Note 13 - Variable Interest Entities ("vies")

6 Months Ended

Nov. 30, 2013

Notes

Note 13 - Variable Interest Entities ("vies")

NOTE 13 – VARIABLE INTEREST ENTITIES (“VIEs”)

Hongsheng, Huitong, Nanjing Jiatong, QBA and Jiamao were all VIEs of the Company. The status of these VIEs has not changed since the date of the combination.

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, 2013	May 31, 2013
Assets
Cash and cash equivalents	$1,892,128	$1,945,614
Inventories	10,717	10,621
Accounts receivable	599,663	2,392,819
Tax recoverable	23,533	23,323
Other receivables and deposits	771,226	283,603
Goodwill	610,386	610,386
Property, plant and equipment, net	159,807	285,823
Available-for-sale investment
Total assets (not include amount due from intra-group companies)	$4,067,460	$5,552,189
Liabilities
Deferred income	$ 1,047,241	$867,804
Accounts payable	1,136,566	3,730,907
Accrued expenses and other payables	392,247	379,035
Tax payables	33,304	31,188
Total liabilities	$2,609,358	$5,008,934

The statements of income of the consolidated VIEs for six months ended November 30, 2013 and 2012 are as follows, and are included in the consolidated statements of income of the Company:

	Six months ended November 30, 2013	Six months ended November 30, 2012
Revenue	$ 2,703,230	$3,333,155
Other income and gains	61,259	45,359
Service costs (Not including service costs payable to intra-group companies)	(1,222,529)	(2,391,397)
Administrative and other expenses	(211,256)	(195,650)
Personnel cost	(324,531)	(353,123)
Depreciation expense	(109,874)	(110,273)
Income before provision for income taxes (Not including service costs payable to intra-group companies)	896,299	328,071
Income tax income/(provision for income taxes)	720	(53,238)
Net income	$897,019	$274,833