Variable Interest Entities ("vies")

3 Months Ended

Feb. 29, 2012

Variable Interest Entities ("vies") [Abstract]

Variable Interest Entities ("vies")

NOTE 14 – VARIABLE INTEREST ENTITIES (“VIEs”)

During the nine months ended February 28, 2011, Hongsheng, Huitong and Jiamao were VIEs of the Company. The status of these VIEs has not changed since the date of the combination. During nine months ended February 29, 2012, Nantong Jiatong, Hongsheng, Huitong, QBA and Jiamao were VIEs of the Company. Nantong Jiatong and QBA were acquired during the fourth quarter of fiscal year 2011.

Although the Company is not the shareholder of Nantong Jiatong, Hongsheng, Huitong, QBA and Jiamao, the Company has determined that it is the primary beneficiary of these entities, as the Company has 100% voting powers and is entitled to receive all the benefit from operations of these entities. Hence, these entities are identified as VIEs and are consolidated as if they are wholly-owned subsidiaries of the Company.

We did not identify any additional VIEs in which we hold a significant interest.

The total consolidated VIE assets and liabilities reflected on the Company’s balance sheet are as follows:

	February 29, 2012		May 31, 2011
Assets
Cash and cash equivalents	$	2,442,278	$	4,003,765
Inventories		6,736		6,679
Accounts receivable		234,999		642,843
Tax recoverable		19,351		81,086
Other receivables and deposits		415,683		363,823
Goodwill		610,386		610,386
Property, plant and equipment, net		513,563		646,972
Total assets (not include amount due from intra-group companies)	$	4,242,996	$	6,355,554
Liabilities
Deferred income	$	1,771,527	$	1,857,752
Accounts payable		457,078		913,504
Accrued expenses and other payables		383,090		314,925
Tax payables		45,565		15,560
Total liabilities	$	2,657,260	$	3,101,741

The statements of income of the consolidated VIEs for the nine months ended February 28, 2011 and February 29, 2012 are as follows, and are included in the consolidated statements of income of the Company:

	Nine months ended February 29, 2012		Nine months ended February 28, 2011
Revenue	$	6,079,597	$	3,531,995
Other income and gains		92,372		28,458
Service costs		(3,889,162)		(1,602,004)
Administrative and other expenses		(674,514)		(274,732)
Personnel cost		(692,676)		(382,286)
Depreciation expense		(166,439)		(16,640)
Income before provision for income taxes (Not including service costs payable to intra-group companies)		749,178		1,284,791
Provision for income taxes		(52,166)		(37,034)
Net income	$	697,012	$	1,247,757