SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM
10/A
(Amendment
No. 1)
GENERAL
FORM FOR REGISTRATION OF SECURITIES
PURSUANT
TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
EFT
BIOTECH HOLDINGS, INC.
(Exact
name of small business issuer as specified in its charter)
Commission
File No.
001-34222
Nevada
(State
or other Jurisdiction of
Incorporation
or Organization)
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22-1211204
(I.R.S.
Employer
Identification
No.)
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|
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929Radecki
Court
City of Industry,
CA
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917
48
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Registrant's Telephone
Number:
(626) 581
- 0388
With
Copies to:
Virginia
K Sourlis, Esq.
The
Sourlis Law Firm
2 Bridge
Avenue
The
Galleria
Red Bank,
New Jersey 07701
Telephone:
(732) 530-9007
Securities
to be registered under Section 12(b) of the Act:
Title
of each class
To
be registered
N/A
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Name
of each exchange on which
Each
class is to be registered
N/A
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Securities
to be registered under Section 12 (g) of the Act:
Common Stock, par value
$0.0
0
001 per
share
(Title of
Class)
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer,”
"non-accelerated filer" and “smaller reporting company” in Rule 12b-2 of
the Exchange Act. (Check one):
Large
accelerated filer
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o
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Accelerated
filer
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o
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Non-accelerated
filer
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o
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Smaller
reporting company
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x
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TABLE
OF CONTENTS
Item:
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Page
Number:
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Item
1.
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Business
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3
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Item
1A.
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Risk
Factors
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10
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Item
2.
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Financial
Information
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17
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Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
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17
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Item
3.
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Properties
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24
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Item
4.
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Security
Ownership of Certain Beneficial Owners and Management
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25
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Item
5.
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Directors
and Executive Officers
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26
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Item
6.
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Executive
Compensation
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27
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Item
7.
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Certain
Relationships and Related Transactions, and Director
Independence
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29
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Item
8.
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Legal
Proceedings
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29
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Item
9.
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Market
Price of and Dividends on the Registrant’s Common Equity and Related
Stockholder Matters
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30
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Item
10.
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Recent
Sales of Unregistered Securities
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31
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Item
11.
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Description
of Registrant’s Securities to be Registered
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33
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Item
12.
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Indemnification
of Directors and Officers
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34
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Item
13.
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Financial
Statements and Supplementary Data
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34
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Item
14.
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Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
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35
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Item
15.
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Financial
Statements and Exhibits
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36
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Signatures
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37
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This
registration statement contains statements that we believe are, or may be
considered to be, “forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements other than
statements of historical fact included in this Report regarding the prospects of
our industry or our prospects, plans, financial position or business strategy,
may constitute forward-looking statements. In addition, forward-looking
statements generally can be identified by the use of forward-looking words such
as “may,” “will,” “expect,” “intend,” “estimate,” “foresee,” “project,”
“anticipate,” “believe,” “plans,” “forecasts,” “continue” or “could” or the
negatives of these terms or variations of them or similar terms. Furthermore,
such forward-looking statements may be included in various filings that we make
with the SEC or press releases or oral statements made by or with the approval
of one of our authorized executive officers. Although we believe that the
expectations reflected in these forward-looking statements are reasonable, we
cannot assure you that these expectations will prove to be correct. These
forward-looking statements are subject to certain known and unknown risks and
uncertainties, as well as assumptions that could cause actual results to differ
materially from those reflected in these forward-looking statements. Readers are
cautioned not to place undue reliance on any forward-looking statements
contained herein, which reflect management’s opinions only as of the date
hereof. Except as required by law, we undertake no obligation to revise or
publicly release the results of any revision to any forward-looking statements.
You are advised, however, to consult any additional disclosures we make in our
reports to the SEC. All subsequent written and oral forward-looking statements
attributable to us or persons acting on our behalf are expressly qualified in
their entirety by the cautionary statements contained in this registration
statement.
Form
10
EFT
BioTech Holdings, Inc. (the “Registrant”) filed a registration
statement on Form 10 with the SEC on December 10, 2008 and the Registration
Statement went effective by operation of law on February 9,
2009. Upon the effectiveness date of the Form 10, we are required to
file annual, quarterly and other required reports and forms with the SEC under
the Securities Exchange Act of 1934, as amended. Our Form 10, as
amended, and our reports and other information may be inspected and copied at
the public reference facilities maintained by the SEC at 100 F Street, N.E.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the
SEC maintains an Internet website that contains reports, proxy and information
statements and other information regarding Registrants that file electronically.
The address of the website is http://www.sec.gov.
Once
the Form 10 is cleared by the SEC, the Registrant intends to solicit a
registered broker/dealer to file an application with FINRA for authorization to
act as a market maker of our common stock on the OTC Bulletin
Board.
ITEM
1. BUSINESS.
General
The
Registrant together with its subsidiaries is an e-Business company designed
around the concept of “Business-to-Customer,” meaning products are sold directly
to individuals, rather than the traditional “Business to Business” model where
products are sold to distributors who then sell to individuals, using the World
Wide Web through our website, www.eftb.us. The contents of our
website are not incorporated by reference herein. The
Registrant is a holding company and conducts its business through its operating
subsidiaries. See “Organizational History” below. The
information in this registration statement concerning the Registrant’s business
and operations pertains to the operating subsidiaries. Terms such as the
“Company,” “EFT,” “we,” “us,” “our” and similar phrases pertain to the
activities of the operating subsidiaries unless otherwise
noted.
We
offer 26 different nutritional products, some of which are oral sprays; 18
different personal care products; 2 environmentally protective automotive
products, an environmentally friendly house cleaner and flip top portable
drinking container which contains a filter to remove impurities from the
water. See “Products” below for a more detailed description of our
products.
We
market and sell our products through an internet platform which consists of us
selling our products directly to customers through our website. Once
a customer purchases our products he or she becomes an “Affiliate” by being
recommended by another Affiliate. Currently, a majority of our
Affiliates are located in China and Hong Kong.
Customers
who originally enrolled in the Affiliate program (the “EFT Program”) shared this
program with friends and relatives in China. From this, our Chinese
business grew. Customers can join the EFT Frogram only by being
recommended by another Affiliate and by making a purchase through our website.
To purchase products, customers order on line and send payment for the
order to an off-shore account. Currently, the Company has no sales
activities in the United States. EFT International Ltd. (“EFT International”) an
off-shore subsidiary will verify receipt of payment and notify the appropriate
distribution center to ship the products. The Affilate then
receives the products for personal use.
As of
December 31, 2008, we had approximately 500,000 Affiliates enrolled in the EFT
Program. When a customer joins the EFT Program, the customer is given a
membership ID number. We have a reward system whereby an Affiliate
earns monetary rewards for products purchased by such Affiliate and by other
persons who join the EFT Program and who were introduced to the program by that
Affiliate or through other Affiliates that were originally introduced to the
program by that Affiliate. For example, when a new Affiliate joins
the program, he/she is required to furnish the referring Affiliate’s ID number.
When the next or second Affiliate introduces a third Affiliate to the Company,
the second Affiliate as well as the first referring Affiliate earn rewards based
on the products purchased by such third Affiliate. This reward system continues
for each additional Affiliate. A certain percentage of the total
purchase price is paid to the Affiliate as the reward. EFT uses a binary
compensation system. For each new order the Affiliate must select a placement on
the right or left side of the referring Affiliate’s ID number in order to have
the system calculate the rewards earned
.
Affiliates
are not required to pay membership fees, buy products, resell products, recruit
others, attend meetings or report to us. Free educational classes are offered to
our Affiliates where they can learn more about our products and how to use them.
Affiliate rewards are issued in the form of a reward card. Rewards are credited
in U.S. Dollars and can be withdrawn in local currency at automated teller
machines (ATM’s) in the country of the Affiliate. By using this
method, we eliminate cumbersome accounting chores such as issuing checks and
reconciling bank statements. This method helps us to keep our accounting staff
smaller than it would be if we used a check payment method, thereby saving
operating expenses.
Full
payment is required in U.S. Dollars prior to shipment of the products
purchased. At period end, we recognize cash received where orders
have not been shipped as a liability. We report unshipped orders as a
liability under unearned revenues. 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 collectibility is reasonably assured. Payments received before
all of the relevant criteria for revenue recognition are satisfied are recorded
as unearned revenue. Cash consideration given by the Company to its
Affiliates is considered to be a reduction of the selling prices of the
Company's products, thus, is recorded as a reduction of revenue. Customers may
return defective merchandise for an exchange or refund.
EFT
does not own any manufacturing facilities. Our products are
manufactured by third party vendors, and are packaged under the EFT
brand. EFT packages clearly state the country of manufacture which
currently is the United States in most cases. We do not have any
long-term supply contracts or agreements with any merchants to produce or market
our products at this time. We order our products directly from vendors, on an
“as-needed” or “expected need” basis.
The
Registrant’s Common Stock is currently trading on the OTC Pink Sheets under the
ticker symbol “EFTB.”As of the quarter ended December 31, 2008, there were
75,983,205 shares of Common Stock outstanding, 53,300,000 of which
(approximately 70%) are beneficially held or controlled by the executive
officers and directors of the Company.
Organizational
History
EFT
BioTech Holdings, Inc., (formerly HumWare Media Corporation, GRG, Inc.,
Ghiglieri Corporation, Karat Productions, Inc.) was incorporated in the state of
Nevada on March 19, 1992 (“EFT Holdings”). HumWare’s stock had been
trading on the Pink Sheets and as a result EFT Holdings is a public company
trading on the Pink Sheets.
On
November 7, 2007, HumWare Media Corporation changed its name to EFT BioTech
Holdings, Inc. and effected a reverse stock split of 20,000 shares of common
stock for 1 share of common stock, which resulted in a decrease in the total
amount of common shares then issued and outstanding.
On
November 18, 2007, EFT Holdings issued an aggregate of 53,300,000 shares of its
Common Stock in connection with a share exchange with EFT BioTech, Inc. (“EFT
BioTech”), a Nevada corporation formed on September 18, 2007, pursuant to which
EFT Holdings acquired 100% of the issued and outstanding shares of EFT BioTech
in consideration for such 53,300,000 shares, representing 70.15% of EFT Holdings
capital stock on a fully-diluted basis. See Item 4, “Security
Ownership of Certain Beneficial Owners and Management” herein for a description
of the current holders of such 53,300,000 common shares.
Upon
the consummation of the merger, EFT BioTech became a wholly-owned subsidiary of
EFT Holdings. The Registrant is a holding company and conducts its
business through the operations of the subsidiaries of EFT Limited, a British
Virgin Islands corporation (“EFT Limited”). EFT Limited has four
wholly-owned subsidiaries: EFT (HK), Inc., Top Capital International Limited,
EFT, Ltd. and EFT International Ltd.
On October 25, 2008, EFT Investment
Co., Ltd. completed the acquisition of 58,567,750 shares of common stock of
Excalibur
International
Marina Corporation (“Excalibur”)
; representing approximately 49% shares
of issued and outstanding shares of Excalibur, for an aggregate purchase price
of USD $19,193,000. Prior to the acquisition of Excalibur, Excalibur was not a
related person under Item 404 of regulation S-K
. See also Item 7 “Certain
Relationships and Related Transactions and Director Independence” for certain
transactions between the Company and Excalibur.
Below is
our corporate chart:
Products
Nutritional
Products:
Our
nutritional products are non-pharmaceutical nutritional
products. They are ingestible through oral liquids, oral sprays,
tablets and tea. Our oral sprays are delivered through very fine mist
sprayed directly into the mouth. Our containers used to deliver our nutritional
products are small, compact and easy to carry.
Our
products are all natural, made from pure ingredients, and are designed to
address specific goals of the user such as strengthening the immune system,
assisting in weight loss, helping to overcome a sore throat and fighting off
colds. Each product has been formulated to address specific need, symptom and
condition. We make no claims as to the products curing any medical condition, or
preventing any medical ailment. Our products have not been tested and/or
approved by the FDA, as with all non-prescription products.
We
currently offer 26 different nutritional products for various
purposes:
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1.
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Zeolite
Plus:
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An oral liquid
designed to detoxify the body, support immune system strength and
normalize pH in the body.
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2006
Celprotect I:
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Ingestible
tablets designed to eliminate toxins and viruses (e.g., cold sores) and
promote energy.
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2007
Celprotect II Bullet Points:
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An oral liquid
designed to stimulate cellular metabolism, neutralize toxins, assist in
avoiding food poisoning, balance cell life and boost
energy.
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4.
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2006
– 2007 Celprotect I:
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A kit containing
2006 Celprotect I and 2006 - 2007 Celprotect II.
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5.
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CardioSupport:
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An oral spray
designed to promote heart health.
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6.
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Colloidal
Silver:
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An
oral liquid designed to combat bacterial, fungal and viral
infections.
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7.
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Colostrum:
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An oral spray
designed to promote anti-aging, weight loss and immune system
support.
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8.
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Deer
Antler Velvet Plus:
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An oral spray
designed to promote white blood cell count and to help the body handle
stress and promote recovery from the effects of injury and
fatigue.
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9.
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Essential
90+:
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An oral spray
designed to promote overall health.
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10.
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GlucoBalance:
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An oral spray
designed to maintain proper levels of blood sugar for good
health.
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11.
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Liver
Support:
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An oral spray
designed to cleanse the liver and rebuild damaged tissue.
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12.
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Memory
Plusb:
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An
oral spray designed to overcome the natural processes associated with
aging and enhance healthy cognitive ability.
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13.
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MSM
(
Methylsulfonymethane):
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An
oral spray designed to rebuild connective tissue and
joints.
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14.
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Perform
Plus:
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An oral spray
designed to promote endurance, performance and increased
libido.
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15.
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Re-Live
Again:
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An oral spray
designed to increase the release of Human Growth Hormone within the body
to increase energy and endurance.
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16.
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ReishiPlus:
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An oral spray
designed to help lower blood pressure and decrease elevated cholesterol
and triglyceride levels and support the immune system.
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17.
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Rooibos
Tea:
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A popular South
African tea believed to promote anti-aging and immune system
health.
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18.
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Slim’n
Easy:
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An oral spray
designed to promote and sustain weight loss.
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19.
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Slumber
Plus:
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An oral spray
designed to aid sleep.
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20.
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An
oral spray designed to alleviate colds and sore
throats.
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21.
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An oral liquid
designed to revitalize and detoxify the human body.
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22.
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A larger bottle
of Super Hydro-Oxy.
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23.
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An oral spray
designed to promote overall health.
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24.
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An oral liquid
designed to support bones, arteries, connective tissue, healthy hair, skin
and nails.
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25.
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An oral spray
designed to promote bone health.
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26.
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An
oral spray designed to nourish the eyes.
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Personal
Care Products:
We
currently offer the following 18 different Personal Care products;
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1.
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Bust Cream:
An herbal
cream containing natural ingredients for the purpose of stimulating the
development of the breast tissue and tightening and firming of the
breast.
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2
.
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Daily Eye
Treatment:
A soothing and hydrating eye cream for the
purpose of reducing puffiness, fine lines and the effects of stress and
fatigue.
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3
.
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Lip gloss:
A
long lasting moisturizing
lipstick.
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4
.
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Pressed Mineral
Powder:
A multi-functional face power containing zinc,
Vitamins A and E and green tea extract.
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5
.
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Fountain of Youth:
A
daily skin care regimen including a synergistic blend of 10 oriental herbs
for the purpose of skin brightening, cleaning, and anti-wrinkle
effects.
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6
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Gold Cream:
A
topical cream containing colloidal gold for the purpose of relieving pain
associated with arthritis, stiff and swollen joints, sprains, strains,
muscle spasms, bursitis and
tendonitis.
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7
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Instant Whitening Cream:
A cream for the purpose of brightening overall complexion, lightening age
spots, liver spots and sun damaged
skin.
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8
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Lifting Masque:
A 20
minute masque for the purpose of reducing the visible signs of aging while
lifting, tightening, and refining the pores of the
skin.
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9
.
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Magik Glove:
A
non-greasy lotion for hand protection against the damaging effects of
dirt, grease, grime, multi-component paints, oils, solvents, adhesives,
chemicals, resins, corrosives, irritants, inks, dyes, toner, toxins and
many other substances.
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10
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Nia 3 Plus 1 Lash &
Line:
Mascara
and eyeliner package containing two items in
each tube: dark brown mascara and navy blue mascara
in one tube and black mascara and black eyeliner in the another
tube.
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11
.
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Nia Concealer:
A light
colored concealer for the purpose of providing coverage for any skin
imperfection as in darkness around the eyes, blemishes and to even out
skin tones.
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12
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Nia Eye Color:
A palette
of four color-coordinated eye shadows: Pearl grey, Soft pink, Cranberry
and Charcoal.
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13
.
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Nia Face and Body
Powder:
A jar containing face and body powder and a powder
puff.
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14.
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Nia Lip Magic:
A lip
gloss. Colors include Celebration Red with Pink shimmer and Plum Raisin
with Peach
shimmer.
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15
.
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Progesterone Cream:
A
non-pharmaceutical cream containing natural ingredients for menopausal and
postmenopausal women.
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16
.
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Rooibos Tea Cream:
A
skin cream containing Alpha-Hydroxy acids, antioxidant, Vitamin B, Vitamin
C and Vitamin E , Zinc, Potassium, Calcium, Copper and
DHEA.
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17
.
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The Collection:
A makeup
kit containing Face Primer, Silk Whipped Foundation, Wet/Dry Powder,
Eye Shadow, Black Eye Pencil, Pressed Shimmer Powder, Shimmer
Blush, Long Lasting Lipstick, Lip Gloss Palate, Cream Lipstick,
and Coordinating Lip Pencils.
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18
.
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Travel Kits.
An
Anti-Aging Skin Care Travel Kit containing products designed for balancing
skin tone, increasing hydration, diminishing lines and wrinkles and
restoring resiliency.
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Automotive
Additive Products:
We
currently offer the following two different automotive products:
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1.
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Fast Team Plus:
A
tire sealant solution for the purpose of protecting a tire against air
loss.
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2.
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MotoMax:
A biodegradable
solution to regulate an engine’s
temperature.
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Environmentally
Friendly Home Cleaning Product:
Natural Clean
:
A
100% biodegradable multi-purpose cleaning solution that aids in the clean-up and
removal of a number of different stains and spills including grease, tar,
crayons, pet stains, soap film, blood, ink and make-up. Natural Clean is
non-toxic, non-caustic, non-pollutant, non-flammable and non-rusting and can be
used for cleaning kitchens, baths and cars as well being used as an insect
repellant when applied on skin or clothing.
Other:
Flip-Top Portable
Filter
:
A
24-ounce drinking container in a portable tote and featuring a filtration
system.
Distribution
of Our Products
Our
products are sold exclusively on the Internet. Customer orders are
filled using the following general process:
|
·
|
To
purchase products, customers order on line and send payment for the order
to an off-shore account. EFT International will verify receipt
of payment and notify the appropriate distribution center to ship the
products. Currently, orders are filled primarily through
our subsidiary EFT (HK) Ltd., located in Hong Kong and we do not have any
sales in the United States. We are currently in the process of
establishing operations in other locations around the world, specifically
Europe, Thailand, Vietnam and South America, from which products may also
be shipped if we determine there is sufficient
demand.
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|
·
|
Once
orders are placed on-line, EFT International will notify EFT (HK) Ltd.
that payment was received. EFT (HK) Ltd. will notify IFC
(defined below) how much of any particular type of product will be
needed. In most cases, products ordered are shipped directly
from our third party vendor
to the distribution
center in Hong Kong. In some cases, however, products are
shipped to California rather than directly to the distribution center in
Hong Kong. As a result some inventory may be
maintained in California but only for a short period of time, generally
not to exceed three months. Any products received in California are
subsequently shipped to Hong Kong for distribution. Vendors are
paid for their products by EFT
International.
|
The
product formulations, delivery systems (spray), packages, packaging design and
labels are proprietary to EFT. There are several manufacturers who
produce these formulated products owned by EFT. We do not own any
manufacturing facilities.
It
would be difficult and prohibitively expensive for a competitor to duplicate the
process without a ready market to sell hundreds of thousands of products into,
therefore, we do not copyright or patent our products. To date, we
have not encountered any competitor who has products similar to ours.
Additionally, we are not fully dependent upon any one manufacturer supplier for
100% of any single product.
Significant
Vendors
The
vendors that supply the Company’s formulated products are currently located in
the United States. None of our vendors account for a significant portion of our
business and can be replaced. In December of 2008, we contracted with
Industry Fulfillment Co., Inc. (“IFC”), a California corporation, to provide
quality control on products ordered from vendors beginning in January
2009. IFC tracks the quantity and progress on delivery of these
orders. In the future products may be purchased from vendors located
outside the United States. There are no commitments or
manufacturing agreements with any of our current
vendors. We order products on an “as needed” or an
“expected need” basis.
Sources
and Availability of Raw Materials
Raw
materials used in the manufacture of our products by third parties are readably
available to the manufacturers of our products. We are not
a party to any agreement for the purchase or delivery of such raw
materials.
Significant
Customers and Dependence on One or More Customers
None
of our customers or Affiliates account for a significant portion of our
business. We do not currently depend on any one or more customers or
Affiliates for the purchase of our products.
Competition
The
nutritional supplement and cosmetic e-business markets have and continue to
become increasingly competitive and are rapidly evolving. In
addition, the internet online commerce market is rapidly evolving and intensely
competitive. Barriers to entry are minimal and current and new competitors can
launch new websites at a relatively low cost. Continued
advancement in technology and increasing access to that technology is paving the
way for growth in the internet consumer industry. We believe that we are
well-positioned within the Asian consumer market with our current marketing plan
of supplying American merchandise brands to Asian consumers and that our
exposure to both the Asian and American cultures gives us a competitive
advantage. We also face competition for consumers from retailers, duty-free
retailers, specialty stores, department stores and specialty and general
merchandise catalogs, many of which have greater financial and marketing
resources than we have.
Government
Regulation
Currently,
pre-market government approval is not necessary for any of our products and none
of our products are otherwise subject to governmental regulation. The
FDA may in the future determine to regulate our nutritional products. If certain
of our products are deemed to be drugs or biologics, we will be required to
conduct clinical trials to demonstrate the safety and efficacy of these products
in order to continue to market and sell them.
The
collection of data and processing of transactions through our systems require us
to receive and store a large volume of personally identifiable data. This
collection, processing and storage of such type of data is subject to
legislation and regulation in various jurisdictions.
Seasonality
Our
business is not seasonal in nature.
Intellectual
Property
We do
not currently hold any patents or trademarks, nor are we a party to any
licenses, franchises, concessions, royalty agreements or labor contracts except
as disclosed herein. The Company uses the “EFT” name, a trademark owned by EFT
Assets Limited and licensed by EFT Assets Limited to the Company. EFT
Limited is required to pay an annual royalty fee equal to a percentage of the
Company’s sales for the previous fiscal year. The percentage is 5%
for the first $30 million in sales, 4% for the $10 million in sales in excess of
$30 million, 3% for the $10 million in sales in excess of $40 million and up to
$50 million; 2% for the $10 million in sales in excess of $50 million
and up to $60 million; and 1% for the $10 million in sales in excess
of $60 million.
Research
and Development Activities
We
have not and do not engage in any research and development activities nor do we
contemplate spending any time on such activities in the foreseeable
future. On an as needed basis we may outsource research and
development of a new product.
Environmental
Laws
Our
products are biodegradable and are not impacted by federal, state or local
environmental laws.
Employees
As of
the date of this Registration Statement, we have 5 full-time employees at
the executive offices of the Registrant in the City of Industry, California and
the remaining 9 at our Kowloon, Hong Kong office. The number of
employees were reduced in the City of Industry office because EFT, Inc. is no
longer a fulfillment or procurement center and in the Kowloon office as a result
of decreased sales generally. We adjust the number of employees
from time to time as necessary to meet the needs of the
Company.
None
of our employees are represented by a collective bargaining agreement. There are
no pending labor-related legal actions against us filed with any state or
federal agency. We believe our employee relations are good.
Available
Information
We
filed the original Form 10 with the SEC on December 10, 2008 and the
Registration Statement is effective by operation of law as of February 9,
2009. Upon the effectiveness date of the Form 10, we are required to
file annual, quarterly and other required reports and forms with the SEC under
the Securities Exchange Act of 1934, as amended. This Form 10, as
amended, and our other reports and other information may be inspected and copied
at the public reference facilities maintained by the SEC at 100 F Street, N.E.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the
SEC maintains an Internet website that contains reports, proxy and information
statements and other information regarding registrants that file electronically.
The address of the website is http://www.sec.gov.
ITEM
1A. RISK
FACTORS.
An
investment in our securities involves risk. Please consider the
following risks and uncertainties together with the other information presented
in this Registration Statement, before investing in our securities.
Risks
Related to Our Business
Current
economic conditions may adversely affect our industry, business and results of
operations and could cause the market value of our common stock to
decline.
The
global economy is currently undergoing a period of unprecedented volatility, and
the future economic environment may continue to be less favorable than that of
recent years. This has led, and could further lead, to reduced consumer spending
in the foreseeable future, and may include consumer spending on nutritional and
beauty products and other discretionary items. In addition, reduced
consumer spending may drive us and our competitors to decrease prices. These
conditions may adversely affect our industry, business and results of operations
and may cause the market value of our common stock to decline.
We
regularly maintain cash balances at a commercial bank in excess of the Federal
Deposit Insurance Corporation insurance limit of $250,000.
We
regularly maintain cash balances at a commercial bank in excess of the Federal
Deposit Insurance Corporation (FDIC) insurance limit of $250,000. While the
financial position and liquidity of the commercial bank has been exceedingly
greater than our uninsured cash balances at any point in time, if the financial
position and/or liquidity of the bank were to become impaired, our financial
position and the results of our operations could be negatively affected to the
extent of account balances held at the financial institution in excess of the
federally insured limit.
The
extent of our sourcing and manufacturing may adversely affect our business,
financial condition and results of operations.
All of
our products are currently manufactured in the United States and a majority of
them are sold to customers in Hong Kong and China. As a result of the
magnitude of this sourcing and shipping, our respective businesses are subject
to the following risks:
·
|
political
and economic instability in foreign countries, including heightened
terrorism and other security concerns, which could subject imported or
exported goods to additional or more frequent inspections, leading to
delays in deliveries or impoundment of goods, or to an increase in
transportation costs of raw materials or finished
product;
|
·
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the
imposition of regulations and quotas relating to exports and imports,
including quotas imposed by bilateral agreements between the United States
from where we source our products and foreign countries, including
China;
|
·
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the
imposition of duties, taxes and other charges on exports and
imports;
|
·
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significant
fluctuation of the value of the U.S. dollar against the Hong Kong Dollar,
Chinese Yuan and other foreign currencies;
|
·
|
restrictions
on the transfer of funds to or from foreign countries;
and
|
·
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violations
by foreign contractors of labor and wage standards and resulting adverse
publicity.
|
We
operate on very tight delivery schedules and, if there are delays and expected
delivery dates cannot be met, it could negatively affect our
profitability.
If
there is a delay in the delivery of goods and delivery schedules cannot be met,
then our Affiliates and retail customers may cancel orders with us
which would impact our gross profits and therefore, our profitability. We may
also incur extra costs to meet delivery dates, which would also reduce our
company’s profitability.
We
face intense competition and any failure to timely implement our business plan
could diminish or suspend our development and possibly cease our
operations.
From
time to time in the Business to Consumer (B2C) e-commerce business competitors,
typically catalog and other online retailers, will attempt to secure contracts
with various merchandise brands to offer merchandise to their consumers. We also
face competition for consumers from retailers, duty-free retailers, specialty
stores, department stores and specialty and general merchandise catalogs, many
of which have greater financial and marketing resources than we have. The
internet online commerce market is rapidly evolving and intensely competitive.
Barriers to entry are minimal and current and new competitors can launch new
websites at a relatively low cost. Many competitors in this area have greater
financial, technical and marketing resources than our Company. Continued
advancement in technology and increasing access to that technology is paving the
way for growth in the internet consumer industry. In addition, the nutritional
supplement and cosmetic e-business markets have and continue to become
increasingly competitive and are rapidly evolving. We believe that we
are well-positioned within the Asian consumer market with our current marketing
plan of supplying American merchandise brands to Asian consumers and that our
exposure to both the Asian and American cultures gives us a competitive
advantage but there can be no assurance that we will maintain our competitive
edge or that we will continue to provide only American made
merchandise.
Consumers
concerns about purchasing items through the Internet as well as external or
internal infrastructure system failures could negatively impact our e-commerce
sales or cause us to incur additional costs.
The
e-commerce business is vulnerable to consumer privacy concerns relating to
purchasing items over the Internet, security breaches, and failures of Internet
infrastructure and communications systems. If consumer confidence in making
purchases over the Internet declines as a result of privacy or other concerns,
e-commerce net sales could decline. We may be required to incur increased costs
to address or remedy any system failures or security breaches.
Our
business depends on the ability to source merchandise in a timely and
cost-effective manner.
Our
business depends on being able to find qualified vendors and access products in
a timely and efficient manner. All of the vendors must comply with applicable
laws. Political or financial instability, changes in U.S. and foreign laws and
regulations affecting the importation and taxation of goods, including duties,
tariffs and quotas, or changes in the enforcement of those laws and regulations,
as well as currency exchange rates, transport capacity and costs and other
factors relating to foreign trade and the inability to access suitable
merchandise on acceptable terms could adversely impact our results of
operations.
We
face significant inventory risks.
We are
exposed to significant inventory risks that may adversely affect our operating
results as a result of new product launches, rapid changes in product cycles,
changes in consumer tastes with respect to our products and other factors. We
must accurately predict these trends and avoid overstocking or under-stocking
products. All of our products are supplied by third parties which we order
generally on an “as needed” basis. However, based on ordering trends
we do stock certain items that we believe will be in demand so that they are
available for immediate shipping. In recent months we have mitigated
decreases in sales by lowering our levels of inventory to preserve cash on hand.
Demand for products, however, can change significantly between the time
inventory is ordered and the date of sale. In addition, when we begin selling a
new product, it may be difficult to establish vendor relationships, determine
appropriate product selection, and accurately forecast product demand. The
acquisition of certain types of inventory, or inventory from certain sources,
may require significant lead-time and prepayment, and such inventory may not be
returnable. Although we have significantly reduced inventory levels and
primarily order products on an as needed basis, any one of the inventory risk
factors set forth above may adversely affect our operating
results.
We
depend on third parties to manufacture all of the products we sell, and we don’t
have any contracts with any of the manufacturers of our products. If we are
unable to maintain these manufacturing relationships or enter into additional or
different arrangements, we may fail to meet customer demand and our net sales
and profitability may suffer as a result.
All of
our products are manufactured by third parties. We don’t have any contracts with
any of the manufacturers of our products. The fact that we do not have contracts
with our third-party manufacturers means that they could cease manufacturing
these products for us at any time and for any reason. In addition, our
third-party manufacturers are not restricted from manufacturing our competitors'
products. Our inability to secure adequate and timely supplies of
merchandise would harm inventory levels, net sales and gross profit, and
ultimately our results of operations.
Our
manufacturers may increase the cost of the products we purchase from
them.
If our
manufacturers increase their costs, our margins would suffer unless we were able
to pass along these increased costs to our customers. We may not be able to
develop relationships with new vendors and manufacturers at the same prices or
at all, and even if we do establish such relationships, such new vendors and
manufacturers might not allocate sufficient capacity to us to meet our
requirements. Furthermore, if we increase our product orders significantly from
the amounts we have historically ordered from our manufacturers, our
manufacturers might be unable to meet this increased demand.
Our
third-party manufacturers may not continue to produce products that are
consistent with our standards or applicable regulatory requirements, which could
harm our brand, cause customer dissatisfaction and require us to find
alternative suppliers of our products.
Our
third-party manufacturers may not maintain adequate controls with respect to
product specifications and quality and may not continue to produce products that
are consistent with our quality standards. If we are forced to rely on products
of inferior quality, then our customer satisfaction and brand reputation would
likely suffer, which would lead to reduced net sales. In addition, we may be
required to find new third-party manufacturers to supply our products. There can
be no assurance that we would be successful in finding third-party manufacturers
that make products meeting our standards of quality.
Future
increases in the price of gasoline may cut into our margins and if we are unable
to pass those costs to our customers, our profit margins will
decrease.
We pay
for the shipment of goods from our vendors. The recent worldwide
prices of gas have significantly and rapidly fluctuated in the recent
past. Increased fuel prices increase our costs of sales which
decrease our profit margins. Future and sustained increases in the
price of gasoline will decrease our profit margins to the extent we are unable
to foresee them and pass on any increased costs to our
customers.
We
are subject to the risks of doing business abroad.
Some of
our products originate from abroad (e.g., our teas originate from South Africa)
and all of our Affiliates are currently located in China and Hong
Kong. As such, we are subject to the usual risks of doing business
abroad, including currency fluctuations, political or labor instability and
potential import restrictions, duties and tariffs. We do not maintain insurance
for the potential lost profits due to such disruptions. Political or economic
instability in the China or Hong Kong or elsewhere could cause substantial
disruption in our business. This could materially adversely affect our financial
condition and results of operations. Heightened terrorism security concerns
could subject exported goods to additional, more frequent or more thorough
inspections. This could delay deliveries or increase costs, which could
adversely impact our results of operations. In addition, since we negotiate our
purchase orders with customers in United States dollars, the value of the United
States dollar against local currencies could impact our cost in dollars of
production from these manufacturers. We are not currently engaged in any hedging
activities to protect against these currency risks. If there is downward
pressure on the value of the dollar, our customers’ purchase prices for our
products could increase. We may not be able to offset an increase in production
costs with a price increase to our customers.
Fluctuations
in the price, availability and quality of materials used in our products could
have a material adverse effect on our cost of goods sold and our ability to meet
our customers’ demands.
Fluctuations
in the price, availability and quality of the materials used in the manufacture
of our products by third parties could have a material adverse effect on the
cost of such products to us or our ability to meet our customers’ demands. We
may not be able to pass on all or any portion of higher material prices to our
customers.
The
regulatory status of our products could change, and we may be required to
conduct clinical trials to establish efficacy and safety or cease to market
these products.
The
Food and Drug Administration, or FDA, does not have a pre-market approval system
for our products. However, the FDA may in the future determine to regulate our
products or the ingredients included in our products as drugs or biologics. If
certain of our products are deemed to be drugs or biologics we would be required
to conduct clinical trials to demonstrate the safety and efficacy of these
products in order to continue to market and sell them. In such event, we may not
have sufficient resources to conduct any required clinical trials, and we may
not be able to establish sufficient efficacy or safety data to resume the sale
of these products. Any inquiries by the FDA or any foreign regulatory
authorities into the regulatory status of our products and any related
interruption in the marketing and sale of these products could severely damage
our brand reputation and image in the marketplace, as well as our relationships
with customers, which would harm our business, prospects, financial condition
and results of operations.
The
failure to upgrade information technology systems as necessary could have an
adverse effect on our operations.
Some
of our information technology systems, which are primarily utilized to manage
information necessary to price and ship products and to generate
reports that report each customer’s order are dated and are
comprised of multiple applications, rather than one overarching state-of-the-art
system. Modifications involve replacing legacy systems with successor systems,
making changes to legacy systems or acquiring new systems with new
functionality. If we are unable to effectively implement these systems and
update them where necessary, this could have a material adverse effect on its
business, financial condition and results of operations.
The
processing, storage and use of personal data could give rise to liabilities as a
result of governmental regulation, conflicting legal requirements or differing
views of personal privacy rights.
The
collection of data and processing of transactions through our systems require us
to receive and store a large volume of personally identifiable data. This type
of data is subject to legislation and regulation in various jurisdictions. We
might become exposed to potential liabilities with respect to the data that we
collect, manage and processes, and may incur legal costs if our information
security policies and procedures are not effective or if it is required to
defend its respective methods of collection, processing and storage of personal
data. Future investigations, lawsuits or adverse publicity relating to its
methods of handling personal data could adversely affect our business, financial
condition and results of operations due to the costs and negative market
reaction relating to such developments
We
are highly dependent on our current management.
Our
success is significantly dependent upon our management team. Our success is
particularly dependent upon Mr. Jack Qin, our Chairman and CEO, Ms. Sharon Tang,
our Chief Financial Officer, and Mr. George Curry, Chief Marketing Officer and
Director. The loss of any of them could have an adverse effect on us. If we were
to lose the services of our officers and directors, we may experience
difficulties in effectively implementing our business plan.
Dragon
Win beneficially owns 52,099,000 shares of common stock thereby controlling
68.57% of our issued and outstanding common stock as of the date of this
Registration Statement.
As of
the date of this registration statement, Dragon Win Management, Ltd., a British
Virgin Islands company (“Dragon Win”) owns 52,099,000 shares of our common
stock, thereby representing approximately 68.57% of our issued and outstanding
common stock. The board of directors of Dragon Win has voting
and dispositive control of the Registrant’s common stock held by Dragon
Win. Due to the fact that Dragon Win owns a majority of our issued
and outstanding common stock, the board of directors of Dragon Win can thus
approve or reject all matters on which the Registrant needs approval by not less
than a majority of stockholders, including mergers, acquisitions, sales of
assets, amending the Registrant’s Certificate of Incorporation, electing the
Registrant’s Board of Directors, and appointing the Registrant’s officers. This
might make the Company less attractive for strategic partners or tender offers
which consequently might artificially suppress the value of the Registrant’s
common stock.
Our
Preferred Stock may be used to avoid a change in control of the
Registrant.
Our
Certificate of Incorporation authorizes the issuance of 25,000,000 shares of
preferred stock with designations, rights and preferences determined from time
to time by the Board of Directors. As of the date of this Form 10, there are no
shares of preferred stock outstanding. However, the Board of Directors is
empowered, without stockholder approval, to issue preferred stock with dividend,
liquidation, conversion, voting or other rights that could be used to avoid a
change of control of the Registrant and which could suppress the value of our
common stock.
We
may not be able to manage our growth effectively.
We
must continually implement and improve our products and/or services, operations,
operating procedures and quality controls on a timely basis, as well as expand,
train, motivate and manage our work force in order to accommodate anticipated
growth and compete effectively in our market segment. Successful implementation
of our strategy also requires that we establish and manage a competent,
dedicated work force and employ additional key employees in corporate
management, product design, client service and sales. We can give no assurance
that our personnel, systems, procedures and controls will be adequate to support
our existing and future operations. If we fail to implement and improve these
operations, there could be a material, adverse effect on our business, operating
results and financial condition.
Our
business is concentrated in Hong Kong and China, making our operations sensitive
to economic fluctuations.
All of
our offered products are marketed outside of the U.S., mostly in Hong Kong and
China. Should we be unable to further diversify our markets, we may be subject
to economic fluctuations within Hong Kong and China. If our business
does not succeed, an investor could lose all or part of his
investment.
If
we do not meet our expansion strategy, we may not achieve our anticipated
results.
Our
business strategy is designed to expand the sales of our products and services
internationally. Our ability to implement our plans will depend primarily on the
ability to attract new customers. To implement this strategy the Registrant in
March of 2009 retained the services of Aero Strategic Advisory, a division of
Aero Financial, a global consulting and financial services
firm, Based in Las Vegas, Nevada, Aero Strategic Advisory will assist
the Registrant in a number of capacities, including corporate communications,
handling of investor inquires, dissemination of news, business development and
other services. We can give you no assurance that any of our
expansion plans will be successful or that we will be able to establish
additional favorable relationships for the marketing and sales of products and
services. If we are unable to expand our business, our business operations could
be adversely affected.
A
dispute concerning the infringement or misappropriation of our proprietary
rights or the proprietary rights of others could be time consuming and costly,
and an unfavorable outcome could harm our business.
We may
be exposed to future litigation by third parties based on claims that our
programs infringe the intellectual property rights of others. If we become
involved in litigation, it could consume a substantial portion of our managerial
and financial resources, regardless of whether we win or lose. We may not be
able to afford the costs of litigation. Any legal action against us or our
collaborators could lead to:
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·
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payment
of damages, potentially treble damages, if we are found to have willfully
infringed a party’s patent rights;
|
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·
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injunctive
or other equitable relief that may effectively block our ability to
further develop, commercialize and sell products; or
|
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·
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we
or our collaborators having to enter into license arrangements that may
not be available on commercially acceptable terms, if at
all.
|
As a
result, we could be prevented from commercializing current or future
products.
We
have agreed to indemnify our officers and directors to fullest extent permitted
under Nevada law.
Our
Certificate of Incorporation contains a provision eliminating the personal
liability of officers and directors to the extent allowed under the law of the
State of Nevada. Under such provision, stockholder(s) may only prosecute an
action against an officer and/or a director if the stockholder(s) can show acts
or omissions which involve intentional misconduct, fraud or a knowing violation
of law or the unlawful payment of distributions.
We
may make acquisitions and strategic investments, which will involve numerous
risks. We may not be able to address these risks without substantial expense,
delay or other operational or financial problems.
Although
we have a limited history of making acquisitions or strategic investments, we
may acquire or make investments in related businesses or products in the future.
Acquisitions or investments involve various risks, such as:
|
·
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higher
than expected acquisition and integration
costs;
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·
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the
difficulty of integrating the operations and personnel of the acquired
business;
|
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·
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the
potential disruption of our ongoing business, including the diversion of
management time and
attention;
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·
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the
possible inability to obtain the desired financial and strategic benefits
from the acquisition or
investment;
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·
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assumption
of unanticipated liabilities;
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·
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incurrence
of substantial debt or dilutive issuances of securities to pay for
acquisitions;
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·
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impairment
in relationships with key suppliers and personnel of any acquired
businesses due to changes in management and
ownership;
|
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·
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the
loss of key employees of an acquired business;
and
|
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·
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the
possibility of our entering markets in which we have limited prior
experience.
|
Future
acquisitions and investments could also result in substantial cash expenditures,
potentially dilutive issuance of our equity securities, our incurring of
additional debt and contingent liabilities, and amortization expenses related to
other assets that could adversely affect our business, operating results and
financial condition.
We are subject
to SEC regulations relating to low-priced penny-stocks.
Our
Common Stock is currently traded on the OTC Pink Sheets under the ticker symbol
“EFTB.” As of the quarter ended December 31, 2008, there are
75,983,205 shares of common stock issued and outstanding. Our common stock has
recently been trading under $5.00 per share. The Securities and Exchange
Commission has adopted regulations concerning low-priced (or “penny”) stocks.
The regulations generally define “penny stock” to be any equity security that
has a market price less than $5.00 per share, subject to certain exceptions. Due
to the fact that our stock is trading under $5.00, our stock is currently
classified as a penny stock.
The
penny stock regulations require that broker-dealers, who recommend penny stocks
to persons other than institutional accredited investors make a special
suitability determination for the purchaser, receive the purchaser’s written
agreement to the transaction prior to the sale and provide the purchaser with
risk disclosure documents that identify risks associated with investing in penny
stocks. Furthermore, the broker-dealer must obtain a signed and dated
acknowledgment from the purchaser demonstrating that the purchaser has actually
received the required risk disclosure document before effecting a transaction in
penny stock. These requirements have historically resulted in reducing the level
of trading activity in securities that become subject to the penny stock
rules.
The
additional burdens imposed upon broker-dealers by these penny stock requirements
may discourage broker-dealers from effecting transactions in our common stock,
which could severely limit the market liquidity of our common stock and our
shareholders’ ability to sell our common stock in the secondary
market.
Penny
stocks may trade infrequently, which means that it may be difficult to sell
penny stock shares once you own them. Because it may be difficult to find
quotations for certain penny stocks, they may be impossible to accurately
price.
Investors in
penny stocks and in the common stock of the Registrant should be
prepared for the possibility that they may lose their whole
investment.
Our
stock price has been thinly traded but may become highly volatile in the
future.
Our
common stock trades on the OTC Pink Sheets and there has historically been a
very low volume of transactions. However, the market price of our
common stock may become highly volatile and be subject to wide fluctuations in
response to factors such as the following, some of which are beyond our
control:
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•
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Quarterly
variations in our operating results;
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•
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Operating
results that vary from the expectations of securities analysts and
investors;
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•
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Changes
in expectations as to our future financial performance, including
financial estimates by securities analysts and
investors;
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•
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Reaction
to our earnings releases and conference calls, or presentations by
executives at investor and industry conferences;
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•
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Changes
in our capital structure;
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•
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Changes
in market valuations of other internet or online service
companies;
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•
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Announcements
of innovations or new services by us or our
competitors;
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•
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Announcements
by us or our competitors of significant contracts, acquisitions, strategic
partnerships, joint ventures or capital
commitments;
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•
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Lack
of success in the expansion of our business
operations;
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•
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Announcements
by third parties of significant claims or proceedings against us or
adverse developments in pending proceedings;
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•
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Additions
or departures of key personnel;
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•
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Rumors
or public speculation about any of the above
factors; and
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•
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Market
and volume fluctuations in the stock markets in
general.
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These
market fluctuations may also materially and adversely affect the market price of
our Common Stock.
ITEM
2. FINANCIAL
INFORMATION.
SELECTED
FINANCIAL DATA (1)
|
|
For
the Fiscal Year Ended
March
31,
|
|
Item
|
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2008
(Unaudited)
|
|
|
2007
(Unaudited)
|
|
Net
Sales
|
|
$
|
30,249,302
|
|
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$
|
14,151,156
|
|
Income
(Loss) from Continuing Operations
|
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$
|
20,795,695
|
|
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$
|
10,063,293
|
|
Income
(Loss) from Continuing Operations per Common Share
|
|
$
|
0.34
|
|
|
$
|
0.17
|
|
Total
Assets
|
|
$
|
57,427,420
|
|
|
$
|
2,826,369
|
|
Long-Term
Obligations (2)
|
|
$
|
1,961,008
|
|
|
$
|
2,081,764
|
|
Capital
Leases
|
|
$
|
0
|
|
|
$
|
0
|
|
Redeemable
Preferred Stock
|
|
$
|
0
|
|
|
$
|
0
|
|
Cash
Dividends and Declared per Common Share
|
|
$
|
0
|
|
|
$
|
0
|
|
(1)
|
Our
auditors have not audited the contents of this Selected Financial Table.
|
(2)
|
Consists
of lease obligations for offices in Hong Kong and City of Industry,
California.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS
This
registration statement contains statements that we believe are, or may be
considered to be, “forward-looking statements”within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements other than
statements of historical fact included in this Report regarding the prospects of
our industry or our prospects, plans, financial position or business strategy,
may constitute forward-looking statements. In addition, forward-looking
statements generally can be identified by the use of forward-looking words such
as “may,” “will,” “expect,” “intend,” “estimate,” “foresee,” “project,”
“anticipate,” “believe,” “plans,” “forecasts,” “continue” or “could” or the
negatives of these terms or variations of them or similar terms. Furthermore,
such forward-looking statements may be included in various filings that we make
with the SEC or press releases or oral statements made by or with the approval
of one of our authorized executive officers. Although we believe that the
expectations reflected in these forward-looking statements are reasonable, we
cannot assure you that these expectations will prove to be correct. These
forward-looking statements are subject to certain known and unknown risks and
uncertainties, as well as assumptions that could cause actual results to differ
materially from those reflected in these forward-looking statements. Readers are
cautioned not to place undue reliance on any forward-looking statements
contained herein, which reflect management’s opinions only as of the date
hereof. Except as required by law, we undertake no obligation to revise or
publicly release the results of any revision to any forward-looking statements.
You are advised, however, to consult any additional disclosures we make in our
reports to the SEC. All subsequent written and oral forward-looking statements
attributable to us or persons acting on our behalf are expressly qualified in
their entirety by the cautionary statements contained in this registration
statement.
Industry
Trends
We
believe that the Business to Customer business is robust and that consumers have
become more confident in ordering products, like ours, over the
internet. However, the nutritional supplement and cosmetic e-business
markets have and continue to become increasingly competitive and are rapidly
evolving. Barriers to entry are minimal and current and new competitors can
launch new websites at a relatively low cost. Many competitors in this area have
greater financial, technical and marketing resources than our Company. Continued
advancement in technology and increasing access to that technology is paving the
way for growth in direct marketing. We also face competition for consumers from
retailers, duty-free retailers, specialty stores, department stores and
specialty and general merchandise catalogs, many of which have greater financial
and marketing resources than we have. Notwithstanding the foregoing, we believe
that we are well-positioned within the Asian consumer market with our current
plan of supplying American merchandise brands to consumers and that our exposure
to both the Asian and American cultures gives us a competitive
advantage. There can be no assurance that we will maintain our
competitive edge or that we will continue to provide only American made
merchandise.
However,
the global economy is currently undergoing a period of unprecedented volatility,
and the future economic environment may continue to be less favorable than that
of recent years. This has led, and could further lead, to reduced consumer
spending in the foreseeable future, and this may include spending on nutritional
and beauty products and other discretionary items, like our products. In
addition, reduced consumer spending may drive us and our competitors to decrease
prices. These conditions may adversely affect our revenues and
profits.
Our
long term plan is to use funds from the private placement and revenues earned
for investments and acquisitions to allow us to grow our existing business
operations and to enter into additional territories. To date, we have
not located any acquisition targets nor do we have any commitments for capital
expenditures, other than Excalibur. We believe that due to the
current global economic recession, there might be material opportunities for us
to acquire smaller companies at discount prices. There can be no
assurances however that we will be successful in doing so. Our
expansion will rely to a great degree on global economic conditions and
perceived future changes. Until such time, we intend to retain our
cash reserves to fund our operations.
RESULTS
OF OPERATIONS
The
Fiscal Year Ended March 31, 2008 Compared to the Fiscal Year Ended March 31,
2007
Assets.
At
March 31, 2008, we had $57,427,420 in total Assets at March 31 2008, compared to
$2,826,369 at March 31, 2007. This was primarily due to an increase
in cash and cash equivalents from $554,562 at March 31, 2007 to $15,165,620 at
March 31, 2008 following our Regulation S Private Placement conducted
beginning in January of 2008. See Item 10, “Recent Sales of Unregistered
Securities” herein. Our inventories also increased from $1,785,759 at March 31,
2007 to $2,619,429 at March 31, 2008 due to anticipated sales increases
. At March 31, 2008, our restricted cash increased to
$37,845,432 from $0 at March 31, 2007. Restricted cash consisted of
approximately $37 million of funds received during March of 2008 from investors
for the Regulation S Private Placement Offering and held in escrow until
closing.
Liabilities.
At
March 31, 2008, our Total Liabilities were $55,687,992, compared to $3,195,557
at March 31, 2007. Liabilities consist of Accounts Payable and
Accrued Expenses; Other Liabilities; Unearned Revenue; Deposits from Investors;
and Income Tax Payable. Accounts payable and accrued expenses
increased from $306,416 at March 31, 2007 to $804,041 at March 31, 2008
primarily due to due to increases in freight expenses incurred from increased
sales. Other liabilities consist of commissions (Affiliate rewards) payable,
payroll liabilities and other liabilities, and increased from $377,806 at March
31, 2007 to $12,787,714 at March 31, 2008 because of increased commissions
(Affiliate rewards) payable and payroll payable. Unearned revenue consists of
customer deposits for unshipped products, and increased from $2,511,335 at March
31, 2007 to $3,945,805 at March 31, 2008 due to increased orders. Deposits from
investors increased from $0 at March 31, 2007 to $37,845,432 at March 31, 2008
and increased due to our Regulation S Private Placement
Offering. Income tax payable increased from $0 at March 31, 2007 to
$305,000 at March 31, 2008 due to the recognition of accrued tax
payable.
Stockholders’
Equity (Deficit).
Our Stockholders’ Equity (Deficit) increased to
$1,739,428 at March 31, 2008 from $(369,188) at March 31,
2007. This increase was primarily due to an increase in
Retained Earnings from $(374,188) at March 31, 2007 to $1,895,330 at March 31,
2008.
Revenues
. Our
Revenues increased from $14,151,156 for the fiscal year ended March 31, 2007 to
$30,249,302 for the fiscal year ended March 31, 2008 because of increased sales
resulting from the Company offering several promotional programs. During the
fourth quarter of 2008, we increased our efforts to promote our advertising and
sales.
Shipping
Charges
. Shipping Charges increased from $5,693,620 for the
fiscal year ended March 31, 2007 to $10,110,360 for the fiscal year ended March
31, 2008 due to increased sales.
Costs of Goods
Sold.
Costs of Goods Sold increased from $5,745,218 for the
fiscal year ended March 31, 2007 to $11,423,852 for the fiscal year March 31,
2008. Costs of Goods Sold consist of merchandise purchases from
vendors and increased because of increased sales.
Shipping
Costs
. Shipping Costs increased from $2,356,338 for the fiscal
year ended March 31, 2007 to $4,467,140 for the fiscal year ended March 31,
2008. Shipping Costs consist of freight charges to our Hong Kong facility and
increased because of increased sales.
Gross
Profits
. Gross Profits increased from $11,743,220 for the fiscal year
ended March 31, 2007 to $24,468,670 for the fiscal year ended March 31,
2008. Gross Profits increased because of increased
sales.
Selling, General
and Administrative Expenses
. Selling, General and
Administrative Expenses increased from $1,690,293 for the fiscal year ended
March 31, 2007 to $3,693,369 for the fiscal year ended March 31, 2008. Selling,
General and Administrative Expenses consist of advertising and corporate
administrative expenses, and increased because of professional fees
incurred in connection with our Regulation S Private Placement
Offering.
Interest
Income
. Interest Income increased from $22,819 for the fiscal
year ended March 31, 2007 to $275,538 for the fiscal year ended March 31,
2008. Interest Income consists of bank deposit interest and increased
because of cash balance increases due to our Regulation S Private Placement
Offering.
Foreign Exchange
Loss
. Foreign Exchange Loss increased from $2,997 for the
fiscal year ended March 31, 2007 to $4,248 for the fiscal year ended March 31,
2008. Foreign Exchange Loss increased because of losses on foreign
exchange rates.
Other
Expense
(Net).
Other Expense (Net) increased from $(8,256) for the
fiscal year ended March 31, 2007 to $54,904 for the fiscal year ended March 31,
2008. Other Expense (Net) consists of fees paid for educational classes and
increased due to additional classes held.
Nine Months
Ended December 31, 2008 Compared to the Fiscal Year Ended March 31,
2008
At
December 31, 2008, we had $68,155,249 in total assets, compared to $57,427,420
at March 31, 2008. This was primarily due to an increase in cash and
cash equivalents from $15,165,620 to $39,364,100 at December 31, 2008 because of
our Regulation S Private Placement. Our inventories also increased from
$2,619,429 at March 31, 2008 to $4,492,864 at December 31, 2008 due to
anticipated sales increase. Our increase in investments was due
to an equity investment in Excalibur from $0 at March 31, 2008 to $19,193,000 at
December 31, 2008 and Notes Receivable of $0 at March 31, 2008 compared to
$4,067,000 at December 31, 2008 due to loans made to Excalibur and
Yeuh-Chi Liu. At March 31, 2008, we had $835,965 invested in mutual funds,
compared to $468,064 at December 31, 2008. Our prepaid expenses decreased to
$374,538 at December 31, 2008 from $793,760 at March 31, 2008.
Accounts
Payable decreased from $804,041 at March 31, 2008 to $630,000 at December 31,
2008 due to decreased in freight expenses. Other Liabilities consist of
commissions (Affiliate rewards) payable, payroll liabilities and other
liabilities, and decreased from $12,787,714 at March 31, 2008 to $4,002,716 at
December 31, 2008 because of a decrease in commissions (Affiliate
rewards)payable as a result of decreases in sales. Unearned Revenues
consist of customer deposits for unshipped products, and decreased from
$3,945,805 at March 31, 2008 to $2,545,785 at December 31, 2008 because of
decreased sales. Deposits from Investors consist of net proceeds from
our Regulation S Private Placement Offering of Units, and decreased from
$37,845,432 at March 31, 2008 to $0 at December 31, 2008 because of the
expiration of that offering. Income Tax Payables consist of Federal
Tax Provision, and increased from $305,000 at March 31, 2008 to $489,000 at
December 31, 2008 because of the recognition of accrued tax
payable.
Our
stockholders’ equity increased to $60,487,748 at December 31, 2008 from
$1,739,428 at March 31, 2008. This increase was primarily due
to an increase in retained earnings from $1,895,330 at March 31, 2008 to
$9,845,289 and proceeds from our Regulation S Private Placement of $51,149,412
at December 31, 2008.
Three
Months Ended December 31, 2008 Compared to the Three Months Ended December 31,
2007
Revenues
. Our
Revenues decreased from $8,893,165 for the three months ended December 31, 2007
to $3,573,484 for the three months ended December 31, 2008. Revenues
decreased because of natural disasters that occurred in China from extreme cold,
earth quakes, and monsoon and interruptions caused by delivery problems due to
the Beijing Olympics.
Shipping
Charges
. Shipping Charges decreased from $2,999,185 for the
three months ended December 31, 2007 to $705,210 for the three months ended
December 31, 2008. Shipping Charges decreased because of decreased
sales.
Costs of Goods
Sold.
Costs of Goods Sold decreased from $2,841,059 for the
three months ended December 31, 2007 to $771,142 for the three months ended
December 31, 2008. Costs of Goods Sold consist of merchandise
purchases and decreased because of decreased costs.
Shipping
Costs
. Shipping Costs decreased from $1,415,391 for the three
months ended December 31, 2007 to $87,960 for the three months ended December
31, 2008. Shipping Costs consist of freight charges to our Hong Kong facility
and decreased because of decreased sales.
Gross
Profits
. Gross Profits decreased from $7,635,900 for the three months
ended December 31, 2007 to $3,419,592 for the three months ended December 31,
2008. Gross Profits decreased because of decreased
sales.
Selling, General
and Administrative Expenses
. Selling, General and
Administrative Expenses decreased from $1,527,283 for the three months December
31, 2007 to $1,154,398 for the three months ended December 31, 2008. Selling,
General and Administrative Expenses consist of advertising and corporate
administrative expenses, and decreased in the three months ended December 31,
2008 from 2007 because of decreased professional expenses.
Interest
Income
. Interest Income increased from $61,236 for the three
months ended December 31, 2007 to $483,723 for the three months ended December
31, 2008. Interest Income consists of bank deposit interest and
increased because of cash balance increases due to our Regulation S Private
Placement.
Investment
Income
. Investment Income increased from $0 for the three
months ended December 31, 2007 to $4,337 for the three months ended December 31,
2008. Investment Income consists of investments in mutual funds and
increased because of a new account.
Foreign Exchange
Loss
. Foreign Exchange Loss increased from $1,317 for the
three months ended December 31, 2007 to $841,920 for the three months ended
December 31, 2008. Foreign Exchange Loss consists of loan repayment
and increased because of losses on foreign exchange rates.
Other
Income
. Other Income (Net) increased from $30,980 for the
three months ended December 31, 2007 to $304,952 for the three months ended
December 31, 2008. Other Income (Net) consists of fees paid for educational
classes and increased because of additional classes held. We offer
educational classes to our Affiliates for a nominal fee where they can learn
more about our products and how to use them.
Nine
Months Ended December 31, 2008 Compared to the Nine Months Ended December 31,
2007
Revenues
. Our
Revenues decreased from $22,984,940 for the nine months ended December 31, 2007
to $12,993,810 for the nine months ended December 31, 2008. Revenues
decreased because of natural disasters that occurred in China from extreme cold,
earth quakes, and monsoon and interruptions caused by delivery problems due to
the Beijing Olympics.
Shipping
Charges
. Shipping Charges decreased from $7,513,465 for the
nine months ended December 31, 2007 to $3,534,320 for the nine months
ended December 31, 2008. Shipping Charges decreased because of
decreased sales.
Costs of Goods
Sold
. Costs of Goods Sold decreased from $8,060,573 for the
nine months ended December 31, 2007 to $4,082,924 for the nine months ended
December 31, 2008. Costs of Goods Sold consist of merchandise costs
and decreased because of decreased sales.
Shipping
Costs
. Shipping Costs decreased from $3,545,473 for the nine
months ended December 31, 2007 to $1,553,401 for the nine months ended December
31, 2008. Shipping Costs consist of freight charges to our Hong Kong facility
and decreased because of decreased sales.
Gross
Profits
. Gross Profits decreased from $18,892,359 for the nine months
ended December 31, 2007 to $10,891,805 for the nine months ended December 31,
2008. Gross Profits decreased because of decreased
sales.
Selling, General
and Administrative Expenses
. Selling, General and
Administrative Expenses increased from $2,547,276 for the nine months December
31, 2007 to $3,484,314 for the nine months ended December 31, 2008. Selling,
General and Administrative Expenses consist of advertising and corporate
administrative expenses, and increased for the nine months ended December 31,
2007 to 2008 because of an increase in professional and payroll
expenses.
Interest
Income
. Interest Income increased from $83,416 for the nine
months ended December 31, 2007 to $1,255,843 for the nine months ended December
31, 2008. Interest Income consists of bank deposit interest and
increased because of cash balance increases due to our Regulation S Private
Placement.
Investment
Income
. Investment Income increased from $0 for the nine
months ended December 31, 2007 to $11,425 for the nine months ended December 31,
2008. Investment Income consists of investments in mutual funds and
increased because of a new account.
Foreign Exchange
Loss
. Foreign Exchange Loss increased from $1,438 for the nine
months ended December 31, 2007 to $841,565 for the nine months ended December
31, 2008. Foreign Exchange Loss consists of loan repayment and
increased because of losses on foreign exchange rates.
Other
Income
. Other Income (Net) increased from $124,035 for the
nine months ended December 31, 2007 to $304,812 for the nine months ended
December 31, 2008. Other Income (Net) consists of fees paid for educational
classes and increased because of additional classes held. We offer
educational classes to our Affiliates for a nominal fee where they can learn
more about our products and how to use them.
LIQUIDITY
AND CAPITAL RESOURCES
As
reflected in the accompanying consolidated financial statements, at December 31,
2008, the Registrant had $39,364,100 cash on hand, increased from $15,165,620 at
Mach 31, 2008, and a stockholders’ equity of $60,487,748 at December 31,
2008 compared to $1,739,428 at March 31, 2008. We believe we have enough capital
to fund our operations during the next 12 months. To date, we have
funded our operations primarily from sales to our Affiliates and through private
equity financings. While we believe in the viability of our strategy to improve
sales volume and in our ability to raise additional funds, there can be no
assurances to that effect.
At
December 31, 2008, we had $68,155,249 in total assets, compared to $57,427,420
at March 31, 2008. This was primarily due to an increase in cash and
cash equivalents from $15,165,620 to $39,364,100 at December 31, 2008 following
our Regulation S Private Placement. Our inventories also increased from
$2,619,429 at March 31, 2008 to $4,492,864 at December 31, 2008 due to
anticipated sales increase . Our increase in investments
was due to an equity investment in Excalibur from $0 at March 31, 2008 to
$19,193,000 at December 31, 2008 and related party Notes Receivable of $0 at
March 31, 2008 compared to $4,067,000 at December 31, 2008 was due to loans
made to Excalibur and Yeuh-Chi Liu. At March 31, 2008, we had $835,965
invested in mutual funds, compared to $468,064 at December 31, 2008. Our prepaid
expenses decreased to $374,538 at December 31, 2008 from $793,760 at March 31,
2008.
Accounts
Payable decreased from $804,041 at March 31, 2008 to $630,000 at December 31,
2008 due to decreases in freight expenses. Other Liabilities consist of
commissions (Affiliate rewards) payable, payroll liabilities and other
liabilities, and decreased from $12,787,714 at March 31, 2008 to $4,002,716 at
December 31, 2008 because of decreases in commissions (Affiliate rewards)
payable as a result of decreases in sales. Unearned Revenues consist
of customer deposits for unshipped products, and decreased from $3,945,805 at
March 31, 2008 to $2,545,785 at December 31, 2008 because of decreased
sales. Deposits from Investors consist of net proceeds from our
Regulation S Private Placement Offering of Units, and decreased from $37,845,432
at March 31, 2008 to $0 at December 31, 2008 because of the expiration of the
Offering. Income Tax Payables consist of Federal Tax Provision, and
increased from $305,000 at March 31, 2008 to $489,000 at December 31, 2008
because of recognition of accrued tax payable.
Our
stockholders’ equity increased to $60,487,748 at December 31, 2008 from
$1,739,428 at March 31, 2008. This increase was primarily due
to an increase in retained earnings from $1,895,330 at March 31, 2008 to
$9,845,289 and proceeds from our Regulation S Private Placement of $51,149,412
at December 31, 2008.
Our
products are sensitive to business and personal discretionary spending levels
and tend to decline or grow more slowly during economic downturns, including
downturns in any of our major markets. In the last nine months,
our sales were $12,993,810 for the nine months ended December 31, 2008 compared
to $22,984,940 for the nine months ended December 31, 2007 and our profits were
$10,891,805 for the nine months ended December 31, 2008 compared to $18,892,359
for the nine months ended December 31, 2007. We believe these decreases are due
to the current worldwide recession. The current worldwide recession
is expected to adversely affect our sales and liquidity for the foreseeable
future. Although we have mitigated decreases in sales by lowering our levels of
inventory to preserve cash on hand, we do not know when the recession will
subside and when consumer spending will increase from its current depressed
levels. Even if consumer spending increases, we are not sure when consumer
spending will increase for our products which will affect our
liquidity.
In
January of 2008, we commenced a private placement of Units
exclusively to non-U.S. residents at a purchase price of $3.80 per Unit under
the exemption from the registration requirements of the Securities Act of 1933,
as amended, afforded the Registrant under Regulation S thereunder due to the
fact that offers and sales were only made to non U.S. residents. The offering
was conducted on a best-efforts basis. The original offering was for
up to 10,000,000 Units but was oversubscribed and increased to
14,890,040 Units pursuant to the terms of the Private Placement
Memorandum. See Item 10, “Recent Sales of Unregistered Securities -
Regulation S Private Offering.”
Each
Unit consisted of one share of Common Stock and one Redeemable Common Stock
Purchase Warrant (a “Warrant”). Each Warrant is exercisable to
purchase one share of Common Stock at $3.80 per share until the second
anniversary date of the date of issuance. The Warrants are redeemable by the
Registrant, on a pro rata basis, at a purchase price of $0.0001 per share within
30 days from the tenth (10
th
) consecutive trading day that the Registrant’s common stock trades on
the OTCBB or any public securities market within the U.S. at a closing sales
price, or the average of the closing bid and asked price, of at least
$11.
Moneys
received from investors were held in an escrow account by Buckman, Buckman &
Reid, Inc., the placement agent, pending the payment of attorneys’
fees and placement agent fees and considered “restricted cash.” The
cash was released from escrow once such payments were made and following each of
five closings: two in July of 2008, two in August of 2008 and one in October of
2008. The cash was then available for lending or operating
purposes. The related Units were issued following each
closing. Until such release from escrow “restricted cash” was
accounted for as an asset and a liability. Following the release from escrow and
until the completion of the offering in October 2008 proceeds
received from the offering were considered “deposits from investors” and
accounted for as a liability in accordance with GAAP.
The private
placement ended on October 25, 2008 and the Registrant sold an aggregate of
14,890,040 Units for net proceeds of $51,149,412 consisting of a total of
14,890,040 shares of Common Stock and 14,890,040 Warrants. As of the
date hereof, none of the warrants have been exercised or
redeemed.
Excalibur
International Marine Corporation
Due to
the recent changes in policy between Mainland China and Taiwan, an opportunity
was recognized to take advantage of direct sailings for cargo and passengers
through the Taiwan Strait. EFT identified Excalibur International
Marina Corporation (“Excalibur”), a shipping company located in Taiwan, as a
viable entity to participate with in this business opportunity. In
order to expedite the purchase of a new vessel, EFT’s Board of Directors
approved a non-interest bearing, unsecured loan to facilitate this purchase. On
July 28, 2008, the Registrant loaned $19,193,000 to Excalibur. This
loan was repaid on November 14, 2008. At the time of the transaction, Excalibur
was not a related party.
On
September 23, 2008, the Registrant signed a loan agreement with Excalibur to
lend $2,000,000 at an interest rate of 3.75% per month with a term of no more
than 60 days.
On
October 20, 2008, EFT Investment Co., Ltd. was formed as a
wholly-owned subsidiary of EFT BioTech Holdings, Inc. EFT
Investment Co., Ltd was formed in Taiwan. On October 25, 2008, EFT Investment
Co., Ltd. completed the acquisition of 58,567,750 shares of common stock of
Excalibur; representing approximately 49% shares of issued and outstanding
shares of Excalibur, for an aggregate purchase price of USD $19,193,000. Prior
to the acquisition of Excalibur, Excalibur was not a related person under Item
404 of regulation S-K.
On
November 14, 2008, the term of the $2,000,000 loan to Excalibur, now a related
party, was extended for a period of 6 months.
On
November 25, 2008, the Registrant signed an additional loan agreement with
Excalibur, a related party, pursuant to which the Registrant loaned Excalibur
$500,000 at the interest rate of 3.75% per month with a term of 30 days with an
extension of 6 months. Currently this loan has been extended for an
additional 6 months.
Note
Receivable – Related party
On
July 25, 2008, the Board of Directors approved a non-interest bearing unsecured
demand loan in the amount of U.S. $1,567,000 to Yeuh-Chi Liu, a vendor and a
member of the board of directors of Excalibur. As of the date hereof
the full principal amount remains outstanding. See Item 7, “Certain
Relationships and Related Transactions, and Director Independence”
herein.
Off-Balance
Sheet Arrangements
The
Registrant does not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on the Registrant’s
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources that
is material to investors.
Quantitative
and Qualitative Disclosures about Market Risk
For
our fiscal year ended March 31, 2008, 100% of our total sales consisted of sales
outside of the United States, with less than 0% of total sales denominated in
currencies other than the United States dollar. In addition, from time to time
we execute intercompany loans with our foreign subsidiaries that are denominated
in foreign currencies.
We are
exposed to foreign currency risks that arise from normal business operations.
These risks include the translation of local currency balances of our Company
and foreign subsidiaries, intercompany loans with foreign subsidiaries and
transactions denominated in foreign currencies. It is our policy not to enter
into derivative financial instruments for speculative purposes. We do not hedge
our exposure to the translation of reported results of our foreign subsidiaries
from local currency to United States dollars. A 10% adverse change in the
underlying foreign currency exchange rates would not be significant to our
financial condition or results of operations.
Critical
Accounting Policies
The
Registrant’s financial statements are based on the selection and application of
significant accounting policies, which require management to make significant
estimates and assumptions. The Registrant believes that the following are some
of the more critical judgment areas in the application of the Registrant’s
accounting policies that currently affect the Registrant’s financial condition
and results of operations.
Cash
& Cash Equivalent
Cash
and cash equivalents include cash in hand and cash in time deposits,
certificates. The Company maintains its accounts in various banks and
several which exceed the federally insured limit.
Inventories
Inventories
are valued at the lower of cost or market. Product cost includes completed
merchandise and is accounted for using the first-in, first-out basis. The
Company has two warehouses, one in City of Industry, CA and the other one in
Kowloon, HK. On a quarterly basis, the Company reviews inventory levels in each
country for estimated obsolescence or unmarketable items, as compared to 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 estimates of the obsolete or
unmarketable items have been insignificant.
SFAS
No. 151, “Inventory Costs,” (“SFAS 151”) which clarifies that abnormal amounts
of idle facility expense, freight, handling costs, and wasted material
(spoilage) should be recognized as period charges, rather than as an inventory
value. This standard also requires the allocation of fixed production overheads
to inventory based on the normal capacity of the production facilities. The
Registrant’s existing accounting policy for inventory valuation is generally
consistent with this guidance, and therefore, the adoption of SFAS 151 did not
have a significant impact on The Registrant’s 2007 and 2008 financial
results.
Notes
Receivables from Related Parties
Notes
receivable consists of receivables from the Registrant’s loans to Excalibur,
Taiwan, and Yeun-Chi-Liu, each a related party . As of December 31, 2008,
outstanding loans to Excalibur totaled $ 2.5 million and to Yeuh-Chi
Liu 1.567 million. The Registrant periodically reviews notes receivables for
reliability and collectability, and recent account activities. If the
Registrant’s estimates regarding collectability are inaccurate or an
unforeseen matter is to occur, the Registrant may be exposed to a write-offs or
bad debts. As of December 31, 2008, the Registrant does not have an
allowance for bad debts.
Investment
The
Registrant accounts for equity investments in entities in which it exercises
significant influence but does not own a majority equity interest in or have
control using the equity method. The Registrant evaluates its equity investments
for impairment whenever events and changes in business circumstances indicate
the carrying amount of the equity investment may not be fully recoverable. On
October 25, 2008, the Registrant, through its wholly-owned subsidiary, EFT
Investment Co. Ltd., invested $19,193,000 in Excalibur International Marine
Corporation for 49% of its ownership. The Registrant recorded this
investment using the equity method because of its significant influence over the
entity.
Unearned
Revenues
Unearned
Revenues consist of cash amounts received in advance for goods and services to
be delivered at a future date. The Registrant records the cash from customers as
a liability until the products are delivered.
Revenue
The
Registrant receives payment by cash only for orders from customers or
Affiliates. Cash consideration given by the Registrant to its sales Affiliates
is considered to be a reduction of the selling prices of the Company’s products,
thus, is recorded as a reduction of revenue. Sales revenue are recorded when the
merchandise delivery is completed.
Foreign
Currency Translation
The
Company’s functional currency is the U.S. dollar and its operation in Hong Kong
uses Hong Kong dollar (HKD) as its functional currency. An entity’s
functional currency is the currency of the primary economic environment in which
the entity operates. Management must use judgment in determining an entity’s
functional currency, assessing economic factors including cash flow, sales
price, sales market, expense, financing and inter-company transactions and
arrangements. Impact from exchange rate changes related to transactions
denominated in currencies other than the functional currency is recorded as a
gain and loss in the statements of operations, while impact from exchange rate
changes related to translating a foreign entity’s financial statements from the
functional currency to its reporting currency, the U.S. dollar, is disclosed and
accumulated in a separate component under the equity section of the balance
sheets. Different judgments or assumptions resulting in a change of functional
currency may materially impact the Registrant’s financial position and results
of operations.
Income
Taxes
The
Registrant uses the asset and liability method of accounting for income taxes.
Under this method, income tax expense is recognized for the amount of taxes
payable or refundable for the current year. In addition, deferred tax assets and
liabilities are recognized for the expected future tax consequences of temporary
differences between the financial reporting and tax bases of assets and
liabilities and for operating losses and tax credit carry-forwards. Management
must make assumptions, judgments and estimates to determine the current
provision for income taxes and the deferred tax assets and liabilities and any
valuation allowance to be recorded against a deferred tax asset. Management’s
judgments, assumptions and estimates relative to the current provision for
income tax take into account current tax laws, management’s interpretation of
current tax laws and possible outcomes of current and future audits conducted by
foreign and domestic tax authorities. Changes in tax law or management’s
interpretation of tax laws and the resolution of current and future tax audits
could significantly impact the amounts provided for income taxes in the
financial statements. Management’s assumptions, judgments and estimates relative
to the value of a deferred tax asset take into account predictions of the amount
and category of future taxable income, such as income from operations. Actual
operating results and the underlying amount and category of income in future
years could render management’s current assumptions, judgments and estimates of
recoverable net deferred taxes inaccurate. Any of the assumptions, judgments and
estimates mentioned above could cause our actual income tax obligations to
differ from the estimates, thus materially impact the financial position and
results of operations.
RECENT
ACCOUNTING PRONOUNCEMENTS
In
March 2008, FASB issued FASB Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under
Statement 133; and how derivative instruments and related hedged items affect
its financial position, financial performance, and cash flows. Management is
currently evaluating the effect of this pronouncement on financial
statements .
On May
8, 2008, FASB issued Statement of Financial Accounting Standards (SFAS) No. 162,
The Hierarchy of Generally Accepted Accounting Principles, which will provide
framework for selecting accounting principles to be used in preparing financial
statements that are presented in conformity with U.S. generally accepted
accounting principles (GAAP) for nongovernmental entities. With the issuance of
SFAS No. 162, the GAAP hierarchy for nongovernmental entities will move from
auditing literature to accounting literature. The Registrant is currently
assessing the impact of SFAS No. 162 on its financial position and results of
operations.
In
December 2007, FASB issued SFAS No. 141 (revised 2007), “Business
Combinations”
(“SFAS 141R”). SFAS 141R establishes principles and requirements for
how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any non-controlling
interest in the acquiree and the goodwill acquired. SFAS 141R also
establishes disclosure requirements to enable the evaluation of the nature and
financial effects of the business combination. This statement is effective for
fiscal years beginning on or after December 15, 2008 and will be applied
prospectively. The Registrant is currently evaluating the potential impact of
the adoption of SFAS 141R on its consolidated financial position, results
of operations or cash flows.
In
December 2007, FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements—an amendment of Accounting Research Bulletin
No. 51”
(“SFAS 160”). SFAS 160 establishes accounting and reporting standards
for ownership interests in subsidiaries held by parties other than the parent,
the amount of consolidated net income attributable to the parent and to the
noncontrolling interest, changes in a parent’s ownership interest, and the
valuation of retained noncontrolling equity investments when a subsidiary is
deconsolidated. SFAS 160 also establishes disclosure requirements that
clearly identify and distinguish between the interests of the parent and the
interests of the noncontrolling owners. This statement is effective for fiscal
years beginning on or after December 15, 2008 and requires retroactive
adoption of the presentation and disclosure requirements for existing minority
interests. The Registrant is currently evaluating the potential impact of the
adoption of SFAS 160 on its consolidated financial position, results of
operations or cash flows.
ITEM
3. PROPERTIES.
The principal
executive office of our operating company, EFT Limited, consists of 6,500 square
feet located at Langham Office Tower, 8 Argyle Street, Suite 3706, Kowloon, Hong
Kong SAR which is leased from a third party. We lease this
property for five years for $50,000 per month expiring on March 31,
2012. There is no affiliation between any of our officers and directors
with the landlord for these premises.
We
also lease, through EFT, Inc., a 10,268 square foot facility center in the City
of Industry in California for $10,063 per month pursuant to a lease, dated
August 1, 2005, with Lee & Lee. This lease expires on July 31,
2009. There is no affiliation between any of our officers and directors
with the landlord for these premises.
We
believe our properties are sufficient for our current
operations.
ITEM
4. SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information regarding the beneficial ownership of
outstanding Common Stock as of the date of this Registration Statement by (i)
each of our directors and executive officers, (ii) all directors and executive
officers as a group, and (iii) each owner of more than 5% of our Common Stock
(5% owners). Except as set forth in the footnotes to this table, the business
address of each director and executive officer listed is c/o EFT BioTech
Holdings, Inc., 929 Radecki Ct., City of Industry,
CA 91789.
Name
of Beneficial Owners
|
|
Number
of Shares Beneficially Owned
|
|
|
Percent
of Shares Outstanding
|
|
|
|
|
(1
|
)
|
|
|
(2
|
)
|
Jack
Jie Qin
--President,
Chief Executive Officer and Chairman
(Principal
Executive Officer)
|
|
|
1,000
|
|
|
|
*
|
|
Sharon
Tang
--Chief
Financial Officer
(Principal
Financial Officer)
|
|
|
0
|
|
|
|
--
|
|
George
W. Curry
--Chief
Marketing Director
|
|
|
300,000
|
|
|
|
*
|
|
Dr.
Joseph B. Williams
--Former
Chief Administrative Officer and Director (3)
|
|
|
300,000
|
|
|
|
*
|
|
Tony
So
--Former
Treasurer (4)
|
|
|
300,000
|
|
|
|
*
|
|
Jun
Qin Liu
--Former
Operations Manager and Director (5)
|
|
|
300,000
|
|
|
|
*
|
|
Dragon
Win Management, Ltd. (6)
Palm
Grove Houses,
P.O.
Box 438
Road
Town, Tortola
British
Virgin Islands
|
|
|
52,099,000
|
|
|
|
68.57
|
%
|
Greenstone
Holdings, Inc. (7)
48
Wall Street, 11
th
Floor
New
York, NY 10005
|
|
|
4,000,000
|
|
|
|
5.26
|
%
|
All
Current and Former Officers and Directors as a group (4
persons)
|
|
|
1,201,000
|
|
|
|
1.58
|
%
|
*
Represents less than 1%.
(1)
|
As
used herein, the term beneficial ownership with respect to a security is
defined by Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, as consisting of sole or shared voting power (including the power
to vote or direct the vote) and/or sole or shared investment power
(including the power to dispose or direct the disposition of) with respect
to the security through any contract, arrangement, understanding,
relationship or otherwise, including a right to acquire such power(s)
during the next 60 days. Unless otherwise noted, beneficial ownership
consists of sole ownership, voting and investment
rights.
|
(2)
|
Based
on 75,983,205 shares of common stock issued and outstanding as of the date
of this registration statement.
|
(3)
|
Dr.
Williams served as our Chief Administrative Officer and Secretary from
June 2008 to February 6, 2009 and as a Director from November
2007 to February 6, 2009. Dr. Williams served as our Chief
Financial Officer (Principal Financial Officer) from February 2008 to June
2008. Before his employment with the Registrant, Mr. Williams
served as a consultant for the Registrant for seven months in the fiscal
year ended March 31, 2008.
|
(4)
|
Tony
So resigned from the Registrant in September 2008.
|
(5)
|
Ms.
Jin Qin Liu resigned from the Registrant on December 2,
2008.
|
(6)
|
On
or around November, 2007, the owner of Top Capital International Limited,
EFT International Limited, and EFT (HK) Limited (collectively, the
“Offshore Operating Entities”), reached an agreement in principle with the
Registrant to transfer, sell and assign, with exception of certain assets,
the entire business operations of these Offshore Operating Entities to EFT
Limited, in exchange for shares of common stock of the Registrant
following the share exchange between the Registrant and EFT BioTech, the
parent of EFT Limited.
In
consideration for the ownership transfer of the Offshore Operating
Entities, 52,099,000 shares of common stock were issued to Dragon Win
Management Limited, a British Virgin Islands company. The board
of directors of Dragon Win has voting and dispositive control of the
Registrant’s common stock held by Dragon Win. Ning-Sheng Cai
and Xiao-Bao Hu are currently the two directors of Dragon
Win.
|
(7)
|
Wallace
Gaikus and Peter Lau have voting and dispositive control of Greenstone
Holdings, Inc.
|
ITEM
5. DIRECTORS
AND EXECUTIVE OFFICERS
Set forth
below is information regarding the current directors and executive officers of
EFT BioTech Holdings, Inc. The directors are elected annually by stockholders.
The executive officers serve at the pleasure of the board of
directors.
Name:
|
Age:
|
Title:
|
Director
Since:
|
Jack
Jie Qin
|
47
|
President,
Chief Executive Officer and Chairman
(Principal
Executive Officer)
|
November
2007
|
Sharon
Tang
|
49
|
Chief
Financial Officer
(Principal
Financial and Accounting Officer)
|
--
|
George
W. Curry
|
62
|
Chief
Marketing Officer and Director
|
November
2007
|
Biographies
Jack
Jie Qin
Mr. Qin
has been serving as our President, Chief Executive Officer and Chairman of the
Board of Directors since November 2007. Since January 2004, Mr. Qin
has been serving as the President of EFT BioTech, Inc. From July 1998
to December 2002, Mr. Qin serviced as the President of eFastTeam International,
Inc. located in Los Angeles, California. From June 1992 to December
1997, he served as the President of LA Import & Export Company located in
Los Angeles, California. In May 1991, Mr. Qin earned an MBA from
Emporia State University located in Kansas. In May 1982, Mr. Qin
graduated from Jiangxi Engineering Institute located in Nanchang, China with a
major in Mechanic Engineering.
Sharon
Tang
Sharon
Tang has been serving as our Chief Financial Officer since June
2008. From April 2007 to June 2008, she served as the Chief Financial
Officer of Advanced Battery Technologies, Inc. (NASDAQCM: ABAT) located in
New York City. From May 2006 to April 2007, Ms. Tang served as a
Managing Director of First Federal Group of Companies, Inc. located in New York
City. From February 2006 to May 2006, she served as a Vice President of Crucible
Capital Group, Inc. located in New York City. From April 1998 to February 2006,
she served as a Financial Advisor at Smith Barney, Citigroup in New York City.
Ms. Tang’s professional experience also includes serving as an Associate
Engineer with The Research Institute of Petroleum Exploration and Development,
Ministry of Petroleum in Beijing, China from December 1983 to July 1986 and
Assistant Professor at the Peking Business College in Beijing, China from
January 1983 to December 1983. Ms. Tang holds a
MBA from Baruch College in New York City (June 2005),
Master of Science in Chemical Engineering from the University of Rochester in
New York, NY (1988) and a Bachelor of Science in Chemistry from Peking
University in Beijing, China (1982) Ms. Tang holds Series 7 and 63
licenses from FINRA.
George
W. Curry
Mr.
Curry has been serving as our Chief Marketing Officer and as a Director since
November 2007. From 1996 to October 2007, Mr. Curry served as a sales
representative of Mayor Pharmaceutical Labs, Inc. where he marketed products
directly to the public and recruited and trained additional sales
people. He also served as a motivational speaker at company training
seminars throughout the U.S. From 1992 to 1995, Mr. Curry owned
Continental Limited, an import export business focused on the clothing industry.
In 1968, Mr. Curry earned a Bachelor in Business Administration (BBA) from the
University of North Texas with a major in Marketing.
Legal/Disciplinary
History
None of
our executive officers or directors has been the subject of:
1.
|
A
conviction in a criminal proceeding or named as a defendant in a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
|
2.
|
The
entry of an order, judgment or decree, not subsequently reversed,
suspended or vacated, by a court of competent jurisdiction that
permanently or temporarily enjoined, barred, suspended or otherwise
limited such person’s involvement in any type of business, securities,
commodities, or banking activities;
|
3.
|
A
finding or judgment by a court of competent jurisdiction (in a civil
action), the Securities and Exchange Commission, the Commodity Futures
Trading Commission, or a state securities regulator of a violation of
federal or state securities or commodities law, which finding or judgment
has not been reversed, suspended, or vacated;
or
|
4.
|
The
entry of an order by a self-regulatory organization that permanently or
temporarily barred, suspended or otherwise limited such party’s
involvement in any type of business or securities
activities.
|
Family/Certain
Relationships
There
are no family relationships among or between any of the Registrant’s
officers and directors.
Employment
Agreements
We
currently do not have any employment agreements with any officer or director
other than with Ms. Sharon Tang.
Ms.
Sharon Tang serves as our Chief Financial Officer pursuant to an Employment
Agreement, dated May 1, 2008. The employment agreement commenced on
June 1, 2008 and expires on June 1, 2013, unless terminated earlier by either
party pursuant to the terms of the employment agreement. Ms.
Tang’s compensation is $120,000 per year payable in equal monthly installments
with 10% annual increases for each subsequent year. She is also
entitled to common stock of the Registrant as determined by the Registrant’s
board of directors.
ITEM
6. EXECUTIVE
COMPENSATION
The table
below summarizes the compensation we have paid our Named Executive Officers in
the last two fiscal years.
SUMMARY
COMPENSATION TABLE
Name
and
Principal
Position
|
Fiscal
Year Ended March 31,
|
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards
|
Non-Equity
Plan
Comp
|
Non-Equity
Incentive
Comp
|
Non-Qualified
Comp
Earnings
|
Other
Comp
|
Total
|
Jack
Jie Qin (President, CEO and Chairman)
(Principal
Executive Officer)
|
2008
|
$300,000(1)
|
$0
|
$1(2)
|
$0
|
$0
|
$0
|
$0
|
$0
|
$300,001
|
|
2007
|
$18,750
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$18,750
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Joseph B Williams
(Former
Chief Administrative Officer, Secretary and
Director)(3)(7)
|
2008
|
$100,000
|
$0
|
$300(4)
|
$0
|
$0
|
$0
|
$0
|
$0
|
$100,300
|
|
2007
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
George
Curry
Chief
Marketing Officer
|
2008
|
$0
|
$0
|
$300(4)
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
Jun
Qin Liu
(Former
Operations Manager and Director)(5)
|
|
|
|
|
|
|
|
|
|
|
2008
|
$100,000
|
$0
|
$300(4)
|
$0
|
$0
|
$0
|
$0
|
$0
|
$100,300
|
2007
|
$18,000
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$18,000
|
|
|
|
|
|
|
|
|
|
|
|
Tony
So
(Former
Treasurer) (6)(7)
|
2008
|
$100,000
|
$0
|
$300(4)
|
$0
|
$0
|
$0
|
$0
|
$0
|
$100,000
|
2007
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
$0
|
Notes:
(1)
|
Accrued
compensation
|
|
|
(2)
|
1,000
shares at $0.0018 per share. Share price is based on estimate fair market
price on the grant date on November 2008.
|
|
|
(3)
|
Dr.
Williams served as our Chief Administrative Officer and Secretary from
June 2008 to February 6, 2009 and as a Director from November
2007 to February 6, 2009. Dr. Williams served as our Chief
Financial Officer (Principal Financial Officer) from February 2008 to June
2008. Before his employment with the Registrant, Mr. Williams
served as a consultant for the Registrant for seven months in the fiscal
year ended March 31, 2008.
|
|
|
(4)
|
300,000
shares at $0.001 per share. Share price is based on estimated fair market
price on the grant date in November 2008.
|
|
|
(5)
|
Ms.
Liu resigned as the Registrant’s Operations Manager and a Director
effective December 2, 2008.
|
|
|
(6)
|
Tony
So resigned from the Registrant in September 2008.
|
|
|
(7)
|
From
June 1, 2007 to December 31, 2007, we retained Dr. Williams and Mr. So as
consultants at an annual salary of $120,000 each. As
of January 1, 2008, Dr. Williams and Mr. So became officers of the
Registrant at a monthly salary of $10,000 each. Mr. So resigned
in September of 2008 and Dr. Williams resigned in February of
2009.
|
Board
Committees
In
light of the current size of the Board of Directors, the Registrant’s Board of
Directors has not established a standing Audit Committee,
Compensation/Nominating Committee or any other committee but intends to do so in
the future. Currently, our Board serves as the Audit Committee and
Compensation/Nominating Committee and none of the directors are deemed to be
“independent.” The Registrant has not appointed separately
standing committees because the Registrant desires to keep overhead expenses to
a minimum.
Financial
Expert
The
Board has designated Ms. Sharon Tang as the Board’s “financial expert” as that
term is defined in Section 407 of The Sarbanes Oxley Act of
2002.
Director
Compensation
Directors
are reimbursed for their out-of-pocket expenses incurred in connection with
attending board meetings. In the fiscal year ended March 31, 2008, the
Registrant reimbursed the directors an aggregate of $5,000 for such
expenses.
Code
of Ethics
We
currently have a Code of Ethics for our directors and principal executive
officers. The Code of Ethics is filed as Exhibit 14.1 to this
Registration Statement and is incorporated by reference herein. We
also have a Code of Business Conduct which is filed as Exhibit 14.2 to this
Registration Statement and is incorporated by reference herein.
Options
To
date the Registrant has not issued any options to its executive officer,
directors or employees.
ITEM
7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
The
Registrant’s Code of Business Conducts states that the Registrant shall not,
directly or indirectly, including through any subsidiary, make or maintain any
new extension of credit or arrange for the extension of credit in the form of a
personal loan to or for any director or executive officer (or equivalent
thereof) of the Registrant. This prohibition includes corporate guarantees but
excludes loans under the Registrant’s 401(k) plan, if any, reimbursable travel
and similar expenses incurred while performing executive responsibilities,
reimbursable relocation expenses, use of company vehicles for business purposes,
and credit and charge cards used only in connection with business and limited
ancillary personal purposes (e.g., personal items included in hotel room
charges) settled within a reasonable time period (e.g.,
monthly).
Our
Board of Directors review and vote on all proposed transactions involving a
related person, including our officers and directors and any affiliates thereof
or their respective family members, if any. The interested director,
if any, does not vote on any such matter(s). In its
determination, the Board deliberates whether the proposed transaction is in the
best interests of the Registrant and its stockholders and whether the proposed
transaction is as fair and equitable as it would be with non-related party on an
“arm’s length basis.”
Loan
to Excalibur Marine Exploration
As of
the date hereof, a loan by the Registrant to Excalibur, a related party in the
amount of $2,500,000 remains outstanding. On October 25, 2008, EFT
Investment Co., Ltd. completed the acquisition of 58,567,750 shares of common
stock of Excalibur, representing approximately 49% shares of issued and
outstanding shares of Excalibur, for an aggregate purchase price of USD
$19,193,000. Prior to the acquisition of Excalibur, Excalibur was not a related
person under Item 404 of regulation S-K. For further
information about the terms of the loan see Item 2, “ Financial Information -
Excalibur International Marine Corporation.”
Note
Receivable
On
July 25, 2008, the Board of Directors approved a non-interest bearing, unsecured
demand loan in the amount of U.S. $1,567,000 to Yeuh-Chi Liu who is a vendor and
director on the board of Excalibur. As of the date hereof, the full
principal amount remains outstanding.
Director Independence
None of
our directors are deemed to be independent.
ITEM
8. LEGAL
PROCEEDINGS
We are
not a party to nor is any of our property the subject of any material pending
legal proceedings. We have not been threatened with or
have any knowledge of any potential claims or legal actions that would have a
material adverse impact on our financial position, operations or potential
performance. There are no material proceedings to which any director,
officer or affiliate of the Registrant or any of its subsidiaries, any owner of
record or beneficially of more than five percent of any class of voting
securities of the Registrant, or any associate of any such director, officer,
affiliate of the Registrant, or security holder is a party adverse to the
Registrant or has a material interest adverse to the
Registrant.
ITEM
9. MARKET PRICE OF AND DIVIDENDS
ON THE REGISTRANT’S COMMON EQUITY
AND
RELATED STOCKHOLDER MATTERS
Our
Common Stock
As of
the date of this Registration Statement, our common stock is listed for trading
on the Pink OTC Markets Inc. (the “Pink Sheets”) under the ticker symbol
“EFTB.” As of the date of this registration statement, there are
75,983,205 shares of common stock issued and outstanding, 7,703,165 (10.13%) of
the issued and outstanding shares of common stock) of which are held by
non-affiliates. . Our common stock has recently been trading under $5.00
per share. Stocks traded on the Pink Sheets are usually thinly traded, highly
volatile, and not followed by analysts. Investors in our common stock may
experience a loss or liquidity problem with their share
holdings.
Upon
the effectiveness of this registration statement on Form 10, Buckman, Buckman
& Reid, Inc., a registered broker/dealer, intends to file an application
with FINRA for authorization to act as a market maker of our common stock on the
OTC Bulletin Board. Buckman, Buckman & Reid, Inc. served as the
placement agent of our Units in the Regulation S Offering which commenced in
January of, 2008 and expired on October 25, 2008.
The
holders of the Registrant’s common stock are entitled to one vote per share. The
common stock holders do not have preemptive rights to purchase, subscribe for,
or otherwise acquire any shares of common stock.
The
ability of individual stockholders to trade their shares in a particular state
may be subject to various rules and regulations of that state. A number of
states require that an Registrant's securities be registered in their state or
appropriately exempted from registration before the securities are permitted to
trade in that state. Presently, the Registrant has no plans to
register its securities in any particular state.
The
Securities and Exchange Commission has adopted regulations concerning low-priced
(or “penny”) stocks. The regulations generally define “penny stock” to be any
equity security that has a market price less than $5.00 per share, subject to
certain exceptions. Due to the fact that our stock is trading under $5.00, our
stock is currently classified as a penny stock.
The
penny stock regulations require that broker-dealers, who recommend penny stocks
to persons other than institutional accredited investors make a special
suitability determination for the purchaser, receive the purchaser’s written
agreement to the transaction prior to the sale and provide the purchaser with
risk disclosure documents that identify risks associated with investing in penny
stocks. Furthermore, the broker-dealer must obtain a signed and dated
acknowledgment from the purchaser demonstrating that the purchaser has actually
received the required risk disclosure document before effecting a transaction in
penny stock. These requirements have historically resulted in reducing the level
of trading activity in securities that become subject to the penny stock
rules.
The
additional burdens imposed upon broker-dealers by these penny stock requirements
may discourage broker-dealers from effecting transactions in our common stock,
which could severely limit the market liquidity of our common stock and our
shareholders’ ability to sell our common stock in the secondary
market.
Penny
stocks may trade infrequently, which means that it may be difficult to sell
penny stock shares once you own them. Because it may be difficult to find
quotations for certain penny stocks, they may be impossible to accurately
price.
Investors in
penny stocks should be prepared for the possibility that they may lose their
whole investment.
The
Registrant’s fiscal year end is March 31
st
. The range of high
and low bid information for our common stock on the Pink Sheets for each
quarterly period within the two most recent fiscal years is set forth below.
Such quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not necessarily represent actual transactions. There was
no active trading market for our common stock during the period reflected
below:
Fiscal
Period
|
Low
Bid
|
High
Bid
|
|
|
|
2009
|
|
|
1st
Quarter as of April 9, 2009
|
$2.20
|
$2.50
|
|
|
|
2008
|
|
|
4
th
Quarter Ended March 31, 2009
|
$2.75
|
$2.75
|
3
rd
Quarter Ended December
31, 2008
|
$3.70
|
$3.80
|
2
nd
Quarter Ended September
30, 2008
|
$3.90
|
$3.95
|
1
st
Quarter Ended June 30,
2008
|
$5.25
|
$5.25
|
|
|
|
2007
|
|
|
4
th
Quarter Ended March 31,
2008
|
$5.45
|
$5.30
|
3
rd
Quarter Ended December
31, 2007
|
$4.15
|
$4.50
|
2
nd
Quarter Ended September
30, 2007
|
N/A
|
N/A
|
1
st
Quarter Ended June 30,
2007
|
N/A
|
N/A
|
Dividend
Policy
For the
fiscal year ended March 31, 2008 and 2007, approximately $18.5 million and $10.4
million in dividends were paid to the stockholders of EFT BioTech before the
merger.
We
currently intend to retain all future earnings for use in the operation and
expansion of our business and do not anticipate paying any cash dividends on
common stock in the foreseeable future. Any future dividends will be at the
discretion of the board of directors, after taking into account various factors,
including among others, operations, current and anticipated cash needs and
expansion plans, the income tax laws then in effect, the requirements of Nevada
law, and any restrictions that may be imposed by our future credit
arrangements.
Transfer
Agent
Our
transfer agent
Standard
Registrar and Transfer Company, Inc.
12528
South 1840 East
Draper,
UT 84020
Phone:
(801)
571-8844
Fax:
(801)
571-2551
Email: investors@amsrcorp.com
ITEM
10. RECENT SALES OF UNREGISTERED SECURITIES
On
November 18, 2007, the Registrant issued an aggregate of 53,300,000 shares of
its common stock in connection with a share exchange with EFT BioTech, Inc.
(“EFT BioTech”), a Nevada corporation formed on September 18, 2007, pursuant to
which EFT Holdings acquired 100% of the issued and outstanding shares of EFT
BioTech in consideration for 53,300,000 shares of the Registrant’s Common Stock,
representing 70.15% of the Registrant’s capital stock on a fully-diluted basis
on the recapitalization date. The Registrant issued the shares pursuant to
the exemptions from the registration requirements of the Securities Act of 1933,
as amended, afforded the Registrant under Section 4(2) promulgated thereunder
due to the fact that such issuances did not involve a public offering of
securities.
Below
is a list of the investors who received shares of EFT BioTech Holdings, Inc. in
the share exchange:
Stockholder:
|
|
No.
of EFT BioTech
Holdings,
Inc. Shares
Received
in Share
Exchange:
|
|
Dragon
Win Management Limited, a BVI company (1)
|
|
|
52,099,000
|
|
George
Curry (2)
|
|
|
300,000
|
|
Jun
Qin Liu (3)
|
|
|
300,000
|
|
Jack
Jie Qin (4)
|
|
|
1,000
|
|
Tony
So (5)
|
|
|
300,000
|
|
Joseph
B. Williams (6)
|
|
|
300,000
|
|
Total
|
|
|
53,300,000
|
|
|
(1)
|
See
Item 4, “Security Ownership of Certain Beneficial Owners and Management”
herein.
|
|
|
|
|
(2)
|
Chief
Marketing Officer of the Registrant.
|
|
|
|
|
(3)
|
Former
Operations Manager and Director of the Registrant.
|
|
|
|
|
(4)
|
President,
Chief Executive Officer and Chairman of the
Registrant.
|
|
|
|
|
(5)
|
Former
Treasurer of the Registrant.
|
|
|
|
|
(6)
|
Former Chief
Administrative Officer, Secretary and Director of the
Registrant.
|
In
November 2007, the Registrant sold an aggregate of 7,550,000 shares of the
Registrant for $0.0018 per share. The Registrant issued these shares
pursuant to the exemptions from the registration requirements of the Securities
Act of 1933, as amended, afforded the Registrant under Section 4(2) promulgated
thereunder due to the fact that such issuances did not involve a public offering
of securities.
Below
is a table which set forth the stock issuances of 7,550,000 shares of
common stock to the following accredited investors:
Holder:
|
Number
of Shares:
|
Consideration:
|
Greenstone
Holdings, Inc.(1)
40
Wall Street, 11
th
Floor
New
York, NY 10005
|
4,000,000
|
$7,200.00
|
Pierstone
Group, LLC
40
Park Avenue, #19B
New
York, NY 10016
|
1,000,000
|
$1,800.00
|
Brown
Door, Inc.
4
Tall Oaks Court
Farmingdale,
NJ 07727
|
1,000,000
|
$1,800.00
|
Robert
McGuire
|
312,000
|
$561.60
|
Ming
Jie Huo
|
337,000
|
$606.60
|
Single
Digit, LLC
321
Libourel Road
South
Plainfield, NJ 07727
|
551,000
|
$991.80
|
John
Heumoeller
|
350,000
|
$630.00
|
Total
|
7,550,000
|
$13,590.00
|
(1) See Item 4, “Security Ownership
of Certain Beneficial Owners and Management” herein .
The
Registrant used the proceeds of this sale for working capital
purposes.
Regulation
S Private Offering
In
January of 2008, we commenced a private placement of Units
exclusively to non-U.S. residents at a purchase price of $3.80 per Unit under
the exemption from the registration requirements of the Securities Act of 1933,
as amended, afforded the Registrant under Regulation S thereunder due to the
fact that offers and sales were only made to non U.S. residents. The offering
was conducted on a best-efforts basis and the placement agent was Buckman,
Buckman & Reid, Inc., a registered broker/dealer (“Buckman”). The original
offering was for up to 10,000,000 Units but was oversubscribed and increased by
Buckman pursuant to the terms of the related Private Placement
Memorandum.
Each
Unit consisted of one share of Common Stock and one Redeemable Common Stock
Purchase Warrant (the “Warrant”). Each Warrant is exercisable to
purchase one share of Common Stock at $3.80 per share until the second
anniversary date of the date of issuance. The Warrants are redeemable by the
Registrant, on a pro rata basis, at a purchase price of $0.0001 per share within
30 days from the tenth (10
th
) consecutive trading day that the closing sales price for the
Registrant’s common stock, or the average of the closing bid and asked price, on
the OTCBB or any public securities market within the U.S., is at least
$11.
Moneys
received from investors were held in an escrow account by Buckman, pending the
payment of attorneys’ fees and placement agent fees and considered
“restricted cash.” The cash was released from escrow once such
payments were made and following each of five closings: two in July of 2008, two
in August of 2008 and one in October of 2008. The cash was then
available for lending or operating purposes. The related Units were
issued following each closing.
The private placement
ended on October 25, 2008 and the Registrant sold an aggregate of 14,890,040
Units for net proceeds of $51,149,412 consisting of a total of 14,890,040 shares
of Common Stock and 14,890,040 Warrants. As of the date hereof, none of the
warrants have been exercised or redeemed.
The table
below sets forth management’s used and currently planned allocation of the net
proceeds of the offering.
Proceeds
from Sale of Units
|
Category:
|
Amount
(USD$):
|
Percentage
of Net Proceeds:
|
Acquisition
of 49% interest of Excalibur (1)
|
$19,193,000
|
38%
|
Loan
to Excalibur International Marine Corporation (1)
|
2,500,000
|
4%
|
Loan
to Yeuh-Chi Liu (2)
|
1,567,000
|
3%
|
Marketing
Development (3)
|
20,000,000
|
39%
|
Business
Development (3)(4)
|
7,889,412
|
16%
|
TOTAL
|
$51,149,412
|
100%
|
(1)
|
On
October 25, 2008, EFT Investment Co., Ltd. completed the acquisition of
58,567,750 shares of common stock of Excalibur; representing approximately
49% shares of issued and outstanding shares of Excalibur, for an aggregate
purchase price of USD $19,193,000. See Item 2, “ Financial
Information - Excalibur International Marine
Corporation..”
|
(2)
|
See
Item 7, “Certain Relationships and Related Transactions, and
Director Independence”
herein
|
(3)
|
Currently
planned. This amount includes the loan
of $19,193,000 loan made to Excalibur in July of 2008 and
repaid in November of 2008. . See Item 2, “ Financial
Information - Excalibur International Marine
Corporation..” Currently, this allocation of these net proceeds
of the private placement represents our best estimate based upon our
present plans and certain assumptions regarding general economic and
industry conditions and our future revenues and expenditures. We reserve
the right to reallocate these proceeds within the above-mentioned
categories or to other purposes if management believes it is in our best
interests.
|
(4)
|
We
anticipate using up to 16% of the net proceeds the private placement for
investments and acquisitions to allow us to grow our existing business
operations and to enter into additional territories. To date,
we have not located any acquisition targets nor do we have any commitments
for capital expenditures, other than Excalibur. We believe that
due to the current global economic recession, there might be material
opportunities for us to acquire smaller companies at discount
prices. There can be no assurances that we will be successful
in doing so. Our expansion will rely to a great degree on
global economic conditions and perceived future changes. Until
such time, we intend to retain our cash reserves to fund our
operations.
|
Other
Issuances
On
April 8, 2008, the Registrant issued 66,667 shares of common stock to John
Heumoeller, an accredited investor, upon the conversion of 75 shares of
preferred stock. The Registrant has issued these securities pursuant
to the exemptions from the registration requirements of the Securities Act of
1933, as amended, afforded the Registrant under Section 4(2) promulgated
thereunder due to the fact that such issuances did not involve a public offering
of securities.
From
time to time, the Registrant has issued 172,448 shares of common stock to
individuals who are accredited investors in consideration for
services rendered. The Registrant has issued these securities
pursuant to the exemptions from the registration requirements of the Securities
Act of 1933, as amended, afforded the Registrant under Section 4(2) promulgated
thereunder due to the fact that such issuances did not involve a public offering
of securities.
ITEM
11. DESCRIPTION OF REGISTRANT’S SECURITIES TO BE REGISTERED
The
following description of certain matters relating to our securities does not
purport to be complete and is subject in all respects to applicable Nevada law
and to the provisions of our certificate of incorporation (“Certificate of
Incorporation”) and By-laws (the “By-Laws”).
Common
Stock
The
Registrant is authorized to issue 4,975,000,000 shares of Common Stock, $0.00001
par value. As of December 31, 2008, there were 75,983,205 shares of
Common Stock outstanding. Each share of the Registrant’s Common Stock is
entitled to one vote at all meetings of our stockholders. The Registrant’s
stockholders are not permitted to cumulate votes in the election of directors.
All shares of the Registrant’s Common Stock are equal to each other with respect
to liquidation rights and dividend rights. There are no preemptive rights to
purchase any additional shares of the Registrant’s Common Stock. In the event of
the Registrant’s liquidation, dissolution or winding up, holders of its Common
Stock will be entitled to receive, on a pro rata basis, all of our assets
remaining after satisfaction of all liabilities and preferences of outstanding
preferred stock, if any. Neither the Certificate of Incorporation nor the
By-Laws of the Registrant contain any provisions which limit or restrict the
ability of another person to take over our company.
As of
the date of this Registration Statement, there are 75,983,205 shares of common
stock issued and outstanding, 7,703,165 (10.13%) of which are held by
non-affiliates.
Preferred
Stock
The
Registrant is also authorized to issue 25,000,000 shares of preferred stock,
$0.001 par value, none of which are outstanding.
The Board
of Directors is empowered, without stockholder approval, to issue preferred
stock with dividend, liquidation, conversion, voting or other rights which could
adversely affect the voting power or other rights of the holders of the
Registrant’s Common Stock.
ITEM
12.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The
Registrant’s Certificate of Incorporation provides that it is required to
indemnify an officer, director, or former officer or director, to the full
extent permitted by Section 78.7502 of the Nevada Revised Statutes 2005,
provided that the person acted in good faith and in a manner reasonably believed
to be in and not opposed to the best interests of the company. The Registrant
has been advised that, in the opinion of the SEC, indemnification for
liabilities arising under the Securities Act is against public policy as
expressed in the Securities Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities is asserted by one of
our directors, officers, or controlling persons in connection with the
securities being registered, we will, unless in the opinion of our legal
counsel, submit the question of whether such indemnification is against public
policy to a court of appropriate jurisdiction.
ITEM
13.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
EFT
BIOTECH HOLDINGS, INC.
CONSOLIDATED
FINANCIAL STATEMENTS
MARCH
31, 2008 AND 2007
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS
|
Page(s)
|
AUDITED
FINANCIAL STATEMENTS FOR THE
FISCAL YEAR ENDED MARCH 31, 2008
|
|
|
|
Audited
Consolidated Financial Statements
|
F-1
|
|
|
Audit
Report, dated October 20, 2008, of Child, Van Wagoner& Bradshaw,
PLLC
|
F-2
|
|
|
Consolidated
Balance Sheets
|
F-3
|
|
|
Consolidated
Statements of Operations and Other Comprehensive
Income
|
F-4
|
|
|
Consolidated
Statements of Changes in Stockholders’ Equity
|
F-5
|
|
|
Consolidated
Statements of Cash Flows
|
F-6
|
|
|
Notes
to Consolidated Financial Statements
|
F-7 - F-16
|
|
|
UNAUDITED
FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED DECEMBER 31,
2008
|
F-17
|
|
|
Consolidated
Balance Sheets
|
F-18
|
|
|
Consolidated
Statements of Operations and Other Comprehensive
Income
|
F-19
|
|
|
Consolidated
Statements of Changes in Stockholders’ Equity
|
F-20
|
|
|
Consolidated
Statements of Cash Flows
|
F-21
|
|
|
Notes
to Consolidated Financial Statements
|
F-22 - F-31
|
Douglas
W. Child, CPA
Marty D.
Van Wagoner, CPA
J. Russ
Bradshaw, CPA
William
R. Denney, CPA
Roger B.
Kennard, CPA
Russell
E. Anderson, CPA
Scott L.
Farnes
Report of
Independent Registered Public Accounting Firm
To the
Board of Directors and Audit Committee
EFT
BioTech Holdings, Inc.
City of
Industry, California
We
have audited the consolidated balance sheets of EFT BioTech Holdings, Inc. (the
Company) as of March 31, 2008 and 2007, and the related consolidated statements
of operations and other comprehensive income, stockholders’ equity and cash
flows for the years ended March 31, 2008 and 2007. These consolidated
financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement. The company is not required to have, nor were we
engaged to perform, an audit of its internal control over financial
reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An
audit also includes examining, on a test basis, evidence supporting the amounts
and disclosures in the consolidated financial statements, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of EFT BioTech
Holdings, Inc. as of March 31, 2008 and 2007, and the consolidated results of
its operations and its cash flows for the years ended March 31, 2008 and 2007,
in conformity with accounting principles generally accepted in the United States
of America.
/s/
Child, Van Wagoner & Bradshaw, PLLC
Child,
Van Wagoner & Bradshaw, PLLC
Salt Lake
City, Utah
October
20, 2008
1284
W. Flint Meadow Dr. #D
|
|
Kaysville,
Utah 84037
|
|
Telephone
801.927.1337
|
|
Facsimile
801.927.1344
|
|
|
|
5296
S. Commerce Dr. #300
|
|
Salt
Lake City, Utah 84107
|
|
Telephone
801.281.4700
|
|
Facsimile
801.281.4701
|
|
|
|
Suite
B, 4F
|
|
North
Cape Commercial Bldg.
|
|
388
King’s Road
|
|
North
Point, Hong Kong
|
|
EFT
BIOTECH HOLDINGS, INC.
Consolidated
Balance Sheets
|
|
As
of March 31,
|
|
|
|
2008
|
|
|
2007
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
15,165,620
|
|
|
$
|
554,562
|
|
Inventories
|
|
|
2,619,429
|
|
|
|
1,785,759
|
|
Available
for sale securities
|
|
|
835,965
|
|
|
|
-
|
|
Prepaid
expenses
|
|
|
793,760
|
|
|
|
382,200
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
19,414,774
|
|
|
|
2,722,521
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
140,106
|
|
|
|
76,740
|
|
Restricted
cash
|
|
|
37,845,432
|
|
|
|
-
|
|
Security
deposit
|
|
|
27,108
|
|
|
|
27,108
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
57,427,420
|
|
|
$
|
2,826,369
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
$
|
804,041
|
|
|
$
|
306,416
|
|
Other
liabilities
|
|
|
12,787,714
|
|
|
|
377,806
|
|
Unearned
revenues
|
|
|
3,945,805
|
|
|
|
2,511,335
|
|
Deposits
from investors
|
|
|
37,845,432
|
|
|
|
-
|
|
Income
tax payable
|
|
|
305,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
55,687,992
|
|
|
|
3,195,557
|
|
|
|
|
|
|
|
|
|
|
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 authorized,
|
|
|
|
|
|
|
|
|
61,022,414
and 52,099,000 shares issued and outstanding
|
|
|
|
|
|
|
|
|
at
March 31, 2008 and 2007
|
|
|
610
|
|
|
|
521
|
|
Additional
paid in capital
|
|
|
6,552
|
|
|
|
4,479
|
|
Retained
earnings (deficit)
|
|
|
1,895,330
|
|
|
|
(374,188
|
)
|
Accumulated
other comprehensive loss
|
|
|
(163,064
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders' equity (deficit)
|
|
|
1,739,428
|
|
|
|
(369,188
|
)
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity (deficit)
|
|
$
|
57,427,420
|
|
|
$
|
2,826,369
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
EFT
BIOTECH HOLDINGS, INC.
Consolidated
Statements of Operations and Other Comprehensive Income
|
|
Year
Ended
|
|
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
|
|
|
|
|
|
|
Sales
revenues, net
|
|
$
|
30,249,302
|
|
|
$
|
14,151,156
|
|
Shipping
charge
|
|
|
10,110,360
|
|
|
|
5,693,620
|
|
|
|
|
40,359,662
|
|
|
|
19,844,776
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
11,423,852
|
|
|
|
5,745,218
|
|
Shipping
cost
|
|
|
4,467,140
|
|
|
|
2,356,338
|
|
|
|
|
15,890,992
|
|
|
|
8,101,556
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
24,468,670
|
|
|
|
11,743,220
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
3,693,369
|
|
|
|
1,690,293
|
|
|
|
|
|
|
|
|
|
|
Net
operating income
|
|
|
20,775,301
|
|
|
|
10,052,927
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
275,538
|
|
|
|
22,819
|
|
Foreign
exchange loss
|
|
|
(4,248
|
)
|
|
|
(2,997
|
)
|
Other
expense, net
|
|
|
54,904
|
|
|
|
(8,256
|
)
|
|
|
|
|
|
|
|
|
|
Total
other income
|
|
|
326,194
|
|
|
|
11,566
|
|
|
|
|
|
|
|
|
|
|
Net
income before income taxes
|
|
|
21,101,495
|
|
|
|
10,064,493
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
305,800
|
|
|
|
1,200
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
20,795,695
|
|
|
$
|
10,063,293
|
|
|
|
|
|
|
|
|
|
|
Unrealized
loss on available for sale securities
|
|
|
(163,064
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
$
|
20,632,631
|
|
|
$
|
10,063,293
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
0.37
|
|
|
$
|
0.19
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
55,350,545
|
|
|
|
52,099,000
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
EFT
BIOTECH HOLDINGS, INC.
Consolidated
Statements of Changes in Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Common
Stock
|
|
|
Paid-in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income
(Loss)
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
APRIL 1, 2006
|
|
|
52,099,000
|
|
|
$
|
521
|
|
|
$
|
4,479
|
|
|
$
|
1,563
|
|
|
$
|
-
|
|
|
$
|
6,563
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,063,293
|
|
|
|
-
|
|
|
|
10,063,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
paid
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,439,044
|
)
|
|
|
-
|
|
|
|
(10,439,044
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
MARCH 31, 2007
|
|
|
52,099,000
|
|
|
|
521
|
|
|
|
4,479
|
|
|
|
(374,188
|
)
|
|
|
-
|
|
|
|
(369,188
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for services
|
|
|
1,201,000
|
|
|
|
12
|
|
|
|
2,150
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
effectively issued to former shareholders as part of the
recapitalization
|
|
|
7,722,414
|
|
|
|
77
|
|
|
|
(77
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
20,795,695
|
|
|
|
-
|
|
|
|
20,795,695
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividend
paid
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(18,526,177
|
)
|
|
|
-
|
|
|
|
(18,526,177
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
loss on available for sale securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(163,064
|
)
|
|
|
(163,064
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE,
MARCH 31, 2008
|
|
|
61,022,414
|
|
|
$
|
610
|
|
|
$
|
6,552
|
|
|
$
|
1,895,330
|
|
|
$
|
(163,064
|
)
|
|
$
|
1,739,428
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
EFT
BIOTECH HOLDINGS, INC.
Consolidated
Statements of Cash Flows
|
|
Year
Ended
|
|
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$
|
20,795,695
|
|
|
$
|
10,063,293
|
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
38,340
|
|
|
|
22,192
|
|
Warranty
liability
|
|
|
36,912
|
|
|
|
48,696
|
|
Stock
based compensation
|
|
|
2,162
|
|
|
|
-
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
(833,670
|
)
|
|
|
(1,785,759
|
)
|
Prepaid
expenses
|
|
|
(411,560
|
)
|
|
|
(312,120
|
)
|
Accounts
payable and accrued liabilities
|
|
|
497,625
|
|
|
|
306,416
|
|
Other
liabilities
|
|
|
12,372,996
|
|
|
|
318,080
|
|
Unearned
revenues
|
|
|
1,434,470
|
|
|
|
1,330,620
|
|
Income
tax payable
|
|
|
305,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by operating activities
|
|
|
34,237,970
|
|
|
|
9,991,418
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Additions
to fixed assets
|
|
|
(101,706
|
)
|
|
|
(3,930
|
)
|
Purchase
of available for sale securities
|
|
|
(999,029
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
cash (used in) investing activities
|
|
|
(1,100,735
|
)
|
|
|
(3,930
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
(37,845,432
|
)
|
|
|
-
|
|
Proceeds
from investor deposits
|
|
|
37,845,432
|
|
|
|
-
|
|
Payment
of dividends
|
|
|
(18,526,177
|
)
|
|
|
(10,439,044
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) financing activities
|
|
|
(18,526,177
|
)
|
|
|
(10,439,044
|
)
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
14,611,058
|
|
|
|
(451,556
|
)
|
|
|
|
|
|
|
|
|
|
Cash,
beginning of period
|
|
|
554,562
|
|
|
|
1,006,118
|
|
|
|
|
|
|
|
|
|
|
Cash,
end of period
|
|
$
|
15,165,620
|
|
|
$
|
554,562
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Interest
paid in cash
|
|
$
|
-
|
|
|
$
|
-
|
|
Income
taxes paid in cash
|
|
$
|
800
|
|
|
$
|
1,200
|
|
|
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Unrealized
loss on available for sale securities
|
|
$
|
163,064
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008
Note
1 -
ORGANIZATION
EFT
Biotech Holdings, Inc. (“EFT Holdings” or “the Company”), formerly HumWare Media
Corporation, GRG, Inc., Ghiglieri Corporation, Karat Productions, Inc., was
incorporated in the State of Nevada on March 19, 1992.
On
November 18, 2007, the Company issued an aggregate of 53,300,000 shares of its
common stock in connection with a share exchange with the stockholders of EFT
BioTech, Inc. (“EFT BioTech”), a Nevada Corporation formed on September 18, 2007
(the “Transaction”), pursuant to which EFT BioTech became a wholly-owned
subsidiary of the Company. The 53,300,000 common shares issued included
52,099,000 to pre-capitalization shareholders and 1,201,000 to four directors
and officers of EFT BioTech, and represented approximately 87.34% of the
Company’s common stock outstanding after the Transaction. Consequently, the
stockholders of EFT BioTech, Inc. own a majority of the Company's common stock
immediately following the Transaction, therefore, the Transaction is being
accounted for as a "reverse acquisition", and EFT BioTech is deemed to be the
accounting acquirer in the reverse acquisition. As EFT Holdings was a
non-operating public shell corporation
that acquired an operating
company, this Transaction is treated as a capital transaction where the
acquiring corporation issued stock for the net monetary assets of the shell
corporation, accompanied by a recapitalization. The accounting is similar in
form to a reverse acquisition, except that goodwill or other intangibles are not
recorded. All references to EFT BioTech common stock have been
restated to reflect the equivalent numbers of EFT Holdings common
shares.
At its
formation on September 18, 2007, EFT BioTech acquired EFT Limited, a British
Virgin Islands company (“BVI”) formed on August 22, 2007, pursuant to which EFT
Limited (BVI) became a wholly-owned subsidiary of EFT BioTech. Since
both EFT BioTech and EFT Limited (BVI) were under the common control, this
acquisition represents a reorganization of entities under common
control.
EFT
Limited (BVI) has four wholly-owned subsidiaries: EFT, Inc., a California
company formed on January 1, 2003, Top Capital, Ltd. (BVI), a BVI company formed
on May 22, 2002, EFT (HK), Ltd., a Hong Kong (“HK”) company formed on November
1, 2006 and EFT International Ltd. (BVI), a BVI company formed on April 20,
2005, which it acquired all on November 14, 2007. As EFT Limited
(BVI) and the four companies being acquired were under the common control, this
acquisition also represents a reorganization of entities under common control.
Top Capital, Ltd. (BVI) is the operating company that generates substantially
all of the Company’s net income.
These
reorganizations of entities under common control resulted in changes in the
legal organization of these predecessors to EFT BioTech but did not result in
changes in the reporting entity.
The
Company, through its subsidiaries, is engaged in the E-Business designed around
the concept of Business-to-customer using the World Wide Web as its “storefront”
and business platform to market, sell and distribute 48 American brand products
consisting of 26 nutritional products, 18 personal care products, 2 automotive
fuel additives, 1 home product and a portable drinking
container.
Note
2 -
SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Basis of
Presentation
The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America.
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008
Principles of
Consolidation
The
consolidated financial statements include the accounts of the Company and its
wholly-owned 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 operation in Hong
Kong uses Hong Kong dollar (HKD) as its functional currency. The financial
statements of the subsidiary are translated into U.S. Dollars (USD) in
accordance with Statement of Financial Accounts Standards (SFAS) No. 52, Foreign
Currency Translation. According to the Statement, all assets and liabilities
were translated at the current exchange rate, stockholders equity 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 SFAS No. 130, Reporting
Comprehensive Income as a Component of Stockholders Equity. Foreign exchange
transaction gains and losses are reflected in the income
statement. During the years 2008 and 2007 there have been immaterial
currency fluctuations between HKD and USD.
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.
Cash and Cash
Equivalents
Cash
and cash equivalents include cash in hand and cash in time deposits,
certificates of deposit and all highly liquid debt instruments with original
maturities of three months or less. The Company maintains its accounts in banks,
several of which exceed the federally insured limit. In aggregate, approximately
$51.5 million were out of federally insured limit. Management believes the
Company is not exposed to any significant credit risk on those
accounts.
Available
for sale securities
The Company’s investments in publicly
traded equity securities 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 in income 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. The Management compares the cost of inventories with the market value
and allowance is made for writing down the inventories to market value, if
lower. Inventory consists of high tech nutritional,
cosmetic, automotive maintenance and environmentally safe
products.
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008
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:
Machinery
& equipment
|
3
years
|
Computers
& office equipment
|
3
years
|
Automobile
|
5
years
|
For
the years ended March 31, 2008 and 2007, depreciation expenses were $38,340 and
$22,192, respectively.
Long-Lived
Assets
Effective
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS
144), which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and supersedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and
the accounting and reporting provisions of APB Opinion No. 30, Reporting the
Results of Operations for a Disposal of a Segment of a Business. The Company
periodically evaluates the carrying value of long-lived assets to be held and
used in accordance with SFAS 144. SFAS 144 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 amounts. 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. Based on its review, the Company believes that, as of
March 31, 2008 there were no significant impairments of its long-lived
assets.
Fair Value of Financial
Instruments
Statement
of Financial Accounting Standard No. 107, “Disclosures about Fair Value of
Financial Instruments”, requires that the Company discloses estimated fair
values of financial instruments. The carrying amounts reported in the statements
of financial position 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.
Stock-Based
Compensation
In
December 2004, the FASB issued FASB Statement No. 123R ("SFAS 123R"),
"Share-Based Payment, an Amendment of FASB Statement No. 123". SFAS 123R
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. The Company adopted SFAS 123R on April 1, 2006.
The
Company did not issue any stock options to employees during the year ended March
31, 2008, therefore pro forma disclosures are not required.
The
Company values the stock awards using the market price on or around the date the
shares were awarded. The amount of compensation was included as a
period compensation expense. For the years ended March 31, 2008 and
2007, the stock-based compensations for shares awarded were $2,162 and $0,
respectively.
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008
Revenue
Recognition
The
Company’s revenue recognition policy is in accordance with the requirements of
Staff Accounting Bulletin (“SAB”) No. 104,
Revenue Recognition,
(“SAB 104”), EITF 01-09,
Accounting for Consideration Given
by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)
(“EITF 01-09”) 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 collectibility is reasonably assured. Payments received before all of the
relevant criteria for revenue recognition are satisfied are recorded as unearned
revenue. Cash consideration given by the Company to its sales
affiliates is considered to be a reduction of the selling prices of the
Company's products, thus, is recorded as a reduction of
revenue.
Warranty
The Company records warranty liabilities
at the time of sale for the estimated costs that may be incurred under its
limited warranty. The specific warranty terms and conditions vary depending upon
the product sold, but generally include
replacement over a period
of six months. 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. The anticipated rate of
warranty claims is the primary factor impacting the estimated warranty
obligation. The other factors are less significant due to the fact that the
warranty period is only six months and
replacement
is
generally already in stock or available
at pre-determined price.
Warranty claims are relatively predictable based on historical experience of
failure rates. If actual results differ from the estimates,
the Company
revises its estimated warranty
liability.
Currently, the Company estimates its
warranty expense as follows:
Products
sold for
|
0-2
months
|
2%
of cost
|
3-4
months
|
1.5%
of cost
|
5-6
months
|
1%
of cos
t
|
Shipping
Costs
The Company’s shipping costs are
included in cost of sales in the accompanying Consolidated Statements of
Operations and Other Comprehensive Income for all periods
presented.
Advertising
Advertising
expenses consist primarily of costs of promotion for corporate image and product
marketing and costs of direct advertising. The Company expenses all advertising
costs as incurred. For the years ended March 31, 2008 and 2007, advertising
expenses were $1,540 and $595, respectively.
Income
Taxes
The
Company utilizes SFAS No. 109, Accounting for Income Taxes, 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.
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008
The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes (“FIN 48”), on April 1, 2007 The Interpretation
addresses the determination of whether tax benefits claimed or expected to be
claimed on a tax return should be recorded in the financial statements. Under
FIN 48, we 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. FIN 48 also
provides guidance on derecognition, classification, interest and penalties on
income taxes, accounting in interim periods and requires increased
disclosures.
Net Income 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.
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 and
unrealized loss on
marketable
securities classified as available-for-sale
.
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 is constantly at
a marginal to zero dollar ($0) level and its revenues are derived from orders
place by consumers located anywhere in the world over the Company’s designate
internet portal. The Company maintains a zero dollar ($0) allowance for doubtful
accounts and authorizes credits based upon its historical “sound and quality”
after sales customer services provided to affiliates and customers.
Historically, such customer services have been maintained in accordance with the
management expectations. 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.
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008
Segment
Reporting
Statement
of Financial Accounting Standards No. 131 (SFAS 131), “
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.
As the
Company offers a wide range of products through the World Wide Web, it is
impractical for it to report revenues by segment.
Recent accounting
pronouncements
In
March 2008, FASB issued FASB Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under
Statement 133; and how derivative instruments and related hedged items affect
its financial position, financial performance, and cash flows. Management is
currently evaluating the effect of this pronouncement on financial
statements.
On May 8, 2008, FASB issued Statement of
Financial Accounting Standards (SFAS) No. 162, The Hie
rarchy of Generally Accepted Accounting
Principles, which will provide framework for selecting accounting principles to
be used in preparing financial statements that are presented in conformity with
U.S. generally accepted accounting principles (GAAP) fo
r
nongovernmental entities. With the
issuance of SFAS No. 162, the GAAP hierarchy for nongovernmental entities will
move from auditing literature to accounting literature. The Company is
currently assessing the impact of SFAS No. 162 on its financial posi
t
ion and results of
operations.
In
December 2007, FASB issued SFAS No. 141 (revised 2007), “Business
Combinations”
(“SFAS 141R”).
SFAS 141R establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any noncontrolling interest in the acquiree
and the goodwill acquired. SFAS 141R also establishes disclosure
requirements to enable the evaluation of the nature and financial effects of the
business combination. This statement is effective for fiscal years beginning on
or after December 15, 2008 and will be applied prospectively. The Company
is currently evaluating the potential impact of the adoption of SFAS 141R
on its consolidated financial position, results of operations or cash
flows.
In
December 2007, FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements—an amendment of Accounting Research Bulletin
No. 51”
(“SFAS 160”).
SFAS 160 establishes accounting and reporting standards for ownership
interests in subsidiaries held by parties other than the parent, the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest, changes in a parent’s ownership interest, and the valuation of
retained noncontrolling equity investments when a subsidiary is deconsolidated.
SFAS 160 also establishes disclosure requirements that clearly identify and
distinguish between the interests of the parent and the interests of the
noncontrolling owners. This statement is effective for fiscal years beginning on
or after December 15, 2008 and requires retroactive adoption of the
presentation and disclosure requirements for existing minority interests. The
Company is currently evaluating the potential impact of the adoption of
SFAS 160 on its consolidated financial position, results of operations or
cash flows.
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008
In
September, 2006, FASB issued SFAS 157 ‘Fair Value Measurements’. This
Statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This Statements applies under other
accounting pronouncements that require or permit fair value measurements, the
Board having previously concluded in those accounting pronouncements that fair
value is the relevant measurement attribute. Accordingly, this
Statement does not require any new fair value measurements. However,
for some entities, the application of this Statement will change current
practice. This Statement is effective for financial statements issued
for fiscal years beginning after November 15, 2007, and interim periods within
those fiscal years. The management is currently evaluating the effect
of this pronouncement on financial statements.
Note
3 -
FINANCIAL
INSTRUMENTS
The
following table summarizes unrealized gains and losses related to the Company’s
investments in marketable securities designated as available-for-sale.
The fair value of a
vailable for sale securities
has been estimated based on quoted
market prices, which the Company currently believes are indicative of fair
value.
The Company’s available for sale securities are mainly on equity
securities mutual funds.
|
|
March
31, 2008
|
|
|
March
31, 2007
|
|
|
|
Fair
Value
|
|
|
Cost
|
|
|
Unrealized
(Loss)
|
|
|
Fair
Value
|
|
|
Cost
|
|
|
Unrealized
(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale
securities
|
|
$
|
835,965
|
|
|
$
|
999,029
|
|
|
$
|
(163,064
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Total
|
|
$
|
835,965
|
|
|
$
|
999,029
|
|
|
$
|
(163,064
|
)
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Note
4 –
PROPERTY AND
EQUIPMENT
Property
and equipment consist of the following:
|
|
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Automobile
|
|
$
|
176,384
|
|
|
$
|
108,775
|
|
Computer
e
quipment
|
|
|
22,068
|
|
|
|
-
|
|
Machinery and
equipment
|
|
|
15,959
|
|
|
|
3,930
|
|
|
|
|
214,411
|
|
|
|
112,705
|
|
Less: Accumulated
depreciation
|
|
|
(74,305
|
)
|
|
|
(35,965
|
)
|
|
|
$
|
140,106
|
|
|
$
|
76,740
|
|
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008
Note
5 –
OTHER
LIABILITIES
Other
liabilities consist of the following:
|
|
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Commission
p
ayable
|
|
$
|
12,028,644
|
|
|
$
|
-
|
|
Payroll
l
iabilities
|
|
|
671,409
|
|
|
|
322,950
|
|
Warranty
liability
|
|
|
85,608
|
|
|
|
48,696
|
|
Other
|
|
|
2,05
3
|
|
|
|
6,16
0
|
|
|
|
$
|
12,787,714
|
|
|
$
|
377,806
|
|
Note
6 –
STOCKHOLDERS’
EQUITY
Common
stock
As of
March 31, 2008 the Company has 4,975,000,000 shares of common stock authorized
and 61,022,414 shares issued and outstanding at par value $0.00001 per
share.
Dividend
For
the years ended March 31, 2008 and 2007, approximately $18.5 million and $10.4
million dividends were paid to the stockholders of EFT BioTech before the
merger.
Deposits from investors and
restricted cash
In
March 2008, The Company received $37,845,432 deposits related to a future
private placement of its common stock to non-resident aliens at a purchase price
of $3.80 per unit, for a unit consisting of one share of common stock and one
common stock redeemable purchase warrant. The private placement offering begins
in April 2008, in this regard, the cash received in the escrow account prior to
our April 2008 private offering has been recorded as restricted cash and
deposits form investors
Note
7 -
INCOME
TAXES
The
Company was incorporated in the United States of America (“US”) and has
operations in three tax jurisdictions - the United States of America, the Hong
Kong Special Administrative Region (“HK SAR”) and the BVI. The Company generated
substantially all of its net income from its BVI operations for the years ended
March 31, 2008 and 2007 which are not subject to any tax provision
according to BVI tax law. The Company’s HK SAR subsidiaries had no taxable
income in the respective periods. The deferred tax assets for the Company’s US
operations and HK SAR subsidiaries were immaterial at March 31, 2008 and
2007.
The
income tax expenses consist of the following:
|
|
Years
Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
Domestic
|
|
$
|
305,800
|
|
|
$
|
1,200
|
|
Foreign
|
|
|
-
|
|
|
|
-
|
|
Deferred
|
|
|
-
|
|
|
|
-
|
|
Income
tax expenses
|
|
$
|
305,800
|
|
|
$
|
1,200
|
|
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008
A reconciliation of income taxes, with
the amount computed by applying the statutory federal income tax rate
(3
7
%
for
the years ended March 31, 2008
and
2007) to income before
income taxes
for
the years ended March 31, 2008
and
2007, is as
follows:
|
|
Years
Ended March 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Income
tax at U.S. statutory rate
|
|
$
|
7,807,553
|
|
|
$
|
3,723,862
|
|
State
tax
|
|
|
800
|
|
|
|
1,200
|
|
Indefinitely
invested earnings of foreign subsidiaries
|
|
|
(7,516,351
|
)
|
|
|
(3,727,814
|
)
|
Nondeductible
expenses
|
|
|
13,798
|
|
|
|
3,952
|
|
|
|
$
|
305,800
|
|
|
$
|
1,200
|
|
Effective
tax rate
|
|
|
1
|
%
|
|
|
-
|
|
The Company’s effective tax
rate
increased for the year ended March 31,
2008, compared to the same period of 2007, is due to, after the
re-capitalization,
a higher
proportion of its operating profits
is subject to income
tax.
Uncertain Tax
Positions
As a
result of the implementation of Interpretation 48, the Company recognized no
material adjustments to liabilities or stockholders’ equity. Interest associated
with unrecognized tax benefits are classified as income tax and penalties are
classified in selling, general and administrative expenses in the statements of
operations. The adoption of FIN 48 did not have a material impact on the
Company’s financial statements.
For
the years ended March 31, 2008 and 2007, the Company had no unrecognized tax
benefits and related interest and penalties expenses. Currently, the
Company is not subject to examination by major tax
jurisdictions.
Note
8 -
WARRANTY
LIABILITY
The
Company records warranty liabilities at the time of sale for the estimated costs
that may be incurred under its limited warranty. Changes in warranty liability
for standard warranties which are included in current liabilities on the
Company’s Consolidated Balance Sheets are presented in the following
tables:
|
|
Years
Ended
|
|
|
|
March
31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Warranty
liability at beginning of year
|
|
$
|
48,696
|
|
|
$
|
-
|
|
Costs
accrued
|
|
|
36,912
|
|
|
|
48,696
|
|
Service
obligations honored
|
|
|
-
|
|
|
|
-
|
|
Warranty
liability at end of year
|
|
$
|
85,608
|
|
|
$
|
48,696
|
|
Current
portion
|
|
$
|
85,608
|
|
|
$
|
48,696
|
|
Non-current
portion
|
|
|
-
|
|
|
|
-
|
|
Warranty
liability at end of year
|
|
$
|
85,608
|
|
|
$
|
48,696
|
|
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH
31, 2008
Note
9 -
COMMITMENT
Operating
Lease
The
Company leases office space in the US under an operating lease
agreement. The lease provides for monthly lease payments
approximating $10,063 and expires on July 31, 2009. Future minimum lease
payments under the operating leases as of March 31, 2008 approximate the
following:
Year
Ending March 31,
|
|
|
|
|
|
|
|
2009
|
|
$
|
120,756
|
|
2010,
four months
|
|
|
40,250
|
|
The
Company rents office space for its sales division in Hong Kong. This property is
owned by a relative of our CEO. The lease provides for free lease in the first
two years and a monthly lease payments approximating $50,000 USD starting the
beginning of the third year and expires on March 31, 2012. Rental
expense is recognized on a straight-line basis over the respective lease term,
as a result, the amount of straight-line lease expense in excess of the payments
are recorded as rent payable relative to annual rent expense and included in
accounts payable and accrued expenses on the balance sheet. Expensing
the 5-year total rent evenly over the life of the lease, the future minimum
lease payments under the operating lease are as follows:
Year
Ending March 31,
|
|
|
|
|
|
|
|
2009
|
|
$
|
360,000
|
|
2010
|
|
|
360,000
|
|
2011
|
|
|
360,000
|
|
2012
|
|
|
360,000
|
|
Rent
expenses for the year ended March 31, 2008 and March 31, 2007 were approximately
$487,896 and $144,544, respectively.
Note
10 –
RELATED PARTY
TRANSACTION
The
Company rents office space for its sales division in Hong Kong. This property is
owned by a relative of our CEO. Rent expense related to this lease
amounted to $360,000 and $0 for the year ended March 31, 2008 and 2007,
respectively.
EFT
BIOTECH HOLDINGS, INC.
CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER
30, 2008 AND 2007
(Unaudited)
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS
|
Page(s)
|
|
|
Unaudited
Consolidated Financial Statements
|
|
|
|
Consolidated
Balance Sheets - Unaudited
|
F-19
|
|
|
Consolidated
Statements of Operations and Other Comprehensive Income -
Unaudited
|
F-20
|
|
|
Consolidated
Statements of Cash Flows - Unaudited
|
F-21
|
|
|
Notes
to Unaudited Consolidated Financial Statements
|
F-22
|
|
|
EFT
BIOTECH HOLDINGS, INC.
|
|
Consolidated
Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
September
30,
|
|
|
March
31,
|
|
|
|
2008
|
|
|
2008
|
|
|
|
(Unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
35,328,559
|
|
|
$
|
15,165,620
|
|
Inventories
|
|
|
5,239,693
|
|
|
|
2,619,429
|
|
Available
for sale securities
|
|
|
714,874
|
|
|
|
835,965
|
|
Prepaid
expenses and other receivable
|
|
|
262,239
|
|
|
|
793,760
|
|
Note
receivable
|
|
|
21,193,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
62,738,365
|
|
|
|
19,414,774
|
|
|
|
|
|
|
|
|
|
|
Note
receivable
|
|
|
1,567,000
|
|
|
|
-
|
|
Property
and equipment, net
|
|
|
173,776
|
|
|
|
140,106
|
|
Restricted
cash
|
|
|
-
|
|
|
|
37,845,432
|
|
Security
deposit
|
|
|
27,108
|
|
|
|
27,108
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$
|
64,506,249
|
|
|
$
|
57,427,420
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
590,087
|
|
|
$
|
804,041
|
|
Other
liabilities
|
|
|
3,593,322
|
|
|
|
12,787,714
|
|
Unearned
revenues
|
|
|
198,735
|
|
|
|
3,945,805
|
|
Deposits
from investors
|
|
|
52,279,728
|
|
|
|
37,845,432
|
|
Income
tax payable
|
|
|
489,000
|
|
|
|
305,000
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
57,150,872
|
|
|
|
55,687,992
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
|
|
|
|
|
|
|
Preferred
stock, $.001 par value, 25,000,000 shares authorized,
|
|
|
|
|
|
|
|
|
none
issued and outstanding
|
|
|
-
|
|
|
|
-
|
|
Common
stock, $0.0001 par value, 4,975,000,000 authorized,
|
|
|
|
|
|
|
|
|
61,089,081
and 61,022,414 shares issued and outstanding
|
|
|
|
|
|
|
|
|
at
September 30, 2008 and March 31, 2008
|
|
|
6,109
|
|
|
|
6,102
|
|
Additional
paid in capital
|
|
|
1,173
|
|
|
|
1,060
|
|
Retained
earnings
|
|
|
7,632,250
|
|
|
|
1,895,330
|
|
Accumulated
other comprehensive loss
|
|
|
(284,155
|
)
|
|
|
(163,064
|
)
|
|
|
|
|
|
|
|
|
|
Total
stockholders' equity
|
|
|
7,355,377
|
|
|
|
1,739,428
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$
|
64,506,249
|
|
|
$
|
57,427,420
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
EFT
BIOTECH HOLDINGS, INC.
|
|
Consolidated
Statements of Operations and Other Comprehensive Income
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended September 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Sales
revenues, net
|
|
$
|
9,420,326
|
|
|
$
|
14,091,775
|
|
Shipping
charge
|
|
|
2,829,110
|
|
|
|
4,514,280
|
|
|
|
|
12,249,436
|
|
|
|
18,606,055
|
|
|
|
|
|
|
|
|
|
|
Cost
of goods sold
|
|
|
3,311,782
|
|
|
|
5,219,514
|
|
Shipping
cost
|
|
|
1,465,441
|
|
|
|
2,130,082
|
|
|
|
|
4,777,223
|
|
|
|
7,349,596
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
7,472,213
|
|
|
|
11,256,459
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative expenses
|
|
|
2,329,916
|
|
|
|
1,019,993
|
|
|
|
|
|
|
|
|
|
|
Net
operating income
|
|
|
5,142,297
|
|
|
|
10,236,466
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense)
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
772,120
|
|
|
|
22,180
|
|
Investment
income
|
|
|
7,088
|
|
|
|
-
|
|
Foreign
exchange gain (loss)
|
|
|
355
|
|
|
|
(121
|
)
|
Other
income (expense), net
|
|
|
(140
|
)
|
|
|
93,055
|
|
|
|
|
|
|
|
|
|
|
Total
other income
|
|
|
779,423
|
|
|
|
115,114
|
|
|
|
|
|
|
|
|
|
|
Net
income before income taxes
|
|
|
5,921,720
|
|
|
|
10,351,580
|
|
|
|
|
|
|
|
|
|
|
Income
taxes
|
|
|
184,800
|
|
|
|
800
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
$
|
5,736,920
|
|
|
$
|
10,350,780
|
|
|
|
|
|
|
|
|
|
|
Unrealized
gain (loss) on available for sale securities
|
|
|
(121,091
|
)
|
|
|
62,723
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income
|
|
$
|
5,615,829
|
|
|
$
|
10,413,503
|
|
|
|
|
|
|
|
|
|
|
Net
income per common share
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
$
|
0.09
|
|
|
$
|
0.17
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
|
|
|
|
|
|
Basic
and diluted
|
|
|
61,086,531
|
|
|
|
59,821,414
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
EFT
BIOTECH HOLDINGS, INC.
|
|
Consolidated
Statements of Cash Flows (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Six
Months Ended September 30,
|
|
|
|
2008
|
|
|
2007
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income
|
|
$
|
5,736,920
|
|
|
$
|
10,350,780
|
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
24,117
|
|
|
|
19,170
|
|
Warranty
liability
|
|
|
(42,696
|
)
|
|
|
-
|
|
Stock
based compensation
|
|
|
120
|
|
|
|
-
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
(2,620,264
|
)
|
|
|
(1,510,679
|
)
|
Prepaid
expenses and other receivable
|
|
|
531,521
|
|
|
|
382,200
|
|
Accounts
payable
|
|
|
(213,954
|
)
|
|
|
179,446
|
|
Other
liabilities
|
|
|
(9,151,696
|
)
|
|
|
161,474
|
|
Unearned
revenues
|
|
|
(3,747,070
|
)
|
|
|
330,815
|
|
Income
tax payable
|
|
|
184,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) operating activities
|
|
|
(9,299,002
|
)
|
|
|
9,913,206
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Increase
in note receivable
|
|
|
(22,760,000
|
)
|
|
|
-
|
|
Additions
to fixed assets
|
|
|
(57,787
|
)
|
|
|
(67,609
|
)
|
Purchase
in investments
|
|
|
-
|
|
|
|
(935,365
|
)
|
Increase
in due from officer
|
|
|
-
|
|
|
|
(1,828
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash (used in) investing activities
|
|
|
(22,817,787
|
)
|
|
|
(1,004,802
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
37,845,432
|
|
|
|
-
|
|
Proceeds
from investor deposits
|
|
|
14,434,296
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
52,279,728
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net
increase in cash
|
|
|
20,162,939
|
|
|
|
8,908,404
|
|
|
|
|
|
|
|
|
|
|
Cash,
beginning of period
|
|
|
15,165,620
|
|
|
|
554,562
|
|
|
|
|
|
|
|
|
|
|
Cash,
end of period
|
|
$
|
35,328,559
|
|
|
$
|
9,462,966
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
Interest
paid in cash
|
|
$
|
-
|
|
|
$
|
-
|
|
Income
taxes paid in cash
|
|
$
|
800
|
|
|
$
|
800
|
|
The
accompanying notes are an integral part of these consolidated financial
statements.
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2008
Note
1 -
ORGANIZATION
EFT
Biotech Holdings, Inc. (“EFT Holdings” or “the Company”), formerly HumWare Media
Corporation, GRG, Inc., Ghiglieri Corporation, Karat Productions, Inc., was
incorporated in the State of Nevada on March 19, 1992.
On
November 18, 2007, the Company issued an aggregate of 53,300,000 shares of its
common stock in connection with a share exchange with the stockholders of EFT
BioTech, Inc. (“EFT BioTech”), a Nevada Corporation formed on September 17, 2007
(the “Transaction”), pursuant to which EFT BioTech became a wholly-owned
subsidiary of the Company. The 53,300,000 common shares issued represented
approximately 87.01% of the Company’s common stock outstanding after the
Transaction. Consequently, the stockholders of EFT BioTech, Inc. own a majority
of the Company's common stock immediately following the Transaction, therefore,
the Transaction is being accounted for as a "reverse acquisition", and EFT
BioTech is deemed to be the accounting acquirer in the reverse
acquisition.
On
September 17, 2007, EFT BioTech acquired EFT Limited, a British Virgin Islands
company (“BVI”) formed on August 22, 2007, pursuant to which EFT Limited (BVI)
became a wholly-owned subsidiary of EFT BioTech. Since both EFT
BioTech and EFT Limited (BVI) were under the common control, this acquisition
represents a reorganization of entities under common control.
EFT
Limited (BVI) has four wholly-owned subsidiaries: EFT, Inc., a California
company formed on January 1, 2003, Top Capital, Ltd. (BVI), a BVI company formed
on May 22, 2002, EFT (HK), Ltd., a Hong Kong (“HK”) company formed on November
1, 2006 and EFT International Ltd. (BVI), a BVI company formed on April 20,
2005, which it acquired all on November 14, 2007. As EFT Limited
(BVI) and the four companies being acquired were under the common control, this
acquisition also represents a reorganization of entities under common
control.
The
Company, through its subsidiaries, is engaged in the E-Business designed around
the concept of Business-to-customer using the World Wide Web as its “storefront”
and business platform to market, sell and distribute 43 American brand products
consisting of 22 nutritional products, 18 personal care products, 2 automotive
fuel additives, 1 home product and a portable drinking
container.
Note
2 -
SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
Basis of
Presentation
The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of
America.
Principles of
Consolidation
The
consolidated financial statements include the accounts of the Company and its
wholly-owned 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 operation in Hong
Kong uses Hong Kong dollar (HKD) as its functional currency. The financial
statements of the subsidiary are translated into U.S. Dollars (USD) in
accordance with Statement of Financial Accounts Standards (SFAS) No. 52, Foreign
Currency Translation. According to the Statement, all assets and liabilities
were translated at the current exchange rate, stockholders equity 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 SFAS No. 130, Reporting
Comprehensive Income as a Component of Stockholders Equity. Foreign exchange
transaction gains and losses are reflected in the income
statement. During the six months ended September 30, 2008 and 2007
there have been immaterial currency fluctuations between HKD and
USD.
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER
30, 2008
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.
Cash and Cash
Equivalents
Cash
and cash equivalents include cash in hand and cash in time deposits,
certificates of deposit and all highly liquid debt instruments with original
maturities of three months or less. The Company maintains its accounts in banks,
several of which exceed the federally insured limit. In aggregate, approximately
$35.6 million were out of federally insured limit.
Available for sale
securities
The
Company’s investments in publicly traded equity securities 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 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 in income 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. The Company records a write-down for inventories which have become
obsolete. The Management compares the cost of inventories with the market value
and allowance is made for writing down the inventories to market value, if
lower. Inventory consists of high tech nutritional, cosmetic, automotive
maintenance and environmentally safe products.
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:
Machinery
and equipment
|
3
years
|
Office
equipment and furniture
|
3
years
|
Automobile
|
5
years
|
For
the six months ended September 30, 2008 and 2007, depreciation expenses were
$24,117 and $19,170, respectively.
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER
30, 2008
Long-Lived
Assets
Effective
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS
144), which addresses financial accounting and reporting for the impairment or
disposal of long-lived assets and supersedes SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, and
the accounting and reporting provisions of APB Opinion No. 30, Reporting the
Results of Operations for a Disposal of a Segment of a Business. The Company
periodically evaluates the carrying value of long-lived assets to be held and
used in accordance with SFAS 144. SFAS 144 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 amounts. 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. Based on its review, the Company believes that, as of
September 30, 2008 there were no significant impairments of its long-lived
assets.
Fair Value of Financial
Instruments
Statement
of Financial Accounting Standard No. 107, “Disclosures about Fair Value of
Financial Instruments”, requires that the Company discloses estimated fair
values of financial instruments. The carrying amounts reported in the statements
of financial position 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.
Revenue
Recognition
The
Company’s revenue recognition policy is in accordance with the requirements of
Staff Accounting Bulletin (“SAB”) No. 104,
Revenue Recognition,
(“SAB 104”), EITF 01-09,
Accounting for Consideration Given
by a Vendor to a Customer (Including a Reseller of the Vendor’s Products)
(“EITF 01-09”) 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 collectibility is reasonably assured. Payments received before all of the
relevant criteria for revenue recognition are satisfied are recorded as unearned
revenue. Cash consideration given by the Company to its sales
affiliates is considered to be a reduction of the selling prices of the
Company's products, thus, is recorded as a reduction of
revenue.
Warranty
The
Company records warranty liabilities at the time of sale for the estimated costs
that may be incurred under its limited warranty. The specific warranty terms and
conditions vary depending upon the product sold, but generally include
replacement over a period of six months. 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. The anticipated rate of warranty
claims is the primary factor impacting the estimated warranty obligation. The
other factors are less significant due to the fact that the warranty period is
only six months and replacement is generally already in stock or available
at pre-determined price. Warranty claims are relatively predictable based on
historical experience of failure rates. If actual results differ from the
estimates, the Company revises its estimated warranty
liability.
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER
30, 2008
Shipping
Costs
The
Company’s shipping costs are included in cost of sales in the accompanying
Consolidated Statements of Operations and Other Comprehensive Income for all
periods presented.
Advertising
Advertising
expenses consist primarily of costs of promotion for corporate image and product
marketing and costs of direct advertising. The Company expenses all advertising
costs as incurred. For the six months ended September 30, 2008 and 2007,
advertising expenses were $85,871 and $770, respectively.
Income
Taxes
The
Company utilizes SFAS No. 109, Accounting for Income Taxes, 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.
The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes (“FIN 48”), on January 1, 2007 The Interpretation
addresses the determination of whether tax benefits claimed or expected to be
claimed on a tax return should be recorded in the financial statements. Under
FIN 48, we 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. FIN 48 also
provides guidance on derecognition, classification, interest and penalties on
income taxes, accounting in interim periods and requires increased
disclosures.
Net Income 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.
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 and
unrealized gain/loss on marketable securities classified as
available-for-sale.
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER
30, 2008
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, thus are exposed to credit risk in the case of
financial institutions failure. The Company’s accounts receivable is constantly
at a marginal to zero dollar ($0) level and its revenues are derived from orders
place by consumers located anywhere in the world over the Company’s designate
internet portal. The Company maintains a zero dollar ($0) allowance for doubtful
accounts and authorizes credits based upon its historical “sound and quality”
after sales customer services provided to affiliates and customers.
Historically, such customer services have been maintained in accordance with the
management expectations. 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.
Recent accounting
pronouncements
In
March 2008, FASB issued FASB Statement No. 161, Disclosures about Derivative
Instruments and Hedging Activities. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under
Statement 133; and how derivative instruments and related hedged items affect
its financial position, financial performance, and cash flows. Management is
currently evaluating the effect of this pronouncement on financial
statements.
On May
8, 2008, FASB issued Statement of Financial Accounting Standards (SFAS) No. 162,
The Hierarchy of Generally Accepted Accounting Principles, which will provide
framework for selecting accounting principles to be used in preparing financial
statements that are presented in conformity with U.S. generally accepted
accounting principles (GAAP) for nongovernmental entities. With the issuance of
SFAS No. 162, the GAAP hierarchy for nongovernmental entities will move from
auditing literature to accounting literature. The Company is currently
assessing the impact of SFAS No. 162 on its financial position and results of
operations.
In
December 2007, FASB issued SFAS No. 141 (revised 2007), “Business
Combinations”
(“SFAS 141R”).
SFAS 141R establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, any noncontrolling interest in the acquiree
and the goodwill acquired. SFAS 141R also establishes disclosure
requirements to enable the evaluation of the nature and financial effects of the
business combination. This statement is effective for fiscal years beginning on
or after December 15, 2008 and will be applied prospectively. The Company
is currently evaluating the potential impact of the adoption of SFAS 141R
on its consolidated financial position, results of operations or cash
flows.
In
December 2007, FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements—an amendment of Accounting Research Bulletin
No. 51”
(“SFAS 160”).
SFAS 160 establishes accounting and reporting standards for ownership
interests in subsidiaries held by parties other than the parent, the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest, changes in a parent’s ownership interest, and the valuation of
retained noncontrolling equity investments when a subsidiary is deconsolidated.
SFAS 160 also establishes disclosure requirements that clearly identify and
distinguish between the interests of the parent and the interests of the
noncontrolling owners. This statement is effective for fiscal years beginning on
or after December 15, 2008 and requires retroactive adoption of the
presentation and disclosure requirements for existing minority interests. The
Company is currently evaluating the potential impact of the adoption of
SFAS 160 on its consolidated financial position, results of operations or
cash flows.
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER
30, 2008
Note
3 -
FINANCIAL
INSTRUMENTS
Disclosures about Fair Value
of Financial Instruments
Statement
of financial accounting standard No. 107, “Disclosures about Fair Value of
Financial Instruments”, requires that the Company discloses estimated fair
values of financial instruments. The carrying amounts reported in the statements
of financial position 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. The fair value of investments has been
estimated based on quoted market prices, which the Company currently believes
are indicative of fair value.
Investments
The
following table summarizes the fair value and cost of the Company’s investments.
The Company’s investments are mainly on equity securities mutual
funds.
|
|
September
30, 2008
|
|
|
March
31, 2008
|
|
|
|
Fair
Value
|
|
|
Cost
|
|
|
Unrealized
(Loss)
|
|
|
Fair
Value
|
|
|
Cost
|
|
|
Unrealized
(Loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
securities
|
|
$
|
714
,
874
|
|
|
$
|
999,0
29
|
|
|
$
|
(284,155
|
)
|
|
$
|
835,965
|
|
|
$
|
999,0
29
|
|
|
$
|
(163,064
|
)
|
Investments
|
|
|
714
,
874
|
|
|
|
999,0
29
|
|
|
|
(
284
,
155
|
)
|
|
|
835,965
|
|
|
|
999,0
29
|
|
|
|
(163,064
|
)
|
Short-term
|
|
|
714,874
|
|
|
|
999,029
|
|
|
|
(284,155
|
)
|
|
|
835,965
|
|
|
|
999,029
|
|
|
|
(163,064
|
)
|
Long-term
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Investments
|
|
$
|
714
,
874
|
|
|
$
|
999,0
29
|
|
|
$
|
(
284
,
155
|
)
|
|
$
|
835,965
|
|
|
$
|
999,0
29
|
|
|
$
|
(163,064
|
)
|
Note
4 -
NOTE
RECEIVABLE
On
September 23, 2008, the Company signed a loan agreement denominated in U.S.
dollars with Excalibur to lend $2,000,000 at interest rate of 3.75% per month
with a term of no more than 60 days.
On
July 18, 2008, the Company lent $1,567,000 to Excalibur International Marine
Corporation (“Excalibur”). The loan has no written note, is not
interest bearing and due upon demand.
On
July 15, 2008, the Company signed a loan agreement with Excalibur to lend
$19,193,000 (New Taiwan Dollar 582,452,000) expiring at the end of October 2008.
The loan is not interest bearing and secured by Excalibur’s
vessel.
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER
30, 2008
Note
5 –
PROPERTY AND
EQUIPMENT
Property
and equipment consist of the following:
|
|
September
30,
|
|
|
March
31,
|
|
|
|
2008
|
|
|
2008
|
|
|
|
|
|
|
|
|
Automobile
|
|
$
|
176,384
|
|
|
$
|
176,384
|
|
Office
equipment and furniture
|
|
|
42,836
|
|
|
|
22,068
|
|
Machinery
and equipment
|
|
|
15,959
|
|
|
|
15,959
|
|
Leasehold
improvements
|
|
|
37,019
|
|
|
|
-
|
|
|
|
|
272,198
|
|
|
|
214,411
|
|
Less:
Accumulated depreciation
|
|
|
(98,422
|
)
|
|
|
(74,305
|
)
|
|
|
$
|
173,776
|
|
|
$
|
140,106
|
|
Note
6 –
OTHER
LIABILITIES
Other
liabilities consist of the following:
|
|
September
30,
|
|
|
March
31,
|
|
|
|
2008
|
|
|
2008
|
|
|
|
|
|
|
|
|
Commission
Payable
|
|
$
|
2,904,510
|
|
|
$
|
12,028,644
|
|
Payroll
Liabilities
|
|
|
645,900
|
|
|
|
671,409
|
|
Warranty
liability
|
|
|
42,912
|
|
|
|
85,608
|
|
Other
|
|
|
-
|
|
|
|
2,053
|
|
|
|
$
|
3,593,322
|
|
|
$
|
12,787,714
|
|
Note
7 –
STOCKHOLDERS’
EQUITY
Common
stock
As of
September 30, 2008 the Company has 4,975,000,000 shares of common stock
authorized and 61,089,081 shares issued and outstanding at par value $0.0001 per
share.
During
the six months ended September 30, 2008, The Company issued 66,667 shares
of Common Stock.
Deposits from
investors
In
March 2008, The Company received $37,845,432 deposits related to a private
placement of its common stock to non-resident aliens at a purchase price of
$3.80 per unit, for a unit consisting of one share of common stock and one
common stock redeemable purchase warrant. During the six months ended September
30, 2008, the Company received $14,434,296 deposits from investors for the same
private placement. The private placement offering was terminated on
October 25, 2008.
Note
8 -
INCOME
TAXES
The
Company was incorporated in the United States of America (“US”) and has
operations in three tax jurisdictions - the United States of America, the Hong
Kong Special Administrative Region (“HK SAR”) and the BVI. The Company generated
substantially all of its net income from its BVI operations for the six months
ended September 30, 2008 and 2007 which are not subject to any tax provision
according to BVI tax law. The Company’s HK SAR subsidiaries had no taxable
income in the respective periods. The deferred tax assets for the Company’s US
operations and HK SAR subsidiaries were immaterial at September 30, 2008 and
2007.
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER
30, 2008
The
income tax expenses consist of the following:
|
|
Six
Months Ended September 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
Domestic
|
|
$
|
184,800
|
|
|
$
|
800
|
|
Foreign
|
|
|
-
|
|
|
|
-
|
|
Deferred
|
|
|
-
|
|
|
|
-
|
|
Income
tax expenses
|
|
$
|
184,800
|
|
|
$
|
800
|
|
A
reconciliation of income taxes, with the amount computed by applying the
statutory federal income tax rate (37% for the six months ended September
30, 2008 and 2007) to income before income taxes for the six months ended
September 30, 2008 and 2007, is as follows:
|
|
Six
Months Ended September 30,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Income
tax at U.S. statutory rate
|
|
$
|
1,715,862
|
|
|
$
|
3,105,234
|
|
State
minimum tax
|
|
|
800
|
|
|
|
800
|
|
Indefinitely
invested earnings of foreign subsidiaries
|
|
|
(1,540,991
|
)
|
|
|
(3,108,027
|
)
|
Nondeductible
expenses
|
|
|
9,129
|
|
|
|
2,793
|
|
|
|
$
|
184,800
|
|
|
$
|
800
|
|
Effective
tax rate
|
|
|
3
|
%
|
|
|
-
|
|
The
Company’s effective tax rate increased for the six months ended September
30, 2008, compared to the same period of 2007, is due to a higher proportion of
its operating profits being generated in the U.S.
Uncertain Tax
Positions
As a
result of the implementation of Interpretation 48, the Company recognized no
material adjustments to liabilities or stockholders’ equity. Interest associated
with unrecognized tax benefits are classified as income tax and penalties are
classified in selling, general and administrative expenses in the statements of
operations. The adoption of FIN 48 did not have a material impact on the
Company’s financial statements.
For
the six months ended September 30, 2008 and 2007, the Company had no
unrecognized tax benefits and related interest and penalties
expenses. Currently, the Company is not subject to examination by
major tax jurisdictions.
Note
9 -
WARRANTY
LIABILITY
The
Company records warranty liabilities at the time of sale for the estimated costs
that may be incurred under its limited warranty. Changes in warranty liability
for standard warranties which are included in current liabilities on the
Company’s Consolidated Balance Sheets are presented in the following
tables:
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER
30, 2008
|
|
September
30,
|
|
|
March
31,
|
|
|
|
2008
|
|
|
2008
|
|
|
|
|
|
|
|
|
Warranty
liability at beginning of period
|
|
$
|
85,608
|
|
|
$
|
48,696
|
|
Costs
accrued (recovered)
|
|
|
(42,696
|
)
|
|
|
36,912
|
|
Service
obligations honored
|
|
|
-
|
|
|
|
-
|
|
Warranty
liability at end of period
|
|
$
|
42,912
|
|
|
$
|
85,608
|
|
Current
portion
|
|
$
|
42,912
|
|
|
$
|
85,608
|
|
Non-current
portion
|
|
|
-
|
|
|
|
-
|
|
Warranty
liability at end of period
|
|
$
|
42,912
|
|
|
$
|
85,608
|
|
Note
10 -
COMMITMENT
Operating
Lease
The
Company leases office space in the US under an operating lease
agreement. The lease provides for monthly lease payments
approximating $10,063 and expires on July 31, 2009. Future minimum lease
payments under the operating leases as of September 30, 2008 approximate the
following:
Year
Ending March 31,
---------------------------
2009
|
|
$
|
60,378
|
|
2010
|
|
|
40,250
|
|
The
Company rents office space for its sales division in Hong Kong. The
lease provides for monthly lease payments approximating $50,000 USD and expires
on March 31, 2012. Future minimum lease payments under the operating
lease are as follows:
Year
Ending March 31,
---------------------------
2009
|
|
$
|
180,000
|
|
2010
|
|
|
360,000
|
|
2011
|
|
|
360,000
|
|
2012
|
|
|
360,000
|
|
Rent
expenses for the six months ended September 30, 2008 and 2007 were approximately
$244,305 and $244,923, respectively.
Note
11 –
SUBSEQUENT
EVENTS
|
a.
|
On
October 20, 2008, the Company formed EFT Investment Co.,
Ltd. EFT Investment Co., Ltd. is a wholly-owned subsidiary of
EFT Biotech Holdings, Inc. and operates in
Taiwan.
|
|
b.
|
On
October 25, 2008, the Company through its wholly-owned subsidiary, EFT
Investment Co. Ltd, a Taiwan company formed in November 2008, completed
the acquisition of 49% shares of Excalibur, a shipping Company located in
Taiwan.
|
|
c.
|
In November 14, 2008, the note
receivable of $19,193,000 (New Taiwan Dollar 582,452,000) was paid back in
full by Excalibur.
|
EFT
BIOTECH HOLDINGS, INC.
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
SEPTEMBER
30, 2008
|
d.
|
In
November 2008, the Company issued 14,894,090 shares pursuant to the
private placement closed on October 25,
2008.
|
ITEM
14. CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND
FINANCIAL DISCLOSURE
We
dismissed our independent accountants, Weinberg & Company, P.A. on March 23,
2008 and engaged Child, Van Wagoner & Bradshaw, PLLC (“CVB”) as our
independent accountants on May 23, 2008 to audit the Registrant’s financial
statements for our fiscal year ended March 31
st
and to
review our unaudited financial statements for the interim periods. The
change in accountants was approved by our board of directors on March 23,
2008. We do not have an audit committee due to the size of our board
of directors. CVB commenced review of our annual audit for the
year ending March 31, 2008. CVB entered into an engagement letter
with EFT BioTech Holdings, Inc. on May 23, 2008. We chose to change
accountants due to the fact that CVB was more familiar with working on
registration statements filed with the SEC and responding to the SEC’s comments
regarding the registration statements.
During
the fiscal year ended March 31, 2008, the Registrant expended $78,338 in
auditor’s fees to Weinberg & Company, P.A. for its audit of the Registrant’s
2007 financial statements and for its review of the Registrant’s quarterly
reports for the fiscal quarters ended June 30, 2007, September 30, 2007 and
December 31, 2007.
During the fiscal years ended
March 31, 2007 audited by Weinberg & Company P.A. , and through the interim
period through the date of their dismissal, there were no disagreements with
Weinberg & Company P.A. on any matters of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure which,
if not resolved to Weinberg & Company P.A.’s satisfaction, would have caused
Weinberg & Company P.A. to make reference to the subject matter in
connection with its reports; and there were no reportable events as defined in
Item 304(a)(1)(iv) of Regulation S-K. During the period of the Company’s
engagement of Weinberg & Company P.A., Weinberg & Company P.A.’s reports
on the financial statements did not contain an adverse opinion or a disclaimer
of opinion nor was qualified or modified as to uncertainty, audit scope, or
accounting principles.
Prior
to its engagement, neither the Company nor anyone on its behalf has consulted
CVB, regarding (i) either: the application of accounting principles to a
specific completed or contemplated transaction, or the type of audit opinion
that might be rendered on the Registrant’s financial statements; as such, no
written or oral advice was provided, and none was an important factor considered
by the Registrant in reaching a decision as to the accounting, auditing or
financial reporting issues; or (ii) any matter that was a subject of a
disagreement or reportable event, as there were none.
We
provided Weinberg & Company P.A. with a copy of this disclosure on April 10,
2009, requesting Weinberg & Company P.A. to furnish us with a letter
addressed to the Securities and Exchange Commission stating whether it agrees
with the statements made by us, and, if not, stating the respects in which it
does not agree. A copy of the letter furnished by CVB in response to that
request will be filed with the Commission within two business days of receipt as
Exhibit 16.1 to this Form 10.
ITEM
15. FINANCIAL STATEMENTS AND EXHIBITS
(a)
Financial Statements filed as part
of this Registration Statement
:
The
Registrant’s audited financial statements for the years ended March 31, 2008 and
2007 and the notes thereto and the unaudited financial statements for the nine
months ended December 31, 2008 and 2007 and notes thereto are included after the
Signature Page of this Registration Statement on Form 10 and are incorporated by
reference herein.
(b)
Exhibits
:
Exhibit
No.:
|
Description:
|
|
|
3.1
(1)
|
Articles
of Incorporation of GRG, Inc. (now EFT BioTech Holdings,
Inc.).
|
3.1.1
(1)
|
Articles
of Merger filed December 28, 2004 between HumWare Media Corporation, World
Wide Golf Web, Inc. and GRG, Inc.
|
3.1.2
(1)
|
Certificate
of Amendment, effective November 7, 2007, to the Articles of
Incorporation of HumWare Media Corporation
|
3.2
|
By-laws
|
4.1
(1)
|
Form
of Common Stock Certificate
|
4.2
(1)
|
Form
of Warrant to purchase one share of Common Stock for a purchase price of
$3.80 per share until the second anniversary date of the date of
issuance
|
10.1
|
Share
Exchange Agreement, dated as of the 1
st
day of November, 2007,
by and among EFT BioTech Holdings, Inc. (formerly HumWare Media
Corporation), a Nevada corporation; certain EFT Shareholders and EFT
BioTech Corporation, a Nevada corporation
|
10.2
(2)
|
Subscription
Agreement for Units in connection with the Registrant’s Regulation S
Private Placement
|
10.3
|
Employment
Agreement, dated May 10, 2008, between EFT BioTech Holdings, Inc. and
Sharon Tang
|
14.1
|
Code
of Ethics
|
14.2
|
Code
of Business Conduct
|
16.1
(3)
|
Letter
of Weinberg & Company P.A.
|
23.1
(1)
|
Consent
of Sharon Tang to be named as “financial expert” of the Board of Directors
of the Registrant
|
(1)
|
Filed
as an exhibit to Form 10 (File No.: 001-34222) filed with the SEC on
December 10, 2008 and incorporated by reference
herein.
|
(2)
|
Filed
as an exhibit to Form 10-Q for the quarter ended December 31, 2008 (File
No.: 001-34222) filed with the SEC on February 13, 2008 and incorporated
by reference herein.
|
(3)
|
To
be filed within two business days of
receipt.
|
SIGNATURES
Pursuant
to the requirements of Section 12 of the Securities and Exchange Act of 1934,
the Registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
|
|
EFT
BIOTECH HOLDINGS, INC.
|
Date:
April 10, 2009
|
|
By:
/s/ Jack Jie
Qin
Name:
Jack Jie Qin
Title: President,
Chief Executive Officer and Chairman
(Principal
Executive Officer)
|
|
|
|
Date:
April 10, 2009
|
|
By:
/s/
Sharon
Tang
Name:
Sharon Tang
Title:
Chief Financial Officer
(Principal
Financing and Accounting
Officer)
|
SHARE
EXCHANGE AGREEMENT
THIS
SHARE EXCHANGE AGREEMENT, dated as of the 1
st
day of
November, 2007 (the “Agreement”), by and among
EFT BioTech Holdings, Inc. (formerly
HumWare Media Corporation),
a Nevada corporation (the “Company”); the EFT
Shareholders, as listed at the end of this Agreement, each a “Seller” and
collectively the “Sellers” and EFT BioTech Corporation (“EFT”), a Nevada
corporation. The entities above are collectively referred to as the
Parties.
WITNESSETH:
WHEREAS,
the Sellers own all of the shares of the capital stock of EFT (the “EFT
Shares”).
WHEREAS,
the Company desires to acquire from the Sellers, and the Sellers desire to sell
to the Company, the EFT Shares in exchange (the “Exchange”) for the issuance by
the Company to Sellers and/or Sellers’ designees 53,300,000 shares of the
Company’s Common Stock, the “Exchange Shares”, representing 87.01% of the
Company’s capital stock on a fully diluted basis after taking into account the
transactions contemplated herein, including the Exchange,
WHEREAS,
after giving effect to the Exchange, there will be approximately 61,256,900
shares of Company Common Stock issued and outstanding,
NOW,
THEREFORE, in consideration of the premises and of the mutual representations,
warranties and agreements set forth herein, the parties hereto agree as
follows:
ARTICLE
1
THE
EXCHANGE
1.1
The Exchange
. Subject
to the terms and conditions of this Agreement, on the Closing Date (as
hereinafter defined):
The
Company shall issue and deliver to Sellers and/or its designee(s) 53,300,000
Shares and Sellers shall deliver to the Company duly executed transfer documents
representing the EFT Shares.
1.2
Time and Place of
Closing
. The closing of the transactions contemplated hereby (the
“Closing”) shall take place at the offices of The Sourlis Law Firm on November
12, 2007 (the “Closing Date”) at 10:00 a.m., or at such place and time as
mutually agreed upon by the parties hereto.
1.3
Effective Time
. The
Exchange shall become effective (the “Effective Time”) at such time as all of
the conditions to set forth in Article VII hereof have been satisfied or waived
by the Parties hereto.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
The
Company severally represents and warrants to the Sellers that now and/or as of
the Closing:
2.1
Due Organization and
Qualification; Due Authorization
.
The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Nevada, with full corporate power and
authority to own, lease and operate its respective business and properties and
to carry on its business in the places and in the manner as presently conducted
or proposed to be conducted. The Company is in good standing as a foreign
corporation in each jurisdiction in which the properties owned, leased or
operated, or the business conducted, by it requires such qualification except
for any such failure, which when taken together with all other failures, is not
likely to have a material adverse effect on the business of the
Company.
The
Company does not own, directly or indirectly, any capital stock, equity or
interest in any corporation, firm, partnership, joint venture or other
entity.
The
Company has all requisite corporate power and authority to execute and deliver
this Agreement, and to consummate the transactions contemplated hereby. The
Company has taken all corporate action necessary for the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby,
and this Agreement constitutes the valid and binding obligation of the Company
and the Shareholder, enforceable against the Company and the Shareholder in
accordance with its terms, except as may be affected by bankruptcy, insolvency,
moratoria or other similar laws affecting the enforcement of creditors’ rights
generally and subject to the qualification that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefore may be brought.
2.2
No Conflicts or
Defaults
. The execution and delivery of this Agreement by the Company and
the consummation of the transactions contemplated hereby do not and shall not
(a) contravene the Articles of Incorporation or By-laws of the Company, or (b)
with or without the giving of notice or the passage of time (i) violate,
conflict with, or result in a breach of, or a default or loss of rights under,
any material covenant, agreement, mortgage, indenture, lease, instrument, permit
or license to which the Company is a party or by which the Company is bound, or
any judgment, order or decree, or any law, rule or regulation to which the
Company is subject, (ii) result in the creation of, or give any party the right
to create, any lien, charge, encumbrance or any other right or adverse interest
(“Liens”) upon any of the assets of the Company, (iii) terminate or give any
party the right to terminate, amend, abandon or refuse to perform, any material
agreement, arrangement or commitment to which the Company is a party or by which
the Company’s assets are bound, or (iv) accelerate or modify, or give any party
the right to accelerate or modify, the time within which, or the terms under
which, the Company is to perform any duties or obligations or receive any rights
or benefits under any material agreement, arrangement or commitment to which it
is a party.
2.3
Capitalization
. The
authorized capital stock of the Company immediately prior to giving effect to
the transactions contemplated hereby consists of 4,975,000,000 shares of Company
Common Stock and 25,000,000 shares of Preferred Stock. As of the date hereof,
there are approximately 156,900 shares of Company Common Stock issued and
outstanding after giving effect to a 20,000 to 1 reverse stock split, and 0
shares of Preferred Stock outstanding. All of the outstanding shares of Company
Common Stock are, and the Shares when issued in accordance with the terms
hereof, will be duly authorized, validly issued, fully paid and non-assessable,
and have not been or, with respect to the Shares, will not be issued in
violation of any preemptive right of stockholders. There is no outstanding
voting trust agreement or other contract, agreement, arrangement, option,
warrant, call, commitment or other right of any character obligating or
entitling the Company to issue, sell, redeem or repurchase any of its
securities, and there is no outstanding security of any kind convertible into or
exchangeable for Company Common Stock. The Company has not granted registration
rights to any person.
2.4
No Assets or
Liabilities
. Except as set forth in the Financial Statements, the Company
does not have any (a) assets of any kind or (b) liabilities or obligations,
whether secured or unsecured, accrued, determined, absolute or contingent,
asserted or unasserted or otherwise.
2.5
Taxes
. The Company
has filed all tax returns and reports which were required to be filed on or
prior to the date hereof in respect of all income, withholding, franchise,
payroll, excise, property, sales, use, value-added or other taxes or levies,
imposts, duties, license and registration fees, charges, assessments or
withholdings of any nature whatsoever (together, “Taxes”), and has paid all
Taxes (and any related penalties, fines and interest) which have become due
pursuant to such returns or reports or pursuant to any assessment which has
become payable, or, to the extent its liability for any Taxes (and any related
penalties, fines and interest) has not been fully discharged, the same have been
properly reflected as a liability on the books and records of the Company and
adequate reserves therefore have been established.
2.6
Indebtedness; Contracts; No
Defaults
. There are no agreements, indentures, mortgages, guarantees,
notes, commitments, accommodations, letters of credit or other arrangements or
understandings, whether written or oral, to which the Company is a
party.
2.7
Real Property
. The
Company does not own or lease any real property.
2.8
Compliance with Law
.
The Company is conducting its business in material compliance with all
applicable laws, ordinances, rules, regulations, court or administrative order,
decree or process (“Applicable Laws”). The Company has not received any notice
of violation or claimed violation of any Applicable Law.
2.9
Litigation
.
There is
no claim, dispute, action, suit, proceeding or investigation pending or, to the
knowledge of the Company and the Shareholder, threatened, against the Company,
or challenging the validity or propriety of the transactions contemplated by
this Agreement, at law or in equity or admiralty or before any federal, state,
local, foreign or other governmental authority, board, agency, commission or
instrumentality, nor to the knowledge of the Company and the Shareholder, has
any such claim, dispute, action, suit, proceeding or investigation been pending
or threatened, during the twelve month period preceding the date
hereof;
There is
no outstanding judgment, order, writ, ruling, injunction, stipulation or decree
of any court, arbitrator or federal, state, local, foreign or other governmental
authority, board, agency, commission or instrumentality, against or materially
affecting the business of the Company; and
The
Company has not received any written or verbal inquiry from any federal, state,
local, foreign or other governmental authority, board, agency, commission or
instrumentality concerning the possible violation of any Applicable
Law.
2.10
Trading
. The Company
Common Stock is currently trading on The Pink Sheets under the ticker symbol
HMWM.
2.11
Fees
. Neither of the
Parties is obligated to pay any person any finder’s or broker’s fees in
connection with the transactions contemplated herein.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES OF EFT
EFT
represents and warrants to the Company that now and/or as of the
Closing:
3.1
Due Organization and
Qualification; Subsidiaries; Due Authorization
.
EFT is a
companies duly organized, validly existing and in good standing in the state of
Nevada with full corporate power and authority to own, lease and operate their
businesses and properties and to carry on their businesses in the places and in
the manner as presently conducted or proposed to be conducted. EFT is in good
standing as foreign corporations in each jurisdiction in which the properties
owned, leased or operated, or the business conducted, by them requires such
qualification except for any such failure, which when taken together with all
other failures, is not likely to have a material adverse effect on the business
of EFT.
EFT has
all requisite power and authority to execute and deliver this Agreement, and to
consummate the transactions contemplated hereby and thereby. EFT has taken all
corporate action necessary for the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, and this Agreement
constitutes the valid and binding obligation of EFT, enforceable against EFT in
accordance with its terms, except as may be affected by bankruptcy, insolvency,
moratoria or other similar laws affecting the enforcement of creditors’ rights
generally and subject to the qualification that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefore may be brought.
3.2
No Conflicts or
Defaults
. The execution and delivery of this Agreement by EFT and the
consummation of the transactions contemplated hereby do not and shall not (a)
contravene the governing documents of EFT, or (b) with or without the giving of
notice or the passage of time, (i) violate, conflict with, or result in a breach
of, or a default or loss of rights under, any material covenant, agreement,
mortgage, indenture, lease, instrument, permit or license to which EFT is a
party or by which EFT or any of their respective assets are bound, or any
judgment, order or decree, or any law, rule or regulation to which their assets
are subject, (ii) result in the creation of, or give any party the right to
create, any lien upon any of the assets of EFT, (iii) terminate or give any
party the right to terminate, amend, abandon or refuse to perform any material
agreement, arrangement or commitment to which EFT is a party or by which EFT or
any of its assets are bound, or (iv) accelerate or modify, or give any party the
right to accelerate or modify, the time within which, or the terms under which
EFT is to perform any duties or obligations or receive any rights or benefits
under any material agreement, arrangement or commitment to which it is a
party.
3.3
Capitalization
. The
authorized capital stock of EFT immediately prior to giving effect to the
transactions contemplated hereby consists of
___________
shares of
Common Stock which as of the date hereof there were
___________
shares
issued and outstanding. All of the outstanding shares of EFT are duly
authorized, validly issued, fully paid and nonassessable, and have not been or,
with respect to EFT Shares, will not be transferred in violation of any rights
of third parties. The EFT Shares are not subject to any preemptive or
subscription right, any voting trust agreement or other contract, agreement,
arrangement, option, warrant, call, commitment or other right of any character
obligating or entitling EFT to issue, sell, redeem or repurchase any of its
securities, and there is no outstanding security of any kind convertible into or
exchangeable for the capital stock of EFT. All of the EFT Shares are owned of
record and beneficially by Sellers free and clear of any liens, claims,
encumbrances, or restrictions of any kind.
3.4
Taxes
. EFT have filed
all tax returns and reports which were required to be filed in any jurisdiction
on or prior to the date hereof in respect of all taxes, and has paid all Taxes
(and any related penalties, fines and interest) which have become due pursuant
to such returns or reports or pursuant to any assessment which has become
payable, or, to the extent its liability for any Taxes (and any related
penalties, fines and interest) has not been fully discharged, the same have been
properly reflected as a liability on the books and records of EFT and adequate
reserves therefore have been established.
3.5
Compliance with Law
.
EFT is conducting their businesses in material compliance with all applicable
law, ordinance, rule, regulation, court or administrative order, decree or
process. EFT has not received any notice of violation or claimed violation of
any such law, ordinance, rule, regulation, order, decree, process or
requirement.
3.6
Litigation
.
There is
no claim, dispute, action, suit, proceeding or investigation pending or
threatened, against or affecting EFT, or challenging the validity or propriety
of the transactions contemplated by this Agreement, at law or in equity or
admiralty or before any federal, state, local, foreign or other governmental
authority, board, agency, commission or instrumentality, has any such claim,
dispute, action, suit, proceeding or investigation been pending or threatened,
during the 12 month period preceding the date hereof;
There is
no outstanding judgment, order, writ, ruling, injunction, stipulation or decree
of any court, arbitrator or federal, state, local, foreign or other governmental
authority, board, agency, commission or instrumentality, against or materially
affecting EFT, or any of its Subsidiaries; and EFT have not received any written
or verbal inquiry from any federal, state, local, foreign or other governmental
authority, board, agency, commission or instrumentality concerning the possible
violation of any Applicable Law.
ARTICLE
IV
REPRESENTATION
AND WARRANTIES OF SELLERS
Sellers
represents and warrants to the Company that now and/or as of the
closing:
4.1
Title to Shares
.
Sellers are the legal and beneficial owner of the EFT Shares, and upon
consummation of the exchange contemplated herein, the Company will acquire from
Sellers good and marketable title to such Shares, free and clear of all Liens
excepting only such restrictions upon transfer, if any, as may be imposed by
Applicable Law.
4.2
Due Authorization
.
Sellers have all requisite power and authority to execute and deliver this
Agreement, and to consummate the transactions contemplated hereby and thereby.
This Agreement constitutes the valid and binding obligation of Sellers,
enforceable against Sellers in accordance with its terms, except as may be
affected by bankruptcy, insolvency, moratoria or other similar laws affecting
the enforcement of creditors’ rights generally and subject to the qualification
that the availability of equitable remedies is subject to the discretion of the
court before which any proceeding therefore may be brought.
4.3
Purchase for
Investment
.
Sellers
are acquiring the Shares for investment for Sellers’ own account and not as a
nominee or agent, and not with a view to the resale or distribution of any part
thereof, and Sellers have no present intention of selling, granting any
participation in, or otherwise distributing the same, it being understood,
however, that Sellers may designate certain persons who will receive the Shares
at the Closing.
Sellers
understand that the Shares are not registered under the Securities Act on the
ground that the sale and the issuance of securities hereunder is exempt from
registration under the Act pursuant to Section 4(2) thereof, and that the
Company’s reliance on such exemption is predicated on such Sellers’
representations set forth herein. Sellers are “accredited investors” as that
term is defined in Rule 501(a) of Regulation D under the Act.
The
certificates representing Shares will bear a legend which states, in all
material effect the following:
THE SECURITIES EVIDENCED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR UNDER THE
SECURITIES LAWS OF ANY STATE. THIS RESTRICTED SHARE AGREEMENT AND THE SECURITIES
UNDERLYING THIS RESTRICTED SHARE AGREEMENT MAY NOT BE SOLD, PLEDGED,
HYPOTHECATED, TRANSFERRED, OR OTHERWISE DISPOSED OF UNLESS SUCH SALE, PLEDGE,
HYPOTHECATION, TRANSFER, OR OTHER DISPOSITION SHALL HAVE BEEN REGISTERED UNDER
SAID ACT AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS OR UNTIL
THE COMPANY SHALL HAVE RECEIVED A LEGAL OPINION SATISFACTORY IN FORM AND
SUBSTANCE TO THE COMPANY, THAT SUCH SECURITIES MAY BE LEGALLY SOLD OR OTHERWISE
TRANSFERRED WITHOUT SUCH REGISTRATION AND COMPLIANCE
.
4.4
Investment
Experience
. Sellers acknowledge that they can bear the economic risk of
his investment, and have such knowledge and experience in financial and business
matters that they are capable of evaluating the merits and risks of the
investment in the Shares.
4.5
Information
. Sellers
have carefully reviewed such information as Sellers deemed necessary to evaluate
an investment in the Shares. To the full satisfaction of Sellers, they have been
furnished all materials that they have requested relating to the Company and the
issuance of the Shares hereunder, and Sellers have been afforded the opportunity
to ask questions of representatives of the Company to obtain any information
necessary to verify the accuracy of any representations or information made or
given to the Sellers. Notwithstanding the foregoing, nothing herein shall
derogate from or otherwise modify the representations and warranties of the
Company set forth in this Agreement, on which Sellers have relied in making an
exchange of the EFT Shares for the Shares.
4.6
Restricted
Securities
. Sellers understand that the Shares may not be sold,
transferred, or otherwise disposed of without registration under the Act or an
exemption therefrom, and that in the absence of an effective registration
statement covering the Company Shares or any available exemption from
registration under the Act, the Shares must be held indefinitely. Sellers are
aware that the Shares may not be sold pursuant to Rule 144 promulgated under the
Act unless all of the conditions of that Rule are met. Among the conditions for
use of Rule 144 may be the availability of current information to the public
about the Company.
ARTICLE
5
COVENANTS
5.1
Further Assurances
.
Each of the Parties shall use reasonable commercial efforts to proceed promptly
with the transactions contemplated herein, to fulfill the conditions precedent
for such party’s benefit or to cause the same to be fulfilled and to execute
such further documents and other papers and perform such further acts as may be
reasonably required or desirable to carry out the provisions of this Agreement
and to consummate the transactions contemplated herein.
5.2
Operation of
Business
. From the date hereof through the date of the Closing, except as
expressly provided herein, each of the Company and EFT:
will
continue its business only in ordinary course;
will not,
without the written consent of the other party:
pay any
dividends, or
make
loans to stockholders or employees;
will not
issue any additional shares that would materially change the structure and
equity ownership position as set forth herein.
will
report to the other party any indication of potential material adverse factors
in its business or any litigation that may be threatened whereby one of the
parties would be a defendant.
ARTICLE
6
DELIVERIES
6.1
Items to be delivered to EFT
prior to or at Closing by the Company
.
a. Company
Shareholder list.
b. Resolution
from the Company’s Board, and shareholder resolutions approving this
transaction.
c. Certificates
representing shares of the Shares issued in the denominations as set forth
opposite the name of Sellers and/or his designee(s).
d. Resignation
of John Huemoeller.
e. Officer’s
Certificate; and
f. Any
other document reasonably requested by Sellers that he deems necessary for the
consummation of this transaction.
6.2
Items to be delivered to the
Company prior to or at Closing by the Sellers and EFT
.
a. Duly
executed transfer documents and medallion signature original stock certificates
from Sellers transferring the EFT Shares;
b. Resolutions
from the Board of Directors of EFT and, if applicable, shareholder resolutions
approving the transactions contemplated hereby;
c. Officer’s
Certificate; and
d. Any
other document reasonably requested by the Company that it deems necessary for
the consummation of this transaction.
ARTICLE
7
CONDITIONS
PRECEDENT
7.1
Conditions Precedent to
Closing
. The obligations of the Parties under this Agreement shall be and
are subject to fulfillment, prior to or at the Closing, of each of the following
conditions:
That each
of the representations and warranties of the Parties contained herein shall be
true and correct at the time of the Closing date as if such representations and
warranties were made at such time except for changes permitted or contemplated
by this Agreement; and
That the
Parties shall have performed or complied with all agreements, terms and
conditions required by this Agreement to be performed or complied with by them
prior to or at the time of the Closing.
7.2
Conditions to Obligations of
Sellers
. The obligations of Sellers shall be subject to fulfillment prior
to or at the Closing, of each of the following conditions:
The
Company shall have received all of the regulatory, shareholder and other third
party consents, permits, approvals and authorizations necessary to consummate
the transactions contemplated by this Agreement.
7.3
Conditions to Obligations of
the Company
. The obligations of the Company shall be subject to
fulfillment at or prior to or at the Closing, of each of the following
conditions:
EFT and
Sellers shall have received all of the regulatory, shareholder and other third
party consents, permits, approvals and authorizations necessary to consummate
the transactions contemplated by this Agreement.
The
Company shall have sold its wholly owned subsidiary prior to or, simultaneous
with, the Closing.
ARTICLE
8
INDEMNIFICATION
8.1
Indemnity of the
Company
. The Company agrees as to defend, indemnify and hold harmless
Sellers from and against, and to reimburse Sellers with respect to, all
liabilities, losses, costs and expenses, including, without limitation,
reasonable attorneys’ fees and disbursements (collectively the “Losses”)
asserted against or incurred by Sellers by reason of, arising out of, or in
connection with any material breach of any representation or warranty contained
in this Agreement made by the Company or in any document or certificate
delivered by the Company pursuant to the provisions of this Agreement or in
connection with the transactions contemplated thereby.
8.2
Indemnity of Sellers
.
Sellers agrees to defend, indemnify and hold harmless the Company from and
against, and to reimburse the Company with respect to, all Losses, including,
without limitation, reasonable attorneys’ fees and disbursements, asserted
against or incurred by the Company by reason of, arising out of, or in
connection with any material breach of any representation or warranty contained
in this Agreement and made by Sellers or in any document or certificate
delivered by Sellers pursuant to the provisions of this Agreement or in
connection with the transactions contemplated thereby.
8.3
Indemnification
Procedure
. A party (an “Indemnified Party”) seeking indemnification shall
give prompt notice to the other party (the “Indemnifying Party”) of any claim
for indemnification arising under this Article VIII. The Indemnifying Party
shall have the right to assume and to control the defense of any such claim with
counsel reasonably acceptable to such Indemnified Party, at the Indemnifying
Party’s own cost and expense, including the cost and expense of reasonable
attorneys’ fees and disbursements in connection with such defense, in which
event the Indemnifying Party shall not be obligated to pay the fees and
disbursements of separate counsel for such in such action. In the event,
however, that such Indemnified Party’s legal counsel shall determine that
defenses may be available to such Indemnified Party that are different from or
in addition to those available to the Indemnifying Party, in that there could
reasonably be expected to be a conflict of interest if such Indemnifying Party
and the Indemnified Party have common counsel in any such proceeding, or if the
Indemnified Party has not assumed the defense of the action or proceedings, then
such Indemnifying Party may employ separate counsel to represent or defend such
Indemnified Party, and the Indemnifying Party shall pay the reasonable fees and
disbursements of counsel for such Indemnified Party. No settlement of any such
claim or payment in connection with any such settlement shall be made without
the prior consent of the Indemnifying Party which consent shall not be
unreasonably withheld.
ARTICLE
9
TERMINATION
9.1
Termination
. This
Agreement may be terminated at any time before or, at Closing, by:
The
mutual agreement of the Parties;
Any party
if:
Any
provision of this Agreement applicable to a party shall be materially untrue or
fail to be accomplished; or
Any legal
proceeding shall have been instituted or shall be imminently threatening to
delay, restrain or prevent the consummation of this Agreement;
Upon
termination of this Agreement for any reason, in accordance with the terms and
conditions set forth in this paragraph, each said party shall bear all costs and
expenses as each party has incurred.
ARTICLE
X
MISCELLANEOUS
10.1
Survival of Representations,
Warranties and Agreements
. All representations and warranties and
statements made by a party to in this Agreement or in any document or
certificate delivered pursuant hereto shall survive the Closing Date for two
years. Each of the parties hereto is executing and carrying out the provisions
of this agreement in reliance upon the representations, warranties and covenants
and agreements contained in this agreement or at the closing of the transactions
herein provided for and not upon any investigation which it might have made or
any representations, warranty, agreement, promise or information, written or
oral, made by the other party or any other person other than as specifically set
forth herein.
10.2
Access to Books and
Records
. During the course of this transaction through Closing, each
party agrees to make available for inspection all corporate books, records and
assets, and otherwise afford to each other and their respective representatives,
reasonable access to all documentation and other information concerning the
business, financial and legal conditions of each other for the purpose of
conducting a due diligence investigation thereof. Such due diligence
investigation shall be for the purpose of satisfying each party as to the
business, financial and legal condition of each other for the purpose of
determining the desirability of consummating the proposed transaction. The
Parties further agree to keep confidential and not use for their own benefit,
except in accordance with this Agreement any information or documentation
obtained in connection with any such investigation.
10.3
Further Assurances
.
If, at any time after the Closing, the parties shall consider or be advised that
any further deeds, assignments or assurances in law or that any other things are
necessary, desirable or proper to complete the merger in accordance with the
terms of this agreement or to vest, perfect or confirm, of record or otherwise,
the title to any property or rights of the parties hereto, the Parties agree
that their proper officers and directors shall execute and deliver all such
proper deeds, assignments and assurances in law and do all things necessary,
desirable or proper to vest, perfect or confirm title to such property or rights
and otherwise to carry out the purpose of this Agreement, and that the proper
officers and directors the parties are fully authorized to take any and all such
action.
10.4
Notice
. All
communications, notices, requests, consents or demands given or required under
this Agreement shall be in writing and shall be deemed to have been duly given
when delivered to, or received by prepaid registered or certified mail or
recognized overnight courier addressed to, or upon receipt of a facsimile sent
to, the party for whom intended, as follows, or to such other address or
facsimile number as may be furnished by such party by notice in the manner
provided herein:
Attention:
|
|
If
to any of the Sellers and EFT:
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The
Sourlis Law Firm
The
Galleria
2
Bridge Avenue
Red
Bank, New Jersey 07701
Attention:
Virginia K. Sourlis, Esq.
(732)
530-9007
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|
If
to the Company:
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EFT
BioTech Holdings, Inc. (formerly HumWare Media Corporation)
78
Rogers Court
Golden,
CO 80401
Attention:
John Huemoeller
(303)
273-9446
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10.5
Entire Agreement
.
This Agreement and any instruments and agreements to be executed pursuant to
this Agreement, sets forth the entire understanding of the parties hereto with
respect to its subject matter, merges and supersedes all prior and
contemporaneous understandings with respect to its subject matter and may not be
waived or modified, in whole or in part, except by a writing signed by each of
the parties hereto. No waiver of any provision of this Agreement in any instance
shall be deemed to be a waiver of the same or any other provision in any other
instance. Failure of any party to enforce any provision of this Agreement shall
not be construed as a waiver of its rights under such provision.
10.6
Successors and
Assigns
. This Agreement shall be binding upon, enforceable against and
inure to the benefit of, the parties hereto and their respective heirs,
administrators, executors, personal representatives, successors and assigns, and
nothing herein is intended to confer any right, remedy or benefit upon any other
person. This Agreement may not be assigned by any party hereto except with the
prior written consent of the other parties, which consent shall not be
unreasonably withheld.
10.7
Governing Law
. This
Agreement shall in all respects be governed by and construed in accordance with
the laws of the State of New Jersey applicable to agreements made and fully to
be performed in such state, without giving effect to conflicts of law
principles.
10.8
Counterparts
. This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
10.9
Construction
.
Headings contained in this Agreement are for convenience only and shall not be
used in the interpretation of this Agreement. References herein to Articles,
Sections and Exhibits are to the articles, sections and exhibits, respectively,
of this Agreement. As used herein, the singular includes the plural, and the
masculine, feminine and neuter gender each includes the others where the context
so indicates.
10.10
Severability
. If any
provision of this Agreement is held to be invalid or unenforceable by a court of
competent jurisdiction, this Agreement shall be interpreted and enforceable as
if such provision were severed or limited, but only to the extent necessary to
render such provision and this Agreement enforceable.
10.11
Expenses
. Each Party
shall separately pay for their respective costs of legal services, accounting,
auditing, communications and due diligence in connection with the transactions
contemplated hereby except that subsequent to the Closing, there shall be no
liability of the Company for any such matters.
10.12
Announcements
. Unless
both the Company and EFT agree in writing, neither the Company nor EFT shall
make a public announcement regarding the transactions contemplated hereby. Any
public announcement shall be made upon the mutual agreement and written consent
of the officers of both corporations. In the event that the Company is required
under federal securities law to either (i) file any document with the SEC that
discloses the transactions contemplated hereby, or (ii) to make a public
announcement regarding the transactions contemplated hereby, the Company shall
provide EFT with a copy of the proposed disclosure no less than 48 hours before
such disclosure is made and shall incorporate into such disclosure any
reasonable comments or changes that EFT may request.
[THIS
PAGE INTENTIONALLY LEFT BLANK]
[SIGNATURE
PAGE FOLLOWS]
IN
WITNESS WHEREOF, each of the parties hereto has executed this Agreement first
set forth above.
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EFT
BioTech Corporation
By:
/s/ Tony K.
So
Tony
K. So
President
|
|
|
|
EFT
BioTech Holdings, Inc. (formerly HumWare Media Corporation)
By:
/s/ John
Huemoeller
John
Huemoeller
President
|
|
|
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Seller:
_____________________.
|
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By:
___________________
Name:
___________________
Title:
___________________
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