ITEM 1. FINANCIAL STATEMENTS
eBullion, Inc.
Condensed Consolidated
Balance Sheets
As of June 30 and March
31, 2016
(Expressed in US dollars)
|
|
Unaudited
June 30,
2016
|
|
|
Audited
March 31,
2016
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
1,015,143
|
|
|
$
|
1,109,465
|
|
Commissions receivable
|
|
|
31,916
|
|
|
|
100,493
|
|
Deposits and prepaid expenses
|
|
|
39,898
|
|
|
|
29,819
|
|
Prepaid income taxes
|
|
|
147,468
|
|
|
|
147,556
|
|
Total current assets
|
|
|
1,234,425
|
|
|
|
1,387,333
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Assets
|
|
|
|
|
|
|
|
|
Deposits and prepaid expenses
|
|
|
186,373
|
|
|
|
141,084
|
|
Equipment, net
|
|
|
280,894
|
|
|
|
253,807
|
|
Loan receivable from Global Long
|
|
|
773,332
|
|
|
|
773,793
|
|
Deferred income taxes
|
|
|
101,900
|
|
|
|
101,960
|
|
Total noncurrent assets
|
|
|
1,342,499
|
|
|
|
1,270,644
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,576,924
|
|
|
$
|
2,657,977
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Bank Overdraft
|
|
$
|
1,088
|
|
|
|
30,645
|
|
Accounts payable and accrued liabilities
|
|
|
33,326
|
|
|
|
33,684
|
|
Customer deposits
|
|
|
189,503
|
|
|
|
187,037
|
|
Total current liabilities
|
|
|
223,917
|
|
|
|
251,366
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Liabilities
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
4,251
|
|
|
|
5,517
|
|
Total noncurrent liabilities
|
|
|
4,251
|
|
|
|
5,517
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
228,168
|
|
|
|
256,883
|
|
|
|
|
|
|
|
|
|
|
Commitments
|
|
|
|
|
|
|
|
|
Shareholders’ Equity
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value, 1,000,000,000 shares authorized, 512,600,000 shares issued and outstanding
|
|
|
51,260
|
|
|
|
51,260
|
|
Additional paid in capital
|
|
|
1,477,404
|
|
|
|
1,477,404
|
|
Retained earnings
|
|
|
823,015
|
|
|
|
873,954
|
|
Accumulated other comprehensive loss
|
|
|
(2,923
|
)
|
|
|
(1,524
|
)
|
Total shareholders’ equity
|
|
|
2,348,756
|
|
|
|
2,401,094
|
|
Total liabilities and shareholders’ equity
|
|
$
|
2,576,924
|
|
|
$
|
2,657,977
|
|
The accompanying notes are an
integral part of these condensed consolidated financial statements.
eBulllion, Inc.
Unaudited Condensed Consolidated
Statements of Comprehensive Income (Loss)
For the Three Months Ended
June 30, 2016 and 2015
(Expressed in US dollars)
|
|
2016
|
|
|
2015
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission revenue
|
|
$
|
473,261
|
|
|
$
|
534,141
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
345,510
|
|
|
|
363,229
|
|
Employee compensation and benefits
|
|
|
174,420
|
|
|
|
165,905
|
|
Depreciation and amortization
|
|
|
18,895
|
|
|
|
20,171
|
|
Total expenses
|
|
|
538,825
|
|
|
|
549,305
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(65,564
|
)
|
|
|
(15,164
|
)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
|
|
|
|
|
|
|
|
|
Rental income
|
|
|
-
|
|
|
|
9,030
|
|
Interest income, net
|
|
|
13,363
|
|
|
|
9,711
|
|
Total other income
|
|
|
13,363
|
|
|
|
18,741
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
|
|
(52,201
|
)
|
|
|
3,577
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX PROVISION (BENEFIT)
|
|
|
|
|
|
|
|
|
Current
|
|
|
-
|
|
|
|
4,180
|
|
Deferred
|
|
|
(1,262
|
)
|
|
|
(2,650
|
)
|
Total income tax provision (benefit)
|
|
|
(1,262
|
)
|
|
|
1,530
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
|
(50,939
|
)
|
|
|
2,047
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
(1,399
|
)
|
|
|
1,621
|
|
COMPREHENSIVE INCOME (LOSS)
|
|
$
|
(52,338
|
)
|
|
$
|
3,668
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
512,600,000
|
|
|
|
512,600,000
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED EARNINGS PER COMMON SHARE
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per common share
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
The
accompanying notes are an integral part of these condensed consolidated financial statements.
eBullion, Inc.
Condensed Consolidated Statements of Shareholders’
Equity
For the Year Ended March
31, 2016 and Three Months Ended June 30, 2016
(Expressed in US dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
Common Stock
|
|
|
Additional
|
|
|
|
|
|
Other
|
|
|
Total
|
|
|
|
Number of
|
|
|
|
|
|
Paid in
|
|
|
Retained
|
|
|
Comprehensive
|
|
|
Shareholders’
|
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Earnings
|
|
|
Income (Loss)
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, March 31, 2015– Audited
|
|
|
512,600,000
|
|
|
$
|
51,260
|
|
|
$
|
1,477,404
|
|
|
$
|
1,383,704
|
|
|
$
|
(1,220
|
)
|
|
$
|
2,911,148
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(509,750
|
)
|
|
|
-
|
|
|
|
(509,750
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(304
|
)
|
|
|
(304
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, March 31, 2016 - Audited
|
|
|
512,600,000
|
|
|
$
|
51,260
|
|
|
$
|
1,477,404
|
|
|
$
|
873,954
|
|
|
$
|
(1,524
|
)
|
|
$
|
2,401,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(50,939
|
)
|
|
|
-
|
|
|
|
(50,939
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,399
|
)
|
|
|
(1,399
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, June 30, 2016 - Unaudited
|
|
|
512,600,000
|
|
|
$
|
51,260
|
|
|
$
|
1,477,404
|
|
|
$
|
823,015
|
|
|
$
|
(2,923
|
)
|
|
$
|
2,348,756
|
|
The accompanying notes are an integral part
of these condensed consolidated financial statements.
eBullion, Inc.
Unaudited Condensed Consolidated Statements
of Cash Flows
For the Three Months Ended June 30, 2016
and 2015
(Expressed in US dollars)
|
|
2016
|
|
|
2015
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(50,939
|
)
|
|
$
|
2,047
|
|
Adjustments to reconcile net income (loss)
to net cash used in operating activities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
18,895
|
|
|
|
20,171
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Commissions receivable
|
|
|
68,502
|
|
|
|
(292,932
|
)
|
Deposits and prepaid expenses
|
|
|
(55,457
|
)
|
|
|
258
|
|
Accounts payable and accrued liabilities
|
|
|
(389
|
)
|
|
|
(15,962
|
)
|
Customer deposits
|
|
|
2,577
|
|
|
|
45,190
|
|
Income taxes payable
|
|
|
-
|
|
|
|
4,180
|
|
Deferred income taxes
|
|
|
(1,262
|
)
|
|
|
(2,650
|
)
|
Net cash used in operating activities
|
|
|
(18,073
|
)
|
|
|
(239,698
|
)
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Loan receivable from Global Long
|
|
|
-
|
|
|
|
(774,020
|
)
|
Purchase of equipment
|
|
|
(46,132
|
)
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
(46,132
|
)
|
|
|
(774,020
|
)
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Bank overdraft
|
|
|
(29,533
|
)
|
|
|
-
|
|
Net cash used in financing activities
|
|
|
(29,533
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH
|
|
|
(93,738
|
)
|
|
|
(1,013,718
|
)
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
|
|
(584
|
)
|
|
|
655
|
|
Cash, beginning of period
|
|
|
1,109,465
|
|
|
|
2,513,423
|
|
Cash, end of period
|
|
$
|
1,015,143
|
|
|
$
|
1,500,360
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid during the period for income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid during the year for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.
eBullion, Inc.
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
For the Three Months Ended June 30, 2016 and 2015
|
(Expressed in US Dollars)
|
1.
|
Nature of Operations and Basis of Presentation
|
eBullion, Inc. (“eBullion”
or “the Company”) was incorporated in Delaware on January 28, 2013. On April 3, 2013, the Company’s shareholders
exchanged 100% of their shares for 100% of the shares of Man Loong Bullion Company Limited (“Man Loong”) a company
which was incorporated in Hong Kong in 1974, and in 2007, was re-registered under Hong Kong law as a limited liability company.
Upon completion of this transaction, Man Loong became a 100% owned subsidiary of eBullion. This transaction was accounted for as
a reverse take-over.
The Company provides trading services
for gold and silver trading positions on Man Loong’s proprietary, 24-hour electronic trading platform, and its telephone
transaction system located in Hong Kong. The Company is licensed through the Chinese Gold and Silver Exchange Society (“CGSE”)
a self-regulatory organization located in Hong Kong which acts as an exchange for the trading of Kilo gold and Loco London gold
and silver price indices quoted on the London Metals Exchange.
The Company is not a counter party
for trades entered through its trading platform and telephone transaction system, and instead, contracts with agents who pay Man
Loong a fixed commission on each trade that the Company executes for its agents and their customers.
In April 2016, Man Loong received
a license from the CGSE to trade gold contracts in the new Qian Hai trade zone in Shenzhen, China. Concurrent with receiving the
license, Man Loong registered a new subsidiary, Shenzhen Qian Hai Man Loong Bullion Company Ltd. (“Shenzhen Qian Hai”)
organized as a Wholly Foreign Owned Enterprise under PRC law. The new license will allow Man Loong to provide its trading platform
and trading services to its existing and new customers who are citizens of the PRC to trade gold contracts through Shenzhen Qian
Hai. Man Loong intends to charge a fee to facilitate such trades placed in Qian Hai and is in the process of defining its business
and marketing strategies and processes for trades placed through Shenzhen Qian Hai.
Basis of Presentation
These unaudited condensed consolidated financial statements are expressed in U.S. Dollars and have been prepared in accordance
with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information
and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments of a normal
recurring nature and considered necessary for a fair presentation of its financial condition and results of operations for the
interim periods presented in this Quarterly Report on Form 10-Q have been included. Operating results for the interim periods
are not necessarily indicative of financial results for the full year. These unaudited condensed consolidated financial statements
should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s
Annual Report on Form 10-K for the year ended March 31, 2016.
The Company’s and Man Loong’s
fiscal year end is March 31.
Principles of Consolidation
The unaudited condensed consolidated financial statements as of June 30, 2016 and March 31, 2016, and for the three months ended
June 30, 2016 and 2015, include the accounts of eBullion and its wholly owned subsidiary, Man Loong. All significant intercompany
transactions have been eliminated.
eBullion, Inc.
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
For the Three Months Ended June 30, 2016 and 2015
|
(Expressed in US Dollars)
|
2.
|
Summary of Significant Accounting Policies
|
Use of Estimates
The preparation of these unaudited
condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
unaudited consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Changes
in these estimates are recorded when known. Significant estimates made by management include:
|
●
|
Valuation
of assets and liabilities
|
|
●
|
Useful
lives of equipment
|
|
●
|
Accounting
for transactions with variable interest entities
|
|
●
|
Other
matters that affect the reported amounts and disclosures of contingencies in the consolidated financial statements.
|
Actual results could differ from
those estimates.
Reclassifications
Certain reclassifications have been
made to amounts reported in the previous periods to conform to the current presentation. Such reclassifications had no effect on
net income (loss).
Revenue Recognition
The Company recognizes revenue in
accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)
Topic 605,
Revenue Recognition
, which requires that four basic criteria must be met before revenue can be recognized: (1)
persuasive evidence that an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the fee is fixed
and determinable; and (4) collectability is reasonably assured. The Company is not a counter party for trades executed through
its trading platform and telephone transaction system and, instead, recognizes revenue to the extent of the flat-fee commission
it receives on each trade processed for its agents and their customers.
Advertising
Advertising costs are incurred for
the production and communication of advertising, as well as other marketing activities. The Company expenses the cost of advertising
as incurred. The Company did not capitalize any production costs associated with advertising for the three months ended June 30,
2016 and 2015. The total amount charged to advertising expense was $229 and $1,878 for the three months ended June 30, 2016
and 2015, respectively.
Cash and cash equivalents
Cash and cash equivalents consist
primarily of cash on deposit, certificates of deposits, money market accounts, and investment grade commercial paper that are readily
convertible to cash and purchased with original maturities of three months or less. As of June 30, 2016 and March 31, 2016,
the Company had no cash equivalents.
eBullion, Inc.
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
For the Three Months Ended June 30, 2016 and 2015
|
(Expressed in US Dollars)
|
2.
|
Summary of Significant Accounting Policies - continued
|
Fair Value of Financial Instruments
ASC 820, “Fair
Value Measurements
”,
defines fair value and establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure
requirements for fair value measures. The carrying amounts reported in the balance sheets for cash, commissions receivable, loan
receivable from Global Long, accounts payable and accrued liabilities and customer deposits qualify as financial instruments and
are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their
expected realization and their current market rate of interest.
The standard establishes a fair value
hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest priority to unobservable inputs
(Level 3 measurement). The three levels of the fair value hierarchy defined by the standard are as follows:
Level 1 - Quoted prices are available
in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions
for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1
primarily consists of financial instruments such as exchange-traded derivatives, listed equities and U.S. government treasury securities.
Level 2 - Pricing inputs are other
than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting
date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models
are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time
value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant
economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument,
can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
Instruments in this category include non-exchange-traded derivatives such as over the counter forwards, options and repurchase
agreements.
Level 3 - Pricing inputs include
significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed
methodologies that result in management’s best estimate of fair value from the perspective of a market participant. Level
3 instruments include those that may be more structured or otherwise tailored to customers’ needs.
Commissions Receivable
Commissions receivable represent
commissions to be collected from agents for their customers’ trades executed across Man Loong’s electronic trade platform
and telephone transaction system through the balance sheet date. Commissions receivable are typically remitted to the Company within
30 days of trade execution. The Company has not historically incurred credit losses on these commissions receivable. As of June
30, 2016 and March 31, 2016, the Company has no reserve for credit losses nor has it incurred any bad debts for the three months
ended June 30, 2016 and 2015.
Deposits and Prepaid Expenses
The Company records goods and services
paid for but not received until a future date as deposits and prepaid expenses. These primarily include deposits and prepayments
for occupancy related expenses. Deposit or prepaid expenses which will be realized more than 12 months past
the balance sheet date are classified as non-current assets in the accompanying unaudited condensed consolidated balance sheets.
eBullion, Inc.
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
For the Three Months Ended June 30, 2016 and 2015
|
(Expressed in US Dollars)
|
2.
|
Summary of Significant Accounting Policies - continued
|
Equipment
Equipment is stated at cost. The
cost of an asset consists of its purchase price and any directly attributable costs of bringing the asset to its present working
condition and location for its intended use.
Equipment is depreciated using the
straight-line method over the estimated useful lives of the assets as follows:
|
Office equipment
|
|
5 years
|
|
Furniture and fixtures
|
|
5 years
|
|
Computer equipment
|
|
5 years
|
Expenditures for maintenance and
repairs are charged to expense as incurred. Additions, renewals and betterments are capitalized.
Gain or loss on disposal of equipment
is the difference between net sales proceeds and the carrying amount of the relevant assets, if any, and is recognized as income
or loss in the accompanying unaudited condensed consolidated statements of comprehensive income (loss).
Variable Interest Entity
A variable interest entity (“VIE”)
is a legal entity, other than an individual, used for business purposes that either (a) has equity investors that do not provide
sufficient financial resources for the entity to support its activities, or (b) the equity investors lack any one of the following
three criteria:
|
●
|
The
power to direct activities that most significantly impact the entity’s economic performance
|
|
●
|
The
obligation to absorb the expected losses of the entity
|
|
●
|
The
right to receive the expected residual returns.
|
A VIE is required to be consolidated
by a reporting entity if it has a controlling financial interest in the VIE. A reporting entity is deemed to have a controlling
financial interest in a VIE if it both has the power to direct the activities that most significantly impact the VIE’s economic
performance and the obligation to absorb the losses or the right to receive economic benefits from the VIE that could potentially
be significant to the VIE. The Company did not have a VIE as of June 30, and March 31, 2016 and for the three months ended June
30, 2016 and 2015.
Reporting Currency and Foreign
Currency Translation
As of June 30 and March 31, 2016
and for the three months ended June 30, 2016 and 2015, the accounts of the Company were maintained in their functional currencies,
which is the U.S. dollar for eBullion and the Hong Kong dollar ("HK dollar") for Man Loong. The financial
statements of Man Loong have been translated into U.S. dollars which is its reporting currency. All assets and liabilities
of Man Loong are translated at the exchange rate on the balance sheet date, shareholders’ equity is translated at historical
rates and the statements of comprehensive income (loss), and statements of cash flows are translated at the weighted average exchange
rate for the periods. The resulting translation adjustments for the period are reported under other comprehensive income (loss)
and accumulated translation adjustments are reported as a separate component of shareholders’ equity.
Foreign
exchange rates at June 30 and March 31, 2016 and for the three months ended June 30, 2016 and 2015 are as follows:
|
|
|
2016
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Year end March 31, 2016 USD/HKD exchange rate
|
|
|
7.7540
|
|
|
|
-
|
|
|
Period end USD/HKD exchange rate
|
|
|
7.7586
|
|
|
|
7.7522
|
|
|
Average USD/HKD exchange rate:
|
|
|
7.7604
|
|
|
|
7.7517
|
|
eBullion, Inc.
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
For the Three Months Ended June 30, 2016 and 2015
|
(Expressed in US Dollars)
|
2.
|
Summary of Significant Accounting Policies - continued
|
Long-Lived Assets
The Company periodically evaluates
the carrying value of long-lived assets when events and circumstances warrant such review. The carrying value of a long-lived asset
is considered impaired when the anticipated undiscounted cash flow from such an asset is less than its carrying value. In that
event, a loss is recognized in the amount by which the carrying value exceeds the fair market value of the long-lived asset. The
Company has identified no such impairment losses.
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities
at June 30, 2016 and March 31, 2016 primarily consist of accrued statutory bonus payable to employees in Hong Kong, audit fees
payable to the Company’s auditors and accountants and legal fees payable to the Company’s legal counsel.
Customer Deposits
Customer deposits at June 30, 2016
and March 31, 2016 were accepted pursuant to the Company’s agreements with certain of its independent agents. Under terms
of those agreements, the Company accepts margin deposits for certain of the agents’ customers who prefer that the Company
hold those deposits. If an agent’s customer suffers a trading loss equaling 80% or more of the customers’ deposit balance,
the customer is required to increase the balance of his deposit or the customer’s trading position is closed and the remaining
deposit balance is remitted to the agent in order to fund the customer’s trading losses.
Accordingly, the Company had no risk
of loss related to customer deposits at June 30, 2016 and March 31, 2016.
Accumulated Other Comprehensive
Loss
The Company’s accumulated other
comprehensive loss as June 30, and March 31, 2016 consist of adjustments resulting from translating Man Loong’s functional
currency, the HK dollar, to its reporting currency, the U.S. dollar.
Rental Income
Rental income consisted of rent charged
for a portion of Man Loong’s office facility which was leased on a short term lease arrangement. Agreed rental payments were
$4,514 per month from January 1, 2015 until March 31, 2015 when the lease arrangement expired. Though not subject to a formal lease
agreement, in April 2015, Man Loong extended the lease arrangement for a further 2 months. For the three months ended June 30,
2016 and 2015, Man Loong recognized $0 and $9,030, respectively of rental income in the accompanying unaudited condensed consolidated
statements of comprehensive income (loss).
eBullion, Inc.
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
For the Three Months Ended June 30, 2016 and 2015
|
(Expressed in US Dollars)
|
2.
|
Summary of Significant Accounting Policies - continued
|
Income Taxes
The Company utilizes ASC 740,
Income
Taxes
, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for
the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting
amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the
amount expected to be realized.
The Company has adopted the provisions
of the interpretation, of ASC 740,
Accounting for Uncertainty in Income Taxes
. The Company did not have any material unrecognized
tax benefits and there was no effect on its financial condition or results of operations as a result of implementing the interpretation.
The Company files income tax returns in the United States and the Company is subject to federal income tax examinations for the
fiscal years ended March 31, 2014 through 2016. Man Loong files income tax returns in Hong Kong and is no longer subject to tax
examinations by tax authorities for years before 2009. At June 30, 2016, Man Loong had no uncertain tax positions.
Historically, the Company has not
provided for U.S. income and foreign withholding taxes on Man Loong’s undistributed earnings, because such earnings have
been retained and reinvested by Man Loong. The Company does not intend to require Man Loong to pay dividends for the foreseeable
future and so additional income taxes and applicable withholding taxes that would result from the repatriation of such earnings
are not practicably determinable.
Earnings (Loss) per Share
The Company computes earnings (loss)
per share (“EPS”) in accordance with ASC 260,
Earnings Per Share
. ASC 260 requires companies with complex capital
structures to present basic and diluted EPS. Basic EPS is measured as net income (loss) divided by the weighted average common
shares outstanding during the period.
Diluted EPS is similar to basic EPS
but presents the dilutive effect on a per share basis of contracts to issue ordinary common shares (e.g., convertible securities,
options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. The
computation of diluted EPS includes the estimated impact of the exercise of contracts to purchase common stocks using the treasury
stock method and the potential shares of converted common stock associated with the convertible debt using the if-converted method.
Potential common shares that have
an anti-dilutive effect (i.e., those that increase earnings per share or decrease loss per share) are excluded from the calculation
of diluted EPS.
The Company does not have any securities
that may potentially dilute its basic earnings (loss) per share.
Comprehensive Income (Loss)
Comprehensive income (Loss) is comprised
of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains or losses
resulting from translating Man Loong’s functional currency, the HK dollar, to its reporting currency, the U.S. dollar.
eBullion, Inc.
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
For the Three Months Ended June 30, 2016 and 2015
|
(Expressed in US Dollars)
|
2.
|
Summary of Significant Accounting Policies - continued
|
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU
2016-13 Financial Instruments – Credit Losses (Topic 326)
Measurement of Credit on Financial Instruments
. ASU 2016-13
will replace the “incurred loss” methodology for recognizing impairment losses on financial instruments, which delays
the recognition of such losses until it is probable that a loss has been incurred the Current Expected Credit Losses (“CECL”)
methodology. Using the CECL methodology, an entity will recognize credit losses based on its estimate of future losses, even though
those estimated losses have not yet met the probable threshold. ASU 2016-13 is effective for years beginning after December 18,
2018 and early adoption is permitted in fiscal years beginning after December 31, 2018. The adoption of ASU 2016-13 is not expected
to have a material effect on the Company’s unaudited condensed consolidated financial statements.
In May 2016, the FASB issued ASU 2016-12
Revenue From Contracts (Topic 606)
Narrow Scope Improvements and Practical Expedients
. ASU 2016-12 is an amendment to ASU
2014-09 and, among other matters, provides new guidance on when an entity would recognize revenue if the entity concludes that
collectability is not probable. ASU 2016-12 is effective for years beginning after December 18, 2018 and early adoption is permitted.
The adoption of ASU 2016-12 is not expected to have a material effect on the Company’s unaudited condensed consolidated financial
statements.
In February 2016, the FASB issued
ASU 2016-02 Leases (Topic 842). ASU 2016-02 establishes new guidance for the recording and disclosure of assets and liabilities
that arise from leasing activity. ASU 2016-02 will require most lessees to record lease assets and lease liabilities that arise
from leases on the statement of financial condition and disclose qualitative and quantitative information related to lease transactions
such as variable lease payments and options to renew and terminate leases. ASU 2016-02 is effective for years beginning after December
18, 2018 and early adoption is permitted. The Company is evaluating ASU 2016-02 to determine its impact, if any, on the unaudited
condensed consolidated financial statements.
In January 2016, the FASB issued ASU
2016-01 Financial Instruments Overall (Subtopic 825-10)
Recognition and Measurement of Financial Assets and Liabilities
.
ASU 2016-01 amends the guidance in US GAAP on classification, measurement and disclosure of financial instruments. It revises an
entity’s accounting related to: 1) classification and measurement of investments in equity securities; 2) presentation of
certain fair value changes for financial liabilities measured at fair value; and, 3) amends disclosure requirements associated
with the fair value of financial instruments. ASU 2016-01 is effective for years beginning after December 15, 2017 and early adoption
is permitted. The adoption of ASU 2016-01 is not expected to have a material effect on the Company’s unaudited condensed
consolidated financial statements.
In August 2015, the FASB issued ASU
2015-14 Revenue From Contracts With Customers (Topic 606)
Deferral of the Effective Date
. ASU 2015-14 defers the effective
date of ASU 2014-09, Revenue From Contracts With Customers (Topic 606) which clarifies the principles for revenue recognition and
develops common revenue recognition standards for US GAAP and International Financial Reporting Standards (IFRS). ASU 2015-14 defers
the effective date of ASU 2014-09 to years beginning after December 31, 2018 and early adoption is permitted. The adoption of ASU
2015-14 and ASU 2014-09 is not expected to have a material effect on the Company’s unaudited condensed consolidated financial
statements.
In November 2015, the FASB issued
ASU 2015-17 Income Taxes (Topic 740)
Balance Sheet Classification of Deferred Taxes.
ASU 2015-17 simplifies the presentation
of deferred tax assets and liabilities by allowing both balances to be presented as non-current on the balance sheet. ASU 2015-17
is effective for years beginning after December 15, 2017 and early adoption is permitted. The adoption of ASU 2015-17 is not expected
to have a material effect on the Company’s unaudited condensed consolidated financial statements.
Other recent accounting pronouncements
issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the
SEC did not or are not believed by management to have a material impact on the Company’s present or future unaudited condensed
consolidated financial statements.
eBullion, Inc.
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
For the Three Months Ended June 30, 2016 and 2015
|
(Expressed in US Dollars)
|
3.
|
Deposits and Prepaid Expenses
|
|
|
|
Deposits and prepaid expenses consisted of the following as of June 30, 2016 and March 31, 2016:
|
|
|
|
Unaudited
|
|
|
|
|
|
|
|
June 30, 2016
|
|
|
March 31,
2016
|
|
|
Current
|
|
|
|
|
|
|
|
Prepaid rent and occupancy expenses
|
|
$
|
39,898
|
|
|
$
|
29,819
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncurrent
|
|
|
|
|
|
|
|
|
|
Rent and occupancy deposits
|
|
|
186,373
|
|
|
|
141,084
|
|
|
Total deposits and prepaid expenses
|
|
$
|
226,271
|
|
|
$
|
170,903
|
|
4.
|
Loan receivable from Global Long
|
On April 3, 2015, Man Loong loaned
Global Long Inc. Limited (“Global Long”) $773,332 (HKD$6,000,000). Global Long is registered in Hong Kong and through
its subsidiary in the Peoples Republic of China, eBullion Trade Company Limited (“eBullion Trade”), is engaged in trading
silver contracts as an electronic trading member of the Guangdong Precious Metal Exchange (“GPME”). The loan bears
interest at a 6% annual rate, matures on its 5th anniversary and is secured by a first right of claim on a bank deposit held by
eBullion Trade. Under the terms of the loan, interest is payable to Man Loong quarterly and Global Long has the right to repay
the loan at any time before the maturity date. Until all principal and accrued interest are repaid on the loan, Global Long may
not enter into additional borrowings without Man Loong’s written permission, and upon certain events of default, the Loan
becomes due on demand. The purpose of the loan was to establish a relationship with Global Long with the intent of becoming their
first choice for Global Long’s customers who wish to trade in gold trading positions through the CGSE.
The Company
determined that the loan to Global Long does not give the Company a variable interest in Global Long and that Global Long is not
a variable interest entity (“VIE”) because Man Loong does not have the power to direct any of the activities of Global
Long or eBullion Trade that significantly impact their economic performance. Accordingly, the Company has not consolidated Global
Long into its consolidated financial statements.
eBullion, Inc.
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
For the Three Months Ended June 30, 2016 and 2015
|
(Expressed in US Dollars)
|
Equipment,
including leasehold improvements, consisted of the following as of June 30, 2016 and March 31, 2016:
|
|
|
Unaudited
|
|
|
|
|
|
|
|
June 30, 2016
|
|
|
March 31, 2016
|
|
|
Office equipment
|
|
$
|
206,222
|
|
|
$
|
206,345
|
|
|
Computer equipment
|
|
|
59,883
|
|
|
|
59,919
|
|
|
Furniture and fixtures
|
|
|
111,877
|
|
|
|
65,774
|
|
|
|
|
|
377,982
|
|
|
|
332,038
|
|
|
Less: Accumulated depreciation
|
|
|
(97,088
|
)
|
|
|
(78,231
|
)
|
|
Equipment, net
|
|
$
|
280,894
|
|
|
$
|
253,807
|
|
Depreciation
expense was $18,895 and $20,171 for the three months ended June 30, 2016 and 2015, respectively, and was recorded as depreciation
and amortization expense in the accompanying unaudited condensed consolidated statements of comprehensive income.
Customer
deposits were $189,503 and $187,037 at June 30, 2016 and March 31, 2016, respectively, and were recorded as a current liability
in the accompanying unaudited condensed consolidated balance sheets.
7.
|
General and Administrative Expenses
|
General and administrative expenses consist
of the following for the three months ended June 30, 2016 and 2015.
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Marketing expenses
|
|
$
|
114,847
|
|
|
$
|
87,350
|
|
|
Trading platform rent
|
|
|
36,783
|
|
|
|
44,281
|
|
|
Transportation
|
|
|
1,139
|
|
|
|
17,348
|
|
|
Internet
|
|
|
4,861
|
|
|
|
4,454
|
|
|
Travel and entertainment
|
|
|
356
|
|
|
|
3,151
|
|
|
Computers and software
|
|
|
14,203
|
|
|
|
7,795
|
|
|
Legal and professional
|
|
|
64,758
|
|
|
|
26,266
|
|
|
Licenses
|
|
|
3,424
|
|
|
|
1,896
|
|
|
Occupancy
|
|
|
89,537
|
|
|
|
149,540
|
|
|
Advertising
|
|
|
229
|
|
|
|
1,878
|
|
|
Other
|
|
|
15,373
|
|
|
|
19,270
|
|
|
Total general and administrative expenses
|
|
$
|
345,510
|
|
|
$
|
363,229
|
|
eBullion, Inc.
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
For the Three Months Ended June 30, 2016 and 2015
|
(Expressed in US Dollars)
|
Income (loss) before income taxes
as shown in the accompanying unaudited condensed consolidated statements of comprehensive income (loss) is summarized below for
the three months ended June 30, 2016 and 2015.
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
|
|
2016
|
|
|
2015
|
|
|
United States
|
|
$
|
(8,901
|
)
|
|
$
|
(9,644
|
)
|
|
Hong Kong
|
|
|
(43,300
|
)
|
|
|
13,221
|
|
|
Income (loss) before income taxes
|
|
$
|
(52,201
|
)
|
|
$
|
3,577
|
|
Under Hong Kong Profits Tax Law the
Company is subject to profits tax at a statutory rate of 16.5% on income reported in its statutory financial statements after appropriate
tax adjustments.
The income tax provision (benefit)
consists of the following for the three ended June 30, 2016 and 2015:
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Current:
|
|
|
|
|
|
|
|
United States
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Hong Kong
|
|
|
-
|
|
|
|
4,180
|
|
|
Total current provision
|
|
|
-
|
|
|
|
4,180
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
-
|
|
|
|
-
|
|
|
Hong Kong
|
|
|
(1,262
|
)
|
|
|
(2,650
|
)
|
|
Total deferred benefit
|
|
|
(1,262
|
)
|
|
|
(2,650
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision (benefit)
|
|
$
|
(1,262
|
)
|
|
$
|
1,530
|
|
The reconciliation of the income
tax provision (benefit)to the amount computed by applying the U.S. statutory federal income tax rate to income before income taxes
is as follows:
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Income tax provision (benefit) at the U.S. statutory tax rate
|
|
$
|
(7,830
|
)
|
|
$
|
537
|
|
|
Valuation allowance on U.S. net operating loss carryforwards
|
|
|
1,335
|
|
|
|
1,447
|
|
|
Impact of foreign operations
|
|
|
7,577
|
|
|
|
(2,314
|
)
|
|
Other
|
|
|
(2,344
|
)
|
|
|
1,860
|
|
|
Total income tax provision (benefit)
|
|
$
|
(1,262
|
)
|
|
$
|
1,530
|
|
At June 30, 2016, we had U.S. net
operating loss carryforwards of approximately $379,000 which expire in 2035. Based on the available evidence, it is uncertain whether
future U.S. taxable income will be sufficient to offset the estimated net loss carryforwards, accordingly, we have recorded a valuation
allowance of approximately $129,000 as of June 30 2016.
eBullion, Inc.
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
For the Three Months Ended June 30, 2016 and 2015
|
(Expressed in US Dollars)
|
8.
|
Income
Taxes- continued
|
At June 30, 2016, we had Hong Kong
net operating loss carryforwards of approximately $43,000 which expire in 2032. Based on the available evidence, it is uncertain
whether future Hong Kong taxable income will be sufficient to offset the estimated net loss carryforwards, accordingly, we have
recorded a valuation allowance of approximately $8,000 as of June 30 2016.
As June 30 and March 31, 2016, the
Company’s and Man Loong’s differences between the book and tax basis of equipment gave rise to deferred income tax
assets of $101,900 and $101,961, respectively which are recorded as noncurrent in the accompanying condensed consolidated balance
sheets. The Company had no other differences between the book and tax basis of assets and liabilities as June 30 and March 31,
2016.
As a result of the implementation
of ASC 740,
Accounting for Income Taxes
, the Company recognized no material adjustment to unrecognized tax benefits. The
Company will continue to classify income tax penalties and interest, if any, as part of interest and other expenses in the accompanying
unaudited condensed consolidated statements of comprehensive income. The Company has incurred no interest or penalties during the
three months ended June 30, 2016 and 2015.
9.
|
Earnings (Loss) Per Share
|
Earnings (Loss) per share (“EPS”)
information for the three months ended June 30, 2016 and 2015 was determined by dividing net income for the period by the weighted
average number of both basic and diluted shares of common stock and common stock equivalents outstanding.
As of and for the three months ending
June 30, 2016 and 2015, the Company did not have any securities that may potentially dilute the basic earnings (loss) per share.
Therefore basic and diluted earnings (loss) per share for the respective periods are the same.
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
|
|
2016
|
|
|
2015
|
|
|
Numerator
|
|
|
|
|
|
|
|
Net income (loss) attributable to common shareholders
|
|
$
|
(50,939
|
)
|
|
$
|
2,047
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
Weighted average shares of common stock (basic and diluted)
|
|
|
512,600,000
|
|
|
|
512,600,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) per share
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
10.
|
Related
Party Transactions and Balances
|
The Company engaged in related party
transactions with certain shareholders, and a company under common control as described below.
On May 27, 2011, the Company entered
into an agreement with a company under common control, True Technology Company Limited (“True Technology”), under which
True Technology hosts the Company’s servers and provides a connection between the customer’s servers and the internet
using True Technology’s public network connections. The fee for these services was $12,894 per month through April 2013 when
the fee was reduced to $3,868 per month and is recorded as trading platform rent as a component of general and administrative expenses.
Included in trading platform rental fees in the accompanying unaudited condensed consolidated statements of comprehensive income
for the three months ended June 30, 2016 and 2015, are rental fees which were paid to True Technology of $11,597 and $11,610 respectively.
Included in employee compensation
and benefits in the accompanying unaudited condensed consolidated statements of comprehensive income for the three months ending
June 30, 2016 and 2015, are salaries and director compensation of $7,732 and $7,740 respectively, which were paid to two of the
Company’s directors and shareholders.
eBullion, Inc.
|
Notes to Unaudited Condensed Consolidated Financial Statements
|
For the Three Months Ended June 30, 2016 and 2015
|
(Expressed in US Dollars)
|
The Company leases office space under
non-cancellable operating lease agreements that expire on various dates through 2019.
In December 2012, the Company entered
into a lease agreement on approximately 10,000 square feet of office space which replaced its previous office facilities. The Company
occupied the space in January 2013. Under terms of the lease, the Company paid approximately $192,000 in lease deposits and was
committed to lease and management fee payments of approximately $46,647 per month for 29 months.
In September 2015, the Company entered
into a new lease agreement on approximately 5,500 square feet of office space which replaced its previous office facilities. The
Company occupied the space in December 2015. Under terms of the lease, the Company paid approximately $147,397 in lease deposits
and was committed to lease and management fee payments of approximately $27,209 per month for 35 months.
In May 2016, the Company entered
into a new lease agreement for additional office space. The Company occupied the space in July 2016. Under terms of the lease,
the Company paid approximately $44,155 in lease deposits and is committed to lease and management fee payments of approximately
$10,645 per month for 29 months.
In May 27, 2011, the Company entered
into an agreement with True Technology, a company under common control under which True Technology hosts the Company’s servers
and provides a connection between the customer’s servers and the internet using True Technology’s public network connections.
The fees paid to True Technology were approximately $12,894 per month for 12 months after which the fees were reduced to $3,868
per month for 24 months. In April 2015, the trading platform lease with True Technology was renewed for 2 years with monthly payment
of approximately $3,868 until March 31, 2017.
Future annual minimum lease payments, including maintenance and management fees, for non-cancellable operating leases and trading
platform fees, are as follows:
|
2017
|
|
|
360,858
|
|
|
2018
|
|
|
326,066
|
|
|
2019
|
|
|
95,103
|
|
|
|
|
$
|
782,026
|
|
ITEM 2.
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
You should read
the following discussion and analysis of our financial condition and results of operations together with our financial statements
and related notes appearing elsewhere in this quarterly report. The following discussion contains forward-looking statements that
involve risks and uncertainties. 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 discussed below and elsewhere in this quarterly
report. This discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements
and the audited consolidated financial statements and notes thereto for the fiscal year ended March 31, 2015, found in our Annual
Report on Form 10-K. This discussion may contain forward-looking statements that involve risks and uncertainties. See “Forward-Looking
Statements.”
OVERVIEW
On April 3, 2013, we entered into a Contribution
Agreement with the shareholders of Man Loong, whereby we acquired 100% of the issued and outstanding capital stock of Man Loong
from its stockholders, in exchange for 507,600,000 newly issued shares of our common stock, with a par value of $0.0001. After
the transaction, Man Loong became our wholly owned subsidiary.
This share exchange transaction (the “Merger”)
was accounted for as a recapitalization whereby Man Loong was the acquirer for financial reporting purposes and eBullion was the
acquired company. Consequently, the assets and liabilities and the operations that are reflected in the historical financial
statements prior to the Merger were those of Man Loong and were recorded at the historical cost basis. The consolidated
financial statements after completion of the Merger include the assets and liabilities of eBullion and Man Loong, historical operations
of Man Loong and operations of eBullion from the closing date of the Merger. Common stock and the corresponding capital
amounts of the Company pre-merger have been retroactively restated as capital stock shares reflecting the exchange ratio in the
Merger. In conjunction with the Merger, Man Loong received no cash and assumed no liabilities of eBullion.
In March 2015, we increased the number of our
authorized shares from 500,000,000 to 1,000,000,000. The par value of our shares remained unchanged at $.0001. We also effected
a 10 for 1 stock split, whereby we exchanged 10 of our shares for every 1 share issued at outstanding before the split. Following
the share split, we have 512,600,000 shares issued and outstanding. All share and per share amounts for the prior year have been
retroactively restated to give effect of the 10 for 1 share split.
Since April 3, 2013, through our subsidiary,
Man Loong, we have been engaged in the precious metals trading business, facilitating the execution of gold and silver price contracts
for customers of its agents via an electronic trading platform which we license from an affiliated company, True Technology. In
facilitating trades of these price contracts, Man Loong acts in its capacity as an officially designated electronics trading member
of the Chinese Gold and Silver Exchange Society, or the “CGSE”, in Hong Kong. Man Loong holds a Type AA License which
it uses to engage in the electronic trading of Kilo Gold and Loco London Gold and Silver. The electronic trading platform that
Man Loong licenses from True Technology provides its agents’ customers with CGSE price quotations on gold and silver price
contracts, on a Loco London basis, as well as information updates on the gold and silver market, based on an evaluation of third-party
market pricing sources such as Reuters or Bloomberg. Man Loong’s customer base is located primarily in China where it works
through independent agents, and in Hong Kong where it has one office and maintains its trading platforms. Man Loong has 3 agents
in Hong Kong which cover three main geographic areas, including Hong Kong Island, Kowloon and the New Territories. In mainland
China, Man Loong has 10 agents located in Shanghai and Guangdong and Fujian provinces. Each of our agents in Hong Kong have between
100 and 150 customers and our agents in China each have between 100 and 600 customers.
In April 2016, Man Loong received a license
from the CGSE to trade gold contracts in the new Qian Hai trade zone in Shenzhen, China. Concurrent with receiving the license,
Man Loong registered a new subsidiary, Shenzhen Qian Hai Man Loong Bullion Company Ltd. (“Shenzhen Qian Hai”) organized
as a Wholly Foreign Owned Enterprise under PRC law. The new license will allow Man Loong to provide its trading platform and trading
services to its existing and new customers who are citizens of the PRC to trade gold contracts through Shenzhen Qian Hai. Man Loong
intends to charge a fee to facilitate such trades, and is in the process of defining its business and marketing strategies and
processes for trades placed through Shenzhen Qian Hai.
Man Loong’s membership in the CGSE allows
it to facilitate trades on behalf of nonmembers who execute trades to buy and/or sell gold and/or silver price contracts without
it being required to become a counterparty to the trade or to purchase or sell any gold or silver being traded as a principal.
Man Loong facilitates the trades that are placed using its electronic trading platform. Man Loong provides agents and their customers
with access to its electronic trading platform which has a direct connection to the CGSE. Man Loong enters into an agency agreement
with each agent for which it facilitates trades pursuant to which the agent agrees to pay a commission to Man Loong for each trade
that Man Loong facilitates and the agent agrees to take all responsibility for trade losses. The agents often use Man Loong’s
offices and conference rooms as a physical place to meet with customers and Man Loong provides a dedicated investment center where
agents and their customers can access the electronic trading platform to place and process contract orders for gold, and silver
and obtain up-to-date market data, trade reports and gain/ loss reports to assist them in evaluating their portfolio and effecting
contract trades.
Man Loong provides its agents and their customers,
with access to its electronic trading platform to place and process price contract orders for gold and silver, which price contracts
do not involve the physical transfer or delivery of any actual gold, silver or other precious metals. The electronic trading
platform also provides an agent’s customers with up-to-date market data, trade reports and gain/ loss reports to assist them
in evaluating their portfolio and effecting price contract trades. Man Loong’s agents assume all of the portfolio trading
risk of their price contract orders. Man Loong merely supplies the trading platform that processes the trade as a member
of the CGSE and receives a commission. The electronic trading platform communicates and confirms all of the trades that are placed
by Man Loong to the CGSE and the CGSE, through the electronic trading platform, provides both the customers of the agents and the
agents with confirmation codes which confirm execution of the trades placed through the electronic platform.
Man Loong receives a brokerage commission per
trade ranging from $20 to $40 regardless of the purchase price paid or received for the gold or silver traded and the agent assumes
the sole responsibility for settlement of the purchase price of the gold or silver traded and for any resulting gain or loss recognized
on those trades.
All of our revenue has been derived by Man Loong
from the commission it receives on each trade executed through its electronic trade platform or telephone transaction system. Man
Loong calculates and charges the agents account a flat fee of between $20 - $40 when each trade is closed and invoices those agents
for their commission at the end of each month. Payment terms for commissions are net 30 days. The typical fee is $40
per trade; however, for agents whose customers execute a large number of trades, Man Loong will discount the fee to as low as $20
per trade. Man Loong evaluates its commission fee on an annual basis and adjusts it accordingly based upon its operational
costs, which include the fees to run its electronic trading platform, the fees associated with the maintenance of its office, the
fees that are charged by the CGSE and its employee costs.
Man Loong is not a counterparty in the trades
executed by our agents’ customers on our trading platforms, instead it charges a commission which ranges from $20 to $40
for each completed trade. Man Loong’s revenue is dependent upon the amount of commission it generates which in turn is dependent
upon the number of agents it has and trade volume as opposed to the price of the commodities. Man Loong’s revenues increase
as it adds new contracted agents and as those agents increase the number of their customers. If Man Loong has fewer agents, its
revenue will suffer. In addition, past trends indicate that at times of price volatility in the prices of gold and silver, Man
Loong’s agents’ customers tend to increase the number of trades that they execute across Man Loong’s trading
platforms and in times of low gold and silver price volatility Man Loong’s agents’ customers decrease the number of
trades. The number of agents’ customers decreased by 2 during the year ended March 31, 2016 and those 2 customers historically
accounted for more than 10% of commission revenue. Additionally, the number of agent customers decreased by 19 during the quarter
ended June 30, 2016. Volatility in the price of gold increased slightly during the 3 months ended June 30, 2016 compared
to the prior year, trading in a range of approximately $1,200 to $1,350 per ounce compared to a relatively steady trading range
of $1,100 to $1,200 per ounce for the three months ended June 30, 2015. Volatility in the price of silver increased slightly during
the three months ended June 30, 2016 compared to the prior year, trading in a range of approximately $15 to $18 per ounce compared
to a relatively steady trading range of $16 to $17 per ounce for the three months ended June 30, 2015. For the three months ended
June 30, 2016, revenues decreased by $60,880, or 11.4% as compared to the three months ended June 30, 2015. We believe that revenues
decreased primarily because of the continued lack of volatility in gold and silver prices which contributed to the decrease in
the number of agent customer with active accounts. A decrease in the number of agents and their customers or the continued lack
of volatility in gold prices in the future could result in declines in trade revenue compared to past results.
Our principal offices are located at 80 Broad
Street, New York, New York 10004, (212) 837-7858. Man Loong currently has one office in Hong Kong. Man
Loong’s principal executive offices are located at 18/F, Tower 6, China Hong Kong City, 33 Canton Road, Tsim Sha Tsui, Hong
Kong. The telephone number at Man Loong’s principal executive office is +852-2155-3999. All of Man Loong’s transactions
and the technologies, including the servers that carry out these transactions, are all processed and located in Hong Kong.
Our Corporate History and Background
We were incorporated under the laws of the State
of Delaware on January 28, 2013. We were initially formed to develop software for use in on-line trading of gold and silver contracts.
Since the acquisition of Man Loong, our business development focus has been, and we expect will continue to be, solely on increasing
Man Loong’s market share for the on-line trading of gold and silver contracts within the Hong Kong market while developing
a business model for the on-line trading of gold and silver contracts by Man Loong in the People’s Republic of China.
Results of Operations for the Three Months
Ended June 30, 2016 and 2015
Man Loong’s revenue was $473,261 and $534,141
for the quarters ended June 30, 2016 and 2015, respectively, a decrease of $60,880 or 11.4%. All of Man Loong's revenue
was derived from commissions on trades placed through its trading platform and telephone transaction system. During
the year ended March 31, 2016, the number of agents remained constant, however the number of agent customers decreased by 2, and
those 2 customers historically accounted for more than 10% of commission revenue. Additionally, the number of agent customers decreased
by 19 during the quarter ended June 30, 2016. We believe that revenues decreased as compared to the prior quarter primarily because
of the continued lack of volatility in gold and silver prices which contributed to the decrease in the number of agent customer
with active accounts. The lack of volatility in gold and silver prices and decreases in the number of agents and their customers
could continue to result in less commission revenues as it has in the past.
Total expenses were $538,825 for the quarter
ended June 30, 2016 as compared to $549,305 for the quarter ended June 30, 2015, an increase of $10,480 or 1.9%. Approximately
64% of our total expenses for the quarter ended June 30, 2016 were attributed to general and administrative expenses compared to
66% for the quarter ended June 30, 2015. Historically, marketing, which includes payment made to agents for their provision
of sales, marketing and customer support services has been our largest expense. Marketing expense was $114,847 or 21%
of Man Loong’s total expenses for the quarter ended June 30, 2016 and $87,350 or 16% of Man Loong’s total expenses
for the quarter ended June 30, 2015. The increase in marketing expenses in the quarter ended June 30, 2016 as compared to the prior
year was the result of Man Loong increasing headcount and expanding its marketing effort to attract new agents and customers. Man
Loong’s other large expenses were (i) its trading platform hosting and rent which was $36,783 or 7% of its total expenses
for the quarter ended June 30, 2016 and $44,281 or 8% of its total expenses for the quarter ended June 30, 2015, (ii) its legal
and professional expense which was $64,758 or 12% of its total expenses for the quarter ended June 30, 2016 and $26,266 or 5% of
its total expenses for the quarter ended June 30, 2015 and (iii) its occupancy costs for the rent and management fee paid for its
offices which was $89,537 or 17% of Man Loong’s total expenses for the quarter ended June 30, 2016 and $149,540 or 27% of
its total expenses for the quarter ended June 30, 2015. For the quarters ended June 30, 2016 and 2015, employee compensation and
benefits was $174,420 and $165,905 or 32% and 30% of Man Loong’s total expenses for the quarters ended June 30, 2016 and
2015, respectively.
Net income (loss) was a net loss of $50,939
for the quarter ended June 30, 2016, compared to net income of $2,047 for the quarter ended June 30, 2015, a decrease of $52,986
or 2,588%. The decrease in net income (loss) was primarily the result of Man Loong’s decrease in revenue while
its, marketing, legal and professional and employee compensation and benefits expenses all increased, offset in part by a decrease
in trading platform rent and occupancy expenses, as a percentage of revenue for the quarter ended June 30, 2016 as compared to
the quarter ended June 30, 2015.
LIQUIDITY
To date, eBullion has funded its operations
from cash flows generated by operations. As of June 30, 2016, eBullion had cash totaling $1,015,143, total assets of $2,576,924,
total liabilities of $228,168 and working capital of $1,010,508. Net cash used in operations was 18,073 and $239,698 for the three
months ended June 30, 2016 and 2015, respectively. The decrease in net cash used in operations for the three months ended June
30, 2016 included an increase in net loss of $52,986, an increase in deposits and prepaid expenses of $55,457, a decrease in accounts
payable and accrued expenses of $389 and a decrease in deferred income taxes of $1,262, offset by a decrease in commissions receivable
of $68,502, and an increase in customer deposits of $2,577. Net cash used in investing activities was $46,132 and $774,020 for
the three months ended June 30, 2016 and 2015, respectively. The decrease in net cash used in investing activities for the three
months ended June 30, 2016 was primarily due to Man Loong’s loan of $774,164 to Global Long Limited Inc. (“Global Long”)
during the three months ended June 30, 2015 compared to no lending activity during the three months ended June 30, 2016. Global
Long is registered in Hong Kong and through its subsidiary in the Peoples Republic of China, eBullion Trade Company Limited (“EBullion
Trade”), is engaged in trading silver contracts as an electronic trading member of the Guangdong Precious Metal Exchange.
The loan bears interest at a 6% annual rate, matures on its 5th anniversary and is secured by a first right of claim on a bank
deposit held by a subsidiary of Global Long. Under terms of the loan, interest is payable to Man Loong quarterly and Global Long
has the right to repay the loan at any time before the maturity date. Until all principal and accrued interest are repaid on the
loan, Global Long may not enter into additional borrowings without Man Loong’s written permission, and upon certain events
of default, the Loan becomes due on demand. The purpose of the loan was to establish a relationship with Global Long with the intent
of becoming the first choice for eBullion Trade’s customers who wish to trade in gold trading positions through the CGSE.
The decrease in net cash used by investing activities compared to the three months ended June 30, 2015 was partially offset by
the purchase of equipment during the three months ended June 30, 2016. Net cash used by financing activities was $29,533 and $0
for the three months ended June 30, 2016 and 2015, respectively. The increase in net cash used by financing activities for the
three months ended June 30, 2016 was due to an increase in bank overdraft during the three months ended June 30, 2016 as compared
to $0 during the three months ended June 30, 2015.
As of June 30, 2016 and for the three months
then ended, Man Loong’s customer deposits increased from $187,037 at March 31, 2016 to $189,503 at June 30, 2016, an increase
of $2,466 or 1.3%. Customer deposits arise when customers of Man Loong’s agents request that Man Loong hold the minimum deposit
required to secure the customer’s account from trading losses instead of the agent. Man Loong will continue to
offer this service to customers who request it, and expects the number of customers who hold minimum deposit funds in its accounts
to increase in the future.
As of June 30, 2016 and for the three months
then ended, Man Loong’s commission receivables decreased from $100,493 at March 31, 2016 to $31,916 at June 30, 2016, a decrease
of $68,577 or 68.2%. Commissions receivable represent commissions to be collected from agents for their customers’ trades
executed across Man Loong’s electronic trade platform and telephone transaction system. Commissions receivable are typically
remitted to Man Loong within 30 days of trade execution. We have not historically incurred credit losses on these commissions receivable,
and we continue working with our agents to improve the payment times of commissions accrued but unpaid at the end of each month.
As of June 30, and March 31, 2016, we had no reserve for credit losses nor had we incurred any bad debts for the three months ended
June 30, 2016 and 2015.
As of June 30, 2016 and for the three months
then ended, Man Loong’s deposits and prepaid expenses increased from $170,903 at March 31, 2016 to $226,271 at June 30, 2016,
an increase of $55,368 or 32.4%. Deposits and prepaid expenses consist primarily of prepaid rent and occupancy expenses on
Man Loong’s principal offices in Hong Kong. In May 2016, Man Loong entered into a lease agreement on new office space which
required Man Loong to pay an additional deposit of approximately $44,155.
No dividends were declared or paid in the quarters
ended June 30, 2016 and 2015 and none are expected to be paid for the foreseeable future.
Commitments
eBullion is committed to paying a monthly
fee of approximately $3,868 until March 31, 2017 to, True Technology Limited for hosting services and use of the trading platform
that is the cornerstone of its business. True Technology is a company owned by Messrs. Choi and Wong, Man Loong’s
CEO and a director, respectively. In September 2015, Man Loong entered into a lease for its principal office space which requires
monthly payments of approximately $27,209 through October 2018. In May 2016, the Company entered into a new lease agreement for
additional office space. The Company paid approximately $44,155 in lease deposits and is committed to lease and management fee
payments of approximately $10,645 per month through October 2018.
OFF-BALANCE SHEET ARRANGEMENTS
We did not have during
the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under Securities and Exchange
Commission rules.
ITEM 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
Not applicable to smaller reporting companies.
ITEM 4.
|
CONTROLS AND PROCEDURES.
|
a) Evaluation of disclosure controls
and procedures
Pursuant to Rule 13a-15(b) under the Securities
Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s
management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”),
of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange
Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded
that the Company’s disclosure controls and procedures are ineffective as of June 30, 2016 to ensure that information required
to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed,
summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely
decisions regarding required disclosure. Subject to receipt of additional financing or revenue generated from operations, the Company
intends to retain additional individuals to remedy the ineffective controls.
(b) Changes in Internal Control
over Financial Reporting
There has been no change in our internal control
over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our fiscal quarter
ended June 30, 2016, that has materially affected, or is reasonably likely to materially affect, our internal control over financial
reporting.
PART II—OTHER
INFORMATION
ITEM 1.
|
LEGAL PROCEEDINGS.
|
None.
The following information updates, and should
be read in conjunction with, information disclosed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K
for the year ended March 31, 2016 which was filed with the Securities and Exchange Commission on June 29, 2016. There have been
no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended March 31, 2016 other than
as set forth below:
RISKS RELATED TO OUR BUSINESS
Our revenue is dependent upon Man Loong’s
ability to attract and retain the agents with whom its customers have accounts.
Our revenue is dependent upon Man Loong’s
ability to retain and attract agents. Man Loong’s customer base is primarily comprised of agents who have been
retained by individual customers who trade in gold and silver price contracts. Although Man Loong offers products and tailored
services designed to educate, support and retain its agents, its efforts to attract new agents, and those agents’ ability
to attract new customers or reduce the attrition rate of its existing agents and their customers may not be successful. If Man
Loong is unable to maintain or increase its agent retention rates or generate a substantial number of new agents in a cost-effective
manner, its business, financial condition and results of operations and cash flows would likely be adversely affected.
During the year ended March 31, 2016, the number of agents remained constant, however the number of agent customers decreased by
2, and those 2 customers historically accounted for more than 10% of commission revenue. Additionally, the number of agent customers
decreased by 19 during the quarter ended June 30, 2016. We believe that revenues decreased as compared to the prior quarter primarily
because of the continued lack of volatility in gold and silver prices which contributed to the decrease in the number of agent
customer with active accounts. For the three months ended June 30, 2016, revenues decreased by $60,880 or 11.4% as compared to
the three months ended June 30, 2015. Although Man Loong has spent significant financial resources on support services for agents
and their customers, and marketing and related expenses and plans to continue to do so, these efforts may not be cost-effective
at attracting new agents and customers. In particular, during the quarter ended June 30, 2016, marketing expenses increased as
we expanded our marketing efforts to attract additional customers, and we believe that costs for customer support services and
rates for desirable advertising and marketing placements, including online, search engine, print and television advertising, are
likely to increase in the foreseeable future, and Man Loong may be disadvantaged relative to its larger competitors in its ability
to expand or maintain its customer support capabilities, and advertising and marketing commitments.
Man Loong currently has 3 agents in Hong Kong
which cover three main geographic areas, including Hong Kong Island, Kowloon and the New Territories. In mainland China,
Man Loong has 10 agents located in Shanghai and Guangdong and Fujian provinces. Each of Man Loong’s agents in
Hong Kong have between 100 – 150 customers and its agents in China each have between 100 and 600 customers. There can be
no assurance that Man Loong will be able to retain its agents and their customers.
If Man Loong were to fail to comply with
the requirements of the CGSE, Man Loong could lose its ability to process client trades, which would have an adverse material effect
on our revenues, financial condition and cash flows.
Man Loong must comply with the minimum working
capital and other requirements of the CGSE to continue our present business operations as an officially designated electronics
trading member of the CGSE, a self-regulatory organization registered in Hong Kong. If we were to fall out of compliance
with the CGSE’s requirements for its members, Man Loong could lose its ability to facilitate any trades of gold or silver
for customers of its agents, and potentially lose its membership in the CGSE, all of which would have an adverse material effect
on our revenues, financial condition and cash flows. The constitution of the CGSE requires its members to have a minimum working
capital, defined as cash plus precious metals, of approximately $193,000 and minimum assets of $643,000. The CGSE also requires
its members to submit a quarterly liquidity capital report, in order to ensure that the bank balances exceed or equal the balance
of customer deposits, as well as comply with a code of conduct which is established by CGSE. As of June 30, 2016 and March 31,
2016, Man Loong had $1.0 million and $1.1 million in cash, respectively, and $2.58 million and $2.66 million, in total assets,
respectively. We were in compliance with the CGSE’s requirements as of June 30, 2016 and March 31, 2016.
ITEM 2.
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
|
RECENT SALES OF UNREGISTERED SECURITIES
There have been no recent sales of unregistered securities.
PURCHASE OF EQUITY SECURITIES
None.
ITEM 3.
|
DEFAULTS UPON SENIOR SECURITIES
|
Not Applicable.
ITEM 4.
|
MINE SAFETY DISCLOSURES
|
Not Applicable.
ITEM 5.
|
OTHER INFORMATION.
|
None.
The exhibits filed
as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index, which Exhibit Index is incorporated
herein by reference.