x
|
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Nevada
|
22-1211204
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
Larger accelerated filer
|
¨
|
Accelerated filer
|
x
|
Non-accelerated filer
|
¨
|
Smaller reporting company
|
¨
|
Page
|
|||
Part I — Financial Information
|
|
||
Item 1.
|
Financial Statements.
|
4 | |
Consolidated Balance Sheets at September 30, 2011 and March 31, 2011 (Unaudited)
|
4 | ||
Consolidated Statements of Operations for the Three Months and Six Months Ended September 30, 2011 and 2010 (Unaudited)
|
5 | ||
Consolidated Statements of Changes in Shareholder Equity (Unaudited)
|
6 | ||
Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2011 and 2010 (Unaudited)
|
7 | ||
Notes to Consolidated Financial Statements for the Three Months and Six Months Ended September 30, 2011 and 2010 (Unaudited)
|
8 | ||
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
28 | |
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
34 | |
Item 4.
|
Controls and Procedures.
|
35 | |
Part II — Other Information
|
|||
Item 1.
|
Legal Proceedings.
|
36 | |
Item 1A.
|
Risk Factors.
|
36 | |
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds.
|
36 | |
Item 3.
|
Defaults Upon Senior Securities.
|
36 | |
Item 4.
|
(Removed and Reserved.)
|
36 | |
Item 5.
|
Other Information.
|
36 | |
|
|||
Item 6.
|
Exhibits.
|
36 | |
Signatures
|
37 |
September 30, 2011
|
March 31, 2011
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets
|
|
|
||||||
Cash and cash equivalents
|
$ | 4,750,977 | $ | 26,805,205 | ||||
Securities available for sale
|
11,660,246 | 16,773,970 | ||||||
Inventories
|
3,269,575 | 2,488,068 | ||||||
Prepaid expenses
|
330,228 | 554,570 | ||||||
Other receivables
|
586,101 | 425,558 | ||||||
Total current assets
|
20,597,127 | 47,047,371 | ||||||
Restricted cash
|
193,992 | 193,992 | ||||||
Property and equipment, net
|
10,295,613 | 8,722,774 | ||||||
Intangible assets, net
|
1,037 | - | ||||||
Investment in developments in progress
|
19,691,500 | - | ||||||
Security deposit
|
549,197 | 527,930 | ||||||
Total assets
|
$ | 51,328,466 | $ | 56,492,067 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities
|
||||||||
Accounts payable
|
$ | 2,197,490 | $ | 1,962,119 | ||||
Commission payable
|
6,159,776 | 8,346,853 | ||||||
Other liabilities
|
690,789 | 304,029 | ||||||
Unearned revenues
|
1,253,354 | 11,327,787 | ||||||
Due to related parties
|
48,611 | 47,995 | ||||||
Total current liabilities
|
10,350,020 | 21,988,783 | ||||||
Contingent liabilities
|
2,739,236 | 2,703,409 | ||||||
Total liabilities
|
13,089,256 | 24,692,192 | ||||||
Equity
|
||||||||
EFT Holdings, Inc. stockholders' equity:
|
||||||||
Preferred stock, $.001 par value, 25,000,000 shares authorized, none issued and outstanding
|
- | - | ||||||
Common stock, $0.00001 par value, 4,975,000,000 shares authorized, 75,983,201 shares issued and outstanding at September 30 and March 31, 2011
|
760 | 760 | ||||||
Additional paid in capital
|
52,854,891 | 52,854,891 | ||||||
Retained deficits
|
(13,918,747 | ) | (19,358,694 | ) | ||||
Accumulated other comprehensive income
|
1,165,618 | 462,790 | ||||||
Total EFT Holdings, Inc. stockholders’ equity
|
40,102,522 | 33,959,747 | ||||||
Non-controlling interest
|
(1,863,312 | ) | (2,159,872 | ) | ||||
Total equity
|
38,239,210 | 31,799,875 | ||||||
Total liabilities and equity
|
$ | 51,328,466 | $ | 56,492,067 |
Three Months Ended
|
Six Months Ended
|
|||||||||||||||
September 30,
2011
|
September 30,
2010
|
September 30,
2011
|
September 30,
2010
|
|||||||||||||
Sales revenues, net
|
$ | 2,722,379 | $ | 3,785,434 | $ | 12,242,673 | $ | 7,551,306 | ||||||||
Shipping charges
|
362,073 | 868,200 | 1,363,883 | 1,751,730 | ||||||||||||
Transportation income – Excalibur
|
12 | 57,784 | 1,024 | 57,784 | ||||||||||||
3,084,464 | 4,711,418 | 13,607,580 | 9,360,820 | |||||||||||||
Cost of goods sold
|
362,843 | 1,173,703 | 2,168,430 | 2,401,741 | ||||||||||||
Shipping costs
|
356,851 | 669,319 | 987,813 | 984,893 | ||||||||||||
Operating costs - Excalibur
|
55,513 | 218,680 | 144,497 | 910,572 | ||||||||||||
775,207 | 2,061,702 | 3,300,740 | 4,297,206 | |||||||||||||
Gross profit
|
2,309,257 | 2,649,716 | 10,306,840 | 5,063,614 | ||||||||||||
Operating expenses:
|
||||||||||||||||
Selling, general and administrative expenses
|
1,814,909 | 1,919,937 | 3,727,617 | 3,663,000 | ||||||||||||
Depreciation
|
285,674 | 942,738 | 557,566 | 981,818 | ||||||||||||
Marketing expenses
|
66,554 | 277,858 | 107,995 | 553,759 | ||||||||||||
Royalty expenses
|
442,476 | 512,747 | 714,401 | 1,019,685 | ||||||||||||
Impairment loss of transportation equipment
|
- | 4,200,000 | - | 4,200,000 | ||||||||||||
Total operating expenses
|
2,609,613 | 7,853,280 | 5,107,579 | 10,418,262 | ||||||||||||
Net operating income (loss)
|
(300,356 | ) | (5,203,564 | ) | 5,199,261 | (5,354,648 | ) | |||||||||
Other income (expense)
|
||||||||||||||||
Interest income
|
111,977 | 338,103 | 297,373 | 510,214 | ||||||||||||
Gain on disposal of securities available-for-sale
|
8,364 | 88,557 | 94,364 | 93,649 | ||||||||||||
Dividend Income
|
13,525 | 11,769 | 26,053 | 11,769 | ||||||||||||
Foreign exchange gain (loss)
|
(1,523,520 | ) | (128,105 | ) | (911,878 | ) | 4,323 | |||||||||
Other income
|
2,369 | 19,836 | 4,762 | 35,086 | ||||||||||||
Total other income (expense)
|
(1,387,285 | ) | 330,160 | (489,326 | ) | 655,041 | ||||||||||
Net income (loss) before income taxes and non-controlling interest
|
(1,687,641 | ) | (4,873,404 | ) | 4,709,935 | (4,699,607 | ) | |||||||||
Income benefit (taxes)
|
64,900 | (2,400 | ) | 64,900 | (2,400 | ) | ||||||||||
Net Income (loss)
|
(1,622,741 | ) | (4,875,804 | ) | 4,774,835 | (4,702,007 | ) | |||||||||
Non-controlling interest
|
335,277 | 2,792,696 | 665,112 | 3,267,149 | ||||||||||||
Net income/ (loss) attributable to EFT Holdings, Inc.
|
(1,287,464 | ) | $ | (2,083,108 | ) | 5,439,947 | $ | (1,434,858 | ) | |||||||
Net income/ (loss) per common share
|
||||||||||||||||
Basic and diluted
|
$ | (0.02 | ) | $ | (0.03 | ) | $ | 0.07 | $ | (0.02 | ) | |||||
Weighted average common shares outstanding
|
||||||||||||||||
Basic and diluted
|
75,983,201 | 75,983,205 | 75,983,201 | 75,983,205 |
Accumulated
|
||||||||||||||||||||||||||||
Additional
|
Retained
|
Other
|
Total
|
|||||||||||||||||||||||||
Common Stock
|
Paid-in
|
Earnings
|
Comprehensive
|
Non-controlling
|
Stockholders'
|
|||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
(Deficits)
|
Income (Loss)
|
Interests
|
Equity
|
||||||||||||||||||||||
BALANCE, MARCH 31, 2010
|
75,983,205 | $ | 760 | $ | 52,854,891 | $ | (3,949,518 | ) | $ | 126,469 | $ | 2,559,516 | $ | 51,592,118 | ||||||||||||||
Retirement of common stock
|
(4 | ) | - | - | - | - | - | - | ||||||||||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||
Net loss
|
- | - | - | (15,409,176 | ) | - | (4,347,704 | ) | (19,756,880 | ) | ||||||||||||||||||
Unrealized gain on securities available for sale
|
- | - | - | - | 206,198 | - | 206,198 | |||||||||||||||||||||
Foreign currency translation adjustment
|
- | - | - | - | 130,123 | (371,684 | ) | (241,561 | ) | |||||||||||||||||||
|
|
|
|
|
|
|
||||||||||||||||||||||
BALANCE, MARCH 31, 2011
|
75,983,201 | $ | 760 | $ | 52,854,891 | $ | (19,358,694 | ) | $ | 462,790 | $ | (2,159,872 | ) | $ | 31,799,875 | |||||||||||||
Comprehensive income:
|
||||||||||||||||||||||||||||
Net income (loss)
|
- | - | - | 5,439,947 | - | (665,112 | ) | 4,774,835 | ||||||||||||||||||||
Unrealized loss on securities available for sale
|
- | - | - | - | (92,964 | ) | - | (92,964 | ) | |||||||||||||||||||
Foreign currency translation adjustment
|
- | - | - | - | 795,792 | 961,672 | 1,757,464 | |||||||||||||||||||||
BALANCE, SEPTEMBER 30, 2011
|
75,983,201 | $ | 760 | $ | 52,854,891 | $ | (13,918,747 | ) | $ | 1,165,618 | $ | (1,863,312 | ) | $ | 38,239,210 |
Six Months Ended
|
||||||||
September 30, 2011
|
September 30, 2010
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income (loss)
|
$ | 4,774,835 | $ | (4,702,007 | ) | |||
Adjustments to reconcile net income (loss) to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
557,566 | 997,767 | ||||||
Bond premium amortization
|
- | 8,752 | ||||||
Impairment loss of transportation equipment
|
- | 4,200,000 | ||||||
Gain from securities available for sale
|
(94,364 | ) | (93,649 | ) | ||||
Changes in operating assets and liabilities:
|
||||||||
Inventories
|
(781,507 | ) | 187,033 | |||||
Prepaid expenses and other receivables
|
33,446 | (561,510 | ) | |||||
Accounts payable
|
337,557 | 117,722 | ||||||
Commission payable
|
(2,187,077 | ) | (11,133 | ) | ||||
Other liabilities
|
285,230 | 729,229 | ||||||
Unearned revenues
|
(10,074,433 | ) | (1,111,991 | ) | ||||
Net cash used in operating activities
|
(7,148,747 | ) | (239,787 | ) | ||||
Cash flows from investing activities:
|
||||||||
Additions to fixed assets
|
(77,946 | ) | (195,792 | ) | ||||
Additions to intangible assets
|
(11,285 | ) | - | |||||
Investment in development in progress
|
(20,632,737 | ) | - | |||||
Convertible note receivable
|
- | (5,000,000 | ) | |||||
Proceeds from vendor for repayment of loan
|
- | 167,100 | ||||||
Proceeds from maturity of corporate notes
|
- | 500,000 | ||||||
Purchase of securities available for sale
|
(683,623 | ) | (4,317,369 | ) | ||||
Proceeds from available for sales securities
|
5,798,748 | 3,379,709 | ||||||
Net cash used in investing activities
|
(15,606,843 | ) | (5,466,352 | ) | ||||
Effect of exchange rate changes on cash
|
701,362 | (19,771 | ) | |||||
Net decrease in cash
|
(22,054,228 | ) | (5,725,910 | ) | ||||
Cash, beginning of period
|
26,805,205 | 29,434,509 | ||||||
Cash, end of period
|
$ | 4,750,977 | $ | 23,708,599 |
Machinery and equipment
|
3-8 years
|
Computers and office equipment
|
3-5 years
|
Automobiles
|
5 years
|
Leasehold improvements
|
5 years
|
Transportation equipment
|
12 years
|
Products sold for
|
|
0-2 months
|
2% of cost
|
3-4 months
|
1.5% of cost
|
5-6 months
|
1% of cost
|
Three Months Ended September 30,
|
Six Months Ended September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Weighted average
|
||||||||||||||||
warrants outstanding
|
14,890,040 | 14,890,040 | 14,890,040 | 14,890,040 | ||||||||||||
Total
|
14,890,040 | 14,890,040 | 14,890,040 | 14,890,040 |
Three Months Ended
September 30,
|
Six Months Ended
September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Historical Numerator:
|
||||||||||||||||
Net income (loss) attributable to EFT Biotech Holdings, Inc.
|
$ | (1,287,464 | ) | $ | (2,083,108 | ) | $ | 5,439,947 | $ | (1,434,858 | ) | |||||
Denominator:
|
||||||||||||||||
Weighted-average shares used for basic net income per share
|
75,983,201 | 75,983,205 | 75,983,201 | 75,983,205 | ||||||||||||
Basic net income (loss) per share
|
$ | (0.02 | ) | $ | (0.03 | ) | $ | 0.07 | $ | (0.02 | ) |
Pronouncement
|
Issued
|
Title
|
||
ASU No. 2011-01
|
|
January 2011
|
|
Receivables (Topic 310): Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20
|
ASU No. 2011-02
|
|
April 2011
|
|
Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring
|
ASU No. 2011-03
|
|
April 2011
|
|
Transfers and Servicing (Topic 860): Reconsideration of Effective Control for Repurchase Agreements
|
ASU No. 2011-04
|
|
May 2011
|
|
Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”)
|
ASU No. 2011-05
|
|
June 2011
|
|
Comprehensive Income (Topic 220): Presentation of Comprehensive Income
|
ASU No. 2011-06
|
July 2011
|
Other Expenses (Topic 720): Fees paid to the Federal Government by Health Insurers
|
||
ASU No. 2011-07
|
July 2011
|
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
|
||
ASU No. 2011-08
|
September 2011
|
Intangibles – Goodwill and Other (Topic 350): Testing Goodwill for Impairment
|
||
ASU No. 2011-09
|
September 2011
|
Compensation – Retirement Benefits – Multiemployer Plans (Subtopic 715-80): Disclosures about an Employer’s Participation in a Multiemployer Plan
|
Level 1—
|
Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
|
Level2—
|
Other inputs that are directly or indirectly observable in the marketplace.
|
Level 3—
|
Unobservable inputs which are supported by little or no market activity.
|
September 30, 2011
|
||||||||||||||||
Level 1
|
||||||||||||||||
Quoted Prices
|
Level 2
|
|||||||||||||||
in Active
|
Significant
|
Level 3
|
||||||||||||||
Markets for
|
Other
|
Significant
|
||||||||||||||
Identical
|
Observable
|
Unobservable
|
||||||||||||||
Assets
|
Inputs
|
Inputs
|
Total
|
|||||||||||||
Securities available for sale - Corporate notes
|
$ | 11,660,246 | $ | - | $ | - | $ | 11,660,246 | ||||||||
Total assets measured at fair value
|
$ | 11,660,246 | $ | - | $ | - | $ | 11,660,246 |
March 31, 2011
|
||||||||||||||||
Level 1
|
||||||||||||||||
Quoted Prices
|
Level 2
|
|||||||||||||||
in Active
|
Significant
|
Level 3
|
||||||||||||||
Markets for
|
Other
|
Significant
|
||||||||||||||
Identical
|
Observable
|
Unobservable
|
||||||||||||||
Assets
|
Inputs
|
Inputs
|
Total
|
|||||||||||||
Securities available for sale
|
$ | 16,773,970 | $ | - | $ | - | $ | 16,773,970 | ||||||||
Total assets measured at fair value
|
$ | 16,773,970 | $ | - | $ | - | $ | 16,773,970 |
September 30,
|
March 31,
|
|||||||
2011
|
2011
|
|||||||
Construction in progress
|
$ | 1,008,727 | $ | 980,656 | ||||
Transportation equipment
|
13,698,134 | 11,611,785 | ||||||
Leasehold improvements
|
529,205 | 507,831 | ||||||
Automobiles
|
241,270 | 239,097 | ||||||
Computer equipment
|
168,768 | 162,198 | ||||||
Furniture & fixtures
|
97,649 | 93,939 | ||||||
Machinery and equipment
|
154,037 | 118,145 | ||||||
15,897,790 | 13,713,651 | |||||||
Less: Accumulated depreciation
|
(5,602,177 | ) | (4,990,877 | ) | ||||
$ | 10,295,613 | $ | 8,722,774 |
Excalibur International Marine Corporation | ||||||||||||||||
June 30, 2011
|
June 30, 2010
|
|||||||||||||||
NTD*
|
USD
|
NTD
|
USD
|
|||||||||||||
Total assets
|
268,817,393 | 9,870,746 | 331,075,610 | 10,214,216 | ||||||||||||
Total liabilities
|
387,937,568 | 13,463,184 | 401,075,434 | 12,424,890 | ||||||||||||
Net liabilities
|
119,120,175 | 3,592,438 | 69,999,824 | 2,210,674 | ||||||||||||
48.81% ownership
|
(58,142,557 | ) | (1,753,469 | ) | 34,166,914 | 1,079,030 |
Excalibur International Marine Corp. Shareholders’ List
|
||||||||
Shareholders’ Name
|
No. of shares
|
%
|
||||||
EFT Investment
|
58,567,750 | 48.81 | ||||||
Yeuh-Chi Liu
|
4,766,000 | 3.97 | ||||||
52.78 | ||||||||
Lu, TsoChun
|
10,000,000 | 8.33 | ||||||
Chiao, Jen-Ho
|
8,200,000 | 6.83 | ||||||
Lin, Ming-i
|
5,170,000 | 4.31 | ||||||
Wang Zhi Yun
|
5,000,000 | 4.17 | ||||||
Wen Investment
|
4,000,000 | 3.33 | ||||||
Steve Hsiao
|
3,938,250 | 3.28 | ||||||
Others
|
20,358,000 | 16.97 | ||||||
Total
|
120,000,000 | 100 |
September 30 , 2011
|
March 31, 2011
|
|||||||
Payroll liabilities
|
34,039 | 35,834 | ||||||
Warranty liabilities
|
33,597 | 88,784 | ||||||
Accrued expenses
|
580,202 | 88,353 | ||||||
Others
|
42,951 | 91,058 | ||||||
$ | 690,789 | $ | 304,029 |
September 30, 2011
|
March 31, 2011
|
|||||||
Warranty liability as at beginning of period, current
|
$ | 88,784 | $ | 43,346 | ||||
Cost accrued/(reversal) of costs
|
(49,813 | ) | 59,312 | |||||
Service obligations honored
|
(5,374 | ) | (13,874 | ) | ||||
Warranty liability as at end of period, current
|
$ | 33,597 | $ | 88,784 |
September 30, 2011
|
March 31, 2011
|
|||||||
Amount due to related parties:
|
$ | 48,611 | $ | 47,995 |
Six Months Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
Current:
|
||||||||
Domestic
|
$ | - | $ | 2,400 | ||||
Foreign
|
- | - | ||||||
Over-provision for prior years
|
(64,900 | ) | - | |||||
Deferred
|
- | - | ||||||
Income tax expenses (benefit)
|
$ | (64,900 | ) | $ | 2,400 |
Six Months Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
Income tax at U.S. statutory rate
|
$ | 2,012,780 | $ | 530,898 | ||||
State tax
|
- | - | ||||||
Indefinitely invested earnings / incurred losses of foreign subsidiaries
|
(2,049,713 | ) | (561,522 | ) | ||||
Nondeductible expenses
|
36,933 | 33,024 | ||||||
Over-provision for prior years
|
(64,900 | ) | - | |||||
Income tax expenses (benefit)
|
$ | (64,900 | ) | $ | 2,400 |
Year Ending March 31,
|
||||
2012
|
$ | 180,000 | ||
2013
|
90,000 |
Year Ending March 31,
|
||||
2012
|
$ | 5,400 | ||
2013
|
8,100 |
Three months ended September 30, 2011
|
||||||||||||
Online
businesses
|
Transportation business
|
Total
|
||||||||||
Sales revenues, net
|
3,084,452 | 12 | 3,084,464 | |||||||||
Cost of goods sold
|
719,694 | 55,513 | 775,207 | |||||||||
Gross profit
|
2,364,758 | (55,501 | ) | 2,309,257 | ||||||||
Operating expenses:
|
||||||||||||
Selling, general and administrative expenses
|
1,382,556 | 432,353 | 1,814,909 | |||||||||
Depreciation
|
62,140 | 223,534 | 285,674 | |||||||||
Marketing expenses
|
66,554 | - | 66,554 | |||||||||
Royalty expenses
|
442,476 | - | 442,476 | |||||||||
Total operating expenses
|
2,609,613 | |||||||||||
Net operating income (loss)
|
411,032 | (711,388 | ) | (300,356 | ) | |||||||
Other expenses
|
(1,387,285 | ) | ||||||||||
Loss before income tax
|
(1,687,641 | ) | ||||||||||
Total long-lived assets
|
1,563,679 | 8,731,934 | 10,295,613 | |||||||||
Additions to long-lived assets
|
58,804 | - | 58,804 |
Three months ended September 30, 2010
|
||||||||||||
Online businesses
|
Transportation business
|
Total
|
||||||||||
Sales revenues, net
|
4,653,634 | 57,784 | 4,711,418 | |||||||||
Cost of goods sold
|
1,843,022 | 218,680 | 2,061,702 | |||||||||
Gross profit
|
2,810,612 | (160,896 | ) | 2,649,716 | ||||||||
Operating expenses:
|
||||||||||||
Selling, general and administrative expenses
|
1,692,118 | 227,819 | 1,919,937 | |||||||||
Depreciation
|
35,693 | 907,045 | 942,738 | |||||||||
Marketing expenses
|
277,858 | - | 277,858 | |||||||||
Impairment loss of transportation equipment
|
- | 4,200,000 | 4,200,000 | |||||||||
Royalty expenses
|
512,747 | - | 512,747 | |||||||||
Total operating expenses
|
7,853,280 | |||||||||||
Net operating income (loss)
|
292,196 | (5,495,760 | ) | (5,203,564 | ) | |||||||
Other income
|
330,160 | |||||||||||
Loss before income tax
|
(4,873,404 | ) | ||||||||||
Total long-lived assets
|
1,421,438 | 8,940,515 | 10,361,953 | |||||||||
Additions to long-lived assets
|
31,707 | - | 31,707 | |||||||||
Six months ended September 30, 2011
|
||||||||||||
Online
businesses
|
Transportation business
|
Total
|
||||||||||
Sales revenues, net
|
13,606,556 | 1,024 | 13,607,580 | |||||||||
Cost of goods sold
|
3,156,243 | 144,497 | 3,300,740 | |||||||||
Gross profit
|
10,450,313 | (143,473 | ) | 10,306,840 | ||||||||
Operating expenses:
|
||||||||||||
Selling, general and administrative expenses
|
2,935,307 | 792,310 | 3,727,617 | |||||||||
Depreciation
|
114,378 | 443,188 | 557,566 | |||||||||
Marketing expenses
|
107,995 | - | 107,995 | |||||||||
Royalty expenses
|
714,401 | - | 714,401 | |||||||||
Total operating expenses
|
5,107,579 | |||||||||||
Net operating income (loss)
|
6,578,232 | (1,378,971 | ) | 5,199,261 | ||||||||
Other expenses
|
(489,326 | ) | ||||||||||
Income before income tax
|
4,709,935 | |||||||||||
Total long-lived assets
|
1,563,679 | 8,731,934 | 10,295,613 | |||||||||
Additions to long-lived assets
|
77,946 | - | 77,946 | |||||||||
Six months ended September 30, 2010
|
||||||||||||
Online businesses
|
Transportation business
|
Total
|
||||||||||
Sales revenues, net
|
9,303,036 | 57,784 | 9,360,820 | |||||||||
Cost of goods sold
|
3,386,634 | 910,572 | 4,297,206 | |||||||||
Gross profit
|
5,916,402 | (852,788 | ) | 5,063,614 | ||||||||
Operating expenses:
|
||||||||||||
Selling, general and administrative expenses
|
3,175,217 | 487,783 | 3,663,000 | |||||||||
Depreciation
|
62,409 | 919,409 | 981,818 | |||||||||
Marketing expenses
|
553,759 | - | 553,759 | |||||||||
Impairment loss of transportation equipment
|
- | 4,200,000 | 4,200,000 | |||||||||
Royalty expenses
|
1,019,685 | - | 1,019,685 | |||||||||
Total operating expenses
|
10,418,262 | |||||||||||
Net operating income (loss)
|
1,105,332 | (6,459,980 | ) | (5,354,648 | ) | |||||||
Other income
|
655,041 | |||||||||||
Loss before income tax
|
(4,699,607 | ) | ||||||||||
Total long-lived assets
|
1,421,438 | 8,940,515 | 10,361,953 | |||||||||
Additions to long-lived assets
|
195,792 | - | 195,792 | |||||||||
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
Item
|
Increase (I) or
Decrease (D)
|
Reason
|
||
Sales revenue, net
|
D
|
The Company increased its cost to become an affiliate from $300 to $600 effective April 2011. As a result, sales demand dropped significantly.
|
||
Shipping charges
|
D
|
Decrease in sales.
|
||
Cost of goods sold
|
D
|
Decrease in sales.
|
||
Shipping cost
|
D
|
Decrease in sales.
|
||
Operating costs – Excalibur
|
D
|
On August 8, 2010, OceanLaLa, the ship owned by Excalibur, was damaged when sailing in the Taiwan Strait. As a result of the damage, the OceanLaLa has been taken out of service, and limited maintenance cost was incurred during the period ended September 30, 2011.
|
||
Gross Profit as a % of total revenue
|
I
|
Gross profit, as the ratio to total revenue, was 75% during the current period compared with 56% during the prior period. The main reasons for the increase in gross profit was due to the fact that the commission for the related undelivered orders had been included and set off against revenue reported for the year ended March 2011.
|
||
Impairment loss of transportation equipment
|
D
|
Last year, the net book value of transportation equipment, OceanLaLa, exceeded its market value after damage.
|
||
Depreciation
|
D
|
Excalibur’s depreciation expenses for the period ended September 30, 2011 decreased as the result of impairment of transportation equipment.
|
||
Marketing expenses
|
D
|
Decrease in commission.
|
||
Royalty expenses
|
D
|
Royalty is payable to EFT Assets which is equal to a percentage of the Company’s gross sales based on certain threshold criteria. A decrease in sales leads to a reduction of royalty expenses.
|
||
Interest income
|
D
|
Interest income reduced because the company liquidated a portion of its securities available for sales to fund the operation.
|
||
Foreign exchange loss
|
I
|
Changes in foreign exchange rates.
|
Item
|
Increase (I) or
Decrease (D)
|
Reason
|
||
Sales revenue, net
|
I
|
Sales are recorded net of the commissions. The Company pays the commission to the Affiliates responsible for the sales upon receipt of sales orders before revenue can be recognized. Increase in sales revenue was due to the fact that the undelivered orders of approximately $10 million as at March 31, 2011 were delivered and recognized as revenue during the period ended September 30, 2011. In addition, the commission related to the above-mentioned undelivered orders had been expensed and was set off against the revenue reported for the period ended March 2011.
|
||
Shipping charges
|
D
|
Decrease in product sales.
|
||
Operating costs – Excalibur
|
D
|
On August 8, 2010, OceanLaLa, the ship owned by Excalibur, was damaged when sailing in the Taiwan Strait. As a result of the damage, the OceanLaLa has been taken out of service, and limited maintenance cost was incurred during the period ended September 30, 2011.
|
||
Gross Profit as a % of total revenue
|
I
|
Gross profit, as the ratio to total revenue, was 76% during the current period compared with 54% during the prior period. The main reasons for the increase in gross profit were the significant increase in net sales and the corresponding commission for the related undelivered orders having been included and set off against revenue reported for the year ended March 2011.
|
||
Depreciation
|
D
|
Excalibur’s depreciation expenses for the period ended September 30, 2011 decreased as the result of impairment of transportation equipment.
|
||
Marketing expenses
|
D
|
Decrease in commission.
|
||
Royalty expenses
|
D
|
Royalty is payable to EFT Assets which is equal to a percentage of the Company’s gross sales base on certain threshold criteria. Decrease in sales leads to reduction of royalty expenses.
|
||
Interest income
|
D
|
Interest income reduced because the company liquidated a portion of its securities available for sales to fund the operation.
|
||
Foreign exchange loss
|
I
|
Changes in foreign exchange rates.
|
Six Months Ended September 30,
|
||||||||
2011
|
2010
|
|||||||
Net cash used in operating activities
|
$ | (7,148,747 | ) | $ | (239,787 | ) | ||
Net cash used in investing activities
|
(15,606,843 | ) | (5,466,352 | ) | ||||
Effect of exchange rate changes on cash
|
701,362 | (19,771 | ) | |||||
Net decrease in cash
|
$ | (22,054,228 | ) | $ | (5,725,910 | ) |
Category
|
Increase (I) or
Decrease (D)
|
Reason
|
||
Cash and cash equivalents
|
D
|
The Company used some of it's excess cash to invest in an investment property project in Taiwan during the period ended September 30, 2011.
|
||
Securities available for sale
|
D
|
The Company liquidated a portion of its securities available for sale as settlement of certain intercompany loans.
|
||
Inventories
|
I
|
For delivery of goods to customers for product sales orders received last year.
|
||
Property and equipment
|
I
|
OceanLaLa, the ship owned by Excalibur, was maintained in NTD. Its value increased due to the increase in the value of the NTD against US dollar.
|
||
Investment in developments in progress
|
I
|
The Company’s wholly owned subsidiary, EFT Investment Co. Ltd, entered into two tripartite agreements on May 31, 2011 to purchase an office building, located in Taipei Taiwan, which is under construction and will be completed by the end of 2013. As of September 30, 2011, deposits approximating $21 million have been made to the sellers.
|
Commission payable
|
D
|
Affiliates withdrew lesser amount of commission payable to them.
|
||
Unearned revenue
|
D
|
Temporary delay in deliveries of product to Affiliates resulted in higher unearned revenues last year. Such revenue was recognized when goods were delivered to Affiliates in current periods.
|
||
Non-controlling interest
|
D
|
This item represents the interests in Excalibur and Digital Development Partners, Inc. owned by others.
|
Principal Amount
|
Interest Rate
|
Due Date
|
|||||
$ | 1,564,717 | 0% |
Due on demand
|
||||
$ | 1,100,000 | 8% |
November 13, 2011
|
||||
$ | 90,000 | 8% |
November 24, 2011
|
||||
$ | 2,500,000 | 8% |
November 25, 2011
|
||||
$ | 330,000 | 8% |
January 5, 2012
|
||||
$ | 100,000 | 8% |
January 7, 2012
|
||||
$ | 100,000 | 8% |
January 25, 2012
|
||||
$ | 120,000 | 8% |
February 1, 2012
|
||||
$ | 160,000 | 8% |
February 11, 2012
|
||||
$ | 140,000 | 8% |
March 10, 2012
|
||||
$ | 130,000 | 8% |
April 3, 2012
|
||||
$ | 512,000 | 8% |
April 30, 2012
|
||||
$ | 260,000 | 8% |
June 5, 2012
|
||||
$ | 150,000 | 8% |
June 28, 2012
|
||||
$ | 400,000 | 8% |
July 6, 2012
|
||||
$ | 100,000 | 8% |
August 20, 2012
|
||||
$ | 250,000 | 8% |
September 1, 2012
|
||||
$ | 200,000 | 8% |
October 12, 2012
|
||||
$ | 8,206,717 |
Total
|
2012
|
2013
|
2014
|
2015
|
Thereafter
|
|||||||||||||||||||
Lease payments
|
$ | 448,376 | $ | 242,124 | $ | 206,252 | - | - | - |
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
Item 4
|
Controls and Procedures
|
|
(a)
|
Disclosure Controls and Procedures
|
|
(b)
|
Changes in Internal Controls.
|
Item 1.
|
Legal Proceedings.
|
Item 1A.
|
Risk Factors.
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Item 3.
|
Defaults upon Senior Securities.
|
Item 4.
|
(Removed and Reserved).
|
Item 5.
|
Other Information.
|
Item 6.
|
Exhibits
|
Exhibit No.:
|
Description:
|
|
31.1
|
Rule 13a-14(a) Certification*
|
|
31.2
|
Rule 13a-14(a) Certification*
|
|
32.1
|
Section 1350 Certification*
|
|
32.2
|
Section 1350 Certification*
|
|
101+
|
The following materials from the EFT Holdings, Inc. Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, filed on November [●], 2011 formatted in Extensible Business Reporting Language (XBRL):*
|
|
(i)
|
Consolidated Balance Sheets,
|
|
(ii)
|
Consolidated Statements of Operations,
|
|
(iii)
|
Consolidated Statements of Comprehensive Income,
|
|
(iv)
|
Consolidated Statements of Cash Flows, and
|
|
(v)
|
related notes
|
*
|
–
|
filed herewith
|
+
|
–
|
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.
|
|
EFT HOLDINGS, INC.
|
|
|
|
(Registrant)
|
|
|
|
Date: November 9, 2011
|
By:
|
/s/ Jack Jie Qin
|
|
|
Jack Jie Qin
|
|
|
Principal Executive Officer
|
By:
|
/s/ William E. Sluss | |
William E. Sluss
Principal Financial Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of ETF Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 9, 2011
|
By: /s/ Jack Jie Qin
|
|
Jack Jie Qin
|
|
Principal Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of ETF Holdings, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: November 9, 2011
|
By: /s/ William E. Sluss
|
|
William E. Sluss
|
|
Principal Financial and Accounting Officer
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: November 9, 2011
|
By: /s/ Jack Jie Qin
|
|
Jack Jie Qin
|
|
Principal Executive Officer
|
|
(1)
|
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: November 9, 2011
|
By: /s/ William E. Sluss
|
|
William E. Sluss
|
|
Principal Financial and Accounting Officer
|
Consolidated Balance Sheets [Parenthetical] (USD $) | Sep. 30, 2011 | Mar. 31, 2011 |
---|---|---|
Preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 25,000,000 | 25,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.00001 | $ 0.00001 |
Common stock, shares authorized | 4,975,000,000 | 4,975,000,000 |
Common stock, shares issued | 75,983,201 | 75,983,201 |
Common stock, shares outstanding | 75,983,201 | 75,983,201 |
Consolidated Statements of Operations (USD $) | 3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2011 | Sep. 30, 2010 | Sep. 30, 2011 | Sep. 30, 2010 | |
Sales revenues, net | $ 2,722,379 | $ 3,785,434 | $ 12,242,673 | $ 7,551,306 |
Shipping charges | 362,073 | 868,200 | 1,363,883 | 1,751,730 |
Transportation income - Excalibur | 12 | 57,784 | 1,024 | 57,784 |
Revenues, Total | 3,084,464 | 4,711,418 | 13,607,580 | 9,360,820 |
Cost of goods sold | 362,843 | 1,173,703 | 2,168,430 | 2,401,741 |
Shipping costs | 356,851 | 669,319 | 987,813 | 984,893 |
Operating costs - Excalibur | 55,513 | 218,680 | 144,497 | 910,572 |
Cost of Revenue, Total | 775,207 | 2,061,702 | 3,300,740 | 4,297,206 |
Gross profit | 2,309,257 | 2,649,716 | 10,306,840 | 5,063,614 |
Operating expenses: | ||||
Selling, general and administrative expenses | 1,814,909 | 1,919,937 | 3,727,617 | 3,663,000 |
Depreciation | 285,674 | 942,738 | 557,566 | 981,818 |
Marketing expenses | 66,554 | 277,858 | 107,995 | 553,759 |
Royalty Expenses | 442,476 | 512,747 | 714,401 | 1,019,685 |
Impairment loss of transportation equipment | 0 | 4,200,000 | 0 | 4,200,000 |
Total operating expenses | 2,609,613 | 7,853,280 | 5,107,579 | 10,418,262 |
Net operating income (loss) | (300,356) | (5,203,564) | 5,199,261 | (5,354,648) |
Other income (expense) | ||||
Interest income | 111,977 | 338,103 | 297,373 | 510,214 |
Gain on disposal of securities available-for-sale | 8,364 | 88,557 | 94,364 | 93,649 |
Dividend Income | 13,525 | 11,769 | 26,053 | 11,769 |
Foreign exchange gain (loss) | (1,523,520) | (128,105) | (911,878) | 4,323 |
Other income | 2,369 | 19,836 | 4,762 | 35,086 |
Total other income (expense) | (1,387,285) | 330,160 | (489,326) | 655,041 |
Net income (loss) before income taxes and non-controlling interest | (1,687,641) | (4,873,404) | 4,709,935 | (4,699,607) |
Income benefit (taxes) | 64,900 | (2,400) | 64,900 | (2,400) |
Net Income (loss) | (1,622,741) | (4,875,804) | 4,774,835 | (4,702,007) |
Non-controlling interest | 335,277 | 2,792,696 | 665,112 | 3,267,149 |
Net income/ (loss) attributable to EFT Holdings Inc. | $ (1,287,464) | $ (2,083,108) | $ 5,439,947 | $ (1,434,858) |
Net income/ (loss) per common share | ||||
Basic and diluted (in dollars per share) | $ (0.02) | $ (0.03) | $ 0.07 | $ (0.02) |
Weighted average common shares outstanding | ||||
Basic and diluted (in shares) | 75,983,201 | 75,983,205 | 75,983,201 | 75,983,205 |
LITIGATION | 6 Months Ended |
---|---|
Sep. 30, 2011 | |
Disclosure Text Block Supplement [Abstract] | |
Legal Matters and Contingencies [Text Block] | Note 17 – LITIGATION
In October 2008, the Company acquired, through a wholly-owned subsidiary, 48.81% of the capital stock of Excalibur International Marine Corporation, a Taiwanese corporation, for $19,193,000. Excalibur owns a high speed ship which, until August 2010, transported passengers and cargo between Taiwan and mainland China through the Taiwan Strait. Excalibur’s ship, the OceanLaLa, was capable of carrying up to 370 passengers and 630 tons of cargo.
Excalibur purchased the OceanLaLa from Ezone Capital Co. Ltd., prior to its acquisition by the Company. The last payment of NTD 77,840,000, equivalent to approximately $2,702,778, was withheld by Excalibur since Excalibur believed that special tooling was not delivered at the time of sale and that an Ezone’s director did not act in good faith and was involved in self-dealing.
EFT Investment Co. Ltd. filed a lawsuit against Jiao Ren-Ho, former chairman of Excalibur, in the Taiwan Shihlin District Prosecutors office on February 12, 2010. EFT Investment Co. Ltd. alleges, among other things, that Jiao Ren-Ho committed the offences of capital forging, fraud, breach of trust, and document fabrication. On July 25, 2011, the attorney general of Shihlin District remanded the case to district attorney for further investigation.
EFT Investment Co. Ltd. filed a lawsuit against Chang Hui-Ying, Excalibur’s former accountant in the Taiwan Shihlin District Prosecutors office in March 2010. The claims of EFT Investment Co. Ltd. against Chang Hui-Ying are based upon the audit of Excalibur’s financial statements by Chang Hui-Ying. EFT Investment Co. Ltd. alleges, among other things, that Chang Hui-Ying committed the offences of capital forging, fraud, breach of trust, and document fabrication. On July 25, 2011, the attorney general of Shihlin District remanded the case to district attorney for further investigation.
EFT Investment Co. Ltd. filed a lawsuit against Hsiao Zhong-Xing, former general manager of Excalibur, and Lu Zhuo-Jun, former vice general manager of Excalibur, collectively "Defendants,” in the Taiwan Shihlin District Prosecutors office on October 1, 2010. EFT Investment Co. Ltd. alleges, among other things, that Defendants committed the offences of capital forging, fraud, breach of trust, and document fabrication. On June 24, 2011, the district attorney of Shihlin District prosecuted both Hsiao Zhong-Xing and Lu Zhuo-Jun for the offences of capital forging, fraud, breach of trust and document fabrication.
EFT Investment Co. Ltd. filed a civil lawsuit against Jiao Ren-Ho, Chang Hui-Ying, Hsiao Zhong-Xing, and Lu Zhuo-Jun, collectively “Defendants,” in the Taiwan Shihlin District court on February 12, 2010. EFT Investment Co. Ltd. alleges Defendants committed tortuous acts, including but not limited to the offences of capital forging, fraud, breach of trust and document fabrication. The final resolution of this case is pending.
Gu Zong-Nan, former vice general manager of Excalibur, filed a lawsuit against Excalibur in the Taiwan Shihlin District Court on June 2, 2009, claiming unpaid salary and severance payments. In April 2010, the Taiwan Shihlin District Court denied the claims as the court found that there was a valid agreement between both parties. In addition, it was determined that the agreement provided that the salary accrued for Gu Zong-Nan would not be paid until Excalibur made a profit from its operations and that Gu Zong-Nan held a managerial position in Excalibur and as a result was not entitled to any severance payment according to the Labor Standard Law of Taiwan. Excalibur has suffered net losses since inception, however, a contingent liability for the unpaid salary remains.
Marinteknik Shipbuilders (S) Pte Ltd., a Singapore company, filed a lawsuit against Excalibur in the Taiwan Taichung District Court on July 9, 2009 for unpaid service fees and out-of-pocket expenses of NTD8,050,832, equivalent to approximately $280,000. On August 20, 2009, the Taiwan Taipei district court froze Excalibur’s cash of $193,992 in response to the suit. The final resolution of this case is pending. However, a contingent liability for the restricted cash has remained.
Jiao Ren-Ho, former chairman of Excalibur, filed a lawsuit against Excalibur in the Taiwan Shihlin District Court claiming Excalibur’s special meeting of shareholders held on January 12, 2010, and the actions taken at the meeting, including the removal of Mr. Jiao as an officer and the chairman of Excalibur, were unlawful. Monetary damages were not claimed in the suit. On October 12, 2010, the Shihlin District Court rendered its judgment in favor of Excalibur, ruling that Excalibur’s special meeting of shareholders held on January 12, 2010 and the actions taken at the meeting, including the removal of Mr. Jiao as an officer and the chairman of Excalibur, were lawful. Subsequently, Mr. Jiao has filed an application to the Court of Appeal in Shihlin District Court to review the lower court’s decision. On July 20, 2011, the Court of Appeal in Shihlin District Court sustains the lower court’s decision. Nevertheless, Mr. Jiao filed and submitted the Appellate Court’s decision to the higher court on August 15, 2011. On October 13, 2011, the higher court rejected Mr. Jiao’s submission and ruled in favor of Excalibur. The judgment rendered by the higher court is the final verdict.
On August 2, 2010 the Company commenced a legal proceeding against Marinteknik Shipbuilders (S) Pte Ltd., and three other persons in the High Court of the Republic of Singapore alleging fraud, misrepresentation, and deceit on the part of the defendants with respect to Excalibur’s purchase of the OceanLaLa. The Company claims that the wrongful actions of the defendants resulted in damages of $19,000,000 to the Company. The case is still pending.
On August 18, 2010 Excalibur received a statement of claim, equivalent to a complaint in the US, from Ezone Capital Co., Ltd., demanding approximately 2,000,000 Euros, equivalent to approximately $2,900,000, for the unpaid balance of the purchase price of the OceanLaLa (see Note 12). Excalibur has denied the claims of Ezone on the basis that the OceanLaLa was defective, unseaworthy, and not fit for its intended purpose. Excalibur has also filed a counterclaim against Ezone seeking a full refund of all amounts paid for the OceanLaLa, as well as reimbursement for amounts incurred in maintenance and repairs. Currently, the case is still under arbitration proceeding. |
Document and Entity Information | 6 Months Ended | |
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Sep. 30, 2011 | Nov. 09, 2011 | |
Entity Registrant Name | EFT Holdings, Inc. | |
Entity Central Index Key | 0001450973 | |
Current Fiscal Year End Date | --03-31 | |
Entity Filer Category | Accelerated Filer | |
Trading Symbol | eftb | |
Entity Common Stock, Shares Outstanding | 75,983,201 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2011 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2012 |
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LOANS TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS | 6 Months Ended |
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Sep. 30, 2011 | |
Loans To Related Parties and Related Party Transactions [Abstract] | |
Loans To Related Parties and Related Party Transactions [Text Block] | Note 6 - LOANS TO RELATED PARTIES AND RELATED PARTY TRANSACTIONS
The Board of Directors of the Company approved a non-interest bearing demand loan in the amount of $1,567,000 on July 25, 2008 to Yeuh-Chi Liu, a vendor to the Company. The $1,567,000 loan was used by Yeuh-Chi Liu to purchase a 3.97% ownership interest in Excalibur, see Note 8, and is collateralized by that interest. Yeuh-Chi Liu has served as a member of the board of directors of Excalibur since then. The Company does not expect that this loan will be repaid and the loan was written off as of December 31, 2010. The Company has not yet enforced its interest in the collateral.
The Company uses the “EFT” name, a trademark owned and licensed to it by EFT Assets Limited. The Company is required to pay an annual royalty to EFT Assets equal to a percentage of its gross sales for the previous fiscal year. The percentage is 5% for the first $30 million in gross sales, 4% for the $10 million in gross sales in excess of $30 million, 3% for the $10 million in gross sales in excess of $40 million; 2% for the $10 million in gross sales in excess of $50 million; and 1% for the $10 million in gross sales in excess of $60 million. EFT Assets Limited is owned by a number of persons, including Wendy Qin, director of EFT International Ltd. Ms. Qin is the sister of Jack Jie Qin, our President. During the six months ended September 30, 2011 and 2010, the Company paid EFT Assets Limited $714,401 and $1,019,685 in royalties, respectively.
The Company rents a 6,500 square foot office space for its satellite training center in Hong Kong. This office is located at Langham Office Tower, 8 Argyle Street, Suite 3706, Kowloon, Hong Kong SAR. This space is leased commencing on March 31, 2007 and expiring on March 31, 2012. The leased space is owned by a number of persons, including Wendy Qin, a director of EFT (HK) Ltd and the sister of Jack Qin, the Company’s President. Pursuant to the lease, there is no rent for the first two years. Commencing on the third year of the lease, the monthly rent is $50,000. During the six months ended September 30, 2011 and 2010, the Company paid the lessor $188,946 and $193,668 in rental expense.
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DUE TO RELATED PARTIES | 6 Months Ended | ||||||||||||||||||
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Due To Related Parties [Abstract] | |||||||||||||||||||
Due To Related Parties [Text Block] | Note 11 – DUE TO RELATED PARTIES
The above amounts are due to Steve Hsiao, a shareholder of Excalibur.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant Accounting Policies [Text Block] | Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Unaudited Interim Financial Information
These unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, “GAAP,” for interim financial reporting and the rules and regulations of the Securities and Exchange Commission that permit reduced disclosure for interim periods. In the opinion of management, all adjustments of a normal recurring nature necessary for a fair presentation of the financial position, results of operations and cash flows for the periods presented have been made. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the year ending March 31, 2012.
These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes for the year ended March 31, 2011, included in the Company’s 2011 Annual Report on Form 10-K.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation.
Foreign Currency
The Company’s reporting currency is the U.S. dollar. The Company’s operations in Hong Kong, Taiwan and China use their local currencies as their functional currency. The financial statements of the subsidiaries are translated into U.S. Dollars, “USD,” in accordance with ASC Topic 830, Foreign Currency Translation. According to ASC 830, all assets and liabilities are translated at the year-end current exchange rate, stockholders’ equity items are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC Topic 220, Reporting Comprehensive Income as a Component of Stockholders’ Equity. Foreign exchange transaction gains and losses are reflected in the statement of operations.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and 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. Actual results could differ from those estimates.
Contingencies
Certain conditions may exist as of the date the financial statements are issued which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and Taiwanese and Singapore legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s Taiwanese and Singapore legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.
If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability is accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed in the footnotes to the financial statements.
Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and cash in time deposits, certificates of deposit and all highly liquid investments with original maturities of three months or less. The Company maintains its accounts in banks and financial institutions in amounts that, at times, may exceed the federally insured limit. Management believes the Company is not exposed to any significant credit risk on those accounts.
Securities Available for Sale
The Company’s investments in corporate notes are classified as available-for-sale and are reported at fair value, based on quoted prices and market prices, using the specific identification method. Unrealized gains and losses, net of taxes, are reported as a component of stockholders’ equity. Realized gains and losses on investments are included in investment and other income, net when realized. Any impairment loss to reduce an investment’s carrying amount to its fair market value is recognized as an expense when a decline in the fair market value of an individual security below its cost or carrying value is determined to be other than temporary.
Inventories
Inventories are valued at the lower of cost, determined on a first-in, first-out basis, or market. Inventory consists of nutritional, personal care, automotive additive, environmentally safe products, portable drinking containers and EFT-Phone. The Company has two warehouses, one in City of Industry, CA and the other in Kowloon, Hong Kong. On a quarterly basis, the Company’s management reviews inventory levels in each country for estimated obsolescence or unmarketable items, as compared with future demand requirements and the shelf life of the various products. Based on this review, the Company records inventory write-downs when costs exceed expected net realizable value. Historically, the Company’s estimates of obsolete or unmarketable items have been insignificant.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives of:
For the six months ended September 30, 2011 and 2010, depreciation expenses were $557,566, and $997,767, respectively. Long-Lived Assets
The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with ASC Topic 360. ASC Topic 360 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the asset’s carrying amount. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. The Company has recorded an impairment loss of $5.4 million on the transportation equipment of Excalibur during the year ended March 31, 2011 because the net book value of the equipment has exceeded its market value.
Fair Value of Financial Instruments
ASC Topic 825 requires the Company to disclose the estimated fair values of financial instruments. The carrying amounts reported in the Company’s consolidated balance sheets for current assets and current liabilities qualifying as financial instruments are a reasonable estimate of fair value due to the short-term maturity of these instruments.
Fair Value Measurements
ASC Topic 820 defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. ASC Topic 820 does not require any new fair value measurements, but rather eliminates inconsistencies in guidance found in various other accounting pronouncements. The adoption of ASC Topic 820 did not have a material effect on the Company’s financial condition or operating results.
Refer to Note 3, “Fair Value Measurements” for additional information on ASC Topic 820.
Stock-Based Compensation
ASC Topic 718 requires companies to recognize in the statement of operations the grant date fair value of stock options and other equity-based compensation issued to employees.
Stock Issued to Officers or Employees
During the six months ended September 30, 2011 and 2010, the Company did not issue any stock options or warrants to its officers or employees nor were there any outstanding warrants or options held by officers or employees as of September 30, 2011.
Stock Issued for Services
The Company accounts for equity instruments issued in exchange for the receipt of goods or services from persons other than employees in accordance with ASC Topic 505. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of performance commitment or completion of performance by the provider of goods or services as defined by ASC Topic 505.
Revenue / Unearned Revenue
The Company’s revenue recognition policy is in accordance with the requirements of Staff Accounting Bulletin, “SAB,” No. 104, Revenue Recognition, “SAB 104,” ASC Topic 605, Accounting for Consideration Given by a Vendor to a Customer, Including a Reseller of the Vendor’s Products, and other applicable revenue recognition guidance and interpretations. Sales revenue is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured. Transportation income is generated from transporting passengers and cargo and is recognized when passengers and cargo are conveyed to the destination port. Payments received before all relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Commissions paid to the Company’s Affiliates are considered to be a reduction of the selling prices of its products, and are recorded as a reduction of revenue. The Company’s policy is to pay out commissions to Affiliates upon receipt of sales orders even before revenue can be recognized.
Unearned Revenues consist of cash received in advance for goods to be delivered at a future date. The Company records the payments received from Affiliates as a liability until the products are delivered. Sales are recorded when the products are delivered.
In 2009, the Company developed a “reverse auction” program as a means of attracting younger members who typically would not otherwise become an Affiliate. The reverse auction is unlike an ordinary auction, also known as a forward auction, where bidders bid the price up and the highest bidder wins that product at the conclusion of bidding. In a reverse auction the objective is to bid the price of a product down.
To participate in the reverse auction, one must initially purchase 300 bids at a price of $1.00 per bid. The purchase of the 300 bids automatically qualifies the purchaser as an Affiliate, and no purchase of the Company’s products is required. All bids are non-refundable once purchased.
Once the reverse auction for a particular product begins, participants can, through a designated website, enter a bid for the product. Each $1.00 bid lowers the price of the product by $0.01. At the conclusion of the auction, the person who entered the last bid is entitled to buy the product at the price reduced by the auction process. The Company only recognizes revenue for the price a bidder pays to purchase relevant bids when the bidder places such bids on an auction product. The reverse auction program ceased operation on April 30, 2011.
For the six months ended September 30, 2011 and 2010, the reverse auction program generated revenues of $113,067 and $945,851 respectively.
Warranty
The Company generally does not provide customers with right of return, but does provide a warranty, entitling the purchaser to a replacement of defective products within six months from the date of sale. Historically, warranty costs have not been material. Factors that affect the Company’s warranty liability include the number of products currently under warranty, historical and anticipated rates of warranty claims on those products, and cost per claim to satisfy the warranty obligation. Other factors are less significant due to the fact that the warranty period is only six months and replacement products are already in stock or available at a pre-determined price. The anticipated rate of warranty claims is the primary factor impacting the estimated warranty obligation. Warranty claims are relatively predictable based on historical experience. Warranty reserves are included in other liabilities and the provision for warranty accruals is included in cost of goods sold in the Consolidated Statements of Operations. Management reviews the adequacy of warranty reserves each reporting period based on historical experience. The Company records warranty liabilities at the time of sale for the estimated costs that may be incurred under its limited warranty. If actual results differ from the estimates, the Company revises its estimated warranty liability.
As of September 30, 2011, the Company’s estimated warranty expense was as follows:
Shipping Costs The Company’s shipping costs are included in cost of sales for all periods presented.
Marketing Expenses
On January 1, 2009, EFT International Limited, a wholly-owned subsidiary of EFT Holdings, Inc., entered into a contract with ZR Public Relation Consultant Ltd., the “Consultant,” which provides public relations consulting services in Asia. In consideration of the services rendered by the Consultant, EFT International Limited pays 5% of total commission payout for each fiscal year. For the six months ended September 30, 2011 and 2010, consultant expense for EFT International Limited was $107,995 and $553,759 respectively.
Income Taxes
The Company follows ASC Topic 740, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
Under ASC Topic 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement.
Earnings per Share
Basic net income per share is computed on the basis of the weighted average number of common shares outstanding during the period.
Diluted net income per share is computed on the basis of the weighted average number of common shares and common share equivalents outstanding. Dilutive securities having an anti-dilutive effect on diluted net income per share are excluded from the calculation.
Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period, or at the time of issuance, if later, and as if funds obtained thereby were used to purchase common stock at the average market price during the period.
The following table shows the weighted-average number of potentially dilutive shares excluded, since they were anti-dilutive, from the diluted net income per share calculation for the six months ended September 30, 2011 and 2010:
Comprehensive income
Comprehensive income is defined as the change in equity of a company during a period from transactions and other events and circumstances excluding transactions resulting from investments from owners and distributions to owners. For the Company, comprehensive income for the periods presented is comprised of net income, unrealized loss on marketable securities classified as available-for-sale, and foreign currency translation adjustments.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk are cash, accounts receivable and other receivables arising from its normal business activities. The Company places its cash in what it believes to be credit-worthy financial institutions, but several of its bank accounts exceed the federally insured limit. The Company’s accounts receivable are constantly at a marginal to zero dollar ($0) level and its revenues are derived from orders placed by consumers located anywhere in the world over the Company’s designated internet portal. The Company maintains a zero dollar ($0) allowance for doubtful accounts and authorizes credits based upon its customers’ historical credit history. The Company routinely assesses the credits authorized to its customers and, based upon factors surrounding the credit risk, establishes an allowance, if required, for uncollectible accounts and, as a consequence, believes that its accounts receivable credit risk exposure beyond such allowance is limited.
Segment Reporting
ASC Topic 280, “Disclosure about Segments of an Enterprise and Related Information” requires use of the management approach model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.
The Company’s business is classified by management into two reportable segments: transportation businesses and online business. These reportable segments are two distinct businesses, each with a different customer base, marketing strategy and management structure. The online business reportable segment is an aggregation of the Company’s online operating segments, which are organized to sell the Company’s products to Affiliates through its websites. The online business reportable segment derives revenue from the sales of nutritional products, personal care products and EFT-phones. The transportation service reportable segment derives revenue from transport passengers and cargo between Taiwan and Mainland China through the Taiwan Strait. Substantially all of the Company’s revenue is generated from Mainland China.
Recent accounting pronouncements
The following Accounting Standards Codification Updates have recently been issued, or will become effective, after the end of the period covered by these financial statements:
To the extent appropriate, except for ASU 2011-04 and ASU 2011-05, the guidance in the above Accounting Standards Codification Updates is already reflected in the Company’s consolidated financial statements and management does not anticipate that these accounting pronouncements will have any material effect on the Company’s consolidated financial statements.
In June 2011, the FASB issued ASU 2011-05, an amendment to ASC Topic 220, “Comprehensive Income,” which provides the entity has the option to present the total 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. This update eliminates the option to present the components of other comprehensive income as part of the statement of changes in stockholders’ equity. This topic will be effective retrospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011 for public entities, early adoption is permitted but the Company does not believe that the adoption of the amendments to ASC 220 will have a material effect on its financial statements.
In May 2011, the FASB issued ASU 2011-04, an amendment to ASC Topic 820 “Fair Value Measurement,” which amendments in this update result in common fair value measurement and disclosure requirements in U.S. GAAP and IFRS. Consequently, the amendments change the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. Some of the amendments clarify FASB’s intent about the application of existing fair value measurement requirements, including (1) specifying that the concepts of highest and best use and valuation premise in a fair value measurement are relevant only when measuring the fair value of nonfinancial assets and are not relevant when measuring the fair value of financial assets or of liabilities; (2) requirements specific to measuring the fair value of instruments classified in a reporting entity’s shareholders’ equity, such as equity interest issued as consideration in a business combination; and (3) clarifying that a reporting entity should disclose quantitative information about the unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy.
Other amendments change particular principles or requirements for measuring fair value or for disclosing information about fair value measurements, including (1) permitting an exception to the requirements in Topic 820 for measuring fair value when a reporting entity manages its financial instruments on the basis of its net exposure, rather than its gross exposure, to those risks; (2) clarifying that the application of premiums and discount in a fair value measurement is related to the unit of account for the asset or liability being measured at fair value; and (3) requiring additional disclosures about fair value measurements. This topic will be effective for periods beginning after December 15, 2011, early adoption is not permitted. The Company does not believe that the adoption of the amendments to ASC 820 will have a material effect on its financial statements.
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Excalibur [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Excalibur [Text Block] | Note 8 – EXCALIBUR
On October 25, 2008, the Company through its wholly-owned subsidiary, EFT Investment, acquired a 48.81% equity interest in Excalibur for $19,193,000. The Company initially loaned funds to Excalibur in July 2008 and subsequently has continued to provide Excalibur with loan capital to fund its operations.
As disclosed in Note 6, on July 25, 2008, the Company loaned $1,567,000 to Yeuh-Chi Liu, a vendor to the Company. The proceeds of the loan were used to acquire a 3.97% interest in Excalibur, which was pledged as collateral for the loan. Yeuh-Chi Liu has served as a member of the board of directors of Excalibur since then. In accordance with ASC 810-10-25-43, the interest in Excalibur held by Yeuh-Chi Liu as a result of the loan made to her by the Company should be treated in the same manner as the Company’s own interest. As a result, the Company has concluded that it effectively held control of Excalibur and has consolidated Excalibur beginning at the time the Company acquired its ownership interest.
The Company consolidates Excalibur based on a three-month lag with the Company’s reporting periods. All inter-company accounts and transactions were eliminated in consolidation. The following table provides a summary of balance sheet information for Excalibur as of June 30, 2011 and 2010, which is consolidated in the Company’s financial statements as of September 30, 2011 and 2010:
*NTD: New Taiwan Dollar
The following is the shareholder list of Excalibur as of September 30, 2011:
On August 8, 2010, Excalibur’s ship, the OceanLaLa, was damaged when sailing in the Taiwan Strait. As a result of the damage suffered, the OceanLaLa has been taken out of service and management estimated that the net book value of the equipment exceeded its market value and an impairment loss of $5.4 million has been provided for the year ended March 31, 2011.
Additional information concerning Excalibur is included in Notes 12 (Contingent Liabilities) and 17 (Litigation).
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STOCKHOLDERS' EQUITY | 6 Months Ended |
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Sep. 30, 2011 | |
Stockholders' Equity Note [Abstract] | |
Stockholders' Equity Note Disclosure [Text Block] | Note 13 – STOCKHOLDERS’ EQUITY
Common stock
As of September 30, 2011 the Company had 4,975,000,000 shares of common stock authorized and 75,983,201 shares issued and outstanding.
The Company did not issue any shares of common stock during the six months ended September 30, 2011.
Warrants
Between January and August 2008, the Company sold 14,890,040 Units to non-U.S. residents at a price of $3.80 per Unit. Each Unit consisted of one share of the Company’s common stock and one warrant. Each warrant allows the holder to purchase one share of the Company’s common stock at a price of $3.80 per share at any time prior to November 30, 2010. As the only settlement option for the warrants is physical settlement, in which the party designated in the contract as the buyer delivers the full stated amount of cash to the seller, and the seller delivers the full stated number of shares to the buyer, the Company accounted for the warrants as permanent equity and recorded the value of the warrants in additional paid in capital.
On September 2, 2010, the Company’s Board of Directors resolved to extend the expiration date of the warrants to November 30, 2011. Using a binomial option model, the exercise price of the warrants of $3.80 per share, the market value of the Company’s common stock on September 2, 2010 of $2.45 per share, estimated volatility of 85% based on the Company’s historical volatility, a risk-free rate of 0.31% and an assumed dividend rate of zero, the effect of extending the expiration date of the warrants was to increase their value by approximately $7,506,000. Because the warrants are accounted for as equity instruments, the cost associated with extending the expiration date of the warrants is considered to be a cost of capital and therefore had no net effect on the Company’s stockholders’ equity.
The Company has the right, but not the obligation, to redeem the warrants, on a pro rata basis, at a purchase price of $0.00001 per warrant within thirty days from the tenth consecutive trading day that the closing sales price, or the average of the closing bid and asked price, of the Company’s common stock on the OTC or any public securities market within the United States, “the U.S.,” is at least $11.00 per share.
As of September 30, 2011, the Company’s subsidiary Digital Development Partners Inc. has 2,000,000 common stock warrants outstanding, and 330,665 Series A and 330,665 Series B warrants outstanding, which are accounted for as equity instruments. The 2,000,000 warrants expire on June 1, 2014 and permit the holders to purchase one share of Digital’s common stock at an exercise price of $1.00 per share. The Series A and Series B warrants expire on September 30, 2014 and permit the holders to purchase one share of Digital’s common stock at an exercise price of $1.00 per share and $1.25 per share, respectively.
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INVESTMENT IN CTX VIRTUAL TECHNOLOGIES | 6 Months Ended |
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Sep. 30, 2011 | |
Investment In Ctx Virtual Technologies [Abstract] | |
Investment In Ctx Virtual Technologies [Text Block] | Note 9- INVESTMENT IN CTX VIRTUAL TECHNOLOGIES
CTX Virtual Technologies, Inc. (Pink Sheets: CTXV), is a technology company that manufactures and distributes mobile telecommunication, IT data management, virtual imaging and mobile data input accessories.
In July 2010 the Company lent $5,000,000 to CTX Virtual Technologies, Inc. The loan to CTX was unsecured, bore interest at 8% per year and had a term of one year to July 26, 2011. At any time during the one-year term, the Company could at its option convert the loan into 8,474,576 units, with each unit consisting of one share of CTX’s common stock and one warrant. Each warrant allows the Company to purchase one additional share of CTX’s common stock at a price of $1.00 at any time on or before June 23, 2015. At any time after January 26, 2011 and before July 26, 2011, CTX could, at its option, cause the loan to be converted into the same 8,474,576 units.
On March 12, 2011, CTX elected to convert the full principal amount of $5,000,000 into 8,474,576 units and paid the Company in full all accrued and unpaid interest owing. The common stock of CTX is quoted on the Pink OTC market. On September 30, 2011, the closing market price of CTX common stock, as reported by NASDAQ, was $2.00. However, this company’s common stock is very thinly traded and, as reported by NASDAQ, a total of 44,308 common shares were traded during the period ended September 30, 2011 at an average price, based on reported closing prices, of $1.49. Because of the lack of a sufficiently active market, the Company does not believe that quoted market prices for CTX’s common stock are a reliable indicator of fair value. Despite repeated inquires and requests to CTX for current financial information that would allow the Company to assess the recoverability of its investment, the Company has not been able to obtain any information to enable it to assess the fair value of this investment. Accordingly, management concluded that it would be prudent to conclude, in the absence of persuasive evidence to the contrary, that the investment should be considered impaired and therefore the Company has provided an impairment loss of $5,000,000 during the year ended March 31, 2011.
On September 23, 2011, CTX released its audited annual financial results for the year ending December 2010 and six month period ending June, 2011. For the year ending December 31, 2010 CTX reported consolidated revenue of $34.3 million with a gross profit of $6.2 million. After one time Non-operating expenses of $9.2 million relating to research and development, investment banking cost and present value of stock issuance, CTX had a net loss of $6.4 million or $(1.80) per basic and diluted share. For the six month period ending June 30, 2011 CTX reported consolidated revenue of [$22.4 million with gross profit of $4.1 million]. Accounting for the reversal of charges relating to the stock issuance valuation, CTX accrued a net profit of [$5.6 million or $1.50] per basic and diluted shares. |
INVESTMENT IN DEVELOPMENT IN PROGRESS | 6 Months Ended |
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Sep. 30, 2011 | |
Development Stage Enterprises [Abstract] | |
Development Stage Enterprise General Disclosures [Text Block] | Note 7 – INVESTMENT IN DEVELOPMENT IN PROGRESS
On May 2, 2011, Jack Qin, as an agent, entered into agreements to purchase an office building, located in Subsection 3, Tanmei Section, Neihu, Tai Pei. The land use category for the Land is the urban planning type three industrial zone, comprising an area of 11,238 ping, or approximately 37,152 square meters. Building construction for the Pre-Sale building Units is under construction and will be completed by the end of 2013. The total purchase price for the office building, which consists of 14 floors and 144 parking spaces, is NTD 7.1 billion, approximately $248 million. The Company intends to retain one floor of the office building for its own business operation and plans to sell the majority of the remaining floors. On May 31, 2011, the Company’s wholly owned subsidiary, EFT Investment Co. Ltd, (Taiwan) assumed the same rights and obligations under these agreements.
As of September 30, 2011, payment of NTD600 million, approximately $20 million, has been made.
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Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Text Block] | Note 3 - FAIR VALUE MEASUREMENTS
ASC Topic 820 defines fair value, establishes a framework for measuring fair value and enhances disclosure requirements for fair value measurements. This topic does not require any new fair value measurements. ASC Topic 820 defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, ASC Topic 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. In accordance with ASC Topic 820, the Company measures its securities available for sale at fair value. The securities available for sale are classified within Level 1 since they are valued using quoted market prices.
The Company does not have non-financial assets and non-financial liabilities that are required to be measured at fair value on a recurring basis at September 30 and March 31, 2011.
Assets measured at fair value are summarized below:
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RESTRICTED CASH | 6 Months Ended |
---|---|
Sep. 30, 2011 | |
Receivables [Abstract] | |
Restricted Assets Disclosure [Text Block] | Note 4 -
RESTRICTED CASH
On August 20, 2009, Taiwan Taipei district court froze Excalibur’s cash of $193,992 as a result of a lawsuit filed by Marinteknik Shipbuilders (S) Pte Ltd, a Singapore company, against Excalibur in the Taiwan Taichung District Court. The lawsuit claims Excalibur owes service fees and out-of-pocket expenses of $249,731 to Marinteknik Shipbulider (S) PTE Ltd.
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8
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