SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): October 25, 2008
EFT BIOTECH HOLDINGS, INC.
---------------- ---------------------------
(Name of registrant as specified in its charter)
Nevada 0-27715 20-1211204
------------------------ --------------------- -------------------
(State of incorporation) (Commission File No.) (IRS Employer
Identification No.)
17800 Castleton St., Suite 300
City of Industry, CA 91748
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(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (626) 581-3335
N/A
-------------------------------------------------
(Former name or former address if changed since last report)
Check appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2. below)
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-14(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.01 Completion of Acquisition or Disposition of Assets
On October 25, 2008, EFT BioTech Holdings, Inc. (the "Company"), through a
wholly owned subsidiary, acquired 48.81% of the capital stock of Excalibur
International Marine Corporation, a Taiwan corporation, for $19,193,000. The
remaining 51.19% equity interest is held by Taiwan residents.
Excalibur owns and operates a high speed ship which transports passengers
and cargo between Taiwan and mainland China through the Taiwan Strait.
Excalibur's ship, the OceanLaLa, can carry up to 370 passengers and 630
tons of cargo.
The OceanLaLa made its first voyage on October 29, 2008, was taken out of
service between mid-March, 2010 and early May, 2010 for repairs, and resumed
sailings on May 13, 2010. The OceanLaLa operates on a charter schedule and
currenly makes six trips each week to Penhu. Excalibur is scheduling additional
services from Taichung to Xiaman at least four additional trips a week.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Excalibur International Marine Corporation for
years ended December 31, 2009 and 2008
(b) Pro Forma Financial Statements
(c) Not applicable
(d) Exhibits
10.1 Agreement relating to the acquisition of the capital stock of
Excalibur International Marine Corporation (incorporated by
reference to Exhibit 10.15 filed with Amendment No. 9 to the
Company's registration statement on Form 10).
EXCALIBUR INTERNATIONAL MARINE CORPORATION
FINANCIAL STATEMENTS
DECEMBER 31, 2009 AND 2008
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page(s)
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Financial Statements
Balance Sheets F-1
Statements of Operations and Other Comprehensive Income (Loss) F-2
Statements of Changes in Stockholders' Equity F-3
Statements of Cash Flows F-4
Notes to Financial Statements F-5
Report of Independent Registered Public Accounting Firm
To the Board of Directors
Excalibur International Marine Corporation
We have audited the balance sheets of Excalibur International Marine Corporation
(the Company) as of December 31, 2009 and 2008, and the related statements of
operations, stockholders' equity and cash flows for the years ended December 31,
2009 and 2008. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Excalibur International Marine
Corporation as of December 31, 2009 and 2008, and the results of its operations
and its cash flows for the years ended December 31, 2009 and 2008, in conformity
with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 12 to the
financial statements, the Company has incurred losses from operations, has
liquidity problems, and requires additional funds for its operational
activities. These factors raise substantial doubt that the Company will be able
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Child, Van Wagoner & Bradshaw, PLLC
/s/ Child, Van Wagoner & Bradshaw PLLC
Salt Lake City, Utah
June 4, 2010
Excalibur International Marine Corporation
Balance Sheets
December 31, December 31,
2009 2008
------------ ------------
ASSETS
Current assets
Cash and cash equivalents $ 21,684 $ 409,971
Accounts receivable, net 207 -
Advances to suppliers - 34,035
Prepaid expenses 39,283 28,784
Other receivable 46,001 1,279,107
------------ ------------
Total current assets 107,175 1,751,897
Restricted cash 193,992 -
Property and equipment, net 14,094,129 21,785,542
------------ ------------
Total assets $14,395,296 $23,537,439
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,257,236 $ 551,703
Other liabilities 6,509 319,161
Short-term loans, related party 6,085,041 4,068,507
Due to related parties 43,427 42,658
------------ ------------
Total current liabilities 7,392,213 4,982,029
Contingent liabilities 2,904,957 2,830,033
Note payable 21,213 41,547
------------ ------------
Total liabilities 10,318,383 7,853,609
Stockholders' equity
Capital stock, NTD 10 par value,
120,000,000 authorized, 120,000,000
shares issued and outstanding at
December 31, 2009 and 2008 36,722,702 36,722,702
Accumulated deficit (32,664,080) (21,072,225)
Accumulated other comprehensive income 18,291 33,353
------------ ------------
Total stockholders' equity 4,076,913 15,683,830
------------ ------------
Total liabilities and stockholders'
equity $14,395,296 $23,537,439
============ ============
The accompanying notes are an integral part of these financial statements.
F-1
Excalibur International Marine Corporation
Statements of Operations and Other Comprehensive Income (Loss)
Year Ended December 31,
-------------------------------
2009 2008
-------------- --------------
Transportation income, net $ 286,377 $ 11,267
Cost of provision of transportation 3,109,613 1,174,923
-------------- --------------
Gross profit (2,823,236) (1,163,656)
Operating expenses:
Selling, general and administrative expenses 2,137,754 891,046
Impairment loss 6,048,414 -
-------------- --------------
Total operating expenses 8,186,168 891,046
Net operating loss (11,009,404) (2,054,702)
Other income (expense)
Interest income 432 17,688
Interest expense (702,447) (286,649)
Foreign exchange gain (loss) 111,929 (3,411,646)
Other income (expense), net 7,635 (5,241)
-------------- --------------
Total other income (582,451) (3,685,848)
-------------- --------------
Net loss before income taxes (11,591,855) (5,740,550)
Income taxes - -
-------------- --------------
Net loss $ (11,591,855) $ (5,740,550)
============== ==============
Foreign currency translation adjustment (15,062) 203,462
-------------- --------------
Comprehensive loss $ (11,606,917) $ (5,537,088)
============== ==============
Net loss per common share
Basic and diluted $ (0.10) $ (0.09)
============== ==============
Weighted average common shares outstanding
Basic and diluted 120,000,000 65,141,331
============== ==============
The accompanying notes are an integral part of these financial statements.
F-2
Excalibur International Marine Corporation
Statements Of Changes In Stockholders' Equity
Accumulated
Capital Stock Other Total
---------------------------- (Accumulated Comprehensive Stockholders'
Shares Amount Deficit) Income (Loss) Equity
------------ ------------ ------------- ------------- -------------
BALANCE, JANUARY 1, 2008 56,666,250 $ 17,425,046 $ (15,331,675) $ (170,109) $ 1,923,262
Issuance of capital stock 63,333,750 19,297,656 - - 19,297,656
Net loss - - (5,740,550) - (5,740,550)
Foreign currency translation
adjustment - - - 203,462 203,462
-------------- -------------- -------------- -------------- --------------
BALANCE, DECEMBER 31, 2008 120,000,000 $ 36,722,702 $ (21,072,225) $ 33,353 $ 15,683,830
============== ============== ============== ============== ==============
Net loss - - (11,591,855) - (11,591,855)
Foreign currency translation
adjustment - - - (15,062) (15,062)
-------------- -------------- -------------- -------------- --------------
BALANCE, DECEMBER 31, 2009 120,000,000 $ 36,722,702 $ (32,664,080) $ 18,291 $ 4,076,913
============== ============== ============== ============== ==============
The accompanying notes are an integral part of these financial statements.
F-3
Excalibur International Marine Corporation
Statements of Cash Flows
Year Ended December 31,
------------------------------
2009 2008
-------------- --------------
Cash flows from operating activities:
Net loss $ (11,591,855) $ (5,740,550)
Adjustments to reconcile net loss to
net cash provided by (used in) operating
activities:
Depreciation and amortization 2,173,650 940,327
Provision for doubtful accounts 98 (199)
Impairment on equipment 6,048,414 -
Changes in operating assets and liabilities:
Accounts receivable (257) -
Advances to suppliers 33,781 (35,398)
Prepaid expenses and other receivable 1,214,926 (1,259,397)
Accounts payable 678,155 372,726
Other liabilities (310,430) 324,245
Contingent liabilities 23,286 2,943,352
-------------- --------------
Net cash (used in) operating activities (1,730,232) (2,454,894)
Cash flows from investing activities:
Purchase of property and equipment (340,319) (23,581,351)
-------------- --------------
Net cash (used in) investing activities (340,319) (23,581,351)
Cash flows from financing activities:
Restricted cash (193,992) -
Proceeds from short term loans, related party 1,894,472 4,231,415
Repayment to related party - (9,507)
Repayment for note payable (20,555) (20,169)
Proceeds from issuance of stock - 20,070,361
-------------- --------------
Net cash provided by financing activities 1,679,925 24,272,100
Effect of exchange rate changes on cash 2,339 48,528
-------------- --------------
Net decrease in cash (388,287) (1,715,617)
Cash, beginning of period 409,971 2,125,588
-------------- --------------
Cash, end of period $ 21,684 $ 409,971
============== ==============
Supplemental disclosures of cash flow
information:
Interest paid in cash $ 702,447 $ 22,260
Income taxes paid in cash $ - $ -
The accompanying notes are an integral part of these financial statements.
F-4
EXCALIBUR INTERNATIONAL MARINE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
Note 1 - ORGANIZATION AND OPERATIONS
Excalibur International Marine Corporation ("Excalibur") was incorporated in
2005 and commenced operations in June 2006. Excalibur owns and operates a ship
which transports passengers and cargo between Taiwan and mainland China through
the Taiwan Strait.
On October 25, 2008, EFT Investment Co. Ltd ("EFT Investment") acquired 48.81%
of Excalibur's capital stock. Due to the substantial financial support EFT
Investment has provided Excalibur to fund its operations, EFT Investment is
deemed to have controlling interest in Excalibur as defined by ASC Topic 810,
Consolidation, which requires EFT Investment to consolidate the financial
statements of Excalibur as its variable interest entity ("VIE").
Excalibur, since it owns a ship which operates in the Taiwan Strait, is subject
to an agreement between Taiwan and China which provides that Taiwan citizens
must own at least 67% of the capital stock of Excalibur. Accordingly, EFT
Investment may be required to reduce its holdings in Excalibur by 15.8%.
Note 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements are prepared in accordance with accounting
principles generally accepted in the United States (U.S.).
Foreign Currency
Excalibur uses New Taiwan dollars ("NTD") as its functional currency. The
financial statements of Excalibur are translated into U.S. dollars in accordance
with Accounting Standards Codification ("ASC") 830, Foreign Currency Matters.
Pursuant to ASC 830, all assets and liabilities were translated at the current
exchange rate, stockholders equity is translated at the historical rates and
income statement items are translated at the average exchange rate for the
period. The resulting translation adjustments are reported as a component of
other comprehensive income in accordance with ASC 220, Comprehensive Income.
Foreign exchange transaction gains and losses are reflected in the income
statement.
Use of Estimates
The preparation of Excalibur's financial statements in conformity with US GAAP
requires management of Excalibur to make a number of estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
F-5
EXCALIBUR INTERNATIONAL MARINE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
Contingencies
Certain conditions may exist as of the date the financial statements are issued,
which may result in a loss to Excalibur but which will only be resolved when one
or more future events occur or fail to occur. Excalibur's management and legal
counsel assess such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies related to
legal proceedings that are pending against Excalibur or unasserted claims that
may result in such proceedings, Excalibur's legal counsel evaluates the
perceived merits of any legal proceedings or unasserted claims as well as the
perceived merits of the amount of relief sought or expected to be sought.
If the assessment of a contingency indicates that it is probable that a material
loss has been incurred and the amount of the liability can be estimated, then
the estimated liability would be accrued in Excalibur's financial statements. If
the assessment indicates that a potential material loss contingency is not
probable but is reasonably possible, or is probable but cannot be estimated,
then the nature of the contingent liability, together with an estimate of the
range of possible loss if determinable and material, would be disclosed.
Loss contingencies considered to be remote by management are generally not
disclosed unless they involve guarantees, in which case the guarantee would be
disclosed.
Cash and Cash Equivalents
For purposes of the statement of cash flows, Excalibur considers highly liquid
financial instruments purchased with a maturity of three months or less to be
cash equivalents.
Accounts Receivable
An allowance for doubtful accounts is provided on the basis of a review of the
collectability of accounts receivable. Excalibur assesses the probability of
collections of accounts receivable by examining the aging analysis of the
outstanding receivables and assessing the value of the collateral provided by
customers. Allowance for doubtful accounts was immaterial as at December 31,
2009 and 2008.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is calculated on a straight-line basis over the estimated useful
lives of the respective assets. Depreciation of property and equipment is
provided using the straight-line method for substantially all assets with
estimated lives as follows:
Leasehold improvements 5 years
Transportation equipment 10 years
Machinery and equipment 8 years
Office equipment 3-5 years
F-6
EXCALIBUR INTERNATIONAL MARINE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
Long-Lived Assets
Effective January 1, 2008, Excalibur adopted ASC Topic 360, Accounting for the
Impairment or Disposal of Long-Lived Assets, which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
Excalibur periodically evaluates the carrying value of long-lived assets to be
held and used in accordance with ASC Topic 360. ASC Topic 360 requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the asset's carrying amounts. In
that event, a loss is recognized based on the amount by which the carrying
amount exceeds the fair market value of the long-lived assets. Loss on
long-lived assets to be disposed of is determined in a similar manner, except
that fair market values are reduced for the cost of disposal. Based on its
review, Excalibur, as of December 31, 2009 recorded impairment loss on
transportation equipment of $6,048,414 ($-0- in 2008).
Fair Value of Financial Instruments
Excalibur's financial instruments consist of cash, accounts receivable, accounts
payable and other liabilities. The fair value of these financial instruments
approximate their carrying amounts reported in the balance sheets due to the
short-term maturity of these instruments.
Revenue Recognition
Transportation income is generated from transporting passengers and cargo and is
recognized at the time when passengers and cargo are conveyed to the destination
port. Payments received before all the relevant criteria for revenue recognition
are satisfied are recorded as deferred revenue.
Cost of Provision of Transportation
Cost of provision of transportation consists of mainly fuel cost and
depreciation on transportation equipment.
Income Taxes
Deferred income taxes are recognized for temporary differences between the tax
basis of assets and liabilities and their reported amounts in the financial
statements, net of operating loss carry forwards and credits, by applying
enacted statutory tax rates applicable to future years. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is not
more likely than not that some portion or all of the deferred tax assets will be
realized. Current income taxes are provided for in accordance with the laws of
the relevant taxing authorities.
F-7
EXCALIBUR INTERNATIONAL MARINE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
Comprehensive Income
Comprehensive income is defined as the change in equity of a company during a
period from transactions and other events and circumstances excluding
transactions resulting from investments from owners and distributions to owners.
For Excalibur, comprehensive income for the periods presented includes net
income and foreign currency translation adjustments.
Recent accounting pronouncements
In December 2009, the FASB issued Accounting Standards Update 2009-17,
Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities. This Accounting Standards Update
amends the FASB Accounting Standards Codification for Statement 167.
In December 2009, the FASB issued Accounting Standards Update 2009-16, Transfers
and Servicing (Topic 860): Accounting for Transfers of Financial Assets. This
Accounting Standards Update amends the FASB Accounting Standards Codification
Statement 166.
In October 2009, the FASB issued Accounting Standards Update 2009-13, Revenue
Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements. This update
addressed the accounting for multiple-deliverable arrangements to enable vendors
to account for products or services (deliverables) separately rather than a
combined unit and will be separated in more circumstances than under existing US
GAAP. This amendment has eliminated that residual method of allocation.
Effective prospectively for revenue arrangements entered into or materially
modified in fiscal years beginning on or after June 15, 2010. Early adoption is
permitted.
In September 2009, the FASB issued Accounting Standards Update 2009-12, Fair
Value Measurements and Disclosures (Topic 820): Investments in Certain Entities
That Calculate Net Asset Value per Share (or Its Equivalent). This update
provides amendments to Topic 820 for the fair value measurement of investments
in certain entities that calculate net asset value per share (or its
equivalent). It is effective for interim and annual periods ending after
December 15, 2009. Early application is permitted in financial statements for
earlier interim and annual periods that have not been issued.
Excalibur does not expect the adoption of the recent accounting pronouncements
described above will have a material effect on its financial position, results
of operations or cash flows.
Note 3 - RESTRICTED CASH
On August 20, 2009, Taiwan Taibei district court froze Excalibur's cash of
$193,992 as a result of a lawsuit filed by Marinteknik Shipbuilder(s) PTE LTD.
(a Singapore company) against Excalibur in the Taiwan Taichung District Court
which claims for service fee and out-of-pocket expense of NTD 8,050,832.
F-8
EXCALIBUR INTERNATIONAL MARINE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
Note 4 - OTHER RECEIVABLE
Other receivables include business tax refund and credit of $46,001 and
$1,279,107 at December 31, 2009 and 2008, respectively.
Note 5 - PROPERTY AND EQUIPMENT
Property and equipment consist of:
December 31, December 31,
2009 2008
-------------- --------------
Transportation equipment $ 17,065,379 $ 22,628,746
Office equipment 77,120 61,718
Machinery and equipment 7,998 -
Leasehold Improvements 99,398 4,922
-------------- --------------
17,249,895 22,695,386
Less: Accumulated depreciation (3,155,766) (909,844)
-------------- --------------
$ 14,094,129 $ 21,785,542
============== ==============
Depreciation expense of $2,144,286 and $931,587 were included in cost of
provision of transportation for the years ended December 31, 2009 and 2008,
respectively.
Impairment loss on transportation equipment of $6,048,414 was recorded in 2009
as the undiscounted cash flows estimated to be generated by the transportation
equipment are less than the carrying amount of the equipment. Accordingly, a
loss was recognized based on the amount by which the carrying amount exceeds the
present value of expected cash flows.
The impairment loss of $6,048,414 is not the same as the difference between the
recorded amount of the transportation equipment at December 31, 2009 and 2008
due to differences in the foreign exchange rates at December 31, 2009 and 2008.
Note 6 - CONTINGENT LIABILITIES
Excalibur purchased the vessel "OceanLaLa" from a BVI company "Ezone Capital Co.
Ltd." in 2008. The purchase price was NTD 708,000,000 ($21,961,660). The vessel
has been delivered to Excalibur and registered as owned by Excalibur at the end
of 2008. The last payment of NTD 92,600,000 ($2,872,387) is still under dispute
as Excalibur believes that certain equipment relating to the OceanLaLa was not
delivered at the time of sale.
Gu Zong-Nan (former vice general manager of Excalibur) filed a lawsuit against
Excalibur in the Taiwan Shihlin District Court claiming unpaid salary. The court
found that there was a valid agreement between the parties that provided the
salary owed by Excalibur did not need to be paid until Excalibur made a profit
from its business operations. Although Excalibur has not been profitable since
its inception, a contingent liability of NTD 1,050,000 ($32,570) was recorded.
F-9
EXCALIBUR INTERNATIONAL MARINE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
Note 7 - CAPITAL STOCK
As of December 31, 2009 and 2008, Excalibur had 120,000,000 shares of capital
stock authorized and issued at par value NTD 10 per share ($0.31 at average
exchange rate of $1 = NTD 32.6776 throughout the issuance of the shares).
Note 8 - STATUTORY RESERVE
Excalibur is required to make appropriations to certain non-distributable
reserve funds. Taiwan Company Law requires that 10% of net income each year,
less losses from prior years, if any, be set aside as a statutory reserve until
the accumulated reserve equals the total paid-in capital of a company before any
net profits can be declared as dividends and/or bonuses. This reserve may be
used to offset deficits. When the statutory reserve has reached 50% of a
company's paid-in capital, up to 50% thereof may be transferred to paid-in
capital. As Excalibur has been incurring losses, no statutory reserve has been
allocated as of December 31, 2009 and 2008.
Note 9 - INCOME TAXES
Excalibur is subject to a 20% standard enterprise income tax based on its
taxable net profit. Excalibur has incurred net accumulated operating losses for
income tax purposes and believes that it is more likely than not that these net
accumulated operating losses will not be utilized in the future. Therefore, it
has provided full valuation allowance for the deferred tax assets arising from
the losses as of December 31, 2009 and 2008.
Note 10 - RELATED PARTY TRANSACTIONS
Amount due to related parties:
December 31, December 31,
2009 2008
-------------- --------------
Three shareholders $ 43,427 $ 42,658
Short-term loans due to related parties:
December 31, December 31,
2009 2008
-------------- --------------
EFT Biotech Holdings Inc. $ 3,632,389 $ 3,568,041
EFT Investment Co. Ltd 2,452,652 500,466
-------------- --------------
$ 6,085,041 $ 4,068,507
============== ==============
During 2008 and 2009, Excalibur borrowed funds on a short-term basis from
related parties to finance its operations. The short-term loans are due within
six months to nine months and are extendable at the end of term. Interest rates
F-10
EXCALIBUR INTERNATIONAL MARINE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
on the short-term loans ranged from 8% to 12.5% per annum and from 3.00% to
3.75% per month at December 31, 2009 and 2008, respectively.
Names and relationship of related parties:
Names Existing relationships with Excalibur
EFT Biotech Holdings Inc. Parent company of EFT Investment Co. Ltd
EFT Investment Co. Ltd Shareholder company
Lu TsoChun Shareholder
Steve Hsiao Shareholder
Gu Zong-Nan Shareholder
Note 11 - LITIGATION
Excalibur filed a lawsuit against Jiao Ren-Ho (former chairman of Excalibur) in
the Taiwan Shihlin District Prosecutors office in February 2010. Excalibur
alleges, among other things, that Jiao Ren-Ho committed the offences of capital
forging, fraud, breach of trust, and document fabrication.
Excalibur filed a lawsuit against Chang Hui-Ying, Excalibur's former accountant
in the Taiwan Shihlin District Prosecutors office in March 2010. The claims of
Excalibur against Chang Hui-Ying are based upon the audit of Excalibur's
financial statements by Chang Hui-Ying. Excalibur alleges, among other things,
that Chang Hui-Ying committed the offences of capital forging, fraud, breach of
trust, and document fabrication.
Excalibur filed a lawsuit against Hsiao Zhong-Xing (former general manager of
Excalibur) and Lu Zhuo-Jun (former general manager of Excalibur) (collectively
"Defendants") in the Taiwan Shihlin District Prosecutors office. Excalibur
alleges, among other things, that Defendants committed the offences of capital
forging, fraud, breach of trust, and document fabrication.
Gu Zong-Nan (former vice general manager of Excalibur) filed a lawsuit against
Excalibur in the Taiwan Shihlin District Court claiming unpaid salary (NTD
1,050,000) and severance payments (260,038 NTD). In April 2010, the Taiwan
Shihlin District Court denied the claims as the court found that (i) there was a
valid agreement between the parties that provided the salary owed by Excalibur
would not be paid until Excalibur makes profit from its operations and (ii) Gu
Zong-Nan held a managerial position in Excalibur and as a result is not entitled
to any severance payment according to the Labor Standard Law of Taiwan.
Excalibur has suffered net losses since inception, however, a contingent
liability for the unpaid salary remains.
Marinteknik Shipbuilder(s) PTE LTD. (a Singapore company) filed a lawsuit
against Excalibur in the Taiwan Taichung District Court for unpaid service fees
and out-of-pocket expenses of NTD8,050,832. On August 20, 2009, the Taiwan
Taibei district court froze Excalibur's cash of $193,992 in response to the
suit. The final resolution of this case is pending.
F-11
EXCALIBUR INTERNATIONAL MARINE CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
Jiao Ren-Ho (former chairman of Excalibur) filed a lawsuit against Excalibur in
the Taiwan Shihlin District Court claiming Excalibur's special meeting of
shareholders held on January 12, 2010, and the actions taken at the meeting,
including the removal of Mr. Jiao as an officer and the chairman of Excalibur,
were unlawful. Monetary damages were not claimed in the suit. The resolution of
this case is pending.
Note 12 - GOING CONCERN
Excalibur's financial statements are prepared in accordance with generally
accepted accounting principles applicable to a going concern. This contemplates
the realization of assets and the liquidation of liabilities in the normal
course of business. Currently, Excalibur's source of revenue is insufficient to
cover its operating costs which raises substantial doubt about its ability to
continue as a going concern. Excalibur intends to fund operations through
additional debt and equity financing arrangements. In the event that funding
from internal sources or from public or private financing is insufficient to
fund the business at current levels, Excalibur will have to substantially reduce
its level of spending which could substantially curtail its operations. There
can be no assurance that Excalibur will be successful in obtaining funding in
order to continue as a going concern.
Note 13 - SUBSEQUENT EVENT
Excalibur has evaluated subsequent events for potential recognition and
disclosure through the date the financial statements were issued. Excalibur has
not discovered any material subsequent events that it would consider necessary
for disclosure.
F-12
EFT BIOTECH HOLDINGS, INC. AND
EXCALIBUR INTERNATIONAL MARINE CORPORATION
Pro Forma Combined Statement of Operations
For the Year Ended March 31, 2009 (unaudited)
On October 25, 2008, EFT BioTech Holdings, Inc. (the "Company"), through its
wholly owned subsidiary, acquired 48.81% of the capital stock of Excalibur
International Marine Corporation for $19,193,000. The remaining 51.19% equity
interest is held by Taiwan residents.
The following pro forma statements of operations assume the Company had acquired
its interest in Excalibur on April 1, 2008.
EFT Biotech (1) Pro Forma Pro Forma
March 31, 2009 Adjustments Combined
--------------- ----------- ---------
Sales $ 12,846,809 $ $ 12,846,809
Shipping Charge 5,657,625 5,657,625
------------- ------------- -------------
Gross Profit (Loss) 18,504,434 18,504,434
------------- ------------- -------------
Cost of goods sold 5,780,447 5,780,447
Shipping cost 2,204,502 2,204,502
------------- ------------- -------------
Total operating expenses 7,984,949 7,984,949
------------- ------------- -------------
Gross Profit 10,519,485 10,519,485
------------- ------------- -------------
Selling, general and
administrative expenses 8,929,162 8,929,162
------------- ------------- -------------
Net operating income 1,590,323 1,590,323
------------- ------------- -------------
Other income(Expenses) -
Interest income (expense) 1,246,433 1,246,433
Subsidiary loss on
equity method investment (2,063,686) 390,171 (2) (1,673,515)
Foreign exchange gain(loss) 723,357 723,357
Other, net 634,635 634,635
------------- ------------- -------------
Total other income 540,739 930,910
Net income before income taxes 2,131,062 2,521,233
Income tax expense(benefit) 2,400 2,400
Net income (loss) 2,128,662 2,518,833
------------- ------------- -------------
Earnings per share basic
and diluted $ 0.03 $ 0.03
============= =============
Weighted average common
shares outstanding
Basic and diluted 66,637,448 70,265,284 (3)
============= =============
F-13
(1) Source: Audited consolidated financial statements of the Company for the
year ended March 31, 2009 as filed in its Report on Form 10-K.
(2) During the twelve months ended December 31, 2008, Excalibur had a loss of
$(3,428,632). The adjustment to "Subsidiary Loss on Equity Method
Investment" reflects the Company's 48.81% share of Excalibur's loss for the
twelve months ended December 31, 2008 [$(3,428,632) x 48.81% =
$(1,673,515)].
(3) Pro forma weighted average number of shares was calculated using the
assumption that the amount received from 5,579,360 shares sold in a private
offering during the Company's year ended March 31, 2009 (at a price, net of
offering costs, of $3.44 per share), were used to acquire Excalibur and
were therefore outstanding on April 1, 2008.
F-14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: June 9, 2010 EFT BIOTECH HOLDINGS, INC.
By: /s/ Jack Jie Qin
--------------------------------
Jack Jie Qin, President
