UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x
Annual
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended March 31, 2014 or
¨
Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from
to
___________
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Commission file number:
001-31747
UNIVERSAL SECURITY INSTRUMENTS, INC.
(Exact name of registrant as specified in
its charter)
MARYLAND
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52-0898545
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(State or other jurisdiction
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(I.R.S. Employer
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of incorporation or organization)
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Identification No.)
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11407 Cronhill Drive, Suite A, Owings Mills, Maryland
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21117
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(Address of principal executive offices)
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(Zip Code)
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Registrant’s telephone number, including area code
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(410) 363-3000
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Securities registered pursuant to Section
12(b) of the Act:
Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $0.01 par value
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NYSE MKT LLC
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Securities registered pursuant to Section
12(g) of the Act:
Indicate by check mark if the registrant
is a well-known seasoned issuer (as defined in Rule 405 of the Act). Yes
¨
No
x
Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes
¨
No
x
Indicate by check mark whether the registrant
(1) has 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
x
No
¨
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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files).
Yes
x
No
¨
Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or other information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K.
x
Indicate by check mark if the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of
“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Large Accelerated Filer
¨
Accelerated Filer
¨
Non-Accelerated Filer
¨
Smaller Reporting Company
x
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act). Yes
¨
No
x
The aggregate market value of Common Stock,
$.01 par value, held by non-affiliates of the registrant based on the closing sales price of the Common Stock on the New York Stock
Exchange (NYSE AMEX) on September 30, 2013, was $9,491,496.
The number of shares of common stock outstanding
as of June 15, 2014 was 2,312,887.
documents
incorporated by reference
To the extent specified, Part III of this
Form 10-K incorporates information by reference to the Registrant’s definitive proxy statement for its 2014 Annual Meeting
of Shareholders.
UNIVERSAL SECURITY INSTRUMENTS, INC.
2014 ANNUAL REPORT ON FORM 10-K
Table of Contents
PART I
General
Universal Security
Instruments, Inc. (“we” or “the Company”) designs and markets a variety of popularly-priced safety products
consisting primarily of smoke alarms, carbon monoxide alarms and related products. Most of our products require minimal installation
and are designed for easy installation by the consumer without professional assistance, and are sold through retail stores. We
also market products to the electrical distribution trade through our wholly-owned subsidiary, USI Electric, Inc. (“USI Electric”).
The electrical distribution trade includes electrical and lighting distributors as well as manufactured housing companies. Products
sold by USI Electric usually require professional installation.
In 1989 we formed Eyston
Company Limited, a limited liability company under the laws of Hong Kong, as a joint venture with a Hong Kong-based partner, to
manufacture various products in the Peoples Republic of China (the “Hong Kong Joint Venture”). We currently own a 50%
interest in the Hong Kong Joint Venture and are a significant customer of the Hong Kong Joint Venture (38.9% and 43.4% of its sales
during fiscal 2014 and 2013 respectively), with the balance of its sales made to unrelated customers worldwide. We import all of
our products from foreign suppliers. For the fiscal year ended March 31, 2014, approximately 92.4% of our purchases were imported
from the Hong Kong Joint Venture.
Our sales for the year
ended March 31, 2014 were $12,577,127 compared to $15,383,877 for the year ended March 31, 2013. We reported a net loss of $4,450,244
in fiscal 2014 compared to a net loss of $452,561 in fiscal 2013, an increase in net loss of $3,997,683 (883.3%). The increase
in net loss is primarily due to a non-cash charge of $2,310,835 to provide an allowance for unrealizable deferred tax assets and
lower earnings of the Hong Kong Joint Venture. Included in the fiscal 2013 results is approximately $500,000 for marketing costs
associated with our new “next generation” product line (discussed below) and a $300,000 charge to establish a valuation
reserve for deferred taxes.
The Company was incorporated
in Maryland in 1969. Our principal executive office is located at 11407 Cronhill Drive, Suite A, Owings Mills, Maryland 21117,
and our telephone number is 410-363-3000. Information about us may be obtained from our website
www.universalsecurity.com.
Copies of our Annual Report on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, are available free of
charge on our website as soon as they are filed with the Securities and Exchange Commission (SEC) through a link to the SEC’s
EDGAR reporting system. Simply select the “Investor Relations” menu item, then click on the “SEC Filings”
link. The SEC’s EDGAR reporting system can also be accessed directly at
www.sec.gov
.
Safety Products
We market a line of
residential smoke and carbon monoxide alarms under the trade names “UNIVERSAL” and “USI Electric” both
of which are manufactured by the Hong Kong Joint Venture.
Our line of smoke alarms
consists of battery powered, electrical and electrical with battery backup alarms. Our products contain different types of batteries
with different battery lives, and some with alarm silencers. The smoke alarms marketed to the electrical distribution trade also
include hearing impaired and heat alarms with a variety of features. We also market carbon monoxide alarms, door chimes and ventilation
products.
Over the past five
fiscal years we developed new smoke, carbon monoxide, and natural gas detection technologies which we consider the “next
generation” of our safety products, and we have applied for thirteen patents on these new technologies and features. To date
we have been granted ten
patents (including six for the new technologies and features), and we
are currently awaiting notification from the U.S. Patent Office regarding the remaining patent applications. Most of our new technologies
and features have been trademarked under the trade name IoPhic
®
. We also submitted each of our new products for
independent testing agency approval, and we introduced products into the marketplace as approvals were received. This process began
during the fourth quarter of our 2010 fiscal year and by the end of our 2012 fiscal year we had completed testing and received
approvals from independent testing agencies for all of the next generation of products that we had submitted for testing.
In addition, we have
submitted a line of safety products utilizing sealed battery technology for independent testing and expect certain of these products
to complete the testing process in the second quarter of the fiscal year ending March 31, 2015 with the remainder completed prior
to the end of the fiscal year ending March 31, 2015. These products are expected to contribute to sales in the third and fourth
quarters of the fiscal year ending March 31, 2015.
Our wholly-owned subsidiary,
USI Electric, Inc., focuses its sales and marketing efforts to maximize safety product sales, especially smoke alarms and carbon
monoxide alarms manufactured by our Hong Kong Joint Venture, to the electrical distribution trade and to foreign customers.
Import Matters
We import all of our
products. As an importer, we are subject to numerous tariffs which vary depending on types of products and country of origin, changes
in economic and political conditions in the country of manufacture, potential trade restrictions, and currency fluctuations. We
have attempted to protect ourselves from fluctuations in currency exchange rates to the extent possible by negotiating commitments
in U.S. dollars.
Our inventory purchases
are also subject to delays in delivery due to problems with shipping and docking facilities, as well as other problems associated
with purchasing products abroad. Substantially all of our safety products, including products we purchase from our Hong Kong Joint
Venture, are imported from the People’s Republic of China.
Sales and Marketing; Customers
We sell our products
to various customers, and our total sales market can be divided generally into two categories; sales by the Company to retailers,
including wholesale distributors, chain, discount, television retailers and home center stores, catalog and mail order companies
and other distributors (“retailers”), and sales by our USI Electric subsidiary to the electrical distribution trade
(primarily electrical and lighting distributors and manufactured housing companies) and foreign customers. Products marketed by
the Company have historically been retailed to “do-it-yourself” consumers by these retailers. Products marketed by
our USI Electric subsidiary to the electrical distribution trade typically require professional installation. We do not currently
market a significant portion of our products directly to end users.
A significant portion
of our sales are made by approximately 45 independent sales organizations, compensated by commission, which represents approximately
230 sales representatives, some of which have warehouses where USI Electric products are maintained for sale. In addition, the
Company has established a national distribution system with nine regional stocking warehouses throughout the United States which
generally enables customers to receive their orders the next day without paying for overnight freight charges. Our agreements with
these sales organizations are generally cancelable by either party upon 30 days’ notice. We do not believe that the loss
of any one of these organizations would have a material adverse effect upon our business. Sales are also made directly by the officers
and full-time employees of the Company and our USI Electric subsidiary, seven of whom have other responsibilities for the Company.
Sales outside the United States are made by our officers and through exporters, and amounted to approximately 17.5% in fiscal 2014
and 10% of total net sales in fiscal 2013.
We also market our
products through our website and through our own sales catalogs and brochures, which are mailed directly to trade customers. Our
customers, in turn, may advertise our products in their own catalogs and brochures and in their ads in newspapers and other media.
We also exhibit and sell our products at various trade shows, including the annual National Hardware Show.
Our backlog of orders
as of March 31, 2014 was approximately $691,873. Our backlog as of March 31, 2013 was approximately $580,629. This increase in
backlog is primarily due to the timing of orders of our safety products.
Hong Kong Joint Venture
We have a 50% interest
in Eyston Company Limited, the Hong Kong Joint Venture, which has manufacturing facilities in the People’s Republic of China,
for the manufacturing of certain of our electronic and electrical products.
We believe that the
Hong Kong Joint Venture arrangement will ensure a continuing source of supply for a majority of our safety products at competitive
prices. During fiscal years 2014 and 2013, 92.4% and 98.5%, respectively, of our total inventory purchases were made from the Hong
Kong Joint Venture. The products produced by the Hong Kong Joint Venture include smoke alarms and carbon monoxide alarms. Negative
changes in economic and political conditions in China or any other adversity to the Hong Kong Joint Venture will unfavorably affect
the value of our investment in the Hong Kong Joint Venture and would have a material adverse effect on the Company’s ability
to purchase products for distribution.
Our purchases from
the Hong Kong Joint Venture represented approximately 38.9% of the Hong Kong Joint Venture’s total sales during fiscal 2014
and 43.4% of total sales during fiscal 2013, with the balance of the Hong Kong Joint Venture’s sales being primarily made
in Europe and Australia, to unrelated customers. The Hong Kong Joint Venture’s sales to unrelated customers were $11,644,850
in fiscal 2014 and $12,577,674 in fiscal 2013. Please see Note C of the Financial Statements for a comparison of annual sales and
earnings of the Hong Kong Joint Venture.
Other Suppliers
Certain private label
products not manufactured for us by the Hong Kong Joint Venture are manufactured by other foreign suppliers. We believe that our
relationships with our suppliers are good. We believe that the loss of our ability to purchase products from the Hong Kong Joint
Venture would have a material adverse effect on the Company. The loss of any of our other suppliers would have a short-term adverse
effect on our operations, but replacement sources for these other suppliers could be developed.
Competition
In fiscal years 2014
and 2013, sales of safety products accounted for substantially all of our total sales. In the sale of smoke alarms and carbon monoxide
alarms, we compete in all of our markets with First Alert and Walter Kidde Portable Equipment, Inc. These companies have greater
financial resources and financial strength than we have. We believe that our safety products compete favorably in the market primarily
on the basis of styling, features and pricing.
The safety industry
in general involves changing technology. The success of our products may depend on our ability to improve and update our products
in a timely manner and to adapt to new technological advances.
Employees
As of March 31, 2014,
we had 16 employees, 12 of whom are engaged in administration and sales, and the balance of whom are engaged in product development.
Our employees are not unionized, and we believe that our relations with our employees are satisfactory.
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ITEM 1B.
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UNRESOLVED STAFF COMMENTS
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Not applicable.
Effective January 2009,
we entered into a ten year operating lease for a 12,000 square foot office and warehouse located in Baltimore County, Maryland.
In June 2009, we amended this lease to include an additional 3,000 square feet of warehouse space contiguous to our existing warehouse
in Baltimore County, Maryland. Monthly rental expense, with common area maintenance, approximates $11,834 and increases 3% per
year.
Effective March 2003,
we entered into an operating lease for an approximately 2,600 square foot office in Naperville, Illinois. This lease was renewed
in March 2012 and increased to approximately 3,400 square feet and extends through February 2015. The monthly rental, with common
area maintenance, approximated $3,457 per month during the current fiscal year and is subject to increasing rentals of 3% per year.
The Hong Kong Joint
Venture currently operates an approximately 100,000 square foot manufacturing facility in the Guangdong province of Southern China
and a 250,000 square-foot manufacturing facility in the Fujian province of Southern China. In addition, the Hong Kong Joint Venture
has construction in progress related to an additional 126,000 square foot facility in southern China. The Hong Kong Joint Venture’s
offices are leased pursuant to a five year lease with rental payments of approximately $13,250 per month.
The Company believes
that its current facilities, and those of the Hong Kong Joint Venture, are currently suitable and adequate.
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ITEM 3
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LEGAL PROCEEDINGS
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From time to time,
the Company is involved in various lawsuits and legal matters. It is the opinion of management, based on the advice of legal counsel,
that there are no outstanding material claims outside the ordinary course of business.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below is
information about the Company’s executive officers.
NAME
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AGE
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POSITIONS
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Harvey B. Grossblatt
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67
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President, Chief Operating Officer and Chief Executive Officer
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James B. Huff
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62
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Chief Financial Officer, Secretary and Treasurer
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HARVEY B. GROSSBLATT
has been a director of the Company since 1996. He served as Chief Financial Officer from October 1983 through August 2004, Secretary
and Treasurer of the Company from September 1988 through August 2004, and Chief Operating Officer from April 2003 through August
2004. Mr. Grossblatt was appointed Chief Executive Officer in August 2004.
JAMES B. HUFF
was appointed Chief Financial Officer in August 2004 and Secretary and Treasurer in October 2004.
PART II
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ITEM
5
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MARKET
FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
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Market for Common Stock
Our common stock, $.01
par value (the “Common Stock”) trades on the NYSE MKT LLC exchange, formerly the American Stock Exchange under the
symbol UUU. As of June 17, 2014, there were 225 record holders of the Common Stock. The closing price for the Common Stock on that
date was $4.54. We have not paid any cash dividends on our common stock, and it is our present intention to retain all earnings
for use in future operations. The following table sets forth the high and low prices for the Common Stock for each full quarterly
period during the fiscal years indicated.
Fiscal Year Ended March 31, 2014
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First Quarter
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High
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$
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5.40
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Low
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$
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4.13
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Second Quarter
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High
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$
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5.90
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Low
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$
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4.03
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Third Quarter
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High
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$
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5.00
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Low
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$
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4.25
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Fourth Quarter
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High
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$
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4.99
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Low
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$
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4.15
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Fiscal Year Ended March 31, 2013
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First Quarter
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High
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$
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5.64
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Low
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$
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4.65
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Second Quarter
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High
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$
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5.05
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Low
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$
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4.11
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Third Quarter
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High
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$
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4.50
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Low
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$
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3.93
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Fourth Quarter
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High
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$
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4.90
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Low
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$
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4.01
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Stock Repurchase Program
In October 2011, the
Company announced a stock buyback program and authorized the purchase of up to 100,000 shares of common stock. Shares could be
purchased from time to time under this program in the open market, through block trades and/or in negotiated transactions. The
program terminated on February 15, 2013 when the acquisition of 100,000 shares of common stock was completed by the Company pursuant
to the program.
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ITEM 7
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
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Forward-Looking Statements
When used in this discussion
and elsewhere in this Annual Report on Form 10-K, the words or phrases “will likely result,” “are expected to,”
“will continue,” “is anticipated,” “estimate,” “project” or similar expressions
are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform
Act of 1995. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the
date made, and readers are advised that various factors, including Risk Factors discussed in earlier filings and other risks, could
affect our financial performance and could cause our actual results for future periods to differ materially from those anticipated
or projected. We do not undertake and specifically disclaim any obligation to update any forward-looking statements to reflect
occurrence of anticipated or unanticipated events or circumstances after the date of such statements.
General
We
are in the business of marketing and distributing safety and security products which are primarily manufactured through our 50%
owned Hong Kong Joint Venture. Our financial statements detail our sales and other operational results, and report the financial
results of the Hong Kong Joint Venture using the equity method. Accordingly, the following discussion and analysis of the fiscal
years ended March 31, 2014 and 2013 relate to the operational results of the Company and its consolidated subsidiaries only and
includes the Company’s equity share of earnings in the Hong Kong Joint Venture. A discussion and analysis of the Hong Kong
Joint Venture’s operational results for these periods is presented below under the heading “Hong Kong Joint Venture.”
While we believe that
our overall sales are likely affected by the current global economic situation, we believe that we are specifically negatively
impacted by the severe downturn in the U.S. housing market. As stated elsewhere in this report, our USI Electric subsidiary markets
our products to the electrical distribution trade (primarily electrical and lighting distributors and manufactured housing companies);
every downturn in new home construction and new home sales negatively impacts sales by our USI Electric subsidiary. Our operating
results for the current fiscal years ended March 31, 2014 and 2013 continue to be significantly impacted by the economic downturn
of the U.S. housing market. We anticipate that when and as the housing market recovers, sales by our USI Electric subsidiary will
improve, as well.
We further believe
that our fiscal 2014 retail sales were impacted by the movement of the smoke and carbon monoxide alarm
retail
markets toward ten-year sealed alarms to comply with new laws passed in several
states, including California and New York. In May 2014, the Company previewed eleven new sealed smoke and carbon monoxide alarms
at the International Hardware Show in Las Vegas, and the Company believes that prospective customers’ responses were very
positive. We anticipate that the first two sealed models will be available toward the end of our second fiscal 2015 quarter (September
2014) and the complete line should be available for sale before the end of our 2015 fiscal year. While the new sealed units are
not ready for sale, we project that based on sales of the new sealed units, the Company will begin to return to profitability
after the complete line of sealed units is available for sale.
Comparison of Results of Operations
for the Years Ended March 31, 2014 and 2013
Sales.
In fiscal
year 2014, our net sales are $12,577,127 compared to sales in the prior year of $15,383,877, a decrease of $2,806,750 (18.2%).
Our lower sales are primarily attributable to the timing of orders of our new carbon monoxide detector to a principal customer
of these products during the prime seasonal selling period, which is the third quarter of our fiscal year.
Gross Profit.
Gross profit margin is calculated as net sales less cost of goods sold expressed as a percentage of net sales. Our gross profit
margin for the fiscal year ended March 31, 2014 was 22.6% compared to 28.2% in fiscal 2013. The decrease in 2014 gross margin is
attributed to increased cost of product sold when compared to the prior year resulting primarily from changes in the mix of products
sold and increased manufacturing costs of our Hong Kong Joint Venture.
Selling, General
and Administrative Expense.
Selling, general and administrative expenses decreased from $5,010,230 in fiscal 2013 to $4,251,274
in fiscal 2014. As a percentage of net sales, these expenses were 33.8% for the fiscal year ended March 31, 2014 and 32.6% for
the prior fiscal year. The decrease in dollars primarily reflects a reduction of approximately $500,000 from amounts incurred in
the fiscal year ended March 31, 2013 to market our new product line and decreases in selling commissions and freight costs due
to reduced sales.
Research and Development.
Research and development expense for the fiscal year ended March 31, 2014 was $592,488, of which approximately $450,000 was
for new product development. Research and development expense for the fiscal year ended March 31, 2013 was $543,141, of which approximately
$400,000 was for new product development. The increase in overall research and development expense for the 2014 period compared
to the 2013 period was due to the cost of independent testing of additional new products in development.
Interest Income
and Other Income.
Interest income for the fiscal year ended March 31, 2014 consisted of interest earned on cash deposits with
our factor. During the fiscal years ended March 31, 2014 and 2013, we earned interest of $23,316 and $23,572, respectively from
these deposits. Other income in the fiscal year ended March 31, 2013, included $66,862 that resulted from a gain on an insurance
settlement.
Interest Expense
.
During the fiscal years ended March 31, 2014 and 2013, we incurred no interest expense.
Income Taxes.
For
the fiscal years ended March 31, 2014 and 2013, our statutory Federal rate of tax is 34.0%. The rate of tax indicated by the provision
for income tax expense as shown on the Consolidated Statements of Operations for the March 31, 2014 and 2013 varies from the expected
statutory rate. Footnote F to the financial statements provides a reconciliation between the amount of tax that would be expected
at statutory rates and the amount of tax expense or benefit provided at the effective rate of tax for each fiscal period.
For the fiscal year
ended March 31, 2014, and 2013, we generated net operating loss carryovers to offset future federal and state income taxes of approximately
$1,176,000 and $870,000, respectively. At March 31, 2014 and 2013, we had net operating loss carryovers of approximately $3,822,000
and $2,351,000, respectively. The Company recognizes a liability or asset for the deferred tax consequences of temporary differences
between the tax basis of assets or liabilities and their reported amounts in the financial statements. These temporary differences
may result in taxable or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered
or settled. The deferred tax assets are reviewed periodically for recoverability and valuation allowances are provided whenever
it is more likely than not that a deferred tax asset will not be realized. Accordingly, the Company has established a full valuation
allowance of $3,120,203 on its deferred tax asset at March 31, 2014, to recognize that certain tax credits expiring in future fiscal
years are not likely to be realized. See “Critical Accounting Policies” below for further discussion regarding the
need to reserve the previously established deferred tax assets.
Net Loss.
We reported a net
loss of $4,450,244 for the fiscal year 2014, compared to a net loss of $452,561 for fiscal 2013, a $3,997,683 (883.3%) decrease.
The increase in the net loss is primarily attributed to a non-cash charge to provide an allowance for unrealizable deferred tax
assets of approximately $2.3 million, lower sales for the fiscal year and lower earnings of the Hong Kong Joint Venture principally
due to lower sales to the Company and its other customers. Our equity in the earnings of the Hong Kong Joint Venture decreased
from $722,827 in fiscal 2013 to a loss of $159,947 in fiscal 2014, a $882,774 (122.1%) decrease.
Financial Condition,
Liquidity and Capital Resources
Our cash needs
are currently met by
financial reserves
and
from our Factoring Agreement with CIT Group, which supplies both short-term borrowings and letters of credit to finance foreign
inventory purchases. Based on specified percentages of our accounts receivable and inventory and letter of credit commitments,
at March 31, 2014, our maximum borrowing availability under this Agreement was $1,000,000. Any outstanding principal balance under
this Agreement is payable upon demand. The interest rate on the Factoring Agreement, on the uncollected factored accounts receivable
and any additional borrowings is equal to the prime rate of interest charged by the factor which, as of March 31, 2014, was 3.25%.
All borrowings are collateralized by all our accounts receivable and inventory. During the year ended March 31, 2014, working
capital (computed as the excess of current assets over current liabilities) decreased by $1,415,892 from $9,570,671 on March 31,
2013, to $8,154,779 on March 31, 2014.
Our operating
activities used cash of $
851,941
for the year
ended March 31, 2014 principally as a result of a loss from operations of $4,450,244. The operating loss was partially offset
by a non-cash allowance for unrealizable deferred income tax assets of $2,310,835, and decreases in accounts receivable and amounts
due from factor of $630,310 and decreases in prepaid expenses of $192,672.
Our
operating activities used cash of $785,730 for the year ended March 31, 2013 principally as a result of the net loss of $452,561
adjusted for non-cash income of $722,827 provided through earnings of our Hong Kong Joint Venture and a decrease in trade accounts
payable and accrued expenses of $565,774, partially offset by a reduction in inventory of $1,056,888.
Our
investing activities provided cash of $382,792 and $264,268 during fiscal 2014 and 2013 principally as a result of cash distributions
of the Hong Kong Joint Venture of $416,275 and $276,157 respectively.
Financing
activities provided cash of $
81,250
during
the fiscal year ended March 31, 2014 as a result of the sale of common stock to an employee in exercise of an option to purchase
said common stock. Financing activities used cash of $225,920 during the fiscal year ended March 31, 2013, resulting from the
repurchase of the Company’s common stock in accordance with the Company’s stock repurchase plan.
Our cash needs are
currently met by funds generated from operations. As stated above, we believe that sales by the Company and by our USI Electric
subsidiary have been negatively impacted by the severe downturn in the U.S. housing market. We anticipate that when and as the
housing market recovers, sales by the Company and by our USI Electric subsidiary will improve, thereby improving our profitability
and increasing our capital resources. The Company continues to develop and market its next generation of products, including a
new line of sealed battery safety alarms, and anticipates that sales of these new products will help the Company return to profitability.
While we expect that our cash and cash equivalents and availability under our Factoring Agreement will be sufficient to fund our
operations and increases in inventory for the next 12 months, we have initiated discussions with CIT Group to increase our availability
under the Factoring Agreement.
Hong Kong Joint
Venture
The financial statements
of the Hong Kong Joint Venture are included in this Form 10-K beginning on page JV-1. These financial statements are presented
in accordance with International Financial Reporting Standards used by the International Financial Standards Board (IFRS) and there
are no (IFRS) to US GAAP differences in the Hong Kong Joint Venture’s accounting policies.
In fiscal year 2014,
sales of the Hong Kong Joint Venture were $19,054,691, compared to $22,031,665 in fiscal 2013. During the fiscal year ended March
31, 2014, sales to the Company declined approximately $2,235,000 due to decreased purchasing by the Company in line with decreased
demand in the U.S. domestic market, and sales to unaffiliated customers declined approximately $744,000, due to decreased demand
from a single large customer in Germany.
Net loss was $437,940
for fiscal year 2014 compared to net income of $1,647,461 for the fiscal year ended March 31, 2013. The decrease in net income
for fiscal 2014 was primarily due to lower sales to the Company and to higher costs for salaries and wages included in selling,
general and administration expenses.
Gross margins of the
Hong Kong Joint Venture for fiscal 2014 decreased to 23.3% from 24.6% in the prior fiscal year. The primary reason for the decrease
is the increase in labor in the production cost.
Selling, general and
administrative expenses of the Hong Kong Joint Venture for fiscal 2014 were $5,310,546, compared to $4,499,939 in the prior fiscal
year. The increase in dollars as compared to the prior fiscal year results primarily from higher labor costs. As a percentage of
sales, these expenses were 27.9% and 20.4%, respectively, for the fiscal years ended March 31, 2014 and 2013.
Investment income
and interest income, net of interest expense was $681,883 for fiscal year 2014, compared to $491,474 for fiscal year 2013.
Cash needs of the Hong Kong Joint Venture
are currently met by funds generated from operations. During fiscal year 2014, working capital decreased from $9,834,568 on March
31, 2013 to $9,287,873 on March 31, 2014.
Critical Accounting Policies
Management’s
discussion and analysis of our consolidated financial statements and results of operations are based upon our Consolidated Financial
Statements included as part of this document. The preparation of these consolidated financial statements requires management to
make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures
of contingent assets and liabilities. On an ongoing basis, we evaluate these estimates, including those related to bad debts, inventories,
income taxes, impairment of long-lived assets, and contingencies and litigation. We base these estimates on historical experiences
and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities that are not readily available from other sources. Actual
results may differ from these estimates under different assumptions or conditions.
We believe that the
following critical accounting policies affect management’s more significant judgments and estimates used in the preparation
of its consolidated financial statements. For a detailed discussion on the application of these and other accounting policies,
see Note A to the consolidated financial statements included in this Annual Report. Certain of our accounting policies require
the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates.
By their nature, these judgments are subject to an inherent degree of uncertainty and actual results could differ from these estimates.
These judgments are based on our historical experience, terms of existing contracts, current economic trends in the industry, information
provided by our customers, and information available from outside sources, as appropriate. Our critical accounting policies include:
Income Taxes
:
The Company recognizes a liability or asset for the deferred tax consequences of temporary differences between the tax basis of
assets or liabilities and their reported amounts in the financial statements. These temporary differences may result in taxable
or deductible amounts in future years when the reported amounts of the assets or liabilities are recovered or settled. The deferred
tax assets are reviewed periodically for recoverability and a valuation allowance is provided whenever it is more likely than not
that a deferred tax asset will not be realized. The Company established an initial valuation allowance of $300,000 on its deferred
tax assets during the year ended March 31, 2013 to recognize that certain foreign tax credits expiring in future periods will likely
not be realized. Upon further review of updated projected taxable income and the components of the deferred tax asset in accordance
with applicable accounting guidance at September 30, 2013, it was determined that it is more likely than not that the tax benefits
associated with the remaining components of the deferred tax assets will not be realized. This determination was made based on
continued taxable losses during fiscal 2014, which were not in line with projections, as well as product offering delays which
cause uncertainty as to whether the Company will generate sufficient taxable income to use the deferred tax assets prior to their
expiration. Accordingly, a valuation allowance was established to fully offset the value of the deferred tax assets. Our ability
to realize the tax benefits associated with the deferred tax assets depends primarily upon the timing of future taxable income
and the expiration dates of the components of the deferred tax assets. If sufficient future taxable income is generated, we may
be able to offset a portion of future tax expenses.
The Company follows ASC 740-10 that gives
guidance to tax positions related to the recognition and measurement of a tax position taken or expected to be taken in a tax return
and requires that we recognize in our financial statements the impact of a tax position, if that position is more likely than not
to be sustained upon an examination, based on the technical merits of the position. Interest and penalties related to income
tax matters are recorded as income tax expenses. The Company has recorded a long-term liability of $25,000 for an uncertain income
tax position, tax penalties and any imputed interest thereon. See Note F, Income Taxes.
Revenue Recognition:
Revenue is recognized at the time product is shipped and title passes pursuant to the terms of the agreement with the customer,
the amount due from the customer is fixed and collectability of the related receivable is reasonably assured. We establish allowances
to cover anticipated doubtful accounts and sales returns based upon historical experience. The Company nets the factored accounts
receivable with the corresponding advance from the Factor, with the net amount reflected in the consolidated balance sheet. The
Company assigns trade receivables on a pre-approved non-recourse basis to the Factor under the Factoring Agreement on an ongoing
basis.
Inventories:
Inventories
are valued at the lower of market or cost. Cost is determined on the first in/first out method. We evaluate inventories on a quarterly
basis and write down inventory that is deemed obsolete or unmarketable in an amount equal to the difference between the cost of
inventory and the estimated market value based upon assumptions about future demand and market conditions.
Recently Issued Accounting Pronouncements
Changes to accounting
principles generally accepted in the United States of America (U.S. GAAP) are established by the Financial Accounting Standards
Board (FASB) in the form of accounting standards updates (ASU’s) to the FASB’s Accounting Standards Codification.
The Company considers
the applicability and impact of all ASU’s. Recently issued ASU’s were evaluated and determined to be either not applicable
or are not expected to have a material impact on our consolidated financial statements.
Revision of Prior Period Financial Statements
Certain amounts appearing in the condensed
consolidated balance sheet as of March 31, 2013 have been revised to correct for an immaterial error and to conform to the current
year’s presentation. The Company had not previously recorded its proportionate share of the Hong Kong Joint Ventures other
comprehensive income amounts. These consisted of the impact of foreign currency exchange rates on the translation of certain subsidiaries
of the Hong Kong Joint Venture and changes in the fair value of investments held by the Hong Kong Joint Venture that are classified
as available for sale. As a result, the Company adjusted the opening balance sheet of the earliest year presented, increasing its
investment in the Hong Kong Joint Venture and accumulated other comprehensive income by $1,083,603 as of April 1, 2012. The adjustments
also increased its previously reported investment in the Hong Kong Joint Venture and accumulated other comprehensive income as
of March 31, 2013 by $1,376,410. Since these two components represented the only components of other comprehensive income, the
Company had not previously presented a Statement of Comprehensive Income (Loss). The Company has, in the accompanying Financial
Statements, presented a separate condensed consolidated statement of comprehensive loss for the twelve months ended March 31, 2014
and 2013.
The Company assessed the materiality of the error in accordance
with the Securities and Exchange Commission (the SEC) Staff Accounting Bulletin Nos. 99 and 108 (SAB 99 and 108), and based on
an analysis of quantitative and qualitative factors, determined that the error was immaterial to each of the prior reporting periods
affected and, therefore, amendment of reports previously filed with the SEC was not required.
Accumulated Other Comprehensive Income
The following table presents the changes in Accumulated Other
Comprehensive Income by component for the fiscal year ended March 31, 2014:
|
|
Currency Translation
|
|
|
Investment Securities
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Balance – March 31, 2013
|
|
$
|
1,172,486
|
|
|
$
|
203,924
|
|
|
$
|
1,376,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
$
|
(44,678
|
)
|
|
$
|
(141,605
|
)
|
|
$
|
(186,283
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance – March 31, 2014
|
|
$
|
1,127,808
|
|
|
$
|
62,319
|
|
|
$
|
1,190,127
|
|
|
ITEM 8
.
|
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|
The financial statements
and supplementary data required by this Item 8 are included in the Company’s Consolidated Financial Statements and set forth
in the pages indicated in Item 15(a) of this Annual Report.
|
ITEM 9.
|
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
|
Not applicable.
|
ITEM 9A
.
|
CONTROLS AND PROCEDURES
|
Evaluation of Disclosure Controls and
Procedures
We maintain a system
of disclosure controls and procedures (as such item is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) that is designed
to provide reasonable assurance that information, which is required to be disclosed by us in the reports that we file or submit
under the Securities and Exchange Act of 1934, as amended (“Exchange Act”), is recorded, processed, summarized and
reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and is accumulated
and communicated to management in a timely manner. Our Chief Executive Officer and Chief Financial Officer have evaluated this
system of disclosure controls and procedures as of the end of the period covered by this annual report, and have concluded that
disclosure controls and procedures were not effective. Material weaknesses arose as a result of staff changes in the accounting
function of the Hong Kong Joint Venture that by virtue of the Hong Kong Joint Venture’s materiality to the Company extends
the material weakness to our system of disclosure controls and procedures. In addition, material weaknesses arose at the Company
in the application of revenue recognition procedures on certain sales to a single customer with a right of return provision. In
addition a material weakness was noted in the cut-off of inventory in transit at the end of the fiscal year and in the application
of overhead burden to inventory.
Management’s Annual Report
on Internal Control over Financial Reporting
Our management, including
our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control
over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control
over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of our financial statements for external reporting purposes in accordance with U.S. generally accepted
accounting principles (GAAP). Internal control over financial reporting includes those policies and procedures that: (i) pertain
to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the
assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with US GAAP, and that the Company’s receipts and expenditures are being made only
in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a
material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may
not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures
may deteriorate.
Our Chief Financial
Officer, with the participation of our Chief Executive Officer, conducted an evaluation of the effectiveness of our internal control
over financial reporting based on the 1992 framework in
Internal Control — Integrated Framework
issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that the Company’s
internal control over financial reporting was not effective as of March 31, 2014. As noted above, staff changes in the accounting
function of the Hong Kong Joint Venture and the lack of an effective transition for the new staff resulted in an inability to prepare
financial statements and disclosure on a timely basis for the fiscal year ended March 31, 2014.
Changes in Internal Control Over
Financial Reporting
Other than staffing
changes in the Hong Kong Joint Venture as discussed herein, there have been no changes in our internal control over financial reporting
during the fourth quarter of fiscal 2014 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.
|
ITEM 9B.
|
OTHER INFORMATION
|
Not applicable.
PART III
|
ITEM 10
.
|
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
The information with
respect to the identity and business experience of the directors of the Company and their remuneration set forth in the section
captioned “Election of Directors” in the Company’s definitive Proxy Statement filed pursuant to Regulation 14A
and issued in conjunction with the 2014 Annual Meeting of Shareholders (the “Proxy Statement”) is incorporated herein
by reference. The information with respect to the identity and business experience of executive officers of the Company is set
forth in Part I of this Form 10-K. The information with respect to the Company’s Audit Committee is incorporated herein by
reference to the section captioned “Meetings and Committees of the Board of Directors” in the Proxy Statement. The
information with respect to compliance with Section 16(a) of the Exchange Act is incorporated herein by reference to the section
captioned “Compliance with Section 16(a) of the Exchange Act” in the Proxy Statement. The information with respect
to the Company’s Code of Ethics is incorporated herein by reference to the section captioned “Code of Ethics”
in the Proxy Statement.
|
ITEM 11
.
|
EXECUTIVE COMPENSATION
|
The information required
by this item is incorporated herein by reference to the sections captioned “Director Compensation” and “Executive
Compensation” in the Proxy Statement.
|
ITEM 12.
|
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|
The information required
by this item regarding security ownership is incorporated herein by reference to the sections captioned “Beneficial Ownership”
and “Information Regarding Share Ownership of Management” in the Proxy Statement. Information required by this item
regarding our equity compensation plans is incorporated herein by reference to the Section entitled “Executive Compensation”
in the Proxy Statement.
|
ITEM 13
.
|
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTOR INDEPENDENCE
|
The information required
by this item is incorporated herein by reference to the sections captioned “Transactions with Management”, if any,
and “Election of Directors” in the Proxy Statement.
|
ITEM 14
.
|
PRINCIPAL ACCOUNTANT FEES AND SERVICES
|
The information required
by this item is incorporated herein by reference to the section captioned “Independent Registered Public Accountants”
in the Proxy Statement.
PART IV
|
ITEM 15
.
|
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
|
(a)1. Financial Statements
.
(a)2. Financial Statement
Schedules.
(a)3. Exhibits required to be filed
by Item 601 of Regulation S-K.
Exhibit No.
3.1
|
Articles of Incorporation (incorporated by reference to the Company’s Quarterly Report on Form 10-Q for the period ended December 31, 1988, File No. 1-31747)
|
3.2
|
Articles Supplementary, filed October 14, 2003 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed October 31, 2002, file No. 1-31747)
|
3.3
|
Bylaws, as amended (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed July 13, 2011, File No. 1-31747)
|
10.1
|
2011 Non-Qualified Stock Option Plan (incorporated by reference to the Company’s Proxy Statement with respect to the Company’s 2011 Annual Meeting of Shareholders, filed July 26, 2011, File No. 1-31747)
|
10.2
|
Hong Kong Joint Venture Agreement, as amended (incorporated by reference to Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2003, File No. 1-31747)
|
10.3
|
Amended and Restated Factoring Agreement between the Registrant and The CIT Group/Commercial Services, Inc. (“CIT”), dated June 22, 2007 (substantially identical agreement entered into by the Registrant’s wholly-owned subsidiary, USI Electric, Inc.) (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed June 26, 2007, file No. 1-31747)
|
10.4
|
Amended and Restated Inventory Security Agreement between the Registrant and CIT, dated June 22, 2007 (substantially identical agreement entered into by the Registrant’s wholly-owned subsidiary, USI Electric, Inc.) (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed June 26, 2007, file No. 1-31747)
|
10.5
|
Amendment, dated December 22, 2009, to Amended and Restated Factoring Agreement between the Registrant and CIT dated June 22, 2007 (substantially identical agreement entered into by the Registrant’s wholly-owned subsidiary, USI Electric, Inc.) (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q filed February 16, 2010, file No. 1-31747)
|
10.6
|
Lease between Universal Security Instruments, Inc. and St. John Properties, Inc. dated November 4, 2008 for its office and warehouse located at 11407 Cronhill Drive, Suites A-D, Owings Mills, Maryland 21117 (incorporated by reference to Exhibit 10.8 to the Company’s Quarterly Report on Form 10-Q for the period ended December 31, 2008, File No. 1-31747)
|
10.7
|
Amendment to Lease between Universal Security Instruments, Inc. and St. John Properties, Inc. dated June 23, 2009 (incorporated by reference to Exhibit 10.9 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2009, File No. 1-31747)
|
10.8
|
Amended and Restated Employment Agreement dated July 18, 2007 between the Company and Harvey B. Grossblatt (incorporated by reference to Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q for the period ended December 31, 2007, File No. 1-31747), as amended by Addendum dated November 13, 2007 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed November 15, 2007, File No. 1-31747), by Addendum dated September 8, 2008 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed September 8, 2008, File No. 1-31747), by Addendum dated March 11, 2010 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed March 12, 2010, File No. 1-31747), and by Addendum dated July 19, 2012 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed July 20, 2012, File No. 1-31747)
|
21
|
Subsidiaries of the Registrant (incorporated by reference to Exhibit 21 to the Company’s Annual Report on Form 10-K for the year ended March 31, 2012, File No. 1-31747)
|
23.1
|
Consent of Grant Thornton LLP*
|
23.2
|
Consent of Grant Thornton LLP (Hong Kong)*
|
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*
|
32.1
|
Section 1350 Certifications*
|
99.1
|
Press Release dated August 4, 2014*
|
101
|
Interactive data files providing financial information from the Registrant’s Annual Report on Form 10-K for the fiscal year ended March 31, 2014 in XBRL (eXtensible Business Reporting Language) pursuant to Rule 405 of Regulation S-T: (i) Consolidated Balance Sheets as of March 31, 2014 and 2013; (ii) Consolidated Statements of Operations for the years ended March 31, 2014 and 2013; (iii) Consolidated Statements of Shareholders’ Equity for the years ended March 31, 2014 and 2013; (iv) Consolidated Statements of Cash Flows for the years ended March 31, 2014 and 2013; and (v) Notes to Consolidated Financial Statements*
|
*Filed herewith
(c) Financial Statements Required
by Regulation S-X.
Separate financial statements of the Hong Kong Joint Venture
SIGNATURES
Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
|
UNIVERSAL SECURITY INSTRUMENTS, INC.
|
|
|
|
August 4, 2014
|
By:
|
/s/ Harvey B. Grossblatt
|
|
|
Harvey B. Grossblatt
|
|
|
President and Chief Executive Officer
|
|
|
(principal executive officer)
|
Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Harvey B. Grossblatt
|
|
President, Chief Executive Officer
|
|
August 4, 2014
|
Harvey B. Grossblatt
|
|
and Director
|
|
|
|
|
|
|
|
/s/ James B. Huff
|
|
Chief Financial Officer
|
|
August 4, 2014
|
James B. Huff
|
|
(principal financial officer and
|
|
|
|
|
principal accounting officer)
|
|
|
|
|
|
|
|
/s/ Cary Luskin
|
|
Director
|
|
August 4, 2014
|
Cary Luskin
|
|
|
|
|
|
|
|
|
|
/s/ Ronald A. Seff
|
|
Director
|
|
August 4, 2014
|
Ronald A. Seff
|
|
|
|
|
|
|
|
|
|
/s/ Ira Bormel
|
|
Director
|
|
August 4, 2014
|
Ira Bormel
|
|
|
|
|
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Shareholders and Board of Directors
of Universal Security Instruments, Inc.
We have audited the accompanying consolidated
balance sheets of Universal Security Instruments, Inc. (a Maryland Corporation) and subsidiaries (the “Company”) as
of March 31, 2014 and 2013, and the related consolidated statements of operations, comprehensive loss, changes in shareholders'
equity, and cash flows for the years then ended. Our audits of the basic consolidated financial statements included the financial
statement schedule listed in the index appearing under Item 15(a)(2). These financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not
engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the financial position of Universal Security Instruments,
Inc. and subsidiaries as of March 31, 2014 and 2013, and the results of their operations and their cash flows for the years then
ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ Grant Thornton LLP
McLean, Virginia
August 4, 2014
UNIVERSAL SECURITY INSTRUMENTS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
March 31
|
|
|
|
2014
|
|
|
2013
|
|
ASSETS
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
As Revised
|
|
Cash and cash equivalents
|
|
$
|
2,050,993
|
|
|
$
|
2,438,892
|
|
Accounts receivable:
|
|
|
|
|
|
|
|
|
Trade less allowance for doubtful accounts of approximately $57,000 at March 31, 2014 and 2013
|
|
|
686,228
|
|
|
|
347,699
|
|
Receivables from employees
|
|
|
67,583
|
|
|
|
65,375
|
|
Receivable from Hong Kong Joint Venture
|
|
|
137,360
|
|
|
|
224,695
|
|
|
|
|
891,171
|
|
|
|
637,769
|
|
|
|
|
|
|
|
|
|
|
Amount due from factor
|
|
|
1,397,951
|
|
|
|
2,281,662
|
|
Inventories
|
|
|
4,194,213
|
|
|
|
4,341,652
|
|
Prepaid expenses
|
|
|
406,012
|
|
|
|
598,686
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT ASSETS
|
|
|
8,940,340
|
|
|
|
10,298,661
|
|
|
|
|
|
|
|
|
|
|
DEFERRED TAX ASSETS
|
|
|
0
|
|
|
|
2,310,835
|
|
|
|
|
|
|
|
|
|
|
INVESTMENT IN HONG KONG JOINT VENTURE
|
|
|
14,144,069
|
|
|
|
14,906,573
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT – NET
|
|
|
146,212
|
|
|
|
152,201
|
|
|
|
|
|
|
|
|
|
|
INTANGIBLE ASSET - NET
|
|
|
76,020
|
|
|
|
80,491
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
38,134
|
|
|
|
38,134
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
23,344,775
|
|
|
$
|
27,786,895
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
606,314
|
|
|
$
|
548,388
|
|
Due to Hong Kong Joint Venture
|
|
|
28,681
|
|
|
|
-
|
|
Accrued liabilities:
|
|
|
|
|
|
|
|
|
Accrued payroll and employee benefits
|
|
|
78,054
|
|
|
|
103,890
|
|
Accrued commissions and other
|
|
|
72,512
|
|
|
|
75,712
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES
|
|
|
785,561
|
|
|
|
727,990
|
|
|
|
|
|
|
|
|
|
|
Long-term obligation – other
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value per share; 20,000,000 authorized, 2,312,887 shares outstanding at March 31, 2014 and 2,287,887 shares issued and outstanding at March 31, 2013
|
|
|
23,129
|
|
|
|
22,879
|
|
Additional paid-in capital
|
|
|
12,885,841
|
|
|
|
12,749,256
|
|
Retained earnings
|
|
|
8,435,116
|
|
|
|
12,885,360
|
|
Accumulated other comprehensive income
|
|
|
1,190,128
|
|
|
|
1,376,410
|
|
TOTAL SHAREHOLDERS’ EQUITY
|
|
|
22,534,214
|
|
|
|
27,033,905
|
|
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$
|
23,344,775
|
|
|
$
|
27,786,895
|
|
The accompanying notes are an integral part of these consolidated
financial statements
UNIVERSAL SECURITY INSTRUMENTS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
|
|
Years Ended March 31
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
12,577,127
|
|
|
$
|
15,383,877
|
|
Cost of goods sold – acquired from Joint Venture
|
|
|
9,008,944
|
|
|
|
10,879,489
|
|
Cost of goods sold - other
|
|
|
727,199
|
|
|
|
162,988
|
|
|
|
|
|
|
|
|
|
|
GROSS PROFIT
|
|
|
2,840,984
|
|
|
|
4,341,400
|
|
|
|
|
|
|
|
|
|
|
Research and development expense
|
|
|
592,488
|
|
|
|
543,141
|
|
Selling, general and administrative expense
|
|
|
4,251,274
|
|
|
|
5,010,230
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(2,002,778
|
)
|
|
|
(1,211,971
|
)
|
|
|
|
|
|
|
|
|
|
Other income :
|
|
|
|
|
|
|
|
|
Interest and other
|
|
|
23,316
|
|
|
|
90,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE EQUITY IN (LOSS) EARNINGS OF JOINT VENTURE
|
|
|
(1,979,462
|
)
|
|
|
(1,121,537
|
)
|
Equity in (loss) earnings of Hong Kong Joint Venture
|
|
|
(159,947
|
)
|
|
|
722,827
|
|
|
|
|
|
|
|
|
|
|
Loss from operations before income taxes
|
|
|
(2,139,409
|
)
|
|
|
(398,710
|
)
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
(2,310,835
|
)
|
|
|
(53,851
|
)
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(4,450,244
|
)
|
|
$
|
(452,561
|
)
|
|
|
|
|
|
|
|
|
|
Loss per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.94
|
)
|
|
$
|
(0.20
|
)
|
Diluted
|
|
$
|
(1.94
|
)
|
|
$
|
(0.20
|
)
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in computing net loss per share:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
2,290,010
|
|
|
|
2,311,152
|
|
Diluted
|
|
|
2,290,010
|
|
|
|
2,311,152
|
|
The accompanying notes are
an integral part of these consolidated financial statements
UNIVERSAL SECURITY INSTRUMENTS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
LOSS
|
|
March 31
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
$
|
(4,450,244
|
)
|
|
$
|
(452,561
|
)
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss)
|
|
|
|
|
|
|
|
|
Company’s Portion of Hong Kong
|
|
|
|
|
|
|
|
|
Joint Venture’s Other Comprehensive
|
|
|
|
|
|
|
|
|
Income (Loss):
|
|
|
|
|
|
|
|
|
Currency translations
|
|
|
(44,678
|
)
|
|
|
211,491
|
|
Unrealized gain (loss) on investment securities
|
|
|
(141,605
|
)
|
|
|
81,316
|
|
|
|
|
|
|
|
|
|
|
Total Comprehensive (Loss) Income
|
|
|
(186,283
|
)
|
|
|
292,807
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE LOSS
|
|
$
|
(4,636,527
|
)
|
|
$
|
(159,754
|
)
|
The accompanying notes are an integral
part of these consolidated financial statements
UNIVERSAL SECURITY INSTRUMENTS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS’
EQUITY
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Additional
Paid-In
Capital
|
|
|
Retained
Earnings
|
|
|
Other
Compre-
Hensive
Loss
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at April 1, 2012
|
|
|
2,336,354
|
|
|
$
|
23,364
|
|
|
$
|
12,885,756
|
|
|
$
|
13,337,921
|
|
|
$
|
1,083,603
|
|
|
$
|
27,330,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
88,935
|
|
|
|
-
|
|
|
|
|
|
|
|
88,935
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
211,491
|
|
|
|
211,491
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
81,316
|
|
|
|
81,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repurchase of common stock
|
|
|
(48,467
|
)
|
|
|
(485
|
)
|
|
|
(225,435
|
)
|
|
|
-
|
|
|
|
|
|
|
|
(225,920
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(452,561
|
)
|
|
|
-
|
|
|
|
(452,561
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2013
|
|
|
2,287,887
|
|
|
|
22,879
|
|
|
|
12,749,256
|
|
|
|
12,885,360
|
|
|
|
1,376,410
|
|
|
|
27,033,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation
|
|
|
|
|
|
|
|
|
|
|
55,585
|
|
|
|
|
|
|
|
|
|
|
|
55,585
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,678
|
)
|
|
|
(44,678
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(141,604
|
)
|
|
|
(141,604
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
25,000
|
|
|
|
250
|
|
|
|
81,000
|
|
|
|
|
|
|
|
|
|
|
|
81,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,450,244
|
)
|
|
|
|
|
|
|
(4,450,244
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2014
|
|
|
2,312,887
|
|
|
$
|
23,129
|
|
|
$
|
12.885,841
|
|
|
$
|
8,435,116
|
|
|
$
|
1,190,128
|
|
|
$
|
22,534,214
|
|
The
accompanying notes are an integral part of these consolidated financial statements
UNIVERSAL SECURITY INSTRUMENTS,
INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
Years Ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
OPERATING ACTIVITIES
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(4,450,244
|
)
|
|
$
|
(452,561
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
43,943
|
|
|
|
40,302
|
|
Stock based compensation
|
|
|
55,585
|
|
|
|
88,935
|
|
Deferred income taxes
|
|
|
2,310,835
|
|
|
|
83,966
|
|
|
|
|
|
|
|
|
|
|
(Earnings) Loss of the Hong Kong Joint Venture
|
|
|
159,947
|
|
|
|
(722,827
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Decrease (Increase) in accounts receivable and amounts due from factor
|
|
|
630,310
|
|
|
|
(317,849
|
)
|
Decrease in inventories
|
|
|
147,439
|
|
|
|
1,056,888
|
|
Decrease in prepaid expenses
|
|
|
192,672
|
|
|
|
1,190
|
|
Increase (Decrease) in accounts payable and accrued expenses
|
|
|
57,572
|
|
|
|
(565,774
|
)
|
Decrease in other assets
|
|
|
-
|
|
|
|
2,000
|
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN OPERATING ACTIVITIES
|
|
|
(851,941
|
)
|
|
|
(785,730
|
)
|
|
|
|
|
|
|
|
|
|
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Cash distributions from Joint Venture
|
|
|
416,275
|
|
|
|
276,157
|
|
Purchase of equipment
|
|
|
(33,483
|
)
|
|
|
(11,889
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH PROVIDED BY INVESTING ACTIVITIES
|
|
|
382,792
|
|
|
|
264,268
|
|
|
|
|
|
|
|
|
|
|
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Exercise of stock options
|
|
|
81,250
|
|
|
|
-
|
|
Repurchase of common stock
|
|
|
-
|
|
|
|
(225,920
|
)
|
|
|
|
|
|
|
|
|
|
NET CASH USED IN FINANCING ACTIVITIES
|
|
|
81,250
|
|
|
|
(225,920
|
)
|
|
|
|
|
|
|
|
|
|
DECREASE IN CASH
|
|
|
(387,899
|
)
|
|
|
(747,382
|
)
|
|
|
|
|
|
|
|
|
|
Cash at beginning of period
|
|
|
2,438,892
|
|
|
|
3,186,274
|
|
|
|
|
|
|
|
|
|
|
CASH AT END OF PERIOD
|
|
$
|
2,050,993
|
|
|
$
|
2,438,892
|
|
|
|
|
|
|
|
|
|
|
Supplemental information:
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
-
|
|
Income taxes recovered (paid)
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes are an integral
part of these consolidated financial statements
UNIVERSAL SECURITY INSTRUMENTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A – NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Nature of Business:
Universal Security
Instruments, Inc.’s (“the Company”) primary business is the sale of smoke alarms and other safety products to
retailers, wholesale distributors and to the electrical distribution trade which includes electrical and lighting distributors
as well as manufactured housing companies. The Company imports all of its safety and other products from foreign manufacturers.
The Company, as an importer, is subject to numerous tariffs which vary depending on types of products and country of origin, changes
in economic and political conditions in the country of manufacture, potential trade restrictions and currency fluctuations.
Principles of Consolidation:
The
consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation. We believe that our 50% ownership interest in the Hong Kong Joint
Venture allows us to significantly influence the operations of the Hong Kong Joint Venture. As such, we account for our interest
in the Hong Kong Joint Venture using the equity method of accounting. We have included our investment balance as a non-current
asset and have included our share of the Hong Kong Joint Venture’s income in our consolidated statement of operations. The
investment and earnings are adjusted to eliminate intercompany profits.
Revision of Prior Period Financial Statements
Certain amounts appearing in the condensed
consolidated balance sheet as of March 31, 2013 have been revised to correct for an immaterial error and to conform to the current
year’s presentation. The Company had not previously recorded its proportionate share of the Hong Kong Joint Ventures other
comprehensive income amounts. These consisted of the impact of foreign currency exchange rates on the translation of certain subsidiaries
of the Hong Kong Joint Venture and changes in the fair value of investments held by the Hong Kong Joint Venture that are classified
as available for sale. As a result, the Company adjusted the opening balance sheet of the earliest year presented, increasing its
investment in the Hong Kong Joint Venture and accumulated other comprehensive income by $1,083,603 as of April 1, 2012. The adjustments
also increased its previously reported investment in the Hong Kong Joint Venture and accumulated other comprehensive income as
of March 31, 2013 by $1,376,410. Since these two components represented the only components of other comprehensive income, the
Company had not previously presented a Statement of Comprehensive Income (Loss). The Company has, in the accompanying Financial
Statements, presented a separate condensed consolidated statement of comprehensive loss for the twelve months ended March 31, 2014
and 2013.
The Company assessed the materiality of the error in accordance
with the Securities and Exchange Commission (the SEC) Staff Accounting Bulletin Nos. 99 and 108 (SAB 99 and 108), and based on
an analysis of quantitative and qualitative factors, determined that the error was immaterial to each of the prior reporting periods
affected and, therefore, amendment of reports previously filed with the SEC was not required.
Accumulated Other Comprehensive Income
The following table presents the changes in Accumulated Other
Comprehensive Income by component for the fiscal year ended March 31, 2014:
|
|
Currency Translation
|
|
|
Investment Securities
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
Balance – March 31, 2013
|
|
$
|
1,172,486
|
|
|
$
|
203,924
|
|
|
$
|
1,376,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
$
|
(44,678
|
)
|
|
$
|
(141,605
|
)
|
|
$
|
(186,283
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance – March 31, 2014
|
|
$
|
1,127,808
|
|
|
$
|
62,319
|
|
|
$
|
1,190,127
|
|
Use of Estimates:
In preparing financial
statements in conformity with accounting principles generally accepted in the United States of America (US GAAP), management is
required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Cash and Cash Equivalents:
Cash
includes demand deposits with banks or other financial institutions. Included within cash and cash equivalents are demand deposits
with the Company’s factor at March 31, 2014 and 2013 totaling approximately $1,900,000 and $2,100,000, respectively. Cash
equivalents consist of highly liquid investments with original maturities of three months or less from the date of purchase. At
times, the Company maintains cash and investment balances in financial institutions, which may exceed federally insured limits.
The Company has not experienced any losses relating to such accounts and believes it is not exposed to a significant credit risk
on its cash and cash equivalents and investments. The carrying value of cash and cash equivalents approximates their fair value
based on their short-term maturities at March 31, 2014 and 2013.
Revenue Recognition:
The Company
recognizes sales upon shipment of products, when title has passed to the buyer, net of applicable provisions for any discounts
or allowances. We recognize revenue when the following criterion are met: evidence of an arrangement exists, fixed and determinable
fee, delivery has taken place, and collectability is reasonably assured. Customers may not return, exchange or refuse acceptance
of goods without our approval. We have established allowances to cover anticipated doubtful accounts based upon historical experience.
Warranties:
We generally provide
warranties, on the safety products, from one to ten years to the non-commercial end user on all products sold. The manufacturers
of our safety products provide us with a one-year warranty on all products we purchase for resale. Claims for warranty replacement
of products beyond the one-year warranty period covered by the manufacturers have not been historically material .
Stock-Based Compensation:
In October
2011, the stockholders approved the Company’s 2011 Non-Qualified Stock Option Plan (the “Plan”). Under the terms
of the Plan, 120,000 shares are reserved for the granting of stock options, of which 97,000 were issued. Under the provisions of
the Plan, a committee of the Board of Directors determines the option price and dates exercisable. During December 2011, ninety-seven
thousand (97,000) options were granted at an option price of $5.51 per share. These options expired on December 14, 2013, with
no forfeiture or exercise activity.
We account for share-based payments using
the fair value method. We recognize all share-based payments to employees and non-employee directors in our financial statements
based on their grant date fair values, calculated using the Black-Scholes option pricing model. Compensation expense related to
share-based awards is recognized on a straight-line basis based on the value of share awards that are expected to vest during the
requisite service period on the grant date, which is revised if actual forfeitures differ materially from original expectations.
The expected term of stock options granted
was based on the Company’s historical option exercise experience and post-vesting forfeiture experience using the historical
expected term from the vesting date. The expected volatility of the options granted was determined using historical volatilities
based on stock prices over a look-back period corresponding to the expected term. The risk-free interest rate was determined using
the yield available for zero-coupon U.S. government issues with a remaining term equal to the expected term of the options. The
forfeiture rate was determined using historical pre-vesting forfeiture rates since the inception of the plans. The company has
never paid a dividend; and, as such, the dividend yield is zero.
Stock Repurchase Program
: In October
2011, the Company announced a stock buyback program under which the Board authorized the purchase of up to 100,000 shares of common
stock. The program terminated in February 2013 when the purchase of 100,000 shares of common stock was completed by the Company
pursuant to the program.
The following table sets forth information
with respect to purchases by the Company of its common stock during the fiscal year ended March 31, 2013:
Period
|
|
Total
Number
of
Shares
Purchased
|
|
|
Average
Price
Paid
per
Share
|
|
|
Total
Number of
Shares
Purchased
As
Part of
Publicly
Announced
Plans
Or
Programs
|
|
|
Maximum
Number
of
Shares that May
Yet
be Purchased
Under
the Plans or
Programs
|
|
April 2012
|
|
|
11,605
|
|
|
$
|
5.37
|
|
|
|
63,138
|
|
|
|
36,862
|
|
July 2012
|
|
|
11,990
|
|
|
$
|
4.90
|
|
|
|
75,128
|
|
|
|
24,872
|
|
December 2012
|
|
|
12,000
|
|
|
$
|
4.20
|
|
|
|
87,128
|
|
|
|
12,872
|
|
February 2013
|
|
|
12,872
|
|
|
$
|
4.23
|
|
|
|
100,000
|
|
|
|
0
|
|
Total
|
|
|
48,467
|
|
|
$
|
4.66
|
|
|
|
100,000
|
|
|
|
0
|
|
Research and Development:
Research
and development costs are charged to operations as incurred.
Accounts Receivable:
The Company
nets the factored accounts receivable with the corresponding advance from the Factor, with the net amount reflected in the consolidated
balance sheet.
The Company assigns trade receivables on
a pre-approved non-recourse basis to the Factor under the Factoring Agreement on an ongoing basis. Factoring charges recognized
on assignment of receivables are included in selling, general and administrative expenses in the consolidated statements of operations
and amounted to $70,666 and $78,467 for the years ended March 31, 2014 and 2013, respectively. The Agreement for the assignment
of accounts receivable provides for continuation of the program on a revolving basis until terminated by one of the parties to
the Agreement.
Financing Receivables.
In September
2010, the FASB issued, and the Company adopted, an Accounting Standards Update requiring enhanced disclosure of the credit quality
of financing receivables, as defined therein, and the adequacy of allowances for credit losses. Management considers amounts due
from the Company’s factor to be “financing receivables”. Trade accounts receivable, other receivables, and receivables
from our Hong Kong Joint Venture are not considered to be financing receivables.
The Company assigns the majority of its
short-term receivables arising in the ordinary course of business to our factor. At the time a receivable is assigned to our factor
the credit risk associated with the credit worthiness of the debtor is assumed by the factor. The Company continues to bear any
credit risk associated with delivery or warranty issues related to the products sold.
Management assesses the credit risk of
both its trade accounts receivable and its financing receivables based on the specific identification of accounts that have exceeded
credit terms. An allowance for uncollectible receivables is provided based on that assessment. Changes in the allowance account
from one accounting period to the next are charged to operations in the period the change is determined. Amounts ultimately determined
to be uncollectible are eliminated from the receivable accounts and from the allowance account in the period that the receivables’
status is determined to be uncollectible.
Based on the nature of the factoring agreement
and prior experience, no allowance for uncollectible financing receivables has been provided. At March 31, 2014 and 2013, an allowance
of $57,000 has been provided for uncollectible trade accounts receivable.
Shipping and Handling Fees and Costs:
The Company includes shipping and handling fees billed to customers in net sales. Shipping and handling costs associated with inbound
freight are included in cost of goods sold. Shipping and handling costs associated with outbound freight are included in selling,
general and administrative expenses and totaled $182,668 and $309,533 in fiscal years 2014 and 2013, respectively.
Inventories:
Inventories are stated
at the lower of cost (first in/first out method) or market. Included as a component of finished goods inventory are additional
non-material costs. These costs include overhead costs, freight, import duty and inspection fees of $381,891 and $509,808 at March
31, 2014 and 2013, respectively. We evaluate inventories on a quarterly basis and write down inventory that is considered obsolete
or unmarketable in an amount equal to the difference between the cost of inventory and the estimated market value based upon assumptions
about future demand and market conditions.
Income Taxes:
The Company recognizes
a liability or asset for the deferred tax consequences of temporary differences between the tax basis of assets or liabilities
and their reported amounts in the financial statements. These temporary differences may result in taxable or deductible amounts
in future years when the reported amounts of the assets or liabilities are recovered or settled. The deferred tax assets are reviewed
periodically for recoverability and a valuation allowance is provided whenever it is more likely than not that a deferred tax asset
will not be realized. The Company established an initial valuation allowance of $300,000 on its deferred tax assets during the
year ended March 31, 2013 to recognize that certain foreign tax credits expiring in future periods will likely not be realized.
Upon further review of updated projected taxable income and the components of the deferred tax asset in accordance with applicable
accounting guidance at September 30, 2013, it was determined that it is more likely than not that the tax benefits associated with
the remaining components of the deferred tax assets will not be realized. This determination was made based on continued taxable
losses during fiscal 2014, which were not in line with projections, as well as product offering delays which cause uncertainty
as to whether the Company will generate sufficient taxable income to use the deferred tax assets prior to expiration. Accordingly,
a valuation allowance was established to fully offset the value of the deferred tax assets. Our ability to realize the tax benefits
associated with the deferred tax assets depends primarily upon the timing of future taxable income and the expiration dates of
the components of the deferred tax assets. If sufficient future taxable income is generated, we may be able to offset a portion
of future tax expenses.
The Company follows ASC 740-10 that gives
guidance to tax positions related to the recognition and measurement of a tax position taken or expected to be taken in a tax return
and requires that we recognize in our financial statements the impact of a tax position, if that position is more likely than not
to be sustained upon an examination, based on the technical merits of the position. Interest and penalties related to income
tax matters are recorded as income tax expenses. The Company has recorded a long-term liability of $25,000 for an uncertain income
tax position, tax penalties and any imputed interest thereon. See Note F, Income Taxes.
Impairment of long-lived assets
:
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the
asset may not be recoverable. The factors considered in performing this assessment include current operating results, anticipated
future results, the manner in which the asset is used and the effects of obsolescence, demand, competition and other economic factors.
Accordingly, when indicators of impairment are present, the Company evaluates the carrying value of these assets in relation to
the operating performance of the business and future undiscounted cash flows expected to result from the use of these assets. Impairment
losses are recognized when the sum of expected future cash flows is less than the assets’ carrying value, and losses are
determined based upon the excess carrying value of the assets over its fair value. Based on this assessment, no impairment to long-lived
assets resulted for fiscal years ended March 31, 2014 and 2013.
Foreign currency
: The activity and
accounts of the Hong Kong Joint Venture are denominated in Hong Kong dollars and are translated to US dollars in consolidation.
The Company translates the accounts of the Hong Kong Joint Venture at the applicable exchange rate in effect at the year-end date
for balance sheet purposes and at the average exchange rate for the reporting period for statement of operation purposes. Transaction
gains and losses arising from transactions denominated in foreign currencies are included in the results of operations. The Company
currently does not maintain cash in foreign banks to support its operations in Hong Kong.
Net Loss per Share:
Basic net loss
per share is computed by dividing net loss for the period by the weighted average number of common shares outstanding during the
period. Diluted loss per share is computed by dividing net loss for the period by the weighted number of common shares and common
share equivalents outstanding (unless their effect is anti-dilutive) for the period. All common share equivalents are comprised
of stock options. Diluted loss per common share for the years ended March 31, 2014 and 2013 exclude the effect of all stock options,
which totaled 0 and 122,000 at March 31, 2014 and 2013, respectively, as their effect is anti-dilutive. As a result, the weighted
average number of common shares outstanding is identical for the years ended March 31, 2014 and 2013 for both basic and diluted
shares.
|
|
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding for basic loss per share
|
|
|
2,290,010
|
|
|
|
2,311,152
|
|
Shares issued upon assumed exercise of outstanding stock options
|
|
|
-
|
|
|
|
-
|
|
Weighted average number of common and common equivalent shares outstanding for diluted loss per share
|
|
|
2,290,010
|
|
|
|
2,311,152
|
|
Recently Issued Accounting Pronouncements:
Changes to accounting principles generally accepted in the United States of America (US. GAAP) are established by the Financial
Accounting Standards Board (FASB) in the form of accounting standards updated (ASU’s) to the FASB’s Accounting Standards
Codification.
The Company considers the applicability
and impact of all ASU’s. Recently issued ASU’s were evaluated and determined to be either not applicable or are not
expected to have a material impact on our consolidated financial statements.
NOTE B – PROPERTY AND EQUIPMENT
Property and equipment are recorded at
cost, less accumulated depreciation and amortization. Depreciation and amortization are provided by using the straight-line method
for financial reporting purposes and accelerated methods for income tax purposes.
The estimated useful lives for financial
reporting purposes are as follows:
Leasehold improvements
|
-
|
Shorter of term of lease or useful life of asset
|
Machinery and equipment
|
-
|
5 to 10 years
|
Furniture and fixtures
|
-
|
5 to 15 years
|
Computer equipment
|
-
|
5 years
|
Property and equipment consist of the following:
|
|
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
Leasehold improvements
|
|
$
|
166,722
|
|
|
$
|
166,722
|
|
Machinery and equipment
|
|
|
190,400
|
|
|
|
190,400
|
|
Furniture and fixtures
|
|
|
261,292
|
|
|
|
261,344
|
|
Computer equipment
|
|
|
286,528
|
|
|
|
253,096
|
|
|
|
|
904,942
|
|
|
|
871,562
|
|
Less accumulated depreciation
|
|
|
(758,730
|
)
|
|
|
(719,361
|
)
|
|
|
$
|
146,212
|
|
|
$
|
152,201
|
|
Depreciation and amortization expense totaled $39,471 and $35,830
for fiscal years ended March 31, 2014 and 2013, respectively.
NOTE C - INVESTMENT IN THE HONG KONG
JOINT VENTURE
The Company holds a 50% interest in a Joint
Venture with a Hong Kong Corporation, which has manufacturing facilities in the People’s Republic of China, for the manufacturing
of consumer electronic products. As of March 31, 2014, the Company has an investment balance of $14,144,069 for its 50% interest
in the Hong Kong Joint Venture. There are no material differences between the generally accepted accounting principles (GAAP) used
in the Hong Kong Joint Venture’s accounting policies when compared to US GAAP.
The following represents summarized financial
information derived from the audited financial statements of the Hong Kong Joint Venture as of March 31, 2014 and 2013.
|
|
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
Current assets
|
|
$
|
16,051,441
|
|
|
$
|
14,893,800
|
|
Property and other assets
|
|
|
18,980,665
|
|
|
|
20,036,497
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
35,032,106
|
|
|
$
|
34,930,297
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
$
|
6,763,568
|
|
|
$
|
5,059,232
|
|
Non-current liabilities
|
|
|
-
|
|
|
|
5,769
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
28,268,538
|
|
|
|
29,865,296
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
35,032,106
|
|
|
$
|
34,930,297
|
|
|
|
For the Year Ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
19,054,691
|
|
|
$
|
22,031,665
|
|
Gross profit
|
|
|
4,446,243
|
|
|
|
5,409,968
|
|
Net (loss) income
|
|
|
(437,940
|
)
|
|
|
1,647,461
|
|
During the years ended March 31, 2014 and
2013, the Company purchased $7,407,826 and $9,694,435, respectively, of finished product from the Hong Kong Joint Venture, which
represents 92.4% and 98.5%, respectively, of the Company’s total finished product purchases. Amounts due the Hong Kong Joint
Venture included in Accounts Payable totaled $28,681 and $0 at March 31, 2014 and 2013, respectively. Amounts due from the Hong
Kong Joint Venture included in Accounts Receivable totaled $137,360 and $224,695 at March 31, 2014 and 2013, respectively.
The Company’s investment in the Hong
Kong Joint Venture as recorded on the Company’s Consolidated Balance sheets has been adjusted for the effect of intercompany
profit of the Hong Kong Joint Venture in the ending inventory of the Company.
NOTE D - AMOUNTS DUE FROM FACTOR
The Company assigns certain of its trade
receivables on a pre-approved, non-recourse basis to a Factor. Since these are assigned on a non-recourse basis, the factored trade
receivables and related repayment obligations are not separately recorded in the Company’s consolidated balance sheets. The
Agreement provides for financing of up to a maximum of $1,000,000 with the amount available at any one time based on cash on deposit,
90% of uncollected non-recourse receivables assigned to the factor, and 50% of qualifying inventory. Financing of approximately
$1,000,000 is available at March 31, 2014. Any outstanding amounts due to the factor are payable upon demand and bear interest
at the prime rate of interest charged by the factor, which is 3.25% at March 31, 2014. Any amount due to the factor is also secured
by the Company’s inventory. There were no borrowings outstanding under this agreement at March 31, 2014.
Under this Factoring Agreement, the Company
assigned receivables of $11,370,850 and $12,966,616 during the years ended March 31, 2014 and 2013, respectively. The uncollected
balance of non-recourse receivables held by the factor amounted to $1,397,951 and $2,281,662 at March 31, 2014 and 2013. The amount
of the uncollected balance of non-recourse receivables borrowed by the Company as of March 31, 2014 and 2013 is $0 and $0, respectively.
Collected cash maintained on deposit with the factor earns interest at the factor’s prime rate of interest less two percentage
points (effective rate of 1.25%) at March 31, 2014 and 2013.
NOTE E - LEASES
During January 2009, the Company entered
into an operating lease for its office and warehouse location in Owings Mills, Maryland which expires in March 2019. This lease
is subject to increasing rentals at 3% per year. In June 2009, we amended this lease to include an additional 3,000 square feet
of warehouse. In February 2004, the Company entered into an operating lease for 2,600 square foot office in Naperville, Illinois.
During fiscal 2012, the lease was expanded to approximately 3,400 square feet and the lease was extended to February 2015 with
rentals increasing at 3% per year.
Each of the operating leases for real estate
has renewal options with terms and conditions similar to the original lease. Rent expense, including common area maintenance, totaled
$185,625 and 180,546 for the years ended March 31, 2014 and 2013, respectively.
|
|
2015
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
Remainder
|
|
Future minimum lease payments are as follows:
|
|
|
196,049
|
|
|
|
153,416
|
|
|
$
|
154,931
|
|
|
$
|
159,579
|
|
|
$
|
164,366
|
|
NOTE F – INCOME TAXES
The Company files its income tax returns
in the U.S. federal jurisdiction, and various state jurisdictions. Deferred income tax assets and liabilities are computed and
recognized for those differences that have future tax consequences and will result in net taxable or deductible amounts in future
periods. Deferred tax expense or benefit is the result of changes in the net asset or liability for deferred taxes. The deferred
tax liabilities and assets for the Company result primarily from net operating loss and tax credit carry forwards, reserves and
accrued liabilities.
For the fiscal
years ended March 31, 2014 and 2013, the Company generated net operating loss carryovers of approximately $1,040,000 and $870,000
that the Company may carry-forward to offset future taxable income. The Company generated no foreign tax credits for the years
ended March 31, 2014 and 2013.
At March 31, 2014 and 2013, the Company
has total net operating loss carry forwards of approximately $3,687,000 and $2,351,000, respectively, which begin expiring in various
amounts at dates from 2013 through 2030. There are certain limitations to the use and application of these deferred tax assets.
Management reviews net operating loss carry forwards and income tax credit carry forwards to evaluate if those amounts are recoverable.
Based on historical results and projections of future operations and taxable income, the Company established a full valuation allowance
on its deferred tax asset during the quarter ended September 30, 2013, to recognize that certain foreign tax credits expiring in
future fiscal years will likely not be realized.
The components of income tax expense (benefit)
from continuing operations for the Company are as follows:
|
|
2014
|
|
|
2013
|
|
Current expense
|
|
|
|
|
|
|
|
|
U.S. Federal
|
|
$
|
-
|
|
|
$
|
-
|
|
U.S. State
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Deferred expense
|
|
|
2,310,835
|
|
|
|
53,851
|
|
Total income tax expense
|
|
$
|
2,310,835
|
|
|
$
|
53,851
|
|
The reconciliation between the statutory federal income tax
provision and the actual effective tax provision for continuing operations is as follows:
|
|
Years ended March 31,
|
|
|
|
2014
|
|
|
2013
|
|
Federal tax expense at statutory rate (34%) before loss carry-forward
|
|
$
|
(749,936
|
)
|
|
$
|
(135,562
|
)
|
Non-repatriated earnings of Hong Kong Joint Venture
|
|
|
218,452
|
|
|
|
(151,868
|
)
|
Permanent differences
|
|
|
26,281
|
|
|
|
8,301
|
|
State income tax expense – net of federal effect
|
|
|
(50,658
|
)
|
|
|
-
|
|
True-up adjustments and allowance
|
|
|
2,866,696
|
|
|
|
332,980
|
|
Income tax expense
|
|
$
|
2,310,835
|
|
|
$
|
53,851
|
|
The individual components of the Company’s deferred tax
assets are as follows:
|
|
March 31,
|
|
|
|
2014
|
|
|
2013
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Financial statement accruals and allowances
|
|
$
|
63,321
|
|
|
$
|
106,398
|
|
Inventory uniform capitalization
|
|
|
45,885
|
|
|
|
38,247
|
|
Net operating loss carry forward
|
|
|
1,433,185
|
|
|
|
881,603
|
|
Foreign tax credit carry forward
|
|
|
1,516,111
|
|
|
|
1,522,886
|
|
Research and development tax credit carry forward
|
|
|
61,701
|
|
|
|
61,701
|
|
Allowance for unrealizable deferred tax assets
|
|
|
(3,120,203
|
)
|
|
|
(300,000
|
)
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
2,310,835
|
|
The Company has adopted ASC 740-10 Accounting
for Income Taxes and recorded a liability for an uncertain income tax position, tax penalties and any imputed interest thereon.
The amount, recorded as a long-term obligation, is $25,000 at March 31, 2014 and 2013.
NOTE G - SHAREHOLDERS’ EQUITY
Stock Repurchase Program
–
In October 2011, the Company announced a stock buyback program and authorized the purchase of up to 100,000 shares of common stock.
The program terminated in February 2013 when the purchase of 100,000 shares of common stock was completed by the Company pursuant
to the program as described in Note A.
Period
|
|
Total
Number
of
Shares
Purchased
|
|
|
Average
Price
Paid
per
Share
|
|
|
Total
Number of
Shares
Purchased
As
Part of
Publicly
Announced
Plans
Or
Programs
|
|
|
Maximum
Number
of
Shares that May
Yet
be Purchased
Under
the Plans or
Programs
|
|
April 2012
|
|
|
11,605
|
|
|
$
|
5.37
|
|
|
|
63,138
|
|
|
|
36,862
|
|
July 2012
|
|
|
11,990
|
|
|
$
|
4.90
|
|
|
|
75,128
|
|
|
|
24,872
|
|
December 2012
|
|
|
12,000
|
|
|
$
|
4.20
|
|
|
|
87,128
|
|
|
|
12,872
|
|
February 2013
|
|
|
12,872
|
|
|
$
|
4.23
|
|
|
|
100,000
|
|
|
|
0
|
|
Total
|
|
|
48,467
|
|
|
$
|
4.66
|
|
|
|
100,000
|
|
|
|
0
|
|
Stock Options
– Under the
terms of the Company’s 2011 Non-Qualified Stock Option Plan, 120,000 shares of common stock were reserved for the granting
of stock options, of which 97,000 were issued on December 13, 2011 at an option price of $5.51 per share. These options expired
on December 14, 2013, with no forfeiture or exercise activity.
In March 2009, 25,000 options were issued
at $3.25 for restricted shares of the Company’s common stock. These options became fully vested after one year and were exercised
on March 14, 2014.
The following tables summarize the status
of stock options at March 31, 2014 and option transactions for the years then ended:
For the Year Ended March 31, 2014:
|
|
Number
of Shares
|
|
|
Weighted Average
Exercise
Price
|
|
Exercised on March 14, 2014 – Grant 1
|
|
|
25,000
|
|
|
|
3.25
|
|
Expired on December 14, 2013 – Grant 2
|
|
|
97,000
|
|
|
|
5.51
|
|
|
|
|
122,000
|
|
|
|
5.05
|
|
Status as of March 31, 2014
|
|
Number of Shares
|
|
Presently exercisable
|
|
|
0
|
|
|
|
|
|
|
Outstanding options by Grant as of March 31, 2013
|
|
|
|
|
Number of options – Grant 1
|
|
|
25,000
|
|
Average exercise price per option
|
|
$
|
3.25
|
|
Exercised
|
|
|
March 14, 2014
|
|
|
|
|
|
|
Number of options – Grant 2
|
|
|
97,000
|
|
Average exercise price per option
|
|
$
|
5.51
|
|
Expired unexercised
|
|
|
December 14, 2013
|
|
The fair value of each stock option was
estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions; no
annual dividends, expected volatility of 57.73%, risk-free interest rate of 0.3% and expected lives of two years used for options
granted in fiscal 2012. The fair value of options granted in fiscal 2012 approximates $170,000. Fifty percent of the options vested
one year after issuance, with the remaining fifty percent vesting twenty-three months after issuance.
NOTE H - COMMITMENTS AND CONTINGENCIES
From time to time, the Company is involved
in various lawsuits and legal matters. It is the opinion of management, based on the advice of legal counsel, that there are no
outstanding material claims outside of the normal course of business.
The Company’s employment agreement with its CEO (the Agreement)
requires the Company to make certain post-employment payments to the CEO in the event of his termination following a change in
control, death, disability or resignation with “Good Reason” under terms of the Agreement. Additionally, the Agreement
requires the Company to make post-employment payments, estimated to be $630,000, should the Company elect not to renew the Agreement.
On July 21, 2014, the Company renewed the Agreement through July 31, 2015.
NOTE I - MAJOR CUSTOMERS
The Company is primarily a distributor
of safety products for use in home and business under both its trade names and private labels for other companies. As described
in Note C, the Company purchased a majority of its products from its 50% owned Hong Kong Joint Venture.
For the fiscal year ended March 31, 2014,
the Company had one customer that represented 13% of the Company’s net sales. For the fiscal year ended March 31, 2013, the
Company had two customers that represented 28.2% of the Company’s net sales.
NOTE J - QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly Results of Operations (Unaudited):
The unaudited quarterly results of operations for fiscal years
2014 and 2013 are summarized as follows:
|
|
Quarter Ended
|
|
|
|
June 30,
|
|
|
September 30,
|
|
|
December 31,
|
|
|
March 31,
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
3,005,669
|
|
|
$
|
3,195,611
|
|
|
$
|
3,738,914
|
|
|
$
|
2,636,933
|
|
Gross profit
|
|
|
749,324
|
|
|
|
809,155
|
|
|
|
1,125,470
|
|
|
|
157,035
|
|
Net income (loss)
|
|
|
(19,530
|
)
|
|
|
(2,559,218
|
)
|
|
|
(367,190
|
)
|
|
|
(1,504,306
|
)
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(0.01
|
)
|
|
|
(1.12
|
)
|
|
|
(0.16
|
)
|
|
|
(0.65
|
)
|
Diluted
|
|
|
(0.01
|
)
|
|
|
(1.12
|
)
|
|
|
(0.16
|
)
|
|
|
(0.65
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
3,059,352
|
|
|
$
|
3,456,813
|
|
|
$
|
4,753,736
|
|
|
$
|
4,113,976
|
|
Gross profit
|
|
|
978,345
|
|
|
|
1,173,332
|
|
|
|
1,027,060
|
|
|
|
1,162,663
|
|
Net income (loss)
|
|
|
(362,598
|
)
|
|
|
(218,193
|
)
|
|
|
23,257
|
|
|
|
104,973
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(0.16
|
)
|
|
|
(0.09
|
)
|
|
|
0.01
|
|
|
|
0.04
|
|
Diluted
|
|
|
(0.16
|
)
|
|
|
(0.09
|
)
|
|
|
0.01
|
|
|
|
0.04
|
|
NOTE K
– RETIREMENT PLAN
The Company has a retirement savings plan
under Section 401(k) of the Internal Revenue Code. All full-time employees who have completed 12 months of service are eligible
to participate. Employees are permitted to contribute up to the amounts prescribed by law. The Company may provide contributions
to the plan consisting of a matching amount equal to a percentage of the employee’s contribution, not to exceed four percent
(4%). Employer contributions were $59,027 and $60,136 for the years ended March 31, 2014 and 2013, respectively.
NOTE L – INTANGIBLE ASSETS
Intangible assets consist of legal expenses
of $89,434 incurred in obtaining and perfecting patents on newly developed detector technology and are capitalized for financial
statement purposes. Upon issuance, patents are amortized over twenty years on a straight-line basis. Amortization expense for the
fiscal year ended March 31, 2014 and 2013 was $4,472 and $4,472, respectively. Accumulated amortization at March 31, 2014 was $13,415.
The estimated useful lives for financial
reporting purposes are as follows:
|
Intangible patent costs
|
-
|
20 years
|
SCHEDULE II
UNIVERSAL SECURITY INSTRUMENTS, INC.
AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED MARCH 31, 2014 AND 2013
|
|
Balance
at
beginning
of
year
|
|
|
Charged
to cost
and
expenses
|
|
|
Deductions
|
|
|
Balance
at
end
of year
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
57,012
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
57,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for doubtful accounts
|
|
$
|
57,012
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
57,012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance for deferred tax asset
|
|
$
|
300,000
|
|
|
$
|
2,769,578
|
|
|
$
|
0
|
|
|
$
|
3,069,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended March 31, 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance for deferred tax asset
|
|
$
|
0
|
|
|
$
|
300,000
|
|
|
$
|
0
|
|
|
$
|
300,000
|
|
Report and Financial Statements
Eyston Company Limited
For the year ended 31 March 2014
Contents
Report of independent registered
public accounting firm
Board of Directors and Shareholders
Eyston Company Limited
We have audited the accompanying consolidated
statement of financial position of Eyston Company Limited (the “Company”) and subsidiaries (collectively, the “Group”)
as of 31 March 2014 and 2013, and the related consolidated statements of profit or loss and other comprehensive income, changes
in equity, and cash flows for each of the two years in the period ended 31 March 2014. These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with
the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.
The Company is not required to have, nor were we engaged to perform the audit of its internal control over financial reporting.
Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial
statements referred to above present fairly, in all material respects, the consolidated financial position of Eyston Company Limited
and subsidiaries as of 31 March 2014 and 2013, and the results of their operations and their cash flows for each of the two years
in the period ended 31 March 2014, in accordance with International Financial Reporting Standards issued by the International Accounting
Standards Board.
Grant Thornton
Beijing, China
July 30, 2014
Consolidated statement of profit or loss and other comprehensive
income
for the year ended 31 March
|
|
Note
|
|
2014
|
|
|
2013
|
|
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
|
Turnover
|
|
5
|
|
|
147,825,376
|
|
|
|
170,914,747
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
|
|
(113,331,639
|
)
|
|
|
(128,948,351
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
34,493,737
|
|
|
|
41,966,396
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
|
|
6
|
|
|
5,290,012
|
|
|
|
7,582,615
|
|
|
|
|
|
|
|
|
|
|
|
|
Administrative expenses
|
|
|
|
|
(41,198,958
|
)
|
|
|
(34,911,101
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/Profit from operations
|
|
|
|
|
(1,415,209
|
)
|
|
|
14,637,910
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs
|
|
7
|
|
|
(42,691
|
)
|
|
|
(62,310
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/Profit before income tax
|
|
8
|
|
|
(1,457,900
|
)
|
|
|
14,575,600
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
9
|
|
|
(1,705,638
|
)
|
|
|
(2,035,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)/Profit for the year
|
|
|
|
|
(3,163,538
|
)
|
|
|
12,539,611
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company
|
|
10
|
|
|
(3,161,175
|
)
|
|
|
12,539,611
|
|
Non-controlling interests
|
|
|
|
|
(2,363
|
)
|
|
|
-
|
|
|
|
|
|
|
(3,163,538
|
)
|
|
|
12,539,611
|
|
Eyston Company Limited
|
JV-
2
|
Consolidated statement of profit or loss and other comprehensive
income (Continued)
for the year ended 31 March
|
|
Note
|
|
2014
|
|
|
2013
|
|
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
|
(Loss)/Profit for the year
|
|
|
|
|
(3,163,538
|
)
|
|
|
12,539,611
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (expense)/income
|
|
|
|
|
|
|
|
|
|
|
Items that may be reclassified subsequently to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
Changes in fair value of available-for-sale financial assets
|
|
|
|
|
(2,199,389
|
)
|
|
|
1,262,673
|
|
Exchange differences arising on translation of financial statements of subsidiaries
|
|
|
|
|
(693,640
|
)
|
|
|
3,296,610
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (expense)/income for the year
|
|
|
|
|
(2,893,029
|
)
|
|
|
4,559,283
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive (expense)/income for the year
|
|
|
|
|
(6,056,567
|
)
|
|
|
17,098,894
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
|
|
|
|
|
Owners of the Company
|
|
|
|
|
(6,054,204
|
)
|
|
|
17,098,894
|
|
Non-controlling interests
|
|
|
|
|
(2,363
|
)
|
|
|
-
|
|
|
|
|
|
|
(6,056,567
|
)
|
|
|
17,098,894
|
|
Eyston Company Limited
|
JV-
3
|
Consolidated statement of financial position
as at 31 March
|
|
Note
|
|
2014
|
|
|
2013
|
|
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
|
ASSETS AND LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
12
|
|
|
63,909,024
|
|
|
|
67,424,864
|
|
Advanced lease payments
|
|
13
|
|
|
13,366,053
|
|
|
|
13,688,797
|
|
Available-for-sale financial assets
|
|
14
|
|
|
69,279,875
|
|
|
|
73,879,426
|
|
Goodwill
|
|
16
|
|
|
-
|
|
|
|
-
|
|
Pledged bank balances
|
|
20
|
|
|
569,775
|
|
|
|
569,775
|
|
Deferred tax assets
|
|
23
|
|
|
145,541
|
|
|
|
-
|
|
|
|
|
|
|
147,270,268
|
|
|
|
155,562,862
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
17
|
|
|
30,315,106
|
|
|
|
30,966,590
|
|
Available-for-sale financial assets
|
|
14
|
|
|
19,795,854
|
|
|
|
9,304,850
|
|
Trade and other receivables
|
|
18
|
|
|
8,929,262
|
|
|
|
8,017,892
|
|
Amount due from a shareholder
|
|
21
|
|
|
-
|
|
|
|
1,674,324
|
|
Amount due from a related company
|
|
21
|
|
|
1,700
|
|
|
|
220,000
|
|
Tax recoverable
|
|
|
|
|
684,084
|
|
|
|
888,798
|
|
Cash and cash equivalents
|
|
20
|
|
|
64,802,204
|
|
|
|
64,562,641
|
|
|
|
|
|
|
124,528,210
|
|
|
|
115,635,095
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
|
|
32,159,301
|
|
|
|
32,509,201
|
|
Amount due to a related company
|
|
21
|
|
|
587,364
|
|
|
|
629,567
|
|
Amount due to a shareholder
|
|
21
|
|
|
2,428,017
|
|
|
|
-
|
|
Amounts due to non-controlling interests
|
|
21
|
|
|
10,799,982
|
|
|
|
-
|
|
Loans from shareholders
|
|
22
|
|
|
2,868,954
|
|
|
|
2,868,954
|
|
Provision for taxation
|
|
|
|
|
3,631,890
|
|
|
|
3,272,030
|
|
|
|
|
|
|
52,475,508
|
|
|
|
39,279,752
|
|
Net current assets
|
|
|
|
|
72,052,702
|
|
|
|
76,355,343
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
23
|
|
|
-
|
|
|
|
44,794
|
|
Net assets
|
|
|
|
|
219,322,970
|
|
|
|
231,873,411
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
24
|
|
|
200
|
|
|
|
200
|
|
Reserves
|
|
|
|
|
219,325,115
|
|
|
|
231,873,211
|
|
Equity attributable to owners of the Company
|
|
|
|
|
219,325,315
|
|
|
|
231,873,411
|
|
Non-controlling interests
|
|
|
|
|
(2,345
|
)
|
|
|
-
|
|
Total equity
|
|
|
|
|
219,322,970
|
|
|
|
231,873,411
|
|
Eyston Company Limited
|
JV-
4
|
Statement of financial position
as at 31 March
|
|
Note
|
|
2014
|
|
|
2013
|
|
|
|
|
|
HK$
|
|
|
HK$
|
|
ASSETS AND LIABILITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
12
|
|
|
2,139,041
|
|
|
|
2,058,630
|
|
Available-for-sale financial assets
|
|
14
|
|
|
69,279,875
|
|
|
|
73,879,426
|
|
Interests in subsidiaries
|
|
15
|
|
|
155,957,818
|
|
|
|
155,957,816
|
|
Pledged bank balances
|
|
20
|
|
|
569,775
|
|
|
|
569,775
|
|
Deferred tax assets
|
|
|
|
|
145,541
|
|
|
|
|
|
|
|
|
|
|
228,092,050
|
|
|
|
232,465,647
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
17
|
|
|
15,616,096
|
|
|
|
17,578,905
|
|
Available-for-sale financial assets
|
|
14
|
|
|
19,795,854
|
|
|
|
9,304,850
|
|
Other receivables
|
|
|
|
|
1,615,392
|
|
|
|
1,550,219
|
|
Amounts due from subsidiaries
|
|
19
|
|
|
25,297,050
|
|
|
|
18,282,437
|
|
Amount due from a related company
|
|
21
|
|
|
1,700
|
|
|
|
220,000
|
|
Tax recoverable
|
|
|
|
|
684,084
|
|
|
|
888,798
|
|
Cash and cash equivalents
|
|
20
|
|
|
21,661,495
|
|
|
|
39,877,025
|
|
|
|
|
|
|
84,671,671
|
|
|
|
87,702,234
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
|
|
9,968,640
|
|
|
|
12,855,609
|
|
Amount due to a subsidiary
|
|
19
|
|
|
1,286,087
|
|
|
|
-
|
|
Amount due to a related company
|
|
21
|
|
|
587,364
|
|
|
|
629,567
|
|
Loans from shareholders
|
|
22
|
|
|
2,868,953
|
|
|
|
2,868,954
|
|
|
|
|
|
|
14,711,044
|
|
|
|
16,354,130
|
|
Net current assets
|
|
|
|
|
69,960,627
|
|
|
|
71,348,104
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities
|
|
23
|
|
|
-
|
|
|
|
44,794
|
|
Net assets
|
|
|
|
|
298,052,677
|
|
|
|
303,768,957
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
24
|
|
|
200
|
|
|
|
200
|
|
Reserves
|
|
25
|
|
|
298,052,477
|
|
|
|
303,768,757
|
|
|
|
|
|
|
298,052,677
|
|
|
|
303,768,957
|
|
Eyston Company Limited
|
JV-
5
|
Consolidated statement of changes in equity
for the year ended 31 March
|
|
Attributable to owners of the Company
|
|
|
|
|
|
|
|
|
|
Share
Capital
|
|
|
Exchange
reserve
|
|
|
Fair value
Reserve
|
|
|
Retained
profits
|
|
|
Total
|
|
|
Non-
controlling
Interests
|
|
|
Total
equity
|
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
1 April 2012
|
|
|
200
|
|
|
|
14,922,284
|
|
|
|
1,903,845
|
|
|
|
202,256,232
|
|
|
|
219,082,561
|
|
|
|
-
|
|
|
|
219,082,561
|
|
Dividends
declared (note 11)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,308,044
|
)
|
|
|
(4,308,044
|
)
|
|
|
-
|
|
|
|
(4,308,044
|
)
|
Transaction
with owners
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(4,308,044
|
)
|
|
|
(4,308,044
|
)
|
|
|
-
|
|
|
|
(4,308,044
|
)
|
Profit for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
12,539,611
|
|
|
|
12,539,611
|
|
|
|
-
|
|
|
|
12,539,611
|
|
Other comprehensive
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of available-for-sale
financial assets
|
|
|
-
|
|
|
|
-
|
|
|
|
1,262,673
|
|
|
|
-
|
|
|
|
1,262,673
|
|
|
|
-
|
|
|
|
1,262,673
|
|
Exchange
differences arising on translation of financial statements of subsidiaries
|
|
|
-
|
|
|
|
3,296,610
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,296,610
|
|
|
|
-
|
|
|
|
3,296,610
|
|
Total
comprehensive income for the year
|
|
|
-
|
|
|
|
3,296,610
|
|
|
|
1,262,673
|
|
|
|
12,539,611
|
|
|
|
17,098,894
|
|
|
|
-
|
|
|
|
17,098,894
|
|
Balance at 31 March 2013
and 1 April 2014
|
|
|
200
|
|
|
|
18,218,894
|
|
|
|
3,166,518
|
|
|
|
210,487,799
|
|
|
|
231,873,411
|
|
|
|
-
|
|
|
|
231,873,411
|
|
Dividends
declared (note 11)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,493,892
|
)
|
|
|
(6,493,892
|
)
|
|
|
-
|
|
|
|
(6,493,892
|
)
|
Transaction
with owners
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(6,493,892
|
)
|
|
|
(6,493,892
|
)
|
|
|
-
|
|
|
|
(6,493,892
|
)
|
Loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,161,175
|
)
|
|
|
(3,161,175
|
)
|
|
|
(2,363
|
)
|
|
|
(3,163,538
|
)
|
Other comprehensive
expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of available-for-sale
financial assets
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,199,389
|
)
|
|
|
-
|
|
|
|
(2,199,389
|
)
|
|
|
-
|
|
|
|
(2,199,389
|
)
|
Exchange
differences arising on translation of financial statements of subsidiaries
|
|
|
-
|
|
|
|
(693,640
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(693,640
|
)
|
|
|
-
|
|
|
|
(693,640
|
)
|
Total comprehensive expense
for the year
|
|
|
-
|
|
|
|
(693,640
|
)
|
|
|
(2,199,389
|
)
|
|
|
(3,161,175
|
)
|
|
|
(6,054,204
|
)
|
|
|
(2,363
|
)
|
|
|
(6,056,567
|
)
|
Contribution
from non-controlling interests
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
18
|
|
|
|
18
|
|
Balance at 31 March 2014
|
|
|
200
|
|
|
|
17,525,254
|
*
|
|
|
967,129
|
*
|
|
|
200,832,732
|
*
|
|
|
219,325,315
|
|
|
|
(2,345
|
)
|
|
|
219,322,970
|
|
|
*
|
These reserve accounts comprise the consolidated
reserves of HK
$
219,322,970 (2013: HK
$
231,873,211)
in the consolidated statement of financial position.
|
Eyston Company Limited
|
JV-
6
|
Consolidated statement of cash flows
for the year ended 31 March
|
|
Note
|
|
2014
|
|
|
2013
|
|
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
(Loss)/Profit before income tax
|
|
|
|
|
(1,457,900
|
)
|
|
|
14,575,600
|
|
Adjustments for :
|
|
|
|
|
|
|
|
|
|
|
Amortisation of advanced lease payments
|
|
|
|
|
322,744
|
|
|
|
322,744
|
|
Depreciation of property, plant and equipment
|
|
|
|
|
5,826,075
|
|
|
|
5,440,036
|
|
Gain on disposal of property, plant and equipment
|
|
|
|
|
(124,877
|
)
|
|
|
-
|
|
Exchange loss on available-for-sale financial assets
|
|
|
|
|
383,371
|
|
|
|
2,001,123
|
|
Loss/(Gain) on disposal of available-for-sale financial assets
|
|
|
|
|
160,388
|
|
|
|
(3,209,283
|
)
|
Provision for impairment on goodwill
|
|
|
|
|
161,136
|
|
|
|
-
|
|
Provision for impairment on other receivables
|
|
|
|
|
-
|
|
|
|
116,869
|
|
Provision for impairment on inventories
|
|
|
|
|
994,727
|
|
|
|
|
|
Interest expenses
|
|
|
|
|
42,691
|
|
|
|
62,310
|
|
Interest income
|
|
|
|
|
(4,009,725
|
)
|
|
|
(3,875,142
|
)
|
Operating profit before working capital changes
|
|
|
|
|
2,298,630
|
|
|
|
15,434,257
|
|
Decrease/(Increase) in amount due from a shareholder
|
|
|
|
|
4,102,341
|
|
|
|
(2,824,488
|
)
|
Increase/(Decrease) in inventories
|
|
|
|
|
(343,243
|
)
|
|
|
(650,549
|
)
|
(Increase)/Decrease in trade and other receivables
|
|
|
|
|
(23,796,619
|
)
|
|
|
6,098,190
|
|
Decrease/(Increase) in amount due from a related company
|
|
|
|
|
218,300
|
|
|
|
(220,000
|
)
|
Decrease in amount due to a related company
|
|
|
|
|
(146,786
|
)
|
|
|
(1,497,361
|
)
|
Increase in amounts due to non-controlling interests
|
|
|
|
|
10,799,982
|
|
|
|
-
|
|
(Decrease)/Increase in trade and other payables
|
|
|
|
|
(349,883
|
)
|
|
|
6,338,960
|
|
Cash (used in)/generated from operations
|
|
|
|
|
(7,217,278
|
)
|
|
|
22,679,009
|
|
Interest received
|
|
|
|
|
3,114,244
|
|
|
|
2,855,060
|
|
Interest paid
|
|
|
|
|
(42,691
|
)
|
|
|
(62,310
|
)
|
Dividend paid
|
|
|
|
|
(6,493,892
|
)
|
|
|
(2,154,022
|
)
|
Income tax paid
|
|
|
|
|
(1,331,398
|
)
|
|
|
(2,055,537
|
)
|
Net cash (used in)/generated from operating activities
|
|
|
|
|
(11,971,015
|
)
|
|
|
21,262,200
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
Deposit paid for acquisition of property, plant and equipment
|
|
|
|
|
(228,471
|
)
|
|
|
(959,637
|
)
|
Purchase of property, plant and equipment
|
|
|
|
|
(2,329,741
|
)
|
|
|
(11,553,071
|
)
|
Purchase of available-for-sale financial assets
|
|
|
|
|
(17,877,600
|
)
|
|
|
(30,546,345
|
)
|
Net cash inflow arising from acquisition of subsidiaries
|
|
31
|
|
|
23,952,649
|
|
|
|
-
|
|
Proceeds from disposal of property, plant and equipment
|
|
|
|
|
144,383
|
|
|
|
-
|
|
Proceeds from disposal of available-for-sale financial assets
|
|
|
|
|
9,243,000
|
|
|
|
17,564,268
|
|
Net cash from/(used in) investing activities
|
|
|
|
|
12,904,220
|
|
|
|
(25,494,785
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash equivalents
|
|
|
|
|
933,205
|
|
|
|
(4,232,585
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of the year
|
|
|
|
|
64,562,641
|
|
|
|
68,417,212
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes, net
|
|
|
|
|
(693,642
|
)
|
|
|
378,014
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of the year
|
|
|
|
|
64,802,204
|
|
|
|
64,562,641
|
|
Eyston Company Limited
|
JV-
7
|
Notes to the consolidated financial statements
for the year ended 31 March
Eyston Company Limited (the “Company”)
is a limited liability company incorporated and domiciled in Hong Kong. The address of the Company’s registered office and
principal place of business is B2, 3/F, Fortune Factory Building, 40 Lee Chung Street, Chai Wan, Hong Kong.
The principal activities of the
Company and its subsidiaries (together referred to as the “Group”) are manufacturing and trading of consumer electronic
products including smoke, fire and carbon monoxide alarms and other home safety products. Details of the company’s subsidiaries
are set out in note 15 to the financial statements.
The financial statements on page
2 to 50 have been prepared in accordance with International Financial Reporting Standards (“IFRS”) which collective
term includes all applicable individual International Financial Reporting Standards, International Accounting Standards. Amendments
and Interpretations issued by the International Accounting Standards Board (“IASB”).
|
2.
|
FIRST TIME ADOPTION OF IFRS AND ADOPTION
OF NEW OR AMENDED IFRS
|
|
2.1
|
Impact on the first time adoption
of IFRS
|
These consolidated financial statements
of the Group have been prepared in accordance with IFRS. These are the Group’s first financial statements prepared in accordance
with IFRS. The date of transition to IFRS is 1 April 2012.
The Group’s IFRS accounting
policies presented in note 3 have been applied in preparing the consolidated financial statements for the year ended 31 March 2014,
the comparative information and the opening statement of financial position at the date of transition.
Eyston Company Limited
|
JV-
8
|
|
2.
|
FIRST TIME ADOPTION OF IFRS AND ADOPTION
OF NEW OR AMENDED IFRS
|
|
2.1
|
Impact on the first time adoption
of IFRS
|
The Group has applied IFRS 1
First-time
Adoption of International Financial Reporting Standards
in preparing these first IFRS consolidated financial statements. The
management of the Company evaluated that there is no effect of the transition to IFRS on equity, total comprehensive income and
reported cash flows because the Group’s consolidated financial statements presented in prior years were prepared under Hong
Kong Financial Reporting Standards (“HKFRS”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”)
where HKFRS have been fully converged with IFRS for annual reporting periods commencing from 1 January 2005.
|
2.2
|
Impact of new or amended IFRS
which are issued but not yet effective
|
The following new standards,
amendments and interpretations which have been issued by the IASB and may be relevant to the Group in future years but are not
yet effective for the year ended 31 March 2014:
Effective for the annual
period beginning on 1 April 2014 or after
IFRS
10, IFRS 12 and IAS 27 (2011) Amendment
|
Investment
Entities
|
IAS
32 Amendment
|
Financial
instruments: Presentation - Offsetting Financial Assets and Financial Liabilities
|
IAS
36 Amendment
|
Recoverable
Amount Disclosures for Non-Financial Assets
|
Annual
Improvements Project
|
Annual
Improvements 2010-2012 Cycle
|
Annual
Improvements Project
|
Annual
Improvements 2011-2013 Cycle
|
Effective for the annual period
beginning on 1 April 2015 or after
IFRS
9
|
Financial
instruments
|
The above standards, amendments
and interpretations, if they are relevant to the Group, will be adopted in the annual periods listed. The Group is in the process
of making an assessment of the impact of the above standards, amendments and interpretations but is not yet in the position to
ascertain their impact on its results of operations and financial position.
Eyston Company Limited
|
JV-
9
|
|
3.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
|
The significant accounting policies
that have been used in the preparation of these consolidated financial statements are summarised below. These policies have been
consistently applied to all the years presented unless otherwise stated.
The financial statements have
been prepared on the historical cost basis except for financial instruments classified as available-for-sale which are stated at
fair values. The measurement bases are fully described in the accounting policies below.
It should be noted that accounting
estimates and assumptions are used in preparation of the financial statements. Although these estimates are based on management’s
best knowledge and judgment of current events and actions, actual results may ultimately differ from those estimates. The areas
involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial
statements are disclosed in note 4 to the financial statements.
|
3.2
|
Basis of consolidation
|
The consolidated financial statements
incorporate the financial statements of the company and its subsidiaries made up to 31 March each year.
Subsidiaries are all entities
(including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or
has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power
over the entity when assessing whether the Group has power, only substantive rights are considered. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. They are excluded from consolidation from the date that control ceases.
Intra-group transactions, balances
and unrealised gains on transactions between group companies are eliminated in preparing the consolidated financial statements.
Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment
from the Group’s perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary
to ensure consistency with the accounting policies adopted by the Group.
In the Company’s statement
of financial position, subsidiaries are carried at cost less any impairment loss unless the subsidiary is held for sale or included
in a disposal group. The results of the subsidiaries are accounted for by the Company on the basis of dividends received and receivable
at the end of the reporting period. All dividends whether received out of the investee’s pre or post-acquisition profits
are recognised in the Company’s profit or loss.
Eyston Company Limited
|
JV-
10
|
|
3.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
|
|
3.3
|
Foreign currency translation (Continued)
|
The
consolidated financial statements are presented in Hong Kong Dollars (HK
$
),
which is also the functional currency of the Company.
In the individual financial statements
of the consolidated entities, foreign currency transactions are translated into the functional currency of the individual entity
using the exchange rates prevailing at the dates of the transactions. At the end of the reporting period, monetary assets and liabilities
denominated in foreign currencies are translated at the foreign exchange rates ruling at that date. Foreign exchange gains and
losses resulting from the settlement of such transactions and from the reporting date retranslation of monetary assets and liabilities
are recognised in profit or loss.
Non-monetary items are carried
at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value
was determined and are reported as part of the fair value gain or loss. Non-monetary items that are measured in terms of historical
cost in a foreign currency are not re-translated.
In the consolidated financial
statements, all individual financial statements of foreign operations, originally presented in a currency different from the Group’s
presentation currency, have been converted into Hong Kong dollars. Assets and liabilities have been translated into Hong Kong dollars
at the closing rate at the end of the reporting period. Income and expenses have been converted into Hong Kong dollars at the exchange
rates ruling at the transaction dates, or at the average rates over the reporting period, provided that the exchange rates do not
fluctuate significantly. Any differences arising from this procedure have been recognised in other comprehensive income and accumulated
separately in the translation reserve in equity.
On the disposal of a foreign operation
(i.e. a disposal of the group’s entire interest in a foreign operation, or a disposal involving loss of control over a subsidiary
that includes a foreign operation, loss of joint control over a jointly controlled entity that includes a foreign operation, or
loss of significant influence over an associate that includes a foreign operation), all of the accumulated exchange differences
in respect of that operation attributable to the Group are reclassified to profit or loss.
Eyston Company Limited
|
JV-
11
|
|
3.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
|
Acquisitions of businesses are
accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value,
which is calculated as the sum of the acquisition-date fair values of assets transferred by the Group, liabilities incurred by
the Group to former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree.
Acquisition-related costs are recognised in profit or loss as incurred.
Identifiable assets acquired
and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the
acquisition date. Subsequent adjustments to the consideration are recognised against the cost of acquisition within the measurement
period which does not exceed one year from the acquisition date. Subsequent accounting for changes in fair values of the contingent
consideration that do not qualify as measurement period adjustments is included in the profit or loss or within equity for contingent
consideration classified as an asset/liability and equity respectively.
Goodwill is measured as the
excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value
of the acquirer’s previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of
the identifiable assets acquired and the liabilities assumed. If, after assessment, the Group’s interest in the fair value
of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount of any non-controlling
interests in the acquiree and the fair value of the acquirer’s previously held interest in the acquiree (if any), the excess
is recognised immediately in profit or loss as a bargain purchase gain.
Non-controlling interests that
are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event
of liquidation may be initially measured either at fair value or at the non-controlling interests’ proportionate share of
the recognised amounts of the acquiree’s identifiable net assets. The choice of measurement basis is made on a transaction-by-transaction
basis. The Group applies the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s
identifiable net assets to account for all its acquisitions.
Eyston Company Limited
|
JV-
12
|
|
3.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
|
|
3.5
|
Property, plant and equipment
|
Property, plant and equipment
are stated at acquisition cost less accumulated depreciation and accumulated impairment losses.
Depreciation is provided to write
off the cost of property, plant and equipment over their estimated useful lives, using the straight-line method, at the following
rates per annum:
Buildings
|
5% or where shorter over 16 - 19 years
|
Leasehold improvements
|
Shorter of 20% or term of the lease
|
Plant and machinery
|
20%
|
Furniture and fixtures
|
20%
|
Motor vehicles
|
20%
|
Computer equipment and software
|
50%
|
Construction in progress represents
costs incurred in the construction of buildings. These costs are not depreciated until such time as the relevant assets are completed
and put into use, at which time the relevant costs are transferred to the appropriate category of property, plant and equipment.
The assets’ residual values,
depreciation methods and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.
The gain or loss arising on the
retirement or disposal is determined as the difference between the sales proceeds and the carrying amount of the assets and is
recognised in profit or loss.
Subsequent costs are included
in the assets’ carrying amounts or recognised as separate assets, as appropriate, only when it is probable that future economic
benefits associated with the items will flow to the Group and the cost of the items can be measured reliably. All other costs,
such as repairs and maintenance, are charged to profit or loss during the period in which they are incurred.
|
3.6
|
Leasehold land and land use
rights
|
When a lease includes both land
and building elements, the Group assesses the classification of each element as a finance or an operating lease separately based
on the assessment as to whether substantively all the risks and rewards incidental to ownership of each element have been transferred
to the Group. Specially, the minimum lease payments (including any lump-sum upfront payments) are allocated between the land and
the building elements in proportion to the relative fair values of the leasehold interests in the land element and building element
of the lease at the inception of the lease. When the lease payments cannot be allocated reliably between the land and building
elements, the entire lease is generally classified as a finance lease and accounted for as property, plant and equipment.
Eyston Company Limited
|
JV-
13
|
|
3.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
|
|
3.6
|
Leasehold land and land use
rights (Continued)
|
To the extent the allocation of
the lease payments can be made reliably, interest in leasehold land that is accounted for as an operating lease is presented as
“advanced lease payments” in the consolidated statement of financial position and is stated at cost less accumulated
amortisation and any accumulated impairment losses. Amortisation is calculated on a straight line basis over the term of the lease/right
of use except where an alternative basis is more representative of the time pattern of benefits to be derived by the Group from
use of the land.
Goodwill
arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see note
3.4) less accumulated impairment losses, if any.
For the
purposes of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating
units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated
is tested for impairment annually, or more frequently when there is indication that the unit may be impaired. If the recoverable
amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying
amount of any goodwill allocated to the unit and then to the other assets of the unit on a pro-rata basis based on the carrying
amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss
recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating
unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
Inventories are stated at the
lower of cost and net realisable value. Cost is determined using first-in, first-out method and, in case of work in progress and
finished goods, comprises direct materials, direct labour and an appropriate proportion of overheads. Net realisable value is the
estimated selling price in the ordinary course of business less estimated cost of completion and applicable selling expenses.
Eyston Company Limited
|
JV-
14
|
|
3.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
|
Classification of financial
assets
Financial assets of the Group
are classified into the following categories: (i) loans and receivables, and (ii) available-for-sale financial assets.
Management determines the classification
of its financial assets at initial recognition depending on the purpose for which the financial assets were acquired and, where
allowed and appropriate, re-evaluates this designation at the end of every reporting period.
|
(i)
|
Loans and receivables
|
Loans and receivables are non-derivative
financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are subsequently
measured at amortised cost using the effective interest method, less any impairment losses. Amortised cost is calculated taking
into account any discount or premium on acquisition and includes fees that are an integral part of the effective interest rate
and transaction cost.
|
(ii)
|
Available-for-sale financial assets
|
Available-for-sale financial assets
include non-derivative financial assets that do not qualify for inclusion in any of the other categories of financial assets. All
financial assets within this category are subsequently measured at fair value. Gain or loss arising from a change in the fair value
excluding any dividend and interest income is recognised in other comprehensive income and accumulated separately in the fair value
reserve in equity, except for impairment losses and foreign exchange gains and losses on monetary assets, until the financial asset
is derecognised, at which time the cumulative gain or loss previously recognised in equity would be recycled to profit or loss.
Upon disposal, the cumulative gain or loss previously recognised in equity is transferred to profit or loss. Interest calculated
using the effective interest method is recognised in profit or loss.
The fair value of available-for-sale
monetary assets denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the
end of the reporting period. The change in fair value attributable to translation differences that result from a change in amortised
cost of the asset is recognised in profit or loss, and other changes are recognised in other comprehensive income.
Eyston Company Limited
|
JV-
15
|
|
3.
|
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES (Continued)
|
|
3.9
|
Financial assets (Continued)
|
Recognition and derecognition
of financial assets
All financial assets are recognised
when, any only when, the Group becomes a party to the contractual provisions of the instrument. Regular way purchases of financial
assets are recognised on trade date. When financial assets are recognised initially, they are measured at fair value, plus, in
the case of investments not at fair value through profit or loss, directly attributable transaction costs.
Derecognition of financial assets
occurs when the rights to receive cash flows from the financial assets expire or are transferred and substantially all of the risks
and rewards of ownership have been transferred. At the end of each of the reporting period, financial assets are reviewed to assess
whether there is objective evidence of impairment. If any such evidence exists, impairment loss is determined and recognised based
on the classification of the financial asset.
Impairment of financial
assets
At the end of each reporting period,
financial assets other than at fair value through profit or loss are reviewed to determine whether there is any objective evidence
of impairment.
Objective evidence of impairment
of individual financial assets includes observable data that comes to the attention of the Group about one or more of the following
loss events:
|
-
|
significant financial difficulty of the debtor;
|
|
-
|
a breach of contract, such as a default or delinquency in interest or principal payments;
|
|
-
|
it becoming probable that the debtor will enter bankruptcy or other financial reorganisation;
|
|
-
|
significant changes in the technological, market, economic or legal environment that have an adverse
effect on the debtor;
|
|
-
|
the disappearance of an active market for that financial asset because of financial difficulties;
and
|
|
-
|
a significant or prolonged decline in the fair value of an investment in an equity instrument below
its cost.
|
Loss events in respect of a group
of financial assets include observable data indicating that there is a measurable decrease in the estimated future cash flows from
the group of financial assets. Such observable data includes but not limited to adverse changes in the payment status of debtors
in the Group and, national or local economic conditions that correlate with defaults on the assets in the Group.
Eyston Company Limited
|
JV-
16
|
|
3.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
3.9
|
Financial assets (Continued)
|
Impairment of financial
assets (Continued)
If any such evidence exists, the
impairment loss is measured and recognised as follows:
|
(i)
|
Loans and receivables
|
If there is objective evidence
that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured
as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future
credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the
effective interest rate computed at initial recognition). The amount of the loss is recognised in profit or loss of the period
in which the impairment occurs.
If, in a subsequent period, the
amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment
was recognised, the previously recognised impairment loss is reversed to the extent that it does not result in a carrying amount
of the financial asset exceeding what the amortised cost would have been had the impairment not been recognised at the date the
impairment is reversed. The amount of the reversal is recognised in profit or loss of the period in which the reversal occurs.
|
(ii)
|
Available-for-sale financial assets
|
When a decline in the fair value
of an available-for-sale financial asset has been recognised in other comprehensive income and accumulated in equity and there
is objective evidence that the asset is impaired, an amount is removed from equity and recognised in profit or loss as impairment
loss. That amount is measured as the difference between the asset’s acquisition cost (net of any principal repayment and
amortisation) and current fair value, less any impairment loss on that asset previously recognised in profit or loss.
Reversals in respect of investment
in equity instruments classified as available-for-sale and stated at fair value are not recognised in profit or loss. The subsequent
increase in fair value is recognised in other comprehensive income. Impairment losses in respect of debt securities are reversed
if the subsequent increase in fair value can be objectively related to an event occurring after the impairment loss were recognised.
Reversal of impairment losses in such circumstances are recognised in profit or loss.
Eyston Company Limited
|
JV-
17
|
|
3.
|
SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
3.9
|
Financial assets (Continued)
|
Financial assets other than
trade receivables that are stated at amortised cost, impairment losses are written off against the corresponding assets directly.
Where the recovery of trade receivables is considered doubtful but not remote, the impairment losses for doubtful receivables are
recorded using an allowance account. When the Group is satisfied that recovery of trade receivables is remote, the amount considered
irrecoverable is written off against trade receivables directly and any amounts held in the allowance account in respect of that
receivable are reversed. Subsequent recoveries of amounts previously charged to the allowance account are reversed against the
allowance account. Other changes in the allowance account and subsequent recoveries of amounts previously written off directly
are recognised in profit or loss.
|
3.10
|
Cash and cash equivalents
|
Cash and cash equivalents include
cash at bank and in hand, demand deposits with bank or financial institutions and short-terms highly liquid investments with original
maturities of three months or less that are readily convertible into known amounts of cash and which are subject to an insignificant
risk of changes in value.
|
3.11
|
Impairment of non-financial assets
other than goodwill
|
The Group’s property, plant
and equipment, advanced lease payments and the Company’s investments in subsidiaries are subject to impairment testing.
The assets are tested for impairment
whenever there are indications that the asset’s carrying amount may not be recoverable.
An impairment loss is recognised
as an expense immediately for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects the current market
assessment of the time value of money and the risk specific to the asset.
For the purposes of assessing
impairment, where an asset does not generate cash inflows largely independent from those from other assets, the recoverable amount
is determined for the smallest group of assets that generate cash inflow independently (i.e. cash-generating units). As a result,
some assets are tested individually for impairment and some are tested at the cash-generating unit level.
Impairment losses is charged pro
rata to the assets in the cash generating unit, except that the carrying value of an asset will not be reduced below its individual
fair value less cost to sell, or value in use, if determinable.
An impairment loss is reversed
if there has been a favourable change in the estimates used to determine the asset’s recoverable amount and only to the extent
that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation
or amortisation, if no impairment had been recognised.
Eyston Company Limited
|
JV-
18
|
|
3.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
3.12
|
Financial liabilities
|
The Group’s financial liabilities
include trade and other payables, amounts due to a shareholder, a related company and non-controlling interests and loans from
shareholders.
Financial liabilities are recognised
when the Group becomes a party to the contractual agreements of the instrument. All interest related charges are recognised in
accordance with the Group’s accounting policy on borrowing costs (see note 3.15)
A financial liability is derecognised
when the obligation under the liability is discharged or cancelled or expires.
Where an existing financial liability
is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially
modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new
liability, and the difference in the respective carrying amount is recognised in profit or loss.
Trade and other payables
Trade and other payables are recognised
initially at their fair value and subsequently measured at amortised cost, using the effective interest method.
Retirement benefits costs
The
Group operates a defined contribution Mandatory Provident Fund retirement benefits scheme (the “MPF Scheme”) under
the Mandatory Provident Fund Schemes Ordinance, for all of its employees in Hong Kong. The MPF Scheme became effective on 1 December
2000. Contributions are made based on a percentage of the employees’ basic salaries, limited to a maximum of HK
$
1,000
per month (HK
$
1,250 per month from 1 June 2012 onwards), and are
charged to profit or loss as they become payable in accordance with the rules of the MPF Scheme. The assets of the MPF Scheme are
held separately from those of the Company in an independently administered fund. The Company’s employer contributions vest
fully with the employees when contributed into the MPF Scheme. The employees of the Group’s subsidiary which operates in
Mainland China are required to participate in a central pension scheme operated by the local municipal government. The subsidiary
is required to contribute certain percentage of its payroll costs to the central pension scheme. The contributions are charged
to profit or loss as they become payable in accordance with the rules of the central pension scheme.
Contributions are recognised as
an expense in profit or loss as employees render services during the year. The Group’s obligations under these plans are
limited to the fixed percentage contribution payable.
Eyston Company Limited
|
JV-
19
|
|
3.
|
SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
3.13
|
Employee benefits (Continued)
|
Short-term employee benefits
Employee entitlements to annual
leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result
of services rendered by employees up to the end of the reporting period. Non-accumulating compensated absences such as sick leave
and maternity leave are not recognised until the time of leave.
Ordinary shares are classified
as equity. Share capital is determined using the nominal value of shares that have been issued.
Any transaction costs associated
with the issuing of shares are deducted from equity (net of any related income tax benefits) to the extent they are incremental
cost directly attributable to the equity transaction.
Borrowing costs incurred, net
of any investment income earned on the temporary investment of the specific borrowings, for the acquisition, construction or production
of any qualifying asset are capitalised during the period of time that is required to complete and prepare the asset for its intended
use. A qualifying asset is an asset which necessarily takes a substantial period of time to get ready for its intended use or sale.
Other borrowing costs are expensed when incurred.
Borrowing costs are capitalised
as part of the cost of a qualifying asset when expenditure for the asset is being incurred, borrowing costs are being incurred
and activities that are necessary to prepare the asset for its intended use or sale are being undertaken. Capitalisation of borrowing
costs ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use or sale are complete.
Eyston Company Limited
|
JV-
20
|
|
3.
|
SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
3.16
|
Accounting for income taxes
|
Income tax comprises current tax
and deferred tax.
Current income tax assets and/or
liabilities comprise those obligations to, or claims from, tax authorities relating to the current or prior reporting period, that
are unpaid at the end of the reporting period. They are calculated according to the tax rates and tax laws applicable to the periods
to which they relate, based on the taxable profit for the year. All changes to current tax assets or liabilities are recognised
as a component of income tax expense in profit or loss.
Deferred tax is calculated using
the liability method on temporary differences at the end of the reporting period between the carrying amounts of assets and liabilities
in the financial statements and their respective tax bases. Deferred tax liabilities are generally recognised for all taxable temporary
differences. Deferred tax assets are recognised for all deductible temporary differences, tax losses available to be carried forward
as well as other unused tax credits, to the extent that it is probable that taxable profit, including existing taxable temporary
differences, will be available against which the deductible temporary differences, unused tax losses and unused tax credits can
be utilised.
Deferred tax liabilities are recognised
for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal
of the temporary differences and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred tax is calculated, without
discounting, at tax rates that are expected to apply in the period the liability is settled or the asset realised, provided they
are enacted or substantively enacted at the end of the reporting period.
Changes in deferred tax assets
or liabilities are recognised in profit or loss, or in other comprehensive income or directly in equity if they relate to items
that are charged or credited to other comprehensive income or directly in equity.
Eyston Company Limited
|
JV-
21
|
|
3.
|
SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
3.16
|
Accounting for income taxes (Continued)
|
Current tax assets and current
tax liabilities are presented in net if, and only if,
|
(a)
|
the Group has the legally enforceable right to set off the recognised amounts; and
|
|
(b)
|
intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
|
The Group presents deferred
tax assets and deferred tax liabilities in net if, and only if,
|
(a)
|
the entity has a legally enforceable right to set off current tax assets against current tax liabilities;
and
|
|
(b)
|
the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same
taxation authority on either:
|
|
(i)
|
the same taxable entity; or
|
|
(ii)
|
different taxable entities which intend either to settle current tax liabilities and assets on
a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts
of deferred tax liabilities or assets are expected to be settled or recovered.
|
An arrangement, comprising a transaction
or a series of transactions, is or contains a lease if the Group determines that the arrangement conveys a right to use a specific
asset or assets for an agreed period of time in return for a payment or a series of payments. Such a determination is made based
on an evaluation of the substance of the arrangement and is regardless of whether the arrangement takes the legal form of a lease.
|
(i)
|
Classification of assets leased to the Group
|
Assets that are held by the Group
under leases which transfer to the Group substantially all the risks and rewards of ownership are classified as being held under
finance leases. Leases which do not transfer substantially all the risks and rewards of ownership to the Group are classified as
operating leases.
|
(ii)
|
Operating lease charges as the lessee
|
Where the Group has the right
to use of assets held under operating leases, payments made under the leases are charged to profit or loss on a straight-line basis
over the lease terms except where an alternative basis is more representative of the time pattern of benefits to be derived from
the leased assets. Lease incentives received are recognised in profit or loss as an integral part of the aggregate net lease payments
made. Contingent rental are charged to profit or loss in the accounting period in which they are incurred.
Eyston Company Limited
|
JV-
22
|
|
3.
|
SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
Revenue comprises the fair value
of the consideration received or receivables for the sale of goods, rendering of services and the use by others of the Group’s
assets yielding interest, net of rebates and discounts. Provided it is probable that the economic benefits will flow to the Group
and the revenue and costs, if applicable, can be measured reliably, revenue is recognised as follows:
Revenue from the sale of goods
is recognised when the significant risks and rewards of ownership of the goods have been transferred to customers. This is usually
taken as the time when the goods are delivered and the customer has accepted the goods.
Interest income is recognised
on a time proportion basis using the effective interest rate method.
Government grants are recognised
when there is reasonable assurance that they will be received and that the Group will comply with the conditions attaching to them.
Grants that compensate the Group for expenses incurred are recognised as revenue in the profit and loss on a systematic basis in
the same periods in which the expenses are incurred. Grants that compensate the Group for the cost of an asset are deducted from
the carrying amount of the asset and consequently are effectively recognised in profit or loss over the useful life of the asset
by way of reduced depreciation expense.
Government grants that compensate
the Group for expenses incurred are set-off with relevant expenses. Government subsidies relating to income is presented at gross
under “Other income” in the consolidated statement of comprehensive income.
|
(a)
|
For the purposes of these financial statements, a person or a close member of that person’s
family is related to the Group if that person:
|
|
(i)
|
has control or joint control over the Group;
|
|
(ii)
|
has significant influence over the Group; or
|
|
(iii)
|
is a member of the key management personnel of the Group or of a parent of the Group.
|
Close family members of an individual
are those family members who may be expected to influence, or be influenced by, that individual in their dealings with the entity.
Eyston Company Limited
|
JV-
23
|
|
3.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
|
|
3.20
|
Related parties (Continued)
|
|
(b)
|
For the purposes of these financial statements, an entity is related to the Group if any of the
following conditions applies:
|
|
(i)
|
the entity and the Group are members of the same group (which means that each parent, subsidiary
and fellow subsidiary is related to the others);
|
|
(ii)
|
one entity is an associate or joint venture of the other entity (or an associate or joint venture
of a member of a group of which the other entity is a member);
|
|
(iii)
|
both entities are joint ventures of the same third party;
|
|
(iv)
|
one entity is a joint venture of a third entity and the other entity is an associate of the third
entity;
|
|
(v)
|
the entity is a post-employment benefit plan for the benefit of employees of either the Group or
an entity related to the Group;
|
|
(vi)
|
the entity is controlled or jointly controlled by a person identified in (a); or
|
|
(vii)
|
a person identified in (a)(i) has significant influence over the entity or is a member of the key
management personnel of the entity (or of a parent of the entity).
|
|
3.21
|
Provisions and contingent liabilities
|
Provisions are recognised when
the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that an outflow of economic
benefits will be required to settle the obligation and a reliable estimate of the amount of the obligation can be made. Where the
time value of money is material, provisions are stated at the present value of the expenditure expected to settle the obligation.
All provisions are reviewed at
the end of each reporting period and adjusted to reflect the current best estimate.
Where it is not probable that
an outflow of economic benefits will be required, or the amount cannot be estimated reliably, the obligation is disclosed as a
contingent liability, unless the probability of outflow of economic benefits is remote. Possible obligations, whose existence will
only be confirmed by the occurrence or non-occurrence of one or more future uncertain events not wholly within the control of the
Group are also disclosed as contingent liabilities unless the probability of outflow of economic benefits is remote.
Eyston Company Limited
|
JV-
24
|
|
4.
|
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
|
Estimates and judgements are
continually evaluated and are based on historical experience and other factors, including expectations of future events that are
believed to be reasonable under the circumstances.
The Group makes estimates and
assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results.
The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are discussed below:
Depreciation and amortisation
The Group and Company depreciates
the property, plant and equipment on a straight-line basis over the estimated useful lives, starting from the date on which the
assets are placed into productive use. The estimated useful lives reflect the directors’ estimate of the periods that the
Group intends to derive future economic benefits from the use of the Group’s and Company’s property, plant and equipment.
Impairment of receivables
The policy for the impairment
of receivables of the Group is based on the evaluation of collectability and ageing analysis of accounts and on the management’s
judgement. A considerable amount of judgement is required in assessing the ultimate realisation of these receivables, including
the current creditworthiness and the past collection history of each debtor.
Net realisable value of inventories
Net realisable value of inventories
is the actual or estimated selling price in the ordinary course of business, less further costs of completion and the estimated
costs necessary to make the sale. These estimates are based on the current market condition and the historical experience of selling
products of similar nature. It could change significantly as a result of competitor actions in response to changes in market condition.
Management reassesses these estimations at the end of each reporting period.
Impairment on interests in
subsidiaries
The Group determines whether
investments in subsidiaries are impaired whenever there are indications that the investment carrying amount may not be recoverable.
This requires an estimation of the value-in-use of the Cash Generating Units (“CGU”) to which investments in subsidiaries
are allocated. Estimating a value-in-use amount requires management to make an estimation of the expected future cash flows from
the CGU and also to choose a suitable discount rate in order to calculate the present value of those cash flows.
Eyston Company Limited
|
JV-
25
|
|
4.
|
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS (Continued)
|
Current taxation and deferred
taxation
The Group is subject to income
taxes in Hong Kong and the People’s Republic of China (“PRC”). Significant judgement is required in determining
the amount of the provision of taxation and the timing of payment of the related taxations. There are many transactions and calculations
for which the ultimate tax determination is uncertain during the ordinary course of business. Where the final tax outcome of these
matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax
provisions in the period in which such determination is made.
Deferred tax liabilities have
not been recognised in respect of the tax that would be payable on the distribution of these retained profits as the Company controls
the dividend policy of these subsidiaries and it has been determined that it is probable that these profits will not be distributed
in the foreseeable future.
Warranties:
We generally
provide warranties, on the safety products, from one to ten years to the non-commercial end user on all products sold. Claims for
warranty replacement of products beyond the one-year warranty period have not been historically material and we do not record estimated
warranty expense or a contingent liability for warranty claims.
Impairment of goodwill
The Group tests annually whether
goodwill has suffered any impairment in accordance with the accounting policy stated in note 3.7. The Group assessed that it is
more likely than not that CGU's fair value is less than its carrying amount as the development of the acquired companies remains
uncertain. These assumptions relate to future events and circumstances and the actual results may vary and may cause a material
adjustment to the carrying amount
During
the year ended 31 March 2014, the Group has incurred an impairment loss of HK
$
161,136
on goodwill and details are set out in note 16.
Revenue, which is also the Group’s
turnover, represents total invoiced value of goods supplied, less discounts and returns.
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
Gain on disposal of available-for-sale financial assets
|
|
|
-
|
|
|
|
3,209,283
|
|
Gain on disposal of property, plant and equipment
|
|
|
124,877
|
|
|
|
-
|
|
Government grant
|
|
|
609,392
|
|
|
|
-
|
|
Interest income
|
|
|
4,009,725
|
|
|
|
3,875,142
|
|
Others
|
|
|
546,018
|
|
|
|
498,190
|
|
|
|
|
5,290,012
|
|
|
|
7,582,615
|
|
Eyston Company Limited
|
JV-
26
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
|
Interest charges on discounted bills which are wholly repayable within 5 years
|
|
|
42,691
|
|
|
|
62,310
|
|
|
8.
|
(LOSS)/PROFIT BEFORE INCOME TAX
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
(Loss)/Profit before income tax is arrived at after charging/(crediting):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortisation of advanced lease payments
|
|
|
322,744
|
|
|
|
322,744
|
|
Auditors’ remuneration
|
|
|
458,636
|
|
|
|
349,519
|
|
Cost of inventories
|
|
|
113,331,639
|
|
|
|
128,948,351
|
|
Depreciation of property, plant and equipment
|
|
|
5,826,075
|
|
|
|
5,440,036
|
|
Exchange loss, net
|
|
|
1,662,759
|
|
|
|
3,088,104
|
|
Impairment loss recognised in respect of:
|
|
|
|
|
|
|
|
|
- Other receivables
|
|
|
-
|
|
|
|
116,869
|
|
- Goodwill
|
|
|
161,136
|
|
|
|
-
|
|
- Inventories
|
|
|
994,727
|
|
|
|
-
|
|
Loss/(Gain) on disposal of available-for-sale financial assets
|
|
|
160,388
|
|
|
|
(3,209,283
|
)
|
Operating lease charges in respect of land and buildings
|
|
|
3,780,205
|
|
|
|
3,604,861
|
|
Retirement benefits scheme contributions
|
|
|
2,944,867
|
|
|
|
3,727,756
|
|
Staff costs
|
|
|
35,544,055
|
|
|
|
30,828,367
|
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
Hong Kong profits tax
|
|
|
|
|
|
|
|
|
- current year
|
|
|
440,532
|
|
|
|
890,529
|
|
- under/(over)-provision in prior years
|
|
|
600,463
|
|
|
|
(47,393
|
)
|
|
|
|
1,040,995
|
|
|
|
843,136
|
|
|
|
|
|
|
|
|
|
|
PRC Enterprise Income Tax
|
|
|
|
|
|
|
|
|
- current year
|
|
|
737,457
|
|
|
|
1,061,626
|
|
- under provision in prior years
|
|
|
117,521
|
|
|
|
133,126
|
|
|
|
|
854,978
|
|
|
|
1,194,752
|
|
|
|
|
|
|
|
|
|
|
Deferred tax
(Note 23)
|
|
|
|
|
|
|
|
|
- current year
|
|
|
(190,335
|
)
|
|
|
(1,899
|
)
|
|
|
|
1,705,638
|
|
|
|
2,035,989
|
|
Hong Kong profits tax has been
provided at the rate of 16.5% (2013: 16.5%) on the Group’s estimated assessable profits arising in Hong Kong for the year.
The PRC enterprise income tax
(“EIT”) is computed according to the relevant laws and regulations in the PRC. The applicable income tax rate was 25%
for the year (2013: 25%).
Eyston Company Limited
|
JV-
27
|
|
9.
|
INCOME TAX EXPENSE (Continued)
|
Reconciliation between tax expense
and accounting (loss)/profit at applicable tax rates:
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
(Loss)/Profit before income tax
|
|
|
1,457,900
|
|
|
|
14,575,600
|
|
|
|
|
|
|
|
|
|
|
Tax on profit before income tax, calculated at the rates applicable to profits in the tax jurisdictions concerned
|
|
|
(549,301
|
)
|
|
|
2,374,599
|
|
Tax effect of non-deductible expenses
|
|
|
686,018
|
|
|
|
574,809
|
|
Tax effect of non-taxable revenue
|
|
|
(639,113
|
)
|
|
|
(2,001,876
|
)
|
Tax effect on temporary differences not recognised
|
|
|
(175,676
|
)
|
|
|
(39,862
|
)
|
Tax effect on unrecognised tax losses
|
|
|
1,665,726
|
|
|
|
947,232
|
|
Underprovision in prior years
|
|
|
717,984
|
|
|
|
85,733
|
|
Others
|
|
|
-
|
|
|
|
95,354
|
|
Income tax expense
|
|
|
1,705,638
|
|
|
|
2,035,989
|
|
|
10.
|
PROFIT ATTRIBUTABLE TO OWNERS OF
THE COMPANY
|
Of
the consolidated loss attributable to owners of the Company of HK
$
6,054,204
(2013: consolidated profit attributable to equity holders of the Company of HK
$
12,539,611),
profit of HK$2,977,001 and HK
$
13,730,659 in 2014 and 2013 respectively
have been dealt with in the financial statements of the Company.
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
Dividends attributable to the year :
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First interim dividend of HK$980,881 (2013: HK$448,801) per share
|
|
|
1,961,762
|
|
|
|
897,602
|
|
|
|
|
|
|
|
|
|
|
Second interim dividend of HK$1,028,687 (2013: HK$57,995) per share
|
|
|
2,057,374
|
|
|
|
115,989
|
|
|
|
|
|
|
|
|
|
|
Third interim dividend of HK$1,237,378 (2013: HK$1,647,227) per share
|
|
|
2,474,756
|
|
|
|
3,294,453
|
|
|
|
|
6,493,892
|
|
|
|
4,308,044
|
|
Eyston Company Limited
|
JV-
28
|
|
12.
|
PROPERTY, PLANT AND EQUIPMENT
|
Group
|
|
Buildings
|
|
|
Leasehold
improvements
|
|
|
Construction
in progress
|
|
|
Plant and
machinery
|
|
|
Furniture
and fixtures
|
|
|
Motor
vehicles
|
|
|
Computer
equipment
and software
|
|
|
Total
|
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
At 31 March 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
40,510,414
|
|
|
|
10,813,762
|
|
|
|
23,580,025
|
|
|
|
60,206,886
|
|
|
|
6,628,901
|
|
|
|
9,501,779
|
|
|
|
2,273,976
|
|
|
|
153,515,743
|
|
Accumulated depreciation
|
|
|
(18,654,476
|
)
|
|
|
(10,736,957
|
)
|
|
|
-
|
|
|
|
(49,783,321
|
)
|
|
|
(5,758,257
|
)
|
|
|
(7,227,519
|
)
|
|
|
(2,249,500
|
)
|
|
|
(94,410,030
|
)
|
Net book amount
|
|
|
21,855,938
|
|
|
|
76,805
|
|
|
|
23,580,025
|
|
|
|
10,423,565
|
|
|
|
870,644
|
|
|
|
2,274,260
|
|
|
|
24,476
|
|
|
|
59,105,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 March 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book amount
|
|
|
21,855,938
|
|
|
|
76,805
|
|
|
|
23,580,025
|
|
|
|
10,423,565
|
|
|
|
870,644
|
|
|
|
2,274,260
|
|
|
|
24,476
|
|
|
|
59,105,713
|
|
Additions
|
|
|
-
|
|
|
|
-
|
|
|
|
1,247,387
|
|
|
|
9,887,557
|
|
|
|
285,775
|
|
|
|
-
|
|
|
|
132,352
|
|
|
|
11,553,071
|
|
Depreciation
|
|
|
(1,560,669
|
)
|
|
|
(40,021
|
)
|
|
|
-
|
|
|
|
(2,879,699
|
)
|
|
|
(277,155
|
)
|
|
|
(627,930
|
)
|
|
|
(54,562
|
)
|
|
|
(5,440,036
|
)
|
Transfer
|
|
|
-
|
|
|
|
-
|
|
|
|
(95,983
|
)
|
|
|
-
|
|
|
|
95,983
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Exchange difference
|
|
|
909,280
|
|
|
|
-
|
|
|
|
869,197
|
|
|
|
296,335
|
|
|
|
116,040
|
|
|
|
15,024
|
|
|
|
240
|
|
|
|
2,206,116
|
|
Closing net book amount
|
|
|
21,204,549
|
|
|
|
36,784
|
|
|
|
25,600,626
|
|
|
|
17,727,758
|
|
|
|
1,091,287
|
|
|
|
1,661,354
|
|
|
|
102,506
|
|
|
|
67,424,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
42,233,502
|
|
|
|
10,813,762
|
|
|
|
25,600,626
|
|
|
|
70,432,437
|
|
|
|
7,099,680
|
|
|
|
9,683,346
|
|
|
|
2,417,578
|
|
|
|
168,280,931
|
|
Accumulated depreciation
|
|
|
(21,028,953
|
)
|
|
|
(10,776,978
|
)
|
|
|
-
|
|
|
|
(52,704,679
|
)
|
|
|
(6,008,393
|
)
|
|
|
(8,021,992
|
)
|
|
|
(2,315,072
|
)
|
|
|
(100,856,067
|
)
|
Net book amount
|
|
|
21,204,549
|
|
|
|
36,784
|
|
|
|
25,600,626
|
|
|
|
17,727,758
|
|
|
|
1,091,287
|
|
|
|
1,661,354
|
|
|
|
102,506
|
|
|
|
67,424,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 March 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book amount
|
|
|
21,204,549
|
|
|
|
36,784
|
|
|
|
25,600,626
|
|
|
|
17,727,758
|
|
|
|
1,091,287
|
|
|
|
1,661,354
|
|
|
|
102,506
|
|
|
|
67,424,864
|
|
Additions
|
|
|
-
|
|
|
|
-
|
|
|
|
447,632
|
|
|
|
1,045,798
|
|
|
|
82,261
|
|
|
|
708,964
|
|
|
|
45,086
|
|
|
|
2,329,741
|
|
Transfer
|
|
|
23,248,451
|
|
|
|
-
|
|
|
|
(25,681,555
|
)
|
|
|
1,878,289
|
|
|
|
446,173
|
|
|
|
-
|
|
|
|
108,642
|
|
|
|
-
|
|
Depreciation
|
|
|
(1,686,230
|
)
|
|
|
(15,746
|
)
|
|
|
-
|
|
|
|
(3,088,513
|
)
|
|
|
(335,097
|
)
|
|
|
(613,527
|
)
|
|
|
(86,962
|
)
|
|
|
(5,826,075
|
)
|
Disposal
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(19,506
|
)
|
|
|
-
|
|
|
|
(19,506
|
)
|
Closing net book amount
|
|
|
42,766,770
|
|
|
|
21,038
|
|
|
|
366,703
|
|
|
|
17,563,332
|
|
|
|
1,284,624
|
|
|
|
1,737,285
|
|
|
|
169,272
|
|
|
|
63,909,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
65,481,953
|
|
|
|
10,813,762
|
|
|
|
366,703
|
|
|
|
73,356,524
|
|
|
|
7,628,114
|
|
|
|
9,815,848
|
|
|
|
2,571,306
|
|
|
|
170,034,210
|
|
Accumulated depreciation
|
|
|
(22,715,183
|
)
|
|
|
(10,792,724
|
)
|
|
|
-
|
|
|
|
(55,793,192
|
)
|
|
|
(6,343,490
|
)
|
|
|
(8,078,563
|
)
|
|
|
(2,402,034
|
)
|
|
|
(106,125,186
|
)
|
Net book amount
|
|
|
42,766,770
|
|
|
|
21,038
|
|
|
|
366,703
|
|
|
|
17,563,332
|
|
|
|
1,284,624
|
|
|
|
1,737,285
|
|
|
|
169,272
|
|
|
|
63,909,024
|
|
Group’s interest in the usage of land
held in the PRC are on leases between 10 to 50 years.
Eyston Company Limited
|
JV-
29
|
|
12.
|
PROPERTY,
PLANT AND EQUIPMENT (Continued)
|
Company
|
|
Leasehold
improvements
|
|
|
Plant and
machinery
|
|
|
Furniture
and fixtures
|
|
|
Motor
vehicles
|
|
|
Computer
equipment
and
software
|
|
|
Total
|
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
At 1 April 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
2,782,291
|
|
|
|
14,426,481
|
|
|
|
1,636,190
|
|
|
|
3,283,785
|
|
|
|
1,321,080
|
|
|
|
23,449,827
|
|
Accumulated depreciation
|
|
|
(2,705,485
|
)
|
|
|
(13,515,855
|
)
|
|
|
(1,636,160
|
)
|
|
|
(1,851,850
|
)
|
|
|
(1,321,080
|
)
|
|
|
(21,030,430
|
)
|
Net book amount
|
|
|
76,806
|
|
|
|
910,626
|
|
|
|
30
|
|
|
|
1,431,935
|
|
|
|
-
|
|
|
|
2,419,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 March 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book amount
|
|
|
76,806
|
|
|
|
910,626
|
|
|
|
30
|
|
|
|
1,431,935
|
|
|
|
-
|
|
|
|
2,419,397
|
|
Additions
|
|
|
-
|
|
|
|
342,752
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
342,752
|
|
Depreciation
|
|
|
(40,021
|
)
|
|
|
(354,628
|
)
|
|
|
(30
|
)
|
|
|
(308,840
|
)
|
|
|
-
|
|
|
|
(703,519
|
)
|
Closing net book amount
|
|
|
36,785
|
|
|
|
898,750
|
|
|
|
-
|
|
|
|
1,123,095
|
|
|
|
-
|
|
|
|
2,058,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
2,782,291
|
|
|
|
14,769,233
|
|
|
|
1,632,015
|
|
|
|
3,283,785
|
|
|
|
1,321,080
|
|
|
|
23,788,404
|
|
Accumulated depreciation
|
|
|
(2,745,506
|
)
|
|
|
(13,870,483
|
)
|
|
|
(1,632,015
|
)
|
|
|
(2,160,690
|
)
|
|
|
(1,321,080
|
)
|
|
|
(21,729,774
|
)
|
Net book amount
|
|
|
36,785
|
|
|
|
898,750
|
|
|
|
-
|
|
|
|
1,123,095
|
|
|
|
-
|
|
|
|
2,058,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 31 March 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Opening net book amount
|
|
|
36,785
|
|
|
|
898,749
|
|
|
|
-
|
|
|
|
1,123,095
|
|
|
|
-
|
|
|
|
2,058,629
|
|
Additions
|
|
|
-
|
|
|
|
242,325
|
|
|
|
-
|
|
|
|
534,700
|
|
|
|
-
|
|
|
|
777,025
|
|
Depreciation
|
|
|
(15,746
|
)
|
|
|
(345,296
|
)
|
|
|
-
|
|
|
|
(335,571
|
)
|
|
|
-
|
|
|
|
(696,613
|
)
|
Closing net book amount
|
|
|
21,039
|
|
|
|
795,778
|
|
|
|
-
|
|
|
|
1,322,224
|
|
|
|
-
|
|
|
|
2,139,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
|
|
|
2,782,291
|
|
|
|
15,011,558
|
|
|
|
1,632,015
|
|
|
|
3,818,485
|
|
|
|
1,321,080
|
|
|
|
24,565,429
|
|
Accumulated depreciation
|
|
|
(2,761,252
|
)
|
|
|
(14,215,780
|
)
|
|
|
(1,632,015
|
)
|
|
|
(2,496,261
|
)
|
|
|
(1,321,080
|
)
|
|
|
(22,426,388
|
)
|
Net book amount
|
|
|
21,039
|
|
|
|
795,778
|
|
|
|
-
|
|
|
|
1,322,224
|
|
|
|
-
|
|
|
|
2,139,041
|
|
Eyston Company Limited
|
JV-
30
|
|
13.
|
ADVANCED LEASE PAYMENTS
|
The Group’s advanced lease
payments represent up-front payments to acquire long term interests in the usage of land held in the PRC on leases of between 10
to 50 years. Movement in their net carrying amounts are analysed as follows:
|
|
Group
|
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
Opening net carrying amount
|
|
|
13,688,797
|
|
|
|
13,511,129
|
|
Exchange adjustments
|
|
|
-
|
|
|
|
500,412
|
|
Amortisation
|
|
|
(322,744
|
)
|
|
|
(322,744
|
)
|
Closing net carrying amount
|
|
|
13,366,053
|
|
|
|
13,688,797
|
|
|
14.
|
AVAILABLE-FOR-SALE FINANCIAL ASSETS
|
|
|
Group and Company
|
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
Available-for-sale financial assets :
|
|
|
|
|
|
|
|
|
Listed outside Hong Kong, at market value
|
|
|
89,075,729
|
|
|
|
83,184,276
|
|
Less: Portion included in current assets
|
|
|
(19,795,854
|
)
|
|
|
(9,304,850
|
)
|
Portion included in non-current assets
|
|
|
69,279,875
|
|
|
|
73,879,426
|
|
The fair value of the Group’s
interests in listed equity securities has been measured as described in note 32.
|
15.
|
INTERESTS IN SUBSIDIARIES –
COMPANY
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
Unlisted shares, at cost
|
|
|
156,157,818
|
|
|
|
156,157,816
|
|
Less: Provision for impairment
|
|
|
(200,000
|
)
|
|
|
(200,000
|
)
|
|
|
|
155,957,818
|
|
|
|
155,957,816
|
|
Eyston Company Limited
|
JV-
31
|
|
15.
|
INTERESTS IN SUBSIDIARIES – COMPANY(Continued)
|
Details of the subsidiaries as
at 31 March 2014 are as follows:
Name
|
|
Place
of
incorporation/
establishment
and operations
|
|
Nominal
value
of issued and
fully paid
capital
|
|
Percentage
of issued capital held by the
Company
|
|
|
Principal
activities
|
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
Directly
|
|
|
Indirectly
|
|
|
Directly
|
|
|
Indirectly
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fujian
Taisun Electronics Technologies Co., Ltd.
|
|
The PRC
|
|
US$15,000,000
|
|
|
100
|
%
|
|
|
-
|
|
|
|
100
|
%
|
|
|
-
|
|
|
Manufacture
of consumer electronic products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fujian
Taisun Fire Safety Technologies Co., Ltd.
|
|
The PRC
|
|
US$5,000,000
|
|
|
100
|
%
|
|
|
-
|
|
|
|
100
|
%
|
|
|
-
|
|
|
Manufacture
of consumer electronic products
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sound
Well (Hong Kong) Co. Limited
|
|
Hong Kong
|
|
HK$200,000
|
|
|
100
|
%
|
|
|
-
|
|
|
|
100
|
%
|
|
|
-
|
|
|
Trading
of consumer electronic products and investment holding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kimbager
International Limited
|
|
British Virgin Islands
|
|
US$1
|
|
|
100
|
%
|
|
|
-
|
|
|
|
100
|
%
|
|
|
-
|
|
|
Trading
of machinery and equipment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kimbager Limited
|
|
Hong Kong
|
|
HK$10,000
|
|
|
100
|
%
|
|
|
-
|
|
|
|
100
|
%
|
|
|
-
|
|
|
Dormant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dongguan
Kimbager Electronics Limited
|
|
The PRC
|
|
HK$800,000
(Note (i))
|
|
|
-
|
|
|
|
100
|
%
|
|
|
-
|
|
|
|
100
|
%
|
|
Dormant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Topmax
Industries Limited
|
|
Hong Kong
|
|
HK$100
|
|
|
-
|
|
|
|
100
|
%
|
|
|
-
|
|
|
|
100
|
%
|
|
Dormant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global Renewable Energies Limited (“Global
Renewable”)
|
|
Hong Kong
|
|
HK$2
|
|
|
100
|
%
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Investment
holding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New Star Investment Group Limited (“New
Star”)
|
|
Hong Kong
|
|
HK$40
|
|
|
-
|
|
|
|
55
(Note
(ii))
|
%
|
|
|
|
|
|
|
|
|
|
Dormant
|
|
Note (i):
|
Registered
capital of Dongguan Kimbager Electronics Limited is HK
$
1,000,000.
The registered capital paid up to 31 March 2014 was HK
$
800,000
(2013: HK
$
200,000).
|
|
Note (ii):
|
During
the year, 39 ordinary shares of New Star were allotted to a number of allottee at a total consideration of HK
$
39,
resulting in a decrease in Global Renewable’s shareholding from 100% to 55%.
|
Eyston Company Limited
|
JV-
32
|
|
|
Group
|
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
At the beginning of the year
|
|
|
|
|
|
|
|
|
Gross carrying amount
|
|
|
-
|
|
|
|
-
|
|
Accumulated impairment
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net carrying amount as at 1 April
|
|
|
|
|
|
|
|
|
Goodwill recognised
|
|
|
161,136
|
|
|
|
-
|
|
Provision for impairment
|
|
|
(161,136
|
)
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
At the end of the year
|
|
|
|
|
|
|
|
|
Gross carrying amount
|
|
|
161,136
|
|
|
|
-
|
|
Accumulated impairment
|
|
|
(161,136
|
)
|
|
|
-
|
|
|
|
|
-
|
|
|
|
-
|
|
Impairment
testing taking into account the development of the companies acquired during the year resulted in impairment of goodwill associated
with the cash generating unit and the related impairment loss of HK
$
161,136
was included under “administrative expenses” in the profit or loss.
|
|
Group
|
|
|
Company
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Raw materials
|
|
|
17,236,936
|
|
|
|
20,364,420
|
|
|
|
10,401,364
|
|
|
|
12,390,833
|
|
Work in progress
|
|
|
6,618,206
|
|
|
|
5,507,121
|
|
|
|
2,868,914
|
|
|
|
2,253,653
|
|
Finished goods
|
|
|
7,454,691
|
|
|
|
5,095,049
|
|
|
|
3,340,545
|
|
|
|
2,664,419
|
|
|
|
|
31,309,833
|
|
|
|
30,966,590
|
|
|
|
16,610,823
|
|
|
|
17,578,905
|
|
Provision for impairment
|
|
|
994,727
|
|
|
|
-
|
|
|
|
994,727
|
|
|
|
-
|
|
Total, net
|
|
|
30,315,106
|
|
|
|
30,966,590
|
|
|
|
15,616,096
|
|
|
|
17,578,905
|
|
|
18.
|
TRADE AND OTHER RECEIVABLES
|
|
|
Group
|
|
|
Company
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
1,212,038
|
|
|
|
2,455,589
|
|
|
|
-
|
|
|
|
-
|
|
Deposits, prepayments and other receivables
|
|
|
7,717,224
|
|
|
|
5,562,303
|
|
|
|
1,615,392
|
|
|
|
1,550,219
|
|
|
|
|
8,929,262
|
|
|
|
8,017,892
|
|
|
|
1,615,392
|
|
|
|
1,550,219
|
|
Eyston Company Limited
|
JV-
33
|
|
18.
|
TRADE AND OTHER
RECEIVABLES (Continued)
|
The ageing analysis of trade
receivables based on due date is as follows:
|
|
Group
|
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
Neither past due nor impaired
|
|
|
1,027,650
|
|
|
|
597,265
|
|
0 – 30 days past due
|
|
|
184,388
|
|
|
|
1,858,324
|
|
|
|
|
1,212,038
|
|
|
|
2,455,589
|
|
The Group monitors the trade
and other receivables on an ongoing basis and only trades with creditworthy third parties. At the end of each reporting period,
the Group’s trade receivables were individually determined to be impaired.
Trade receivables that were past
due but not impaired relate to a number of independent customers that had a good track record with the Group. Based on past experience,
the management believe that no impairment allowance is necessary in respect of these balances as there has not been a significant
change in credit quality and the balances are still considered fully recoverable. The Group does not hold any collateral or other
credit enhancements over these balances.
|
19.
|
AMOUNTS DUE FROM/(TO) SUBSIDIARIES – COMPANY
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
Trade *
|
|
|
84,442
|
|
|
|
6,461,714
|
|
Non-trade **
|
|
|
26,849,599
|
|
|
|
13,457,714
|
|
|
|
|
26,934,041
|
|
|
|
19,919,428
|
|
Less : Provision for impairment
|
|
|
(1,636,991
|
)
|
|
|
(1,636,991
|
)
|
|
|
|
25,297,050
|
|
|
|
18,282,437
|
|
|
*
|
The amount is unsecured and arises from trading activities of which the settlement period is in
accordance with normal commercial terms.
|
|
**
|
The amount is unsecured, interest-free and repayable on demand.
|
Eyston Company Limited
|
JV-
34
|
20. CASH
AND CASH EQUIVALENTS
|
|
Group
|
|
|
Company
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bank and cash balances
|
|
|
64,802,204
|
|
|
|
64,562,641
|
|
|
|
21,661,495
|
|
|
|
39,877,025
|
|
Long-term deposit
|
|
|
569,775
|
|
|
|
569,775
|
|
|
|
569,775
|
|
|
|
569,775
|
|
|
|
|
65,371,979
|
|
|
|
65,132,416
|
|
|
|
22,231,270
|
|
|
|
40,446,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Long-term pledged deposit-guarantee for electricity supply
|
|
|
(569,775
|
)
|
|
|
(569,775
|
)
|
|
|
(569,775
|
)
|
|
|
(569,775
|
)
|
|
|
|
64,802,204
|
|
|
|
64,562,641
|
|
|
|
21,661,495
|
|
|
|
39,877,025
|
|
The long-term deposit was denominated
in Renminbi (“RMB”) and deposited with bank in the PRC as at 31 March 2014 and 2013 to guarantee for the electricity
supply of its manufacturing plant.
Deposits with banks earn interest
at floating rates based on daily bank deposit rates.
At
31 March 2014, the Group had cash and cash equivalents denominated in RMB amounting to approximately HK
$
15,035,681
(2013: HK
$
15,119,394), representing deposits placed with banks
in the PRC.
Renminbi is not freely convertible
into foreign currencies. Under the PRC’s Foreign Exchange Control Regulations and Administration of Settlement, Sales and
Payment of Foreign Exchange Regulations, the Group is permitted to exchange RMB for foreign currencies through banks which are
authorised to conduct foreign exchange business.
21. AMOUNTS
DUE FROM/(TO) A SHAREHOLDER / A RELATED COMPANY / NON-CONTROLLING INTERESTS
The amounts are unsecured, interest-free
and repayable on demand.
22. LOANS
FROM SHAREHOLDERS
The loans are unsecured, interest-free
and repayable on demand by the respective shareholders.
Eyston Company Limited
|
JV-
35
|
23. DEFERRED
TAX
At 31 March 2014, the major deferred
tax liabilities and assets recognised in the statement of financial position and the movements during the current and prior years
is as follows:
Group and Company
|
|
Accelerated tax
depreciation
|
|
|
Provision of
slow moving
inventory
|
|
|
Total
|
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 April 2012
|
|
|
46,693
|
|
|
|
-
|
|
|
|
46,693
|
|
Recognised in profit or loss
|
|
|
(1,899
|
)
|
|
|
-
|
|
|
|
(1,899
|
)
|
Balance at 31 March 2013 and 1 April 2013
|
|
|
44,794
|
|
|
|
-
|
|
|
|
44,794
|
|
Recognised in profit or loss
|
|
|
(26,205
|
)
|
|
|
(164,130
|
)
|
|
|
(190,335
|
)
|
Balance at 31 March 2014
|
|
|
18,589
|
|
|
|
(164,130
|
)
|
|
|
(145,541
|
)
|
24. SHARE
CAPITAL
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
Authorised :
|
|
|
|
|
|
|
100 ordinary shares of HK$100 each (note)
|
|
|
-
|
|
|
|
10,000
|
|
|
|
|
|
|
|
|
|
|
Issued and fully paid :
|
|
|
|
|
|
|
|
|
2 ordinary shares of HK$100 each (note)
|
|
|
200
|
|
|
|
200
|
|
Note: Under
the new Hong Kong Companies Ordinance (Cap. 622), which commenced to be effective on 3 March 2014, the concept of authorised share
capital no longer exists. In accordance with section 135 of the new Hong Kong Companies Ordinance (Cap. 622), the Company’s
shares no longer have a par or nominal value with effect from 3 March 2014. There is no impact on the number of shares in issue
or the relative entitlement of any of the members as a result of the effective of this new ordinance.
Eyston Company Limited
|
JV-
36
|
25. RESERVES
The amounts of the Group’s
reserves and the movements therein for the current and prior years are presented in consolidated statement of changes in equity
on page 6 of the financial statements.
Company
|
|
Retained
profits
|
|
|
Fair value
Reserve
|
|
|
Total
|
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 1 April 2012
|
|
|
291,179,624
|
|
|
|
1,903,845
|
|
|
|
293,083,469
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
13,730,659
|
|
|
|
-
|
|
|
|
13,730,659
|
|
Items that may be reclassified subsequently to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of available-for-sale financial assets
|
|
|
-
|
|
|
|
1,262,673
|
|
|
|
1,262,673
|
|
Dividends declared
|
|
|
(4,308,044
|
)
|
|
|
-
|
|
|
|
(4,308,044
|
)
|
Balance at 31 March 2013 and 1 April 2013
|
|
|
300,602,239
|
|
|
|
3,166,518
|
|
|
|
303,768,757
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
|
2,977,001
|
|
|
|
-
|
|
|
|
2,977,001
|
|
Items that may be reclassified subsequently to profit or loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of available-for-sale financial assets
|
|
|
-
|
|
|
|
(2,199,389
|
)
|
|
|
(2,199,389
|
)
|
Dividends declared
|
|
|
(6,493,892
|
)
|
|
|
-
|
|
|
|
(6,493,892
|
)
|
Balance at 31 March 2014
|
|
|
297,085,348
|
|
|
|
967,129
|
|
|
|
298,052,477
|
|
26. OPERATING
LEASE ARRANGEMENTS
At 31 March 2014, the total future
minimum lease payments under non-cancellable operating leases in respect of land and buildings are as follows:
|
|
Group
|
|
|
Company
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Within one year
|
|
|
1,506,775
|
|
|
|
1,659,936
|
|
|
|
1,151,280
|
|
|
|
1,151,280
|
|
In the second to fifth years
|
|
|
2,494,440
|
|
|
|
4,001,215
|
|
|
|
2,494,440
|
|
|
|
3,645,720
|
|
|
|
|
4,001,215
|
|
|
|
5,661,151
|
|
|
|
3,645,720
|
|
|
|
4,797,000
|
|
The Group and the Company lease
land and buildings under operating leases. The leases run for an initial period of one to five years, with an option to renew the
leases at the expiry dates. None of the leases include contingent rentals.
Eyston Company Limited
|
JV-
37
|
27. CAPITAL
COMMITMENTS
|
|
Group
|
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
|
Contracted but not provided for the construction of the factory premises in the PRC
|
|
|
4,195,612
|
|
|
|
4,371,457
|
|
28. CONTINGENT
LIABILITIES
The
current and prior years’ tax provisions have been prepared on the basis that the management fees and bonuses are deductible
in the determination of the assessable profits of the Company and the Company is entitled to the offshore claims. During the year
ended 31 March 2006, the Company received enquiries from the Hong Kong Inland Revenue Department regarding these deductions and
offshore claims. As at the date of approval of these financial statements, the outcome of the enquiries is uncertain. In the opinion
of the directors, no provision for additional taxes is required. The total contingent tax exposures to the Group and Company in
respect of the deductions and offshore claims are estimated to be approximately HK
$
7.3
million and HK
$
33.7 million, respectively.
The Group is required to make
contribution of social security insurance according to the relevant laws and regulations for their employees/workers in the PRC.
However the Group had not been requested by the relevant authorities to make such contributions fully in the past. The Group has
made a provision for the underpaid contributions for the recent years based on the directors’ estimation and the aggregate
provision at the end of the reporting period is HK
$
14.6 million. The directors consider that
the likelihood of the Group to incur further loss in relation to this matter is remote. The Group is not currently aware of any
investigations or other circumstances that would indicate that the Group will be required to pay up any of the social insurance
underpayment.
Except as disclosed above, the
Group and Company have no contingent liabilities at 31 March 2014.
Eyston Company Limited
|
JV-
38
|
29. RELATED
PARTY TRANSACTIONS
In addition to the transactions
and balances disclosed elsewhere in the financial statements, during the year, the Group had the following transactions with related
parties:
|
|
|
Group
|
|
|
|
|
2014
|
|
|
2013
|
|
|
Note
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
Transactions with a related company
|
(i)
|
|
|
|
|
|
|
|
|
Rental expense
|
|
|
|
3,249,199
|
|
|
|
3,168,333
|
|
Management fee expense
|
|
|
|
4,434,600
|
|
|
|
4,434,600
|
|
Management bonus expense
|
|
|
|
-
|
|
|
|
629,567
|
|
|
|
|
|
|
|
|
|
|
|
Transactions with a shareholder
|
|
|
|
|
|
|
|
|
|
Sales
|
|
|
|
58,478,478
|
|
|
|
75,616,596
|
|
Purchases
|
|
|
|
9,259,015
|
|
|
|
12,460,702
|
|
Sales commission expenses
|
|
|
|
190,627
|
|
|
|
613,754
|
|
Note:
(i) The
Group entered into those transactions with Taisun Magnetics Limited, in which Mr. Lam Wai Shuen, Shiman, Mr. Lam Wa Leung and Dr.
Lam Wai Wing, Malcolm, directors of the Company, had interests.
30. MAJOR
NON-CASH TRANSACTION
During
the year ended 31 March 2014, no dividend for the year was settled through the current account with a shareholder (2013: HK
$
2,154,022).
Eyston Company Limited
|
JV-
39
|
31. BUSINESS
COMBINATION
On
11 December 2013
, the Company acquired
100% equity interest in Global Renewable Energies Limited and its subsidiary (collectively, referred to as “Global Group”)
from two related parties, Taisun Technologies Group Limited and Taisun Magnetics Limited at a consideration of HK
$
2.
The equity transfer was completed on the same date. The principal business of Global Group is as follow:
Subsidiaries acquired
|
|
Principal activity
|
|
Date of
acquisition
|
|
|
Proportion of
shares
required
|
|
|
|
|
|
|
|
|
|
|
Global Renewable
|
|
Investment holding
|
|
|
11 December 2013
|
|
|
|
100
|
%
|
New Star
|
|
Dormant
|
|
|
11 December 2013
|
|
|
|
100
|
%
|
The acquisition has been accounted
for using the acquisition method.
The assets acquired and liabilities
recognised at the date of acquisition are as follows:
|
|
Carrying
amount
|
|
|
|
HK$
|
|
Cash and cash equivalents
|
|
|
23,952,649
|
|
Amount due to a related company
|
|
|
(104,583
|
)
|
Amount due to shareholders
|
|
|
(24,009,200
|
)
|
Net liabilities
|
|
|
(161,134
|
)
|
|
|
|
|
|
Consideration
|
|
|
2
|
|
Fair value of identifiable net liabilities acquired
|
|
|
161,134
|
|
Goodwill arising on acquisition
|
|
|
161,136
|
|
|
|
|
|
|
Net cash inflow arising on acquisition
|
|
|
|
|
Cash paid on acquisition (note)
|
|
|
-
|
|
Cash and cash equivalents acquired
|
|
|
23,952,649
|
|
|
|
|
23,952,649
|
|
|
Note:
|
The consideration was payable to the sellers as at the year end date where there was no actual
cash outflow on acquisition.
|
Goodwill arose in the acquisition
of Global Group as the cost included a control premium. No revenue has been generated by Global Group as it is dormant.
On
28 January 2014, 39 ordinary shares of New Star were allotted to a number of allottee at a total consideration of HK
$
39.
Upon the completion of the allotment, Global Renewable, the immediate holding company of New Star hold 22 out of 40 ordinary shares
of New Star, resulting in a decrease in shareholding from 100% to 55% and non-controlling interests of 45% was resulted.
Eyston Company Limited
|
JV-
40
|
31. BUSINESS
COMBINATION (Continued)
Included
in the consolidated loss for the year is profit of HK
$
42,780 attributable
to the additional business generated by Global Group.
If the acquisition had occurred on 1 April 2013, the
Group's revenue would have no change as Global Group is dormant and change in profit for the year ended 31 March 2013 would be
considered immaterial. This pro forma information is for illustrative purposes only and is not necessarily an indication of revenue
and results of operations of the Group that actually would have been achieved had the acquisition been completed on 1 April 2013,
nor is it intended to be a projection of future results.
32. FINANCIAL
RISK MANAGEMENT AND FAIR VALUE MEASUREMENT
The Group is exposed to financial
risks through its use of financial instruments in its ordinary course of operations and in its investment activities. The financial
risks include market risk (including foreign currency risk, interest rate risk and other price risk), credit risk and liquidity
risk.
Financial risk management is
co-ordinated at the Group’s headquarters, in close co-operation with the Board of Directors. The overall objectives in managing
financial risks focus on securing the Group’s short to medium term cash flows by minimising its exposure to financial markets.
Long term financial investments are managed to generate lasting returns with acceptable risk levels.
It is not the Group’s policy
to actively engage in the trading of financial instruments for speculative purposes. The management manages and monitors these
exposures to ensure appropriate measures are implemented on a timely and effective manner.
32.1 Interest
rate risk
Interest rate risk related to
the risk that the fair value or cash flow of a financial instrument will fluctuate because of changes in market interest rates.
The Group’s exposure to interest rate risk mainly arises on cash and cash equivalents. The Group has not used any derivative
contracts to hedge its exposure to interest rate risk or formulated a policy to manage the interest rate risk. However, the directors
monitor interest rate change exposure and will consider hedging significant interest rate exchange exposure should the need arises.
The policies to manage interest
rate risk have been followed by the Group since prior year are considered to be effective.
Eyston Company Limited
|
JV-
41
|
32. FINANCIAL
RISK MANAGEMENT AND FAIR VALUE MEASUREMENT (Continued)
32.1 Interest
rate risk (Continued)
At 31 March 2014, the Group was
exposed to changes in market interest rates through cash and cash equivalent, which are subject to variable interest rates. The
following table illustrates the sensitivity of the profit after tax for the year and retained earnings to a change in interest
rates of +1% and -1% (2013: +1% and -1%), with effect from the beginning of the year. The calculations are based on the Group’s
and the Company’s bank balance held at each reporting date. All other variables are held constant.
|
|
Group
|
|
|
Company
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
If interest rates were 1% (2013: 1%) higher
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit for the year
|
|
|
653,720
|
|
|
|
651,324
|
|
|
|
222,313
|
|
|
|
404,468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
If interest rates were 1% (2013: 1%) lower
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net profit for the year
|
|
|
(653,720
|
)
|
|
|
(651,324
|
)
|
|
|
(222,313
|
)
|
|
|
(404,468
|
)
|
32.2 Price
risk
Price risk related to the risk
that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than
changes in interest rates and foreign exchange rates). The Group is exposed to change in market prices in respect of its investment
in listed securities which are classified as available-for-sale financial assets.
To manage its market price risk
arising from these investments, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with
the limits set by the Board of Directors.
The policies to manage other
price risk have been followed by the Group since prior years and are considered to be effective.
At
31 March 2014, if securities prices had increased/decreased by 1% and all other variables were held constant, fair value reserve
would increase/decrease by approximately HK
$
890,757 (2013: HK
$
831,843).
This is mainly due to the changes in available-for-sale financial assets. This sensitivity analysis has been determined assuming
that the price change had occurred at the reporting date and had been applied to the Group’s investment on that date.
The assumed volatilities of listed
securities represent management’s assessment of a reasonably possible change in these security prices over the next twelve
month period.
Eyston Company Limited
|
JV-
42
|
32. FINANCIAL
RISK MANAGEMENT AND FAIR VALUE MEASUREMENT (Continued)
32.3 Foreign
currency risk
Currency risk refers to the risk
that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
The Group mainly operates in the Asia Pacific Region and is exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to the US dollar, RMB, Australian dollar (“AUD”), Pound sterling (“GBP”) and Euro
(“EUR”). The HK dollar is pegged to the US dollar at an exchange rate of approximately 7.8, the foreign exchange exposure
between US dollar and HK dollar is therefore minimal. The Group’s exposure to RMB is minimal as majority of the subsidiaries
of the Group operates in the PRC with most of the transactions denominated and settled in Renminbi. The Group also holds foreign
currency time deposits which are exposed to foreign currency risk. To mitigate the Group’s exposure to foreign currency risk,
the Group manages its foreign exchange risk by actively monitoring its foreign currency translations.
The policies to manage foreign
currency risk have been followed by the Group since prior years and are considered to be effective.
(a) Exposure
to currency risk
The following table details
the Group’s and the Company’s exposure at the end of the reporting period to currency risk arising from recognised
assets or liabilities denominated in a currency other than the Group’s functional currency.
|
|
Group
|
|
|
Company
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
Net financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AUD
|
|
|
9,499,637
|
|
|
|
10,171,621
|
|
|
|
9,499,637
|
|
|
|
10,171,621
|
|
GBP
|
|
|
7,994,459
|
|
|
|
7,157,782
|
|
|
|
7,994,459
|
|
|
|
7,157,782
|
|
EUR
|
|
|
834,969
|
|
|
|
426,659
|
|
|
|
692,861
|
|
|
|
550,463
|
|
Eyston Company Limited
|
JV-
43
|
32. FINANCIAL
RISK MANAGEMENT AND FAIR VALUE MEASUREMENT (Continued)
32.3 Foreign
currency risk (Continued)
(b) Sensitivity
analysis
The
sensitivity analysis has been determined assuming that the reasonably possible change in foreign exchange rates had occurred at
the reporting date and had been applied to the Group’s exposure to currency risk for financial instruments in existence at
that date, and that all other variables, in particular interest rates, remain constant. The stated changes represent management’s
assessment of reasonably possible changes in foreign exchange rates over the period until the next annual reporting date. A 1%
strengthening/ (weakening) of HK
$
against AUD, GBP and EUR at the
reporting date would increase/ (decrease) the Group’s and the Company’s profit after tax and retained profits by the
amount shown below. Other components of equity would not be affected by changes in the foreign exchange rates.
|
|
|
2014
|
|
|
2013
|
|
|
|
|
Changes in
foreign exchange
rates
|
|
|
Effect on profit
after tax and
retained profits
|
|
|
Changes in
foreign exchange
rates
|
|
|
Effect on profit
after tax and
retained profits
|
|
|
|
|
|
|
|
HK$
|
|
|
|
|
|
HK$
|
|
Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AUD
|
|
|
|
+1%/-1%
|
|
|
|
79,322/(79,322)
|
|
|
|
+1%/-1%
|
|
|
|
84,933/(84,933)
|
|
GBP
|
|
|
|
+1%/-1%
|
|
|
|
66,754/(66,754)
|
|
|
|
+1%/-1%
|
|
|
|
59,767/(59,767)
|
|
EUR
|
|
|
|
+1%/-1%
|
|
|
|
6,972/(6,972)
|
|
|
|
+1%/-1%
|
|
|
|
3,563/(59,767
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
Changes in
foreign exchange
rates
|
|
|
Effect on profit
after tax and
retained profits
|
|
|
Changes in
foreign exchange
rates
|
|
|
Effect on profit
after tax and
retained profits
|
|
|
|
|
|
|
|
HK$
|
|
|
|
|
|
HK$
|
|
Company
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AUD
|
|
|
|
+1%/-1%
|
|
|
|
79,322/(79,322)
|
|
|
|
+1%/-1%
|
|
|
|
84,933/(84,933)
|
|
GBP
|
|
|
|
+1%/-1%
|
|
|
|
66,754/(66,754)
|
|
|
|
+1%/-1%
|
|
|
|
59,767/(59,767)
|
|
EUR
|
|
|
|
+1%/-1%
|
|
|
|
5,785/(5,785)
|
|
|
|
+1%/-1%
|
|
|
|
4,596/(4,596)
|
|
Eyston Company Limited
|
JV-
44
|
32. FINANCIAL
RISK MANAGEMENT AND FAIR VALUE MEASUREMENT (Continued)
32.4 Credit
risks
Credit risk arises from the possibility
that the counterparty to a transaction is unwilling or unable to fulfill its obligation with the results that the Group thereby
suffers financial loss. The Group’s exposure to credit risk mainly arises from granting credit to customers in the ordinary
course of its operations and from its investing activities. The carrying amounts of trade and other receivables, amount due from
a shareholder, available-for-sale financial assets and cash and cash equivalents included in the consolidated statement of financial
position represent the Group’s maximum exposure to credit risk in relation to financial assets. No other financial assets
carry a significant exposure to credit risk. The Group monitors the trade and other receivables on an ongoing basis and only trades
with creditworthy third parties. In addition, all the Group’s cash and cash equivalents are deposited with major banks located
in Hong Kong and the PRC. The Group adopts conservative investment strategies. For investments in debt securities, only issuers
with credit rating of A- or above from Standard & Poor’s would be considered. Trading accounts are only opened with reputable
security brokers. No margin trading is allowed. Accordingly, the Group has no significant concentrations of credit risk.
The credit and investment policies
have been followed by the Group since prior years and are considered to have been effective in limiting the Group’s exposure
to credit risk to a desirable level.
See note 18 to these financial
statements for further details of the Group’s exposures to credit risk on trade and other receivables.
32.5 Fair
values
The following table presents
the Group’s financial instrument measured at fair value at the end of the reporting period on a recurring basis, in accordance
with the three-level fair value hierarchy as defined in IFRS 13, “Fair Value Measurement”. The hierarchy groups financial
instruments into three levels based on the relative reliability of significant inputs used in measuring the fair value of these
financial instruments is as follows:
Eyston Company Limited
|
JV-
45
|
32. FINANCIAL
RISK MANAGEMENT AND FAIR VALUE MEASUREMENT (Continued)
32.5 Fair
values (Continued)
|
- Level 1 :
|
Fair value measured using level 1 inputs, i.e. unadjusted
quoted prices in active markets for identical assets and liabilities at the measurement date;
|
|
- Level 2:
|
Fair value measured using level 2 inputs, i.e. observable
inputs which fail to meet with Level 1, and not using unobservable inputs. Unobservable inputs are inputs for which market data
are not available.
|
|
- Level 3 :
|
Fair value measured using significant unobservable inputs.
|
The level in the fair value hierarchy
within which the financial asset or liability is categorised in its entirety is based on the lowest level of input that is significant
to the fair value measurement.
The financial assets and liabilities
measured at fair value in the statements of financial position are grouped into the fair value hierarchy as follows:
Group and Company
|
|
|
|
Recurring fair value measurements
|
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
Level 1
|
|
|
Level 1
|
|
|
|
HK$
|
|
|
HK$
|
|
Assets
|
|
|
|
|
|
|
|
|
Available-for-sale financial assets
|
|
|
89,075,729
|
|
|
|
83,184,276
|
|
The Group does not have any financial
instruments categorised as Level 2 or Level 3 and there have been no significant transfers between levels 1 and 2 in the reporting
periods.
The methods used for the purpose
of measuring fair value are unchanged compared to the previous reporting periods. The available-for-sale financial assets are denominated
in US dollar, AUD and GBP. Fair values have been determined by reference to their quoted bid prices at the reporting date and have
been translated using the spot foreign currency rates at the end of the reporting period where appropriate.
The carrying amounts of the Group’s
and the Company’s financial instruments carried at cost or amortised costs are not materially different from their fair values
as at 31 March 2014 and 2013.
Eyston Company Limited
|
JV-
46
|
32. FINANCIAL
RISK MANAGEMENT AND FAIR VALUE MEASUREMENT (Continued)
32.6 Liquidity
risks
Liquidity risk relates to the
risk that the Group will not be able to meet its obligations associated with its financial liabilities that are settled by delivering
cash or another financial asset. The Group is exposed to liquidity risk in respect of settlement of trade and other payables, amount
due to a related party, and its financing obligations, and also in respect of its cash flow management. The Group’s objective
is to maintain an appropriate level of liquid assets and committed lines of funding to meet its liquidity requirements in the short
and longer term.
As
at 31 March 2014, the Group had net current assets of HK
$72,052,702
(2013: HK
$
76,355,343) and net assets of HK
$
219,322,970
(2013: HK
$
231,873,411). The management considered the liquidity
risk to be minimal.
The Group manages its liquidity
needs by carefully monitoring expected payments for potential investments as well as cash-outflows due in day-to-day business.
Liquidity needs are monitored on a day-to-day basis. Long-term liquidity needs for a 365-day lookout period are identified on a
monthly basis.
The Group maintains mainly cash
to meet its liquidity requirements for up to 30-day periods, funding for long-term liquidity needs will be considered when there
is any potential investment identified.
The liquidity policies have been
followed by the Group since prior years and are considered to have been effective in managing liquidity risks.
The following table details the
remaining contractual maturities at the end of the reporting period of the Group’s and the Company’s non-derivative
financial liabilities, which are based on contractual undiscounted cash flows (including interest payment computed using contractual
rate or, if floating, based on rates current at the reporting date) and the earliest date the Group and the Company can be required
to pay:
Eyston Company Limited
|
JV-
47
|
32. FINANCIAL
RISK MANAGEMENT AND FAIR VALUE MEASUREMENT (Continued)
32.6 Liquidity
risks
Group
|
|
On demand
or within
1 year
|
|
|
Total
contractual
undiscounted
cash flow
|
|
|
Carrying
amount
|
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
19,969,591
|
|
|
|
19,969,591
|
|
|
|
19,969,591
|
|
Amount due to a shareholder
|
|
|
2,428,017
|
|
|
|
2,428,017
|
|
|
|
2,428,017
|
|
Amount due to a related company
|
|
|
587,364
|
|
|
|
587,364
|
|
|
|
587,364
|
|
Amounts due to non-controlling interests
|
|
|
10,799,982
|
|
|
|
10,799,982
|
|
|
|
10,799,982
|
|
Loans from shareholders
|
|
|
2,868,954
|
|
|
|
2,868,954
|
|
|
|
2,868,954
|
|
|
|
|
36,653,908
|
|
|
|
36,653,908
|
|
|
|
36,653,908
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
32,275,201
|
|
|
|
32,275,201
|
|
|
|
32,275,201
|
|
Amount due to a related company
|
|
|
629,567
|
|
|
|
629,567
|
|
|
|
629,567
|
|
Loans from shareholders
|
|
|
2,868,954
|
|
|
|
2,868,954
|
|
|
|
2,868,954
|
|
|
|
|
35,773,722
|
|
|
|
35,773,722
|
|
|
|
35,773,722
|
|
Company
|
|
On demand
or within
1 year
|
|
|
Total
contractual
undiscounted
cash flow
|
|
|
Carrying
amount
|
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
8,380,222
|
|
|
|
8,380,222
|
|
|
|
8,380,222
|
|
Amount due to a related company
|
|
|
587,364
|
|
|
|
587,364
|
|
|
|
587,364
|
|
Amount due to a subsidiary
|
|
|
1,286,087
|
|
|
|
1,286,087
|
|
|
|
1,286,087
|
|
Loans from shareholders
|
|
|
2,868,954
|
|
|
|
2,868,954
|
|
|
|
2,868,954
|
|
|
|
|
13,122,627
|
|
|
|
13,122,627
|
|
|
|
13,122,627
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 31 March 2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
12,855,609
|
|
|
|
12,855,609
|
|
|
|
12,855,609
|
|
Amount due to a related company
|
|
|
629,567
|
|
|
|
629,567
|
|
|
|
629,567
|
|
Loans from shareholders
|
|
|
2,868,954
|
|
|
|
2,868,954
|
|
|
|
2,868,954
|
|
|
|
|
16,354,130
|
|
|
|
16,354,130
|
|
|
|
16,354,130
|
|
Eyston Company Limited
|
JV-
48
|
32. FINANCIAL
RISK MANAGEMENT AND FAIR VALUE MEASUREMENT (Continued)
32.7 Summary
of financial assets and liabilities by category
The carrying amounts presented
in the statements of financial position relate to the following categories of financial assets and financial liabilities:
|
|
Group
|
|
|
Company
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
|
HK$
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pledged bank balances
|
|
|
569,775
|
|
|
|
569,775
|
|
|
|
569,775
|
|
|
|
569,775
|
|
Available-for-sale financial assets
|
|
|
89,075,728
|
|
|
|
83,184,276
|
|
|
|
89,075,728
|
|
|
|
83,184,276
|
|
Loans and receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other receivables
|
|
|
7,438,953
|
|
|
|
8,017,892
|
|
|
|
1,220,932
|
|
|
|
1,550,219
|
|
Amount due from a shareholder
|
|
|
-
|
|
|
|
1,674,324
|
|
|
|
-
|
|
|
|
-
|
|
Amounts due from subsidiaries
Amount due from a related company
|
|
|
-1,700
|
|
|
|
-220,000
|
|
|
|
25,297,049
1,700
|
|
|
|
18,282,437
220,000
|
|
Cash and cash equivalents
|
|
|
64,802,204
|
|
|
|
64,562,641
|
|
|
|
21,661,495
|
|
|
|
39,877,025
|
|
|
|
|
161,888,360
|
|
|
|
158,228,908
|
|
|
|
137,826,679
|
|
|
|
143,683,732
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial liabilities measured at amortised cost:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables
|
|
|
19,969,591
|
|
|
|
32,509,201
|
|
|
|
8,380,222
|
|
|
|
12,855,609
|
|
Amount due to a shareholder
|
|
|
2,428,017
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Amount due to a related company
|
|
|
587,364
|
|
|
|
629,567
|
|
|
|
587,364
|
|
|
|
629,567
|
|
Amount due to a subsidiary
|
|
|
-
|
|
|
|
-
|
|
|
|
1,286,087
|
|
|
|
-
|
|
Amounts due to non-controlling interests
|
|
|
10,799,982
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Loans from shareholders
|
|
|
2,868,954
|
|
|
|
2,868,954
|
|
|
|
2,868,954
|
|
|
|
2,868,954
|
|
|
|
|
36,653,908
|
|
|
|
36,007,722
|
|
|
|
13,122,627
|
|
|
|
16,354,130
|
|
Eyston Company Limited
|
JV-
49
|
33. CAPITAL
MANAGEMENT POLICIES AND PROCEDURES
The Group’s
objectives when managing capital are:
(a) To
safeguard the Group’s ability to continue as a going concern, so that it continues to provide returns and benefits for its
stakeholders;
(b) To
support the Group’s stability and growth; and
(c) To
provide capital for the purpose of strengthening the Group’s risk management capability.
The
Group actively and regularly reviews and manages its capital structure to ensure optimal capital structure and shareholder returns,
taking into consideration the future capital requirements of the Group and capital efficiency, prevailing and projected profitability,
projected operating cash flows, projected capital expenditures and projected strategic investment opportunities. To maintain or
adjust the capital structure, the Group may adjust the dividend payables to shareholders, issue new shares or raise and repay debts.
The Group’s capital management objectives, policies or processes were unchanged during the year ended 31 March 2014 and 31
March 2013. Management regards total equity of HK
$
220,278,166 (2013:
HK
$
231,873,411) as capital for capital management purpose.
Eyston Company Limited
|
JV-
50
|
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