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  registered under Section 12(b) of the Act:

Securities  registered under Section 12 (g) of the Act:

Common Stock, par value $0.00001 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):

 

TABLE   OF CONTENTS

 

All statements other than statements of historical fact included in this Form 10 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 Form 10.

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 25 different nutritional products, some of which are oral sprays; 18 different personal care products; an environmentally protective automotive product, 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. 

To become an Affiliate, a customer must make a minimum purchase of $300 plus $30 for shipping and handling fees. After that point, the new Affiliate is not required to make any additional purchases. Our Affiliates only purchase because they want to. 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.

The Company generally does not have a return policy. The Company does, however, provide a warranty for its products. If a customer receives defective products, we will send replacement products. Historically, the company warranty provisions have not been material. The specific warranty terms and conditions vary depending upon the product sold, but generally include replacement over a period of six months.

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 program 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 Affiliate then receives the products for personal use.

 

As of June 30, 2009, we had approximately 980,000 Affiliates enrolled in the EFT Program. When a customer joins the EFT Program, the customer is given a membership ID number. 

We also have a commission plan.  The Company's commission plan is calculated on every nine new orders that are placed under an Affiliate’s identification number. When an Affiliate places an order, he/she is required to provide us with identification number of the Affiliate which referred him/her to us.  Each Affiliate is recognized to have both a right and left sales side. The commissions that each Affiliate earns are calculated on the accumulation of nine new orders placed on these two sides with a minimum of three orders placed on one side in order to generate the commission. Commissions are paid on a weekly basis and are calculated on total new sales generated each week.

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 fiscal quarter ended June 30, 2009 , there were 75,983,205  shares of Common Stock outstanding (7,793,165 of which are held by non-affiliates and the remaining 68,190,040 are held by affiliates).

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. 

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.  The purpose of this loan was to provide Excalibur funds to purchase a vessel ($17,628,283) and working capital ($1,564,717). This loan was still outstanding with balance of $1,564,717 as of June 30, 2009. At the time of the transaction, Excalibur was not a related party nor did any of the Company or any of its officers or directors have any relationship with Excalibur or any of its officers and directors. 

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. At the end of the 60 days term, the term of the loan was extended for six months. On December 25, 2008, the Company extended this loan to May 25, 2009. On May 25, 2009, the Company extended this loan to Excalibur for another six months and decreased the interest rate to 12.5% per annum.  The loan was used to fund operations.

 

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 585,677,500 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 24, 2008, the Registrant signed an additional loan agreement with Excalibur, a then 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 six months.  On December 25, 2008, the Company extended the loan to May 25, 2009.  On May 25, 2009, the Company extended this loan for another six months and decreased the interest rate to 12.5% per annum. The loan was used to fund operations.

On May 13, 2009, the Company signed another loan agreement denominated in U.S. dollars with Excalibur to lend Excalibur $600,000 at interest rate of 12.5% per annum with a maturity date of November 13, 2009. The loan was used to fund operations.

 

On June 28, 2009, Excalibur completed its inaugural passenger voyage across the Taiwan Strait.   

 

Below is our corporate chart:

 

EFT Limited (BVI) has four wholly-owned subsidiaries: EFT, Inc., a California company formed on January 1, 2003, Top Capital International, 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. EFT International Ltd. is the operating company that generates substantially all of the company’s net income. 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.

 

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 25 different nutritional products for various purposes:

 

1.

Zeolite Plus:

An oral liquid designed to detoxify the body, support immune system strength and normalize pH in the body.

2.

2006 Celprotect I:

Ingestible tablets designed to eliminate toxins and viruses (e.g., cold sores) and promote energy.

3.

2007 Celprotect II Bullet Points:

An oral liquid designed to stimulate cellular metabolism, neutralize toxins, assist in avoiding food poisoning, balance cell life and boost energy.

4.

2006 – 2007 Celprotect I:

A kit containing 2006 Celprotect I and 2006 - 2007 Celprotect II.

5.

CardioSupport:

An oral spray designed to promote heart health.

 

6.

Colloidal Silver:

An oral liquid designed to combat bacterial, fungal and viral infections.

7.

Colostrum:

An oral spray designed to promote anti-aging, weight loss and immune system support.

8.

Deer Antler Velvet Plus:

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.

9.

Essential 90+:

An oral spray designed to promote overall health.

 

 

 

Personal Care Products:

We currently offer the following 18 different Personal Care products;

 

1.

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.

 

2 .

Daily Eye Treatment:   A soothing and hydrating eye cream for the purpose of reducing puffiness, fine lines and the effects of stress and fatigue.

 

3 .

Lip gloss:   A long lasting moisturizing lipstick.

4 .

Pressed Mineral Powder:  A multi-functional face power containing zinc, Vitamins A and E and green tea extract.

5 .

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.

 

6 .

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.

 

7 .

Instant Whitening Cream: A cream for the purpose of brightening overall complexion, lightening age spots, liver spots and sun damaged skin.

 

8 .

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.

 

9 .

Perfume set: A floral fragrance perfume.

 

Automotive Additive Products:

 

We currently offer the following one automotive product:

Fast Team Plus:  A fuel additive that acts as a lubricant and cleaning compound and has been found to significantly improve gas mileage and performance and reduce smog in all gasoline powered engines.

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.

 

·

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 readily 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

Food & Drug Administration

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.

 

Personal Identifiable Information

 

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 gross sales for the previous fiscal year.  The percentage is 5% for the first $30 million in gross sales, 4% for the $10 million in gross sales in excess of $30 million, 3% for the $10 million in gross sales in excess of $40 million and up to $50 million; 2% for the $10 million in gross sales in excess of $50 million and up to $60 million; and 1% for the $10 million in gross 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 was 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.  Since the effectiveness date of the Form 10, we have been  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

 

Risk Factors

 

Investing in our securities involves risk.  You should carefully consider all of the information contained in or incorporated by reference into this report and, in particular, the risks described below before investing in our securities.  If any of the following risks actually occur, our business, financial condition or results of operations could be materially harmed and you may lose part or all of your investment.

 

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.

FINRA might not approve of Buckman, Buckman & Reid, Inc’s application to act as a market maker for our common stock on the OTC Bulletin Board.

After we have been informed by the SEC that they no longer have any further comments regarding our Form 10, Buckman, Buckman & Reid, Inc., will apply 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. No assurance can be made that their application will be approved by FINRA.  If their application is not approved, we will remain quoted on the OTC Pink Sheets which could make our common stock less attractive for potential investments and our company less attractive for any deals.  This could decrease the value of our common stock.

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. 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;

 

·

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;

 

·

the imposition of duties, taxes and other charges on exports and imports;

·

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

·

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.

 

We are subject to laws governing our customers’ personal identifiable information. 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. We are subject to various consumer protection laws relating to the collection, use, retention, security and transfer of personally identifiable information about our users, especially for financial information. In many states, there is currently great uncertainty whether or how existing laws governing issues such as property ownership, sales and other taxes, apply to the Internet and commercial online services. The interpretation and application of these laws are in a state of flux. These laws may be interpreted and applied inconsistently from country to country and our current data protection policies and practices may not be consistent with those interpretations and applications. . 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 we are required to defend our  respective methods of collection, processing and storage of personal data. Complying with these varying requirements could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business. Any failure, or perceived failure, by us to comply with any regulatory requirements or orders or other federal, state or international privacy or consumer protection-related laws and regulations could result in proceedings or actions against us by governmental entities or others, subject us to significant penalties and negative publicity and adversely affect us. In addition, we are subject to the possibility of security breaches, which themselves may result in a violation of these laws. Future investigations, lawsuits or adverse publicity relating to our 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.

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.

  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:

 

·

payment of damages, potentially treble damages, if we are found to have willfully infringed a party’s patent rights;

·

injunctive or other equitable relief that may effectively block our ability to further develop, commercialize and sell products; or

·

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:

 

·

higher than expected acquisition and integration costs;

 

·

the difficulty of integrating the operations and personnel of the acquired business;

 

·

the potential disruption of our ongoing business, including the diversion of management time and attention;

 

·

the possible inability to obtain the desired financial and strategic benefits from the acquisition or investment;

 

·

assumption of unanticipated liabilities;

·

incurrence of substantial debt or dilutive issuances of securities to pay for acquisitions;

 

·

impairment in relationships with key suppliers and personnel of any acquired businesses due to changes in management and ownership;

 

·

the loss of key employees of an acquired business; and

 

·

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 fiscal quarter ended June 30, 2009, there are 75,983,205 shares of common stock issued and outstanding (7,793,165 of which are held by non-affiliates and the remaining 68,190,040 are held by affiliates). 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:

 

•

Quarterly variations in our operating results;

•

Operating results that vary from the expectations of securities analysts and investors;

•

Changes in expectations as to our future financial performance, including financial estimates by securities analysts and investors;

•

Reaction to our earnings releases and conference calls, or presentations by executives at investor and industry conferences;

•

Changes in our capital structure;

•

Changes in market valuations of other internet or online service companies;

•

Announcements of innovations or new services by us or our competitors;

•

Announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;

•

Lack of success in the expansion of our business operations;

•

Announcements by third parties of significant claims or proceedings against us or adverse developments in pending proceedings;

•

Additions or departures of key personnel;

•

Rumors or public speculation about any of the above factors; and

•

Market and volume fluctuations in the stock markets in general.

These market fluctuations may also materially and adversely affect the market price of our Common Stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2.        FINANCIAL INFORMATION.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion together with "Selected Historical Financial Data" and our consolidated financial statements and the related notes included elsewhere in this Registration Statement on Form 10. This discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results may differ materially from those we currently anticipate as a result of many factors, including the factors we describe under "Risk Factors” and elsewhere in this Registration Statement.

Forward Looking Statements

Some of the information in this section contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as "may," "will," "expect," "anticipate," "believe," "estimate" and "continue," or similar words. You should read statements that contain these words carefully because they:

·	discuss our future expectations;

·	contain projections of our future results of operations or of our financial condition; and

·	state other "forward-looking" information.

We believe it is important to communicate our expectations. However, there may be events in the future that we are not able to accurately predict or over which we have no control. Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under "Risk Factors," "Business" and elsewhere in this Registration Statement. See "Risk Factors."

Unless stated otherwise, the words “we,” “us,” “our,” “the Company” or “EFT BioTech” in this Registration Statement collectively refers to the EFT BioTech Holdings, Inc. and its subsidiaries.

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 Quarter Ended June 30, 2009 Compared to the Fiscal Quarter Ended June 30, 2008

RESULTS OF OPERATIONS

Assets.   At June 30, 2009, we had $67,557,453 in total assets, compared to $68,666,322 at March 31 2009.  This was primarily due to the investment loss of $2,077,703 from Excalibur International Corporation at June 30, 2009.  Our inventories also decreased to $3,657,057 at June 30, 2009 from $3,908,629 at March 31, 2009 due to sales decreases during the quarter ended June 30, 2009.   

Liabilities.   At June 30, 2009, our Total Liabilities consisted of $11,465,870 compared to $12,276,962 at March 31, 2009.  Liabilities consist of Accounts Payable; Other Liabilities; Unearned Revenue; Deposits from Investors; and Income Tax Payable.  Accounts payable decreased to $1,524,374 at June 30, 2009 from $3,610,195 at March 31, 2009 primarily due to due to payment of trademark royalty expenses for last fiscal year. Other liabilities consist of commissions (Affiliate rewards) payable, payroll liabilities and other liabilities, and increased to $7,747,921 at June 30, 2009 from $6,675,552 at March 31, 2009 because of increased commissions payable and payroll payable. Unearned revenue consists of customer deposits for unshipped products, and increased to $2,193,575 at June 30, 2009 from $1,991,215 at March 31, 2009 due to increased deliveries in-transit. 

Stockholders’ Equity (Deficit). Our Stockholders’ Equity (Deficit) decreased to $56,091,583 at June 30, 2009 from $56,389,360 at March 31, 2009. This decrease was primarily due to a decrease in Retained Earnings to $3,616,067 at June 30, 2009 from $4,023,992 at March 31, 2009.

Revenues .    Our Revenues decreased to $3,989,316 for the three months ended June 30, 2009 from $4,751,518 for the three months ended June 30, 2008 because of decreased sales.  The decrease in sales from the fiscal year ended March 31, 2008 to 2009 was due to the worldwide recession and to several natural disasters in China during 2008. Also, in July 2008, we increased our initial cost to our customers in order for them to become Affiliates from $250 to $300.  This increase in the initial cost might have contributed to a decrease in sales as customers believe that such an increase is prohibitively expensive.  Our products are discretionary items and in light of the worldwide recession, consumers have generally been decreasing their purchases of discretionary items.  Also, in the 1 st quarter of, 2008, we discontinued two (2) of our environmental home care products and, in 4 th quarter of 2008, we have added four (4) nutritional products. Consumers might have decreased their purchases of our products due to the change in the mix of products we offer.

Costs of Goods Sold.   Costs of Goods Sold decreased to $960,448 for the three months ended June 30, 2009 from $1,632,841 for the three months ended June 30, 2008.  Costs of Goods Sold consist of merchandise purchases from vendors and decreased because of decreased in sales volume. Costs of Goods Sold percentage (Total Costs of Goods Sold divided by Total sales) decreased from approximately 34% to 24% for the three months ended June 30, 2008 and 2009, respectively.

Shipping Charges .  Shipping Charges decreased to $1,054,080 for the three months ended June 30, 2009 from $1,499,870 for the three months ended June 30, 2008 due to decreased sales.

Shipping Costs .  Shipping Costs decreased to $301,900 for the three months ended June 30, 2009 from $736,904 for the three months ended June 30, 2008.  Shipping Costs consist of freight charges to our Hong Kong facility and decreased because of decreased sales.

Gross Profits . Gross Profits decreased to $3,781,048 for the three months ended June 30, 2009 from $3,881,643 for the three months ended June 30, 2008.  Our gross profit margin for the three months ended June 30, 2009 was 75% compared to 66% for the three months ended June 30, 2008.  Gross Profits decreased due to sales volume decreasing by 10% and gross profit margins increasing due to the Company raising its unit sales prices in July 2008.

Selling, General and Administrative Expenses .  Selling, General and Administrative Expenses increased to $2,306,319 for the three months ended June 30, 2009 from $1,246,573 for the three months ended June 30, 2008. Selling, General and Administrative Expenses consist of advertising of $15,141 and corporate administrative expenses of $1,336,431, and increasing consultant fees to ZR Public Relation Company, Ltd. of $354,747 and royalty fees accrued for trademark of $600,000 at June 30, 2009.

Interest Income .  Interest Income decreased to $164,932 for the three months ended June 30, 2009 from $416,376 for the three months ended June 30, 2008.  Interest Income decreased due to cash increasing $1,994,148 and interest rate declining at June 30, 2009.

Foreign Exchange Loss .  Foreign Exchange Gain increased to $886 for the three months ended June 30, 2009 from $(499) for the three months ended June 30, 2008.  Foreign Exchange Gain increased because of fluctuation on foreign exchange rates.

Other Income (Net).   Other Income (Net) increased to $29,232 for the three months ended June 30, 2009 from $3,634 for the three months ended June 30, 2008. Other Income (Net) consists of fees received for educational training classes and increased due to additional classes held.

LIQUIDITY AND CAPITAL RESOURCES

 

As reflected in the accompanying consolidated financial statements, at June 30, 2009, the Company had $40,175,985 cash on hand and a stockholders’ equity of $56,091,584. 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 June 30, 2009, we had $67,557,454 in total assets, compared to $68,666,322 at March 31, 2009.  This was primarily due to investment loss from Excalibur International Corporation. Our inventories also decreased to $3,657,057 at June 30, 2009 from $3,908,629 at March 31, 2009 due to a sales decrease.  Our decrease in investments was due to an equity investment in Excalibur to $15,051,611 at June 30, 2009 from $17,129,314 at March 31, 2009, and related party Notes Receivable of $6,561,717 at June 30, 2009 compared to $5,961,717 at March 31, 2009 was due to loans made to Excalibur and Yeuh-Chi Liu.  At June 30, 2009, we had $618,894 in invested mutual funds and our prepaid expenses were $927,515.

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.    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. We believe we have enough capital to fund our operations during the next 12 months. 

The Fiscal Year Ended March 31, 2009 Compared to the Fiscal Year Ended March 31, 2008

Assets.   At March 31, 2009, we had $68,666,322 in total assets, compared to $57,427,420 at March 31 2008.  This was primarily due to an increase in cash and cash equivalents to $38,181,837 at March 31, 2009 from $15,165,620 at March 31, 2008 following our Regulation S Private Placement. Our inventories also increased to $3,908,629 at March 31, 2009 from $2,619,429 at March 31, 2008 due to anticipated sales increases.   At March 31, 2009, our restricted cash decreased to $0 from $37,845,432 at March 31, 2008 because release of cash restriction.  Restricted cash consisted of $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, 2009, our Total Liabilities were $12,276,962, compared to $55,687,992 at March 31, 2008.  Liabilities consist of Accounts Payable; Other Liabilities; Unearned Revenue; Deposits from Investors; and Income Tax Payable.  Accounts payable increased to $3,610,195 at March 31, 2009 from $804,041 at March 31, 2008 primarily due to increases in freight expenses incurred from decreased sales. Other liabilities consist of commissions (Affiliate rewards) payable, payroll liabilities and other liabilities, and decreased to $6,675,552 at March 31, 2009 from $12,787,714 at March 31, 2008 because of decreased commissions (Affiliate rewards) payable and payroll payable. Unearned revenue consists of customer deposits for unshipped products, and decreased to 1,991,215 at March 31, 2009 from $3,945,805 at March 31, 2008 due to decreased orders. Deposits from investors decreased to $0 at March 31, 2009 from $37,845,432 at March 31, 2008 due to our Regulation S Private Placement Offering was completed in year 2008.  Income tax payable decreased to $0 at March 31, 2009 from $305,000 at March 31, 2008 due to recognition of a tax calculation method according to the treasury regulations.

Stockholders’ Equity (Deficit). Our Stockholders’ Equity (Deficit) increased to $56,389,360 at March 31, 2009 from $1,739,428 at March 31, 2008. This increase was primarily due to an increase in Additional Paid in Capital to $52,854,891 at March 31, 2009 from $6,552 at March 31, 2008 and in Retained Earnings to $4,023,992 at March 31, 2009 from $1,895,330 at March 31, 2008.

Revenues .    Our Revenues decreased to $12,846,809 for the fiscal year ended March 31, 2009 from $30,249,302 for the fiscal year ended March 31, 2008 because of decreased sales.  The decrease in sales from the fiscal year ended March 31, 2008 to 2009 was due to the worldwide recession and to several natural disasters in China during 2008. Also, in July 2008, we increased our initial cost to our customers in order for them to become Affiliates from $250 to $300.  This increase in the initial cost might have contributed to a decrease in sales as customers believe that such an increase is prohibitively expensive.  Our products are discretionary items and in light of the worldwide recession, consumers have generally been decreasing their purchases of discretionary items.  Also, in the 1 st quarter of, 2008, we discontinued two (2) of our environmental home care products and, in 4 th quarter of 2008, we have added four (4) nutritional products. Consumers might have decreased their purchases of our products due to the change in the mix of products we offer.

Shipping Charges .  Shipping Charges decreased to $5,657,625 for the fiscal year ended March 31, 2009 from $10,110,360 for the fiscal year ended March 31, 2008 due to decreased sales.

Costs of Goods Sold.   Costs of Goods Sold decreased to $5,780,447 for the fiscal year ended March 31, 2009 $11,423,852 for the fiscal year March 31, 2008.  Costs of Goods Sold consist of merchandise purchases from vendors and decreased because of decreased sales.

Shipping Costs .  Costs of Goods Sold decreased to $5,780,447 for the fiscal year ended March 31, 2009 from $11,423,852 for the fiscal year March 31, 2008.  Costs of Goods Sold consist of merchandise purchases from vendors and decreased because of decreased in sales volume.  On the contrary, Costs of Goods Sold percentage (Total Costs of Goods Sold divided by Total sales) increased from approximately 39% to 43% for the fiscal year ended March 31, 2008 and March 31, 2009 respectively due to the Company had given out free products to promote its business.

Gross Profits . Gross Profits decreased to $10,519,486 for the fiscal year ended March 31, 2009 from $24,468,670 for the fiscal year ended March 31, 2008.  Our gross profit margin for the fiscal year ended March 31, 2009 decreased to 57% from 61% for the fiscal year ended March 31, 2008.  Gross Profits and gross profit margins decreased because of decreased sales in year 2009. Also, during the year 2009, we held many promotions by giving out free products to boost our sales. As a result, our cost of goods sold was correspondingly higher in year 2009.

 

Selling, General and Administrative Expenses .  Selling, General and Administrative Expenses increased to $8,931,562 for the fiscal year ended March 31, 2009 from $3,693,369 for the fiscal year ended March 31, 2008, 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 and royalty fees accrued for trademark at the year end.

Interest Income .  Interest Income increased to $1,246,433 for the fiscal year ended March 31, 2009 from $275,538 for the fiscal year ended March 31, 2008.  Interest Income consists of bank deposit interest, interest income from the outstanding loans and increased because of cash balance increases due to our Regulation S Private Placement Offering.

Foreign Exchange Loss .  Foreign Exchange Gain increased to $723,357 for the fiscal year ended March 31, 2009 from $(4,248) for the fiscal year ended March 31, 2008.  Foreign Exchange Gain increased because of gains on foreign exchange rates.

Other Income (Net).   Other Income (Net) increased to $634,635 for the fiscal year ended March 31, 2009 from $54,904 for the fiscal year ended March 31, 2008. Other Income (Net) consists of fees received for educational training classes and increased due to additional classes held.

LIQUIDITY AND CAPITAL RESOURCES

 

As reflected in the accompanying consolidated financial statements, at March 31, 2009, the Company had $38,181,837 cash on hand and a stockholders’ equity of $56,389,360. 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 March 31, 2009, we had $68,666,322 in total assets, compared to $57,427,420 at March 31, 2008.  This was primarily due to our Regulation S Private Placement and outstanding loans. Our inventories also increased to $3,908,629 at March 31, 2009 from $2,619,429 at March 31, 2008 due to anticipated sales increase.  Our increase in investments was due to an equity investment in Excalibur of $17,129,314 at March 31, 2009 from $0 at March 31, 2008, and related party Notes Receivable of $5,961,717 at March 31, 2009 compared to $0 at March 31, 2008 was due to loans made to Excalibur and Yeuh-Chi Liu.  At March 31, 2009 we had $508,746 invested in mutual funds, compared to $835,965 at March 31, 2008. Our prepaid expenses increased to $2,551,298 at March 31, 2009 from $793,760 at March 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.    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. We believe we have enough capital to fund our operations during the next 12 months. 

Our Revenues decreased to $12,846,809 for the fiscal year ended March 31, 2009 from $30,249,302 for the fiscal year ended March 31, 2008 due to decreased sales The decrease in revenue from the fiscal year ended March 31, 2008 to 2009 was due to the worldwide recession and to several natural disasters in China during 2008. Also, in July 2008, we increased our initial cost to our customers in order for them to become Affiliates from $250 to $300.  This increase in the initial cost might have contributed to a decrease in sales as customers believe that such an increase is prohibitively expensive for their budgets.  Our products are discretionary items and in light of the worldwide recession, consumers have been decreasing their purchases of discretionary items.  Also, in the 1 st quarter of, 2008, we discontinued two (2) of our environmental home care products and, in 4 th quarter of 2008, we have added four (4) nutritional products.  Consumers might have decreased their purchases of our products due to the change in the mix of products we offer.

  Accounts Payable increased to $3,610,195 at March 31, 2009 from $804,041 at March 31, 2008 to due to the trademark royalty fee accrued at the year end. Other Liabilities consist of commissions (Affiliate rewards) payable, payroll liabilities and other liabilities, and decreased to $6,657,552 at March 31, 2009 from $12,787,714 at March 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 to $1,991,215 at March 31, 2009 from $3,945,805 at March 31, 2008 because of decreased sales.  Deposits from Investors consist of net proceeds from our Regulation S Private Placement Offering of Units, and decreased to $0 at March 31, 2009 from $37,845,432 at March 31, 2008 because of the expiration of the Regulation S Offering.  Income Tax Payables consist of Federal Tax Provision, and decreased to $0 at March 31, 2009 from $305,000 at March 31, 2008 because of recognition of a tax calculation method according to the treasury regulation.

 

Our stockholders’ equity increased to $56,389,360 at March 31, 2009 from $1,739,428 at March 31, 2008.   This increase was primarily due to an increase in retained earnings to $4,023,992 at March 31, 2009 from $1,895,330 at March 31, 2008 and proceeds from our Regulation S Private Placement of $51,149,412 at December 31, 2008.

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.  

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 (10th) 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: three in July of 2008, one 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.

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.

 

 

(1)

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, 2009 approximate the following:

 

The Company rents office space for its sales division in Hong Kong.  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.  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:

 

The Company rents storage space to for its sales division in Hong Kong.  The lease provides for monthly lease payments approximating $1,135 USD starting on May 8, 2008 and expires on May 7, 2010.  Future minimum lease payments under the operating leases as of March 31, 2009 approximate the following:

Rent expenses for the year ended March 31, 2009 and March 31, 2008 were approximately $494,487 and $487,896, respectively.

 

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 still outstanding with balance of $1,564,717 as of June 30, 2009. At the time of the transaction, Excalibur was not a related party nor did any of the Company or any of its officers or directors have any relationship with Excalibur or any of its officers and directors.   

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. At the end of the 60 days term, the term of the loan was extended for six months. On December 25, 2008, the Company extended this loan to May 25, 2009. On May 25, 2009, the Company extended this loan to Excalibur for another six months and decreased the interest rate to 12.5% per annum.

 

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 585,677,500 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 24, 2008, the Registrant signed an additional loan agreement with Excalibur, a then 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 six months.  On December 25, 2008, the Company extended the loan to May 25, 2009.  On May 25, 2009, the Company extended this loan for another six months and decreased the interest rate to 12.5% per annum.

On May 13, 2009, the Company signed another loan agreement denominated in U.S. dollars with Excalibur to lend Excalibur $600,000 at interest rate of 12.5% per annum with a maturity date of November 13, 2009.

 

Note Receivable – Related party

The Board of Directors approved two non-interest bearing unsecured demand loans in the amount of U.S. $330,000 and $1,567,000 respectively on July 14, 2008 and July 25, 2008 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.  

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, 2009, 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 on hand and cash in time deposits, and 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 2008 and 2009 financial results.

 

Notes Receivables from Related Parties

 

Notes receivable consists of receivables from the Registrant’s loans to Excalibur, Taiwan, and Yeuh-Chi Liu, related parties. As of March 31, 2009, outstanding loans to Excalibur  totaled $ 4.06 million and to Yeuh-Chi Liu $1.89 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 March 31, 2009, 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

 

The FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, on June 29, 2009 and, in doing so, authorized the Codification as the sole source for authoritative U.S. GAAP. SFAS No. 168 will be effective for financial statements issued for reporting periods that end after September 15, 2009.  Once it's effective, it will supersede all accounting standards in U.S. GAAP, aside from those issued by the SEC. SFAS No. 168 replaces SFAS No. 162 to establish a new hierarchy of GAAP sources for non-governmental entities under the FASB Accounting Standards Codification. The Company will evaluate the impact of SFAS No. 168 upon its effectiveness.

 

SFAS No. 167 amends FASB Interpretation (FIN) No. 46(R), Consolidation of Variable Interest Entities, by altering how a company determines when an entity that is insufficiently capitalized or not controlled through voting should be consolidated, the FASB said. A company has to determine whether it should provide consolidated reporting of an entity based upon the entity's purpose and design and the parent company's ability to direct the entity's actions.

 

 

The standards will be effective at the start of the first fiscal year beginning after November 15, 2009, which will mean January 2010 for companies that are on calendar years. The guidance will have to be applied for first-quarter filings. The Company will comply with the disclosure requirements of this statement when and if it acquires a variable interest entity, upon its effectiveness.

 

FAS No. 166 revises SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, and will require entities to provide more information about sales of securitized financial assets and similar transactions, particularly if the seller retains some risk to the assets, the FASB said. The statement eliminates the concept of a qualifying special-purpose entity, changes the requirements for the derecognition of financial assets, and calls upon sellers of the assets to make additional disclosures about them.   The Company does not believe implementation of FAS No. 166 will have a material impact on its financial statements.

 

On May 28, 2009 the FASB announced  the issuance of SFAS 165, Subsequent Events . SFAS 165 should not result in significant changes in the subsequent events that an entity reports. Rather, SFAS 165 introduces the concept of financial statements being available to be issued. Financial statements are considered available to be issued when they are complete in a form and format that complies with generally accepted accounting principles (GAAP) and all approvals necessary for issuance have been obtained.  The Company believes that SFAS No. 165 will have an effect on its financial statements and will comply upon effectiveness

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 pursuant to a five year lease commencing on March 31, 2007.   The lease expires on March 31, 2012. Pursuant to the lease, there is no rent for the first two years.  Commencing on the third year of the lease, the monthly rent is $50,000 USD starting the beginning of the third year and we expense the 5-year total rent evenly over the life of the lease.  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.

The Company also rents storage space to for its sales division in Hong Kong.  The lease provides for monthly lease payments approximating $1,135 USD starting on May 8, 2008 and expires on May 7, 2010.

We believe our properties are sufficient for our current operations.

 

ITEM 4.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

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.

 

* 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 fiscal quarter ended June 30, 2009.

 

(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.

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.

Jerry B. Lewin

During the past five years, Mr. Lewin has been serving as the Senior Vice President of Field Operations North America for Hyatt Hotel Corporation.  Mr. Lewin is responsible for, and oversees the operation of 23 Hyatt Hotels throughout the East Coast and Canada including the Flag Ship Hotel, Grand Hyatt New York in Mid-Town Manhattan. Mr. Lewin also serves on several boards and foundations including the New York City Hotel Association and the New York Law Enforcement Foundation.

Visman Chow

Since 1993, Mr. Chow has been serving as the Chief Lending Officer and board member at Universal Bank. From 1979 to 1983, Mr. Chow was with Union Bank where he managed a commercial real estate portfolio of approximately $50 million. Mr. Chow then went on to become President of Unieast Financial Corporation prior to his current position.

Norman Ko

Since 2007, Mr. Ko has been a partner with Smith Mandel and Associates, LLP.  He provides audit and assurance services to private clients in various industry groups along with SEC audit preparation and tax planning. Mr. Ko also has experience in areas including due diligence, mergers and acquisition and business reorganizations.

 

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.     

 

COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934  

Section 16(a) of the Exchange Act requires the Registrant’s directors and officers, and persons who beneficially own more than 10% of a registered class of the Registrant’s equity securities, to file reports of beneficial ownership and changes in beneficial ownership of the Registrant’s securities with the SEC on Forms 3, 4 and 5. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish the Registrant with copies of all Section 16(a) forms they file.  

 

Jack Jie Qin, our President, CEO and Chairman; Sharon Tang, our Chief Financial Officer; and George Curry, our Chief Marketing Officer, have not filed Forms 3, 4 and 5 to date.  They intend to file them in the near future.   Our 5% stockholders have not filed a Form 3 to date.

ITEM 6.

EXECUTIVE COMPENSATION

  Compensation Discussion and Analysis

The goal of our named executive officers’ compensation levels is the same as our goal for operating the Company – to create long-term value for our stockholders.  Toward this goal, we establish compensation levels based on our named executive officers’ relevant experience and leadership experience and skills. We also consider the named executive officers’ ability and likelihood of contributing to our Company’s growth and success.  We also take into account comparable salary ranges at similar companies in order to attract and retain our named executive officers.

We do not have a formula or benchmark or necessarily react to short-term changes in business performance when reviewing our named executive officers’ salaries.  We consider their past contributions to the Company, ability to work cohesively with our management team and our expectations regarding their future performance.  Executive officers have an active role in our determination of their compensation levels and we consider such executive officers’ opinions and expectations.

To date, we have not adopted a stock option plan or other incentive plan.  We intend to adopt a plan in the future to further align our management’s interest with our stockholders’ interest.

Other than our employment with Ms. Sharon Tang, our Chief Financial Officer, we do not have any employment agreements with our executive officers. Ms. Tang’s employment agreement does not contain a change in control or severance provisions. Our executive officers serve at the will of the Board which enables the Company to terminate their employment at their discretion.  This is consistent with the Company’s performance-based employment and compensation philosophy.

The table below summarizes the compensation we have paid our Named Executive Officers in the last two fiscal years.

 

 

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)

Ms. Tang commenced serving as the Company’s Chief Financial Officer on June 1, 2008.

 

(4)

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.

 

(5)

300,000 shares at $0.001 per share. Share price is based on estimated fair market price on the grant date in November 2008.

 

(6)

Ms. Liu resigned as the Registrant’s Operations Manager and a Director effective December 2, 2008.

 

(7)

Tony So resigned from the Registrant in September 2008.

 

(8)

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

The Company has a standing Audit Committee and a Compensation Committee.  Norman Ko is the Chairperson of both committees.  Jack Qin and George Curry are the other two members sitting on the Audit Committee and the Compensation Committee.  Jerry B. Corwin, Visman Chow and Norman Ko are deemed to be independent.

Financial Expert

Our Board of Directors has designated Mr. Norman Ko as a “financial expert” as that term is defined in Item 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, 2009, the Registrant reimbursed the directors an aggregate of $0 for such expenses.

 

Code of Ethics

 

We currently have a Code of Ethics for our directors and principal executive officers.   

Code of Business Conduct

 

The Company has adopted a Code of Business Conduct which is followed in connection with all Related Party Transactions (as defined below) with Related Persons (as defined in Rule 404 of Regulation S-K). For these purposes, a “Related Person Transaction” is a financial transaction, arrangement or relationship, or any series of similar transactions, between the Company and an entity in which any Related Person will have a direct or indirect material interest, other than:

 

1.           Transactions available to all employees generally.

 

2.           Transactions involving less than $25,000 annually ($6,250 quarterly) when aggregated with all similar transactions.

 

This includes any transactions requiring disclosure under item 404 of Regulation S-K under the Securities and Exchange Act of 1934,as amended.

 

Approval Procedures:

 

1.

A proposed Related Person Transaction shall be brought before the Board of Directors. The Board must be informed of (a) the Related Person’s relationship or interest, including all conflicts of interest that may exist or otherwise arise on account of the Related Person Transaction, and (b) the material facts of the proposed Related Person Transaction.

 

2.

The Board shall determine whether to approve a Related Person Transaction after considering the following factors, as deemed relevant by the Board:

 

• Whether the transaction is on terms comparable to those that could be obtained in arms-length dealing with an unrelated third party;

 

• Whether there are business reasons to enter into the Related Person Transaction;

 

 

• Whether the Related Person Transaction could impair the independence of a director, if applicable;

 

• Whether the Related Person Transaction would present an improper conflict of interest, taking into account the size of the transaction, the overall financial position of the executive officer, Director or Director Nominee, the direct or indirect nature of the interest of the executive officer, Director or Director Nominee in the transaction, the ongoing nature of any proposed relationships or any other factors the Board deems relevant.

 

3.

The Board will approve such transactions to be entered into by the Company, including the ratification of such transactions if applicable. At subsequent meetings, management shall update the Board as to any material changes to those proposed transactions.

 

4.

The Board shall also periodically review and assess ongoing relationships with Related Persons to assure compliance with the Board guidelines and directives and to ensure that such Related Person Transaction remains fair to the Company.

 

5.

Any member of the Board who has an interest in the transaction under consideration will abstain from voting, but may participate in the discussion if invited to do so by the Chair of the Board.

 

6.

These procedures generally should be used to approve Related Person Transactions in advance of the transaction being entered into. On occasion, however, it may be advisable to commence a Related Person Transaction before the Board has evaluated it, or a transaction may commence before it is discovered there is a Related Person. Accordingly, in such instances, notwithstanding the above, management should consult with the Chair of the Board to determine the appropriate course of action, which may include subsequent ratification by the Board.

 

Disclosure:

 

Related Person Transactions are to be disclosed in the Company’s applicable filings as required by the Securities Act of 1933 and the Securities Exchange Act of 1934 and related rules. Any material Related Person Transaction shall be disclosed to the full Board of Directors.

 

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 disclosed in this Form 10, the Company has loaned amounts to Excalibur, a related party.  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, the Company did not have any relationship with Excalibur nor was it deemed to be a related party.

Note Receivable

On July 14, 2008, the Company entered into a loan agreement and issued a promissory note to Yeuh-Chi Liu, a vendor and a director of the Company’s Board of Directors, for the principal amount of $330,000.  The loan is non-interesting bearing and was payable upon demand.  On July 15, 2009, the loan agreement was amended to change the term of the loan to December 15, 2009. As of the date hereof, the full principal amount remains outstanding.

On July 25, 2008, the Company entered into a loan agreement and issued a promissory note to Yeuh-Chi Liu, a vendor and a director of the Company’s Board of Directors, for the principal amount of $1,567,000.  The loan is non-interesting bearing and was payable upon demand.  The loan is secured by Yeuh-Chi Liu’s 3.97% ownership interest of Excalibur Marine Company.

The Board of Directors approved two non-interest bearing, unsecured demand loans in the amount of U.S. $330,000 and $1,567,000 on July 14, 2008 and July 25, 2008, respectively, to Yeuh-Chi Liu who is a vendor and director on the board of Excalibur.  

 

Director Independence  

 

None of our directors are deemed to be independent.

ITEM 8.

LEGAL PROCEEDINGS

 

We are not a party to nor are any of our properties the subject of any material pending legal proceedings.  We have not been  threatened with nor 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.

 

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 fiscal quarter ended June 30, 2009,  there are 75,983,205 shares of common stock issued and outstanding (7,793,165 are held by non-affiliates and the remaining 68,190,040 are held by 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.

 

After we have been informed by the SEC that they no longer have any further comments regarding this Form 10, Buckman, Buckman & Reid, Inc., will apply 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 31st.  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:

 

 

Dividend Policy

For the fiscal year ended March 31, 2009 and 2008, approximately $0 and $18.5 million, respectively, in dividends were paid to the Company’s stockholders.

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.

Record Holders

As of September 3, 2009, there were 29,821 record holders of our common stock.

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:

 

(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:

 

(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 (10th) 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.

 

(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 the fiscal quarter ended Jun 30, 2009, there are 75,983,205 shares of common stock issued and outstanding (7,793,165 are held by non-affiliates and the remaining 68,190,040 are held by affiliates).

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.

 

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

 

 

  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS