Note 4 - Disposal of Subsidiaries and Discontinued Operation

12 Months Ended

May. 31, 2015

Notes

Note 4 - Disposal of Subsidiaries and Discontinued Operation

NOTE 4 – DISPOSAL OF SUBSIDIARIES AND DISCONTINUED OPERATION

On July 25, 2014, the Company entered into an agreement to dispose of its entire equity interest in Hongsheng, a VIE subsidiary, to Guotai Investment Holdings Limited at a total cash consideration of approximately $4.54 million.

Pursuant to the agreement, Hongsheng shall transfer all its operations, assets and liabilities other than investment in QBA prior to the completion of the above transaction. Therefore, the entire arrangement is to dispose of the shell of Hongsheng together with the entire interest in QBA.

As of the disposal date, QBA’s assets and liabilities are summarized as follows:

	July 25, 2014	May 31, 2014
Assets
Cash and cash equivalents	$2,969,661	$1,687,392
Inventories	6,708	6,669
Accounts receivable	525	522
Other receivables and deposits	8,892	8,841
Property, plant and equipment, net	5,937	9,587
Total assets	2,991,723	1,713,011
Liabilities
Accounts payable	29,699	32,701
Accrued expenses and other payables	17,462	24,160
Total current liabilities	47,161	56,861
Net assets of QBA	2,944,562	1,656,150

The assets of QBA as of May 31, 2014 are classified as assets held for sale and liabilities in the consolidated balance sheet.

The results of QBA during the year (up to date of disposal) are summarized as follows:

	From June 1, 2014 to July 25, 2014	Year ended May 31, 2014
Revenue	$3	$63,849
Other income and gains	164	97,390
Service costs	-	(14,354
Personnel cost	(93,580)	(157,777)
Depreciation expense	(3,689)	(182,797)
Administrative and other expenses	(6,916)	(50,548)
Net loss	(104,018)	(244,237)

The results of QBA for the nine months ended February 28, 2015 and 2014, respectively, are reported as discontinued operations in the condensed consolidated statement of income and comprehensive income.

The gain on disposal of QBA is analyzed as follows:

Consideration received	4,565,936
Less: Net assets of QBA	(2,944,563)
Less: Goodwill arising in the acquisition of QBA	(610,386)
Gain on disposal	1,010,987