ITEM 1. FINANCIAL STATEMENTS.
|
|
Unaudited
June 30,
2017
|
|
|
Audited
March 31,
2017
|
|
ASSETS
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
Cash
|
|
$
|
429,267
|
|
|
$
|
1,061,609
|
|
Commissions receivable
|
|
|
613,321
|
|
|
|
546,310
|
|
Deposits and prepaid expenses
|
|
|
40,816
|
|
|
|
42,141
|
|
Total current assets
|
|
|
1,083,404
|
|
|
|
1,650,161
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Assets
|
|
|
|
|
|
|
|
|
Deposits and prepaid expenses
|
|
|
214,826
|
|
|
|
188,010
|
|
Equipment, net
|
|
|
205,516
|
|
|
|
224,350
|
|
Loan receivable from Global Long
|
|
|
768,761
|
|
|
|
772,157
|
|
Deferred income taxes
|
|
|
72,757
|
|
|
|
71,221
|
|
Total noncurrent assets
|
|
|
1,261,860
|
|
|
|
1,255,738
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,345,264
|
|
|
$
|
2,905,799
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
27,869
|
|
|
$
|
56,161
|
|
Amount due to shareholder
|
|
|
282,497
|
|
|
|
313,050
|
|
Customer deposits
|
|
|
11,520
|
|
|
|
212,886
|
|
Total current liabilities
|
|
|
321,886
|
|
|
|
582,097
|
|
|
|
|
|
|
|
|
|
|
Noncurrent Liabilities
:
|
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
-
|
|
|
|
466
|
|
Total noncurrent assets
|
|
|
-
|
|
|
|
466
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
321,886
|
|
|
|
582,563
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
523,269
|
|
|
|
818,849
|
|
Accumulated other comprehensive loss
|
|
|
(28,555
|
)
|
|
|
(24,277
|
)
|
Total shareholders’ equity
|
|
|
2,023,378
|
|
|
|
2,323,236
|
|
Total liabilities and shareholders’ equity
|
|
$
|
2,345,264
|
|
|
$
|
2,905,799
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
|
2017
|
|
|
2016
|
|
REVENUES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commission revenue
|
|
$
|
90,764
|
|
|
$
|
473,261
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
204,216
|
|
|
|
345,510
|
|
Employee compensation and benefits
|
|
|
177,469
|
|
|
|
174,420
|
|
Depreciation and amortization
|
|
|
18,834
|
|
|
|
18,895
|
|
Total expenses
|
|
|
400,519
|
|
|
|
538,825
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) FROM OPERATIONS
|
|
|
(309,755
|
)
|
|
|
(65,564
|
)
|
|
|
|
|
|
|
|
|
|
OTHER INCOME
|
|
|
|
|
|
|
|
|
Interest income, net
|
|
|
11,693
|
|
|
|
13,363
|
|
Total other income
|
|
|
11,693
|
|
|
|
13,363
|
|
|
|
|
|
|
|
|
|
|
INCOME (LOSS) BEFORE INCOME TAXES
|
|
|
(298,062
|
)
|
|
|
(52,201
|
)
|
|
|
|
|
|
|
|
|
|
INCOME TAX (PROVISION) BENEFIT
|
|
|
|
|
|
|
|
|
Current
|
|
|
-
|
|
|
|
-
|
|
Deferred
|
|
|
2,482
|
|
|
|
1,262
|
|
Total income tax (provision) benefit
|
|
|
2,482
|
|
|
|
1,262
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS)
|
|
|
(295,580
|
)
|
|
|
(50,939
|
)
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
(4,278
|
)
|
|
|
(1,399
|
)
|
COMPREHENSIVE INCOME (LOSS)
|
|
$
|
(299,858
|
)
|
|
$
|
(52,338
|
)
|
|
|
|
|
|
|
|
|
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
|
|
|
|
|
|
|
|
|
Basic and diluted
|
|
|
512,600,000
|
|
|
|
512,600,000
|
|
|
|
|
|
|
|
|
|
|
BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE
|
|
|
|
|
|
|
|
|
Basic and diluted earnings (loss) 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
Years Ended
March 3
1, 201
7 and
Three Months Ended
June 3
0, 201
7
|
(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, 2016 – Audited
|
|
|
512,600,000
|
|
|
$
|
51,260
|
|
|
$
|
1,477,404
|
|
|
$
|
873,954
|
|
|
$
|
(1,524
|
)
|
|
$
|
2,401,094
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(55,105
|
)
|
|
|
-
|
|
|
|
(55,105
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(22,753
|
)
|
|
|
(22,753
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, March 31, 2017 – Audited
|
|
|
512,600,000
|
|
|
$
|
51,260
|
|
|
$
|
1,477,404
|
|
|
$
|
818,849
|
|
|
$
|
(24,277
|
)
|
|
$
|
2,323,236
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(295,580
|
)
|
|
|
-
|
|
|
|
(295,580
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,278
|
)
|
|
|
(4,278
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE, June 30, 2017 – Unaudited
|
|
|
512,600,000
|
|
|
$
|
51,260
|
|
|
$
|
1,477,404
|
|
|
$
|
523,269
|
|
|
$
|
(28,555
|
)
|
|
$
|
2,023,378
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
|
|
2017
|
|
|
2016
|
|
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(298,062
|
)
|
|
$
|
(50,939
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
18,834
|
|
|
|
18,895
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Commissions receivable
|
|
|
(69,587
|
)
|
|
|
68,502
|
|
Deposits and prepaid expenses
|
|
|
(26,568
|
)
|
|
|
(55,457
|
)
|
Accounts payable and accrued liabilities
|
|
|
(28,199
|
)
|
|
|
(389
|
)
|
Amount due to shareholder
|
|
|
(29,248
|
)
|
|
|
-
|
|
Customer deposits
|
|
|
(200,925
|
)
|
|
|
2,577
|
|
Deferred income taxes
|
|
|
-
|
|
|
|
(1,262
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(633,755
|
)
|
|
|
(18,073
|
)
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Purchase of equipment
|
|
|
-
|
|
|
|
(46,132
|
)
|
Net cash used in investing activities
|
|
|
-
|
|
|
|
(46,132
|
)
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Bank overdraft
|
|
|
-
|
|
|
|
(29,533
|
)
|
Net cash used by financing activities
|
|
|
-
|
|
|
|
(29,533
|
)
|
|
|
|
|
|
|
|
|
|
NET INCREASE (DECREASE) IN CASH
|
|
|
(633,754
|
)
|
|
|
(93,738
|
)
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
|
|
1,412
|
|
|
|
(584
|
)
|
Cash, beginning of period
|
|
|
1,061,609
|
|
|
|
1,109,465
|
|
Cash, end of period
|
|
$
|
429,267
|
|
|
$
|
1,015,143
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid income taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
1.
|
Nature of Operations and Basis of Presentation
|
|
|
|
eBullion, Inc. (“eBullion” or “the Company”) was incorporated in Delaware on January 28, 2013.
The Company provides trading services for gold and silver trading positions, 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.
Description of subsidiaries
|
Name
|
|
Place of incorporation
and kind of
legal entity
|
|
Principal activities
and place of operation
|
|
Particulars
paid-up
capital
|
|
Effective
interest
held
|
|
|
|
|
|
|
|
|
|
Man Loong Bullion Company Limited (“Man Loong”)
|
|
Hong Kong, a limited liability company
|
|
Provision of sub-agency service in London gold dealing
|
|
HK$10,152,000
|
|
100%
|
|
|
|
|
|
|
|
|
|
Shenzhen Qianhai Man Loong Bullion Company Limited
(“SQML”)
|
|
The PRC, a limited liability company
|
|
Provision of gold trading service in the PRC
|
|
RMB2,000,000
|
|
100%
|
|
eBullion and its subsidiaries are hereinafter referred to as (the “Company”).
|
|
|
|
Basis of Presentation
|
|
|
|
The Company’s condensed consolidated financial statements are expressed in U.S. Dollars and are presented in accordance with U.S. GAAP and the rules and regulations of the Securities and Exchange Commission (“SEC”). The Company’s and Man Loong’s fiscal year end is March 31.
|
|
|
|
The accompanying unaudited condensed consolidated financial statements have been prepared by management in accordance with both accounting principles generally accepted in the United States (“GAAP”), and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.
|
|
|
|
In the opinion of management, the consolidated balance sheet as of March 31, 2017 which has been derived from audited financial statements and these unaudited condensed consolidated financial statements reflect all normal and recurring adjustments considered necessary to state fairly the results for the periods presented. The results for the period ended June 30, 2017 are not necessarily indicative of the results to be expected for the entire fiscal year ending March 31, 2018 or for any future period.
|
|
|
|
These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Management’s Discussion and the audited financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended March 31, 2017.
|
|
|
|
Principles of Consolidation
|
|
|
|
The condensed consolidated financial statements as of June 30, 2016, include the accounts of eBullion and its subsidiaries. All significant intercompany transactions have been eliminated.
|
2.
|
Summary of Significant Accounting Policies
|
|
|
|
Use of Estimates
The preparation of these 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 condensed consolidated financial statements and the reported amounts of revenue and expenses during the year. 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 years to conform to the current presentation. Such reclassifications had no effect on net income (loss).
|
eBullion, Inc.
|
Notes to Condensed Consolidated Financial Statements
|
For the
Three Months Ended
June 3
0, 201
7 and 201
6
|
(Expressed in US Dollars)
|
2.
|
Summary of Significant Accounting Policies - continued
|
|
|
|
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.
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 six months or less. As of June 30, 2017 and March 31, 2017, the Company had no cash equivalents. The Company reclassifies cash overdrafts to accounts payable.
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.
|
eBullion, Inc.
Notes to Condensed Consolidated Financial Statements
For the
Three Months Ended
June 3
0, 201
7 and 201
6
(Expressed in US Dollars)
2.
|
Summary of Significant Accounting Policies - continued
|
|
|
|
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 180 days of trade execution. The Company has not historically incurred credit losses on these commissions receivable. As of June 30, 2017 and March 31, 2017, the Company had no reserve for credit losses nor had it incurred any bad debts for the three months ended June 30, 2017 and 2016.
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 consolidated balance sheets.
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 consolidated statements of comprehensive income (loss).
|
eBullion, Inc.
|
Notes to Condensed Consolidated Financial Statements
|
For the
Three Months Ended
June 3
0, 201
7 and 201
6
|
(Expressed in US Dollars)
|
2.
|
Summary of Significant Accounting Policies – continued
|
|
|
|
Reporting Currency and Foreign Currency Translation
As of June 30 and March 31, 2017 and for the three months ended June 30, 2017 and 2016, 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, 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 used:
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Period-end June 30, 2017 USD/HKD exchange rate
|
|
|
7.8048
|
|
|
|
7.7586
|
|
Average USD/HKD exchange rate:
|
|
|
7.7855
|
|
|
|
7.7604
|
|
Period end June 30, 2017 USD/RMB exchange rate
|
|
|
6.7842
|
|
|
|
-
|
|
Average USD/RMB exchange rate:
|
|
|
6.8630
|
|
|
|
-
|
|
|
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 long-lived assets 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.
|
|
|
|
Customer Deposits
|
|
|
|
Customer deposits at June 30, 2017 and March 31, 2017 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, 2017 and March 31, 2017.
|
|
|
|
Accumulated Other Comprehensive (Loss)
|
|
|
|
The Company’s accumulated other comprehensive (loss) as June 30, and March 31, 2017 consists of adjustments resulting from translating Man Loong’s functional currency, the HK dollar, to its reporting currency, the U.S. dollar.
|
eBullion, Inc.
|
Notes to Condensed Consolidated Financial Statements
|
For the
Three Months Ended
June 3
0, 201
7 and 201
6
|
(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 2008. At June 30, 2017, Man Loong had no uncertain tax positions.
Historically, we have 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 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.
|
eBullion, Inc.
|
Notes to Condensed Consolidated Financial Statements
|
For the
Three Months Ended
June 3
0, 201
7 and 201
6
|
(Expressed in US Dollars)
|
2.
|
Summary of Significant Accounting Policies - continued
|
|
|
|
Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized gains and losses resulting from translating Man Loong’s functional currency, the HK dollar, to its reporting currency, the U.S. dollar.
Recent Accounting Pronouncements
In January 2017, the FASB has issued Accounting Standards Update (ASU) No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” These amendments eliminate Step 2 from the goodwill impairment test. The annual, or interim, goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. In addition, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss, if applicable. The amendments also eliminate the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. Effective for public business entities that are a SEC filers for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. ASU 2017-04 should be adopted on a prospective basis.
In December 2016, the FASB has issued Accounting Standards Update (ASU) No. 2016-20, “Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.” The amendments affect narrow aspects of the guidance issued in ASU 2014-09 including Loan Guarantee Fees, Contract Costs, Provisions for Losses on Construction-Type and Production-Type Contracts, Disclosure of Remaining Performance Obligations, Disclosure of Prior Period Performance Obligations, Contract Modifications, Contract Asset vs. Receivable, Refund Liability, Advertising Costs, Fixed Odds Wagering Contracts in the Casino Industry, and Costs Capitalized for Advisors to Private Funds and Public Funds. The effective date and transition requirements for the amendments are the same as the effective date and transition requirements for FASB Accounting Standards Codification Topic 606. Public entities should apply Topic 606 (and related amendments) for annual reporting periods beginning after December 15, 2017, including interim reporting periods therein.
Management has considered all recent accounting pronouncements issued. The Company’s management believes that these recent pronouncements will not have a material effect on the Company’s financial statements.
|
eBullion, Inc.
|
Notes to Condensed Consolidated Financial Statements
|
For the
Three Months Ended
June 3
0, 201
7 and 201
6
|
(Expressed in US Dollars)
|
3.
|
Deposits and Prepaid Expenses
|
|
|
|
Deposits and prepaid expenses consisted of the following as of June 30, 2017 and March 31, 2017.
|
|
|
Unaudited
|
|
|
Audited
|
|
Current
|
|
June 30,
2017
|
|
|
March 31,
2017
|
|
Prepaid rent and occupancy expenses
|
|
$
|
40,816
|
|
|
$
|
42,141
|
|
|
|
|
|
|
|
|
|
|
Noncurrent
|
|
|
|
|
|
|
|
|
Rent and occupancy deposits
|
|
|
214,826
|
|
|
|
188,010
|
|
Total deposits and prepaid expenses
|
|
$
|
255,642
|
|
|
$
|
230,151
|
|
4.
|
Loan receivable from Global Long
|
|
|
|
On April 3, 2015, Man Loong loaned Global Long Inc. Limited (“Global Long”) $768,761 (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 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 Condensed Consolidated Financial Statements
|
For the
Three Months Ended
June 3
0, 201
7 and 201
6
|
(Expressed in US Dollars)
|
5.
|
Equipment
|
|
|
|
Equipment, including leasehold improvements, consisted of the following as of June 30, 2017and March 31, 2017
|
|
|
Unaudited
June 30,
2017
|
|
|
March 31,
2017
|
|
Office equipment
|
|
$
|
206,345
|
|
|
$
|
206,345
|
|
Computer equipment
|
|
|
59,919
|
|
|
|
59,919
|
|
Furniture and fixtures
|
|
|
111,916
|
|
|
|
111,916
|
|
|
|
|
378,180
|
|
|
|
378,180
|
|
Less: Accumulated depreciation
|
|
|
(172,664
|
)
|
|
|
(153,830
|
)
|
Equipment, net
|
|
$
|
205,516
|
|
|
$
|
224,350
|
|
|
Depreciation expense was $18,834 and $18,895 for the three months ended June 30, 2017 and 2016, respectively, and was recorded as depreciation expense in the accompanying consolidated statements of comprehensive income (loss).
|
6.
|
Customer Deposits
|
|
|
|
Customer deposits were $11,520 and $212,886 at June 30, 2017 and March 31, 2017, respectively, and were recorded as a current liability in the accompanying consolidated statements of financial condition.
|
7.
|
General and Administrative Expenses
|
|
|
|
General and administrative expenses consist of the following for the three months ended June 30, 2017 and 2016.
|
|
|
2017
|
|
|
2016
|
|
Marketing expenses
|
|
$
|
8,593
|
|
|
$
|
114,847
|
|
Trading platform rent
|
|
|
26,122
|
|
|
|
36,783
|
|
Transportation
|
|
|
755
|
|
|
|
1,139
|
|
Internet
|
|
|
4,705
|
|
|
|
4,861
|
|
Travel and entertainment
|
|
|
612
|
|
|
|
356
|
|
Computers and software
|
|
|
7,214
|
|
|
|
14,203
|
|
Legal and professional
|
|
|
21,719
|
|
|
|
64,758
|
|
Licenses
|
|
|
1,400
|
|
|
|
3,424
|
|
Occupancy
|
|
|
121,001
|
|
|
|
89,537
|
|
Advertising
|
|
|
1,284
|
|
|
|
229
|
|
Other
|
|
|
10,811
|
|
|
|
15,373
|
|
Total general and administrative expense
|
|
$
|
204,216
|
|
|
$
|
345,510
|
|
eBullion, Inc.
|
Notes to Condensed Consolidated Financial Statements
|
For the
Three Months Ended
June 3
0, 201
7 and 201
6
|
(Expressed in US Dollars)
|
|
Income (loss) before income taxes as shown in the accompanying consolidated statements of comprehensive income (loss) is summarized below for the three months ended June 30, 2017 and 2016.
|
|
|
2017
|
|
|
2016
|
|
United States
|
|
$
|
7,259
|
|
|
|
(8,901
|
)
|
Hong Kong
|
|
|
(305,321
|
)
|
|
|
(43,300
|
)
|
Income (loss) before income taxes
|
|
$
|
(298,062
|
)
|
|
|
(52,201
|
)
|
|
The provision (benefit) for income taxes consists of the following for the three months ended June 30, 2017 and 2016:
|
|
|
2017
|
|
|
2016
|
|
Current:
|
|
|
|
|
|
|
United States
|
|
$
|
-
|
|
|
$
|
-
|
|
Hong Kong
|
|
|
-
|
|
|
|
-
|
|
Total current provision
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
United States
|
|
|
-
|
|
|
|
-
|
|
Hong Kong
|
|
|
(2,482
|
)
|
|
|
(1,262
|
)
|
Total deferred benefit
|
|
|
(2,482
|
)
|
|
|
(1,262
|
)
|
|
|
|
|
|
|
|
|
|
Total income tax provision (benefit)
|
|
$
|
(2,482
|
)
|
|
$
|
(1,262
|
)
|
|
The reconciliation of the income tax provision to the amount computed by applying the U.S. statutory federal income tax rate to income (loss) before income taxes is as follows:
|
|
|
2017
|
|
|
2016
|
|
Income tax provision (benefit) at the U.S. statutory tax rate
|
|
$
|
(44,709
|
)
|
|
$
|
(7,830
|
)
|
Valuation allowance on U.S. net operating loss carryforwards
|
|
|
1,089
|
|
|
|
1,335
|
|
Impact of foreign operations
|
|
|
50,378
|
|
|
|
7,577
|
|
Defferred provision
|
|
|
|
|
|
|
-
|
|
Other
|
|
|
(9,240
|
)
|
|
|
(2,344
|
)
|
Income tax provision (benefit)
|
|
$
|
(2,482
|
)
|
|
$
|
(1,262
|
)
|
|
At June 30, 2017, the Company had U.S. net operating loss carryforwards of approximately $462,500 which expire in 2037. 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, the Company has recorded a valuation allowance of approximately $127,000 as of June 30 2017.
|
eBullion, Inc.
|
Notes to Condensed Consolidated Financial Statements
|
For the
Three Months Ended
June 3
0, 201
7 and 201
6
|
(Expressed in US Dollars)
|
8.
|
Income Taxes, Continued
|
|
|
|
At June 30, 2017 and March 31, 2017, the Company’s and Man Loong’s differences between the book and tax basis of equipment gave rise to deferred income tax asset of $72,757 and $71,221, respectively which are recorded as noncurrent in the accompanying consolidated statements of financial condition. The Company had no other differences between the book and tax basis of assets and liabilities as June 30 and March 31, 2017.
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 consolidated statements of comprehensive income (loss). The Company has incurred no interest or penalties during the three months ended June 30, 2017 and 2016.
|
9.
|
Earnings (Loss) Per Share
|
|
Earnings (loss) per share (“EPS”) information for the three months ended June 30, 2017 and 2016 was determined by dividing net income (loss) 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, 2017 and 2016, 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 years are the same.
|
|
|
2017
|
|
|
2016
|
|
Numerator
|
|
|
|
|
|
|
Net income (loss) attributable to common shareholders
|
|
$
|
(295,580
|
)
|
|
$
|
(50,939
|
)
|
|
|
|
|
|
|
|
|
|
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 expense as a component of general and administrative expenses. Included in general and administrative expenses in the accompanying unaudited condensed consolidated statements of comprehensive income (loss) for the three months ended June 30, 2017 and 2016, are rental fees which were paid to True Technology of $11,560 and $11,610 respectively.
Included in employee compensation and benefits in the accompanying consolidated statements of comprehensive income (loss) for the three months ending June 30, 2017 and 2016, are salaries and director compensation of $ $11,560 and $7,732 respectively, which were paid to two of the Company’s directors and shareholders.
|
11.
|
Commitments
|
|
|
|
The Company leases office space under non-cancellable operating lease agreements that expire on various dates through 2019.
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 are approximately $12,894 per month for 12 months after which the fees were reduced to $3,866 per month for 24 months. In April 2017, the trading platform lease with True Technology was renewed for 2 years with monthly payment of approximately $3,866 until March 31, 2019.
Future annual minimum lease payments, including maintenance and management fees, for non-cancellable operating leases and trading platform fees, are as follows:
|
Years ending June 30,
|
|
|
|
2018
|
|
$
|
505,073
|
|
2019
|
|
|
173,984
|
|
|
|
$
|
679,057
|
|
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following information should be read in conjunction with (i) the financial statements of eBullion, Inc., a Delaware corporation (the “Company”), and development stage company, and the notes thereto appearing elsewhere in this Form 10-Q together with (ii) the more detailed business information and the March 31, 2017 audited financial statements and related notes included in the Company’s Form 10-K, as amended (File No. 000-55231; the “Form 10-K”), as filed with the Securities and Exchange Commission on July 6, 2017. Statements in this section and elsewhere in this Form 10-Q that are not statements of historical or current fact constitute “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, the number of customers its agents have, 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 may 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 nine months ended December 31, 2016. Volatility in the price of gold increased during the three and nine months ended December 31, 2016 compared to the prior year, trading in a range of approximately $1,100 to $1,400 per ounce compared to a relatively steady trading range of $1,050 to $1,300 per ounce for the three and nine months ended December 31, 2015. Volatility in the price of silver also increased during the three and nine months ended December 31, 2016 compared to the prior year, trading in a range of approximately $15 to $20 per ounce compared to a relatively steady trading range of $15 to $17 per ounce for the three and nine months ended December 31, 2015. For the three and nine months ended December 31, 2016, revenues decreased by $60,279, or 11.4% and increased by $131,586 or 9.6%, respectively, as compared to the three and nine months ended December 31, 2015. We believe that revenues decreased or increased primarily because of the decrease or increase in volatility in gold and silver prices. A decrease in the volatility in gold prices in the future or further decreases in the number of agents and their customers could result in declines in trade revenue compared to past results.
Our principal office is 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 +85221553999. 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.
CRITICAL ACCOUNTING POLICIES
The discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States ("US GAAP"). The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We have identified the policies below as critical to our business operations and to the understanding of our financial results:
Basis of Accounting
The Company's financial statements are prepared using the accrual method of accounting and are presented in United States Dollars.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with maturities of three months or less to be cash equivalents.
Property and Equipment
Property and equipment are stated at cost. Major repairs and betterments are capitalized and normal maintenance and repairs are charged to expense as incurred. Depreciation is computed by the straight-line method over the estimated useful lives of the related assets. Upon retirement or sale of an asset, the cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in operations.
Fair Value of Financial Instruments
The fair value of cash and cash equivalents and accounts receivable and accounts payable approximates their carrying amount.
Recent Accounting Pronouncements
The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operations, financial position or cash flow.
Results of Operations for the Three Months Ended June 30, 2017 and 2016
Man Loong’s revenue was $90,764 and $473,261 for the quarters ended June 30, 2017 and 2016, respectively, a decrease of $382,497, or 521.4%. 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. The number of agent customers remained unchanged during the quarter ended December 31, 2016. We believe that revenues decreased as compared to the prior quarter primarily because of the decrease in volatility in gold and silver prices. A lack of volatility in gold and silver prices in the future or further decreases in the number of agents and their customers could result in declines in commission revenues as it has in the past.
Total expenses were $400,519 for the quarter ended June 30, 2017 as compared to $538,825 for the quarter ended June 30, 2016, a decrease of $138,306 or 34.5%. Approximately 50.9% of our total expenses for the quarter ended June 30, 2017 were attributed to general and administrative expenses compared to 64.1% for the quarter ended June 30, 2016. Employee compensation and benefits expense was $177,469 or 44.3% of Man Loong’s total expenses for the quarter ended June 30, 2017 and $174,420 or 32.3% of Man Loong’s total expenses for the quarter ended June 30, 2016. For the quarter ended June 30, 2017 and 2016, depreciation and amortization was $18,834 and $18,895 or 4.7% and 3.5% of Man Loong’s total expenses for the quarters ended June 30, 2017 and 2016, respectively.
Net income (loss) was net loss of $295,580 for the quarter ended June 30, 2017, compared to net loss of $50,939 for the quarter ended June 30, 2016, an increase of $244,641 or 480.3%. The decrease in net income was primarily the result of Man Loong’s decrease in revenue while its expenses decreased by a smaller ratio, as a percentage of revenue for the quarter ended June 30, 2017 as compared to the quarter ended June 30, 2016.
Liquidity and Capital Resources
To date, eBullion has funded its operations from cash flows generated by operations. As of June 30, 2017, eBullion had cash totaling $429,267, total assets of $1,083,404, total liabilities of $321,886 and working capital of $761,518. Net cash used in operations was $633,755 and $18,073for the three months ended June 30, 2017 and 2016, respectively. The increase in net cash used in operations for the three months ended June 30, 2017, included a decrease in commissions receivable of $69,587, an increase in deposits and prepaid expenses of $26,568, an increase in accounts payable and accrued expenses of $28,199, an increase in deferred income taxes of $2,482, and a decrease in customer deposits of $200,925.Net cash used in investing activities was $0 and $46,132 for the three months ended June 30, 2017 and 2016, respectively. The decrease in net cash used in investing activities for the three months ended June 30, 2017 was primarily due to purchases of equipment of $46,132, compared to no lending activity during the three months ended June 30, 2017. 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. Net cash used by financing activities was $0 and $29,533 for the three months ended June 30, 2017 and 2016, respectively.
As of June 30, 2017 and for the three months then ended, Man Loong’s customer deposits decreased from $212,886 at March 31, 2017 to $11,520 at June 30, 2017, a decrease of $201,366 or 94.6%. 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, 2017 and for the three months then ended, Man Loong’s commission receivables increased from $546,310 at March 31, 2017 to $613,321 at June 30, 2017, an increase of $67,011or 12.7%. 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, 2017, we had no reserve for credit losses nor had we incurred any bad debts for the three and months ended June 30, 2017 and 2016.
As of June 30, 2017 and for the three months then ended, Man Loong’s deposits and prepaid expenses increased from $188,010 at March 31, 2017 to $214,826 at June 30, 2017, an increase of $26,816 or 14.3%. Deposits and prepaid expenses consist primarily of prepaid rent and occupancy expenses on Man Loong’s principal offices in Hong Kong.
No dividends were declared or paid in the quarters ended June 30, 2017 and 2016 and none are expected to be paid for the foreseeable future.
Subsequent Events
None through date of this filing.