Eft (EFTB) CORRESP Correspondence with SEC

APPENDIX

Note 2 - RESTATEMENT OF PRIOR PERIOD FINANCIAL STATEMENTS

The Company has restated its consolidated financial statements for prior periods, the effects of which are summarized below, to address two issues:

1. Excalibur:

As described in Note 9, the Company acquired a 48.81% interest in Excalibur on October 25, 2008. The Company initially loaned funds to Excalibur in July 2008 and subsequently has continued to provide Excalibur with loan capital to fund its operations.

The Company initially accounted for its investment in Excalibur under the equity method. As previously disclosed, as a result of damage to Excalibur’s primary asset and a change in Excalibur’s management on January 15, 2010, the Company became responsible for a majority of Excalibur’s gains and losses and, with effect from that date, the Company began to include Excalibur on a consolidated basis as a variable interest entity in the Company’s consolidated financial statements.

As previously disclosed, on July 25, 2008, the Company loaned $1,567,000 to Yeuh-Chi Liu, a vendor to the Company. The proceeds of the loan were used by Yeuh-Chi Liu to acquire a 3.97% interest in Excalibur, which was pledged as collateral for the loan. Yeuh-Chi Liu has served as a member of the board of directors of Excalibur since then. The current status of the loan is discussed in Note 8.

In initially considering whether its investment in Excalibur should be accounted for under the equity method or whether the investment in, and loans to, Excalibur resulted in the Company being the primary beneficiary of a variable interest entity, the Company did not consider the effect of the loan made to Yeuh-Chi Liu. In accordance with ASC 810-10-25-43, in determining whether the Company was the primary beneficiary of Excalibur, the interest in Excalibur held by Yeuh-Chi Liu as a result of the loan made to her by the Company should be treated in the same manner as the Company’s own interests.  As a result, the Company should have concluded that it effectively held control of Excalibur from the time it acquired its interest in Excalibur.

The Company has now restated its financial statements for periods prior to December 31, 2009 to consolidate Excalibur from the time it acquired its interest in Excalibur, rather than accounting for its investment in Excalibur under the equity method.

In reviewing the prior accounting for its interest in Excalibur, the Company also determined that certain errors were made in accounting for its interest in Excalibur and those errors have now been corrected.  These errors related to –

1.1 For the three months ended December 31, 2008, Excalibur recorded a deferred tax benefit for its net operating loss.  Because the realization of the benefit of this net operating loss was not more likely than not, no benefit should have been recognized.

1.2 The Company consolidates Excalibur based on quarterly data for the prior fiscal quarter. For the three months ended March 31, 2009 (Excalibur information for the fiscal quarter ended December 31, 2008) and June 30, 2009 (Excalibur information for the fiscal quarter ended March 31, 2009), the Company did not use the correct periods and partially duplicated Excalibur’s results of operations.

1.3 During the three months ended December 31, 2008, Excalibur previously recorded a prepaid asset of approximately $14.8 million for deposits on two ships purportedly made by certain shareholders of Excalibur. Neither the deposits nor the ships are owned or controlled by Excalibur, and the existence of these deposits is the subject of litigation as described in Note 18. When Excalibur was consolidated beginning on January 15, 2010, this purported prepayment was treated as a stock subscription receivable and excluded from Excalibur’s assets to be consolidated.  However, an exchange loss previously recorded by Excalibur related to these deposits was not adjusted.

1.4 The Company did not consistently adjust Excalibur’s financial statements to reflect the elimination of inter-company interest income and expense.

1.5 Because of Excalibur’s continuing losses, the Company previously considered that the amount by which the carrying value of its investment in Excalibur exceeded the Company’s share of Excalibur’s net assets should be written off. The amount to be written off has been adjusted as a result of the above adjustments.

The effect of each of the above adjustments is summarized below.

	Year Ended			Three Months Ended											Year Ended
	March 31, 2009			June 30, 2009			September 30, 2009			December 31, 2009		March 31, 2010			March 31, 2010
Net income (loss) attributable to EFT Holdings Inc
Adjustments for -
Deferred tax benefit reversed	$	(214,141	)		-			-			-		-			-
Duplication of reporting periods		269,355			490,920			-			-		(490,920	)		-
Exchange losses related to prepayment		437,322			-			-			-		-			-
Omission of depreciation expenses		(176,029	)		-			-			-		-			-
Impairment of goodwill		-			1,080,969			-			-		(1,838,120	)		(757,151	)
Inter-company interest		98,391			-			-			-		333,554			333,554
Exchange rate differences		(1,765	)		(41,663	)		(5,946	)		1,577		(71,098	)		(117,130	)
		413,133			1,530,226			(5,946	)		1,577		(2,066,584	)		(540,727	)
Net income (loss) - as previously reported		2,128,662			(407,924	)		1,873,715			521,479		(9,833,186	)		(7,845,916	)
Net income (loss) – as restated	$	2,541,795		$	1,122,302		$	1,867,769		$	523,056	$	(11,899,770	)	$	(8,386,643	)

2. Digital Development Partners:

On February 18, 2010, the Company contributed its EFT Phone to Digital Development Partners, Inc., a previously unrelated company, in exchange for 79,265,000 common shares of Digital, representing 91.74% of Digital’s outstanding common stock.  This exchange was part of a re-organization undertaken by Digital in which the existing assets and proposed businesses of Digital were spun-off to Digital’s existing shareholders (excluding the Company) in exchange for the surrender by those shareholders of 20,095,000 shares of Digital’s then-outstanding common stock. In accounting for the transaction with Digital, the Company treated the transaction as a business combination, although as a result of the spin-off of its proposed business and related assets to its existing shareholders, Digital had no continuing business at the time its re-organization and the transaction with the Company were completed.

In accounting for the transaction with Digital in its consolidated financial statements for the three months and the year ended March 31, 2010, the Company incorrectly included $104,153 of expenses incurred by Digital during the three months ended March 31, 2010, which expenses were incurred prior to the transaction with the Company or related to the businesses spun-off to Digital’s prior shareholders.  After accounting for the non-controlling shareholders’ interest in such expenses and recording goodwill of $5,000 previously recorded by Digital, the Company recorded an offsetting net gain of $100,531 in its consolidated statement of operations for the three months ended March 31, 2010. The Company has now restated its consolidated financial statements for the three months and the year ended March 31, 2010 to eliminate the pre-transaction Digital expenses previously recorded and the non-controlling shareholders’ portion thereof, eliminate the pre-existing Digital goodwill recorded, and eliminate the offsetting net gain previously recognized related to the transaction. The net effect of these adjustments on the Company’s net loss for the year ended March 31, 2010 was not material.

 Effects of Restatement

The effects of the restatement of the Company’s prior period financial statements for the above matters are summarized below. In addition, as disclosed below, the Company has restated its prior period financial statements to provide segment information not previously provided and to include information on non-recurring fair value measurements.

Consolidated Balance Sheets

Comparison for the Year Ended March 31, 2010 and 2009

	March 31, 2010						March 31, 2009
	As Previously Reported			As Restated			As Previously Reported			As Restated
Current assets
Cash and cash equivalents	$	29,434,509		$	29,434,509		$	38,181,837		$	38,589,565
Securities available for sale		9,740,712			9,740,712			508,746			508,746
Inventories		2,971,713			2,971,713			3,908,629			3,908,940
Prepaid expenses		475,092			942,192			2,551,298			2,923,023
Other receivables		96,914			96,914			33,504			1,096,188
Short-term notes receivable – Excalibur		-			-			4,064,717			-
Total current assets		42,718,940			43,186,040			49,248,731			47,026,462
Restricted cash		193,992			193,992			-			-
Property and equipment, net		15,370,975			15,370,975			360,156			22,020,413
Investments in bonds		4,763,165			4,763,165			-			-
Equity method investment – Excalibur		-			-			17,129,314			-
Loans to related parties		2,034,100			1,567,000			1,897,000			1,897,000
Security deposit		658,575			658,575			31,121			50,909
Goodwill		5,000			-			-			8,935,848
		23,025,807			22,553,707			19,417,591			32,904,170
Total assets	$	65,744,747		$	65,739,747		$	68,666,322		$	79,930,632
Current liabilities:
Accounts payable		2,346,835			1,424,459			3,610,195			6,424,740
Commission payable		6,380,408			6,380,408			5,977,969			5,977,969
Other liabilities		720,698			720,698			697,583			1,247,851
Unearned revenues		2,673,680			2,673,680			1,991,215			1,991,215
Due to related parties		43,427			43,427			-			42,424
Total current liabilities		12,165,048			11,242,672			12,276,962			15,684,199
Contingent liabilities		2,904,957			2,904,957			-			-
Total liabilities		15,070,005			14,147,629			12,276,962			15,684,199
Stockholders’ equity:
EFT Holdings Inc. stockholders’ equity
Common stock		760			760			760			760
Additional paid-in capital		52,854,891			52,854,891			52,854,891			52,854,891
Retained earnings (deficit)		(3,821,924	)		(3,949,518	)		4,023,992			4,437,125
Accumulated other comprehensive income (loss)		(469,326	)		126,469			(490,283	)		(1,262,615	)
Total EFT Holdings Inc. stockholders’ equity		48,564,401			49,032,602			56,389,360			56,030,161
Non-controlling interests		2,110,341			2,559,516			-			8,216,272
Total stockholders’ equity		50,674,742			51,592,118			56,389,360			64,246,433
Total liabilities and stockholders’ equity	$	65,744,747		$	65,739,747		$	68,666,322		$	79,930,632

Consolidated Statements of Operations

Comparison for the Year Ended March 31, 2010 and 2009

	Year Ended March 31, 2010						Year Ended March 31, 2009
	As Previously Reported			As Restated			As Previously Reported			As Restated
Sales revenue, net	$	16,776,314		$	16,776,314		$	12,846,809		$	12,846,809
Shipping charge		4,006,080			4,006,080			5,657,625			5,657,625
Transportation income – Excalibur		-			290,772			-			10,774
		20,782,394			21,073,166			18,504,434			18,515,208
Cost of goods sold		4,869,900			4,869,900			5,780,447			5,780,447
Shipping cost		1,224,231			1,224,231			2,204,502			2,204,502
Operating costs – Excalibur		-			3,157,348			-			250,179
		6,094,131			9,251,479			7,984,949			8,235,128
Gross profit		14,688,263			11,821,687			10,519,485			10,280,080
Operating expenses:
Selling, general and administrative expenses		7,171,017			9,244,229			6,616,025			7,388,908
Impairment of transportation equipment		-			6,141,261			-			-
Impairment of goodwill		-			8,935,848			-			-
Royalty expenses		2,059,445			2,059,445			2,313,137			2,313,137
Total operating income (loss)		9,230,462			26,380,783			8,929,162			9,702,045
Net operating income (loss)		5,457,801			(14,559,096	)		1,590,323			578,035
Other income (expense)
Interest income		546,471			517,039			1,246,433			1,261,708
Investment income		13,437			13,437			-			-
Loss from equity method investment		(5,744,421	)		-			(2,063,686	)		-
Equity method investment write-off		(8,178,697	)		-			-			-
Foreign exchange gain (loss)		(133,437	)		(248,645	)		723,357			(1,661,245	)
Other income (expense)		88,780			102,827			634,635			634,665
Total other income (expense)		(13,407,867	)		384,658			540,739			235,128
Net income (loss)  before income taxes and non-controlling interest		(7,950,066	)		(14,174,438	)		2,131,062			813,163
Income taxes expense		(4,505	)		(4,505	)		(2,400	)		(2,400	)
Extraordinary gain		100,531			-			-			-
Net income (loss)		(7,854,040	)		(14,178,943	)		2,128,662			810,763
Non-controlling interest		8,124			5,792,300			-			1,731,032
Net income (loss) attributable to EFT Holdings Inc.	$	(7,845,916	)	$	(8,386,643	)	$	2,128,662		$	2,541,795
Net income (loss) per common share:
Basic and diluted	$	(0.10	)	$	(0.11	)	$	0.03		$	0.04
Weighted average common shares outstanding		75,983,205			75,983,205			66,637,448			66,637,448

Consolidated Statements of Operations

Three Months Ended June 30, September 30 and December 31, 2009

	Three Months Ended						Three Months Ended						Three Months Ended
	June 30, 2009						September 30, 2009						December 31, 2009
	As Previously Reported			As Restated			As Previously Reported			As Restated			As Previously Reported			As Restated
Sales revenue, net	$	3,989,316		$	3,989,316		$	5,125,444		$	5,125,444		$	3,362,196		$	3,362,196
Shipping charge		1,054,080			1,054,080			995,490			995,490			965,520			965,520
Transportation income – Excalibur		-			3,281			-			62,376			-			179,394
		5,043,396			5,046,677			6,120,934			6,183,310			4,327,716			4,507,110
Cost of goods sold		960,448			960,448			1,365,484			1,365,483			1,048,913			1,048,913
Shipping cost		301,900			301,900			286,468			286,468			334,879			334,879
Operating costs – Excalibur		-			793,770			-			868,695			-			923,765
		1,262,348			2,056,118			1,651,952			2,520,646			1,383,792			2,307,557
Gross profit		3,781,048			2,990,559			4,468,982			3,662,664			2,943,924			2,199,553
Selling, general and administrative expenses		2,306,319			2,524,505			2,253,548			2,501,530			2,398,664			2,601,802
Net operating income (loss)		1,474,729			466,054			2,215,434			1,161,134			545,260			(402,249	)
Other income (expense)
Interest income		164,932			165,054			134,462			134,663			426,577			426,601
Investment loss – 48.81% Excalibur		(1,080,969	)		-			-			-			-			-
Loss from equity method investment		(996,734	)		-			(514,854	)		-			(464,566	)		-
Foreign exchange gain (loss)		886			(112,212	)		(5,038	)		(17,951	)		751			(351	)
Other income (expense)		29,232			29,232			43,711			43,730			13,457			13,491
Total other income (expense)		(1,882,653	)		82,074			(341,719	)		160,442			(23,781	)		439,741
Net income (loss)  before income taxes		(407,924	)		548,128			1,873,715			1,321,576			521,479			37,492
Income taxes expense		-			-			-			-			-			-
Net income (loss) before non-controlling interest		(407,924	)		548,128			1,873,715			1,321,576			521,479			37,492
Non-controlling interest		-			574,173			-			546,195			-			485,564
Net income (loss) attributable to EFT Holdings Inc.	$	(407,924	)	$	1,122,301		$	1,873,715		$	1,867,771		$	521,479		$	523,056
Net income (loss) per common share:
Basic and diluted	$	(0.01	)	$	0.01		$	0.02		$	0.02		$	0.01		$	0.01
Weighted average common shares outstanding		75,983,205			75,983,205			75,983,205			75,983,205			75,983,205			75,983,205

Consolidated Statements of Cash Flows

Comparison for the Year Ended March 31, 2010 and 2009

	Year Ended March 31, 2010						Year Ended March 31, 2009
	As Previously Reported			As Restated			As Previously Reported			As Restated
Cash flows from operating activities:
Net income (loss)	$	(7,854,040	)	$	(14,178,943	)	$	2,128,662		$	810,763
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization		77,110			2,284,127			51,514			409,852
Loss on equity method investment		5,744,421			-			2,063,686			-
Warranty liability		(9,079	)		-			(33,924	)		-
Stock based compensation		11,467			-			16,731			16,731
Impairment of goodwill		-			8,935,848			-			-
Impairment of transportation equipment		-			6,141,261			-			-
Equity method investment write-off		8,178,697			-			-			-
Extraordinary gain from acquisition of business		(100,531	)		-			-			-
Changes in operating assets and liabilities:
Inventories		936,916			937,231			(1,289,200	)		(1,289,511	)
Prepaid expenses and other receivable		1,478,331			2,407,919			(1,761,551	)		(257,840	)
Accounts payable		(2,520,479	)		(2,399,492	)		2,806,154			(1,258,563	)
Commission payable		-			402,439			-			(5,648,236	)
Other liabilities		406,742			(300,787	)		(6,078,238	)		(1,547,424	)
Unearned revenues		682,465			682,465			(1,954,590	)		(1,954,590	)
Income tax payable		-			-			305,000			(305,000	)
Net cash provided by (used in) operating activities		7,032,020			4,912,068			(3,745,756	)		(11,023,818	)
Cash flows from investing activities:
Cash acquired in acquisition of Digital Development		96,561			381			-			-
Cash acquired upon taking control of Excalibur		728,298						-
Additions to fixed assets		(993,800	)		(1,353,248	)		(305,068	)		(276,654	)
Note receivables – related party		(1,660,382	)		1,197,839			(5,961,717	)		(1,897,000	)
Purchase of corporate notes		(4,800,184	)		(4,800,184	)		-			-
Purchase of securities available for sale		-			(8,949,324	)		-			-
Investments		-			-			(19,193,000	)		(15,985,269	)
Stock issuing costs		(3,992	)					-
Net cash (used in) investing activities		(6,633,499	)		(13,904,536	)		(25,459,785	)		(18,158,923	)
Cash flows from financing activities:
Restricted cash		(193,992	)		(193,992	)		-			-
Proceed from issuance of stock and warrants		-			-			52,831,758			52,848,489
Net cash provided by (used in) financing activities		(193,992	)		(193,992	)		52,831,758			52,848,489
Effect of exchange rate changes on cash		(2,533	)		31,404			-			(241,533	)
Net increase (decrease) in cash		201,996			(9,155,056	)		23,626,217			23,424,215
Cash, beginning of period		38,181,837			38,589,565			15,165,620			15,165,620
Cash, end of period	$	38,383,833		$	29,434,509		$	38,791,837		$	38,589,835
Supplemental disclosures of cash flow information:
Income taxes paid in cash	$	4,505		$	4,505		$	2,400		$	2,400
Non-cash investing and financing activities:
Unrealized loss on securities available for sale	$	245,623			-		$	327,219			-
Fixed assets sold with receivable		-			-		$	33,504			-
Release of cash from restriction		-			-		$	37,845,432			-

Selected Financial Data

	Years ended March 31,
Statements of Operations	2010			2010			2009		2009
	As Previously Reported			As Restated			As Previously Reported		As Restated
Net revenue	$	20,782,394		$	21,073,166		$	18,504,434	$	18,515,208
Operating expenses:
Total operating expenses		9,230,462			26,380,783			8,929,162		9,702,045
Total other income (expense)		(13,407,867	)		384,658			540,739		235,128
Interest income		546,471			517,039			1,246,433		1,261,708
Net income (loss)		(7,946,447	)		(14,178,943	)		2,128,662		810,763
Net income (loss) attributable to Company	$	(7,845,916	)	$	(8,386,643	)	$	2,128,662	$	2,541,795
Net income (loss) per common share:
Basic and diluted	$	(0.10	)	$	(0.11	)	$	0.03	$	0.04
Weighted average common shares outstanding:
Basic and diluted		75,983,205			75,983,205			66,637,448		66,637,448

Balance Sheets	March 31,
	2010		2010		2009		2009
	As Previously Reported		As Restated		As Previously Reported		As Restated
Current assets	$	42,622,026	$	43,186,040	$	49,215,227	$	19,414,774
Total assets		65,744,747		65,739,747		68,666,322		57,427,420
Current liabilities		12,165,048		11,242,672		12,276,962		55,687,992
Contingent liabilities		2,904,957		2,904,957		—		—
Total liabilities		15,070,005		14,147,629		12,276,962		55,687,992
Working capital		30,456,978		31,943,368		36,938,265		(36,273,218	)
Stockholders' equity (deficit)		50,674,742		51,592,118		56,389,360		1,739,428

Our net income (loss) for each fiscal quarter during the year ended March 31, 2010 were:

	As Previously Reported
	6/30/2009			9/30/2009		12/31/2009		3/31/2010
Net revenue	$	5,043,396		$	6,120,934	$	4,327,716	$	5,290,348
Gross profit		3,781,048			4,468,982		2,943,924		3,494,309
Net income (loss) from continuing operations		(407,924	)		1,873,715		521,479		(9,836,805	)
Income tax (expense) benefit									(4,505	)
Net income (loss)		(407,924	)		1,873,715		521,479		(9,941,310	)
Non-controlling interest									8,124
Net income (loss) attributable to Company		(407,924	)		1,873,715		521,479		(9,833,186	)
Net income (loss) per common share, basic and diluted		(0.01	)		0.02		0.01		(0.13	)

	As Restated
	6/30/2009		9/30/2009		12/31/2009		3/31/2010
Net revenue	$	5,046,677	$	6,183,310	$	4,507,110	$	5,336,069
Gross profit		2,990,559		3,662,664		2,199,553		2,968,911
Net income (loss) from continuing operations								(4,505	)
Income tax (expense) benefit		548,128		1,321,576		37,492		(16,086,139	)
Net income (loss)
Non-controlling interest		574,173		546,195		485,564		4,186,368
Net income (loss) attributable to Company		1,122,301		1,867,771		523,056		(11,899,771	)
Net income (loss) per common share, basic and diluted		0.01		0.02		0.01		(0.15	)

Segment Information

The Company’s business is classified by management into two reportable business segments: transportation and online. The online business reportable segment is an aggregation of the Company’s online operating segments, which are organized to sell the Company’s products to affiliates through its websites. The online business reportable segment derives revenue from the sales of nutritional products, personal care products and EFT-phones. The transportation business reportable segment derives revenue from transport passengers and cargo between Taiwan and Mainland China through the Taiwan Strait.

Although substantially all of the Company’s revenue is generated from Mainland China, the Company is organizationally structured along business segments. The accounting policies of each of the Company’s operating segments are the same as those described in Note 3, “Summary of Significant Accounting Policies.”

The following tables provide business segment information as of and for the year ended March 31, 2010 and 2009.

	Year ended March 31, 2010
	Online business		Transportation business			Total
Sales revenues, net		20,782,394		290,772			21,073,166
Cost of goods sold		6,094,131		3,157,348			9,251,479
Gross profit		14,688,263		(2,866,576	)		11,821,687
Operating expenses:
Selling, general and administrative expenses		7,066,562		2,177,667			9,244,229
Impairment of goodwill		-		8,935,848			8,935,848
Impairment loss of transportation equipment		-		6,141,261			6,141,261
Royalty expenses		2,059,445		-			2,059,445
Total operating expenses							26,380,783
Net operating income (loss)		5,562,256		(20,121,352	)		(14,559,096	)
Other income							384,658
Loss before income tax							(14,174,438	)
Total long-lived assets		1,276,846		14,094,129			15,370,975
Additions to long-lived assets		993,800		359,448			1,353,248

	Year ended March 31, 2009
	Online business		Transportation business			Total
Sales revenues, net		18,504,434		10,774			18,515,208
Cost of goods sold		7,984,949		250,179			8,235,128
Gross profit		10,519,485		(239,405	)		10,280,080
Operating expenses:
Selling, general and administrative expenses		4,308,881		772,883			5,081,764
Marketing expenses		2,307,144		-			2,307,144
Royalty expenses		2,313,137		-			2,313,137
Total operating expenses							9,702,045
Net operating income (loss)		1,590,323		(1,012,288	)		578,035
Other income							235,128
Loss before income tax							813,163
Total long-lived assets		360,156		21,660,257			22,020,413
Additions to long-lived assets		276,654		-			276,654

	Three months ended December 31, 2010
	Online business			Transportation business			Total
Sales revenues, net		4,160,577			81,329			4,241,906
Cost of goods sold		(2,228,801	)		(451,326	)		(2,680,127	)
Gross profit		1,931,776			(369,997	)		1,561,779
Operating expenses:
Selling, general and administrative expenses		1,511,693			321,417			1,833,110
Marketing expenses		299,374			-			299,374
Impairment loss of loan receivable		-			1,567,000			1,567,000
Impairment loss of  transportation equipment		-			1,164,091			1,164,091
Royalty expenses		502,566			-			502,566
Total operating expenses								5,366,141
Net operating income (loss)		(381,857	)		(3,422,505	)		(3,804,362	)
Other income								547,641
Loss before income tax								(3,256,721	)
Total long-lived assets		1,497,187			8,162,804			9,659,991
Additions to long-lived assets		125,489			1,408			126,897

	Three months ended September 30, 2010
	Online business		Transportation business			Total
Sales revenues, net		4,653,634		57,784			4,711,418
Cost of goods sold		1,843,022		1,130,757			2,973,779
Gross profit		2,810,612		(1,072,973	)		1,737,639
Operating expenses:
Selling, general and administrative expenses		1,727,811		222,787			1,950,598
Marketing expenses		277,858		-			277,858
Impairment loss of  transportation equipment		-		4,200,000			4,200,000
Royalty expenses		512,747		-			512,747
Total operating expenses							6,941,203
Net operating income (loss)		292,196		(5,495,760	)		(5,203,564	)
Other income							330,160
Loss before income tax							(4,873,404	)
Total long-lived assets		1,421,438		8,940,515			10,361,953
Additions to long-lived assets		31,707		-			31,707

	Three months ended June 30, 2010
	Online business		Transportation business			Total
Sales revenues, net		4,649,402		-			4,649,402
Cost of goods sold		1,543,612		691,892			2,235,504
Gross profit		3,105,790		(691,892	)		2,413,898
Operating expenses:
Selling, general and administrative expenses		1,509,815		272,328			1,782,143
Marketing expenses		275,901		-			275,901
Royalty expenses		506,938		-			506,938
Total operating expenses							2,564,982
Net operating loss		813,136		964,220			(151,084	)
Other income							324,881
Income before income tax							173,797
Total long-lived assets		1,401,052		13,788,997			15,190,049
Additions to long-lived assets		147,698		-			147,698

Fair Value Measurements

As discussed in Note 9, the Company’s investment in the transportation equipment of Excalibur has been valued at fair value, on a non-recurring basis, using Level 3 – unobservable inputs, to reflect management’s estimate that the net book value of the transportation equipment owned by Excalibur exceeded its market value. Accordingly, on a non-recurring basis, using Level 3 – unobservable inputs, the Company recorded an impairment loss of $6.1 million during the year ended March 31, 2010. As of March 31, 2010, the Company also recorded an impairment loss of $8.9 million to write off the goodwill associated with the Company’s investment in Excalibur.

As part of the Company's periodic review of the value of its transportation assets, the Company recorded an impairment loss of $1.2 million and $4.2 million during the period ended December 31 and September 30, 2010, respectively, to reflect management’s estimate that the net book value of the transportation equipment owned by Excalibur exceeded its market value.

	As previously reported
	Level 1
	Quoted Prices		Level 2		Level 3
	in Active Markets		Significant Other		Significant
	for Identical Assets		Observable Inputs		Unobservable Inputs		Total
Securities available for sale
-           December 31, 2010	$	12,106,817	$	-	$	-	$	12,106,817
-           September 30, 2010		11,233,654		-		-		11,233,654
-           June 30, 2010		1,235,591		-		-		1,235,591
-           March 31, 2010		9,740,712		-		-		9,740,712

	As restated
	Level 1
	Quoted Prices		Level 2		Level 3
	in Active Markets		Significant Other		Significant
	for Identical Assets		Observable Inputs		Unobservable Inputs		Total
Securities available for sale
-           December 31, 2010	$	12,106,817	$	-	$	-	$	12,106,817
-           September 30, 2010		11,233,654		-		-		11,233,654
-           June 30, 2010		1,235,591		-		-		1,235,591
-           March 31, 2010		9,740,712		-		-		9,740,712
Transportation equipment of Excalibur
-           December 31, 2010						11,611,785		11,611,785
-           September 30, 2010						13,333,122		13,333,122
-           June 30, 2010						12,832,569		12,832,569
-           March 31, 2010						17,270,427		17,270,427