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ForceField Energy Inc. – ‘10-K’ for 12/31/11 – ‘EX-101.INS’

On:  Monday, 4/16/12, at 3:08pm ET   ·   For:  12/31/11   ·   Accession #:  1354488-12-1890   ·   File #:  0-54312

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  As Of               Filer                 Filing    For·On·As Docs:Size             Issuer                      Filing Agent

 4/16/12  ForceField Energy Inc.            10-K       12/31/11   42:4.9M                                   Issuer Direct/FA

Annual Report   —   Form 10-K   —   Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                       HTML   1.02M 
 5: EX-99       Miscellaneous Exhibit                               HTML    533K 
 2: EX-31.1     Certification -- §302 - SOA'02                      HTML     20K 
 3: EX-31.2     Certification -- §302 - SOA'02                      HTML     20K 
 4: EX-32       Certification -- §906 - SOA'02                      HTML     16K 
24: R1          Document and Entity Information                     HTML     42K 
17: R2          Consolidated Balance Sheets                         HTML    140K 
22: R3          Consolidated Balance Sheets (Parenthetical)         HTML     43K 
26: R4          Consolidated Statements of Operations and           HTML     63K 
                Comprehensive Income                                             
38: R5          Consolidated Statements of Equity (Deficit)         HTML     82K 
18: R6          Consolidated Statements of Cash Flows               HTML    171K 
21: R7          Nature of Operations                                HTML     18K 
16: R8          Summary of Significant Accounting Policies          HTML     57K 
13: R9          The Effect of Recently Issued Accounting Standards  HTML     28K 
39: R10         Accounts Receivable                                 HTML     23K 
28: R11         Notes Receivable                                    HTML     20K 
27: R12         Inventory                                           HTML     24K 
32: R13         Prepaid and Other Current Assets                    HTML     23K 
33: R14         Property, Plant and Equipment                       HTML     30K 
31: R15         Business Combinations                               HTML     50K 
34: R16         Goodwill and Intangible Assets, Net                 HTML     37K 
23: R17         Related Party Receivable                            HTML     19K 
25: R18         Other Assets                                        HTML     21K 
30: R19         Accounts Payable and Accrued Liabilities            HTML     21K 
42: R20         Advances Payable                                    HTML     20K 
36: R21         Related Party Payable                               HTML     22K 
19: R22         Income Taxes Payable                                HTML     38K 
29: R23         Debt                                                HTML     29K 
20: R24         Stockholders’ Equity                                HTML     33K 
12: R25         Commitments                                         HTML     20K 
37: R26         Segment Information                                 HTML     71K 
40: R27         Defined Contribution Plan                           HTML     17K 
15: R28         Subsequent Events                                   HTML     17K 
41: XML         IDEA XML File -- Filing Summary                      XML     54K 
14: EXCEL       IDEA Workbook of Financial Reports (.xls)            XLS    345K 
 6: EX-101.INS  XBRL Instance -- ssie-20111231                       XML    650K 
 8: EX-101.CAL  XBRL Calculations -- ssie-20111231_cal               XML    115K 
 9: EX-101.DEF  XBRL Definitions -- ssie-20111231_def                XML    144K 
10: EX-101.LAB  XBRL Labels -- ssie-20111231_lab                     XML    320K 
11: EX-101.PRE  XBRL Presentations -- ssie-20111231_pre              XML    243K 
 7: EX-101.SCH  XBRL Schema -- ssie-20111231                         XSD     58K 
35: ZIP         XBRL Zipped Folder -- 0001354488-12-001890-xbrl      Zip     62K

‘EX-101.INS’   —   XBRL Instance — ssie-20111231

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<p style="margin: 0pt"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">1.</td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">NATURE OF OPERATIONS</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">SunSi Energies Inc. (“the Company” or “SunSi”) was incorporated in the State of Nevada on January 30, 2007. SunSi through its operations in China (“China” or “PRC”) is a specialty chemical manufacturer and distributor whose focus is to acquire and develop a portfolio of high quality trichlorosilane (“TCS”) producing facilities and distribution rights that possess a potential for future growth and expansion. TCS is a chemical primarily used in the production of polysilicon, which is an essential raw material in the production of solar cells for photovoltaic (PV) panels that convert sunlight to electricity. Prior to December 9, 2010 when the Company acquired 90% of Zibo Baokai Commerce and Trade Co., Ltd. (“Baokai”), SunSi was a Development Stage Company as defined by ASC Topic 915. After the purchase of Baokai, the Company emerged from development stage status and started generating revenues.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="margin: 0pt"></p>
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<p style="margin: 0pt"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">2.</td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">SUMMARY OF  SIGNIFICANT ACCOUNTING POLICIES</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Basis of Presentation and Principles of Consolidation</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (GAAP) and are expressed in U.S. Dollars.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Change of Year End Reporting Period</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Prior to December 7, 2011, the Company’s fiscal year-end was May 31. On December 8, 2011, the Company changed its year-end to December 31. As a result this Report is filed under the Securities and Exchange Commission’s (“SEC”) guidelines 210.3-06. This Report includes the following information:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 48px; font: 10pt Symbol; text-align: center">·</td> <td style="font: 10pt Times New Roman, Times, Serif">Audited balance sheets as of December 31, May 31, 2011 and May 31, 2010</td></tr> <tr style="vertical-align: top"> <td style="font: 10pt Symbol; text-align: center">·</td> <td style="font: 10pt Times New Roman, Times, Serif">Audited statements of operations, equity (deficit) and cash flows for the seven months ended December 31, 2011 and years ended May 31, 2011 and 2010.</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr> <td style="font: 10pt Times New Roman, Times, Serif"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiary SunSi Energies Hong Kong Ltd. (“SunSi HK”), SunSi HK's 90% owned subsidiary Baokai and SunSi HK's 60% owned subsidiary Wendeng He Xie Silicon Industry Co., Ltd. (“Wendeng”). All intercompany accounts have been eliminated in consolidation. As a result of the acquisitions of Baokai in December 2010 and Wendeng in March 2011, the Company transitioned from a development stage company to planned operations. Consequently, the need to disclose certain historical data which has previously been presented in company filings is no longer necessary.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Use of Estimates</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company continually evaluates its estimates, including but not limited to those related to the valuation of accounts receivable, inventories, deferred income taxes, goodwill and intangible assets, and the estimation on the useful lives of property, plant and equipment. The Company bases its estimates on historical experience, known or expected trends and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company believes that the following critical accounting policies govern its more significant judgments and estimates used in the preparation of its consolidated financial statements:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Financial Instruments</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company considers all highly liquid investments with a maturity of three months or less at the date of purchase to be cash equivalents. Cash and cash equivalents are stated at cost and consist solely of bank deposits held in the United States, Hong Kong and the PRC (“China”). The carrying amount of cash and cash equivalents approximates fair value.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">As of December 31, 2011, $487,868 of the cash and cash equivalents were in banks in China; the Wendeng branch of Industrial & Commercial Bank of China and a Central District, Hong Kong branch of HSBC Bank. The remittance of these funds out of China is subject to exchange control restrictions imposed by the Chinese government. Deposits in banks in the PRC are not insured by any government entity or agency, and are consequently exposed to risk of loss. Management believes the probability of a bank failure, causing loss to the Company, is remote.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Concentration of Credit Risk</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and accounts receivable.  As of December 31, 2011, May 31, 2011 and May 31, 2010, substantially all of the Company’s cash and cash equivalents were held by major financial institutions located in the United States, Hong Kong and the PRC, which management believes are of high credit quality.  </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">With respect to accounts receivable, the Company extends credit based on an evaluation of the customer’s financial condition.  The Company generally does not require collateral for trade receivables and maintains an allowance for doubtful accounts of accounts receivable.  </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of <font style="background-color: white">December 31, 2011, three customers accounted for approximately 11%, 22% and 65%, respectively, or approximately 98% of total accounts receivable. These same customers also accounted for approximately 3%, 50% and 23%, respectively, of the Company’s revenues, or approximately 76% of revenues for the seven month period ended December 31, 2011.</font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="background-color: white">As of May 31, 2011, four customers accounted for approximately 14%, 19%, 29% and 37%, respectively, or approximately 99% of total accounts receivable. These same customers also accounted for approximately 5%, 10%, 15% and 62%, respectively, of the Company’s revenues, or approximately 92% of revenues for the period ended May 31, 2011.</font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company did not have any accounts receivable, nor had it recorded any sales, as of May 31, 2010.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Allowance for doubtful accounts</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company establishes an allowance for doubtful accounts based on management’s assessment of the collectability of trade receivables.  A considerable amount of judgment is required in assessing the amount of the allowance.  The Company makes judgments about the creditworthiness of each customer based on ongoing credit evaluations, and monitors current economic trends that might impact the level of credit losses in the future.  If the financial condition of the customers were to deteriorate, resulting in their inability to make payments, a specific allowance will be required.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Bad debts are written off when identified.  The Company extends unsecured credit to customers ranging from one month in the normal course of business.  The Company does not accrue interest on trade accounts receivable. Historically, losses from uncollectible accounts have not significantly deviated from the specific allowance estimated by the management.  This specific provisioning policy has not changed since establishment and the management considers that the aforementioned specific provisioning policy is adequate and does not expect to change this established policy in the near future.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Inventory</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Inventories are stated at the lower of cost or market value.  Cost is determined on weighted average basis and includes all expenditures incurred in bringing the goods in a saleable condition to the point of sale.   The Company’s inventory reserve requirements generally fluctuate based on projected demands and market conditions. In determining the adequate level of inventories to have on hand, management makes judgments as to the projected inventory demands as compared to the current or committed inventory levels. Inventory quantities and condition are reviewed regularly and provisions for excess or obsolete inventory are recorded based on the condition of inventory and the Company’s forecast of future demand and market conditions.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of December 31, 2011, the Company recorded provisions for excess or obsolete inventory of $82,706 related to its Wendeng segment. No provisions for excess or obsolete inventory were made as of May 31, 2011. The Company did not have any inventory, nor had it recorded any reserves, as of May 31, 2010.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Intangible assets</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Customer relationships are stated at cost less accumulated amortization.  Amortization is provided using the straight-line method over the assets estimated useful life; determined to be three years.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Land use rights are stated at cost less accumulated amortization.  Amortization is provided using the straight-line method over the terms of 50 years. The lease term is obtained from the relevant PRC land authority.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Property, plant and equipment</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">Property, plant and equipment is stated at cost less accumulated depreciation.  Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The property, plant and equipment of the Company will be depreciated with straight-line method according to the following estimated residual value and service life.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">Service life (year)</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Estimated</b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>residual rate %</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Annual</b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>depreciation rate %</b></p></td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 64%">Building</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 9%; text-align: center">20</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 9%; text-align: center">5</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 9%; text-align: center">2.05</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Furniture and equipment</td> <td> </td> <td> </td> <td style="text-align: center">5</td> <td> </td> <td> </td> <td> </td> <td style="text-align: center">5</td> <td> </td> <td> </td> <td> </td> <td style="text-align: center">3.17</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Machines and equipment</td> <td> </td> <td> </td> <td style="text-align: center">10</td> <td> </td> <td> </td> <td> </td> <td style="text-align: center">5</td> <td> </td> <td> </td> <td> </td> <td style="text-align: center">7.34</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Automotive equipment</td> <td> </td> <td> </td> <td style="text-align: center">5</td> <td> </td> <td> </td> <td> </td> <td style="text-align: center">5</td> <td> </td> <td> </td> <td> </td> <td style="text-align: center">10.93</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Office equipment</td> <td> </td> <td> </td> <td style="text-align: center">5</td> <td> </td> <td> </td> <td> </td> <td style="text-align: center">5</td> <td> </td> <td> </td> <td> </td> <td style="text-align: center">8.64</td> <td> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The residual value and service life of property, plant and equipment will be reviewed on each balance sheet date, and adjusted if necessary.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company capitalizes the interest expenses incurred before property, plant and equipment are built and installed to the usable state, and capitalizes other loan interest expenses.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Construction in progress</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The value of construction in progress comprises buildings and plants under construction, as well as machines and equipment being installed and commissioned, specifically comprises the costs of property, plant and equipment and other direct costs, relevant interest accrued during the construction period and profits and losses from foreign exchange transactions.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Depreciation will not start until the construction in progress is completed and put into operation.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Impairment of Assets</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company reviews long-lived assets and certain identifiable intangibles held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating the fair value and future benefits of its long-lived assets, management performs an analysis of the anticipated undiscounted future net cash flows of the individual assets over the remaining depreciation or amortization period. The Company recognizes an impairment loss if the carrying value of the asset exceeds the expected future cash flows.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Each year, the Company performs a transitional test for impairment of goodwill and other indefinite-lived intangible assets. This test is performed by comparing, at the reporting unit level, the carrying value of goodwill to its fair value. The Company assesses fair value based upon its best estimate of the present value of future cash flows that it expects to generate by the reporting unit. The Company’s annual fair value assessment is performed each December 31 on subsidiaries with material goodwill on their respective balance sheets. However, changes in expectations as to the present value of the reporting unit’s future cash flows might impact subsequent years’ assessments of impairment.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Goodwill and Intangible Assets</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Under ASC 350, the Company is required to perform an annual impairment test of the Company’s goodwill and indefinite-lived intangibles. On an annual basis, management assesses the composition of the Company’s assets and liabilities, as well as the events that have occurred and the circumstances that have changed since the most recent fair value determination. If events occur or circumstances change that would more likely than not reduce the fair value of goodwill and indefinite-lived intangibles below their carrying amounts, they will be tested for impairment. The Company will recognize an impairment charge if the carrying value of the asset exceeds the fair value determination. The impairment test that the Company has selected historically consisted of a ten year discounted cash flow analysis including the determination of a terminal value, and requires management to make various assumptions and estimates including revenue growth, future profitability, peer group comparisons, and a discount rate which management believes are reasonable.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The impairment test involves a two-step approach. Under the first step, the Company determines the fair value of each reporting subsidiary to which goodwill has been assigned. The Company then compares the fair value of each reporting subsidiary to its carrying value, including goodwill. The Company estimates the fair value of each reporting subsidiary by estimating the present value of the reporting subsidiaries' future cash flows. If the fair value exceeds the carrying value, no impairment loss is recognized. If the carrying value exceeds the fair value, the goodwill of the reporting unit is considered potentially impaired and the second step is completed in order to measure the impairment loss.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Under the second step, the Company calculates the implied fair value of goodwill by deducting the fair value of all tangible and intangible net assets, including any unrecognized intangible assets, of the reporting unit from the fair value of the reporting unit, as determined in the first step. The Company then compares the implied fair value of goodwill to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, the Company recognizes an impairment loss equal to the difference.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Income Taxes</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company accounts for income taxes under FASB ASC 740 Accounting for Income Taxes.  Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.   FASB ASC 740-10-05 Accounting for Uncertainty in Income Taxes prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. We assess the validity of our conclusions regarding uncertain tax positions on a quarterly basis to determine if facts or circumstances have arisen that might cause us to change our judgment regarding the likelihood of a tax position’s sustainability under audit.  We have determined that there were no uncertain tax positions for the periods ended December 31, 2011, May 31, 2011, and May 31, 2010.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Basic and Diluted Net Income (Loss) Per Share</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company computes net income (loss) per share in accordance with ASC 260 “Earnings per Share”. ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the income statement. Basic EPS is computed by dividing net income (loss) available to common stockholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period using the treasury stock method and convertible preferred stock using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options or warrants. Diluted EPS excludes all dilutive potential shares if their effect is anti-dilutive.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Fair value of financial instruments</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company adopted FASB ASC 820 on June 1, 2010.  The adoption of FASB ASC 820 did not materially impact the Company's financial position, results of operations or cash flows.  FASB ASC 820 requires the disclosure of the estimated fair value of financial instruments including those financial instruments for which the fair value option was not elected.  The carrying amounts of both the financial assets and liabilities approximate to their fair values due to short maturities or the applicable interest rates approximate the current market rates.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Revenue Recognition</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Revenue from the sales of the Company’s products is recognized upon customer acceptance. This occurs at the time of delivery to the customer, provided persuasive evidence of an arrangement exists, such as a signed sales contract. The significant risks and rewards of ownership are transferred to the customers at the time when the products are delivered and there is no significant post-delivery obligation to the Company. In addition, the sales price is fixed or determinable and collection is reasonably assured.  The Company does not provide customers with contractual rights of return for products.  When there are significant post-delivery performance obligations, revenue is recognized only after such obligations are fulfilled.  The Company evaluates the terms of the sales agreement with its customer in order to determine whether any significant post-delivery performance obligations exist.  Currently, the sales do not include any terms which may impose any significant post-delivery performance obligations on the Company.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Revenue from the sales of the Company’s products represents the invoiced value of goods, net of the value-added tax (VAT). All of the Company’s products that are sold in the PRC are subject to a Chinese value-added tax at a rate of 17 percent of the gross sales price. This VAT may be offset by the VAT paid by the Company on raw and other materials that are included in the cost of producing the Company’s finished products.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Advertising expenses</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Advertising costs are expensed as incurred.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Shipping and handling costs</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">All shipping and handling costs are included in cost of sales expenses.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Foreign Currency Translation</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company’s functional and reporting currency is the United States dollar. Transactions may occur in Renminbi (“RMB”) dollars and management has adopted ASC 830 “Foreign Currency Matters”. The RMB is not freely convertible into foreign currencies.  Monetary assets denominated in foreign currencies are translated using the exchange rate prevailing at the balance sheet date. Average monthly rates are used to translate revenues and expenses. The Company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction.  Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Assets and liabilities of the Company’s operations are translated into the reporting currency, United States dollars, at the exchange rate in effect at the balance sheet dates. Revenue and expenses are translated at average rates in effect during the reporting periods. Equity transactions are recorded at the historical rate when the transaction occurred. The resulting translation adjustment is reflected as accumulated other comprehensive income, a separate component of stockholders' equity in the statement of stockholders' equity.  </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Comprehensive Gain or Loss</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">ASC 220 “Comprehensive Income,” establishes standards for the reporting and display of comprehensive income and its components in the financial statements. As of December 31, 2011 and May 31, 2011, the Company determined that it had items that represented components of comprehensive income and, therefore, has included a schedule of comprehensive income in the financial statements. As of May 31, 2010, the Company did not have any such items.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="margin: 0pt"></p>
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<us-gaap:ScheduleOfNewAccountingPronouncementsAndChangesInAccountingPrinciplesTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">3.</td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">THE EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following Accounting Standards Codification Updates have been issued, or will become effective, after the end of the period covered by these financial statements. The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its financial condition or the results of its operations.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 11%; border-bottom: black 1.5pt solid; padding: 0.75pt; font-size: 8pt; font-weight: bold">Pronouncement</td> <td style="width: 11%; border-bottom: black 1.5pt solid; padding: 0.75pt; font-size: 8pt; font-weight: bold">Issued</td> <td style="width: 78%; border-bottom: black 1.5pt solid; padding: 0.75pt; font-size: 8pt; font-weight: bold">Title</td></tr> <tr style="vertical-align: top; background-color: #CCEEFF"> <td style="padding: 0.75pt">ASU No. 2010-25</td> <td style="padding: 0.75pt">September 2010</td> <td style="padding: 0.75pt">Plan Accounting—Defined Contribution Pension Plans (Topic 962) Reporting Loans to Participants by Defined Contribution Pension Plans EITF consensus</td></tr> <tr style="vertical-align: top; background-color: white"> <td style="padding: 0.75pt">ASU No. 2010-26</td> <td style="padding: 0.75pt">October 2010</td> <td style="padding: 0.75pt">Financial Services—Insurance (Topic 944) Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts EITF consensus</td></tr> <tr style="vertical-align: top; background-color: #CCEEFF"> <td style="padding: 0.75pt">ASU No. 2010-27</td> <td style="padding: 0.75pt">December 2010</td> <td style="padding: 0.75pt">Other Expenses (Topic 720) Fees Paid to the Federal Government by Pharmaceutical Manufacturers EITF consensus</td></tr> <tr style="vertical-align: top; background-color: white"> <td style="padding: 0.75pt">ASU No. 2010-28</td> <td style="padding: 0.75pt">December 2010</td> <td style="padding: 0.75pt">Intangibles—Goodwill and Other (Topic 350) When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts  EITF consensus</td></tr> <tr style="vertical-align: top; background-color: #CCEEFF"> <td style="padding: 0.75pt">ASU No. 2010-29</td> <td style="padding: 0.75pt">December 2010</td> <td style="padding: 0.75pt">Business Combinations (Topic 805) Disclosure of Supplementary Pro Forma Information for Business Combinations EITF consensus</td></tr> <tr style="vertical-align: top; background-color: white"> <td style="padding: 0.75pt">ASU No. 2011-01</td> <td style="padding: 0.75pt">January 2011</td> <td style="padding: 0.75pt">Receivables (Topic 310) Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20</td></tr> <tr style="vertical-align: top; background-color: #CCEEFF"> <td style="padding: 0.75pt">ASU No. 2011-02</td> <td style="padding: 0.75pt">April 2011</td> <td style="padding: 0.75pt">Receivables (Topic 310) A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring</td></tr> <tr style="vertical-align: top; background-color: white"> <td style="padding: 0.75pt">ASU No. 2011-03</td> <td style="padding: 0.75pt">April 2011</td> <td style="padding: 0.75pt">Transfers and Servicing (Topic 860) Reconsideration of Effective Control for Repurchase Agreements</td></tr> <tr style="vertical-align: top; background-color: #CCEEFF"> <td style="padding: 0.75pt">ASU No. 2011-04</td> <td style="padding: 0.75pt">May 2011</td> <td style="padding: 0.75pt">Fair Value Measurement (Topic 820) Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs</td></tr> <tr style="vertical-align: top; background-color: white"> <td style="padding: 0.75pt">ASU No. 2011-05</td> <td style="padding: 0.75pt">June 2011</td> <td style="padding: 0.75pt">Comprehensive Income (Topic 220): Presentation of Comprehensive Income</td></tr> <tr style="vertical-align: top; background-color: #CCEEFF"> <td style="padding: 0.75pt">ASU No. 2011-06</td> <td style="padding: 0.75pt">July 2011</td> <td style="padding: 0.75pt">Other Expenses (Topic 720): Fees Paid to the Federal Government by.  Health Insurers</td></tr> <tr style="vertical-align: top; background-color: white"> <td style="padding: 0.75pt">ASU No. 2011-07</td> <td style="padding: 0.75pt">July 2011</td> <td style="padding: 0.75pt">Health Care Entities (Topic 954): Presentation and Disclosure of Patient Service Revenue, Provision for Bad Debts, and the Allowance for Doubtful Accounts for Certain Health Care Entities</td></tr> <tr style="vertical-align: top; background-color: #CCEEFF"> <td style="padding: 0.75pt">ASU No. 2011-08</td> <td style="padding: 0.75pt">September 2011</td> <td style="padding: 0.75pt">Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment</td></tr> <tr style="vertical-align: top; background-color: white"> <td style="padding: 0.75pt">ASU No. 2011-09</td> <td style="padding: 0.75pt">September 2011</td> <td style="padding: 0.75pt">Compensation – Retirement Benefits – Multiemployer Plans (Subtopic 715-80): Disclosures about an Employer’s Participation in a Multiemployer Plan</td></tr> <tr style="vertical-align: top; background-color: #CCEEFF"> <td style="padding: 0.75pt">ASU No. 2011-10</td> <td style="padding: 0.75pt">December 2011</td> <td style="padding: 0.75pt">Property, Plant, and Equipment (Topic 360): Derecognition of in Substance Real Estate – a Scope Clarification (a consensus of the FASB Emerging Issues Task Force)</td></tr> <tr style="vertical-align: top; background-color: white"> <td style="padding: 0.75pt">ASU No. 2011-11</td> <td style="padding: 0.75pt">December 2011</td> <td style="padding: 0.75pt">Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities</td></tr> <tr style="vertical-align: top; background-color: #CCEEFF"> <td style="padding: 0.75pt">ASU No. 2011-12</td> <td style="padding: 0.75pt">December 2011</td> <td style="padding: 0.75pt">Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">To the extent appropriate, the guidance in the above Accounting Standards Codification Updates is already reflected in our financial statements and management does not anticipate that these accounting pronouncements will have any future effect on our financial statements.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="margin: 0pt"></p>
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<us-gaap:InventoryDisclosureTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">6.</td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">INVENTORY</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Inventories at December 31, 2011, May 31, 2011, and May 31, 2010 consisted of the following:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <table align="center" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2011</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2010</b></p></td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2" style="text-align: center"> </td> <td> </td></tr> <tr style="background-color: #CCEEFF"> <td style="width: 64%; vertical-align: bottom">Raw materials</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: bottom; text-align: right">187,224</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: bottom; text-align: right">526,753</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: top; text-align: right">—</td> <td style="width: 1%; vertical-align: bottom"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom; padding-left: 446pt">Finished goods</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">554,189</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">36,826</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt">Allowance for excess or obsolete inventory</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(84,126</td> <td style="padding-bottom: 1.5pt">)</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt">Total</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid">$</td> <td style="border-bottom: black 1.5pt solid; text-align: right">657,287</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid">$</td> <td style="border-bottom: black 1.5pt solid; text-align: right">563,579</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid">$</td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">At December 31, 2011, the Company recorded a provision for excess or obsolete inventory of $82,706 at its Wendeng segment. No provision for excess or obsolete inventory was made as of May 31, 2011. The Company held no inventory at May 31, 2010.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"></p> <p style="margin: 0pt"></p>
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<p style="margin: 0pt"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">7. </td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">PREPAID AND OTHER CURRENT ASSETS</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Prepaid and other assets at December 31, 2011, May 31, 2011, and May 31, 2010 consisted of the following:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2011</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2010</b></p></td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2" style="text-align: center"> </td> <td> </td></tr> <tr style="background-color: #CCEEFF"> <td style="width: 64%; vertical-align: bottom">Advances to suppliers, net of allowance</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: bottom; text-align: right">46,632</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: bottom; text-align: right">360,113</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: top; text-align: right">—</td> <td style="width: 1%; vertical-align: bottom"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom">Prepaid expenses</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">157,222</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">36,101</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom; padding-bottom: 1.5pt">Other</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">3,983</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">2,872</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt">Total</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid">$</td> <td style="border-bottom: black 1.5pt solid; text-align: right">207,837</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid">$</td> <td style="border-bottom: black 1.5pt solid; text-align: right">399,086</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid">$</td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Advances made to suppliers are for the purchase of raw materials which are expected to be recovered in one year. During the seven month period ended December 31, 2011, the Company recorded a provision for bad debts of  $9,314 related to its advances to suppliers. Prepaid expenses and other assets represent normal course prepayments made by the Wendeng segment.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="margin: 0pt"></p>
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<us-gaap:PropertyPlantAndEquipmentDisclosureTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">8. </td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">PROPERTY, PLANT AND EQUIPMENT</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Property, plant and equipment consisted of the following at December 31, 2011, May 31, 2011, and May 31, 2010:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">                                                                                                                                                          </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2011</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2010</b></p></td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td></tr> <tr style="background-color: #CCEEFF"> <td style="width: 64%; vertical-align: bottom">Building</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: bottom; text-align: right">3,745,873</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: bottom; text-align: right">3,637,779</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: top; text-align: right">—</td> <td style="width: 1%; vertical-align: bottom"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom">Furniture and fixtures</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">9,733</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">4,113</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom">Machinery and equipment</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">3,875,396</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">3,637,067</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom">Automotive equipment</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">172,375</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">167,401</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom; padding-bottom: 1.5pt">Office equipment</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">11,558</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">4,260</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom">Property, plant and equipment in service, gross</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">7,814,935</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">7,450,620</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom; padding-bottom: 1.5pt">Less accumulated depreciation</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">(499,330</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt">)</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">(123,419</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt">)</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Property, plant and equipment in service, net</td> <td> </td> <td> </td> <td style="text-align: right">7,315,605</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">7,327,201</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Construction in progress</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">574,527</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">232,168</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 0.25pc">Total property, plant and equipment, net</td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">7,890,132</td> <td style="padding-bottom: 0.25pc"> </td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">7,559,369</td> <td style="padding-bottom: 0.25pc"> </td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">—</td> <td style="padding-bottom: 0.25pc"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Depreciation expense for the seven months ended December 31, 2011 and the years ended May 31, 2011 and 2010 was approximately $365,959 , $121,652, and $-0-, respectively.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Differences may arise in the amount of depreciation expense reported in the Company's operating results when compared to the corresponding change in accumulated depreciation due to foreign currency translation. These translation adjustments are reflected in accumulated other comprehensive income, a separate component of the Company's stockholders' equity.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="margin: 0pt"></p>
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<us-gaap:BusinessCombinationDisclosureTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">9. </td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">BUSINESS COMBINATIONS</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">During 2011, the Company completed its acquisitions of equity interests in both Zibo Baokai Commerce and Trade Co., Ltd. and Wendeng He Xie Silicon Industry Co., Ltd. These acquisitions were accounted for as business combinations under the acquisition method of accounting.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Acquisition of Zibo Baokai Commerce and Trade Co., Ltd.</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Description of Transaction</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">On December 8, 2010, SunSi HK acquired a 90% equity interest in Zibo Baokai Commerce and Trade Co., Ltd (“Baokai”) for cash consideration of $263,647. As part of the closing, Baokai was re-formed as a joint venture business under Chinese law and issued a new business license.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Founded in January 2008, Baokai is located in the city of Zibo in the Shandong province of the People’s Republic of China. Baokai maintains the right to distribute the trichlorosilane production of Zibo Baoyun Chemical Plant both domestically and internationally. Trichlorosilane (“TCS”), a chemical primarily used in the production of polysilicon, is an essential raw material used in the production of solar cells.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The acquisition was accounted for as a business combination under the acquisition method of accounting in accordance with generally accepted accounting principles.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Fair Value of Consideration Transferred and Recording of Assets Acquired, Liabilities Assumed and Noncontrolling Interests</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table summarizes the acquisition date fair value of the consideration transferred, identifiable assets acquired, liabilities assumed and noncontrolling interests including an amount for goodwill:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="font-weight: bold">Consideration:</td> <td> </td> <td colspan="2"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 88%; padding-bottom: 1.5pt">Cash and cash equivalents</td> <td style="width: 1%; padding-bottom: 1.5pt; text-align: right"> </td> <td style="width: 1%; border-bottom: black 1.5pt solid">$</td> <td style="width: 9%; border-bottom: black 1.5pt solid; text-align: right">263,647</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 0.25pc">Fair value of total consideration transferred</td> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">263,647</td> <td style="padding-bottom: 0.25pc"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="font-weight: bold">Recognized amount of identifiable assets acquired and liabilities assumed:</td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Total identifiable net assets</td> <td style="text-align: right"> </td> <td>$</td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Noncontrolling interest in Baokai</td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">(29,294</td> <td>)</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt">Goodwill</td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">292,941</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 0.25pc"> </td> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">263,647</td> <td style="padding-bottom: 0.25pc"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the acquisition is attributable to the general reputation of the business. The goodwill is not expected to be deductible for tax purposes.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following is a schedule of accrued purchase consideration included in the accompanying Balance Sheet as of December 31, 2011, May 31, 2011, and May 31, 2010:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2011</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2010</b></p></td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt">Purchase price related to Baokai acquisition, unpaid</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid">$</td> <td style="border-bottom: black 1.5pt solid; text-align: right">163,647</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid">$</td> <td style="border-bottom: black 1.5pt solid; text-align: right">213,647</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid">$</td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>Acquisition of Wendeng He Xie Silicon Industry Co., Ltd.</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Description of Transaction</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">On March 18, 2011, SunSi HK acquired a 60% equity interest in Wendeng He Xie Silicon Industry Co., Ltd. (“Wendeng”) in exchange for total consideration of approximately $5.8 million comprised of the following:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; text-align: right">(1)  </td> <td style="width: 97%">$445,075 of cash consideration;</td></tr> <tr style="vertical-align: top"> <td style="text-align: right">(2)  </td> <td style="text-align: justify">1,349,628 restricted shares of SunSi common stock, such shares carry an optional right of redemption whereby the Company shall buy such shares back from shareholder if shareholder exercises the option within six months at a price equivalent to RMB 18,000,000 on the transfer date; and</td></tr> <tr style="vertical-align: top"> <td style="text-align: right">(3)  </td> <td>1,574,566 restricted shares of SunSi common stock, transferred by an affiliate of SunSi.</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">As part of the closing, Wendeng was re-formed as a joint venture business under Chinese law and issued a new business license.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Founded in April 2008, Wendeng is located in Weihai City in the Shandong province of the People’s Republic of China. Wendeng manufactures and distributes trichlorosilane, a chemical primarily used in the production of polysilicon, which is an essential raw material used in the production of solar cells. All of Wendeng’s sales are to destinations with the People’s Republic of China.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The acquisition was accounted for as a business combination under the acquisition method of accounting in accordance with generally accepted accounting principles.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Fair Value of Consideration Transferred and Recording of Assets Acquired, Liabilities Assumed and Noncontrolling Interests</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table summarizes the acquisition date fair value of the consideration transferred, identifiable assets acquired, liabilities assumed and noncontrolling interests including an amount for goodwill:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="font-weight: bold">Consideration:</td> <td> </td> <td colspan="2"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 88%">Cash and cash equivalents</td> <td style="width: 1%; text-align: right"> </td> <td style="width: 1%">$</td> <td style="width: 9%; text-align: right">445,075</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Common stock, 1,574,566 shares of SunSi common stock (1)</td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">2,645,271</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt">Redeemable common stock, 1,349,628 shares of SunSi common stock (2)</td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">2,708,838</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 0.25pc">Fair value of total consideration transferred</td> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">5,799,184</td> <td style="padding-bottom: 0.25pc"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="font-weight: bold">Recognized amount of identifiable assets acquired and liabilities assumed:</td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Financial assets</td> <td style="text-align: right"> </td> <td>$</td> <td style="text-align: right">3,613,721</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Inventory</td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">473,354</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Other current assets</td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">309,329</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Related party receivables</td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">1,131,548</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Property, plant and equipment</td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">7,392,976</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Identifiable intangible assets:</td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Land use leasehold</td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">1,559,070</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Customer relationships</td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">1,534,000</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt">Financial liabilities</td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(10,294,200</td> <td style="padding-bottom: 1.5pt">)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Total identifiable net assets</td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">5,719,798</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Noncontrolling interest in Wendeng</td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">(2,927,000</td> <td>)</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Goodwill</td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">3,006,386</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 0.25pc"> </td> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">5,799,184</td> <td style="padding-bottom: 0.25pc"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 4%">(1)</td> <td style="width: 96%">The $1.68 per share price was determined by reference to recent private placement shares issued, less a discount for marketability. This fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement as defined in ASC Topic 820.</td></tr> <tr style="vertical-align: top"> <td>(2)</td> <td>Represents the redeemable option price granted by SunSi to the shareholder.</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company utilized an alternative valuation method for the restricted common stock issued due to the limited public trading volume of its common stock prior to the measurement date. The recent average daily trading volume of the Company’s common shares was below levels considered by management to be representative of an active market.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 8pt"> </font>Goodwill represents the future economic benefit arising from other assets acquired that could not be individually identified and separately recognized. The goodwill arising from the acquisition is attributable to the general reputation of the business and the collective experience of the management and employees. The goodwill is not expected to be deductible for tax purposes.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Below is a summary of the methodologies and significant assumptions used in estimating the fair value of intangible assets and noncontrolling interests.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; text-align: center">●</td> <td style="width: 1%"> </td> <td style="width: 96%"><i>Intangible assets </i>— The fair value of the acquired intangible assets was determined using a variety of valuation approaches. In estimating the fair value of the acquired intangible assets, the Company utilized the valuation methodology determined to be most appropriate for the individual intangible asset being valued as described below. The acquired intangible assets include the following:</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table align="center" cellspacing="0" cellpadding="0" style="width: 100%; font: 10pt Times New Roman, Times, Serif"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Valuation</b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Method</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Estimated</b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Fair Value</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Estimated</b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Useful Lives (1)</b></p></td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td style="font-style: italic; text-align: center">(years)</td></tr> <tr style="background-color: #CCEEFF"> <td style="width: 43%; vertical-align: bottom; padding-left: 2.25pc; text-indent: -1.5pc">Customer relationships</td> <td style="width: 26%; vertical-align: bottom; text-align: center">Multi-Period</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: top">$</td> <td style="width: 12%; vertical-align: top; text-align: right">1,534,000</td> <td style="width: 1%; vertical-align: top"> </td> <td style="width: 16%; vertical-align: bottom; text-align: center">3</td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: center">Excess Earnings (2)</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top"> </td> <td style="vertical-align: top"> </td> <td style="vertical-align: top"> </td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom; padding-left: 464pt; text-indent: -1.5pc"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="border-bottom: black 2.25pt double; vertical-align: top"> </td> <td style="border-bottom: black 2.25pt double; vertical-align: top; text-align: right">1,534,000</td> <td style="vertical-align: top"> </td> <td style="vertical-align: bottom"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%">(1)</td> <td style="width: 97%">Determination of the estimated useful lives of the individual categories of intangible assets was based on the nature of the applicable intangible asset and the expected future cash flows to be derived from the intangible asset. Amortization of intangible assets with definite lives is recognized over the shorter of the respective lives of the agreement or the period of time the assets are expected to contribute to future cash flows.</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%">(2)</td> <td style="width: 97%">The multi-period excess earnings method estimates an intangible asset’s value based on the present value of the prospective net cash flows (or excess earnings) attributable to it. The value attributed to these intangibles was based on projected net cash inflows from existing contracts or customer relationships. This fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement as defined in ASC Topic 820.</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Some of the more significant estimates and assumptions inherent in determining the fair value of the customer relationships are associated with forecasting cash flows and profitability. The primary assumptions used were generally based upon the present value of anticipated cash flows, assuming a three year customer attrition rate, discounted to present value at a 25% rate.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: top"> <td style="width: 2%; text-align: center">●</td> <td style="width: 1%"> </td> <td style="width: 97%"><i>Noncontrolling interests </i>— The fair value of the noncontrolling interests of $2.9 million was estimated by applying the income approach. This fair value measurement is based on significant inputs that are not observable in the market and thus represents a Level 3 measurement as defined in ASC Topic 820. Key assumptions include (i) a compound annual sales growth rate of 33% for the five year period after the measurement date, (ii) a weighted average cost of capital of 19%, (iii) a terminal value based on a long-term sustainable growth rate of 3.5% and (iv) adjustments for lack of control and lack of marketability that market participants would consider when estimating the fair value of the noncontrolling interest in Wendeng.</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> <b> </b></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="margin: 0pt"></p>
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<p style="margin: 0pt"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">10. </td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">GOODWILL AND  INTANGIBLE ASSETS, NET</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">As of December 31, 2011, May 31, 2011, and May 31, 2010, the carrying amount of goodwill is illustrated as follows:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 88%">Goodwill, net at May 31, 2009</td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: right">$</td> <td style="width: 9%; text-align: right">—</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Addition resulting from the acquisition of Zibo Baokai Commerce and Trade Co., Ltd</td> <td> </td> <td> </td> <td style="text-align: right">292,941</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Addition resulting from the acquisition of Wendeng He Xie Silicon Industry Co., Ltd</td> <td> </td> <td> </td> <td style="text-align: right">3,006,386</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Other – translation adjustments</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">57,951</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Goodwill, net at May 31, 2011</td> <td style="text-align: right"> </td> <td style="text-align: right">$</td> <td style="text-align: right">3,357,278</td> <td style="text-align: right"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Impairment charge</td> <td style="text-align: right"> </td> <td style="text-align: right"> </td> <td style="text-align: right">(2,800,000</td> <td>) </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Other – translation adjustments</td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">51,675</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-align: right"> </td> <td style="text-align: right"> </td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 0.25pc">Goodwill, net at December 31, 2011</td> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">608,953</td> <td style="padding-bottom: 0.25pc; text-align: right"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><u>Goodwill Impairment</u></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Goodwill represents the excess of cost over fair value of assets of businesses acquired. Goodwill acquired in a business combination is not amortized. The Company evaluates the carrying amount of goodwill for impairment annually on December 31 and whenever events or circumstances indicate impairment may have occurred.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">When evaluating whether goodwill is impaired, the Company compares the fair value of the reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount, including goodwill. The fair value of the reporting unit is estimated using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies’ data. If the carrying amount of a reporting unit exceeds its fair value, then the amount of the impairment loss must be measured. The impairment loss would be calculated by comparing the implied fair value of reporting unit goodwill to its carrying amount. In calculating the implied fair value of reporting unit goodwill, the fair value of the reporting unit is allocated to all of the other assets and liabilities of that unit based on their fair values. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Due to the inability to meet anticipated sales growth, the Company assessed the acquired goodwill associated with its related business units for impairment as of December 31, 2011. Based on the discounted cash flows model utilizing estimated future earnings and cash flows, the fair value of the reporting units was less than the carrying value of the acquired goodwill. The Company’s evaluation of goodwill resulted in a total impairment charge of $2,800,000; of which $2,487,567 was attributed to Wendeng and $312,433 was attributed to Baokai.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The components of the Company’s intangible assets are approximately as follows:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, <br /> 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2011</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2010</b></p></td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td>Intangible assets subject to amortization:</td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td></tr> <tr> <td style="width: 64%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 9%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 9%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 9%; vertical-align: top"> </td> <td style="width: 1%; vertical-align: bottom"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom">Customer relationships</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom">$</td> <td style="vertical-align: bottom; text-align: right">1,601,787</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom">$</td> <td style="vertical-align: bottom; text-align: right">1,555,565</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom">$</td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom; padding-bottom: 1.5pt">Land lease</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">1,990,816</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">1,580,988</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom">Intangible assets subject to amortization, gross</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">3,592,603</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">3,136,553</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom; padding-bottom: 1.5pt">Accumulated amortization</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">(449,606</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt">)</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">(111,064</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt">)</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 0.25pc">Total intangible assets subject to amortization, net</td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">3,142,997</td> <td style="padding-bottom: 0.25pc"> </td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">3,025,489</td> <td style="padding-bottom: 0.25pc"> </td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">—</td> <td style="padding-bottom: 0.25pc"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Amortization expense for intangible assets during the seven months ended December 31, 2011 and the years ended May 31, 2011 and 2010 was approximately $329,582, $111,373, and $-0-, respectively.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Differences may arise in the amount of amortization expense reported in the Company's operating results when compared to the corresponding change in accumulated amortization due to foreign currency translation. These translation adjustments are reflected in accumulated other comprehensive income, a separate component of the Company's stockholders' equity.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table provides information regarding estimated amortization expense for intangible assets subject to amortization for each of the following years ending December 31:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 88%">2012</td> <td style="width: 1%; text-align: right"> </td> <td style="width: 1%; text-align: right">$</td> <td style="width: 9%; text-align: right">564,996</td> <td style="width: 1%; text-align: right"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>2013</td> <td style="text-align: right"> </td> <td style="text-align: right"> </td> <td style="text-align: right">564,996</td> <td style="text-align: right"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>2014</td> <td style="text-align: right"> </td> <td style="text-align: right"> </td> <td style="text-align: right">152,966</td> <td style="text-align: right"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>2015</td> <td style="text-align: right"> </td> <td style="text-align: right"> </td> <td style="text-align: right">40,081</td> <td style="text-align: right"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>2016</td> <td style="text-align: right"> </td> <td style="text-align: right"> </td> <td style="text-align: right">40,081</td> <td style="text-align: right"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Thereafter</td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">1,779,877</td> <td style="padding-bottom: 1.5pt; text-align: right"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">3,142,997</td> <td style="padding-bottom: 0.25pc; text-align: right"> </td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p>
</us-gaap:GoodwillAndIntangibleAssetsDisclosureTextBlock>
<SSIE:RelatedPartyReceivableTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"><b> </b></p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">11. </td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">RELATED PARTY RECEIVABLE</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt">Related party receivables consisted of the following :</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2011</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2010</b></p></td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 64%; padding-bottom: 1.5pt">Wendeng Huahai Chemical Co., Ltd.</td> <td style="width: 1%; padding-bottom: 1.5pt; text-align: right"> </td> <td style="width: 1%; border-bottom: black 1.5pt solid; text-align: right">$</td> <td style="width: 9%; border-bottom: black 1.5pt solid; text-align: right">489,595</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="width: 1%; border-bottom: black 1.5pt solid">$</td> <td style="width: 9%; border-bottom: black 1.5pt solid; text-align: right">1,177,204</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="width: 1%; padding-bottom: 1.5pt; text-align: right"> </td> <td style="width: 1%; border-bottom: black 1.5pt solid">$</td> <td style="width: 9%; border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The amount represents trade receivables due from a related party; an entity in which a shareholder of the Company maintains an equity interest. The receivable is interest-free, unsecured and payable in accordance with the Company’s standard trade terms.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"></p> <p style="margin: 0pt"></p>
</SSIE:RelatedPartyReceivableTextBlock>
<us-gaap:OtherAssetsDisclosureTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">12. </td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">OTHER ASSETS</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt">Other assets consist of the following :</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2011</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2010</b></p></td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td></tr> <tr style="background-color: #CCEEFF"> <td style="width: 64%; vertical-align: bottom">Deposit – Department of Extrabudgetary Fund (Wendeng)</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: bottom; text-align: right">21,737</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: bottom; text-align: right">21,110</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: top; text-align: right">—</td> <td style="width: 1%; vertical-align: bottom"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom">Deposit – TCS Management Association (Wendeng)</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">7,715</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom">Deposit – Intangible assets (Wendeng)</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">220,054</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: top"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 0.25pc">Total, net</td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">21,737</td> <td style="padding-bottom: 0.25pc"> </td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">248,879</td> <td style="padding-bottom: 0.25pc"> </td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">—</td> <td style="padding-bottom: 0.25pc"> </td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"></p>
</us-gaap:OtherAssetsDisclosureTextBlock>
<us-gaap:AccountsPayableAndAccruedLiabilitiesDisclosureTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">13. </td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">ACCOUNTS PAYABLE AND ACCRUED LIABILITIES</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Accounts payable and accrued liabilities consisted of the following at December 31, 2011, May 31, 2011, and May 2010:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2011</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2010</b></p></td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 64%">Accounts payable</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 9%; text-align: right">3,333,500</td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: right"> </td> <td style="width: 1%">$</td> <td style="width: 9%; text-align: right">5,320,381</td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: right"> </td> <td style="width: 1%">$</td> <td style="width: 9%; text-align: right">149,538</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Accrued liabilities</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">373,802</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">256,444</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 0.25pc">Total</td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">3,707,302</td> <td style="padding-bottom: 0.25pc"> </td> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">5,576,825</td> <td style="padding-bottom: 0.25pc"> </td> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">149,538</td> <td style="padding-bottom: 0.25pc"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Accounts payable and accrued liabilities primarily represent trade payables of the Company’s Chinese operating subsidiaries.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="margin: 0pt"></p>
</us-gaap:AccountsPayableAndAccruedLiabilitiesDisclosureTextBlock>
<us-gaap:OtherLiabilitiesDisclosureTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">14.</td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">ADVANCES PAYABLE</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Advances payable consisted of the following at December 31, 2011, May 31, 2011, and May 2010:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2011</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2010</b></p></td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 64%; padding-bottom: 0.25pc">Advances payable</td> <td style="width: 1%; padding-bottom: 0.25pc"> </td> <td style="width: 1%; border-bottom: black 2.25pt double">$</td> <td style="width: 9%; border-bottom: black 2.25pt double; text-align: right">—</td> <td style="width: 1%; padding-bottom: 0.25pc"> </td> <td style="width: 1%; padding-bottom: 0.25pc; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double">$</td> <td style="width: 9%; border-bottom: black 2.25pt double; text-align: right">—</td> <td style="width: 1%; padding-bottom: 0.25pc"> </td> <td style="width: 1%; padding-bottom: 0.25pc; text-align: right"> </td> <td style="width: 1%; border-bottom: black 2.25pt double">$</td> <td style="width: 9%; border-bottom: black 2.25pt double; text-align: right">230,981</td> <td style="width: 1%; padding-bottom: 0.25pc"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Total</td> <td> </td> <td>$</td> <td style="text-align: right">—</td> <td> </td> <td style="text-align: right"> </td> <td>$</td> <td style="text-align: right">—</td> <td> </td> <td style="text-align: right"> </td> <td>$</td> <td style="text-align: right">230,981</td> <td> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">During the year ended May 31, 2010, the Company owed $230,981 from advances made by two non-affiliated stockholders that helped fund the Company’s operations until proceeds from private stock offerings were received. These advances were made on an interest free basis and were repaid in full during the fiscal year ended May 31, 2011.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="margin: 0pt"></p>
</us-gaap:OtherLiabilitiesDisclosureTextBlock>
<SSIE:RelatedPartyPayableTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt">  </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">15. </td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">RELATED PARTY PAYABLE     </td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Related party payable consisted of the following at December 31, 2011, May 31, 2011, and May 31, 2010:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2011</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2010</b></p></td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td></tr> <tr style="background-color: #CCEEFF"> <td style="width: 64%; vertical-align: bottom">Advances from minority shareholder of noncontrolling interest (Wendeng)</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: bottom; text-align: right">5,501,598</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: bottom; text-align: right">5,321,502</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: top; text-align: right">—</td> <td style="width: 1%; vertical-align: bottom"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom">Purchase consideration due minority shareholder of noncontrolling interest (Baokai)</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">163,647</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">213,647</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt">Due to officer</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">5,671</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 0.25pc">Total</td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">5,665,245</td> <td style="padding-bottom: 0.25pc"> </td> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">5,535,149</td> <td style="padding-bottom: 0.25pc"> </td> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">5,671</td> <td style="padding-bottom: 0.25pc"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The minority shareholder of the Company’s Wendeng subsidiary made a series of advances, both pre and post-acquisition, to fund capital expenditures and plant expansion. These advances were made on an interest-free basis, are unsecured and payable on demand.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The amount due to the minority shareholder of its Baokai subsidiary represents unpaid purchase consideration from the Company’s December 8, 2010 acquisition (see Note 9 – Business Combinations). This amount bears no interest, is unsecured and payable on demand.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="margin: 0pt"></p>
</SSIE:RelatedPartyPayableTextBlock>
<us-gaap:IncomeTaxDisclosureTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt"><font style="font: 10pt Times New Roman, Times, Serif"> </font> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt Times New Roman, Times, Serif">16.</td> <td style="width: 97%; font: bold 10pt Times New Roman, Times, Serif">INCOME TAXES PAYABLE  </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The components of the income tax provision at December 31, 2011, May 31, 2011, and May 31, 2010 is as follows:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b>                    </b></p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="6" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="6" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">May 31, 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="6" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">May 31, 2010</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 22%">Federal taxes at statutory rate - current</td> <td style="width: 1%"> </td> <td style="width: 1%">$</td> <td style="width: 9%; text-align: right">(190,890</td> <td style="width: 1%">)</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 9%; text-align: right">35.0</td> <td style="width: 3%"> %</td> <td style="width: 1%; text-align: right"> </td> <td style="width: 1%">$</td> <td style="width: 9%; text-align: right">(297,570</td> <td style="width: 1%">)</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 9%; text-align: right">35.0</td> <td style="width: 3%"> %</td> <td style="width: 1%; text-align: right"> </td> <td style="width: 1%">$</td> <td style="width: 9%; text-align: right">(217,642</td> <td style="width: 1%">)</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 9%; text-align: right">35.0</td> <td style="width: 3%"> %</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Foreign taxes - current</td> <td> </td> <td> </td> <td style="text-align: right">(81,572</td> <td>)</td> <td> </td> <td> </td> <td style="text-align: right">25.0</td> <td> %</td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">256,227</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">25.0</td> <td> %</td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">—</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">—</td> <td> %</td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt">Change in valuation allowance</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">190,890</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(21.9</td> <td style="padding-bottom: 1.5pt">) %</td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">297,570</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(287.1</td> <td style="padding-bottom: 1.5pt">) %</td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">217,642</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(35.0</td> <td style="padding-bottom: 1.5pt">) %</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 0.25pc">Total</td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">(81,572</td> <td style="padding-bottom: 0.25pc">)</td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">9.4</td> <td style="padding-bottom: 0.25pc"> %</td> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">256,227</td> <td style="padding-bottom: 0.25pc"> </td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">(247.2</td> <td style="padding-bottom: 0.25pc">) %</td> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">—</td> <td style="padding-bottom: 0.25pc"> </td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double"> </td> <td style="border-bottom: black 2.25pt double; text-align: right">0.00</td> <td style="padding-bottom: 0.25pc"> %</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">The components of the net deferred tax asset at December 31, 2011, May 31, 2011, and May 31, 2010, the statutory tax rate, the effective tax rate and the elected amount of the valuation allowance are indicated below:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <table align="center" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="font-size: 8pt"> </td> <td style="font-size: 8pt"> </td> <td colspan="2" style="font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="font-size: 8pt"> </td> <td style="font-size: 8pt"> </td> <td colspan="2"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2011</b></p></td> <td style="font-size: 8pt"> </td> <td style="font-size: 8pt"> </td> <td colspan="2"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2010</b></p></td> <td style="font-size: 8pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Deferred tax asset:</td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="width: 68%">Net operating loss carryforward United States</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 7%; text-align: right">793,358</td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: right"> </td> <td style="width: 1%">$</td> <td style="width: 8%; text-align: right">589,399</td> <td style="width: 1%"> </td> <td style="width: 1%; text-align: right"> </td> <td style="width: 1%">$</td> <td style="width: 8%; text-align: right">291,891</td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt">Less: Valuation allowance</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(793,358</td> <td style="padding-bottom: 1.5pt">)</td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(589,399</td> <td style="padding-bottom: 1.5pt">)</td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">(291,829</td> <td style="padding-bottom: 1.5pt">) </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 0.25pc">Net deferred tax asset</td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">—</td> <td style="padding-bottom: 0.25pc"> </td> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">—</td> <td style="padding-bottom: 0.25pc"> </td> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">—</td> <td style="padding-bottom: 0.25pc"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Income taxes payable consisted of the following at May 31, 2011 and 2010:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2011</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2010</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td></tr> <tr style="background-color: #CCEEFF"> <td style="width: 68%; vertical-align: bottom">U.S. taxes due</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 7%; vertical-align: bottom; text-align: right">—</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 8%; vertical-align: bottom; text-align: right">—</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 8%; vertical-align: top; text-align: right">—</td> <td style="width: 1%; vertical-align: bottom"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom; padding-bottom: 1.5pt">Foreign taxes</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">886,050</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">1,561,112</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom; padding-bottom: 0.25pc">Total</td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom">$</td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: right">881,263</td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td> <td style="vertical-align: bottom; padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom">$</td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: right">1,561,112</td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td> <td style="vertical-align: bottom; padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom">$</td> <td style="border-bottom: black 2.25pt double; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has incurred a net operating loss of approximately $2,267,000 which expires in 2031. Pursuant to ASC 740 the Company is required to compute tax asset benefits for net operating losses carried forward. Potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">As a result of its operations recorded at the Baokai and Wendeng segments, the Company has recorded a tax benefit of $81,572 for the seven months ended December 31, 2011 and a tax provision of $256,227 for the year ended May 31, 2011 based upon the estimated effective tax rate for the Baokai subsidiary for the year ending May 31, 2011. Pursuant to the new PRC’s enterprise income tax (“EIT”) law, the Company is subject to EIT at the statutory rate of 25%.  Income taxes in the statements of operations and comprehensive income represent current taxes for the periods ended May 31, 2011 and May 31, 2010. The effective income tax rate has no material difference with the PRC statutory income tax rate of 25% for the seven month period ended December 31, 2011 or the years ended May 31, 2011, and May 31, 2010.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company had no material adjustments to its liabilities for unrecognized income tax benefits according to the provision of FASB ASC 740. The Company has recorded no deferred tax assets or liabilities as of December 31, 2011, May 31, 2011, and May 31, 2010, since nearly all differences in tax basis and financial statement carrying values are permanent differences.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="margin: 0pt"></p>
</us-gaap:IncomeTaxDisclosureTextBlock>
<us-gaap:DebtDisclosureTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">17.</td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">DEBT</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Debt was comprised of the following at December 31, 2011, May 31, 2011, and May 31, 2010:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2011</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2011</b></p></td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td></tr> <tr style="background-color: #CCEEFF"> <td style="width: 64%; vertical-align: bottom">9% Unsecured, convertible debenture</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: bottom; text-align: right">100,000</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: bottom; text-align: right">—</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: top; text-align: right">—</td> <td style="width: 1%; vertical-align: bottom"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom; padding-bottom: 1.5pt">Loan discount on unsecured, convertible debenture</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom">     Total long term debt</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">100,000</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom; padding-bottom: 1.5pt">Less: Current portion</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom; padding-bottom: 0.25pc">     Long term debt</td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom">$</td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: right">100,000</td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td> <td style="vertical-align: bottom; padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom">$</td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td> <td style="vertical-align: bottom; padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom">$</td> <td style="border-bottom: black 2.25pt double; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table summarizes the issuance of all unsecured, convertible debentures during the seven month period ended December 31, 2011 and the years ended May 31, 2011 and 2010:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-indent: 3pc"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold">Issue Date</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">Interest Rate</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">Face Value</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">Maturity Date</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Conversion Rate of</b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>Face Value to Common Shares</b></p></td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="width: 21%; padding-bottom: 1.5pt">10/15/2011</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="width: 26%; padding-bottom: 1.5pt; text-align: center">9%</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="width: 1%; border-bottom: black 1.5pt solid">$ </td> <td style="width: 8%; border-bottom: black 1.5pt solid; text-align: right">100,000</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="width: 20%; padding-bottom: 1.5pt; text-align: center">10/15/2014</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td> <td style="width: 20%; padding-bottom: 1.5pt; text-align: center">0.25</td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Total</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid">$</td> <td style="border-bottom: black 1.5pt solid; text-align: right">100,000</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">On October 15, 2011, the Company completed the private placement of an unsecured, convertible debenture in the amount of $100,000. The debenture carries an interest of 9% per annum, payable semiannually each April 15 and October 15, for a three-year term with a fixed conversion price of $4.00 per share, or 25,000 shares of the Company’s common stock.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">At May 31, 2011 and 2010, the Company had no unsecured, convertible debentures outstanding. No debt was issued prior to October 15, 2011.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="margin: 0pt"></p>
</us-gaap:DebtDisclosureTextBlock>
<us-gaap:StockholdersEquityNoteDisclosureTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt">  </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">18.</td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">STOCKHOLDERS’ EQUITY</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company is authorized to issue 25,000,000 shares of preferred stock at a par value of $0.001. At December 31, 2011, May 31, 2011, and May 31, 2010, no shares of preferred stock were issued or outstanding.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company is authorized to issue 75,000,000 shares of common stock at a par value of $0.001. At December 31, 2011, May 31, 2011, and May 31, 2010, shares of common stock totaling 30,005,628, 29,436,928 and 27,312,500 were issued and outstanding, respectively.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Since September 10, 2009, the Company has conducted a private placement of its common stock at a price of $2.00 per share and a maximum issuance of 8,000,000 shares. During the seven month period ended December 31, 2011, the Company accepted subscription agreements from investors and correspondingly issued 507,500 shares of its common stock pursuant to this offering, and received $1,015,000 in gross proceeds. The cost of this issuance was $101,500. During the years ended December 31, 2011 and 2010, the Company accepted subscription agreements from investors and correspondingly issued 711,000 and 552,000 shares, respectively, of its common stock pursuant to this offering, and received $1,422,000 and $1,105,000 in gross proceeds, respectively. The costs of these issuances were $142,000 and $110,500, respectively.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">On September 5, 2011, the Company closed this offering and commenced a new offering of 3,000,000 shares at $3.00 per share. As of December 31, 2011, the Company accepted subscription agreements from investors and correspondingly issued 40,000 shares of its common stock pursuant to this new offering, and received $120,000 in gross proceeds. The cost of this issuance was $12,000.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">During the seven month period ended December 31, 2011, the Company issued 21,200 shares of common stock in exchange for consulting, professional and other services rendered. The value of these services aggregated $69,600. During the year ended May 31, 2011, the Company issued 63,800 shares of common stock in exchange for consulting, professional and other services rendered. The value of these services aggregated $114,192. No shares of the Company’s common stock were issued in exchange for consulting, professional and other services rendered during 2010.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">On June 13, 2011, SunSi Energies Hong Kong Limited executed an addendum to its agreement with Mr. Dongqiang Liu, the 40% minority shareholder of Wendeng, for the purpose of amending the terms to the equity transfer agreement dated November 22, 2010, as amended on December 15, 2010, between the parties for the purchase of a 60% equity interest in Wendeng.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Under the terms of the original agreement, the Company would have had an obligation, upon receiving formal notice, to buy back 1,349,628 shares of its common stock at a value of RMB 18,000,000 (approximately USD $2.00 per share) from Mr. Liu. The addendum cancelled any potential obligation that the Company would have to buy back the shares and confirmed that all purchase consideration was fully paid.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">As a result, the Company reclassified the value of the common shares subjected to this buyback provision, approximately $2.7 million, as additional paid-in capital. These shares were presented as redeemable common stock at May 31, 2011</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p>
</us-gaap:StockholdersEquityNoteDisclosureTextBlock>
<us-gaap:CommitmentsDisclosureTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">19.</td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">COMMITMENTS</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">SunSi Energies Inc. entered into various engagement agreements for advisory and consulting services on a non-exclusive basis to obtain equity capital. In the event that the Company completes a financing from a funding source provided by one of the consultants, then such consultant will receive a finders or referral fee at closing ranging from seven percent (7%) to ten percent (10%) of the amount received by the Company. The total financing sought is in the amount of $9.0 million in equity. The maximum potential amount of fees that can be paid amounts to $0.9 million. The terms and condition of financing are subject to Company approval.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">On November 10, 2009 and February 9, 2010, the Company entered in agreements with its Director of Business Development and Chief Executive Officer, respectively, to pay each of these individuals $60,000 per year plus any documented out of pocket business expenses. Additionally, the Company entered into an agreement on May 15, 2009 to pay a representative in China $60,000 per year.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p> <p style="margin: 0pt"></p>
</us-gaap:CommitmentsDisclosureTextBlock>
<us-gaap:SegmentReportingDisclosureTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif; text-align: justify">20. </td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif; text-align: justify">SEGMENT INFORMATION</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As a result of the acquisition of its equity interest in Wendeng, the Company reassessed its requirement for segment reporting based on the operating and reporting structure of the combined company.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company utilized several criteria, including (i) the Company’s organizational structure, (ii) the manner in which the Company’s operations are managed, (iii) the criteria used by the Company’s Chief Executive Officer, the Chief Operating Decision Maker (“CODM”), to evaluate segment performance and (iv) the availability of separate financial information, as a basis to identify its operating segments.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company determined that it has two reportable business segments, Baokai and Wendeng. The Baokai segment consists of the business of Zibo Baokai Commerce and Trade Co., Ltd., a company based in the Shandong province of the People’s Republic of China that distributes the trichlorosilane production of Zibo Baoyun Chemical Plant. The Wendeng segment consists of the operations of Wendeng He Xie Silicon Industry Co., Ltd., a company based in the Shandong province of the People’s Republic of China that directly manufactures and sells trichlorosilane.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The accounting policies of the reportable segments are the same as those described in Note 2 to the consolidated financial statements. The Company’s CODM reviews financial information presented on a consolidated basis, accompanied by disaggregated information by segment for purpose of evaluating financial performance.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Segment Results</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table sets forth the results of operations by segment for the seven months ended December 31, 2011 and 2010 and the years ended May 31, 2011 and 2010:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="6" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">Seven Months Ended December,</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="6" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">Years Ended May 31,</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td></tr> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2010</b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>(unaudited)</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">2010</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td></tr> <tr style="vertical-align: bottom"> <td style="width: 52%">Sales:</td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 9%"> </td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 9%"> </td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 9%"> </td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 1%"> </td> <td style="width: 9%"> </td> <td style="width: 1%"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-indent: 1.5pc">Baokai</td> <td> </td> <td>$</td> <td style="text-align: right">5,956,999</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">1,165,239</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">9,755,030</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-indent: 1.5pc">Wendeng</td> <td> </td> <td> </td> <td style="text-align: right">8,463,841</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">—</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">5,327,758</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt; text-indent: 1.5pc">Corporate</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-indent: 1.5pc">Total</td> <td> </td> <td>$</td> <td style="text-align: right">14,420,840</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">1,165,239</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">15,082,788</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Cost of goods sold:</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-indent: 1.5pc">Baokai</td> <td> </td> <td>$</td> <td style="text-align: right">5,837,859</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">1,141,605</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">9,538,061</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-indent: 1.5pc">Wendeng</td> <td> </td> <td> </td> <td style="text-align: right">6,374,278</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">—</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">3,506,938</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt; text-indent: 1.5pc">Corporate</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-indent: 1.5pc">Total</td> <td> </td> <td>$</td> <td style="text-align: right">12,212,137</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">1,141,605</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">13,044,999</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Gross margin:</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-indent: 1.5pc">Baokai <font style="font-size: 7pt">(1)</font></td> <td> </td> <td>$</td> <td style="text-align: right">119,140</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">23,634</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">216,969</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-indent: 1.5pc">Wendeng <font style="font-size: 7pt">(2)</font></td> <td> </td> <td> </td> <td style="text-align: right">2,089,563</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">—</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">1,820,820</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt; text-indent: 1.5pc">Corporate</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-indent: 1.5pc">Total</td> <td> </td> <td>$</td> <td style="text-align: right">2,208,703</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">23,634</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">2,037,789</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Operating expenses:</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-indent: 1.5pc">Baokai</td> <td> </td> <td>$</td> <td style="text-align: right">352,697</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">—</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">37,000</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-indent: 1.5pc">Wendeng</td> <td> </td> <td> </td> <td style="text-align: right">4,982,293</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">—</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">975,882</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt; text-indent: 1.5pc">Corporate</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">545,370</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">445,647</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">921,247</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">621,835</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-indent: 1.5pc">Total</td> <td> </td> <td>$</td> <td style="text-align: right">5,880,360</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">445,647</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">1,934,129</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">621,835</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Provision for income taxes:</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-indent: 1.5pc">Baokai</td> <td> </td> <td>$</td> <td style="text-align: right">19,719</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">5,909</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">44,992</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-indent: 1.5pc">Wendeng</td> <td> </td> <td> </td> <td style="text-align: right">(101,291</td> <td>) </td> <td> </td> <td> </td> <td style="text-align: right">—</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">211,235</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt; text-indent: 1.5pc">Corporate</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-indent: 1.5pc">Total</td> <td> </td> <td>$</td> <td style="text-align: right">(81,572</td> <td>) </td> <td> </td> <td>$</td> <td style="text-align: right">5,909</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">256,227</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Net income (loss):</td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="text-indent: 1.5pc">Baokai</td> <td> </td> <td>$</td> <td style="text-align: right">(253,276</td> <td>) </td> <td> </td> <td>$</td> <td style="text-align: right">17,725</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">134,977</td> <td> </td> <td> </td> <td>$</td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="text-indent: 1.5pc">Wendeng</td> <td> </td> <td> </td> <td style="text-align: right">(2,791,439</td> <td>) </td> <td> </td> <td> </td> <td style="text-align: right">—</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">633,703</td> <td> </td> <td> </td> <td> </td> <td style="text-align: right">—</td> <td> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr> <td style="width: 52%; vertical-align: bottom; padding-bottom: 1.5pt; text-indent: 1.5pc">Corporate</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="width: 1%; vertical-align: bottom; border-bottom: black 1.5pt solid"> </td> <td style="width: 9%; vertical-align: bottom; border-bottom: black 1.5pt solid; text-align: right">(545,370</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt">)</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="width: 1%; vertical-align: bottom; border-bottom: black 1.5pt solid"> </td> <td style="width: 9%; vertical-align: top; border-bottom: black 1.5pt solid; text-align: right">(445,647)</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="width: 1%; vertical-align: bottom; border-bottom: black 1.5pt solid"> </td> <td style="width: 9%; vertical-align: bottom; border-bottom: black 1.5pt solid; text-align: right">(921,247</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt">)</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="width: 1%; vertical-align: bottom; border-bottom: black 1.5pt solid"> </td> <td style="width: 9%; vertical-align: bottom; border-bottom: black 1.5pt solid; text-align: right">(621,835</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt">)</td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom; text-indent: 1.5pc">Total</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom">$</td> <td style="vertical-align: bottom; text-align: right">(3,590,085</td> <td style="vertical-align: bottom">)</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom">$</td> <td style="vertical-align: top; text-align: right">(427,922)</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom">$</td> <td style="vertical-align: bottom; text-align: right">(152,567</td> <td style="vertical-align: bottom">)</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom">$</td> <td style="vertical-align: bottom; text-align: right">(621,835</td> <td style="vertical-align: bottom">)</td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 7pt">(1)</font> Includes goodwill impairment charge of $312,433</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><font style="font-size: 7pt">(2)</font> Includes goodwill impairment charge of $2,487,567</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Operating segments do not sell products to each other, and accordingly, there is no inter-segment revenue to be reported.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table sets forth the total assets by segment for at December 31, 2011, May 31, 2011, and May 31, 2010:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table align="center" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="width: 65%; padding-bottom: 1.5pt">Total assets:</td> <td style="width: 1%; border-bottom: black 1.5pt solid"> </td> <td style="width: 9%; border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="width: 2%; padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="width: 1%; border-bottom: black 1.5pt solid; font-size: 8pt"> </td> <td style="width: 9%; border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">May 31, 2011</td> <td style="width: 1%; padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="width: 1%; padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="width: 1%; border-bottom: black 1.5pt solid; font-size: 8pt"> </td> <td style="width: 9%; border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">May 31, 2010</td> <td style="width: 1%; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td>Baokai</td> <td style="text-align: center">$</td> <td style="text-align: right">840,280</td> <td style="text-align: right"> </td> <td style="text-align: center">$</td> <td style="text-align: right">2,028,632</td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: center">$</td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td>Wendeng</td> <td> </td> <td style="text-align: right">16,986,030</td> <td style="text-align: right"> </td> <td> </td> <td style="text-align: right">20,458,838</td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td style="text-align: right">—</td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt">Corporate</td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">199,400</td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">95,097</td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid"> </td> <td style="border-bottom: black 1.5pt solid; text-align: right">598,468</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 0.25pc">Total</td> <td style="border-bottom: black 2.25pt double; text-align: center">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">18,025,710</td> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; text-align: center">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">22,582,567</td> <td style="padding-bottom: 0.25pc; text-align: right"> </td> <td style="padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double; text-align: center">$</td> <td style="border-bottom: black 2.25pt double; text-align: right">598,468</td> <td style="padding-bottom: 0.25pc"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Goodwill, Intangible and Long-Lived Assets</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table sets forth the carrying amount of goodwill by segment at December 31, 2011, May 31, 2011, and May 31, 2010:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr> <td style="width: 64%; vertical-align: bottom; padding-bottom: 1.5pt">Goodwill by segment:</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="width: 1%; vertical-align: bottom; border-bottom: black 1.5pt solid; font-size: 8pt"> </td> <td style="width: 9%; vertical-align: bottom; border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="width: 1%; vertical-align: bottom; border-bottom: black 1.5pt solid; font-size: 8pt"> </td> <td style="width: 9%; vertical-align: bottom; border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">May 31, 2011</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt; font-size: 8pt; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom; border-bottom: black 1.5pt solid; font-size: 8pt"> </td> <td style="width: 9%; vertical-align: top; border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">May 31, 2010</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom">Baokai</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: center">$</td> <td style="vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: center">$</td> <td style="vertical-align: bottom; text-align: right">308,627</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right"> </td> <td style="vertical-align: bottom; text-align: center">$</td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom">Wendeng</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">608,953</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">3,048,650</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom; padding-bottom: 1.5pt">Corporate</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom; padding-bottom: 1.5pt">Total</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: center">$</td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">608,953</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: center; text-indent: -3pc">$</td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">3,357,277</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: center">$</td> <td style="border-bottom: black 1.5pt solid; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">As of December 31, 2011, the Company’s evaluation of goodwill resulting in a total impairment charge of $2,800,000; of which $312,433 was attributed to Baokai and $2,487,567 was attributed to Wendeng.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table sets forth the carrying amount of intangible assets by segment at December 31, 2011, May 31, 2011, and May 31, 2010:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr> <td style="width: 64%; vertical-align: bottom; padding-bottom: 1.5pt">Intangible assets by segment:</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="width: 1%; vertical-align: bottom; border-bottom: black 1.5pt solid"> </td> <td style="width: 9%; vertical-align: bottom; border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="width: 1%; vertical-align: bottom; border-bottom: black 1.5pt solid; font-size: 8pt"> </td> <td style="width: 9%; vertical-align: bottom; border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, 2</b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>011</b></p></td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt; font-size: 8pt; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom; border-bottom: black 1.5pt solid; font-size: 8pt"> </td> <td style="width: 9%; vertical-align: top; border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">May 31, 2010</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom">Baokai</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: center">$</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: center">$</td> <td style="vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right"> </td> <td style="vertical-align: bottom; text-align: center">$</td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom">Wendeng</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">  3,142,997</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">3,025,489</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom; padding-bottom: 1.5pt">Corporate</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom; padding-bottom: 0.25pc">Total</td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: center">$</td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: right">3,142,997</td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: center">$</td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: right">3,025,489</td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td> <td style="vertical-align: bottom; padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: center">$</td> <td style="border-bottom: black 2.25pt double; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The following table sets forth the carrying amount of property, plant and equipment by segment at December 31, 2011, May 31, 2011, and May 31, 2010:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <table align="center" cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr> <td style="width: 64%; vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom; border-bottom: black 1.5pt solid; font-size: 8pt"> </td> <td style="width: 9%; vertical-align: bottom; border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="width: 1%; vertical-align: bottom; border-bottom: black 1.5pt solid; font-size: 8pt"> </td> <td style="width: 9%; vertical-align: bottom; border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">May 31, 2011</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="width: 1%; vertical-align: bottom; border-bottom: black 1.5pt solid; font-size: 8pt"> </td> <td style="width: 9%; vertical-align: top; border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">May 31, 2010</td> <td style="width: 1%; vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr> <td style="vertical-align: bottom">Property, plant and equipment by segment:</td> <td style="vertical-align: bottom; text-align: right"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top; text-align: right"> </td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom">                Baokai</td> <td style="vertical-align: bottom; text-align: right"> </td> <td style="vertical-align: bottom">$</td> <td style="vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom">$</td> <td style="vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom">$</td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom">Wendeng</td> <td style="vertical-align: bottom; text-align: right"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">7,890,132</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom; text-align: right">7,559,369</td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: bottom"> </td> <td style="vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom"> </td></tr> <tr style="background-color: #CCEEFF"> <td style="vertical-align: bottom; padding-bottom: 1.5pt">Corporate</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom; padding-bottom: 0.25pc">Total</td> <td style="vertical-align: bottom; padding-bottom: 0.25pc; text-align: right"> </td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom">$</td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: right">7,890,132</td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: center">$</td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: right">7,559,369</td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td> <td style="border-bottom: black 2.25pt double; vertical-align: bottom; text-align: center">$</td> <td style="border-bottom: black 2.25pt double; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 0.25pc"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Depreciation and amortization expense for Wendeng totaled $122,652 and $110,373, respectively for the seven month period ended December 31, 2011 and year ended May 31, 2011. Capital expenditures for Wendeng totaled $470,310 and $184,725, respectively for the seven month period ended December 31, 2011 and year ended May 31, 2011.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Baokai and Corporate did not record any depreciation or amortization expense, nor did they incur any capital expenditures for the seven month period ended December 31, 2011 or year ended May 31, 2011.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company had no goodwill, intangible or long-lived assets at May 31, 2010.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Customer information</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">For the seven month period ended December 31, 2011, one customer accounted for approximately 98% of Baokai's sales. For the seven month period ended December 31, 2011, two customers accounted for approximately 70% of Wendeng’s sales. Concentration levels amongst these two customers were 20% and 50% of Wendeng’s total sales. No other customer accounted for more than 10% of either segment’s revenue for seven month period ended December 31, 2011.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">For the year ended May 31, 2011, one customer accounted for approximately 97% of Baokai's sales. For the year ended May 31, 2011, four customers accounted for approximately 94% of Wendeng’s sales. Concentration levels amongst these four customers ranged from 10% to 42% of Wendeng’s total sales. No other customer accounted for more than 10% of either segment’s revenue for years ended May 31, 2011.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">At May 31, 2011, one customer accounted for approximately 100% of Baokai’s accounts receivable. At May 31, 2011, three customers accounted for approximately 97% of Baokai’s accounts receivable. Concentration levels amongst these three customers ranged from 22% to 45% of Wendeng’s total trade receivables. No other single customer accounted for 10% or more of either segment’s trade accounts receivable at May 31, 2011.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company did not own equity interests in either subsidiary, or segment, during the year ended May 31, 2010.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"><b><i>Geographic Information</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">All of the Company’s long-lived assets During the seven months period ended December 31, 2011, the Company made one sale valued at approximately $188,000 to Russia. All of the Company’s other revenues, as determined by shipping destination, are located within the People’s Republic of China.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: justify"></p> <p style="margin: 0pt"></p>
</us-gaap:SegmentReportingDisclosureTextBlock>
<us-gaap:CompensationAndEmployeeBenefitPlansTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">21.</td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">DEFINED CONTRIBUTION PLAN</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Pursuant to the relevant PRC regulations, the Company is required to make contributions at a rate of 28% of employees’ salaries and wages to a defined contribution retirement plan organized by a state-sponsored social insurance plan in respect of the retirement benefits for the Company’s employees in the PRC.  The only obligation of the Company with respect to the retirement plan is to make the required contributions under the plan.  No forfeited contribution is available to reduce the contribution payable in the future years. The defined contribution plan contributions were charged to the statements of operations.  </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="margin: 0pt"></p>
</us-gaap:CompensationAndEmployeeBenefitPlansTextBlock>
<us-gaap:SubsequentEventsTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">22.</td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">SUBSEQUENT EVENTS</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Subsequent to December 31, 2011, the Company has received $50,000 from the sale of 25,000 shares of common stock.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company has evaluated subsequent events from the balance sheet through the date the financial statements were issued, and determined there are no other events to disclose.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="margin: 0pt"></p>
</us-gaap:SubsequentEventsTextBlock>
<us-gaap:ScheduleOfAccountsNotesLoansAndFinancingReceivableTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">4.</td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">ACCOUNTS RECEIVABLE</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Accounts receivable at December 31, 2011, May 31, 2011, and May 31, 2010 consisted of the following:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">May 31, 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">May 31, 2010</td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2" style="text-align: center"> </td> <td> </td></tr> <tr style="background-color: #CCEEFF"> <td style="width: 64%; vertical-align: bottom">Trade receivables</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: bottom; text-align: right">3,799,420</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: bottom; text-align: right">4,669,490</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: top; text-align: right">—</td> <td style="width: 1%; vertical-align: bottom"> </td></tr> <tr style="background-color: white"> <td style="vertical-align: bottom; padding-bottom: 1.5pt">Allowance for doubtful accounts</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">(25,864</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt">)</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td> <td style="vertical-align: bottom; padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: bottom"> </td> <td style="border-bottom: black 1.5pt solid; vertical-align: top; text-align: right">—</td> <td style="vertical-align: bottom; padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td style="padding-bottom: 1.5pt">Total</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid">$</td> <td style="border-bottom: black 1.5pt solid; text-align: right">3,773,556</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid">$</td> <td style="border-bottom: black 1.5pt solid; text-align: right">4,669,490</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid">$</td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">As of <font style="background-color: white">December 31, 2011, three customers accounted for approximately 11%, 22% and 65%, respectively, or approximately 98% of total accounts receivable. These same customers also accounted for approximately 3%, 50% and 23%, respectively, of the Company’s revenues, or approximately 76% of revenues for the seven month period ended December 31, 2011.</font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><font style="background-color: white">As of May 31, 2011, four customers accounted for approximately 14%, 19%, 29% and 37%, respectively, or approximately 99% of total accounts receivable. These same customers also accounted for approximately 5%, 10%, 15% and 62%, respectively, of the Company’s revenues, or approximately 92% of revenues for the period ended May 31, 2011.</font></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">The Company did not have any accounts receivable, nor had it recorded any sales, as of May 31, 2010.</p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="margin: 0pt"></p>
</us-gaap:ScheduleOfAccountsNotesLoansAndFinancingReceivableTextBlock>
<SSIE:NotesReceivableTextBlock contextRef="From2011-06-01to2011-12-31">
<p style="margin: 0pt"> </p> <table cellspacing="0" cellpadding="0" style="width: 100%"> <tr style="vertical-align: top"> <td style="width: 3%; font: bold 10pt/115% Times New Roman, Times, Serif">5.</td> <td style="width: 97%; font: bold 10pt/115% Times New Roman, Times, Serif">NOTES RECEIVABLE</td></tr> </table> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Notes receivable at December 31, 2011, May 31, 2011, and May 31, 2010 consisted of the following:</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center"> </p> <table cellspacing="0" cellpadding="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%"> <tr style="vertical-align: bottom"> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid; font-size: 8pt; font-weight: bold; text-align: center">December 31, 2011</td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2011</b></p></td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td style="padding-bottom: 1.5pt; font-size: 8pt"> </td> <td colspan="2" style="border-bottom: black 1.5pt solid"> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>May 31, </b></p> <p style="font: 8pt Times New Roman, Times, Serif; margin: 0; text-align: center"><b>2010</b></p></td> <td style="padding-bottom: 1.5pt"> </td></tr> <tr style="vertical-align: bottom"> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2"> </td> <td> </td> <td> </td> <td colspan="2" style="text-align: center"> </td> <td> </td></tr> <tr style="background-color: #CCEEFF"> <td style="width: 64%; vertical-align: bottom">Notes receivable</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: bottom; text-align: right">559,325</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom">$</td> <td style="width: 9%; vertical-align: bottom; text-align: right">941,314</td> <td style="width: 1%; vertical-align: bottom"> </td> <td style="width: 1%; vertical-align: bottom; text-align: right"> </td> <td style="width: 1%; vertical-align: bottom">$ </td> <td style="width: 9%; vertical-align: top; text-align: right">—</td> <td style="width: 1%; vertical-align: bottom"> </td></tr> <tr style="vertical-align: bottom; background-color: white"> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td> <td> </td> <td> </td> <td style="text-align: right"> </td> <td> </td></tr> <tr style="vertical-align: bottom; background-color: #CCEEFF"> <td style="padding-bottom: 1.5pt">Total</td> <td style="padding-bottom: 1.5pt"> </td> <td style="border-bottom: black 1.5pt solid">$</td> <td style="border-bottom: black 1.5pt solid; text-align: right">559,325</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid">$</td> <td style="border-bottom: black 1.5pt solid; text-align: right">941,314</td> <td style="padding-bottom: 1.5pt"> </td> <td style="padding-bottom: 1.5pt; text-align: right"> </td> <td style="border-bottom: black 1.5pt solid">$</td> <td style="border-bottom: black 1.5pt solid; text-align: right">—</td> <td style="padding-bottom: 1.5pt"> </td></tr> </table> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0">Notes receivable represent negotiable commercial paper in China which can be used to make new purchases or to satisfy outstanding invoices.</p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0"> </p> <p style="font: 10pt/normal Times New Roman, Times, Serif; margin: 0"></p> <p style="margin: 0pt"></p>
</SSIE:NotesReceivableTextBlock>
<dei:EntityPublicFloat contextRef="AsOf2012-04-13" unitRef="USD" decimals="0"> 30005628 </dei:EntityPublicFloat>
<dei:EntityCommonStockSharesOutstanding contextRef="AsOf2012-04-13" unitRef="Shares" decimals="INF"> 48166822 </dei:EntityCommonStockSharesOutstanding>
<us-gaap:ConvertibleDebtNoncurrent contextRef="AsOf2011-12-31" unitRef="USD" decimals="0"> 100000 </us-gaap:ConvertibleDebtNoncurrent>
<us-gaap:ConvertibleDebtNoncurrent contextRef="AsOf2011-05-31" unitRef="USD" decimals="0"> 0 </us-gaap:ConvertibleDebtNoncurrent>
<us-gaap:ConvertibleDebtNoncurrent contextRef="AsOf2010-05-31" unitRef="USD" decimals="0"> 0 </us-gaap:ConvertibleDebtNoncurrent>
<us-gaap:GoodwillAndIntangibleAssetImpairment contextRef="From2011-06-01to2011-12-31" unitRef="USD" decimals="0"> 2800000 </us-gaap:GoodwillAndIntangibleAssetImpairment>
<us-gaap:GoodwillAndIntangibleAssetImpairment contextRef="From2010-06-01to2010-12-31_UnauditedMember" unitRef="USD" decimals="0"> 0 </us-gaap:GoodwillAndIntangibleAssetImpairment>
<us-gaap:GoodwillAndIntangibleAssetImpairment contextRef="From2010-06-01to2011-05-31" unitRef="USD" decimals="0"> 0 </us-gaap:GoodwillAndIntangibleAssetImpairment>
<us-gaap:GoodwillAndIntangibleAssetImpairment contextRef="From2009-06-01to2010-05-31" unitRef="USD" decimals="0"> 0 </us-gaap:GoodwillAndIntangibleAssetImpairment>
</xbrli:xbrl>

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