|
Item 1.
|
Unaudited Financial Statements
|
Our unaudited interim financial statements
for the nine month period ended September 30, 2019 form part of this quarterly report. They are stated in United States Dollars
(US$) and are prepared in accordance with Generally Accepted Accounting Principles in the United States.
Zhen Ding Resources Inc.
Consolidated Balance Sheets
As of September 30, 2019 and December
31, 2018
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2019
(Unaudited)
|
|
|
2018
(Audited)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6,095
|
|
|
$
|
5,931
|
|
Other receivables
|
|
|
-
|
|
|
|
881
|
|
Total current assets
|
|
$
|
6,095
|
|
|
$
|
6,812
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
650,445
|
|
|
$
|
604,396
|
|
Accounts payable and accrued liabilities-related parties
|
|
|
3,790,757
|
|
|
|
3,572,385
|
|
Deferred revenue
|
|
|
126,929
|
|
|
|
131,824
|
|
Due to related parties
|
|
|
749,078
|
|
|
|
777,942
|
|
Short-term debt
|
|
|
136,000
|
|
|
|
72,500
|
|
Short-term debt-related parties
|
|
|
3,627,494
|
|
|
|
3,747,273
|
|
Total current liabilities
|
|
|
9,080,703
|
|
|
|
8,906,320
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit
|
|
|
|
|
|
|
|
|
Common stock, 150,000,000 authorized, $0.0001 par
value, 63,968,798 shares issued and outstanding
|
|
|
6,397
|
|
|
|
6,397
|
|
Additional paid-in capital
|
|
|
12,762,875
|
|
|
|
12,762,875
|
|
Subscriptions receivable
|
|
|
(5,431
|
)
|
|
|
(5,431
|
)
|
Accumulated other comprehensive income
|
|
|
720,005
|
|
|
|
504,405
|
|
Accumulated deficit
|
|
|
(19,892,946
|
)
|
|
|
(19,518,729
|
)
|
Total deficit attributable to Zhen Ding Resources Inc.
|
|
|
(6,409,100
|
)
|
|
|
(6,250,483
|
)
|
Non-controlling interests
|
|
|
(2,665,508
|
)
|
|
|
(2,649,025
|
)
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ deficit
|
|
|
(9,074,608
|
)
|
|
|
(8,899,508
|
)
|
|
|
|
|
|
|
|
|
|
Total liabilities and Stockholders’ deficit
|
|
$
|
6,095
|
|
|
$
|
6,812
|
|
The accompanying notes are an integral part
of these unaudited consolidated financial statements.
Zhen Ding Resources Inc.
Consolidated Statements of Operations
and Comprehensive Loss
(Unaudited)
|
|
Three months ended
|
|
|
Nine months ended
|
|
|
|
September 30, 2019
|
|
|
September 30, 2018
|
|
|
September 30, 2019
|
|
|
September 30, 2018
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
17,089
|
|
|
|
18,040
|
|
|
|
68,328
|
|
|
|
58,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
17,089
|
|
|
|
18,040
|
|
|
|
68,328
|
|
|
|
58,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(17,089
|
)
|
|
|
(18,040
|
)
|
|
|
(68,328
|
)
|
|
|
(58,566
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expenses
|
|
|
133,658
|
|
|
|
132,401
|
|
|
|
414,838
|
|
|
|
425,656
|
|
Other (income) Expense
|
|
|
(67
|
)
|
|
|
890
|
|
|
|
(67
|
)
|
|
|
(22,620
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
(150,680
|
)
|
|
|
(151,331
|
)
|
|
|
(483,099
|
)
|
|
|
(461,602
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(150,680
|
)
|
|
|
(151,331
|
)
|
|
|
(483,099
|
)
|
|
|
(461,602
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss attributable to non-controlling
interests
|
|
|
34,751
|
|
|
|
35,245
|
|
|
|
108,882
|
|
|
|
107,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Zhen Ding
Resources Inc.
|
|
$
|
(115,929
|
)
|
|
$
|
(116,086
|
)
|
|
$
|
(374,217
|
)
|
|
$
|
(354,348
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common
share
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.00
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average
number
of
common shares outstanding
|
|
|
63,968,798
|
|
|
|
63,968,798
|
|
|
|
63,968,798
|
|
|
|
63,968,798
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(150,680
|
)
|
|
$
|
(151,331
|
)
|
|
$
|
(483,099
|
)
|
|
$
|
(461,602
|
)
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustments
|
|
|
(299,658
|
)
|
|
|
283,981
|
|
|
|
(307,999
|
)
|
|
|
426,003
|
|
Total comprehensive (loss) income
|
|
|
(450,338
|
)
|
|
|
132,650
|
|
|
|
(791,098
|
)
|
|
|
(35,599
|
)
|
Comprehensive (loss) income
attributable to non-
controlling interest
|
|
|
(60,151
|
)
|
|
|
(49,991
|
)
|
|
|
16,483
|
|
|
|
(20,589
|
)
|
Comprehensive (loss) income
attributable to Zhen
Ding Resources Inc.
|
|
$
|
(510,489
|
)
|
|
$
|
82,659
|
|
|
$
|
(774,615
|
)
|
|
$
|
(56,188
|
)
|
The accompanying notes are an integral part
of these consolidated financial statements.
Zhen Ding Resources Inc.
Consolidated Statements of Cash Flows
For the nine months ended September 30,
2019 and 2018
(Unaudited)
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(483,099
|
)
|
|
$
|
(461,602
|
)
|
Adjustment to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Other receivables
|
|
|
881
|
|
|
|
(16,552
|
)
|
Accounts payable and accrued liabilities
|
|
|
46,049
|
|
|
|
(1,749
|
)
|
Accounts payable and accrued liabilities-related parties
|
|
|
218,372
|
|
|
|
425,392
|
|
Deferred revenue
|
|
|
(4,895
|
)
|
|
|
(15,080
|
)
|
Due to related parties
|
|
|
(28,864
|
)
|
|
|
-
|
|
Net cash used in operating activities
|
|
|
(251,556
|
)
|
|
|
(69,591
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from borrowings on short-term debt
|
|
|
63,500
|
|
|
|
72,500
|
|
Proceeds from borrowings on short-term debt – related parties
|
|
|
(119,779
|
)
|
|
|
22,198
|
|
Repayment of borrowings on short-term debt – related parties
|
|
|
-
|
|
|
|
(9,175
|
)
|
Net cash provided by financing activities
|
|
|
(56,279
|
)
|
|
|
85,523
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
307,999
|
|
|
|
(38
|
)
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
164
|
|
|
|
15,894
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - beginning of the period
|
|
|
5,931
|
|
|
|
7,669
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - end of the period
|
|
$
|
6,095
|
|
|
$
|
23,563
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information:
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
-
|
|
|
$
|
-
|
|
Cash paid for income tax
|
|
$
|
-
|
|
|
$
|
-
|
|
The accompanying notes are an integral part
of these unaudited consolidated financial statements.
Zhen Ding Resources Inc.
Consolidated Statement of Stockholders’
Deficit
For the periods ended September 30, 2019
and September 30, 2018
(unaudited)
|
|
Common Stock
|
|
|
Additional Paid
in
|
|
|
Subscriptions
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Accumulated
|
|
|
Non-
controlling
|
|
|
Total
Stockholders'
|
|
|
|
Shares
|
|
|
Par
|
|
|
Capital
|
|
|
Receivable
|
|
|
Income
|
|
|
Deficit
|
|
|
Interest
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2018
|
|
|
63,968,798
|
|
|
$
|
6,397
|
|
|
$
|
12,762,875
|
|
|
|
(5,431
|
)
|
|
|
504,405
|
|
|
|
(19,518,729
|
)
|
|
|
(2,649,025
|
)
|
|
|
(8,899,508
|
)
|
Foreign currency translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(139,260
|
)
|
|
|
-
|
|
|
|
(59,683
|
)
|
|
|
(198,943
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(128,744
|
)
|
|
|
(37,366
|
)
|
|
|
(166,140
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2019
|
|
|
63,968,798
|
|
|
$
|
6,397
|
|
|
$
|
12,762,875
|
|
|
$
|
(5,431
|
)
|
|
$
|
365,145
|
|
|
$
|
(19,647,503
|
)
|
|
$
|
(2,746,074
|
)
|
|
$
|
(9,264,591
|
)
|
Foreign
currency translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
133,422
|
|
|
|
-
|
|
|
|
57,180
|
|
|
|
(190,602
|
)
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(129,514
|
)
|
|
|
(36,765
|
)
|
|
|
(166,279
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2019
|
|
|
63,968,798
|
|
|
$
|
6,397
|
|
|
$
|
12,762,875
|
|
|
$
|
(5,431
|
)
|
|
$
|
498,567
|
|
|
$
|
(19,777,017
|
)
|
|
$
|
(2,725,659
|
)
|
|
$
|
(9,240,268
|
)
|
Foreign currency translation
adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
221,438
|
|
|
|
|
|
|
|
94,902
|
|
|
|
316,340
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(115,929
|
)
|
|
|
(34,751
|
)
|
|
|
(150,680
|
)
|
Balances, September 30, 2019
|
|
|
63,968,798
|
|
|
|
6,397
|
|
|
|
12,762,875
|
|
|
|
(5,431
|
)
|
|
|
720,005
|
|
|
|
(19,892,946
|
)
|
|
|
(2,665,508
|
)
|
|
|
(9,074,608
|
)
|
|
|
Common Stock
|
|
|
Additional Paid
in
|
|
|
Subscriptions
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Accumulated
|
|
|
Non-
controlling
|
|
|
Total
Stockholders'
|
|
|
|
Shares
|
|
|
Par
|
|
|
Capital
|
|
|
Receivable
|
|
|
Income
|
|
|
Deficit
|
|
|
Interest
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2017
|
|
|
63,968,798
|
|
|
$
|
6,397
|
|
|
$
|
12,762,875
|
|
|
|
(5,431
|
)
|
|
|
193,802
|
|
|
|
(19,011,152
|
)
|
|
|
(2,624,988
|
)
|
|
|
(8,678,497
|
)
|
Foreign currency translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(203,198
|
)
|
|
|
-
|
|
|
|
(87,025
|
)
|
|
|
(290,233
|
)
|
Net
loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(118,027
|
)
|
|
|
(39,953
|
)
|
|
|
(157,980
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, March 31, 2018
|
|
|
63,968,798
|
|
|
$
|
6,397
|
|
|
$
|
12,762,875
|
|
|
$
|
(5,431
|
)
|
|
$
|
(9,396
|
)
|
|
$
|
(19,129,179
|
)
|
|
$
|
(2,751,966
|
)
|
|
$
|
(9,126,700
|
)
|
Foreign currency translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
302,849
|
|
|
|
-
|
|
|
|
129,278
|
|
|
|
432,127
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(136,692
|
)
|
|
|
(38,594
|
)
|
|
|
(175,286
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, June 30, 2018
|
|
|
63,968,798
|
|
|
$
|
6,397
|
|
|
$
|
12,762,875
|
|
|
$
|
(5,431
|
)
|
|
$
|
293,453
|
|
|
$
|
(19,265,871
|
)
|
|
$
|
(2,661,282
|
)
|
|
$
|
(8,869,859
|
)
|
Foreign currency translation
adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
198,509
|
|
|
|
|
|
|
|
85,075
|
|
|
|
283,584
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(99,629
|
)
|
|
|
(28,192
|
)
|
|
|
(127,821
|
)
|
Balances, September 30, 2018
|
|
|
63,968,798
|
|
|
|
6,397
|
|
|
|
12,762,875
|
|
|
|
(5,431
|
)
|
|
|
491,962
|
|
|
|
(19,365,500
|
)
|
|
|
(2,604,399
|
)
|
|
|
(8,714,096
|
)
|
Zhen Ding Resources Inc.
Notes to Consolidated
Financial Statements
(Unaudited)
Note 1. Description of Business
Zhen Ding Resources Inc. (formerly Robotech Inc.) (the “Company”,
“Zhen Ding DE”, or “ZDRI”) was incorporated in the State of Delaware in September 1996 and began its business
activities in the development and marketing of specialized technological equipment. In early 2010, the business direction of our
Company was changed to seek opportunities to focus particularly on searching for companies engaged in the mining of gold, silver
and copper.
The Company indirectly owns 70% of a Chinese Joint Venture entity,
Zhen Ding Mining Co. Ltd. (“Zhen Ding JV” or “JXZD”). This indirect ownership is through a 100% ownership
of a California company Z&W, Zhen Ding Corporation (“Z&W CA”).
Our Company, through Z&W CA, participates in a joint venture
with Jing Xian Xinzhou Gold Co., Ltd. (“Xinzhou Gold”), a company organized under the laws of the People’s Republic
of China (“PRC”). The joint venture company, JXZD, is 70% held by our Company through Z&W CA who has the mineral
exploration, mineral mining and gold mining rights to a property located in the southwestern part of Anhui province in China, near
the town of Jing Xian. Xinzhou Gold, the other 30% partner of JXZD is the actual named owner of the various licenses used by JXZD
and transferred all rights emanating from these licenses as part of the joint venture agreement between Z&W CA and Xinzhou
Gold. Our Company’s primary activity, through JXZD, is ore processing and production in China.
In 2017, the Company shut down its mineral processing plant
in China due to insufficient working capital. The Company had limited operations and plans to resume selling processed ore concentrate
as soon as possible to provide Zhen Ding JV the cash flow needed to keep its plant operating and to maintain a viable work force
for future expansion.
Note 2. Summary of Significant Accounting Policies
The summary of significant accounting policies presented below
is designed to assist in understanding the Company’s financial statements. Such financial statements and accompanying notes
are the representations of the Company’s management, which is responsible for the integrity and objectivity. These accounting
policies conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) in all material
respects and have been consistently applied in preparing the accompanying financial statements.
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements and related
notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.
GAAP”).
The consolidated financial statements include the accounts of
the Company, its wholly-owned subsidiaries Z&W CA and its majority owned subsidiary JXZD. All inter-company transactions and
balances were eliminated. The portion of the income applicable to non-controlling interests in subsidiary undertakings is reflected
in the consolidated statements of operations.
Use of Estimates and Assumptions
The Company prepares its financial
statements in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and 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.
Interim Financial Statements
These unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles in the United States (“US GAAP”) for interim financial
information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, the consolidated financial statements do not
include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments considered necessary for a fair presentation have been included and such adjustments
are of a normal recurring nature. These consolidated financial statements should be read in conjunction with the consolidated financial
statements for the year ended December 31, 2018 and notes thereto and other pertinent information contained in our Form 10-K the
Company has filed with the Securities and Exchange Commission (the “SEC”) on April 16, 2019. The results of operations
for the three and nine months ended September 30, 2019, are not necessarily indicative of the results to be expected for the full
fiscal year ending December 31, 2019.
Foreign Currency Adjustments
Assets and liabilities recorded in foreign currencies are translated
at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during
the year. Any translation adjustments are reflected as a separate component of stockholders’ equity (deficit) and have no
effect on current earnings. Gains and losses resulting from foreign currency transactions are included in current results of operations.
During the periods ended September 30, 2019 and 2018, the Company had aggregate foreign currency translation gains (loss) of ($307,999)
and $426,003, respectively.
Cash and Cash Equivalents
The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be cash equivalents.
Income Taxes
An asset and liability approach is used for financial accounting
and reporting for income taxes. Deferred income taxes arise from temporary differences between income tax and financial reporting
and principally relate to recognition of revenue and expenses in different periods for financial and tax accounting purposes and
are measured using currently enacted tax rates and laws. In addition, a deferred tax asset can be generated by net operating loss
carry forwards. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation
allowance is recognized. The Company has tax losses that may be applied against future taxable income. The potential tax benefit
arising from these loss carryforwards are offset by a valuation allowance due to uncertainty of profitable operations in the future.
Fair Values of Financial Instruments
Management believes that the carrying amounts of the Company’s
financial instruments, consisting primarily of cash, other receivable, due to related parties, short term debt and short term debt
– related parties, approximated their fair values as of September 30, 2019 and December 31, 2018, due to their short-term
nature.
Non-controlling Interests
Non-controlling interests in the Company’s subsidiaries
are reported as a component of equity, separate from the parent’s equity. Purchase or sale of equity interests that do not
result in a change of control are accounted for as equity transactions. Results of operations attributable to the minority interest
are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest retained,
if any, will be reported at fair value with any gain or loss recognized in earnings.
Basic and Diluted Earnings (Loss) Per Common Share
The basic net loss per common share is computed by dividing
the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing
the net loss adjusted on an “as converted” basis, by the weighted average number of common shares outstanding plus
potential dilutive securities. For all periods presented, there were no potentially dilutive securities outstanding.
Reclassifications
Certain prior-period amounts in the consolidated financial statements
and notes thereto, have been reclassified to conform to the current period presentation. These changes had no impact on the previously
reported consolidated results of operations, total assets, total liabilities, stockholders’ equity or cash flow subtotals
Subsequent Events
The Company evaluated events subsequent to September 30, 2019
through the date the financial statements were issued for disclosure consideration.
Recently Issued Accounting Pronouncements
In February 2016, FASB issued ASU No.
2016-02 Leases (Topic 842), which creates new accounting and reporting guidelines for leasing arrangements. The
standard requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize
on its balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to
use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting
policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors
are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.
The guidance in ASU 2016-02 is effective for annual and interim reporting periods beginning after December 15, 2018. Effective
January 1, 2019 the Company adopted accounting standard 842, as of September 30, 2019 there is no impact on its consolidated financial
statements.
Note 3. Going Concern
These financial statements have been
prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations
for the next twelve months. As of September 30, 2019, the Company had accumulated losses of $19,892,946 since inception and
had a working capital deficit of $9,074,608. These factors raise substantial doubt regarding the Company’s ability to continue
as a going concern. The continuation of the Company as a going concern is dependent upon financial support from its stockholders,
the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations.
Realization value may be substantially different from carrying values as shown and these financial statements do not include any
adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern.
Note 4. Short-Term Debt
The following table represents the details of the short-term
debts at September 30, 2019:
Issuance date
|
|
Maturity
|
|
|
Interest Rate
|
|
Amount
|
|
January 31, 2018
|
|
|
January 31, 2019*
|
|
|
1% per month
|
|
$
|
27,500
|
|
May 18, 2018
|
|
|
May 18, 2019*
|
|
|
1% per month
|
|
|
25,000
|
|
September 14,
2018
|
|
|
September 13, 2019
|
|
|
1% per month
|
|
|
20,000
|
|
January 21, 2019
|
|
|
January 20, 2020
|
|
|
1% per month
|
|
|
20,000
|
|
February 12, 2019
|
|
|
February 11, 2020
|
|
|
1% per month
|
|
|
10,000
|
|
April 26, 2019
|
|
|
April 25, 2020
|
|
|
1% per month
|
|
|
15,000
|
|
June 28, 2019
|
|
|
June 28, 2020
|
|
|
1% per month
|
|
|
18,500
|
|
|
|
|
|
|
|
|
|
|
136,000
|
|
According to the loan agreements, there is not any additional
interest and penalty for the loans passing maturity date.
During the nine months ended September
30, 2019, the Company recorded interest expense and accrued interest of $10,048.
Note 5. Related Party Transactions
Accounts payable
As of September 30, 2019 and December
31, 2018, the Company had payables of $749,078 and $777,942, respectively, to Xinzhou Gold. These payables bear no interest,
are unsecured and are due on demand.
Short-term debt
As of September 30, 2019 and December 31, 2018, the Company
had short-term debts to related parties of $3,627,494 and $3,747,273, respectively. The details of the loans are described as below.
At September 30, 2019:
Name
|
|
Relationship to the Company
|
|
Amount
|
|
|
Interest Rate
|
|
|
Start Date
|
|
Maturity
|
Shor-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
Wei De Gang
|
|
CEO & Legal person of JXZD
|
|
$
|
2,517,178
|
|
|
|
15
|
%
|
|
May 31, 2011
|
|
May 31, 2014
|
Zhao Yan Ling
|
|
Former office manager of JXZD, wife of Zhou Zhi Bin
|
|
|
14,700
|
|
|
|
15
|
%
|
|
January 1, 2011
|
|
December 31, 2013
|
Zhou Zhi Bin
|
|
Former CEO & Legal person of JXZD
|
|
|
7,000
|
|
|
|
15
|
%
|
|
January 1, 2011
|
|
December 31, 2013
|
Tang Yong Hong
|
|
Manager of JXZD
|
|
|
301,759
|
|
|
|
15
|
%
|
|
February 28, 2015
|
|
February 28, 2016
|
Yan Chun Yan
|
|
Accountant of JXZD
|
|
|
169
|
|
|
|
15
|
%
|
|
August 31, 2014
|
|
August 31, 2015
|
Wen Mei Tu
|
|
President & shareholder of ZDRI
|
|
|
370,800
|
|
|
|
12
|
%
|
|
Various
|
|
Various
|
Importation
Tresor Plus Inc
|
|
Shareholder of ZDRI
|
|
|
30,000
|
|
|
|
12
|
%
|
|
July 9, 2012
|
|
July 12, 2013
|
Tony Ng Man
Kin
|
|
Shareholder of ZDRI
|
|
|
25,000
|
|
|
|
12
|
%
|
|
February 27, 2013
|
|
February 27, 2014
|
Wei Tai Trading
Inc.
|
|
Shareholder of ZDRI
|
|
|
12,000
|
|
|
|
12
|
%
|
|
June 3, 2015
|
|
September 3, 2015
|
JYS Technologies
Inc.
|
|
Wen Mei Tu’s brother in law owned
|
|
|
6,000
|
|
|
|
12
|
%
|
|
May 22, 2015
|
|
July 19, 2016
|
Philip Pak
|
|
Shareholder of ZDRI
|
|
|
41,000
|
|
|
|
12
|
%
|
|
Various
|
|
Various
|
Victor Sun
|
|
Consultant & shareholder of ZDRI
|
|
|
3,923
|
|
|
|
0
|
%
|
|
January 1, 2013
|
|
On Demand
|
Helen Chen
|
|
President of Z&W CA
|
|
|
17,965
|
|
|
|
0
|
%
|
|
January 1, 2011
|
|
On Demand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
|
|
|
|
|
|
Zhou Qiang
|
|
Office manager of JXZD
|
|
|
280,000
|
|
|
|
15
|
%
|
|
December 18, 2012
|
|
December 18, 2015
|
Total
|
|
|
|
$
|
3,627,494
|
|
|
|
|
|
|
|
|
|
At December 31, 2018:
Name
|
|
Relationship to the Company
|
|
Amount
|
|
|
Interest Rate
|
|
|
Start Date
|
|
Maturity
|
Short-term debt – related party
|
|
|
|
|
|
|
|
|
|
|
|
|
Wei De Gang
|
|
Former CFO & Legal person of JXZD
|
|
$
|
2,614,271
|
|
|
|
15
|
%
|
|
May 31, 2011
|
|
May 31, 2014
|
Zhao Yan Ling
|
|
Former office manager of JXZD, wife of Zhou Zhi Bin
|
|
|
15,267
|
|
|
|
15
|
%
|
|
January 1, 2011
|
|
December 31, 2013
|
Zhou Zhi Bin
|
|
Former CEO & Legal person of JXZD
|
|
|
7,270
|
|
|
|
15
|
%
|
|
January 1, 2011
|
|
December 31, 2013
|
Tang Yong Hong
|
|
Manager of JXZD
|
|
|
312,977
|
|
|
|
15
|
%
|
|
February 28, 2015
|
|
February 28, 2016
|
Wen Mei Tu
|
|
President & shareholder of ZDRI
|
|
|
370,800
|
|
|
|
12
|
%
|
|
Various
|
|
Various
|
Importation
Tresor Plus Inc
|
|
Shareholder of ZDRI
|
|
|
30,000
|
|
|
|
12
|
%
|
|
July 9, 2012
|
|
July 12, 2013
|
Tony Ng Man
Kin
|
|
Shareholder of ZDRI
|
|
|
25,000
|
|
|
|
12
|
%
|
|
February 27, 2013
|
|
February 27, 2014
|
Wei Tai Trading
Inc.
|
|
Shareholder of ZDRI
|
|
|
12,000
|
|
|
|
12
|
%
|
|
June 3, 2015
|
|
September 3, 2015
|
JYS Technologies
Inc.
|
|
Wen Mei Tu’s brother in law owned
|
|
|
6,000
|
|
|
|
12
|
%
|
|
May 22, 2015
|
|
July 19, 2016
|
Philip Pak
|
|
Consultant & shareholder of ZDRI
|
|
|
41,000
|
|
|
|
12
|
%
|
|
Various
|
|
Various
|
Victor Sun
|
|
Consultant & shareholder of ZDRI
|
|
|
3,923
|
|
|
|
0
|
%
|
|
January 1, 2013
|
|
On Demand
|
Helen Chen
|
|
President of Z&W CA
|
|
|
17,965
|
|
|
|
0
|
%
|
|
January 1, 2011
|
|
On Demand
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debts – related parties
|
|
|
|
|
|
|
|
|
|
|
|
Zhou Qiang
|
|
Office manager of JXZD
|
|
|
290,800
|
|
|
|
15
|
%
|
|
December 18, 2012
|
|
December 18, 2015
|
Total
|
|
|
|
$
|
3,747,273
|
|
|
|
|
|
|
|
|
|
As of September 30, 2019 and December 31, 2018, the Company
had accrued interest payable to the related parties of $3,790,757 and $3,572,385, respectively. For the periods ended September
30, 2019 and 2018, the Company recorded interest expense of $414,838 and $378,681, respectively. The Company has received no demands
for repayment of matured debt instruments.
Note 6. Deferred Revenues
As of September 30, 2019 and December 31, 2018, the Company
had deferred revenue of $126,929 and $131,824 related to receipts of payment for unprocessed ore from Xinzhou Gold Co. Ltd, respectively,
related to advances that the Company received from its customers. The Company has received no demands for repayment of deferred
revenues.
Note 7. Contingencies
Concentration of Credit Risk
The Company and its subsidiaries are subject to income taxes
on an "entity" basis that is, on income arising in or derived from the tax jurisdiction in which each entity is domiciled.
It is management's intention to reinvest all the income earned by the Company's subsidiaries outside of the US. Accordingly, no
US federal income taxes have been provided on earnings of the foreign based subsidiaries.
On December 22, 2017, new federal tax reform legislation was
enacted in the United States (the “2017 Tax Act”), resulting in significant changes from previous tax law. The 2017
Tax Act reduces the federal corporate income tax rate to 21% from 35% effective January 1, 2018.
The Company was incorporated in the United States and is subject
to United States federal income taxes and has incurred operating losses since its inception. The Company's joint venture in China
is subject to a 25% statutory PRC enterprise income tax rate and has also incurred operating losses since its inception.
As of September 30, 2019, the Company had net operating losses (“NOL”) carryforwards of approximately $20 million.
The NOL carryforwards expire between fiscal year 2018 through 2035. The value of these carryforwards depends on the Company’s
ability to generate taxable income. Tax laws in both China and United States limit the time during which the net operating loss
carryforwards may be applied against future taxes, if the Company fails to generate taxable income prior to the expiration dates,
the Company may not be able to fully utilize the net operating loss carryforwards to reduce future income taxes. The Company has
had cumulative losses and there is no assurance of future taxable income; therefore, valuation allowances have been recorded to
fully offset the deferred tax asset at September 30, 2019 and December 31, 2018.
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
FORWARD LOOKING STATEMENTS
This quarterly report contains forward-looking
statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking
statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”,
“believes”, “estimates”, “predicts”, “potential” or “continue” or the
negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks,
uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements
to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these
forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable,
we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including
the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements
to actual results.
Our unaudited financial statements are
stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere
in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs.
Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
Our financial statements are stated in
United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this quarterly report, unless otherwise
specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to
the common shares in our capital stock.
As used in this quarterly report, the terms
“we”, “us”, “our” and “our company” mean Zhen Ding Resources Inc., unless otherwise
indicated.
General Overview
We are engaged in seeking business partnership
opportunities with companies that are in the field of exploration and extraction of precious and/or base metals, primarily in China,
which are in need of funding and improved management. We would provide the necessary management expertise and assist
in financing efforts of these mining operations. In exchange, we would acquire metal ores produced by these mines and
process the ores in our ore milling plant and sell the ore concentrates to metal refineries. Our only operating company
is Zhen Ding JV, which engages in the processing of metal ore and the selling of ore concentrates of gold, silver, lead, zinc and
copper at purity levels ranging from 65% to 80%. Zhen Ding JV purchases metal ore in rock form from its joint venture
partner, Xinzhou Gold, which has rights to explore and mine ore from a property located in the southwestern part of Anhui province
in China.
Our Corporate History and Structure
Our principal office is located at Suite
111, 3900 Place De Java, Second Floor, Brossard, Quebec, Canada J4Y 9C4. The offices, located in a suburb of Montreal, are
not under written lease but are rented through a verbal agreement, on a month to month basis, from Immeuble Wing Kei Inc. at $500 per
month, due and payable at each calendar quarter end. The occupancy began October 15, 2018.
Our operational offices are located at: Zhen
Ding Mining Co. Ltd., Wuxi County, Town of Langqiao, Jing Xian, Anhui Province, China, Tel: 86-6270-9018.
We were incorporated in September 1996
as Robotech Inc., and began our business in the development and marketing of specialized technological equipment. At that time
we estimated that we would require approximately $6,000,000 to realize our plans. Through the year of 2003, we had not reached
our financing goals and therefore abandoned that particular business plan. Since that time, we have been seeking suitable candidates
for acquisition.
In the past decade there has been a worldwide
recovery in the price and interest in precious metals, minerals and industrial commodities. Such interest has been fueled to a
large degree, by the economic awakening of the two most populous nations, China and India and further bolstered by a sharp decline
in the US dollar. A particular beneficiary of this revival has been the market prices of gold, silver and copper. Thus, in early
2010, the business direction of our company was changed to seek to profit from this revival and we began to focus our acquisition
search in that industry, particularly on companies engaged in the mining of gold, silver and copper.
In January 2012, our Board of Directors,
with authorization from a majority of our shareholders, made an offer to the shareholders of Zhen Ding Resources Inc., a Nevada
corporation (“Zhen Ding NV”), to acquire, at the very least, the majority of their common shares, and, if available,
up to 100% ownership.
Zhen Ding NV through its wholly owned subsidiary,
Z&W Zhen Ding Corporation, a California corporation (“Zhen Ding CA”), has been engaged in a joint venture with
Jing Xian Xinzhou Gold Co., Ltd. (“Xinzhou Gold”), a company organized under the laws of the People’s Republic
of China (“PRC”). The joint venture company, Zhen Ding Mining Co. Ltd. (“Zhen Ding JV”) is 70% held
by Zhen Ding NV through Zhen Ding CA. It is a common practice in China to append the name of the town or city where
an enterprise is located to its legally incorporated name. Thus many documents referencing Zhen Ding JV may refer to it as Jing
Xian Zhen Ding Mining Co. Ltd. Zhen Ding JV engages in the processing of metal ore and the selling of ore concentrates of gold,
silver, lead, zinc and copper at purity levels ranging from 65% to 80%. Zhen Ding JV purchases metal ore in rock form
from Xinzhou Gold.
On March 8, 2012, we changed our name from
Robotech, Inc. to Zhen Ding Resources Inc., in anticipation of the acquisition of Zhen Ding NV. Our trading symbol, RBTK, however
remained unchanged.
During 2012, a total of 50,746,358 shares
of the issued and outstanding common stock of Zhen Ding NV were tendered to our company. On August 13, 2013, an additional 13,100,000
shares were tendered to us. Thus, as of August 13, 2013 the shareholders of Zhen Ding NV had tendered 100% of the issued and outstanding
shares of common stock, representing 100% of the issued and outstanding equity of Zhen Ding NV to us.
On October 23, 2013, we issued 122,440
shares of our common stock, on a one-for-one basis, to the tendering shareholders of Zhen Ding NV making Zhen Ding NV a wholly
owned subsidiary of our company.
On October 28, 2013, we dissolved Zhen
Ding NV by merging it with and into Zhen Ding DE. As a result, Zhen Ding CA became a wholly-owned subsidiary of Zhen
Ding DE. Zhen Ding CA continues to exist as an intermediate holding company with no operations of its own, but which
in turn owns our 70% interest in Zhen Ding JV.
The following illustrates our corporate and share ownership
structure:
Current Operations
Current Operations
Presently, we are conducting our operations
exclusively through Zhen Ding JV, our joint venture company. However, we continue to look for other attractive potential acquisition
targets in the mining industry.
Our joint venture, Zhen Ding JV, is
equipped to process ore mined by our joint venture partner Xinzhou Gold when in operation. Zhen Ding JV purchases the
ore in rock form from Xinzhou Gold and processes the ore into our final product, which is a gold, silver, lead, zinc and copper
ore concentrate. We estimate that our processed product is 65% to 80% pure. The product is then sold to refineries which further
purify and separate the concentrate. Zhen Ding JV also arranges all exploration, mining process and operations, and
financial and administrative support for Xinzhou Gold’s mine, known as the Wuxi Gold Mine.
We purchase all of our raw material
from Xinzhou Gold for our ore processing operation and rely solely on Xinzhou Gold for our supply of ores. The veins most recently
excavated by Xinzhou Gold in the permitted areas of our mines are very low grade and, as such, the production is minimal. The higher
yielding and therefore more profitable veins run outside Xinzhou Gold’s permitted mining area boundaries under its current
license. Xinzhou Gold applied for an extension of the permitted mining area, however, the application was rejected by the government
in December 2016 due to Xinzhou Gold’s insufficient working capital. Xinzhou Gold intends to reapply for an extension of
the permitted mining area when it is able to demonstrate sufficient working capital to drill the extended area. However, if sufficient
working capital is unavailable, or should the application be denied on other grounds, we would not be able to secure another source
with higher grade ores for our processing plant, which would severely limit our ability to execute our plan of operation and our
potential profitability.
At the beginning of fiscal 2015, we
idled our mineral processing plant due to an overall downturn in the demand and market prices for our concentrates. At the beginning
of fiscal 2017, we shut down the mineral processing plant in China due to insufficient working capital.
On May 9, 2018, De Gang Wei resigned
as Chairman, Chief Financial Officer and Director of the Company and Zhou Zhi Bin resigned as a director of the Company. The resignations
did not result from any disagreement with our company regarding our operations, policies, practices or otherwise.
During the twelve months ended December
31, 2018, we actively sought an investment of approximately $3,000,000, which we believe is required to expand Xinzhou Gold’s
mining permit, and which would allow us to resume our ore extraction and refinery activities. However, as at the date of this report
we have not successfully secured any financing commitment.
On May 9, 2018, De Gang Wei resigned
as Chairman, Chief Financial Officer and Director of the Company and Zhou Zhi Bin resigned as a director of the Company. The resignations
did not result from any disagreement with our company regarding our operations, policies, practices or otherwise.
Summary of Operations during the
Nine Months Ended September 30, 2019
During the nine months ended September
30, 2019, we actively sought an investment of approximately $3,000,000, which we believe is required to expand Xinzhou Gold’s
mining permit, and which would allow us to resume our ore extraction and refinery activities. However, as at the date of this report
we have not successfully secured any financing commitment.
Due to our continued inability to raise
sufficient financing to expand Xinzhou Gold’s mining permit, Xinzhou Gold elected to reapply for a new drilling permit based
on a scaled-down drilling plan. The resulting new permit application, which was submitted to the Anhui Province Land & Resources
Bureau for approval on March 8, 2017, sought renewed permission to continue drilling in the areas directly adjacent to our concentration
plant. That application was subsequently rejected due to environmental concerns regarding wastewater runoff onto nearby agricultural
lands. Accordingly, during the last quarter, the Company was primarily devoted to refining its environmental impact compliance
proposal and design in consultation with government officials. A new proposal and design was submitted to the environmental protection
authorities on June 30, 2019, and the Company anticipates receiving a response in the late summer or fall of 2019.
We intend to resume selling processed
ore concentrate as soon as possible in order to supply Zhen Ding JV with the cash flow needed to keep its plant running and to
maintain a viable work force for future expansion. However, we are not able to predict at this time when economic conditions will
allow us to resume our ore refinery operation.
Going forward, we will continue to
seek sufficient financing to re-establish our mineral extraction and refining operations. We will also seek to identify and evaluation
businesses opportunities and other strategic transactions on an ongoing basis with a view toward diversifying our business and
optimizing shareholder value.
Results of Operations
Three Months Ended September 30, 2019
compared to the Three Months Ended September 30, 2018
We had a net loss of $150,680 for the three
month period ended September 30, 2019, which was $651 less than our net loss of $151,331 for the three month period ended September
30, 2018. The change in our results over the two periods is a result of decreased interest
expense accrued on related party loans.
The following table summarizes key items
of comparison and their related increase (decrease) for the three month periods ended September 30, 2019 and 2018:
|
|
Three Months
Ended
September 30,
2019
|
|
|
Three Months
Ended
September 30,
2018
|
|
|
Percentage Increase
(Decrease) From
Three Month Period
Ended
September 30, 2018 to
Three Month Period
Ended September 30,
2019
|
|
General and administrative
|
|
$
|
17,089
|
|
|
$
|
18,040
|
|
|
|
(0.05
|
)%
|
Other (Income) Expense
|
|
|
(67
|
)
|
|
|
890
|
|
|
|
(92.47
|
)%
|
Interest expense
|
|
|
133,658
|
|
|
|
132,401
|
|
|
|
0.95
|
%
|
Net loss
|
|
$
|
150,680
|
|
|
$
|
151,331
|
|
|
|
(0.43
|
)%
|
Nine Months Ended September 30, 2019
compared to the Nine Months Ended September, 2018
We did not earn any revenues in the nine
months ended September 30, 2019 or September 30, 2018. Our lack of revenue is due to our inability to find better quality materials
for our production.
We had a net loss of $483,099 for the nine
month period ended September 30, 2019, which was $21,497 more than the net loss of $461,602 for the nine month period ended September
30, 2018. The change in our results over the two periods is a result of increased interest
expense..
The following table summarizes key items
of comparison and their related increase (decrease) for the nine month periods ended September 30, 2019 and 2018:
|
|
Nine Months
Ended
September 30,
2019
|
|
|
Nine Months
Ended
September 30,
2018
|
|
|
Percentage Increase
(Decrease) From
Nine Month Period
Ended
September 30, 2019 to
Nine Month Period
Ended
September 30, 2018
|
|
General and administrative
|
|
$
|
68,328
|
|
|
$
|
58,566
|
|
|
|
(16.67)
|
%
|
Other (Income) Expense
|
|
|
(67)
|
|
|
|
(22,620)
|
|
|
|
(99.70)
|
%
|
Interest expense
|
|
|
414,838
|
|
|
|
425,656
|
|
|
|
()
|
%
|
Net loss
|
|
$
|
483,099
|
|
|
$
|
461,602
|
|
|
|
4.65
|
%
|
Liquidity and Capital Resources
Our balance sheet as of September 30, 2019
reflects current assets of $6,095 and a working capital deficit in the amount of $9,074,608. Our current assets consisted of $6,095
in cash and cash equivalents. We have insufficient working capital to carry out our stated plan of operation for the next twelve
months.
Working Capital
|
|
At
September 30,
2019
|
|
|
At
December 31,
2018
|
|
Current assets
|
|
$
|
6,095
|
|
|
$
|
6,812
|
|
Current liabilities
|
|
|
9,080,703
|
|
|
|
8,906,320
|
|
Working capital (deficit)
|
|
$
|
(9,074,608
|
)
|
|
$
|
(8,899,508
|
)
|
As of September 30, 2019, we had accumulated
losses of $19,892,946 since our inception. We anticipate generating losses and, therefore, may be unable to continue operations
further in the future.
Cash Flows
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2019
|
|
|
2018
|
|
Net cash used in operating activities
|
|
$
|
(251,556
|
)
|
|
$
|
(69,591
|
)
|
Net cash provided by (used in) financing activities
|
|
|
(56,279
|
)
|
|
|
85,523
|
|
Foreign currency transaction
|
|
|
307,999
|
|
|
|
(38
|
)
|
Net increase in cash during period
|
|
$
|
164
|
|
|
$
|
15,894
|
|
Operating Activities
Net cash used in operating activities during
the nine months ended September 30, 2019 was $251,556, a 261.47% increase from the $69,591 net cash outflow during the nine months
ended September 30, 2018. The increase was a result of increased interest expense compounded
by an increase in accounts payable and accrued liability, and by an increase in amounts due to related parties. During
the nine months ended September 30, 2019 we had no sales and did not purchase any raw materials.
Financing Activities
Cash used in financing activities during
the nine months ended September 30, 2019 was $56,279, which was a 34.19% decrease from the $85,523 in cash provided by financing
activities during the nine months ended September 30, 2018. The decrease was a
result of decreased related party loans made during the most recent period, compounded by an increase in loan interest expense.
Plan of Operation
Our operating plan for the 12 months beginning
from October 1, 2019 is as follows:
• Continue to pursue potential financing
activities.
• The funds raised would be used to
(a) identify additional veins, (b) to re-start the mill, (c) re-test the mill, (d) develop expansion plans for our plant capacity,
(e) drilling additional holes near the concentration plant and (f) undertake at least three deep drill holes in the permit area.
• To re-commence greater milling operations
as soon as possible. This will involve re-hiring all personnel laid off as a result of the mining halt.
• Actively seek partnerships with
mining enterprises primarily active in the gold, silver and/or copper fields and subject to the general parameters described earlier
to increase our supply of raw material.
The extent of this program is dependent
on the success of the $3,000,000 financing efforts currently underway, as described earlier.
Accordingly, we estimate that our operating
expenses and working capital requirements for the next 12 months to be as follows:
Estimated Net Expenditures During The Next Twelve Months
|
|
|
|
|
General and administrative expenses
|
|
$
|
1,000,000
|
|
Exploration expenses: identify additional veins; re-start mill; re-test mill;
develop expansion plan for plant capacity
|
|
$
|
2,000,000
|
|
Total
|
|
$
|
3,000,000
|
|
To date we have relied on proceeds from
the sale of our shares and on loans from our directors and officers in order to sustain our basic minimum operating expenses; however,
we cannot guarantee that we will secure any further sales of our shares or that our related parties with provide us with any future
loans. We estimate that the cost of maintaining our current operations and reporting requirements will be approximately
$20,000 per month. Due to our cash position of $6,095 as of September 30, 2019, we estimate that we will require approximately
$240,000 to sustain our current operations for the next twelve months, or approximately $3,000,000 to execute our above described
exploration plan.
We are not aware of any known trends, demands,
commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or
decreasing in any material way.
Future Financings
We anticipate continuing to rely on equity
sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution
to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange
for debt or other financing to fund our planned business activities.
We presently do not have any arrangements
for additional financing for the expansion of our exploration operations, and no potential lines of credit or sources of financing
are currently available for the purpose of proceeding with our plan of operations.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, and capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies
Use of Estimates and Assumptions
The Company prepares its financial statements
in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets
and liabilities and 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.
Foreign Currency Adjustments
Assets and liabilities recorded in foreign
currencies are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates
of exchange prevailing during the year. Any translation adjustments are reflected as a separate component of stockholders’
equity (deficit) and have no effect on current earnings. Gains and losses resulting from foreign currency transactions are included
in current results of operations. During the nine months ended September 30, 2019 and 2018, the Company had aggregate foreign currency
translation gain (loss) of $(307,999) and $426,003, respectively.
Non-controlling Interests
Non-controlling interests in the Company’s
subsidiaries are reported as a component of equity, separate from the Company’s equity. Purchase or sale of equity interests
that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the minority
interest are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest
retained, if any, will be reported at fair value with any gain or loss recognized in earnings.
Revenue Recognition
Revenue is recognized when products are
shipped, title and risk of loss is passed to the customers and collection is reasonably assured. Payments received prior to the
satisfaction of above criteria are deferred.