Sales and Marketing Agreement with Related Party

9 Months Ended

Feb. 29, 2012

Sales and Marketing Agreement With Related Party [Abstract]

Sales and Marketing Agreement With Related Party [Text Block]

NOTE 2 - SALES AND MARKETING AGREEMENT WITH RELATED PARTY

On August 29, 2008 the Company entered into a related party Sales and Marketing Agreement (the “Agreement”) with the Yunnan Zhongsen Group, Ltd. (formerly known as Yunnan Zhongsen Forest Co., Ltd. (a/k/a Yunnan Zhongsen Commercial Forest Plantation Group Inc) on or before September 1, 2008), or YZG, a Chinese company located in Kunming, Yunnan Province, People’s Republic of China, which caused them to become YZG’s exclusive sales and marketing agent worldwide. The Company receives a commission of 20% of global sales, payable each month based on the Company’s and YZG’s sales figures. The Agreement is for a fifty year term, commencing on the Closing Date and ending on August 29, 2058 (the “Initial Term”). The Initial Term shall be automatically extended for additional terms of successive fifty year periods (the “Additional Term”) unless the Parties give written notice to the other of the termination of the Agreement hereunder at least 180 days prior to the expiration of the Initial Term or Additional Term. Under the Agreement, the Company shall provide sales, marketing and finance services to YZG as the exclusive worldwide sales agent, and shall identify customers throughout the entire world for YZG products and services. The Company shall further, within such limitations relating to price, delivery and other key terms as YZG may, from time to time specify in writing, and subject to acceptance by YZG (by telex or otherwise), negotiate sales contracts as YZG’s exclusive worldwide sales agent, inside and outside of China.

 On August 29, 2008, the effective date of the transaction, the Company issued 831,667 shares of common stock valued at $499,000 or $.60 per share the most recent cash offering price in exchange for the sales and marketing agreement to 4,200 YZG shareholders, who were, at the time, made up of shareholders, officers and directors, friends and family, and suppliers and customers of YZG. Prior to the transaction, there were no common shareholders, officers, directors or other related parties or transactions between the Company and YZG. The Company determined the fair value of the equity exchanged was the more reliable measurement of the assets acquired. ASC 805-50-25-1 requires the equity issued to be recognized on the date of the acquisition. At the time the company entered into the marketing agreement, we had recently completed a private placement of stock for cash. Based on the current cash offering price, it was determined that this was the fair value of the stock and this value was used to value the transaction.

In August 2010, the 5 current shareholders of YZG, acquired all of the outstanding shares of YZG from the previous 4,200 shareholders, among which selling shareholders was Ms. Wang.  In connection with their acquisition of the YZG shares, the former officers and directors of YZG, including Zhou Zhongping, Zou Jun and Pin Nie, resigned from their positions in YZG effective August 2010.  On August 29, 2008, Ms. Wang owned 13.61% of YZG, which was subsequently sold to the 5 current shareholders in August 2010 in an undisclosed ratio.  Currently, none of our officers and directors is related to the owners of YZG.

 The Company determined the fair value of the equity exchanged was the more reliable measurement of the assets acquired. ASC 805-50-25-1 requires the equity issued to be recognized on the date of the acquisition. At the time the company entered into the marketing agreement, we had recently completed a private placement of stock for cash. Based on the current cash offering price, it was determined that this was the fair value of the stock and this value was used to value the transaction.

In May, 2011, we impaired the entire value of the Marketing Agreement due our inability to collect our receivables from YZG.  While YZG continues to assure us that they are obligated to make, and will make, payment on our open receivable from them, we have thus far been unable to collect our receivable.  The inability to collect this receivable has caused us to examine the value of the Marketing Agreement, based on the future value of the revenues and the ability of us to collect those revenues, and we determined that it is in our best interest to impair the remaining value of the Marketing Agreement.

We are not under common ownership or management as YZG with the exception of our President and Chairman, Wang Li, who currently serves as a director on the Board of Directors of YZG.  The following tables set forth our current Officers and Directors and the Officers, Directors and ownership interests of YZG.

Name	Director of ZSIT	ZSIT Officer/Title	Director of YZG	YZG Officer/Title	Ownership Interest in YZG
Li Wang	X	President/Secretary	X
Zhou Zhongping	X
Zou Jun	X
Pin Nie	X	CEO, COO
Binquan Zhang	X	CFO
Kaibiao Yin			X	President
DelinFeng			X	Executive VP
Ruigang Su			X	Administrative VP
FeiZou			X	VP of Sales
Baosheng Wang			X
Jinquan Ma			X
Fei Wang					40%
Xiaochuan Wang					30%
Jinfei Zhang					20%
Guisheng Wang					5%
Tenggao Liu					5%