COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Oct. 31, 2013 |
COMMITMENTS AND CONTINGENCIES [Abstract] | ' |
COMMITMENTS AND CONTINGENCIES | ' |
NOTE 23. COMMITMENTS AND CONTINGENCIES |
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Operating Lease Commitments |
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The Company held operating lease in the Seattle office, Beijing office, Guizhou office and Taiwan office. The leases of the Seattle office and Beijing office expire in March 2014 and December 2014. The leases of the Guizhou office and Taiwan office both expire in February 2014.The non-cancelable operating lease agreement requires that the Company pay certain operating expenses, including management fees to the leased premises. The future minimum rental payments in less than a year and in greater than a year are $267,195 and $308,461, respectively. |
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Legal Matters |
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We are not currently a party to any legal proceedings in material nature and we are not aware of any material pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us, other than the legal proceeding described below: |
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On August 26, 2011, a federal securities law class action complaint was filed against the Company, certain officers and directors (i.e., Dickson V. Lee and Ian G. Robinson) and a former officer (i.e., Jung Mei (Rosemary) Wang) in the United States District Court, Western District of Washington at Seattle on behalf of a proposed class of all persons who purchased the common stock of the Company during the period August 13, 2009 through August 2, 2011, inclusive, and who were damaged thereby (the “Washington Securities Class Action”), alleging that the defendants violated Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 by filing materially false and misleading public statements August 2009 to July 2011. On December 15, 2011, the court appointed Gregg Irvin as lead plaintiff, and plaintiff filed an amended complaint and a second amended complaint on February 8 and March 2, 2012, respectively, naming four other current and former directors as defendants (i.e., Shirley Kiang, Robert Lee, Dennis Bracy and Robert Okun). |
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On November 4, 2011, a complaint was filed by Larew P. Stouffer, in a shareholder derivative suit on behalf of the Company, which is a nominal defendant, against certain of its then existing officers and/or directors (i.e., Dickson V. Lee, Norman Mineta, Ian G. Robinson, Robert W. Lee, Shirley Kiang, Dennis Bracy, Syd S. Peng) and certain former officers and/or directors (i.e., Edward L. Dowd, Andrew M. Leitch, Robert Okun, Joseph J. Borich, Jung Mei Wang and David Lin) in the First Judicial District Court of the State of Nevada for Carson City (the “Nevada Derivative Suit”), alleging that the defendants breached fiduciary duties to the Company and its shareholders, wasted corporate assets, were unjustly enriched , and committed other wrongful acts. |
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On November 15, 2011, a complaint was filed by Russell L. Bush, in a shareholder derivative suit on behalf of the Company, which is a nominal defendant, against its then existing directors (i.e., Dickson V. Lee, Norman Mineta, Ian G. Robinson, Robert W. Lee, Shirley Kiang, Dennis Bracy, Syd S. Peng) in the United States District Court, Western District of Washington at Seattle (“Washington Derivative Suit”), alleging that the defendants breached fiduciary duties and were unjustly enriched. |
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The Company has notified our insurance carrier of the Washington Securities Class Action and the Washington Derivative Suits. The Company has also retained outside legal counsel. |
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On April 23, 2012, the Company and Dickson V. Lee and Ian G. Robinson filed a motion to dismiss the Washington Securities Class Action. Proceedings in the Washington Derivative Suits were stayed pending the court's ruling on the motion to dismiss. |
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On December 3, 2012, the United States District Court, Western District of Washington at Seattle granted the Company's motion to dismiss the Securities Class Action lawsuit without prejudice, and gave plaintiff thirty days in which to seek the court's permission to file another amended complaint. |
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On January 2, 2013, plaintiff filed a motion for leave to file an amended complaint. Pursuant to a stipulation of the parties, the court granted such leave, and on February 4, 2013, plaintiff filed a third amended complaint in the Washington Securities Class Action on behalf of a proposed class of all persons who purchased the common stock of the Company during the period August 13, 2009 through August 2, 2011, inclusive, and who were damaged thereby, against the Company, certain officers and/or directors (i.e., Dickson V. Lee and Ian G. Robinson) and a former officer (i.e., Jung Mei (Rosemary) Wang), alleging that the defendants violated Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 by filing materially false and misleading reports and financial statements with the SEC from August 2009 to July 2011. |
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Proceedings in the Washington and Nevada Derivative Suits continued to be stayed pending the court's ruling on the second motion to dismiss. |
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On December 3, 2013, the United States District Court, Western District of Washington at Seattle denied the defendants' second motion to dismiss. The court has not yet issued a case scheduling order in the Washington Securities Class Action and there is no trial date. |
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The Company believes that the Washington and Nevada Securities Class Action and the Washington Derivative Suits are without merit and intends to defend them vigorously. |
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On September 23, 2013, a federal securities law class action complaint was filed against the Company, and certain officers and directors (i.e., Dickson V. Lee, Ian G. Robinson and Clayton Fong) in the United States District Court, Southern District of New York on behalf of a proposed class of all persons who purchased common stock of the Company during the period September 11, 2012 through September 18, 2013, inclusive, and who were damaged thereby (the “New York Securities Class Action”), alleging that the defendants violated Sections 10(b) and 20(a) of the Securities and Exchange Act of 1934 by filing materially false and misleading public statements from September 2012 to September 2013. On November 22, 2013, the plaintiff and several other proposed plaintiffs filed motions for appointment as lead plaintiff and counsel. The court set a status conference for December 20, 2013 to consider the motions. |
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On October 18, 2013, a complaint was filed by Joseph D, Bessent, in a shareholder derivative suit on behalf of the Company, which is a nominal defendant, against certain of its then existing officers and/or directors (i.e., Dickson V. Lee, Syd S. Peng, Mohan Datwani, Jingcai Yang, James Schaeffer, and Joseph Borich) in the Superior Court for the State of Washington in King County, Washington (the “Bessent Derivative Suit”), alleging that the defendants breached fiduciary duties to the Company and its shareholders and committed other wrongful acts. |
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On December 9, 2013, a complaint was filed by Jay Finkelstein, in a shareholder derivative suit on behalf of the Company, which is a nominal defendant, against certain of its current and former officers and/or directors (i.e. Dickson V. Lee, Norman Mineta, Shirley Kiang, Ian Robinson, Dennis Bracy, Edward L. Dowd, Jr., Robert W. Lee, Robert A. Okun, Andrew M. Leitch, Edmund Moy, Dr. Syd S. Peng, Clayton Fong, Jungcai Yang, Mohan Datwani, Joseph Borich, and James Schaeffer) in the United States District Court, Western District of Washington at Seattle (the “Finkelstein Derivative Suit”), alleging that the defendants breached fiduciary duties to the Company and its shareholders and committed other wrongful acts. |
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The Company has notified our insurance carriers of the New York Securities Class Action, the Bessent Derivative Suit, and Finkelstein Derivative Suit. The Company has retained outside legal counsel. |
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The Company believes that the New York Securities Class Action, the Bessent Derivative Suit, and the Finkelstein Derivative Suit are without merit and intends to defend them vigorously. |
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The Company is unable to estimate the amount or range of any potential loss in the event of an unfavorable outcome in any of the aforementioned legal proceedings. As such, as of October 31, 2013, the Company has not accrued any liability in connection with potential losses from legal proceedings. |
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Foreign Currency |
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The majority of the Company sales, purchases and expense transactions are denominated in RMB (Chinese currency) and most of the Company's assets and liabilities are also denominated in RMB. The RMB is not freely convertible into foreign currencies under the current law. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions. Remittances in currencies other than RMB may require certain supporting documentation in order to affect the remittance. |
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Environmental Remediation |
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The PRC adopted extensive environmental laws and regulations that affect the operations of the coal mining industry. The outcome of environmental liabilities under proposed or future environmental legislation cannot be reasonably estimated at present, and could be material. Under existing legislation, however, Company management believes that there are no probable liabilities that will have a material adverse effect on the financial position of the Company. |
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Chinese Government |
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The Company's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company's results may be adversely affected by changes in the governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversions and remittance abroad, and rates and methods of taxation, among other things. |
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Concentrations |
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For the six months ended October 31, 2013, we had three major customers who purchased 38% of the Company's total sales, and represented $10,360,075 of accounts receivable balance in total as of October 31, 2013. In addition, we had three major suppliers who provided 39% of our total purchases, and the relevant account payable had been paid off as of October 31, 2013. |
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