INCOME TAXES

9 Months Ended

Dec. 31, 2011

INCOME TAXES

NOTE 11 - INCOME TAXES

Shandong Spring Pharmaceutical Co., Ltd is subject to the Enterprise income tax (“EIT”) at a statutory rate of 25%.

The expense associated with the recognition of a contingent obligation under ASC 480-10-25-8, is not tax deductible in China. Therefore, the tax difference in the amount of $829,784 ($3,319,135 x 25% tax rate) caused by expense recognized in the financial report of the Chinese operating legal entity but not in the Chinese tax return at December 31, 2011 is a permanent difference. Therefore, we did not recognize the difference as a deferred tax asset.

For the three months ended December 31, 2011 and 2010, Shandong Spring Pharmaceutical Co., Ltd. recorded income tax provisions of $1,112,777 and $1,141,919, respectively.

For the nine months ended December 31, 2011 and 2010, Shandong Spring Pharmaceutical Co., Ltd. recorded income tax provisions of $2,283,837 and $2,085,719, respectively.