| INCOME TAXES PAYABLE |
The components of the income tax provision at December 31, 2011,
May 31, 2011, and May 31, 2010 is as follows:
| |
|
December 31, 2011 |
|
|
May 31, 2011 |
|
|
May 31, 2010 |
|
| Federal taxes at statutory rate - current |
|
$ |
(190,890 |
) |
|
|
35.0 |
% |
|
$ |
(297,570 |
) |
|
|
35.0 |
% |
|
$ |
(217,642 |
) |
|
|
35.0 |
% |
| Foreign taxes - current |
|
|
(81,572 |
) |
|
|
25.0 |
% |
|
|
256,227 |
|
|
|
25.0 |
% |
|
|
— |
|
|
|
— |
% |
| Change in valuation allowance |
|
|
190,890 |
|
|
|
(21.9 |
) % |
|
|
297,570 |
|
|
|
(287.1 |
) % |
|
|
217,642 |
|
|
|
(35.0 |
) % |
| Total |
|
$ |
(81,572 |
) |
|
|
9.4 |
% |
|
$ |
256,227 |
|
|
|
(247.2 |
) % |
|
$ |
— |
|
|
|
0.00 |
% |
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:
| |
|
December 31, 2011 |
|
|
May 31,
2011 |
|
|
May 31,
2010 |
|
| Deferred tax asset: |
|
|
|
|
|
|
|
|
|
| Net operating loss carryforward United States |
|
|
793,358 |
|
|
$ |
589,399 |
|
|
$ |
291,891 |
|
| Less: Valuation allowance |
|
|
(793,358 |
) |
|
|
(589,399 |
) |
|
|
(291,829 |
) |
| Net deferred tax asset |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Income taxes payable consisted of the following at May 31, 2011
and 2010:
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.
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.
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.
|
