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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
12 Months Ended
Jun. 30, 2012
Accounting Policies [Abstract]  
Note 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A.  Basis of Presentation

 

These accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

 

B.  Use of Estimates

 

In preparing these financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the year reported.  Actual results may differ from these Estimates.

 

C.  Basis of Consolidation

 

After disposal of the two subsidiaries on September 16, 2010, the Company has no subsidiaries; therefore, no consolidation is necessary.

 

D.  Cash and Cash Equivalents

 

Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.

 

E.  Accounts Receivable, Net

 

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business, but mitigates the associated risks by performing credit checks and actively pursuing past due accounts.  An allowance for doubtful accounts is established and determined based on managements’ assessment of known requirements, aging of receivables, payment history, the customer’s current credit worthiness, and the economic environment.

 

F.  Property, Plant, and Equipment, Net

 

Property, plant, and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any.  Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational.

 

Asset Classification   Depreciable Life
Land Use right   50 years  
Buildings   50 years  
Motor vehicles   8 – 10 years  
Equipment and machinery   5 – 8 years  
Intangible Assets   3 years  
Leasehold improvement   2 years  

 

Expenditure for maintenance and repairs is expensed as incurred.  The gain or loss on the disposal of property, plant, and equipment is the difference between the net sales proceeds and the carrying amount of the relevant assets and is recognized in the statement of income.

 

G.  Impairment of Long-life Assets

 

In accordance with ASC 360, “Accounting for the impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of’, a long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  For the purposes of evaluating the recoverability of long-lived assets, the recoverability test is performed using undiscounted net cash flows related to the long-lived assets.  The Company reviews long-lived assets, if any, to determine whether the carrying values are not impaired.

 

H.  Revenue Recognition

 

Sales revenue is recognized when persuasive evidence of an arrangement exists, the price is fixed and final, delivery has occurred and there is reasonable assurance of collection of the sales proceeds.  The Company generally obtains purchase authorizations from its customers for a specified amount of products at a specified price and considers delivery to have occurred when the customer takes possession of the products.  Net sales incorporate offsets for discounts and sales returns.  Revenue is recognized upon delivery, risk and ownership of the title is transferred and a reserve for sales returns is recorded even though invoicing may not be completed.  The Company has demonstrated the ability to make reasonable and reliable estimates of products returns in accordance with SFAS No. 48, “Revenue Recognition When Right of Return Exists”.

 

Shipping and handling fees billed to customers are included in sales.  Costs related to shipping and handling are part of selling, general, and administrative expenses in the statements of income.  EITF No. 00-10, “Accounting for Shipping and Handling Fees and Costs” allows for the presentation of shipping and handling expenses in line items other than cost of sales. For the year ended June 30, 2012, there were no shipping and handling costs included in selling, general and administrative expenses in the accompanying statements of income.

 

I.  Cost of Sales

 

Cost of sales includes depreciation of property, plant, and equipment and purchase costs to publishers.

 

J.  Value-Added Tax

 

The Company is subject to value added tax (“VAT”) imposed by the PRC on sales. The output VAT is charged to customers who purchase books from the Company and the input VAT is paid when the Company purchases books from publishers. The VAT rate is 13%. The input VAT can be offset against the output VAT.

 

K.  Advertising Expenses

 

The Company expenses advertising costs as incurred in accordance with the ASC No. 35, “Advertising Costs”.  For the period ended June 30, 2012, advertising expenses amount to zero.

 

L.  Comprehensive Income

 

ASC 220, “Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components, and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources.  Accumulated comprehensive income, as presented in the accompanying statement of changes in owners’ equity consists of changes in unrealized gains and losses on foreign currency translation.  This comprehensive income is not included in the computation of income tax expense or benefit.

 

M.  Income Taxes

 

The Company uses the accrual method of accounting to determine and report its taxable reduction of income taxes for the year in which they are available. The Company has implemented ASC 740 - Accounting for Income Taxes. Income tax liabilities computed according to the United States and People’s Republic of China (PRC) tax laws are provided for the tax effects of transactions reported in the financial statements and consists of taxes currently due plus deferred taxes related primarily to differences between the basis of fixed assets and intangible assets for financial and tax reporting. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will be either taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future income taxes. A valuation allowance is created to evaluate deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize that tax benefit, or that future realization is uncertain.

 

· The Company is subject to United States Tax according to Internal Revenue Code Sections 951 and 957. Corporate income tax is imposed on progressive rates in the range of:

 

Taxable Income  
Rate   Over     But Not Over     Of Amount Over  
  15%     0       50,000       0  
  25%     50,000       75,000       50,000  
  34%     75,000       100,000       75,000  
  39%     100,000       335,000       100,000  
  345     335,000       10,000,000       335,000  
  35%     10,000,000       15,000,000       10,000,000  
  38%     15,000,000       18,333,333       15,000,000  
  35%     18,333,333       -       -  

 

Based on the net loss for the year ended June 30, 2012, the Company shall not be subject to income tax.

 

N.  Loss Per Share

 

The Company calculates loss per share in accordance with ASC 260, “Earnings per Share”.  Basic loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding.  Diluted loss per share is computed similar to basic loss per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.  The effect of outstanding stock options, stock purchase warrants and convertible debenture, which could result in the issuance of 499,911,400 of common stock at June 30, 2012 and June 30, 2011, respectively, are anti-dilutive.  As a result, diluted loss per share data does not include the assumed exercise of outstanding stock options, stock purchase warrants, or conversion of convertible debenture and has been presented jointly with basic loss per share.

 

O.  Foreign Currencies Translation

  

The functional and reporting currency of the Company is the United States dollars (“U.S. dollars”).  The accompanying financial statements have been expressed in U.S. dollars.

 

The functional currency of the Company’s foreign subsidiaries is the Renminbi Yuan (“RMB”).  The balance sheet is translated into United States dollars based on the rates of exchange ruling at the balance sheet date.  The statement of income is translated using a weighted average rate for the year.  Translation adjustments are reflected as cumulative translation adjustments in stockholders’ equity.

 

Exchange Rates   6/30/2012     6/30/2011  
Year end RMB : US$ exchange rate     6.2990       6.4630  
Average yearly RMB : US$ exchange rate     6.3403       6.4593  

 

P.  Fair Value of Financial Instruments 

 

For certain of the Company’s financial instruments, including cash and equivalents, accounts and other receivables, accounts and other payables, accrued liabilities and short-term debt, the carrying amounts approximate their fair values due to their short maturities. ASC Topic 820, “Fair Value Measurements and Disclosures,” requires disclosure of the fair value of financial instruments held by the Company. ASC Topic 825, “Financial Instruments,” defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

· Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
· Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
· Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.

  

The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815.

 

As of June 30, 2012 and 2011, the Company did not identify any assets and liabilities that were required to be presented on the balance sheet at fair value.

  

Q.  Related Parties

 

For the purposes of these financial statements, parties are considered to be related if one party has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence.  Related parties may be individuals or other entities. All material related part transactions have been disclosed.

 

R.  Convertible Debenture Issued with Stock Purchase Warrants

 

The Company accounts for the issurance of and modifications to the convertible debt issued with stock purchase warrants in accordance with ASC 470, Accounting for Convertible Debt.

 

Due to the indeterminate number of shares, which might be issued under the embedded convertible host debt conversion feature of these debentures, the Company is required to record a liability relating to both the detachable warrants and embedded convertible feature of the notes payable (included in the liabilities as a "derivative liability").

 

The accompanying financial statements comply with current requirements relating to warrants and embedded derivatives as described in SFAS 133 as follows:

 

The Company treats the full fair market value of the derivative and warrant liability on the convertible secured debentures as a discount on the debentures (limited to their face value).  The excess, if any, is recorded as an increase in the derivative liability and warrant liability with a corresponding increase in loss on adjustment of the derivative and warrant liability to fair value.

 

Subsequent to the initial recording, the change in the fair value of the detachable warrants, determined under the Black-Scholes option pricing formula and the change in the fair value of the embedded derivative (utilizing the Black-Scholes option pricing formula) in the conversion feature of the convertible debentures are recorded as adjustments to the liabilities as of September 30, 2006.

 

The expense relating to the change in the fair value of the Company's stock reflected in the change in the fair value of the warrants and derivatives is included in interest expense in the accompanying statements of income.

 

S.  Going Concern Uncertainties

 

These financial statements have been prepared assuming that Company will continue as a going concern, which contemplates the realization of assets and the discharge of liabilities in the normal course of business for the foreseeable future.

 

T.  Recently Issued Accounting Standard

 

In January 2011, the FASB issued an Accounting Standard Update (“ASU”) No. 2011-01, “Receivables Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, to be concurrent with the effective date of the guidance for determining what constitutes a troubled debt restructuring, as presented in proposed Accounting Standards Update, Receivables (Topic 310): Clarifications to Accounting for Troubled Debt Restructurings by Creditors. The amendments in this Update apply to all public-entity creditors that modify financing receivables within the scope of the disclosure requirements about troubled debt restructurings in Update 2010-20.  Under the existing effective date in Update 2010-20, public-entity creditors would have provided disclosures about troubled debt restructurings for periods beginning on or after December 15, 2010. The amendments in this Update temporarily defer that effective date, enabling public-entity creditors to provide those disclosures after the Board clarifies the guidance for determining what constitutes a troubled debt restructuring. The deferral in this Update will result in more consistent disclosures about troubled debt restructurings. This amendment does not defer the effective date of the other disclosure requirements in Update 2010-20.  In the proposed Update for determining what constitutes a troubled debt restructuring, the Board proposed that the clarifications would be effective for interim and annual periods ending after June 15, 2011. For the new disclosures about troubled debt restructurings in Update 2010-20, those clarifications would be applied retrospectively to the beginning of the fiscal year in which the proposal is adopted. This new accounting is not expected to have a material impact on the Company’s financial position or results of the operations.

 

In June 2011, the FASB issued an Accounting Standard Update (“ASU” No. 2011-05, “Comprehensive Income (Topic 220).  Under the amendments to Topic 220, Comprehensive Income, entities have the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. This Update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The amendments in this Update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. For nonpublic entities, the amendments are effective for fiscal years ending after December 15, 2012, and interim and annual periods thereafter. This new accounting is not expected to have a material impact on the Company’s financial position or results of the operations.