrial and Commercial Bank Of China [Member] CNY	Mar. 31, 2014 Industrial and Commercial Bank Of China [Member]	Jan. 16, 2013 Industrial and Commercial Bank Of China [Member] USD ($)	Jan. 16, 2013 Industrial and Commercial Bank Of China [Member] CNY	Apr. 16, 2013 Xian Taixin Investment Guarantee Co Ltd [Member] USD ($)	Apr. 16, 2013 Xian Taixin Investment Guarantee Co Ltd [Member] CNY	Mar. 31, 2014 Xian Taixin Investment Guarantee Co Ltd [Member] USD ($)	Mar. 31, 2014 Xian Taixin Investment Guarantee Co Ltd [Member] CNY	Apr. 16, 2013 Postal Savings Bank Of China Xi [Member] USD ($)	Apr. 16, 2013 Postal Savings Bank Of China Xi [Member] CNY	Mar. 31, 2014 Postal Savings Bank Of China Xi [Member]	Sep. 10, 2013 Bank Of Beijing [Member] Chairman And CEO [Member] USD ($)	Sep. 10, 2013 Bank Of Beijing [Member] Chairman And CEO [Member] CNY	Mar. 31, 2014 Bank Of Beijing [Member] Chairman And CEO [Member] USD ($)	Mar. 31, 2014 Bank Of Beijing [Member] Chairman And CEO [Member] CNY	Mar. 31, 2014 Industrial Bank Co Ltd Xian Branch [Member] USD ($)	Mar. 31, 2014 Industrial Bank Co Ltd Xian Branch [Member] CNY	Dec. 31, 2013 Industrial Bank Co Ltd Xian Branch [Member] USD ($)	Dec. 31, 2013 Industrial Bank Co Ltd Xian Branch [Member] CNY	Jan. 16, 2013 Industrial Bank Co Ltd Xian Branch [Member] USD ($)	Jan. 16, 2013 Industrial Bank Co Ltd Xian Branch [Member] CNY
Short Term And Long Term [Line Items]
Bank Loans	$ 5,680,500	65,000,000		35,000,000	$ 10,640,500	$ 324,600	2,000,000							$ 7,790,400	48,000,000	$ 7,790,400	48,000,000		$ 811,500	5,000,000				$ 7,790,400	48,000,000	$ 811,500	5,000,000		$ 4,869,000	30,000,000	$ 324,600	2,000,000	$ 58,158	360,000	$ 3,246,000	20,000,000						$ 0	0	$ 4,911,000	30,000,000	$ 4,869,000	30,000,000
Interest Rate																3.00%	3.00%				7.80%			3.00%	3.00%	30.00%	30.00%	7.80%	6.60%	6.60%			10.00%	10.00%	20.00%	20.00%	7.20%	7.80%	7.80%			6.60%	6.60%			6.60%	6.60%
Cash paid for interest	129,129	189,392	181,426															53,195
Fee Paid For Loan Guarantee																			81,150	500,000		81,150	500,000								58,158	360,000
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 20% of that rate	People's Bank of China floating benchmark lending rate over the same period plus 20% of that rate
Debt Instrument, Collateral Amount																																								162,300	1,000,000
Debt Instrument, Collateral																					This loan is secured by the Companys buildings and land use rights in Jingzhou, Hubei Province.												10% of the loan or $324,600 (RMB 2,000,000) is required to be kept by Xian Investment and Financing Guarantee Co., Ltd. to serve as collateral until the loan is repaid. This loan is secured by the Companys office buildings located in Xian	10% of the loan or $324,600 (RMB 2,000,000) is required to be kept by Xian Investment and Financing Guarantee Co., Ltd. to serve as collateral until the loan is repaid. This loan is secured by the Companys office buildings located in Xian
Short-term Bank Loans and Notes Payable																																						1,623,000	10,000,000	162,300	1,000,000
Debt Instrument, Interest Rate Terms																												People's Bank of China floating benchmark lending rate over the same period plus 30% of that rate										period plus 30% of that rate, which was 7.8% at the date that the loan was issued.	period plus 30% of that rate, which was 7.8% at the date that the loan was issued.
Debt Issuance Cost																																								29,434	180,000
Percentage Of Loan Served As Collateral Amount																										10.00%	10.00%													10.00%	10.00%
Pledged Assets, Not Separately Reported, Real Estate	16,811,260
Debt Instrument, Fee Amount								3,895	24,000
Interest Expense, Short-term Borrowings, Total	129,129		189,392
Proceeds from Bank Debt												7,790,400	48,000,000
Interest Costs Capitalized	53,195		0
Deposit Assets, Total										$ 3,895,200	24,000,000
Debt Instrument Fee Percentage								0.05%	0.05%

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ORGANIZATION

3 Months Ended

Mar. 31, 2014

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 $81,150 (RMB 500,000), of which Xi’an Tianxing and Sida each contributed $40,575 (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. On March 26, 2014, the Company received the government approval of extension for payment of the remaining registered capital of $12,750,000 by May 6, 2015. 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) paid by Sida.

On March 15, 2011, Xi’an Tianxing formed Xi’an Sikaida Bio-products Co., Ltd. (“Xi’an Sikaida”) with a registered capital of approximately $1,623,000 (RMB 10,000,000 ) paid by Xi’an Tianxing.

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

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CONDENSED CONSOLIDATED BALANCE SHEETS [Parenthetical] (USD $)	Mar. 31, 2014	Dec. 31, 2013
Allowance for doubtful accounts	$ 960,578	$ 602,243
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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INTANGIBLE ASSETS

3 Months Ended

Mar. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets Disclosure [Text Block]

Note 11 – INTANGIBLE ASSETS

Intangible assets consist of the following:

	March 31, 2014		December 31, 2013
Land use rights	$	4,909,577	$	4,951,927
Technological know-how		2,596,800		2,619,200
Total		7,506,377		7,571,127
Less: accumulated amortization		(2,375,923)		(2,333,872)
Intangible assets, net	$	5,130,454	$	5,237,255

For the three months ended March 31, 2014 and 2013, the amortization expense for intangibles amounted to $62,477 and $60,872, respectively.

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

Years ending December 31,	Amount
2014	$	186,032
2015		248,042
2016		248,042
2017		248,042
2018		248,042
Thereafter		3,952,254
Total	$	5,130,454

As of March 31, 2014 and December 31, 2013, land use rights with a carrying amount of $1,136,461 and $1,529,960, respectively, were pledged against the Company’s short-term loans.

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Document And Entity Information	3 Months Ended
	Mar. 31, 2014	May 09, 2014
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1
Trading Symbol	SKBI
Entity Common Stock, Shares Outstanding		7,604,800
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

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LOANS RECEIVABLE

3 Months Ended

Mar. 31, 2014

Receivables [Abstract]

Loans Receivable Disclosure [Text Block]

Note 12 – LOANS RECEIVABLE

On January 2, 2014, the Company entered a loan agreement with Shaanxi Feilong Logistics Co., Ltd., (“Feilong”), the Company’s major logistics provider, to lend up to $1,298,400 (RMB 8,000,000) to Feilong. This loan agreement expires on May 31, 2014 with an annual interest rate of 6%. During the three months ended March 31, 2014, Feilong borrowed a total amount of $1,046,835 (RMB 6,450,000) from the Company.  Interest income earned on this unsecured loan amounted to $7,781 for the three months ended March 31, 2014. The unpaid interest balance of $7,723 as of March 31, 2014 was included in “Deposits, Prepaid Expenses and Other Receivables” (note 6).

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EARNINGS PER SHARE (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Earnings Per Share [Line Items]
Net income	$ 975,450	$ 712,733
Weighted average shares used in basic computation	7,676,268	7,613,712
Effect of dilutive potential non-vested common shares	24,466	0
Weighted average shares used in diluted computation	7,700,734	7,613,712
Earnings per share:
Basic (in dollars per share)	$ 0.13	$ 0.09
Diluted (in dollars per share)	$ 0.13	$ 0.09

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
REVENUE, net	$ 6,832,588	$ 5,530,741
COST OF REVENUE	4,009,403	2,930,886
GROSS PROFIT	2,823,185	2,599,855
OPERATING EXPENSES:
Research and development costs	4,213	461
Selling expenses	370,208	317,836
General and administrative expenses	1,276,417	1,211,273
Total operating expenses	1,650,838	1,529,570
INCOME FROM OPERATIONS	1,172,347	1,070,285
OTHER INCOME (EXPENSE):
Other income (expense), net	154,919	(187)
Interest income	170,665	148,845
Interest expense	(75,934)	(189,392)
Change in fair value of purchase option liability	(16,520)	4,466
Total other income (expense), net	233,130	(36,268)
INCOME BEFORE PROVISION FOR INCOME TAXES	1,405,477	1,034,017
PROVISION FOR INCOME TAXES	430,027	321,284
NET INCOME	975,450	712,733
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment	(966,949)	550,883
COMPREHENSIVE INCOME	$ 8,501	$ 1,263,616
EARNINGS PER SHARE:
Basic (in dollars per share)	$ 0.13	$ 0.09
Diluted (in dollars per share)	$ 0.13	$ 0.09
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic (in shares)	7,676,268	7,613,712
Diluted (in shares)	7,700,734	7,613,712

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DEPOSITS, PREPAID EXPENSES AND OTHER RECEIVABLES

3 Months Ended

Mar. 31, 2014

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:

	March 31, 2014		December 31, 2013
Other prepayments	$	365,055	$	478,144
Deposits placed with guarantors (note 13)		486,900		491,100
Interest receivable (notes 7 and 12)		168,718		497,844
Other receivables		587,732		667,075
Total	$	1,608,405	$	2,134,163

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INVENTORIES

3 Months Ended

Mar. 31, 2014

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

Note 5 – INVENTORIES

Inventories consist of the following:

	March 31, 2014		December 31, 2013
Raw materials	$	21,970,441		23,001,461
Packing materials		350,799		396,067
Work-in-process		152,884		23,140
Finished goods		2,717,505		2,409,083
Other		74,154		73,835
Total	$	25,265,783		25,903,586

No write-down of inventories was recorded for the three months ended March 31, 2014 and 2013.

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TAXES

3 Months Ended

Mar. 31, 2014

Taxes Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 17 – TAXES

Provision for income taxes consisted of the following:

	Three months ended March 31,
PRC income taxes	2014		2013
Current	$	472,407	$	321,284
Deferred		(42,380)		-
Total	$	430,027	$	321,284

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 months ended March 31, 2014 and 2013, 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 months ended March 31, 2014 and 2013:

	Three Months ended March 31,
	2014		2013
U.S. statutory rate	34.0	%	34.0	%
Foreign income not recognized in the U.S.	(34.0)		(34.0)
China income tax rate	25.0		25.0
China income tax exemption	(10.0)		(10.0)
Other items (1)	15.6		16.1
Total provision for income taxes	30.6	%	31.1	%

(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 15.6% and 16.1% for the three months ended March 31, 2014 and 2013, respectively.

Other items consisted of the following:

	Three Months ended March 31,
	2014		2013
Income taxed at Chinese statutory rate of 25%	1.3	%	1.0	%
Valuation allowance on tax loss	8.3		9.9
Share based compensation	0.6		0.1
Non-deductible operating expenses	5.4		5.1
Total other items	15.6	%	16.1	%

Taxes payable consisted of the following:

	March 31, 2014		December 31, 2013
Income taxes	$	1,126,025	$	662,811
Value added taxes		1,526,475		576,603
Other taxes		200,344		76,072
Total	$	2,852,844	$	1,315,486

As of March 31, 2014 and December 31, 2013, the estimated net operating loss carry forwards of Skystar for U.S. income tax purposes amounted to $5,069,380 and $4,917,108, which may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, beginning in 2025 and through 2033. As of March 31, 2014 and December 31, 2013, the estimated net operating loss carry forwards of Skystar for PRC income tax purposes amounted to $5,039,534 and $4,572,233, which may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, through 2018. Management believes that the realization of the arising from this loss appears to be uncertain due to the Company’s limited operating history and continuing losses for U.S. and PRC income tax purposes. Accordingly, the Company has provided a 100% valuation allowance at March 31, 2014 and December 31, 2013. As of March 31, 2014 and December 31, 2013, the valuation allowance on the tax loss of Skystar was $1,723,589 and $1,671,817, respectively, and that of PRC subsidiaries was $1,259,883 and $1,142,813, respectively. The Company’s management reviews this valuation allowance periodically and makes adjustments as necessary. As of March 31, 2014, the Company had deferred tax assets amounting to $403,372, in respect of accrued expenses of $163,227 and an allowance on doubtful accounts of $240,145. As of December 31, 2013, the Company had deferred tax assets amounting to $364,425, in respect of accrued expenses of $213,865 and an allowance on doubtful accounts of $150,560.

The Company did not provide for deferred income taxes and foreign withholding taxes on the cumulative undistributed earnings of foreign subsidiaries as of March 31, 2014 and December 31, 2013 of approximately $52.9 million and $50.9 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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SHORT-TERM LOANS

3 Months Ended

Mar. 31, 2014

Debt Disclosure [Abstract]

Short-term Debt [Text Block]

Note 13 – SHORT-TERM LOANS

On January 16, 2013, the Company obtained a one year loan with Industrial Bank Co. Ltd. Xi’an branch for $4,869,000 (RMB 30,000,000) at an annual interest rate of 6.6%. This loan was secured by the Company’s land use rights and manufacturing plant located in Huxian County. This loan was also personally guaranteed by the Company’s Chairman and CEO and his wife. On January 15, 2014, the loan was fully repaid.

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 $3,246,000 (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 March 31, 2014. This loan is guaranteed by Xi’an Investment and Financing Guarantee Co., Ltd. For this guarantee, the Company is required to pay $58,158 (RMB 360,000) of fees to Xi’an Investment and Financing Guarantee Co., Ltd. and 10% of the loan or $324,600 (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 $811,500 (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 March 31, 2014. The Company is originally required to keep 10% of the loan or $81,150 (RMB 500,000) with the bank as collateral. During the fourth quarter of 2013, the collateral was waived. This loan is secured by the Company’s buildings and land use rights in Jingzhou, Hubei Province. 

On September 10, 2013, the Company entered into a loan agreement with its Chairman and CEO. Under the agreement, the Chairman and CEO obtained a one year personal bank loan from September 12, 2013 to September 11, 2014 with Bank of Beijing of $1,623,000 (RMB 10,000,000) and lent the entire loan proceeds to the Company. The interest and repayment terms of the loan from the Chairman and CEO are identical to those of the personal bank loan. The annual interest rate is determined by using the prime rate over the same period plus 30% of that rate, which was 7.8% at the date that the loan was issued. The Company agrees to bear all the costs and expenses associated with the personal bank loan. The personal bank loan is guaranteed by Xi’an Investment and Financing Guarantee Co., Ltd. For this guarantee, the CEO is required to (i) pay $29,434 (RMB 180,000) of fees to Xi’an Investment and Financing Guarantee Co., Ltd. This cost has been paid and recorded as an expense of the Company using the effective interest method for the three months ended March 31, 2014; and (ii) place 10% of the loan or $162,300 (RMB 1,000,000) at Xi’an Investment and Financing Guarantee Co., Ltd. to serve as collateral until the loan is repaid. The Company had placed such a deposit with Xi’an Investment and Financing Guarantee Co., Ltd. as of March 31, 2014. The personal bank loan is also secured by the Chairman and CEO’s real estate properties and the Company’s office buildings and machineries located in Xi’an.

On April 14, 2014, the Company entered into a six-month Banker’s Acceptance agreement with Chang’an Bank for $7,790,400 (RMB 48,000,000) at a six-month interest rate of 3%. The Banker’s Acceptance was issued on April 21, 2014 and secured by pledged deposits placed with Chang’an Bank of $3,895,200 (RMB 24,000,000), and the Company’s land use rights and manufacturing plant located in Huxian County with a carrying value of $16,811,260 as of March 31, 2014. This Banker’s Acceptance was also personally guaranteed by the Company’s Chairman and CEO and his wife. The fee to cash the Banker’s Acceptance is 0.05% of the face value of this Banker’s Acceptance or $3,895 (RMB 24,000). Pursuant to this Bank’s Acceptance, loans of $7,790,400 (RMB 48,000,000) were drawn down as of April 21, 2014.

Outstanding short-term loans consisted of the following:

	March 31, 2014				December 31, 2013					Interest
Bank	Amt RMB		Amt USD		Amt RMB		Amt USD		Due Date	Rate
Industrial Bank Co. Ltd. Xi’an Branch		-	$	-		30,000,000	$	4,911,000	01/15/14		6.60	%
Postal Savings Bank of China Xi’an Branch		20,000,000		3,246,000		20,000,000		3,274,000	05/26/14		(2)
ICBC Songzi Branch		5,000,000		811,500		5,000,000		818,500	06/19/14		(1)
Related-party Individual – Chairman and CEO		10,000,000		1,623,000		10,000,000		1,637,000	09/11/14		7.8	%
Total		35,000,000	$	5,680,500		65,000,000	$	10,640,500

(1)	People's Bank of China floating benchmark lending rate over the same period plus 30%, which was 7.8% at March 31, 2014.
(2)	People's Bank of China floating benchmark lending rate over the same period plus 20%, which was 7.2% at March 31, 2014.

Interest expense incurred and associated with the short-term loans amounted to $129,129 and $189,392 for the three months ended March 31, 2014 and 2013, respectively, $53,195 and $nil of which has been capitalized as part of construction-in-progress in 2014 and 2013, respectively.

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COMMITMENTS AND CONTINGENCIES (Details) (USD $)	Mar. 31, 2014
Future Minimum Payments [Line Items]
Year ending December 31, 2014	$ 72,503
Year ending December 31, 2015	61,349
Year ending December 31, 2016	61,349
Year ending December 31, 2017 and thereafter	15,824
Total	211,025
Unrelated third parties [Member]
Future Minimum Payments [Line Items]
Year ending December 31, 2014	25,761
Year ending December 31, 2015	8,764
Year ending December 31, 2016	8,764
Year ending December 31, 2017 and thereafter	2,191
Total	45,480
Related parties [Member]
Future Minimum Payments [Line Items]
Year ending December 31, 2014	46,742
Year ending December 31, 2015	52,585
Year ending December 31, 2016	52,585
Year ending December 31, 2017 and thereafter	13,633
Total	$ 165,545

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CONSTRUCTION-IN-PROGRESS

3 Months Ended

Mar. 31, 2014

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 Good Manufacturing Practices (“GMP”) qualification process for the vaccine facility. In September 2012, the China’s Ministry of Agriculture (“MOA”) physically inspected this 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.  On December 26, 2013, the MOA granted the GMP certificate for this new facility which is valid for five years, and the facility started to launch trial production in the quarter ended March 31, 2014. Vaccine facility of $2,462,966 was transferred to property, plant and equipment during the three months ended March 31, 2014. The facility is currently in the process of applying for individual product permits from the government. The Company expects to complete the application and launch the normal production in the second half of 2014.

In 2011, the Company started a facility improvement project in the amount of approximately $324,600 for the Huxian Animal Laboratory. The facility is a supporting project to the Huxian vaccine facility. The project was completed and passed GMP inspection in December 2013. The cost of the animal laboratory of $324,600 was transferred to property, plant and equipment during the three months ended March 31, 2014. The Company expects this facility to become operational once the Huxian vaccine facility launches its manufacturing in the second half of 2014.

Jingzhou facility

In 2011, the Company started a facility improvement project to expand the 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 $1,704,150, of which $1,203,130 had been incurred as of March 31, 2014. Due to the revision in the project blueprint to comply with GMP requirements, the project was temporarily halted. The Company expects the project will be resumed in the second quarter of 2014 and be completed by the end of the fourth quarter of 2014.

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 December 31, 2013, the construction and installation of these facilities were completed, inspected and accepted. However, the construction-in-progress of $5,267,642 has not been transferred to property, plant and equipment as the Kunshan micro-organism facility was not operational at this point. During the third quarter of 2013, the Company contracted with an unrelated third party to purchase machinery and equipment at a total consideration of approximately $7,303,500, of which $3,482,958 was paid and was included in “Long-term prepayments” (note 10) as of March 31, 2014. The Company expects the purchase and installation of this equipment will be completed by the end of the third quarter of 2014.

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	March 31, 2014		Estimated Cost to Complete		Estimated Total Cost		Estimated Completion Date
Jingzhou veterinary medication facility	$	1,203,130	$	501,020	$	1,704,150	Fourth quarter of 2014
Kunshan micro-organism facility		5,267,642		7,241,039		12,508,681	Construction - completed, Installation of machinery and equipment – Third quarter of 2014
Total	$	6,470,772	$	7,742,059	$	14,212,831

As of March 31, 2014 and December 31, 2013, the Company had construction in progress amounting to $6,470,772 and $9,284,947, respectively. Interest expense of $53,195 and $nil has been capitalized for construction in progress for the three months ended March 31, 2014 and 2013, respectively.

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CONSTRUCTION-IN-PROGRESS (Details Textual) (USD $)	3 Months Ended			3 Months Ended					3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013	Mar. 31, 2014 Huxian Vaccine Facility [Member]	Mar. 31, 2014 Huxian Animal Laboratory [Member]	Dec. 31, 2011 Huxian Animal Laboratory [Member]	Mar. 31, 2014 Jingzhou Facility [Member]	Dec. 31, 2011 Jingzhou Facility [Member]	Mar. 31, 2014 Kunshan Micro Organism Facility [Member]	Dec. 31, 2013 Kunshan Micro Organism Facility [Member]
Construction In Progress [Line Items]
Total in cost in progress	$ 6,470,772		$ 9,284,947			$ 324,600	$ 1,203,130	$ 1,704,150	$ 5,267,642	$ 5,267,642
Payments to Acquire Machinery and Equipment				2,462,966	324,600				3,482,958
Purchase Price of Machinery And Equipment									7,303,500
Interest Costs Capitalized	$ 53,195	$ 0

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PREPAYMENTS TO SUPPLIERS

3 Months Ended

Mar. 31, 2014

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:

	March 31, 2014		December 31, 2013
Prepayments for raw materials	$	39,438,992	$	39,937,944
Prepayments for packaging materials		1,102,483		1,123,200
Total	$	40,541,475	$	41,061,144

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 the unused prepayments for raw materials. Starting from January 1, 2014, in addition to these two major suppliers, the Company began to charge another supplier interest at an annual rate of 2.0% on the unused prepayments for raw materials. As of March 31, 2014 and December 31, 2013, prepayments to these suppliers were $32,199,192 and $31,953,084, respectively. For the three months ended March 31, 2014 and 2013, $162,205 and $118,182, respectively, of interest income was recognized on these prepayments. The unpaid interest balance of $160,995 and $497,844 as of March 31, 2014 and December 31, 2013, respectively, was included in “Deposits, Prepaid Expenses and Other Receivables” (note 6).

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PROPERTY, PLANT AND EQUIPMENT, NET

3 Months Ended

Mar. 31, 2014

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:

	March 31, 2014		December 31, 2013
Buildings and improvements	$	28,033,999	$	27,703,872
Machinery and equipment		8,261,929		6,093,533
Office equipment and furniture		334,800		337,688
Vehicles		606,755		611,989
Total		37,237,483		34,747,082
Less: accumulated depreciation		(6,819,830)		(6,477,927)
Plant and equipment, net	$	30,417,653	$	28,269,155

Depreciation expense was $400,291 and $313,561 for the three months ended March 31, 2014 and 2013, respectively.

As of March 31, 2014 and December 31, 2013, property, plant and equipment with a carrying amount of $3,191,746 and $19,969,335, respectively, were pledged against the Company’s short-term and long-term loans.

XML

LONG-TERM PREPAYMENTS

3 Months Ended

Mar. 31, 2014

Long Term Prepayments Disclosure [Abstract]

Long Term Prepayments Disclosure [Text Block]

Note 10 - LONG-TERM PREPAYMENTS

Long-term prepayments consist of the following:

	March 31, 2014		December 31, 2013
Deposits for equipment purchase and land use rights	$	3,836,884	$	3,871,228
Construction deposits		386,224		366,688
Prepayments for R&D project		363,552		389,556
Deposits for other		6,091		6,142
Long-term prepayments	$	4,592,751	$	4,633,614
Long-term prepayments for acquisitions	$	-	$	183,344

As of March 31, 2014 and December 31, 2013, deposits for potential acquisitions totaled $Nil and $183,344, respectively, all of which was held by an unrelated third party engaged to facilitate potential acquisition projects.  

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INTANGIBLE ASSETS (Details 1) (USD $)	Dec. 31, 2013
Intangible Assets Future Amortization Expense [Line Items]
2014	$ 186,032
2015	248,042
2016	248,042
2017	248,042
2018	248,042
Thereafter	3,952,254
Total	$ 5,130,454

XML

COMMITMENTS AND CONTINGENCIES (Details 1)	Mar. 31, 2014 USD ($)	Mar. 31, 2014 Project With Northwestern Agricultural Technology University [Member] USD ($)	Mar. 31, 2014 Project With Northwestern Agricultural Technology University [Member] CNY	Mar. 31, 2014 Project With Fourth Military Medical University One [Member] USD ($)	Mar. 31, 2014 Project With Fourth Military Medical University One [Member] CNY	Dec. 31, 2009 Project With Fourth Military Medical University One [Member] USD ($)	Dec. 31, 2009 Project With Fourth Military Medical University One [Member] CNY	Mar. 31, 2014 Project With Fourth Military Medical University Two [Member] USD ($)	Mar. 31, 2014 Project With Fourth Military Medical University Two [Member] CNY	Sep. 30, 2013 Project With Fourth Military Medical University Two [Member] USD ($)	Sep. 30, 2013 Project With Fourth Military Medical University Two [Member] CNY	Mar. 31, 2014 Project With Fourth Military Medical University Three [Member] USD ($)	Mar. 31, 2014 Project With Fourth Military Medical University Three [Member] CNY	Jun. 30, 2013 Project With Fourth Military Medical University Three [Member] USD ($)	Jun. 30, 2013 Project With Fourth Military Medical University Three [Member] CNY	Mar. 31, 2014 In House R And D Project One [Member] USD ($)	Mar. 31, 2014 In House R And D Project Two [Member] USD ($)	Mar. 31, 2014 In House Rand D Project Three [Member] USD ($)	Mar. 31, 2014 In House R And D Project Four [Member] USD ($)	Mar. 31, 2014 In House R and D Project Five [Member] USD ($)	Mar. 31, 2014 In House R and D Project Six [Member] USD ($)	Mar. 31, 2014 In House R and D Project Seven [Member] USD ($)	Mar. 31, 2014 In House R and D Project Eight [Member] USD ($)	Mar. 31, 2014 In House R and D Project Nine [Member] USD ($)	Mar. 31, 2014 In House R and D Project Ten [Member] USD ($)	Mar. 31, 2014 In House R and D Project Eleven [Member] USD ($)
Commitments And Contingencies [Line Items]
Amount incurred as of 3/31/2014	$ 5,269,008	$ 568,050	3,500,000	$ 843,960	5,200,000			$ 243,450	1,500,000			$ 486,900	3,000,000			$ 162,300	$ 162,300	$ 81,150	$ 81,150	$ 81,150	$ 81,150	$ 81,150	$ 405,750	$ 486,900	$ 324,600	$ 1,665,948
Amount expected to be incurred	779,040	81,150		129,840		973,800	6,000,000	81,150		324,600	2,000,000			568,050	3,500,000	0	0	0	0	0	0	0	0	81,150	389,520	16,230
Total amount of project	$ 6,048,048	$ 649,200		$ 973,800				$ 324,600								$ 162,300	$ 162,300	$ 81,150	$ 81,150	$ 81,150	$ 81,150	$ 81,150	$ 405,750	$ 568,050	$ 714,120	$ 1,682,178

XML

LOANS RECEIVABLE (Details Textual)	3 Months Ended
	Mar. 31, 2014 USD ($)	Mar. 31, 2014 CNY	Jan. 02, 2014 USD ($)	Jan. 02, 2014 CNY	Dec. 31, 2013 USD ($)	Mar. 31, 2014 Prepaid Expenses and Other Current Assets [Member] USD ($)
Loans Receivables [Line Items]
Notes Receivable Stated Interest Rate			6.00%	6.00%
Notes, Loans and Financing Receivable, Net, Current	$ 1,046,835	6,450,000	$ 1,298,400	8,000,000	$ 0
Interest and Fee Income, Loans and Leases, Total	7,781
Interest Payable						$ 7,723

XML

INTANGIBLE ASSETS (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Finite-Lived Intangible Assets [Line Items]
Total	$ 7,506,377	$ 7,571,127
Less: accumulated amortization	(2,375,923)	(2,333,872)
Intangible assets, net	5,130,454	5,237,255
Land Use Rights [Member]
Finite-Lived Intangible Assets [Line Items]
Total	4,909,577	4,951,927
Technical Know How [Member]
Finite-Lived Intangible Assets [Line Items]
Total	$ 2,596,800	$ 2,619,200

XML

PROPERTY, PLANT AND EQUIPMENT, NET (Tables)

3 Months Ended

Mar. 31, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

Property, plant and equipment consist of the following:

	March 31, 2014		December 31, 2013
Buildings and improvements	$	28,033,999	$	27,703,872
Machinery and equipment		8,261,929		6,093,533
Office equipment and furniture		334,800		337,688
Vehicles		606,755		611,989
Total		37,237,483		34,747,082
Less: accumulated depreciation		(6,819,830)		(6,477,927)
Plant and equipment, net	$	30,417,653	$	28,269,155

XML

ACCOUNTS RECEIVABLE, NET (Details) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Schedule of Financing Receivable [Line Items]
Accounts receivable	$ 13,624,127	$ 11,611,741
Allowance for doubtful accounts	(960,578)	(602,243)
Accounts receivable, net	$ 12,663,549	$ 11,009,498

XML

CAPITAL TRANSACTIONS

3 Months Ended

Mar. 31, 2014

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

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

Note 15 - CAPITAL TRANSACTIONS

Stock-based compensation

On March 31, 2012, the Company entered into an agreement with a non-executive director to grant him an aggregate 28,000 shares of restricted common stock each year under the Company’s 2010 Stock Incentive Plan, vested in four equal quarterly installments of 7,000 shares. The closing price per share of the stock on the next business day of each of the grant date in 2012 and 2013 was $2.95 and $1.73 respectively. The Board of Directors approved his agreement with the Company on March 10, 2014. As of March 31, 2014 and December 31, 2013, 56,000 shares and 49,000 shares, respectively, were vested and 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, which runs from May 26, 2013 to May 25, 2014. 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. The closing price per share of the stock on the next business day of each of the grant date in 2012 and 2013 was $2.39 and $1.20 respectively. As of March 31, 2014 and December 31, 2013, 11,112 shares were vested and to be issued to this non-executive director.

On July 29, 2011, the Company entered into a one-year employment agreement with its CFO effective July 29, 2011. 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 effective July 29, 2012. 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 effective July 29, 2013. 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 in 2013 and 2012 was $1.37 and $2.17 respectively. The Board of Directors ratified and approved the CFO’s employment agreement with the Company on March 10, 2014. As of March 31, 2014 and December 31, 2013, 12,000 shares and 10,000 shares were vested and to be issued to this executive, respectively.

The Company entered into a five-year employment agreement with its Chief Executive Officer on May 5, 2008. After the agreement was expired on December 31, 2013, the Company renewed the employment agreement with its Chief Executive Officer for another five year period effective January 1, 2014. Under the agreement, he is entitled to receive an aggregate 50,000 shares of common stock , vested in four equal quarterly installments of 12,500 shares. The closing price per share of the stock on the next business day of each of the grant date in 2014 was $3.59. The Board of Directors ratified and approved the CEO’s employment agreement with the Company on March 10, 2014. As of March 31, 2014, 12,500 shares were vested and to be issued to this executive.

The Company recorded $59,725 and $4,340 share based compensation for the three months ended March 31, 2014 and 2013, 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 March 31, 2014 and December 31, 2013, there are 247,119 shares of the Company’s common stock remaining available for future issuance under the Plan. As of March 31, 2014 and December 31, 2013, there are 91,612 shares and 70,112 shares, respectively, vested pending to be issued.

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

	Non-vested Shares
Non-vested at January 1, 2013		6,000
Granted		69,556
Vested		(62,556)
Forfeited		-
Non-vested at December 31, 2013		13,000
Granted		50,000
Vested		(21,500)
Forfeited		-
Non-vested at March 31, 2014		41,500

As of March 31, 2014, there was $138,198 of total unrecognized compensation cost related to non-vested shares granted.  The total fair value of shares vested during the three months ended March 31, 2014 and 2013 was $59,725 and $4,340, respectively, based on the closing price of the Company’s common stock on the next business day of 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 March 31, 2014 and December 31, 2013, 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 purchase options using the Black-Scholes Option Pricing Model (“Black-Scholes Model”) using the following assumptions: 

	Purchase Options
	March 31, 2014			December 31, 2013
Stock price	$	6.56		$	3.51
Exercise price	$	8.11		$	8.11
Annual dividend yield		-			-
Expected term (years)		0.25			0.50
Risk-free interest rate		0.05	%		0.10	%
Expected volatility		80	%		125	%
Option value	$	0.56		$	0.45

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 purchase options is likely to differ materially from historical volatility. The expected life is based on the remaining term of the purchase options. The risk-free interest rate is based on U.S. Treasury securities according to the remaining term of the 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 March 31, 2014 and December 31, 2013 was determined using the Black-Scholes Model, utilizing level 2 inputs, and the change was recorded in earnings. The Company recognized a loss of $16,520 and a gain of $4,466 from the change in fair value of derivative liability for the three months ended March 31, 2014 and 2013, 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, 2014		140,000	$	8.11		0.50
Granted		-		-
Forfeited		-		-
Exercised		-		-
Outstanding at March 31, 2014		140,000	$	8.11		0.25
Exercisable at March 31, 2014		140,000	$	8.11		0.25

XML

COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 20 - 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 March 31, 2014, the annual rent for the factory premises was approximately $22,780 (RMB 140,360).

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. 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 $29,214 (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 $23,371 (RMB 144,000).

The Company entered into a one year tenancy agreement for an office lease in Kunshan, Jiangsu Province from October 15, 2012 to April 14, 2013 with a six-month rent of approximately $1,689 (RMB 10,405). On April 15, 2013, the Company entered into an another one-year tenancy agreement for this office from April 15, 2013 to April 14, 2014 with a one-year rent of approximately $3,820 (RMB 23,536). On April 17, 2014, the Company entered into an another one-year tenancy agreement for this office from April 15, 2014 to April 14, 2015 with a one-year rent of approximately $3,820 (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 $38,141 (RMB 235,000) subject to a 10% increase every two years starting July 20, 2013. As of March 31, 2014, the annual rent for the warehouse premises was approximately $41,955 (RMB 258,500).

The Company entered into a tenancy agreement for the lease of a sales office in Jingzhou, Hubei Province for a period of five years from April 18, 2012 to April 17, 2017 with an annual rent of approximately $8,764 (RMB 54,000) for the first three years subject to increase during last two years.

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, 2014	$	25,761	$	46,742	$	72,503
Year ending December 31, 2015		8,764		52,585		61,349
Year ending December 31, 2016		8,764		52,585		61,349
Year ending December 31, 2017 and thereafter		2,191		13,633		15,824
Total	$	45,480	$	165,545	$	211,025

Rental expense to unrelated third parties for the three months ended March 31, 2014 and 2013 amounted to $18,921 and $15,271, respectively. Rental expense to related parties for the three months ended March 31, 2014 and 2013 amounted to $13,245 and $12,905, 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 condensed consolidated financial statements as of March 31, 2014.

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.” The Supreme Court of the United States denied Chien’s petition for writs of certiorari.

(c) 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 $649,200 (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 March 31, 2014, the Company has incurred approximately $568,050 (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 $973,800 (RMB 6,000,000). As of March 31, 2014, the Company has incurred approximately $843,960 (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 $324,600 (RMB 2,000,000). As of March 31, 2014, the project was extended for clinical trials and the Company has incurred approximately $243,450 (RMB 1,500,000). The project is expected to be completed by the end of 2015.

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 March 31, 2014, 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 $568,050 (RMB 3,500,000). As of March 31, 2014, the Company has incurred $486,900 (RMB 3,000,000) and this project is still under development.

During the third quarter of 2013, Xi’an Tianxing launched an R&D project to develop livestock and avian disease multi-joint yolk antibody therapeutic agents and contracted with Lantian County Chicken Farm to test the effect of its developed agents. The project is expected to be completed by the end of 2014. The total projected budget for this project is approximately $714,120 (RMB 4,400,000). As of March 31, 2014, the Company has incurred $324,600 (RMB 2,000,000) 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, fermentation engineering design and development, GMP inspection trial production tests and lab tests. As of March 31, 2014, $1,665,948 (RMB 10,264,620) has been incurred related to these projects and lab tests.

R&D projects are summarized as follows:

Project	Amount incurred as of 03/31/2014		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	$	568,050	$	81,150	$	649,200
Project with the Fourth Military Medical University
Fish diseases linked immunosorbent detection kit and fish diseases Multi-linked monoclonal antibody therapeutic agents		843,960		129,840		973,800
New treatment and diagnosis method for Mycoplasmal pneumonia of swine		243,450		81,150		324,600
In-house R&D projects during 2012:
Oral liquid products R&D and field trials		162,300		-		162,300
Powder for injection products R&D and field trials		162,300		-		162,300
Vitamin E injection product development		81,150		-		81,150
Anthelmintic product development		81,150		-		81,150
Three disease grams product development		81,150		-		81,150
Premixes class product development		81,150		-		81,150
Bulk powder products development		81,150		-		81,150
Livestock and fish diseases immunoassay kit development		405,750		-		405,750
In-house R&D projects during 2013:
Fish monoclonal antibody vaccine		486,900		81,150		568,050
Livestock and avian disease multi-joint yolk antibody therapeutic agents		324,600		389,520		714,120
Other projects for veterinary products formula adjustment, pet drug development, fermentation engineering design and development, GMP inspection trial production tests and other lab tests		1,665,948		16,230		1,682,178
Total	$	5,269,008	$	779,040	$	6,048,048

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

(d) Registered capital commitment:

Skystar Kunshan’s remaining registered capital of $12,750,000 was originally required to be invested by May 7, 2012. On March 26, 2014, the Company received the approval of extension for payment of the remaining registered capital to May 6, 2015.

(e) Capital commitment

The Company’s commitments for capital expenditure as of March 31, 2014 are as follows:

Contracted but not accrued for:
Purchase of machinery and construction (Note 9)	$	4,321,562

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Significant Accounting Policies [Line Items]
Shipping, Handling and Transportation Costs	$ 192,048	$ 203,849
Interest Income, Other	170,665	148,845
Other Nonoperating Income (Expense)	154,919	(187)
Increase (Decrease) in Due to Related Parties, Total		201,325
Net Cash Provided by (Used in) Financing Activities, Continuing Operations, Total	(4,905,600)	2,389,800
Net Cash Provided by (Used in) Operating Activities, Continuing Operations, Total	4,597,282	(9,782,575)
Percentage Of Income Tax Examination Minimum Likelihood Of Tax Benefits Being Realized Upon Settlement	50.00%
Government Grants [Member]
Significant Accounting Policies [Line Items]
Other Nonoperating Income (Expense)	154,902	0
Scenario, Previously Reported [Member]
Significant Accounting Policies [Line Items]
Other Nonoperating Income (Expense)	40,547
Interest Expense	189,392
Net Cash Provided by (Used in) Financing Activities, Continuing Operations, Total		2,591,125
Net Cash Provided by (Used in) Operating Activities, Continuing Operations, Total		$ 9,983,900
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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EARNINGS PER SHARE (Tables)

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

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

The following is the calculation of earnings per share:

	Three months ended March 31,
	2014		2013
Net income	$	975,450	$	712,733
Weighted average shares used in basic computation		7,676,268		7,613,712
Effect of dilutive potential non-vested common shares		24,466		-
Weighted average shares used in diluted computation		7,700,734		7,613,712
Earnings per share:
Basic	$	0.13	$	0.09
Diluted	$	0.13	$	0.09

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(USD ($))	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 975,450	$ 712,733
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation	400,291	313,561
Amortization	62,477	60,872
Provision for doubtful accounts	366,218	351,534
Share based compensation	59,725	4,340
Change in fair value of purchase option liability	16,520	(4,466)
Deferred tax assets	(42,380)	0
Change in operating assets and liabilities
Accounts receivable	(2,127,566)	(1,725,889)
Inventories	419,398	(557,269)
Deposits, prepaid expenses and other receivables	513,005	292,476
Prepayments to suppliers	169,771	(9,696,136)
Accounts payable	1,350,410	1,023,288
Other payables and accrued expenses	135,167	(339,030)
Deferred government grants	0	(159,320)
Deposits from customers	131,733	28,061
Taxes payable	1,560,250	(288,655)
Due to related parties	606,813	201,325
Net cash provided by (used in) operating activities	4,597,282	(9,782,575)
CASH FLOWS FROM INVESTING ACTIVITIES:
Refund of long-term prepayments	184,387	0
Loans to third parties	(1,054,704)	0
Payments on construction-in-progress	(53,195)	0
Net cash used in investing activities	(923,512)	0
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from short-term loans	0	4,779,600
Repayment of short-term loans	(4,905,600)	(2,389,800)
Net cash (used in) provided by financing activities	(4,905,600)	2,389,800
EFFECT OF EXCHANGE RATE CHANGES ON CASH	(61,561)	50,421
DECREASE IN CASH	(1,293,391)	(7,342,354)
CASH, beginning of period	8,142,296	11,321,848
CASH, end of period	6,848,905	3,979,494
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income tax	0	0
Cash paid for interest	129,129	181,426
Non-cash investing activities
Construction-in-progress transferred to property, plant and equipment	$ 2,787,566	$ 0

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SEGEMENT INFORMATION (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Revenues
Total Revenues	$ 6,832,588	$ 5,530,741
Cost of Revenues
Total Cost of Revenues	4,009,403	2,930,886
Gross Profit	2,823,185	2,599,855
Veterinary Medications [Member]
Revenues
Total Revenues	4,844,968	3,446,717
Cost of Revenues
Total Cost of Revenues	3,033,027	2,105,516
Micro-organism [Member]
Revenues
Total Revenues	1,521,165	1,667,182
Cost of Revenues
Total Cost of Revenues	683,784	587,417
Feed Additives [Member]
Revenues
Total Revenues	330,537	286,288
Cost of Revenues
Total Cost of Revenues	220,148	214,637
Vaccines [Member]
Revenues
Total Revenues	135,918	130,554
Cost of Revenues
Total Cost of Revenues	$ 72,444	$ 23,316

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ACCOUNTS RECEIVABLE, NET

3 Months Ended

Mar. 31, 2014

Accounts Receivable Disclosure [Abstract]

Accounts Receivable Disclosure [Text Block]

Note 4 - ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following:

	March 31, 2014		December 31, 2013
Accounts receivable	$	13,624,127	$	11,611,741
Allowance for doubtful accounts		(960,578)		(602,243)
Accounts receivable, net	$	12,663,549	$	11,009,498

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

Balance, January 1, 2014	$	602,243
Addition		366,218
Recovery		—
Translation adjustment		(7,883)
Balance, March 31, 2014	$	960,578

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PROPERTY, PLANT AND EQUIPMENT, NET (Details Textual) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Depreciation	$ 400,291	$ 313,561
Property, Plant and Equipment Pledged Against Loan	$ 3,191,746		$ 19,969,335

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RELATED PARTY TRANSACTIONS AND ARRANGEMENTS (Details) (USD $)	Mar. 31, 2014		Dec. 31, 2013
Related Party Transaction [Line Items]
Amounts due to related parties	$ 1,962,238		$ 1,361,548
Weibing Lu - Ceo [Member]
Related Party Transaction [Line Items]
Amounts due to related parties	1,155,155	[1]	857,012	[1]
Scott Cramer - Non-Executive Director And Shareholder [Member]
Related Party Transaction [Line Items]
Amounts due to related parties	530,349	[2]	300,203	[2]
Officer, Shareholder And Other Related Party [Member]
Related Party Transaction [Line Items]
Amounts due to related parties	184,525	[3]	163,050	[3]
Bing Mei Cfo [Member]
Related Party Transaction [Line Items]
Amounts due to related parties	$ 92,209	[4]	$ 41,283	[4]

[1] As of March 31, 2014 and December 31, 2013, the Company had unpaid reimbursement, compensation, and advances for business expenses due to Weibing Lu valued at $1,155,155 and $857,012, respectively.

[2] As of March 31, 2014 and December 31, 2013, the Company had unpaid reimbursement and compensation due to Scott Cramer valued at $530,349 and $300,203, respectively. On March 10, 2014, the Board of Directors, including all of the independent members of the Board, reviewed and approved the terms of Mr. Cramer’s Consulting Services Agreement with the Company pursuant to which the Company would continue employing him as its US representative in consideration of (i) a quarterly cash fee of $7,500, (ii) 7,000 restricted shares of the Company’s common stock issuable on a quarterly basis pursuant to the Company’s 2010 Stock Incentive Plan (note 15), and (iii) reimbursement of out of pocket expenses. In addition, Mr. Cramer agreed to pay certain invoices of the Company to its vendors (and the Company agreed to reimburse Mr. Cramer) in the form of a no interest bearing loan in the aggregate amount of approximately $250,000.

[3] The amounts due to directors, shareholders and other related parties at March 31, 2014 and December 31, 2013 include unpaid reimbursement and advances to other related parties for business expenses.

[4] As of March 31, 2014 and December 31, 2013, the Company had unpaid reimbursement and compensation due to Bing Mei valued at $92,209 and $41,283, respectively.

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DEFERRED GOVERNMENT GRANT (Details Textual)	3 Months Ended			12 Months Ended	3 Months Ended
	Mar. 31, 2014 Xian Municipal Government [Member] USD ($)	Mar. 31, 2014 Xian Municipal Government [Member] CNY	Mar. 31, 2013 Xian Municipal Government [Member] USD ($)	Dec. 31, 2013 Xian Municipal Government [Member] USD ($)	Mar. 31, 2014 Xian City Science and Technology Bureau [Member] USD ($)	Mar. 31, 2014 Xian City Science and Technology Bureau [Member] CNY	Dec. 31, 2013 Xian City Science and Technology Bureau [Member] USD ($)
Deferred Government Grant [Line Items]
Proceeds From Government Subsidies	$ 405,750	2,500,000	$ 409,250
Repayments Of Government Subsidies	681,660	4,200,000	687,540
Percentage Repayment Of Government Subsidies	70.00%	70.00%
Proceeds From Demand Payment					486,900	3,000,000	491,100
Proceeds from Interest Received	$ 194,760	1,200,000		$ 196,440

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SEGEMENT INFORMATION

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

Note 21 – SEGEMENT INFORMATION

The Company currently engages in one business segment, the research, development, production, marketing and sales of veterinary healthcare and medical care products. The Company’s revenues and cost of revenues by product line were as follows:

	Three Months Ended March 31,
	2014		2013
Revenues
Micro-organism	$	1,521,165	$	1,667,182
Veterinary Medications		4,844,968		3,446,717
Feed Additives		330,537		286,288
Vaccines		135,918		130,554
Total Revenues	$	6,832,588	$	5,530,741
Cost of Revenues
Micro-organism	$	683,784	$	587,417
Veterinary Medications		3,033,027		2,105,516
Feed Additives		220,148		214,637
Vaccines		72,444		23,316
Total Cost of Revenues		4,009,403		2,930,886
Gross Profit	$	2,823,185	$	2,599,855

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STATUTORY RESERVES (Details Textual)	Mar. 31, 2014
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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SHORT-TERM LOANS (Tables)

3 Months Ended

Mar. 31, 2014

Debt Disclosure [Abstract]

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

Outstanding short-term loans consisted of the following:

	March 31, 2014				December 31, 2013					Interest
Bank	Amt RMB		Amt USD		Amt RMB		Amt USD		Due Date	Rate
Industrial Bank Co. Ltd. Xi’an Branch		-	$	-		30,000,000	$	4,911,000	01/15/14		6.60	%
Postal Savings Bank of China Xi’an Branch		20,000,000		3,246,000		20,000,000		3,274,000	05/26/14		(2)
ICBC Songzi Branch		5,000,000		811,500		5,000,000		818,500	06/19/14		(1)
Related-party Individual – Chairman and CEO		10,000,000		1,623,000		10,000,000		1,637,000	09/11/14		7.8	%
Total		35,000,000	$	5,680,500		65,000,000	$	10,640,500

(1)	People's Bank of China floating benchmark lending rate over the same period plus 30%, which was 7.8% at March 31, 2014.
(2)	People's Bank of China floating benchmark lending rate over the same period plus 20%, which was 7.2% at March 31, 2014.

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DEFERRED GOVERNMENT GRANT

3 Months Ended

Mar. 31, 2014

Deferred Government Grant Disclosure [Abstract]

Deferred Government Grant Disclosure [Text Block]

Note 14 - 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 March 31, 2014 and December 31, 2013, the subsidies were RMB 2,500,000, equivalent to $405,750 and $409,250, 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 March 31, 2014 and December 31, 2013, 70% of the subsidies or RMB 4,200,000, equivalent to $681,660 and $687,540, respectively had been received and RMB 3,000,000 equivalent to $486,900 and $491,100 has been expensed on this project and were accounted for as an offset against deferred government grant as of March 31, 2014 and December 31, 2013, respectively.

The interest subsidies granted by Xi’an municipal government were required to be used exclusively for the chicken coccidia vaccine project in the third quarter of 2013. As of March 31, 2014 and December 31, 2013, the subsidies of RMB 1,200,000, equivalent to $194,760 and $196,440 had been received and nil has been expensed on this project.