Note 10 - Stockholders' Equity

12 Months Ended

Mar. 31, 2016

Notes

Note 10 - Stockholders' Equity

NOTE 10 - STOCKHOLDERS’ EQUITY

Stock Issued for compensation and service

On May 16, 2014, in accordance with the Company’s agreement with the independent director, the Company issued 16,667 shares of common stock to one independent director, which was valued at $12,500 based on the quoted price at issuance.

On June 30, 2014, the Company issued 21,000 shares of common stock to non-employee consultants for their service.  The total value of $17,850 was determined based on the quoted price at issuance.

On October 19, 2015, in accordance with the Company's agreement with the independent director, the Company issued 20,000 shares of common stock to one independent director, which were valued at $10,000 based on the quoted price at issuance.

Statutory Reserve

Subsidiaries incorporated in China are required to make appropriations to reserve funds, based on after-tax net income determined in accordance with generally accepted accounting principles of the People’s Republic of China (“PRC GAAP”).  Effective January 1, 2006, the Company is only required to contribute to one statutory reserve fund at 10% of net income after tax per annum, and any contributions are not to exceed 50% of the respective companies’ registered capital.

The Company appropriated nil to the statutory reserve for the years ended March 31, 2016 and 2015, respectively.

Stock Option Plan 

On July 23, 2015, the Company adopted a stock option plan that was approved by its Board of Directors on June 15, 2015.  This plan is intended to retain and provide incentives for talented employees, officers and directors, and to align stockholder and employee interests.  Under this stock option plan, the participants of the plan include the Company's directors, officers and some employees who were previously determined by the Board of Directors.  On July 23, 2015, the Company signed stock option agreements with each participant and granted options to purchase a total of 2.6 million shares of Common Stock to the participants.  The vesting period of the stock options is ten months from July 23, 2015, the grant date of the stock options.  Immediately following the date when the stock options are vested, the participants will have five consecutive business days to exercise the stock options at an exercise price of $0.40 per share.    Stock options not exercised within the five consecutive business days will expire.  The Company assessed the fair value of the total granted stock options on the grant date using a Black-Scholes Stock Option Pricing Model.  Significant assumptions used in calculating fair value of options are as follows:

• Expected volatility 92.03%;

• Risk-free interest rate 0.33%;
• Expected term (year) 0.85;
• Exercise price $0.4.

The estimated fair value of the total granted stock options on the grant date was $529,100 which is being amortized over ten months period.  For the year ended March 31, 2016, the amortization of stock-based compensation expense was $428,074. All stock options expired on May 30, 2016 and none of the vested stock options were exercised by the end of the option exercise date.

Stock Warrant

On August 1, 2015, the Company executed a warrant in favor of a non-employee holder. The warrant would have been released to the holder of the warrant, had the Company's common stock been approved for listing on the NASDAQ Stock Market or such other mutually agreed-upon, United States-registered national securities exchange, on the date that the Company received notice of such approval (the "Notice").  The number of shares of common stock issuable upon exercise of the warrant would have equaled six percent (6%) of the total issued and outstanding shares (on a fully diluted basis) of the Company's common stock on the date of the Notice at an exercise price of $0.36 per share. Based on the number of issued and outstanding shares as of August 1, 2015 (on a fully diluted basis), the warrant would have been exercisable for 1,938,041 shares of common stock, which amount would then have been subjected to adjustment should the Company have issued any additional shares of Common Stock or options, rights or warrants to receive common stock, or securities convertible into common stock, prior the date of the Notice.  The Company had no obligation to deliver the Warrant to the holder if the Company did not receive the Notice on or before July 13, 2016.

Effective December 21, 2015, the Company and the non-employee holder agreed to terminate the Company's engagement of the holder dated July 1, 2015 and the Warrant.  No warrant was issued and the Company has no further obligations to the non-employee holder. The termination of the Warrant has no impact on the Company's current and future financial statements.