MONIES HELD BY A LEGAL FIRM AND PROVISION FOR EMPLOYEE BENEFITS

3 Months Ended

Dec. 31, 2012

Monies Held By Legal Firm and Provision For Employee Benefits [Abstract]

Monies Held By Legal Firm And Provision For Employee Benefits [Text Block]

Note 13 - MONIES HELD BY A LEGAL FIRM AND PROVISION FOR EMPLOYEE BENEFITS

On September 26, 2011, the Company’s wholly-owned subsidiary Shenzhen Digital Image Technologies Co., Ltd. (“SDIT”) entered into a Letter of Intent for Share Purchase (the “Acquisition Agreement”) with Li Dongxiang and Zeng Xianguang (together, the “Sellers”) with respect to the shares of Guangzhou Fanyutuo 3D Technology Co., Ltd. (“Guangzhou”), a recently formed start-up company involved in three dimensional technology. Pursuant to the terms of the Acquisition Agreement, the Sellers agreed to sell all of the capital stock of Guangzhou to SDIT in exchange for $952,215 (CNY6,000,000). 

A Supplemental Letter of Intent for Share Purchase Agreement (“Supplemental Agreement”) was entered into on September 26, 2011. Extracts to the Supplemental Agreement are:

i) The Sellers and three non-shareholder employees of Guangzhou guarantee themselves to work for SDIT;

ii) 5 working days after execution of the Supplemental Agreement, 50% of the amount of $952,215 (CNY6,000,000) shall be paid to the Sellers through the legal firm witnessing the transaction;

iii) 5 working days after completion of two years employment by the Sellers and the three non-shareholder employees with SDIT, 30% of the amount of $952,215 (CNY6,000,000) shall be paid to the Sellers through the legal firm witnessing the transaction;

iv) 5 working days after completion of three years employment by the Sellers and the three non-shareholder employees with SDIT, 20% of the amount $952,215 (CNY6,000,000) shall be paid to the Sellers through the legal firm witnessing the transaction;

v) As the Supplemental Agreement forms part and parcel of the Acquisition Agreement, in accordance with the terms of the Acquisition Agreement, any dispute arising from the Agreement, both parties shall resolve by mutual negotiations or in the event of such negotiations fail, the dispute should be resolved by arbitrations or by Court Action in PRC;

vi) In the event that any one of the Sellers and the three non-shareholder employees left employment with SDIT during the three years Agreement period, the acquisition price shall not establish.

Management considers that in the event that any one of the Sellers or the three non-shareholder employees terminates employment with SDIT before completion of the three years Agreement period, any payment that had paid to the Sellers under the terms of the Supplemental Agreement will not be repaid back to the Company. The unpaid balance in respect of the remaining Agreement period, shall cease to be payable to the Sellers and that the Acquisition price shall then be reduced in proportion to the number of Sellers and the three non-shareholder employees left employment before completion of the three years Agreement period.

Management also considers that the acquisition is in fact to secure three years continuing employment of the Sellers and three non-shareholder employees of Guangzhou by SDIT.

On September 28, 2011, SDIT paid the full amount of $952,215 (CNY6,000,000) to the legal firm witnessing the transaction under Escrow.

50% of the amount $952,215 i.e. $476,107 (CNY3,000,000) was then paid to the Sellers following execution of the Supplemental Agreement and that the remaining balance $476,107 (CNY3,000,000) remains under the custody of the legal firm witnessing the transaction under Escrow for future payments to the Sellers in accordance with the terms of the Supplemental Agreement.

The Company therefore accounts for:

(a) 50% of the amount, $476,107 (CNY3,000,000) that was paid to the Sellers following execution of the Supplemental Agreement as employee benefits and expensed to consolidated statement of income and comprehensive income;

(b) 30% of the amount, $285,664 (CNY1,800,000) is expensed over the two years Agreement period with the corresponding entry credited to provision for employee benefits in the balance sheet.

(c) 20% of the amount, $190,443 (CNY1,200,000) is expensed over the three years Agreement period with the corresponding entry credited to provision for employee benefits in the balance sheet.

In total, the Company incurred employee benefits of US$51,686 and $521,400 for three months ended December 31, 2012 and 2011 respectively under the Acquisition Agreement and the Supplemental Agreement. As of December 31, 2012 and September 30, 2012, the unamortized balance of employee benefits were $218,216 and $268,393, respectively.