Note 14 - Variable Interest Entities ("vies")

3 Months Ended

Nov. 30, 2012

Note 14 - Variable Interest Entities ("vies"):

Note 14 - Variable Interest Entities ("vies")

NOTE 14 – VARIABLE INTEREST ENTITIES (“VIEs”)

During six months ended November 30, 2012, Nantong Jiatong, Hongsheng, Huitong, QBA and Jiamao were VIEs of the Company.

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:

	November 30, 2012		May 31, 2012
Assets
Cash and cash equivalents	$	2,127,439	$	3,466,743
Inventories		10,462		18,385
Accounts receivable		659,131		633,009
Tax recoverable		22,974		22,755
Other receivables and deposits		890,054		237,490
Goodwill		610,386		610,386
Property, plant and equipment, net		342,179		454,875
Total assets (not include amount due from intra-group companies)	$	4,662,625	$	5,443,643
Liabilities
Deferred income	$	1,162,052	$	1,441,347
Accounts payable		1,167,590		694,626
Accrued expenses and other payables		423,122		467,246
Tax payables		100,322		44,424
Total liabilities	$	2,853,086	$	2,647,643

The statements of income of the consolidated VIEs for the six months ended November 30, 2012 and 2011 are as follows, and are included in the consolidated statements of income of the Company:

	Six months ended November 30, 2012		Six months ended November 30, 2011
Revenue	$	3,333,155	$	3,827,643
Other income and gains		45,359		45,321
Service costs		(2,391,397)		(2,484,147)
Administrative and other expenses		(195,650)		(425,885)
Personnel cost		(353,123)		(458,475)
Depreciation expense		(110,273)		(109,678)
Income before provision for income taxes (Not including service costs payable to intra-group companies)		328,071		394,779
Provision for income taxes		(53,238)		(14,366)
Net income	$	274,833	$	380,413