Note 5 - Acquisition of A Subsidiary

12 Months Ended

May. 31, 2015

Notes

Note 5 - Acquisition of A Subsidiary

NOTE 5 – ACQUISITION OF A SUBSIDIARY

On July 16, 2014, Huitong, Mao Hong, a director and nominee shareholder of certain VIEs, and Wei Gang, an independent third party  jointly incorporated YuZhong and the founders owned 49.8%, 25.1% and 25.1% of equity interests in YuZhong, respectively.

On July 17, 2014, Huitong and YuZhong jointly incorporated YuGuang. Huitong and YuZhong owns 20% and 80% of equity interests in YuGuang, respectively.

On September 11, 2014, YuGuang entered into an agreement with Zhou Jin Shan and Chen Xiu Lan to acquire 51% equity interest in Taizhou Haitai Motor Vehicle Inspection Co, Ltd. (“Haitai”) from Zhou Jin Shan at a consideration of RMB652,800. Haitai is principally engaged in the provision of motor vehicle inspection service in the PRC. The acquisition was completed in January 2015.

As of the date of acquisition, Haitai has 51% equity interest in FengCheng. FengCheng is principally engaged in the provision of services for motor vehicle technical and emission inspection. Haitai and FengCheng was collectively known as “Haitai Group”.

The car inspection Center that still under construction in progress.

Management has assessed the fair value of the assets and liabilities of Haitai Group as of the acquisition date, and is analyzed as follows:

Assets
Construction in progress	$1,100,243
Other receivables and deposits	101,036
Cash and cash equivalents	1,132
	1,202,411
Liabilities
Accrued expenses and other payables	1,736,068
	1,736,068
Net assets acquired	(533,657)
Net assets shared by YuGuang	(272,165)
Cash consideration	105,006
Goodwill	377,171
Reconciliation of net cash used in acquisition
Cash consideration paid	105,006
Less: cash acquired from the transaction	(1,132)
Net cash used in acquisition	103,874

On January 22, 2014, the Company acquired 56% equity interest in Xin Chang. Consideration of $245,655 was paid upon signing of the Acquisition Agreement; while another $489,900 to be paid to Xin Chang as an operating fund in batches based on Xin Chang’s financial needs as determined by the Company.

The results of Xin Chang for the year are analyzed as follows:

	2015	2014 (post acquisition)
Revenue	$1,910,175	$650,217
Other income	5,131	-
Cost of services	(1,663,261)	(599,433)
Personnel cost	(155,784)	(47,230)
Depreciation expense	(44,021)	(893)
Amortization expense	(183,016)	(9,090)
Administrative and other expenses	(183,394)	(55,926)
Net loss for the period	(314,170)	(62,355)