Attached files
file | filename |
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EX-32 - EXHIBIT 32 - T BAY HOLDINGS INC | c11949exv32.htm |
EX-31.1 - EXHIBIT 31.1 - T BAY HOLDINGS INC | c11949exv31w1.htm |
EX-31.2 - EXHIBIT 31.2 - T BAY HOLDINGS INC | c11949exv31w2.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the quarter ended December 31, 2010
-OR-
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number 033-37099-S
T-BAY HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
NEVADA (State or other jurisdiction of incorporation or organization) |
91-1465664 (I.R.S. Employer Identification No.) |
Block
3, Qiao Xing Science Technological & Industrial Zone,
Tang Quan, Huizhou, Guangdong, PRC
Tang Quan, Huizhou, Guangdong, PRC
(Address of principal executive offices)
Issuers
telephone number, including area code: 86-752-6209699
(Former name, former address or former fiscal year, if changed since last report)
Indicate by check mark whether the registrant: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such files).
Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2of the
Exchange Act).
Yes o No þ
The number of shares outstanding of each of the Registrants classes of common stock, as of
February 1, 2011 was 30,088,174 shares, all of one class of $0.001 par value Common Stock.
T-BAY HOLDINGS, INC.
FORM 10-Q
Quarter Ended December 31, 2010
TABLE OF CONTENTS
FORM 10-Q
Quarter Ended December 31, 2010
TABLE OF CONTENTS
Page | ||||||||
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18 | ||||||||
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24 | ||||||||
26 | ||||||||
26 | ||||||||
Exhibit 31.1 | ||||||||
Exhibit 31.2 | ||||||||
Exhibit 32 |
2
Table of Contents
SPECIAL NOTE ON FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, including Managements Discussion and Analysis of
Financial Condition and Results of Operation in Item 2 of Part I of this report, includes
forward-looking statements. These statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, levels of activity, performance or achievements to
be materially different from any future results, levels of activity, performance, or achievements
expressed or implied by forward-looking statements.
In some cases, you can identify forward-looking statements by terminology such as may,
should, expects, plans, anticipates, believes, estimates, predicts, potential,
proposed, intended, or continue or the negative of these terms or other comparable
terminology. You should read statements that contain these words carefully, because they discuss
our expectations about our future operating results or our future financial condition or state
other forward-looking information. There may be events in the future that we are not able to
accurately predict or control. Before you invest in our securities, you should be aware that the
occurrence of any of the events described in this Quarterly Report could substantially harm our
business, results of operations and financial condition, and that upon the occurrence of any of
these events, the trading price of our securities could decline and you could lose all or part of
your investment. Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, growth rates, levels of activity,
performance or achievements. We are under no duty to update any of the forward-looking statements
after the date of this Quarterly Report to conform these statements to actual results.
Please note that we suspended operations in September 2010.
3
Table of Contents
PART 1. FINANCIAL INFORMATION
ITEM 1. | FINANCIAL STATEMENTS |
T-BAY HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
5 | ||||
6 | ||||
7 | ||||
8 | ||||
9-17 |
4
Table of Contents
T-BAY HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2010 and MARCH 31, 2010
(In thousands of United States dollars)
DECEMBER 31, | MARCH 31, | |||||||||||
Note(s) | 2010 | 2010 | ||||||||||
(Unaudited) | ||||||||||||
ASSETS |
||||||||||||
CURRENT ASSETS |
||||||||||||
Cash and cash equivalents |
$ | 18 | $ | 703 | ||||||||
Notes receivable |
| 10 | ||||||||||
Prepayments, deposits and other receivables, net |
14 | 12,517 | ||||||||||
Total current assets |
32 | 13,230 | ||||||||||
PROPERTY, PLANT AND EQUIPMENT, NET |
4 | 28 | 1,591 | |||||||||
ACCOUNTS RECEIVABLE, NET |
7 | 9,786 | 28,493 | |||||||||
INTANGIBLE ASSETS, NET |
5 | 26 | 42 | |||||||||
TOTAL ASSETS |
$ | 9,872 | $ | 43,356 | ||||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||
CURRENT LIABILITIES |
||||||||||||
Accounts payable |
$ | 153 | $ | 155 | ||||||||
Accruals and other payables |
||||||||||||
Related parties |
9 | 625 | 437 | |||||||||
Third parties |
1,025 | 1,259 | ||||||||||
Receipts in advance |
143 | 143 | ||||||||||
Total current liabilities |
1,946 | 1,994 | ||||||||||
LONG-TERM LIABILITIES |
||||||||||||
Due to shareholders |
9 | 4,255 | 4,255 | |||||||||
Total liabilities |
6,201 | 6,249 | ||||||||||
COMMITMENTS AND CONTINGENCIES |
10 | |||||||||||
STOCKHOLDERS EQUITY |
||||||||||||
Preferred stock, authorized 10,000,000 shares, par value
$0.001, issued and outstanding Nil |
| | ||||||||||
Common stock, authorized 100,000,000 shares, par value
$0.001, issued and outstanding 30,088,174 |
30 | 30 | ||||||||||
Additional paid-in capital |
1,462 | 1,462 | ||||||||||
Public welfare fund |
2,109 | 2,109 | ||||||||||
Statutory surplus fund |
4,219 | 4,219 | ||||||||||
(Accumulated losses) /retained earnings |
(11,332 | ) | 21,795 | |||||||||
Accumulated other comprehensive income |
6,108 | 5,830 | ||||||||||
Total stockholders equity |
2,596 | 35,445 | ||||||||||
NON-CONTROLLING INTEREST |
1,075 | 1,662 | ||||||||||
TOTAL EQUITY |
3,671 | 37,107 | ||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |
$ | 9,872 | $ | 43,356 | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
5
Table of Contents
T-BAY HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
For the three and nine months ended December 31, 2010 and 2009
(In thousands of United States dollars, except per share data)
THREE MONTHS ENDED | NINE MONTHS ENDED | |||||||||||||||||||
DECEMBER 31, | DECEMBER 31, | |||||||||||||||||||
Note | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||
NET REVENUE |
$ | | $ | 8,129 | $ | 9,641 | $ | 28,912 | ||||||||||||
COST OF REVENUE |
| 7,624 | 9,383 | 27,054 | ||||||||||||||||
GROSS PROFIT |
| 505 | 258 | 1,858 | ||||||||||||||||
OPERATING EXPENSES |
||||||||||||||||||||
Selling expenses |
| 32 | 34 | 96 | ||||||||||||||||
General and administrative expenses |
7,104 | 6,724 | 34,168 | 17,668 | ||||||||||||||||
TOTAL OPERATING EXPENSES |
7,104 | 6,756 | 34,202 | 17,764 | ||||||||||||||||
LOSS FROM OPERATIONS |
(7,104 | ) | (6,251 | ) | (33,944 | ) | (15,906 | ) | ||||||||||||
OTHER INCOME |
| 5 | 238 | 44 | ||||||||||||||||
GAIN ON DISPOSAL OF A SUBSIDIARY |
| | | 7 | ||||||||||||||||
LOSS BEFORE INCOME TAX |
(7,104 | ) | (6,246 | ) | (33,706 | ) | (15,855 | ) | ||||||||||||
INCOME TAX: CURRENT |
6 | | | | (7 | ) | ||||||||||||||
NET LOSS |
(7,104 | ) | (6,246 | ) | (33,706 | ) | (15,862 | ) | ||||||||||||
Less: Net loss attributable to
non-controlling interest |
21 | 57 | 579 | 266 | ||||||||||||||||
NET LOSS ATTRIBUTABLE TO COMMON
STOCKHOLDERS |
(7,083 | ) | (6,189 | ) | (33,127 | ) | (15,596 | ) | ||||||||||||
OTHER COMPREHENSIVE INCOME |
||||||||||||||||||||
Foreign currency translation
adjustment |
181 | 33 | 278 | 18 | ||||||||||||||||
COMPREHENSIVE LOSS |
$ | (6,902 | ) | $ | (6,156 | ) | $ | (32,849 | ) | $ | (15,578 | ) | ||||||||
WEIGHTED AVERAGE NUMBER OF SHARES
(in thousands) |
30,088 | 30,088 | 30,088 | 30,088 | ||||||||||||||||
LOSS PER SHARE ATTRIBUTABLE TO
COMMON STOCKHOLDERS (in dollars) |
$ | (0.24 | ) | $ | (0.21 | ) | $ | (1.10 | ) | $ | (0.52 | ) | ||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
6
Table of Contents
T-BAY HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
For the nine months ended December 31, 2010
(In thousands of United States dollars)
Retained | Accumulated | |||||||||||||||||||||||||||||||||||||||
Additional | Public | Statutory | earnings/ | other | Total | Non- | ||||||||||||||||||||||||||||||||||
paid-in | welfare | surplus | (accumulated | comprehensive | stockholders | controlling | ||||||||||||||||||||||||||||||||||
Common stock | capital | fund | fund | losses) | income | equity | interest | Total | ||||||||||||||||||||||||||||||||
No. of | ||||||||||||||||||||||||||||||||||||||||
shares | ||||||||||||||||||||||||||||||||||||||||
Balance, March 31,
2010 |
30,088,174 | $ | 30 | $ | 1,462 | $ | 2,109 | $ | 4,219 | $ | 21,795 | $ | 5,830 | $ | 35,445 | $ | 1,662 | $ | 37,107 | |||||||||||||||||||||
Net loss |
| | | | | (33,127 | ) | | (33,127 | ) | (579 | ) | (33,706 | ) | ||||||||||||||||||||||||||
Repayment to minority
shareholder |
| | | | | | | | (8 | ) | (8 | ) | ||||||||||||||||||||||||||||
Foreign currency
translation adjustment |
| | | | | | 278 | 278 | | 278 | ||||||||||||||||||||||||||||||
Balance, December 31,
2010 |
30,088,174 | $ | 30 | $ | 1,462 | $ | 2,109 | $ | 4,219 | $ | (11,332 | ) | $ | 6,108 | $ | 2,596 | $ | 1,075 | $ | 3,671 | ||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
Table of Contents
T-BAY HOLDINGS, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended December 31, 2010 and 2009
(In thousands of United States dollars)
FOR THE NINE MONTHS | ||||||||
ENDED DECEMBER 31, | ||||||||
2010 | 2009 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES |
||||||||
Net loss |
$ | (33,706 | ) | $ | (15,862 | ) | ||
Adjustments to reconcile net income to net cash
generated from operating activities: |
||||||||
Depreciation |
439 | 660 | ||||||
Amortization |
16 | 18 | ||||||
Gain on disposal of a subsidiary |
| (7 | ) | |||||
Loss on disposal of property, plant and equipment |
| 12 | ||||||
Allowances for doubtful trade and other receivables |
33,273 | 17,580 | ||||||
Changes in operating assets and liabilities: |
||||||||
Decrease /(increase) in notes receivable |
11 | (10,438 | ) | |||||
Increase in accounts receivable |
(4,451 | ) | (21,939 | ) | ||||
Decrease in prepayments, deposits and other receivables |
2,026 | 11,757 | ||||||
Increase /(decrease) in accounts payable |
1,779 | (278 | ) | |||||
Decrease in accruals and other payables |
(109 | ) | (94 | ) | ||||
Decrease in receipts in advance |
| (844 | ) | |||||
Decrease in income tax payable |
| (262 | ) | |||||
Net cash used in operating activities |
(722 | ) | (19,697 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES |
||||||||
Proceeds received from disposal of property, plant and equipment |
| 14 | ||||||
Net cash provided by investing activities |
| 14 | ||||||
CASH FLOWS FROM FINANCING ACTIVITIES |
||||||||
Repayment of cash advance to the minority shareholder |
(8 | ) | (6 | ) | ||||
Cash advance from shareholders |
38 | 112 | ||||||
Net cash provided by financing activities |
30 | 106 | ||||||
Effect of exchange rate changes on cash |
7 | (10 | ) | |||||
Net decrease in cash and cash equivalents |
(685 | ) | (19,587 | ) | ||||
Cash and cash equivalents at beginning of period |
703 | 20,493 | ||||||
Cash and cash equivalents at end of period |
$ | 18 | $ | 906 | ||||
SUPPLEMENTAL INFORMATION |
||||||||
Income taxes paid |
$ | | $ | 269 | ||||
Interest paid |
$ | | $ | | ||||
NON-CASH OPERATING AND INVESTING ACTIVITIES |
||||||||
Settlement of accounts payable (Note 11) |
$ | 1,786 | $ | | ||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
8
Table of Contents
T-BAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010
1. The Company and Subsidiaries
T-Bay Holdings, Inc. (the Company or T-Bay) was incorporated under the laws of the State of
Utah on August 8, 1984 as Sharus Corporation with authorized common stock of 50,000,000 shares
with a par value of US$0.001. On June 13, 1989, the domicile of the Company was changed to the
state of Nevada in connection with a name change to Golden Quest, Inc.. On January 7, 2002, the
name was changed to T-Bay Holdings, Inc. as part of a reverse stock split of 400 shares of
outstanding stock for one share and on November 23, 2004, the Company increased the authorized
common stock to 100,000,000 shares with a par value of US$0.001 as part of a reverse stock split of
20 outstanding shares for one share.
On August 16, 2005, pursuant to an Agreement and Plan of Reorganization, T-Bay issued 18,550,000
shares of its common stock for all of Amber Link International Limiteds (Amber Link) and Wise
Target International Limiteds (Wise Target) outstanding shares of common stock (the Merger).
Amber Link and Wise Target were two of the owners of Shanghai Sunplus Communication Technology Co.,
Ltd. (Sunplus). Wise Target owned a 75% interest and Amber Link owned a 20% interest in Sunplus.
After the Merger, T-Bay indirectly owned a 95% interest in Sunplus. In March 2009, Wise Target
transferred all its holdings (75%) in Sunplus to Amber Link for US$2,885,000 (HK$22,500,000). As a
result of this transaction, Amber Link directly owned 95% of Sunplus and this transaction had no
impact on the Companys effective holdings of Sunplus. Shanghai Fanna Industrial Design Co., Ltd.
owned the remaining 5% interest in Sunplus. On November 25, 2009, the Company transferred all its
holdings (100%) in Amber Link to Wise Target for US$2,600. As a result of the transaction, the
Company indirectly holds Amber Link and this transaction had no impact on the Companys effective
holdings of Amber Link and Sunplus.
Wise Target was incorporated on April 24, 2002 under the International Business Companies Act in
the British Virgin Islands.
Amber Link was incorporated on May 10, 2002 under the International Business Companies Act in the
British Virgin Islands. During the year ended March 31, 2007, Amber Link commenced the sales of
mobile phones and components. In September 2010, Amber Link suspended operations.
Sunplus was established on October 17, 2002 under the laws of the Peoples Republic of China
(PRC) as a Sino-foreign joint venture specialized in the development, production and sales of
electronic telecommunication devices. Sunplus commenced operations on May 1, 2003.
At December 31, 2010, Sunplus has approximately 8 staff, mostly administrative staff. In September 2010, Sunplus suspended
operations.
On February 12, 2007, Sunplus established a wholly-owned subsidiary, Zhangzhou JiaXun Communication
Facility Co., Ltd. (Zhangzhou JiaXun) under the laws of the PRC. Zhangzhou JiaXun is an
investment holding company.
On March 19, 2007, Sunplus and Zhangzhou JiaXun acquired 80% and 20%, respectively, of Fujian
Qiaoxing Industry Co., Ltd. (Fujian Qiaoxing).
On March 20, 2009, Sunplus disposed of its 80% interest in Fujian Qiaoxing to Qiaoxing
Telecommunication Industry Company Limited (QiaoXing Telecom), a third party, at a consideration
of US$12,230,000 (RMB84,000,000).
On April 9, 2009, Sunplus disposed of Zhangzhou JiaXun to QiaoXing Telecom at a consideration of
US$731,000 (RMB5,000,000).
9
Table of Contents
T-BAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
1. The Company and Subsidiaries (continued)
As of December 31, 2010, the Group structure is as follows:-
2. Going concern
These financial statements have been prepared on a going concern basis which assumes the Company
and its subsidiaries (collectively referred to as the Group) will be able to realize its assets
and discharge its liabilities in the normal course of business for the foreseeable future. The
Group suspended operations in September 2010 with a view to minimise future losses. As of December
31, 2010, the Group had net current liabilities of US$1,914,000 and accumulated losses of
US$11,332,000. This raised uncertainty about the Groups ability to continue as a going concern.
These financial statements do not include any adjustments that may result from this uncertainty.
The Groups ability to continue as a going concern is dependent upon the Group generating
profitable operations in the future and/or obtaining the necessary financing to meet its
obligations and repay its liabilities as and when they fall due. Management intends to look for new
business opportunities and to finance operating costs over the next twelve months with existing
cash on hand and advances from shareholders.
10
Table of Contents
T-BAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
3. Summary of Significant Accounting Policies
(a) Basis of Preparation
The accompanying unaudited consolidated financial statements of T-Bay and its subsidiaries have
been prepared in accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and of Regulation S-X. Certain information and
footnote disclosures normally included in financial statements prepared with accounting principles
generally accepted in the United States have been condensed or omitted pursuant to the Securities
and Exchange Commissions rules and regulations. In the opinion of management, these unaudited
consolidated interim financial statements include all adjustments and disclosures considered
necessary to make the financial statements not misleading. All adjustments are of a normal
recurring nature. These unaudited consolidated interim financial statements should be read in
conjunction with the audited consolidated financial statements of T-Bay for the year ended March
31, 2010 and notes thereto contained in the Form 10-K as filed with the Securities and Exchange
Commission. The results of operations for the three and nine months ended December 31, 2010 are
not necessarily indicative of the results for the full fiscal year ending March 31, 2011.
(b) Basis of Consolidation
The unaudited consolidated balance sheet as of December 31, 2010 and the unaudited consolidated
statement of operations for the three and nine months ended December 31, 2010 include T-Bay, Wise
Target, Amber Link and Sunplus. All material intercompany transactions have been eliminated upon
consolidation.
(c) Loss Per Share
Basic loss per share is computed by dividing the loss for the period by the weighted average
number of common shares outstanding for the period. There are no common stock equivalents
outstanding for any period presented.
4. Property, Plant and Equipment, Net
DECEMBER 31, | MARCH 31, | |||||||
2010 | 2010 | |||||||
US$000 | US$000 | |||||||
(Unaudited) | ||||||||
Cost |
||||||||
Machinery |
$ | 81 | $ | 4,766 | ||||
Office equipment |
108 | 104 | ||||||
189 | 4,870 | |||||||
Accumulated depreciation |
||||||||
Machinery |
73 | 3,200 | ||||||
Office equipment |
88 | 79 | ||||||
161 | 3,279 | |||||||
Carrying value |
||||||||
Machinery |
8 | 1,566 | ||||||
Office equipment |
20 | 25 | ||||||
$ | 28 | $ | 1,591 | |||||
Depreciation expense for each of the three months ended December 31, 2010 and 2009 was
approximately US$9,000 and US$216,000, respectively, and for each of the nine months ended December
31, 2010 and 2009 was approximately US$439,000 and US$660,000, respectively.
11
Table of Contents
T-BAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
5. Intangible Assets, Net
Changes in the carrying amount of intangible assets for the nine months ended December 31, 2010
were as follows:-
Software | Patent | Total | ||||||||||
US$000 | US$000 | US$000 | ||||||||||
Cost: |
||||||||||||
Balance, March 31, 2010 and December
31, 2010 |
$ | 183 | $ | 4 | $ | 187 | ||||||
Less: Accumulated amortization |
||||||||||||
Balance, March 31, 2010 |
(141 | ) | (4 | ) | (145 | ) | ||||||
Amortization expenses |
(16 | ) | | (16 | ) | |||||||
Balance, December 31, 2010 |
(157 | ) | (4 | ) | (161 | ) | ||||||
Net balance, December 31, 2010 |
$ | 26 | $ | | $ | 26 | ||||||
Amortization expense for each of the three months ended December 31, 2010 and 2009 was
approximately US$5,000 and US$6,000, respectively, and for each of the nine months ended December
31, 2010 and 2009 was approximately US$16,000 and US$18,000, respectively. The estimated
amortization expense for the three months ending March 31, 2011 and the four years ending March 31,
2012, 2013, 2014 and 2015 amounts to approximately US$6,000, US$18,000, US$2,000, US$ nil and US$
nil, respectively.
12
Table of Contents
T-BAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
6. Income Taxes
Amber Link and Wise Target are not subject to income taxes in any tax jurisdiction.
No provision for current income tax for T-Bay has been made as it incurred a loss for each of the
nine months ended December 31, 2010 and 2009, respectively.
Sunplus is subject to PRC Income Tax. Pursuant to the PRC Income Tax Laws, the prevailing statutory
rate of enterprise income tax is 25%.
Zhangzhou JiaXun was inactive during the nine months ended December 31, 2009 up to date of
disposal.
A reconciliation between taxes computed at the PRC statutory rate of 25% and the Groups effective
tax rate is as follows:-
FOR THE THREE MONTHS | FOR THE NINE MONTHS | |||||||||||||||
ENDED | ENDED | |||||||||||||||
DECEMBER 31, | DECEMBER 31, | DECEMBER 31, | DECEMBER 31, | |||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
US$000 | US$000 | US$000 | US$000 | |||||||||||||
Loss before income tax |
$ | (7,104 | ) | $ | (6,246 | ) | $ | (33,706 | ) | $ | (15,855 | ) | ||||
Income tax benefit on pretax loss at
statutory rate |
(1,776 | ) | (1,562 | ) | (8,426 | ) | (3,964 | ) | ||||||||
Effect of different tax rates of
Group company operating in other
jurisdictions |
1,668 | 1,265 | 5,498 | 2,611 | ||||||||||||
Change in valuation allowance |
105 | 297 | 2,880 | 1,353 | ||||||||||||
Under-provision in prior period |
| | | 7 | ||||||||||||
Tax effect of non-deductible expenses |
3 | | 48 | | ||||||||||||
Income tax expense |
$ | | $ | | $ | | $ | 7 | ||||||||
As of December 31, 2010, T-Bay had accumulated net operating loss carryforwards for United States
federal tax purposes of approximately US$2,012,000, that are available to offset future taxable
income. T-Bays net operating loss carryforwards expire in years 2012 through 2030. As of
December 31, 2010, Sunplus had net operating loss carryforwards of approximately US$23,179,000 that
are available to offset future taxable income up to 2015. Realization of the net operating loss
carryforwards is dependent upon future profitable operations. In addition, the T-Bay carryforwards may
be limited upon a change of control in accordance with Internal Revenue Code Section 382, as
amended. Accordingly, management has recorded a valuation allowance to reduce deferred tax assets
associated with the net operating loss carryforwards to zero at December 31, 2010.
As of December 31, 2010, deferred tax assets consist of:-
DECEMBER 31, 2010 | ||||
US$000 | ||||
Net operating loss carryforwards |
$ | 6,478 | ||
Less: valuation allowance |
(6,478 | ) | ||
$ | | |||
13
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T-BAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
7. Concentrations and Credit Risk
The Group operates principally in the PRC (including Hong Kong) and grants credit to its customers
in this geographic region. Although the PRC is economically stable, it is always possible that
unanticipated events in foreign countries could disrupt the Groups operations.
Financial instruments that potentially subject the Group to a concentration of credit risk consist
of cash, accounts and other receivables.
At March 31, 2010, the Group had credit risk exposure of sales proceeds receivable from Qiaoxing
Telecom of approximately US$10,475,000 (RMB71,500,000) (See Note 1).
Pursuant to the agreement signed between Shanghai Sunplus Communication Technology Co., Ltd.
(Sunplus) and Qiaoxing Telecommunication Industry Company Limited (Qiaoxing Telecom) in respect
of the disposal of Fujian Qiaoxing Industry Co., Ltd. (Fujian Qiaoxing) to Qiaoxing Telecom in
March 2009, Qiaoxing Telecom was to settle this outstanding balance by June 2009. However,
Qiaoxing Telecom was unable to obtain approval from the local governmental bureau in Zhangzhou to
develop the land held by Fujian Qiaoxing. This was due to the delay in development by Fujian
Qiaoxing. When the Zhangzhou local government granted the land use right to Fujian Qiaoxing in
2006, Fujian Qiaoxing was required to develop the land within three years. However, the land had
not been developed prior to the disposal to Qiaoxing Telecom and the local authorities have refused
to approve the development plans submitted by Qiaoxing Telecom. Since March 2010, the management
has actively liaised with the Zhangzhou local governmental bureau to apply for an extension of the
land development.
Despite various discussions and negotiations held with the Zhangzhou local authority, the effort
failed, and the local authorities took back the land by forced resumption. In view of this, full
allowance has been made in respect of the sales proceeds receivable from Qiaoxing Telecom of
US$10,543,000 and charged to the statement of operations and comprehensive income for the nine
months ended December 31, 2010.
On August 31, 2010, an agreement was signed between Sunplus and Qiaoxing Telecom for settlement. As
Zhangzhou local government had taken back the land, Qiaoxing Telecom can no longer use the land for
any purpose. It was mutually agreed that Sunplus will not request Qiaoxing Telecom to repay the
outstanding balance of US$10,543,000 while the deposit paid by Qiaoxing Telecom will not be
refunded back to Qiaoxing Telecom. In view of this, Sunplus wrote off the allowance made
previously in the last quarter.
A substantial portion of revenue was generated from one group of customers for the three and nine
months ended December 31, 2010 and 2009.
The net sales to customers representing at least 10% of net total sales are as follows:-
FOR THE THREE MONTHS ENDED | FOR THE NINE MONTHS ENDED | |||||||||||||||||||||||||||||||
DECEMBER 31, | DECEMBER 31, | |||||||||||||||||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||||||
US$000 | % | US$000 | % | US$000 | % | US$000 | % | |||||||||||||||||||||||||
Customer A |
$ | | | $ | 1,922 | 24 | $ | 1,881 | 20 | $ | 5,840 | 20 | ||||||||||||||||||||
Customer B |
| | 1,582 | 19 | 1,667 | 17 | 4,263 | 15 | ||||||||||||||||||||||||
Customer C |
| | 893 | 11 | 850 | 9 | 3,680 | 13 | ||||||||||||||||||||||||
Customer D* |
| | 416 | 5 | 1,203 | 12 | 4,015 | 14 | ||||||||||||||||||||||||
Customer E |
| | 872 | 11 | 1,667 | 17 | 2,282 | 8 | ||||||||||||||||||||||||
Customer F* |
| | 335 | 4 | 1,135 | 12 | 3,758 | 13 | ||||||||||||||||||||||||
Customer G |
| | 1,019 | 13 | 504 | 5 | 3,193 | 11 | ||||||||||||||||||||||||
Customer H |
| | 1,091 | 13 | 735 | 8 | 1,584 | 5 | ||||||||||||||||||||||||
Customer Group A* |
| | 751 | 9 | 2,338 | 24 | 7,773 | 27 |
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T-BAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
7. Concentrations and Credit Risk (continued)
The following customers had balances of at least 10% of the total accounts receivable as of
December 31, 2010 and March 31, 2010:-
DECEMBER 31, 2010 | MARCH 31, 2010 | |||||||||||||||
US$000 | % | US$000 | % | |||||||||||||
Customer A |
8,973 | 19 | 8,248 | 19 | ||||||||||||
Customer B |
7,799 | 17 | 6,846 | 16 | ||||||||||||
Customer F* |
5,327 | 11 | 4,731 | 11 | ||||||||||||
Customer G |
4,624 | 10 | 4,497 | 11 | ||||||||||||
Customer group A* |
9,165 | 20 | 8,499 | 20 |
* | Customer Group A includes customers D and F. |
|
* | At December 31, 2010 and March 31, 2010, this group of customers accounted for 20% of accounts
receivable. |
The accounts receivable that have repayment terms of more than twelve months have been discounted.
The Group does not require collateral to support financial instruments that are subject to credit
risk.
8. Retirement and Welfare Benefits
The full-time employees of the PRC subsidiaries are entitled to staff welfare benefits including
medical care, casualty, housing benefits, education benefits, unemployment insurance and pension
benefits through a PRC government-mandated multi-employer defined contribution plan. The PRC
subsidiaries are required to accrue the employer-portion for these benefits based on certain
percentages of the employees salaries. The total provision for such employee benefits was US$nil
and US$56,000 for the three and nine months ended December 31, 2010 and US$41,000 and US$124,000
for the three and nine months ended December 2009, respectively. The PRC subsidiaries are
required to make contributions to the plans out of the amounts accrued for all staff welfare
benefits except for education benefits. The PRC government is responsible for the staff welfare
benefits including medical care, casualty, housing benefits, unemployment insurance and pension
benefits to be paid to these employees.
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T-BAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 30, 2010
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 30, 2010
9. Related Party Transactions
The Group engages in business transactions with the following related parties:-
a. | Li Xiaofeng, a director and stockholder of T-Bay. |
|
b. | Li Meilian, a stockholder of T-Bay. |
The Group has the following transactions and balances with related parties:-
DECEMBER 31, 2010 | MARCH 31, 2010 | |||||||
US$000 | US$000 | |||||||
Other payable Li Meilian |
$ | 604 | $ | 437 | ||||
Other payable Li Xiaofeng |
21 | | ||||||
$ | 625 | $ | 437 | |||||
Long-term liabilities |
||||||||
Other payable Li Meilian |
$ | 3,482 | $ | 3,482 | ||||
Other payable Li Xiaofeng |
773 | 773 | ||||||
$ | 4,255 | $ | 4,255 | |||||
The balances have no stated terms for repayment, are not interest bearing, and are the result of
cash advances from related parties and the repayment thereof. Those payables to Li Meilian and Li
Xiaofeng which are classified as long-term liabilities are not repayable within the next twelve
months.
10. Commitments and Contingencies
a. | As of December 31, 2010, Sunplus leased office premises and staff quarters under several
agreements expiring from 2010 to 2012. |
Rental expenses for the three and nine months ended December 31, 2010 amounted to
US$11,000 and US$53,000, respectively. Rental expenses for the three and nine months ended
December 31, 2009 amounted to US$23,000 and US$69,000, respectively. All rental expenses are included in
general and administrative expenses in the consolidated statements of operations and
comprehensive income.
The future minimum lease payments under the above-mentioned leases as of December 31, 2010 are
as follows:-
Year Ending March 31, | US$000 | |||
2011 |
$ | 10 | ||
2012 |
40 | |||
Total |
$ | 50 | ||
b. | As of December 31, 2010, the Group had capital commitments in relation to acquisition of
intangible assets of US$40,000. |
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T-BAY HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
DECEMBER 31, 2010
11. Major non-cash transaction
During the nine months ended December 31, 2010, the Group settled accounts payable of US $1,786,000
with the following assets:
US$000 | ||||
Property, plant and equipment |
$ | 1,140 | ||
Accounts receivable |
646 | |||
Total |
$ | 1,786 | ||
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ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following review concerns the three and nine months ended December 31, 2010, which should be
read in conjunction with the financial statements and notes thereto presented in the Form 10-K for
the year ended March 31, 2010.
As a result of the change in consumer preference away from the types of mobile phone handsets to
which our design service and our mobile phone components were suited, our business has been in
decline. Management has concluded that this trend will not reverse, and therefore in September 2010
we suspended operations and have concentrated on collecting our accounts receivable. Management
also seeks new business opportunities. It is not possible to predict whether this effort will
succeed, or whether we will ever again engage in active business operations.
THREE MONTHS ENDED DECEMBER 31, 2010 COMPARED TO THREE MONTHS ENDED DECEMBER 31, 2009
Overview
For the three months ended December 31, 2010, our net revenue decreased from $8,129,000 for the
three months ended December 31, 2009 to $nil, which represented a 100% decrease. Our net loss
increased from $6,189,000 for the three months ended December 31, 2009 to $7,083,000 for the three
months ended December 31, 2010, primarily as a result of the suspension of operations and the increase in allowance for doubtful
receivables. We recorded a loss per share of $0.24 for the three months ended December 31, 2010,
compared to a loss per share of $0.21 for the three months ended December 31, 2009.
Net Revenue
Three months ended December 31, | ||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||
(in thousand US dollars) | ||||||||||||||||||||
% Change | Amount | % | Amount | % | ||||||||||||||||
Sales of mobile phone components |
-100 | % | Nil | nil | % | 7,968 | 98.0 | % | ||||||||||||
Revenue from design services |
-100 | % | Nil | nil | % | 161 | 2.0 | % | ||||||||||||
NET REVENUE |
-100 | % | Nil | nil | % | 8,129 | 100 | % | ||||||||||||
As a result of the suspension of our operations in September 2010, our net revenue was $nil for
the three months ended December 31, 2010, a decrease of $8,129,000, or 100%, from $8,129,000 for
the same period in the previous year. Revenue from sales of mobile phone components was $nil
compared to $7,968,000 in the same period of the previous fiscal year, representing a 100%
decrease. Revenue from design services decreased to $nil from $161,000 in the same period of the
previous fiscal year, representing a 100% decrease.
Cost of Revenue
For the three months ended December 31, 2010, cost of revenue decreased to $nil from $7,624,000 for
the three months ended December 31, 2009, representing a 100% decrease as we suspended operations. Cost of revenue primarily
consisted of purchase cost of raw and processed materials, cost of salaries of engineers and
designers, and research and development (R&D) expenses.
Gross Profit
Taking into account the above, we had a gross profit of $nil for the three months ended December
31, 2010 compared to gross profit $505,000 for the three months ended December 31, 2009.
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Operating Expenses
Operating expenses consisted of selling expenses and general and administrative (G&A) expenses. For
the three months ended December 31, 2010, operating expenses were $7,104,000, as compared to
$6,756,000 for the three months ended December 31, 2009, representing a 5.2% increase.
Detailed information of operating expenses for the three months ended December 31, 2010 is as
follows:-
Three months ended December 31, | ||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||
(in thousand US dollars) | ||||||||||||||||||||
% of | % of | |||||||||||||||||||
% Change | Amount | Net revenue | Amount | net revenue | ||||||||||||||||
G&A expenses |
5.7 | % | 7,104 | n/a | 6,724 | 82.7 | % | |||||||||||||
Selling expenses |
-100 | % | | n/a | 32 | 0.4 | % | |||||||||||||
Operating expenses |
5.2 | % | 7,104 | n/a | 6,756 | 83.1 | % | |||||||||||||
Operating expenses during the three months ended December 31, 2010 were $7,104,000 compared to
$6,756,000 for the three months ended December 31, 2009. The increase was mainly attributed to the
increase in G&A expenses.
G&A expenses were $7,104,000 compared to $6,724,000 for the three months ended December 31, 2009.
The increase in G&A expenses was mainly due to the increase in allowance for doubtful receivables.
We increased the allowance for doubtful receivables to $6,980,000 for the three months ended
December 31, 2010 as compared to $6,332,000 for the three months ended December 31, 2009. An
allowance for doubtful receivables is maintained for all debtors based on a variety of factors,
including the overall economy and industrial condition, length of time the receivables are past
due, significant one-time events and historical experience. As a precautionary measure, after we
suspended our operations in September 2010, we made allowance for debts that are not yet due in
view of the increase in difficulty in collection of debts.
Selling expenses decreased from $32,000 to $nil as we suspended operations.
Loss from Operations
Loss from operations increased from $6,251,000 for the three months ended December 2009 to
$7,104,000 for the same period this year. The increase in the loss was mainly attributable to the suspension of operations and the
increase in allowance for doubtful receivables.
Income Tax
Sunplus is subject to PRC Enterprise Income Tax. Pursuant to the PRC Income Tax Laws, the
prevailing statutory rate of enterprise income tax in Shanghai was 25%.
No income tax expense was recorded for Sunplus for each of the three months ended December 31, 2010
and 2009, as Sunplus incurred losses during these periods.
Non-controlling Interests
Non-controlling interests represented the portion of loss of Sunplus that we do not own. For the
three months ended December 31, 2010, non-controlling interest was attributable to the 5% of the
equity interest of Sunplus owned by Shanghai Fanna.
Net loss attributable to common stockholders
As a result of the above items, net loss attributable to common stockholders was $7,083,000
for the three months ended December 31, 2010, as compared to net loss attributable to common
stockholders of $6,189,000 for the three months ended December 31, 2009. This increase of loss was
mainly the result of the decrease in gross profit and the increase in allowance for doubtful receivables.
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Loss per share attributable to common stockholders
We reported loss per share attributable to common stockholders of $0.24, based on a weighted
average number of shares outstanding of 30,088,174 for the three months ended December 31, 2010.
Our outstanding common stock was 30,088,174 shares as of December 31, 2010. We do not have any
preferred stock issued or outstanding warrants or options.
NINE MONTHS ENDED DECEMBER 31, 2010 COMPARED TO NINE MONTHS ENDED DECEMBER 31, 2009
Overview
For the nine months ended December 31, 2010, our net revenue decreased from $28,912,000 for the
nine months ended December 31, 2009 to $9,641,000, which represented a 66.7% decrease. Our net loss
increased from $15,596,000 for the nine months ended December 31, 2009 to $33,127,000 for the nine
months ended December 31, 2010, primarily as a result of the increase in allowance for doubtful
receivables. We recorded a loss per share of $1.10 for the nine months ended December 31, 2010,
compared to a loss per share of $0.52 for the nine months ended December 31, 2009.
Net Revenue
Nine months ended December 31, | ||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||
(in thousand US dollars) | ||||||||||||||||||||
% Change | Amount | % | Amount | % | ||||||||||||||||
Sales of mobile phone
components |
-66.7 | % | 9,457 | 98.1 | % | 28,364 | 98.1 | % | ||||||||||||
Revenue from design services |
-66.4 | % | 184 | 1.9 | % | 548 | 1.9 | % | ||||||||||||
NET REVENUE |
-66.7 | % | 9,641 | 100 | % | 28,912 | 100 | % | ||||||||||||
Our net revenue was $9,641,000 for the nine months ended December 31, 2010, a decrease of
$19,271,000, or 66.7%, from $28,912,000 for the same period in the previous year. Revenue from
sales of mobile phone components was $9,457,000 compared to $28,364,000 in the same period of the
previous fiscal year, representing a 66.7% decrease. Revenue from design services decreased to
$184,000 from $548,000 in the same period of the previous fiscal year, representing a 66.4%
decrease.
For the nine months ended December 31, 2010 and 2009, revenue from design services represented 1.9%
of total revenue, while revenue from sales of mobile phone components was 98.1%.
Detailed information on sales of mobile phone components
Before the suspension of our operations in
September 2010, we designed and manufactured PCB and
provided PCBA according to our customers specifications. Revenue from the sales of mobile phone
components (comprising PCB and PCBA) decreased from $28,364,000 for the nine months ended December
31, 2009 to $9,457,000 for the same period this year, representing a 66.7% decrease, as we
disengaged ourselves from the business of sales of mobile phone components.
Detailed information on revenue from design services
Revenue from design services decreased from $548,000 for the nine months ended December 31, 2009 to
$184,000 for the same period this year, representing a 66.4% decrease, as we disengaged ourselves
from the business of design services.
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Cost of Revenue
For the nine months ended December 31, 2010, cost of revenue decreased to $9,383,000 from
$27,054,000 for the nine months ended December 31, 2009, representing a 65.3% decrease. Cost of
revenue primarily consisted of purchase cost of raw and processed materials, cost of salaries of
engineers and designers, and research and development (R&D) expenses. The decrease was largely
the result of the decrease in the sales of mobile phone components.
Gross Profit
Our gross profit was $258,000 for the nine months ended December 31, 2010 compared to $1,858,000
for the nine months ended December 31, 2009, representing an 86.1% decrease. Our gross profit was
significantly reduced not only as a direct result of the drop in sales of our products, but also
because the cost of sales was not reduced to the same extent as the reduction in revenue, as not
all costs were variable with respect to revenue.
Operating Expenses
Operating expenses consisted of selling expenses and general and administrative (G&A) expenses. For
the nine months ended December 31, 2010, operating expenses were $34,202,000, as compared to
$17,764,000 for the nine months ended December 31, 2009, representing a 92.5% increase.
Detailed information in respect of operating expenses for the nine months ended December 31, 2010
is as follows:-
Nine months ended December 31, | ||||||||||||||||||||
2010 | 2009 | |||||||||||||||||||
(in thousand US dollars) | ||||||||||||||||||||
% of | % of | |||||||||||||||||||
% Change | Amount | Net revenue | Amount | net revenue | ||||||||||||||||
G&A expenses |
93.4 | % | 34,168 | 354.4 | % | 17,668 | 61.1 | % | ||||||||||||
Selling expenses |
-64.6 | % | 34 | 0.4 | % | 96 | 0.3 | % | ||||||||||||
Operating expenses |
92.5 | % | 34,202 | 354.8 | % | 17,764 | 61.4 | % | ||||||||||||
Operating expenses during the nine months ended December 31, 2010 were $34,202,000, or 354.8% of
net revenue, compared to $17,764,000, or 61.4% of net revenue for the nine months ended December
31, 2009. The significant increase was mainly attributed to the increase in G&A expenses.
G&A expenses were $34,168,000, or 354.4% of net revenue, compared to $17,668,000, or 61.1% of net
revenue, for the nine months ended December 31, 2009. The significant increase in G&A expenses was
mainly due to the increase in allowance for doubtful receivables.
We increased allowance for doubtful receivables to $33,273,000 for the nine months ended December
31, 2010 as compared to $17,580,000 for the nine months ended December 31, 2009. An allowance for
doubtful receivables is maintained for all debtors based on a variety of factors, including the
overall economy and industrial condition, length of time the receivables are past due, significant
one-time events and historical experience. As a precautionary measure, after we suspended our
operations in September 2010, we made allowance for debts that are not yet due in view of the
increase in difficulty in collection of debts. We have also made full allowance for the sales
proceeds recoverable from Qiaoxing Telecom of $10,478,000, which is described below.
Pursuant to the agreement signed between Sunplus and Qiaoxing Telecom in respect of the disposal of
Fujian Qiaoxing to Qiaoxing Telecom in March 2009, Qiaoxing Telecom was to settle this outstanding
balance by June 2009. However, Qiaoxing Telecom was unable to obtain approval from the local
governmental bureau in Zhangzhou to develop the land held by Fujian Qiaoxing. This was due to the
delay in development by Fujian Qiaoxing. When the Zhangzhou local government granted the land use
right to Fujian Qiaoxing in 2006, Fujian Qiaoxing was required to develop the land within three
years. However, the land had not been developed prior to the disposal to Qiaoxing Telecom and the
local authority has refused to approve the development plans submitted by Qiaoxing Telecom.
The Company has liaised with the Zhangzhou local governmental bureau to apply for an extension of
the land development. This effort has, however, failed, and the local authority took back the land
by forced resumption. In view of this, full allowance has been made in respect of the sales
proceeds receivable from Qiaoxing Telecom of $10,543,000 in the first quarter of the fiscal year
ending March 31, 2011.
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On August 31, 2010, an agreement was signed between Sunplus and Qiaoxing Telecom for the
settlement. As Zhangzhou local government had taken back the land, Qiaoxing Telecom can no longer
use the land for any purpose. Sunplus agreed not to request Qiaoxing Telecom to repay the
outstanding balance of $10,543,000 while the deposit paid by Qiaoxing Telecom will not be refunded
back to Qiaoxing Telecom. In view of this, in the second quarter of
the fiscal year ending March 31, 2011, Sunplus wrote off the allowance made in the first quarter of
that fiscal year.
Selling expenses decreased from $96,000 for the nine months ended December 31, 2009 to $34,000 for
the same period this year. The decrease was consistent with the decrease in revenue.
Loss from Operations
Loss from operations increased from $15,906,000 for the nine months ended December 31, 2009 to
$33,944,000 for the same period this year. The increase in the loss was mainly attributable to the
increase in allowance for doubtful receivables.
Income Tax
Sunplus is subject to PRC Enterprise Income Tax. Pursuant to the PRC Income Tax Laws, the
prevailing statutory rate of enterprise income tax in Shanghai was 25%.
For the nine months ended December 31, 2010, Sunplus recorded an income tax expense of $nil,
compared to $7,000 for the nine months ended December 31, 2009. The income tax expenses of US$7,000
for the nine months ended December 31, 2009 related to an under-provision in the prior year.
Non-controlling Interests
Non-controlling interests represented the portion of loss of Sunplus that we do not own. For the
nine months ended December 31, 2010, non-controlling interests were attributable to the 5% of the
equity interest of Sunplus owned by Shanghai Fanna.
Net loss attributable to common stockholders
As a result of the above items, net loss attributable to common stockholders was $33,127,000 for
the nine months ended December 31, 2010, as compared to net loss attributable to common
stockholders of $15,596,000 for the nine months ended December 31, 2009. This increase of loss was
mainly the result of the increase in allowance for doubtful receivables.
Loss per share attributable to common stockholders
We reported loss per share attributable to common stockholders of $1.10, based on a weighted
average number of shares outstanding of 30,088,174 for the nine months ended December 31, 2010. Our
outstanding common stock was 30,088,174 shares as of December 31, 2010. We do not have any
preferred stock issued or outstanding warrants or options.
22
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LIQUIDITY AND CAPITAL RESOURCES
Assets
As of December 31, 2010, the total assets of the Company were $9,872,000 which consisted of $32,000
in current assets, $28,000 in property, plant and equipment (PPE), $9,786,000 in non-current
accounts receivable and $26,000 in intangible assets.
Liabilities
Our total liabilities as of December 31, 2010 were $6,201,000, which consisted of $1,946,000 in
current liabilities and $4,255,000 in long-term liabilities. Long-term liabilities were all
liabilities due to shareholders.
Capital Resources
For the nine months ended December 31, 2010, before the suspension of our operations in September
2010, we were principally engaged in provision of design solutions of wireless communication
devices and sales of mobile phone components. We did not declare or pay dividends for the nine
months ended December 31, 2010.
For the nine months ended December 31, 2010, $722,000 was used in operating activities and $30,000
was provided by financing activities. Cash and cash equivalents decreased by $685,000 to $18,000 as
of December 31, 2010 from $703,000 as of March 31, 2010.
We used $722,000 in operating activities for the nine months ended December 31, 2010. Net cash used
in operating activities for the nine months ended December 31, 2010 related to net loss adjusted
for items not involving movement of cash for the period, augmented mainly by an increase in
accounts receivable of $4,451,000, but offset mainly by the decrease in prepayments, deposits and
other receivables of $2,026,000 and an increase in accounts payable of $1,779,000.
In arriving at the net loss, we made an allowance of $33,273,000 for doubtful debts for the nine
months ended December 31, 2010, which did not involve any outflow of cash.
There was no cash flow relating to investing activities for the nine months ended December 31,
2010.
For the nine months ended December 31, 2010, net cash provided by financing activities was
approximately $30,000, which related primarily to the increase in advances from a shareholder and
the repayment of cash advance to the minority shareholder.
As of December 31, 2010, we had capital commitments of $40,000 in relation to acquisition of
intangible assets.
We believe that proceeds from the collection of our long-outstanding receivables are necessary to
support our operations and capital commitments, as well as to meet our working capital needs for
the next twelve months. While we believe that adequate provisions on our receivables have been
made, we cannot assure investors that their carrying amount (net of provision) will be received in
full within the anticipated time frame. A failure to collect the anticipated amount within the
anticipated time frame would adversely affect our liquidity and capital resources.
Off-Balance Sheet arrangements
The Company has not engaged in any off-balance sheet transactions since its inception.
Going concern statement
We suspended operations in September 2010 and have
negative working capital and recurring losses
from operations. The continuation of our Company as a going concern is dependent upon the Company
achieving profitable operations in the future and/or obtaining the
necessary financing to meet its obligations and repay its liabilities
as and when they fall due. The financial
statements do not include any adjustments relating to the recovery
and classification of recorded
asset amounts or the amount and classification of liabilities that might
result from this uncertainty.
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Employees
As of December 31, 2010, we had approximately 8 full-time employees employed in Greater China.
Web Site Access to Our Periodic SEC Reports
You may read and copy any public reports we filed with the SEC at the SECs Public Reference Room
at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains
an Internet site http://www.sec.gov that contains reports and information statements, and other
information that we filed electronically.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
The majority the assets and liabilities in Shanghai Sunplus Communication Technology Co., Ltd., a
subsidiary of ours which is based in China, is denominated in Chinese Renminbi (RMB). Thus, the
amounts of the assets and liabilities presented in United States dollars (US$ or $) in our
consolidated financial statements may be impacted by exchange rate fluctuations in the currency of
China. We have not tried to reduce our exposure to exchange rate fluctuations by using hedging
transactions. However, we may choose to do so in the future. The availability and effectiveness of
any hedging transactions may be limited and we may not be able to successfully hedge our exchange
rate risks. Accordingly, we may experience negative impacts on equity as a result of foreign
exchange rate fluctuations.
ITEM 4. | CONTROLS AND PROCEDURES |
Evaluation of Disclosure Controls and Procedures.
Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the Exchange Act)) are controls and other procedures
that are designed to provide reasonable assurance that the information that we are required to
disclose in the reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and forms, and that
such information is accumulated and communicated to our management, including our Chief Executive
Officer (CEO) and Chief Financial Officer (CFO) as appropriate to allow timely decisions
regarding required disclosure.
In connection with the preparation of this Quarterly Report on Form 10-Q for the third quarter
ended December 31, 2010, an evaluation was performed by our management, with the participation of
the CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and
procedures as of the end of the period covered by this Quarterly Report.
As previously disclosed under Item 9A (T) Controls and Procedures in our Annual Report on Form
10-K for fiscal year ended March 31, 2010, our management concluded that our disclosure controls
and procedures were not effective at a reasonable assurance level because of certain material
weaknesses in our internal controls over financial reporting, including the lack of (i) effective
communication of the importance of internal controls over financial reporting throughout the
structure of the Company, (ii) an adequate tone set by management around control consciousness,
(iii) sufficient in-house capacity to review and supervise the accounting operations, (iv)
knowledge of U.S. GAAP and SEC reporting requirements, (v) anti-fraud program designed to detect
and prevent fraud (vi) effective risk assessment and management mechanism, and (vii) personnel with
an appropriate level of experience, training in our internal audit department. In
addition, on September 2, 2009, the two independent directors who comprised the audit committee
resigned from their positions as independent directors of the Company effective September 2, 2009.
There is no audit committee since that date. Our management considers that the absence of an audit
committee constitutes a material weakness in our internal controls over financial reporting.
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As a
result of the foregoing material weaknesses in our internal controls over financial reporting,
our management has concluded that our disclosure controls and procedures were not effective as of
December 31, 2010.
Each of the control deficiencies described here could result in a misstatement of the
aforementioned accounts or disclosures that might result in a material misstatement to the annual
or interim consolidated financial statements that would not be prevented or detected. However,
giving full consideration to these material weaknesses, we performed adequate analyses and
procedures, including among other things, transaction reviews and account reconciliations in
order to provide assurance that our unaudited consolidated financial statements included in this
Quarterly Report were prepared in accordance with generally accepted accounting principles (GAAP)
and present fairly, in all material respects, our financial position, results of operations and
cash flows for the periods presented in conformity with GAAP. As a result of these procedures, we
concluded that the unaudited consolidated financial statements included in this Quarterly Report
present fairly, in all material respects, our financial position, results of operations and cash
flows for the periods presented in conformity with GAAP.
Change in Internal Controls
There were no changes in the Companys internal controls over financial reporting during the
quarter ended December 31, 2010 that have materially affected, or are reasonably likely to
materially affect, the Companys internal controls over financial reporting.
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PART II OTHER INFORMATION
ITEM 6. | EXHIBITS |
INDEX TO EXHIBITS
OF
T-BAY HOLDINGS, INC.
OF
T-BAY HOLDINGS, INC.
31.1 | Rule 13a-14 (a)/15d-14 (a) Certification of Chief Executive Officer |
|||
31.2 | Rule 13a-14 (a)/15d-14 (a) Certification of Chief Financial Officer |
|||
32 | Section 1350 Certification of Chief Executive Officer and Chief Financial Officer |
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
T-BAY HOLDINGS, INC. (Registrant) |
||||
Date: February 14, 2011 | By: | /s/ Li Xiaofeng | ||
Li Xiaofeng, Chief Executive Officer | ||||
Date: February 14, 2011 | By: | /s/ Qin Xiangning | ||
Qin Xiangning, Chief Financial Officer |
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