Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The Selling Stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.
The Selling Stockholders may from time to time pledge or grant a security interest in some or all of the Shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell shares of Common Stock from time to time under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 amending the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus.
Upon the Company being notified in writing by a Selling Stockholder that any material arrangement has been entered into with a broker-dealer for the sale of Common Stock through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of each such Selling Stockholder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such the shares of Common Stock were sold, (iv)the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information set out or incorporated by reference in this prospectus, and (vi) other facts material to the transaction. In addition, upon the Company being notified in writing by a Selling Stockholder that a donee or pledgee intends to sell more than 500 shares of Common Stock, a supplement to this prospectus will be filed if then required in accordance with applicable securities law.
The Selling Stockholders also may transfer the shares of Common Stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
The Selling Stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of Securities will be paid by the Selling Stockholder and/or the purchasers. Each Selling Stockholder has represented and warranted to the Company that it acquired the securities subject to this registration statement in the ordinary course of such Selling Stockholder’s business and, at the time of its purchase of such securities such Selling Stockholder had no agreements or understandings, directly or indirectly, with any person to distribute any such securities.
The Company has advised each Selling Stockholder that it may not use shares registered on this Registration Statement to cover short sales of Common Stock made prior to the date on which this Registration Statement shall have been declared effective by the Commission. In addition, the Company has advised each Selling Stockholder that the Commission currently takes the position that coverage of short sales “against the box” prior to the effective date of the registration statement of which this prospectus is a part would be a violation of Section 5 of the Securities Act, as described in Item 65, Section A, of the Manual of Publicly Available Telephone Interpretations, dated July 1997, compiled by the Office of Chief Counsel, Division of Corporate Finance.
If a Selling Stockholder uses this prospectus for any sale of the Common Stock, it will be subject to the prospectus delivery requirements of the Securities Act. The Selling Stockholders will be responsible to comply with the applicable provisions of the Securities Act and Exchange Act, and the rules and regulations there-under promulgated, including, without limitation, Regulation M, as applicable to such Selling Stockholders in connection with re-sales of their respective shares under this Registration Statement.
The Company is required to pay all fees and expenses incident to the registration of the shares, but the Company will not receive any proceeds from the sale of the Common Stock. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.
The Company’s directors and executive officers are indemnified as provided by the DGCL and the Company’s Bylaws. Under Delaware law, director immunity from liability to a company or its shareholders from monetary liabilities applies automatically unless it is specifically limited by a company's articles of incorporation. Our articles of incorporation limit the liability of directors to the maximum extent permitted by Delaware law. This limitation of liability is subject to exceptions including intentional misconduct, obtaining an improper personal benefit and abdication or reckless disregard of director duties. Our articles of incorporation and bylaws provide that we may indemnify our directors, officers, employees and other agents to the fullest extent permitted by law. Our bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether the bylaws would permit indemnification. We currently do not have such an insurance policy.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, or otherwise, the Company has been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
The legality of the issuance of the shares offered in this prospectus will be passed upon for us by the Chiang Law Office, P.C., 101A Clay Street, Unit 286, San Francisco, CA 94111, Phone and FAX 415 882-7239882-7239.
The financial statements of Zhen Ding Resources Inc. as of December 31, 20132014 and 20122013 and for the years ended December 31, 2013,2014, and 20122013 included in this prospectus have been audited by GBH CPAs, PC of Houston, Texas, independent registered public accountants, as stated in its report appearing herein and elsewhere in this prospectus, and have been so included in reliance upon the report of this firm given upon their authority as experts in auditing and accounting.
We have filed with the Securities and Exchange Commission a registration statement on Form S-1 (including exhibits) under the Securities Act, with respect to the shares to be sold in this offering. This prospectus does not contain all the information set forth in the registration statement. For further information with respect to our company and the common stock offered in this prospectus, reference is made to the registration statement, including the exhibits filed thereto, and the financial statements and notes filed as a part thereof. With respect to each such document filed with the SEC as an exhibit to the registration statement, reference is made to the exhibit for a more complete description of the matter involved.
We intend to file quarterly and annual reports, proxy statements and other information with the SEC. You may read and copy any document that we file at the public reference facilities of the SEC in Washington, D.C. You may call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public from the SEC’s website at http://www.sec.gov.
| PAGE | Page |
InterimReport of Independent Registered Public Accounting Firm | | F-1 |
Consolidated Balance Sheets | | F-2 |
Consolidated Statements of Operations and Comprehensive Loss | | F-3 |
Consolidated Statements of Cash Flows | | F-4 |
Consolidated Statement of Deficit | | F-5 |
Notes to Consolidated Financial Statements | |
| |
| F-1 |
| |
| F-2 |
| |
| F-3 |
| |
| F-4 |
| |
Audited Financial Statements | |
| F-13 |
| |
| F-14 |
| |
| F-15 |
| |
| F-16 |
| |
| F-17 |
| |
| F-18F-6 |
To the Board of Directors and Stockholders of
Zhen Ding Resources Inc.
Montreal, Quebec
We have audited the accompanying consolidated balance sheets of Zhen Ding Resources Inc. as of December 31, 2014 and 2013 and the related consolidated statements of operations and comprehensive loss, deficit, and cash flows for each of the years then ended. Zhen Ding Resources Inc.’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements 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 consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an 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 consolidated 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 Zhen Ding Resources Inc. as of December 31, 2014 and 2013 and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that Zhen Ding Resources Inc. will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, Zhen Ding Resources Inc. has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ GBH CPAs, PC
GBH CPAs, PC
www.gbhcpas.com
Houston, Texas
April 16, 2015
Zhen Ding Resources Inc. |
(Formerly Robotech Inc.) |
|
As of September 30,December 31, 2014 and December 31, 2013 (Unaudited)
|
| | September 30, | | December 31, | | | | | | |
| | 2014 | | 2013 | | | 2014 | | 2013 | |
Assets | | | | | | | | | | |
| | | | | | | | | | |
Current Assets: | | | | | | | | | | |
Cash & cash equivalents | | $ | 19,060 | | | $ | 20,554 | | |
Accounts receivable, net | | 370,666 | | - | | |
Cash and cash equivalents | | | $ | 8,199 | | $ | 20,554 | |
Accounts receivable, net of allowance for doubtful accounts | | | 100,113 | | - | |
VAT receivables | | 157,061 | | 229,118 | | | 174,896 | | 229,118 | |
Inventory | | | - | | | | 98,045 | | |
Inventories | | | - | | 98,045 | |
Prepaid expenses and other current assets | | | 6,658 | | | | 2,763 | | | | 6,663 | | | 2,763 | |
Total current assets | | | 553,445 | | | | 350,480 | | | 289,871 | | 350,480 | |
| | | | | | | | | | | | | |
Property and equipment, net of accumulated depreciation | | | 2,102,742 | | | | 2,266,910 | | | 1,929,820 | | 2,266,910 | |
Construction in progress | | | 174,210 | | | | 203,121 | | | | 174,318 | | | 203,121 | |
| | | | | | | | | | |
Total assets | | $ | 2,830,397 | | | $ | 2,820,511 | | | $ | 2,394,009 | | $ | 2,820,511 | |
| | | | | | | | | | |
Liabilities and Equity (Deficit) | | | | | | | | | | |
| | | | | | | | | | |
Current Liabilities: | | | | | | | | | | |
Accounts payable and accrued liabilities | | $ | 442,905 | | | $ | 437,678 | | | $ | 349,955 | | $ | 437,678 | |
Accrued interest – related parties | | | 1,741,964 | | | | 1,329,942 | | | 1,885,345 | | 1,329,942 | |
Deferred revenues | | | 162,677 | | | | 328,285 | | | 163,779 | | 328,285 | |
Due to related parties | | | 622,593 | | | | 682,981 | | |
Due to related party | | | 766,672 | | 682,981 | |
Short-term debt – related parties | | | 3,587,330 | | | | 3,141,735 | | | 3,500,349 | | 3,141,735 | |
Current portion of long-term debt – related party | | | | 325,000 | | | - | |
Total current liabilities | | | 6,557,469 | | | | 5,920,621 | | | 6,991,100 | | 5,920,621 | |
| | | | | | | | | | |
Long-term debt-related parties | | | 324,800 | | | | 327,200 | | |
Long-term debt – related parties | | | | - | | | 327,200 | |
| | | | | | | | | | |
Total liabilities | | | 6,882,269 | | | | 6,247,821 | | | | 6,991,100 | | | 6,247,821 | |
| | | | | | | | | | | | | |
Equity (Deficit): | | | | | | |
Equity (Deficit) | | | | | | |
Common stock, 150,000,000 shares authorized, $0.0001 par value, 63,968,798 shares issued and outstanding | | | 6,397 | | | | 6,397 | | | 6,397 | | 6,397 | |
Additional paid-in capital | | | 12,762,875 | | | | 12,762,875 | | | 12,762,875 | | 12,762,875 | |
Subscriptions receivables | | | (5,431 | ) | | | (5,431 | ) | | (5,431 | ) | | (5,431 | ) |
Accumulated other comprehensive loss | | | (78,461 | ) | | | (95,402 | ) | | (79,538 | ) | | (95,402 | ) |
Accumulated deficit | | | (15,367,381 | ) | | | (14,892,446 | ) | | | (15,760,155 | ) | | | (14,892,446 | ) |
Total deficit attributable to Zhen Ding Resources Inc. | | | (2,682,001 | ) | | | (2,224,007 | ) | | (3,075,852 | ) | | (2,224,007 | ) |
Non-controlling interests | | | (1,369,871 | ) | | | (1,203,303 | ) | |
Non-controlling interest | | | | (1,521,239 | ) | | | (1,203,303 | ) |
| | | | | | | | | | | |
Total equity (deficit) | | | (4,051,872 | ) | | | (3,427,310 | ) | | | (4,597,091 | ) | | | (3,427,310 | ) |
| | | | | | | | | | | | | |
Total liabilities and equity (deficit) | | $ | 2,830,397 | | | $ | 2,820,511 | | | $ | 2,394,009 | | $ | 2,820,511 | |
The accompanying notes are an integral part of these consolidated financial statements.
Zhen Ding Resources Inc. |
(Formerly Robotech Inc.) |
|
For the Nine Months Ended September 30, 2014 and 2013
(Unaudited)
|
| | September 30, | | | September 30, | |
| | 2014 | | | 2013 | |
| | | | | | |
Revenues | | $ | 180,502 | | | $ | 56,314 | |
Cost of revenues (exclusive of items shown separately below) | | | (97,446 | ) | | | (34,918 | ) |
| | | | | | | | |
Gross profit | | | 83,056 | | | | 21,396 | |
| | | | | | | | |
Operating expenses: | | | | | | | | |
General and administrative | | | 400,239 | | | | 128,538 | |
Depreciation | | | 253,330 | | | | 21,530 | |
| | | | | | | | |
Total operating expenses | | | 653,569 | | | | 150,068 | |
| | | | | | | | |
| | | | | | | | |
Operating loss | | | (570,513 | ) | | | (128,672 | ) |
| | | | | | | | |
Other income (expenses) | | | | | | | | |
Interest expense | | | (402,676 | ) | | | (350,942 | ) |
Other income (expenses) | | | 324,426 | | | | (233 | ) |
| | | | | | | | |
Total other expenses | | | (78,250 | ) | | | (351,175 | ) |
| | | | | | | | |
Net loss | | | (648,763 | ) | | | (479,847 | ) |
| | | | | | | | |
Loss attributable to non-controlling interests | | | 173,828 | | | | 129,013 | |
| | | | | | | | |
Net loss attributable to Zhen Ding Resources Inc. | | $ | (474,935 | ) | | $ | (350,834 | ) |
| | | | | | | | |
Basic and diluted loss per common share | | $ | (0.01 | ) | | $ | (0.01 | ) |
| | | | | | | | |
Basic and diluted weighted average number | | | | | | | | |
of common shares outstanding | | | 63,968,798 | | | | 63,968,798 | |
| | | | | | | | |
| | | | | | | | |
Comprehensive loss: | | | | | | | | |
Net loss | | $ | (648,763 | ) | | $ | (479,847 | ) |
Other comprehensive loss: | | | | | | | | |
Foreign currency translation adjustments | | | 24,201 | | | | (52,865 | ) |
Total comprehensive loss | | | (624,562 | ) | | | (532,712 | ) |
Comprehensive loss attributable to non-controlling interest | | | 166,568 | | | | 144,873 | |
| | | | | | | | |
Comprehensive loss attributable to Zhen Ding Resources Inc. | | $ | (457,994 | ) | | $ | (387,839 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
Zhen Ding Resources Inc. | |
(Formerly Robotech Inc.) | |
| |
For the Nine Months Ended September 30,years ended December 31, 2014 and 2013 (Unaudited)
| |
| | | | | | |
| | | | | | |
| | 2014 | | | 2013 | |
Cash flows from operating activities | | | | | | |
Net loss | | $ | (648,763 | ) | | $ | (479,847 | ) |
Adjustment to reconcile net loss to net cash provided by (used in) operating activities: | | | | | | | | |
Depreciation | | | 253,019 | | | | 36,417 | |
Change in operating assets and liabilities | | | | | | | | |
Accounts receivables | | | (369,178 | ) | | | - | |
Other receivables | | | - | | | | 1,928,400 | |
VAT receivables | | | 70,463 | | | | (153,280 | ) |
Inventory | | | 97,446 | | | | (338,518 | ) |
Prepaid expenses and other current assets | | | (6,667 | ) | | | 191,896 | |
Accounts payables and accrued liabilities | | | 8,060 | | | | (40,779 | ) |
Accrued interest – related parties | | | 422,048 | | | | 288,733 | |
Deferred revenues | | | (162,600 | ) | | | (61,295 | ) |
Net cash provided by (used in) operating activities | | | (336,172 | ) | | | 1,371,727 | |
| | | | | | | | |
Cash flows from investing activities | | | | | | | | |
Payments for purchases of property and equipment | | | - | | | | (83,875 | ) |
Payments for construction in progress | | | (77,826 | ) | | | (229,700 | ) |
Net cash provided by (used in) investing activities | | | (77,826 | ) | | | (313,575 | ) |
| | | | | | | | |
Cash flows from financing activities | | | | | | | | |
Net change in advance from related parties | | | (55,447 | ) | | | 29,353 | |
Payments on short-term debt | | | - | | | | (2,249,800 | ) |
Proceeds from borrowings on short-term debt – related parties | | | 467,991 | | | | 1,112,729 | |
Net cash provided by (used in) financing activities | | | 412,544 | | | | (1,107,718 | ) |
| | | | | | | | |
Foreign currency translations | | | (40 | ) | | | 1,671 | |
| | | | | | | | |
Net change in cash | | | (1,494 | ) | | | (47,895 | ) |
| | | | | | | | |
Cash - beginning of the period | | | 20,554 | | | | 96,874 | |
| | | | | | | | |
Cash - end of the period | | $ | 19,060 | | | $ | 48,979 | |
| | | | | | | | |
Supplement cash flows information: | | | | | | | | |
Cash paid for interest | | $ | - | | | $ | - | |
Cash paid for income tax | | $ | - | | | $ | - | |
| | | | | | | | |
Non-cash investing and financing activities: | | | | | | | | |
Reclassification of construction in progress to property and equipment | | $ | 105, 280 | | | $ | - | |
Depreciation capitalized in inventory | | $ | - | | | $ | 191,451 | |
| | | | | | |
| | 2014 | | | 2013 | |
| | | | | | |
Revenues | | $ | 648,550 | | | $ | 56,560 | |
Cost of revenues | | | (471,835 | ) | | | (812,405 | ) |
| | | | | | | | |
Gross profit | | | 176,715 | | | | (755,845 | ) |
| | | | | | | | |
Operating expenses: | | | | | | | | |
General and administrative | | | 565,289 | | | | 248,270 | |
Depreciation | | | 257,778 | | | | 27,065 | |
| | | | | | | | |
Total operating expenses | | | 823,067 | | | | 275,335 | |
| | | | | | | | |
| | | | | | | | |
Operating loss | | | (646,352 | ) | | | (1,031,180 | ) |
| | | | | | | | |
Other expenses: | | | | | | | | |
Interest expense | | | (545,840 | ) | | | (472,123 | ) |
Other expenses | | | (253 | ) | | | (718 | ) |
| | | | | | | | |
Total other expenses | | | (546,093 | ) | | | (472,841 | ) |
| | | | | | | | |
Net loss | | | (1,192,445 | ) | | | (1,504,021 | ) |
| | | | | | | | |
Loss attributable to non-controlling interests | | | 324,736 | | | | 316,692 | |
| | | | | | | | |
Net loss attributable to Zhen Ding Resources Inc. | | $ | (867,709 | ) | | $ | (1,187,329 | ) |
| | | | | | | | |
Basic and diluted loss per common share | | $ | (0.01 | ) | | $ | (0.02 | ) |
| | | | | | | | |
Basic and diluted weighted average number | | | | | | | | |
of common shares outstanding | | | 63,968,798 | | | | 63,869,840 | |
| | | | | | | | |
| | | | | | | | |
Comprehensive loss: | | | | | | | | |
Net loss | | $ | (1,192,445 | ) | | $ | (1,504,021 | ) |
Other comprehensive loss: | | | | | | | | |
Foreign currency translation adjustments | | | 22,664 | | | | (77,510 | ) |
Total comprehensive loss | | | (1,169,781 | ) | | | (1,581,531 | ) |
Comprehensive loss attributable to non-controlling interest | | | 317,936 | | | | 339,945 | |
| | | | | | | | |
Comprehensive loss attributable to Zhen Ding Resources Inc. | | $ | (851,845 | ) | | $ | (1,241,586 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
Zhen Ding Resources Inc. |
|
For the years ended December 31, 2014 and 2013 |
| | 2014 | | | 2013 | |
Cash flows from operating activities | | | | | | |
Net loss | | $ | (1,192,445 | ) | | $ | (1,504,021 | ) |
Adjustment to reconcile net loss to net cash used in operating activities: | | | | | | | | |
Bad debt expense | | | 100,042 | | | | - | |
Inventory write-offs | | | 226,088 | | | | 777,335 | |
Depreciation | | | 340,458 | | | | 304,908 | |
Change in operating assets and liabilities | | | | | | | | |
Accounts receivables | | | (197,529 | ) | | | - | |
VAT receivables | | | 52,746 | | | | (182,143 | ) |
Inventories | | | (128,583 | ) | | | (874,061 | ) |
Prepaid expenses and other current assets | | | (6,671 | ) | | | 67,299 | |
Accounts payables and accrued liabilities | | | (75,973 | ) | | | (80,646 | ) |
Accrued interest – related parties | | | 564,803 | | | | 423,508 | |
Deferred revenues | | | (162,700 | ) | | | (61,562 | ) |
Net cash used in operating activities | | | (479,764 | ) | | | (1,129,383 | ) |
| | | | | | | | |
Cash flows from investing activities | | | | | | | | |
Repayment from (advance to) YJSLC | | | - | | | | 1,936,800 | |
Payments for purchases of property, equipment and other assets | | | - | | | | (72,071 | ) |
Payments for construction in progress | | | - | | | | (103,521 | ) |
Net cash provided by (used in) investing activities | | | - | | | | 1,761,208 | |
| | | | | | | | |
Cash flows from financing activities | | | | | | | | |
Net change in advance from related parties | | | 88,393 | | | | 159,069 | |
Repayment on short-term debt | | | - | | | | (2,340,300) | |
Proceeds from borrowings on short-term debt – related parties | | | 379,058 | | | | 1,471,268 | |
Net cash provided by (used in) financing activities | | | 467,451 | | | | (709,963 | ) |
| | | | | | | | |
Foreign currency translations | | | (42 | ) | | | 1,818 | |
| | | | | | | | |
Net change in cash | | | (12,355 | ) | | | (76,320 | ) |
| | | | | | | | |
Cash - beginning of the year | | | 20,554 | | | | 96,874 | |
| | | | | | | | |
Cash - end of the year | | $ | 8,199 | | | $ | 20,554 | |
| | | | | | | | |
Supplement cash flows information: | | | | | | | | |
Cash paid for interest | | $ | - | | | $ | - | |
Cash paid for income tax | | $ | - | | | $ | - | |
| | | | | | | | |
Non-cash investing and financing activities: | | | | | | | | |
Reclassification of construction in progress to property and equipment | | $ | 27,471 | | | $ | 197,223 | |
Value of shares issued and change of par value as the result of share exchange | | | - | | | | 57,450 | |
The accompanying notes are an integral part of these consolidated financial statements.
Zhen Ding Resources Inc. | |
| |
For the years ended December 31, 2014 and 2013 | |
| | Common Stock | | | Additional Paid-in | | | Subscription | | | Accumulated Other Comprehensive | | | Accumulated | | | Non-controlling | | | Total | |
| | Shares | | | Par | | | Capital | | | Receivables | | | Income | | | Deficit | | | Interest | | | Deficit | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balances, December 31, 2012 | | | 63,846,358 | | | $ | 63,847 | | | $ | 12,705,425 | | | | (5,431 | ) | | | (41,145 | ) | | | (13,705,117 | ) | | | (863,358 | ) | | | (1,845,779 | ) |
Share issued and change of par value as the result of shares exchange | | | 122,440 | | | | (57,450 | ) | | | 57,450 | | | | - | | | | - | | | | - | | | | - | | | | - | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | - | | | | (54,257 | ) | | | - | | | | (23,253 | ) | | | (77,510 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,187,329 | ) | | | (316,692 | ) | | | (1,504,021 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balances, December 31, 2013 | | | 63,968,798 | | | $ | 6,397 | | | $ | 12,762,875 | | | $ | (5,431 | ) | | $ | (95,402 | ) | | $ | (14,892,446 | ) | | $ | (1,203,303 | ) | | $ | (3,427,310 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | - | | | | 15,864 | | | | - | | | | 6,800 | | | | 22,664 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (867,709 | ) | | | (324,736 | ) | | | (1,192,445 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balances, December 31, 2014 | | | 63,968,798 | | | $ | 6,397 | | | $ | 12,762,875 | | | $ | (5,431 | ) | | $ | (79,538 | ) | | $ | (15,760,155 | ) | | $ | (1,521,239 | ) | | $ | (4,597,091 | ) |
The accompanying notes are an integral part of these consolidated financial statements
Zhen Ding Resources Inc.
(Formerly Robotech Inc.)
(Unaudited)
Note 1. Description of Business
Zhen Ding Resources Inc. (formerly Robotech Inc.) (the “Company”, “Zhen Ding DE”, or “ZDRI”) was incorporated in State of Delaware in September 1996 and began its business activities in the field of development and marketing of specialized technological equipment. In 2003, the Company abandoned its business because it was not able to reach the Company’s financing goals. Since 2004, several potential businesses were investigated by the Company as candidates for acquisition but for various reasons none were pursued. In 2008, negotiations were entered into with intent to acquire a solar energy company operating in the North African region. However, due to the inability to arrange for adequate funding, discussions were terminated. In the past decade there has been a worldwide sharp recovery in the price and interest in precious metals, minerals and industrial commodities fueled to a large degree by the economic awakening of the two most populous nations, China and India. In early 2010, the business direction of the Company was changed to seek opportunities from this revival and the Company began to focus particularly on searching for companies engaged in the mining of gold, silver and copper.
The Company entered into negotiations with Zhen Ding Resources Inc. (a Nevada entity) (“Zhen Ding NV”), which 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”).
On January 10, 2012, the shareholders of the Company approved a 100-for-1 reverse stock split of the Company’s common stock, affecting 12,242,972 shares that had issued to that date and reducing the number of shares outstanding to 122,440. The Company’s financial statements have been retroactively restated to incorporate the effect of the stock split.
In January 2012, the Board of Directors, with authorization from the majority of the shareholders of the Company, made an offer to the shareholders of Zhen Ding NV, to acquire, at the very least, the majority of their common shares, and, if available, up to 100% ownership.
On March 8, 2012, the Company changed its name from Robotech Inc. to Zhen Ding Resources, Inc., in anticipation of the acquisition of Zhen Ding NV. An application was made to FINRA to reflect this name change and the new name was subsequently accepted by FINRA.
During 2012, a total of 50,746,358 shares of the issued and outstanding common stock of Zhen Ding NV were tendered to the Company. This represented 79% of the ownership of Zhen Ding NV.
On August 13, 2013, an additional 13,100,000 shares of Zhen Ding NV were tendered to the Company. 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 the Company.
On October 23, 2013, the Company issued 122,440 shares of its common stock, on a one-for-one basis, to the tendering shareholders of Zhen Ding NV and made Zhen Ding NV a wholly owned subsidiary of the Company.
The Share Exchange was accounted for as a reverse merger rather than a business combination, wherein ZDRI is considered the acquirer for accounting and financial reporting purposes. The consolidated statements of operations reflect the activities of ZDRI. On October 28, 2013, the Company dissolved Zhen Ding NV by merging it into the Company.
The Company now through itsZhen Ding NV’s wholly owned subsidiary, 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 the 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.
Now, the Company’s primary activity, through JXZD, is ore processing and production. The Company focus in the growth regions mostly in China and Southeast Asia geographically.
Note 2. Summary of Significant Accounting Policies
The summary of significant accounting policies presented below is designed to assist in understanding Thethe 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 unaudited consolidated financial statements of the Company and accompanying notes are prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all of the information and notes necessary for comprehensive financial statements and should be read in conjunction with our audited financial statements for the years ended December 31, 2013 and 2012 included in this Registration Statement on Form S-1.
The unaudited consolidated financial statements include the accounts of the Company, and its wholly subsidiaries Z&W CA and its majority owned subsidiaries 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.
Foreign Currency Adjustments
The Company's functional currency for all operations worldwide is the U.S. dollar. Nonmonetary assets and liabilities are translated at historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year. Income statement accounts are translated at average rates for the year. Any translation adjustments are reflected as a separate component of stockholders’ equity and have no effect on current earnings. Gains and losses resulting from foreign currency transactions are included in current results of operations. AggregateDuring the years ended December 31, 2014 and 2013, the Company had aggregate foreign currency translation gains (losses) of $22,664 and losses included in other comprehensive loss totaled a gain of $24,201 during nine months ended September 30, 2014 and a loss of $52,865 during nine months ended September 30, 2013.($77,510) 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.
Accounts Receivable
Accounts receivable are stated at the amount the Company expects to collect. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectibilitycollectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. Past due balances over 90 days and other higher risk amounts are reviewed individually for collectibility.collectability. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. At September 30,As of December 31, 2014, the Company believesrecorded allowances of $100,042 for doubtful accounts from certain sales that alloccurred in August and November 2014 but had not been collected.
Inventories mainly consists of finished goods. Finished goods, are primarily determined using weighted average cost. Cost includeswork-in-process, and raw materials labor, and manufacturing overhead related to the purchase and production of inventories. The Company continuously reviews its inventory to ensure inventories are valued at the lower of average production cost and net realizable value.
The Company records the costs of ore stacked on its leach pads and in process at its production sites as heap leach ore and working process inventories measured at the lower of cost and estimated net realizable value in inventory. These costs are charged to earnings and included in cost of revenues on the basis of tons of precious mineral sold. The estimates and assumptions used in the measurement of heap leach ore and work-in-process inventories include quantities of ore stacked on leach pads, recoverable tons of precious minerals contained in ore stacked on leach pads, recoverable tons of precious minerals in the mill processing circuits and the price expected to be realized when the tons of precious minerals are recovered.
At December 31, 2013, the average costs of inventories were significantly below their net realizable values. Therefore,If these estimates or assumptions prove to be inaccurate, the Company wrotecould be required to write down the carrying amounts of its inventory to their net realizable values.heap leach ore and work-in-process inventories, which would reduce the Company’s earnings and working capital.
Property and Equipment
Property and equipment is stated at the historical cost, less accumulated depreciation. Depreciation on property, plant and equipment is provided using the straight-line method over the estimated useful lives of the assets for both financial and income tax reporting purposes as follows:
Buildings | 20 years |
Motor vehicles | 5 years |
Production and office Equipment | 5 years |
Expenditures for normal repairs and maintenance are charged to expense as incurred. Significant renewals and improvements are capitalized. The costs and related accumulated depreciation of assets retired or otherwise disposed of are eliminated from the accounts, and any resulting gain or loss is recognized in the year of disposal.
Impairment of Long-Lived Assets
Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be realizable or at a minimum annually during the fourth quarter of the year. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying value to determine if an impairment of such asset is necessary. The effect of any impairment would be to expense the difference between the fair value of such asset and its carrying value.
Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company computes a deferred tax asset for net operating losses carried forward. The potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
Fair Values of Financial Instruments
Management believes that the carrying amounts of the Company’s financial instruments, consisting primarily of cash and accounts payable, approximated their fair values as of September 30,December 31, 2014 and December 31, 2013, due to their short-term nature.
Non-controlling Interest
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.
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.
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.
Subsequent Events
The Company evaluated events subsequent to September 30,December 31, 2014 through the date the financial statements were issued for disclosure consideration.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.
ASU 2014-10 Topic 915 Development Stage Entities
The objective of the guidance is to reduce cost and complexity in the financial reporting system by eliminating inception-to-date information from the financial statements of development stage entities. The new standard eliminates the concept of a development stage entity (“DSE”) from U.S. GAAP. Therefore, the current incremental reporting requirements for a DSE, including inception-to-date information, will no longer apply. This standard is effective for annual reporting periods beginning after December 15, 2014. The Company has elected to early adopt this guidance.
ASU 3013-05 Topic 830 Accounting for cumulative translation adjustments
The standards amends cumulative translation adjustment derecognition guidance in particular when (i) an entity ceases to have a controlling financial interest in certain subsidiaries or groups of assets within a foreign entity, or (ii) there is a loss of a controlling financial interest in a foreign entity or a step acquisition involving an equity method investment that is a foreign entity. This is effective for public entities for years, and interim periods within those years, beginning after December 15, 2013. The Company has elected to early adopt this guidance.
ASU 2013-11 Topic 740 Accounting for cumulative translation adjustmentsIncome taxes
The standard amends guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This is effective for public entities for years, and interim periods within those years, beginning after December 15, 2013. The Company has elected to early adopt this guidance.
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 fiscal year. As of September 30,December 31, 2014, the Company has generated minimal revenues, hashad accumulated losses of $15,760,155 since inception and had a working capital deficit and has accumulated losses of $15,367,381 since inception.$6,701,229. 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. VAT Receivables
As of September 30,December 31, 2014 and December 31, 2013, the Company had VAT receivables of $157,061$174,896 and $229,118, respectively. The VAT receivables isare the input tax of VAT to the purchased materials and property and equipment.
As of September 30,December 31, 2014 and December 31, 2013, the Company had inventory of $0 and $98,045, respectively. The inventory is finished goods, the processed ore powder. At December 31, 2014 and 2013, the net realizable value of inventories were significantly below average cost. Therefore, the Company wrote down $226,088 and $777,335 of its inventory to their net realizable value.
Note 6. Property and Equipment
Property and equipment consistconsisted of the following:
| | September 30, | | | December 31, | |
| | 2014 | | | 2013 | |
| | | | | | |
Buildings | | $ | 1,616,218 | | | $ | 1,353,844 | |
Motor Vehicles | | | 124,522 | | | | 68,080 | |
Production and Office Equipment | | | 1,148,471 | | | | 1,382,691 | |
Subtotal | | | 2,889,211 | | | | 2,804,615 | |
Less: Accumulated Depreciation | | | (786,469 | ) | | | (537,705 | ) |
Property and Equipment, Net | | $ | 2,102,742 | | | $ | 2,266,910 | |
| | December 31, | | | December 31, | |
| | 2014 | | | 2013 | |
| | | | | | |
Buildings | | $ | 1,358,788 | | | $ | 1,353,844 | |
Motor Vehicles | | | 65,368 | | | | 68,080 | |
Production and Office Equipment | | | 1,379,793 | | | | 1,382,691 | |
Subtotal | | | 2,803,949 | | | | 2,804,615 | |
Less: Accumulated Depreciation | | | (874,129 | ) | | | (537,705 | ) |
Property and Equipment, Net | | $ | 1,929,820 | | | $ | 2,266,910 | |
Depreciation for the nine monthsyears ended September 30,December 31, 2014 and 2013 is summarized as follows:
| | 2014 | | | 2013 | |
| | | | | | |
Statement of operations: | | | | | | |
Operating expenses | | $ | 257,778 | | | $ | 27,065 | |
Cost of revenues | | | 82,680 | | | | 248,280 | |
Depreciation expense | | | 340,458 | | | | 275,345 | |
Balance sheet: | | | | | | | | |
Capitalized in inventory | | | - | | | | 29,563 | |
Total depreciation | | $ | 340,458 | | | $ | 304,908 | |
| | 2014 | | | 2013 | |
| | | | | | |
Statement of operations | | | | | | |
Operating expenses | | $ | 253,019 | | | $ | 21,530 | |
Cost of revenues | | | - | | | | 14,887 | |
Total depreciation expense | | | 253,019 | | | | 36,417 | |
Balance sheet: | | | | | | | | |
Capitalized in inventory | | | - | | | | 191,451 | |
Total depreciation | | | 253,019 | | | | 227,868 | |
In the PRC, land use rights, are the legal rights for an entity to use land for a fixed period of time. The PRC adopts dual land tenure system under which land ownership is independent of land use rights. The land is either owned by the state (“State Land”) or by rural collective economic organization (“Collective Land”).
As of September 30,December 31, 2014, the Company does not have any land use rights agreements with the PRC for the office buildings owned by the Company. The Government owns the land where the Company’s buildings are located and allows the Company free usage of the land.
Note 7. Construction in Progress
As of September 30,December 31, 2014 and December 31, 2013, the Company had Construction in progress (“CIP”) of $174,210$174,318 and $203,121, respectively. The CIP is mainly comprised of funds spent by the Company to build an office building and a reservoir dam.
Note 8. Related Party Transactions
Accounts payables
As of September 30,December 31, 2014 and December 31, 2013, the Company had payables of $622,593$766,672 and $682,981, respectively, to Xinzhou Gold for the fixed assets and construction in progress transferring and routine transactions that Xinzhou Gold supplies ore to JXZD.Gold. These payables bear no interest, are unsecured and are due on demand.
Short-term and long-term debt
As of September 30,December 31, 2014 and December 31, 2013, the Company had short-term debts to related parties of $3,587,330$3,500,349 and $3,141,735, respectively. The details of the debts are described as below:below.
At December 31, 2014:
At September 30, 2014:
| | | | | Annual | | | |
Name | Relationship to the Company | | Amount | | | Interest Rate | | Start Date | Maturity | Relationship to the Company | | Amount | | Annual Interest Rate | Start Date | Maturity |
Wei De Gang | CEO & Legal Person of JXZD | | $ | 3,173,296 | | | | 15 | % | 05/31/12 | On Demand | CEO & Legal Person of JXZD | | $ | 2,905,515 | | 15% | May 31, 2012 | On Demand |
Zhao Yan Ling | Former Office Manager in JXZD, wife of Zhou Zhi Bin | | | 17,052 | | | | 15 | % | 01/01/12 | On Demand | Former Office Manager in JXZD, wife of Zhou Zhi Bin | | | 17,063 | | 15% | January 1, 2012 | On Demand |
Zhou Zhi Bin | Former CEO & Legal Person of JXZD | | | 8,120 | | | | 15 | % | 01/01/12 | On Demand | Former CEO & Legal Person of JXZD | | | 8,125 | | 15% | January 1, 2012 | On Demand |
Tang Yong Hong | Manager of JXZD | | | 169,327 | | | | 15 | % | 02/28/14 | 02/28/15 | Manager of JXZD | | | 334,622 | | 15% | February 28, 2014 | February 28, 2015 |
Yan Chun Yan | Accountant of JXZD | | | 2,682 | | | | 15 | % | | Accountant of JXZD | | 3,171 | | 15% | August 31, 2014 | August 31, 2015 |
Wen Mei Tu | | President & shareholder of ZDRI | | 154,965 | | 12% | Various | Various |
Importation Tresor Plus Inc | Shareholder of ZDRI | | | 30,000 | | | | 12 | % | 07/09/12 | On Demand | Shareholder of ZDRI | | 30,000 | | 12% | July 9, 2012 | On Demand |
Wen Mei Tu | President & shareholder of ZDRI | | | 25,000 | | | | 12 | % | 09/07/12 | On Demand | |
Wen Mei Tu | President & shareholder of ZDRI | | | 24,965 | | | | 12 | % | 02/27/13 | On Demand | |
Wen Mei Tu | President & shareholder of ZDRI | | | 20,000 | | | | 12 | % | 06/11/13 | On Demand | |
Wen Mei Tu | President & shareholder of ZDRI | | | 20,000 | | | | 12 | % | 09/06/13 | 09/06/14 | |
Wen Mei Tu | President & shareholder of ZDRI | | | 15,000 | | | | 12 | % | 10/23/13 | 12/26/14 | |
Wen Mei Tu | President & shareholder of ZDRI | | | 15,000 | | | | 12 | % | 01/30/14 | 01/30/15 | |
Wen Mei Tu | President & shareholder of ZDRI | | | 15,000 | | | | 12 | % | 04/18/14 | 04/18/15 | |
Wen Mei Tu | President & shareholder of ZDRI | | | 15,000 | | | | 12 | % | 05/23/14 | 05/23/15 | |
Wen Mei Tu | President & shareholder of ZDRI | | | 15,000 | | | | 12 | % | 09/01/14 | 09/01/15 | |
Tony Ng Man Kin | | Shareholder of ZDRI | | 25,000 | | 12% | February 27, 2013 | February 27, 2014 |
Victor Sun | Consultant & shareholder of ZDRI | | | 3,923 | | | | 0 | % | 01/01/13 | On Demand | Consultant & shareholder of ZDRI | | 3,923 | | 0% | January 1, 2013 | On Demand |
Helen Chen | President of Z&W | | | 17,965 | | | | 0 | % | 01/01/11 | On Demand | President of Z&W CA | | | 17,965 | | 0% | January 1, 2011 | On Demand |
Total | | | $ | 3,587,330 | | | | | | | | | $ | 3,500,349 | | | | |
| | | | Annual | | | | | | Annual | |
Name | Relationship to the Company | | Amount | | Interest Rate | | Start Date | Maturity | Relationship to the Company | | Amount | | Interest Rate | Start Date | Maturity |
Wei De Gang | CEO & Legal Person of JXZD | | $ | 2,959,524 | | 15% | | 05/31/12 | 05/31/14 | CEO & Legal Person of JXZD | | $ | 2,959,524 | | 15% | May 31, 2012 | On Demand |
Zhao Yan Ling | Former Office Manager in JXZD, wife of Zhou Zhi Bin | | | 17,178 | | 15% | | 01/01/12 | On Demand | Former Office Manager in JXZD, wife of Zhou Zhi Bin | | | 17,178 | | 15% | January 1, 2012 | On Demand |
Zhou Zhi Bin | Former CEO & Legal Person of JXZD | | | 8,180 | | 15% | | 01/01/12 | On Demand | Former CEO & Legal Person of JXZD | | | 8,180 | | 15% | January 1, 2012 | On Demand |
Wen Mei Tu | | President & shareholder of ZDRI | | 79,965 | | 12% | Various |
Importation Tresor Plus Inc | Shareholder of ZDRI | | 30,000 | | 12% | | 07/09/12 | On Demand | Shareholder of ZDRI | | 30,000 | | 12% | July 9, 2012 | On Demand |
Wen Mei Tu | President & shareholder of ZDRI | | 25,000 | | 12% | | 09/07/12 | On Demand | |
Wen Mei Tu | President & shareholder of ZDRI | | 24,965 | | 12% | | 02/27/13 | 02/27/14 | |
Wen Mei Tu | President & shareholder of ZDRI | | 20,000 | | 12% | | 06/11/13 | 06/11/14 | |
Wen Mei Tu | President & shareholder of ZDRI | | 20,000 | | 12% | | 09/06/13 | 09/06/14 | |
Wen Mei Tu | President & shareholder of ZDRI | | 15,000 | | 12% | | 10/23/13 | 12/26/14 | |
Tony Ng Man Kin | | Shareholder of ZDRI | | 25,000 | | 12% | February 27, 2013 | February 27, 2014 |
Victor Sun | Consultant & shareholder of ZDRI | | 3,923 | | 0% | | 01/01/13 | On Demand | Consultant & shareholder of ZDRI | | 3,923 | | 0% | January 1, 2013 | On Demand |
Helen Chen | President of Z&W | | | 17,965 | | 0% | | 01/01/11 | On Demand | President of Z&W CA | | | 17,965 | | 0% | January 1, 2011 | On Demand |
Total | | | $ | 3,141,735 | | | | | | | $ | 3,141,735 | | | |
As of September 30,December 31, 2014 and December 31, 2013, the Company had long-term debtsother debt to a related party of $324,800$325,000 and $327,200, respectively. At December 31, 2014, the debt became current and it is due in 2015.
In addition, as of September 30,December 31, 2014 and December 31, 2013, the Company hashad accrued interest payable with annual interest rate of 15% to the related parties of $1,741,964$1,885,345 and $1,329,942, respectively.
Note 9. Deferred Revenues
As of September 30,December 31, 2014 and December 31, 2013, the Company had deferred revenue of $162,677$163,779 and $328,285, respectively, related to advances that the Company received from its customers.
Note 10. Contingencies
Concentration of Credit Risk
Substantially all of the Company’s bank accounts are in banks located in The People’s Republic of China and are not covered by protection similar to that provided by the FDIC on funds held in United States banks.
Vulnerability Due to Operations in PRC
The Company’s operations in China may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than twenty years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective in the future.
Note 12.11. Equity Transactions
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 Zhen Ding DE.
On October 23, 2013, Zhen Ding DE issued 122,440 shares of its common stock, on a one-for-one basis, to the tendering shareholders of Zhen Ding NV and made Zhen Ding NV a wholly owned subsidiary of Zhen Ding DE.
To the Board of Directors and Stockholders of
Zhen Ding Resources Inc.
(formerly Robotech Inc.)
Montreal, Quebec
We have audited the accompanying consolidated balance sheets of Zhen Ding Resources Inc. (“Zhen Ding” or the “Company”) (formerly Robotech Inc.) as of December 31, 2013 and 2012 and the related consolidated statements of operations and comprehensive loss, changes in equity and cash flows for each of the years then ended. Zhen Ding’s management is responsible for these consolidated financial statements. Our responsibility is to express the ended an opinion on these consolidated financial statements 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. The Company is not required to have, nor were we engaged to perform, an 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 financial position of Zhen Ding as of December 31, 2013 and 2012 and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that Zhen Ding will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, Zhen Ding has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ GBH CPAs, PC
GBH CPAs, PC
www.gbhcpas.com
Houston, Texas
November 3, 2014
Zhen Ding Resources Inc. | |
(Formerly Robotech Inc.) | |
| |
As of December 31, 2013 and 2012 | |
| | | | | | |
| | December 31, | | | December 31, | |
| | 2013 | | | 2012 | |
Assets | | | | | | |
| | | | | | |
Current Assets: | | | | | | |
Cash & cash equivalents | | $ | 20,554 | | | $ | 96,874 | |
Other receivable | | | - | | | | 1,899,600 | |
VAT receivable | | | 229,118 | | | | 36,151 | |
Inventory | | | 98,045 | | | | - | |
Prepaid expenses and other current assets | | | 2,763 | | | | 68,873 | |
Total current assets | | | 350,480 | | | | 2,101,498 | |
| | | | | | | | |
Property and equipment, net of accumulated depreciation | | | 2,266,910 | | | | 2,222,711 | |
Construction in progress | | | 203,121 | | | | 288,443 | |
Other assets | | | - | | | | 12,664 | |
Total assets | | $ | 2,820,511 | | | $ | 4,625,316 | |
| | | | | | | | |
Liabilities and Equity (Deficit) | | | | | | | | |
| | | | | | | | |
Current Liabilities: | | | | | | | | |
Accounts payable and accrued liabilities | | $ | 437,678 | | | $ | 503,859 | |
Accrued interest-related parties | | | 1,329,942 | | | | 871,890 | |
Deferred revenues | | | 328,285 | | | | 378,029 | |
Due to related parties | | | 682,981 | | | | 504,841 | |
Short-term debt | | | - | | | | 2,216,200 | |
Short-term debt-related parties | | | 3,141,735 | | | | 1,996,276 | |
Total current liabilities | | | 5,920,621 | | | | 6,471,095 | |
| | | | | | | | |
Long-term debt-related parties | | | 327,200 | | | | - | |
Total liabilities | | | 6,247,821 | | | | 6,471,095 | |
| | | | | | | | |
Equity (Deficit): | | | | | | | | |
Common stock, 150,000,000 and 100,000,000 shares authorized, $0.0001 and $0.001 par value, 63,968,798 and 63,846,358 shares issued and outstanding, respectively | | | 6,397 | | | | 63,847 | |
Additional paid-in capital | | | 12,762,875 | | | | 12,705,425 | |
Subscriptions receivable | | | (5,431 | ) | | | (5,431 | ) |
Accumulated other comprehensive loss | | | (95,402 | ) | | | (41,145 | ) |
Accumulated deficit | | | (14,892,446 | ) | | | (13,705,117 | ) |
Total deficit attributable to Zhen Ding Resource Inc. | | | (2,224,007 | ) | | | (982,421 | ) |
Non-controlling interests | | | (1,203,303 | ) | | | (863,358 | ) |
| | | | | | | | |
Total equity (deficit) | | | (3,427,310 | ) | | | (1,845,779 | ) |
| | | | | | | | |
Total liabilities and equity (deficit) | | $ | 2,820,511 | | | $ | 4,625,316 | |
The accompanying notes are an integral part of these consolidated financial statements.
Zhen Ding Resources Inc. |
(Formerly Robotech Inc.) |
|
For the Years Ended December 31, 2013 and 2012 |
| | 2013 | | | 2012 | |
| | | | | | |
Revenues | | $ | 56,560 | | | $ | 2,101,217 | |
Cost of revenues (exclusive of items shown separately below) | | | (812,405 | ) | | | (2,084,968 | ) |
| | | | | | | | |
Gross profit | | | (755,845 | ) | | | 16,249 | |
| | | | | | | | |
Operating expenses: | | | | | | | | |
General and administrative | | | 248,270 | | | | 235,303 | |
Depreciation | | | 27,065 | | | | 15,188 | |
| | | | | | | | |
Total operating expenses | | | 275,335 | | | | 250,491 | |
| | | | | | | | |
Operating loss | | | 1,031,180 | | | | 234,242 | |
| | | | | | | | |
Other expenses: | | | | | | | | |
Interest expense | | | 472,123 | | | | 234,009 | |
Other expenses | | | 718 | | | | 498 | |
| | | | | | | | |
Total other expenses | | | 472,841 | | | | 234,507 | |
| | | | | | | | |
Net loss | | | (1,504,021 | ) | | | (468,749 | ) |
Loss attributable to non-controlling interests | | | 316,692 | | | | 110,927 | |
| | | | | | | | |
Net loss attributable to Zhen Ding Resources Inc. | | $ | (1,187,329 | ) | | $ | (357,822 | ) |
| | | | | | | | |
Basic and diluted loss per common share | | $ | (0.02 | ) | | $ | (0.01 | ) |
| | | | | | | | |
Basic and diluted weighted average number | | | | | | | | |
of common shares outstanding | | | 63,869,840 | | | | 63,846,358 | |
| | | | | | | | |
Comprehensive loss: | | | | | | | | |
Net loss | | $ | (1,504,021 | ) | | $ | (468,749 | ) |
Other comprehensive loss: | | | | | | | | |
Foreign currency translation adjustments | | | (77,510 | ) | | | (10,764 | ) |
Total comprehensive loss | | | (1,581,531 | ) | | | (479,513 | ) |
Comprehensive loss attributable to non-controlling interests | | | 339,945 | | | | 114,156 | |
Comprehensive loss attributable to Zhen Ding Resources Inc. | | $ | (1,241,586 | ) | | $ | (365,357 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
Zhen Ding Resources Inc. |
(Formerly Robotech Inc.) |
|
For the years ended December 31, 2013 and 2012 |
|
|
|
| | Common Stock | | | Additional Paid-in | | | Subscription | | | Accumulated Other Comprehensive | | | Accumulated | | | Non- controlling | | | Total | |
| | Shares | | | Par | | | Capital | | | Receivable | | | Income | | | Deficit | | | Interest | | | Equity | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Balances, December 31, 2011 | | | 63,846,358 | | | $ | 63,847 | | | $ | 12,705,425 | | | $ | (5,431 | ) | | $ | (33,610 | ) | | $ | (13,347,295 | ) | | $ | (749,202 | ) | | $ | (1,366,266 | ) |
Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | - | | | | (7,535 | ) | | | - | | | | (3,229 | ) | | | (10,764 | ) |
Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (357,822 | ) | | | (110,927 | ) | | | (468,749 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balances, December 31, 2012 | | | 63,846,358 | | | $ | 63,847 | | | $ | 12,705,425 | | | $ | (5,431 | ) | | $ | (41,145 | ) | | $ | (13,705,117 | ) | | $ | (863,358 | ) | | $ | (1,845,779 | ) |
Shares issued and change of par value as the result of share exchange | | | 122,440 | | | | (57,450 | ) | | | 57,450 | | | | - | | | | - | | | | - | | | | - | | | | - | |
Foreign currency translation adjustment | | | - | | | | - | | | | - | | | | - | | | | (54,257 | ) | | | - | | | | (23,253 | ) | | | (77,510 | ) |
Net loss | | | - | | | | - | | | | - | | | | - | | | | - | | | | (1,187,329 | ) | | | (316,692 | ) | | | (1,504,021 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Balances, December 31, 2013 | | | 63,968,798 | | | $ | 6,397 | | | $ | 12,762,875 | | | $ | (5,431 | ) | | $ | (95,402 | ) | | $ | (14,892,446 | ) | | | (1,203,303 | ) | | | (3,427,310 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
Zhen Ding Resources Inc. |
(Formerly Robotech Inc.) |
|
For the Years Ended December 31, 2013 and 2012 |
| | 2013 | | | 2012 | |
Cash flows from operating activities | | | | | | |
Net loss | | $ | (1,504,021 | ) | | $ | (468,749 | ) |
Adjustment to reconcile net loss to net cash from operating activities: | | | | | | | | |
Depreciation | | | 275,345 | | | | 129,596 | |
Change in operating assets and liabilities | | | | | | | | |
VAT receivable | | | (182,143 | ) | | | (13,897 | ) |
Inventory | | | (67,163 | ) | | | - | |
Prepaid expenses and other current assets | | | 67,299 | | | | (68,835 | ) |
Other assets | | | 12,912 | | | | - | |
Accounts payables and accrued liabilities | | | (80,646 | ) | | | 74,460 | |
Accrued interest-related parties | | | 423,508 | | | | 199,830 | |
Deferred revenues | | | (61,562 | ) | | | 377,790 | |
Net cash provided by (used in) operating activities | | | (1,116,471 | ) | | | 230,195 | |
| | | | | | | | |
Cash flows from investing activities | | | | | | | | |
Repayment from (advance to) YJSLC | | | 1,936,800 | | | | (1,898,400 | ) |
Payments for purchases of property and equipment | | | (84,983 | ) | | | (344,092 | ) |
Payments for construction in progress | | | (103,521 | ) | | | (1,044,112 | ) |
Net cash provided by (used in) investing activities | | | 1,748,296 | | | | (3,286,604 | ) |
| | | | | | | | |
Cash flows from financing activities | | | | | | | | |
Net change in advance from related parties | | | 159,069 | | | | 169,534 | |
Proceeds from borrowings on short-term debt | | | - | | | | 2,214,800 | |
Proceeds from borrowings on short-term debt-related parties | | | 1,471,268 | | | | 713,112 | |
Payments on short-term debt | | | (2,340,300 | ) | | | - | |
Net cash provided by (used in) financing activities | | | (709,963 | ) | | | 3,097,446 | |
| | | | | | | | |
Foreign currency translation | | | 1,818 | | | | 132 | |
| | | | | | | | |
Net change in cash | | | (76,320 | ) | | | 41,169 | |
Cash - beginning of the year | | | 96,874 | | | | 55,705 | |
| | | | | | | | |
Cash - end of the year | | $ | 20,554 | | | $ | 96,874 | |
| | | | | | | | |
Supplement cash flows information: | | | | | | | | |
Cash paid for interest | | $ | - | | | $ | - | |
Cash paid for income tax | | $ | - | | | $ | - | |
| | | | | | | | |
Non-cash investing and financing transactions: | |
Reclassification of construction in progress to fixed assets | | $ | 197,223 | | | $ | 114,489 | |
Shares issued and change of par value as the result of share exchange | | $ | 57,450 | | | $ | - | |
Depreciation capitalized in inventory | | $ | 29,563 | | | $ | - | |
The accompanying notes are an integral part of these consolidated financial statements.
Zhen Ding Resources Inc.
(Formerly Robotech Inc.)
Note 1. Description of Business
Zhen Ding Resources Inc. (formerly Robotech Inc.) (the “Company”, “Zhen Ding DE”, or “ZDRI”) was incorporated in State of Delaware in September 1996 and began its business activities in the field of development and marketing of specialized technological equipment. In 2003, the Company abandoned its business because it was not able to reach the Company’s financing goals. Since 2004, several potential businesses were investigated by the Company as candidates for acquisition but for various reasons none were pursued. In 2008, negotiations were entered into with intent to acquire a solar energy company operating in the North African region. However, due to the inability to arrange for adequate funding, discussions were terminated. In the past decade there has been a worldwide sharp recovery in the price and interest in precious metals, minerals and industrial commodities fueled to a large degree by the economic awakening of the two most populous nations, China and India. In early 2010, the business direction of the Company was changed to seek opportunities from this revival and the Company began to focus particularly on searching for companies engaged in the mining of gold, silver and copper.
The Company entered into negotiations with Zhen Ding Resources Inc. (a Nevada entity) (“Zhen Ding NV”), which indirectly owns 70% of a Chinese Joint Venture entity, Zhen Ding Mining Co. Ltd.(“Zhen Ding JV”). This indirect ownership is through a 100% ownership of a California company, Z&W Zhen Ding Corporation (“Z&W CA”).
On January 10, 2012, the shareholders of the Company approved a 100-for-1 reverse stock split of the Company’s common stock, affecting 12,242,972 shares that had issued to that date and reducing the number of shares outstanding to 122,440. The Company’s financial statements have been retroactively restated to incorporate the effect of the stock split.
In January 2012, the Board of Directors, with authorization from the majority of the shareholders of the Company, made an offer to the shareholders of Zhen Ding NV, to acquire, at the very least, the majority of their common shares, and, if available, up to 100% ownership.
On March 8, 2012, the Company changed its name from Robotech Inc. to Zhen Ding Resources, Inc., in anticipation of the acquisition of Zhen Ding NV. An application was made to FINRA to reflect this name change and the new name was subsequently accepted by FINRA.
During 2012, a total of 50,746,358 shares of the issued and outstanding common stock of Zhen Ding NV were tendered to the Company. This represented 79% of the ownership of Zhen Ding NV.
On August 13, 2013, an additional 13,100,000 shares of Zhen Ding NV were tendered to the Company. 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 the Company.
On October 23, 2013, the Company issued 122,440 shares of its common stock, on a one-for-one basis, to the tendering shareholders of Zhen Ding NV and made Zhen Ding NV a wholly owned subsidiary of the Company.
The Share Exchange was accounted for as a reverse merger rather than a business combination, wherein ZDRI is considered the acquirer for accounting and financial reporting purposes. The consolidated statements of operations reflect the activities of ZDRI. On October 28, 2013, the Company dissolved Zhen Ding NV by merging it into the Company.
The Company now through Zhen Ding NV’s wholly owned subsidiary, 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 the 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.
Now, the Company’s primary activity, through JXZD, is ore processing and production. The Company focus in the growth regions mostly in China and Southeast Asia geographically.
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.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly subsidiaries Z&W CA and its majority owned subsidiaries 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.
Foreign Currency Adjustments
The Company's functional currency for all operations worldwide is the U.S. dollar. Nonmonetary assets and liabilities are translated at historical rates and monetary assets and liabilities are translated at exchange rates in effect at the end of the year. Income statement accounts are translated at average rates for the year. Any translation adjustments are reflected as a separate component of stockholders’ equity and have no effect on current earnings. Gains and losses resulting from foreign currency transactions are included in current results of operations. Aggregate foreign currency translation gains and losses included in other comprehensive loss totaled a loss of $77,510 in 2013 and a loss of $10,764 in 2012 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.
Inventories mainly consists of finished goods. Finished goods are primarily determined using weighted average cost. Cost includes materials, labor, and manufacturing overhead related to the purchase and production of inventories. The Company continuously reviews its inventory to ensure inventories are valued at the lower of average production cost and net realizable value. The estimates and assumptions used in the measurement of heap leach ore and work-in-process inventories include quantities of ore stacked on leach pads, recoverable tons of precious minerals contained in ore stacked on leach pads, recoverable tons of precious minerals in the mill processing circuits and the price expected to be realized when the tons of precious minerals are recovered.
At December 31, 2013, the average costs of inventories are significantly below their net realizable values. Therefore, the Company wrote down its inventory to their net realizable values.
Property and Equipment
Property and equipment is stated at the historical cost, less accumulated depreciation. Depreciation on property, plant and equipment is provided using the straight-line method over the estimated useful lives of the assets for both financial and income tax reporting purposes as follows:
Buildings | 20 years |
Motor vehicles | 5 years |
Production and office equipment | 5 years |
Expenditures for normal repairs and maintenance are charged to expense as incurred. Significant renewals and improvements are capitalized. The costs and related accumulated depreciation of assets retired or otherwise disposed of are eliminated from the accounts, and any resulting gain or loss is recognized in the year of disposal.
Impairment of Long-Lived Assets
Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be realizable or at a minimum annually during the fourth quarter of the year. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying value to determine if an impairment of such asset is necessary. The effect of any impairment would be to expense the difference between the fair value of such asset and its carrying value.
Income Taxes
Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company computes a deferred tax asset for net operating losses carried forward. The potential benefit of net operating losses have not been recognized in these financial statements because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.
Fair Values of Financial Instruments
Management believes that the carrying amounts of the Company’s financial instruments, consisting primarily of cash and accounts payable, approximated their fair values as of December 31, 2013 and 2012, due to their short-term nature.
Non-controlling Interest
Non-controlling interests in the Company’s subsidiaries are recorded in accordance with the provisions of FASB Accounting Standards Codification ASC 810 Consolidation and 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.
Revenue Recognition
Revenue is recognized in accordance with ASC 605. 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.
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.
Subsequent Events
The Company evaluated events subsequent to December 31, 2013 through the date the financial statements were issued for disclosure consideration.
Recently Issued Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, we believe that the impact of recently issued standards that are not yet effective will not have a material impact on our financial position or results of operations upon adoption.
ASU 2014-10 Topic 915 Development Stage Entities
The objective of the guidance is to reduce cost and complexity in the financial reporting system by eliminating inception-to-date information from the financial statements of development stage entities. The new standard eliminates the concept of a development stage entity (“DSE”) from U.S. GAAP. Therefore, the current incremental reporting requirements for a DSE, including inception-to-date information, will no longer apply. This standard is effective for annual reporting periods beginning after December 15, 2014. The Company has elected to early adopt this guidance.
ASU 3013-05 Topic 830 Accounting for cumulative translation adjustments
The standards amends cumulative translation adjustment derecognition guidance in particular when (i) an entity ceases to have a controlling financial interest in certain subsidiaries or groups of assets within a foreign entity, or (ii) there is a loss of a controlling financial interest in a foreign entity or a step acquisition involving an equity method investment that is a foreign entity. This is effective for public entities for years, and interim periods within those years, beginning after December 15, 2013. The Company has elected to early adopt this guidance.
ASU 2013-11 Topic 740 Accounting for cumulative translation adjustments
The standard amends guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. This is effective for public entities for years, and interim periods within those years, beginning after December 15, 2013. The Company has elected to early adopt this guidance.
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 12 months. As of December 31, 2013, the Company has generated minimal revenues, has working capital deficit and has accumulated losses of $14,892,446 since inception. 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. The Company is planning to obtain financing either through the issuance of equity or debt. To the extent that funds generated from any private placements, public offerings, and/or bank financings are insufficient, the Company will have to raise additional working capital through other sources.
Note 4. Other Receivable
At December 31, 2012, the Company had a receivable of $1,899,600 from Yantai Jinao Smelling Limited Company (YJSLC), a majority third-party customer of JXZD. JXZD sells processed ore powder to YJSLC. JXZD advanced the funds to YJSLC to support its short-term operation needs. The entire balance of this receivable was paid back by YJSLC on June 4, 2013.
Note 5. VAT Receivable
The VAT receivables are the input tax of VAT to the purchased materials. As of December 31, 2013 and 2012, the Company had VAT receivables of $229,118 and $36,151, respectively.
Note 6. Inventory
As of December 31, 2013 and 2012, the Company had inventory of $98,045 and $0, respectively. The inventory contains finished goods which is the processed ore powder.
Note 7. Property and Equipment
Property and Equipment consist of the following:
| | December 31, | | | December 31, | |
| | 2013 | | | 2012 | |
Buildings | | $ | 1,600,520 | | | $ | 359,516 | |
Motor Vehicles | | | 125,442 | | | | 121,379 | |
Production and Office Equipment | | | 1,078,653 | | | | 1,963,049 | |
Subtotal | | | 2,804,615 | | | | 2,443,944 | |
Less: Accumulated Depreciation | | | (537,705 | ) | | | (221,233 | ) |
Property and Equipment, Net | | $ | 2,266,910 | | | $ | 2,222,711 | |
Depreciation for the years ended December 31, 2013 and 2012 is summarized as follows:
| | 2013 | | | 2012 | |
| | | | | | |
Statement of operations: | | | | | | |
Operating expenses | | $ | 27,065 | | | $ | 15,188 | |
Cost of revenues | | | 248,280 | | | | 114,408 | |
Depreciation expense | | | 275,345 | | | | 129,596 | |
Balance sheet: | | | | | | | | |
Capitalized in inventory | | | 29,563 | | | | - | |
Total depreciation | | $ | 304,908 | | | $ | 129,596 | |
In the PRC, land use rights, are the legal rights for an entity to use land for a fixed period of time. The PRC adopts dual land tenure system under which land ownership is independent of land use rights. The land is either owned by the state (“State Land”) or by rural collective economic organization (“Collective Land”).
As of December 31, 2013, the Company does not have any land use rights agreements with the PRC for the office buildings owned by the Company. The Government owns the land where the Company’s buildings are located and allows the Company free usage of the land.
Note 8. Construction in Progress
As of December 31, 2013 and 2012, the Company had construction in progress (“CIP”) of $203,121 and $288,443, respectively. The CIP is mainly comprised of funds spent by the Company to build an office building and a reservoir dam.
Note 9. Related Party Transactions
As of December 31, 2013 and 2012, the Company had payables of $682,981 and $504,841, respectively, to Xinzhou Gold for the fixed assets and construction in progress transferring and routine transactions that Xinzhou Gold supplies ore to JXZD. These payables bear no interest, are unsecured and are due on demand.
As of December 31, 2013 and 2012, the Company had short-term debts to related parties of $3,141,735 and $1,996,276, respectively. The details of the debts are described as below:
At December 31, 2013:
| | | | | Annual | | |
Name | Relationship to the Company | | Amount | | Interest Rate | Start Date | Maturity |
Wei De Gang | CEO & Legal Person of JXZD | | $ | 2,959,524 | | 15% | 5/31/12 | 05/31/14 |
Zhao Yan Ling | Former Office Manager in JXZD, wife of Zhou Zhi Bin | | | 17,178 | | 15% | 01/01/12 | 12/18/15 |
Zhou Zhi Bin | Former CEO & Legal Person of JXZD | | | 8,180 | | 15% | 01/01/12 | On Demand |
Importation Tresor Plus Inc | Shareholder of ZDRI | | | 30,000 | | 12% | 07/09/12 | On Demand |
Wen Mei Tu | President & shareholder of ZDRI | | | 25,000 | | 12% | 09/07/12 | On Demand |
Wen Mei Tu | President & shareholder of ZDRI | | | 24,965 | | 12% | 02/27/13 | 02/27/14 |
Wen Mei Tu | President & shareholder of ZDRI | | | 20,000 | | 12% | 06/11/13 | 06/11/14 |
Wen Mei Tu | President & shareholder of ZDRI | | | 20,000 | | 12% | 09/06/13 | 09/06/14 |
Wen Mei Tu | President & shareholder of ZDRI | | | 15,000 | | 12% | 10/23/13 | 12/26/14 |
Victor Sun | Consultant & shareholder of ZDRI | | | 3,923 | | 0% | 01/01/13 | On Demand |
Helen Chen | President of Z&W | | | 17,965 | | 0% | 01/01/11 | On Demand |
Total | | | $ | 3,141,735 | | | | |
At December 31, 2012:
| | | | | Annual | | |
Name | Relationship | | Amount | | Interest Rate | Start Date | Maturity |
Wei De Gang | CEO & Legal Person of JXZD | | $ | 1,578,251 | | 15% | 05/31/11 | 5/31/14 |
Zhou Qiang | Senior Management in JXZD | | | 316,600 | | 15% | 12/21/12 | 12/18/15 |
Zhao Yan Ling | Former Office Manager in JXZD, wife of Zhou Zhi Bin | | | 16,622 | | 15% | 01/01/11 | 12/31/13 |
Zhou Zhi Bin | Former CEO & Legal Person of JXZD | | | 7,915 | | 15% | 01/01/11 | 12/31/13 |
Importation Tresor Plus Inc | Shareholder of ZDRI | | | 30,000 | | 12% | 07/09/12 | 07/12/13 |
Wen Mei Tu | President & shareholder of ZDRI | | | 25,000 | | 12% | 09/07/12 | 09/07/13 |
Victor Sun | Consultant & shareholder of ZDRI | | | 3,923 | | 0% | 01/01/13 | On Demand |
Helen Chen | President of Z&W | | | 17,965 | | 0% | 01/01/11 | On Demand |
Total | | | $ | 1,996,276 | | | | |
As of December 31, 2013 and 2012, the Company has accrued interest payable to related parties of $1,329,942 and $871,890, respectively.
Note 10. Deferred Revenue
As of December 31, 2013 and 2012, the Company had deferred revenue of $328,285 and $378,029, respectively, related to advances that the Company received from its customers.
Note 11. Short-term Debt
On December 12, 2012, JXZD obtained a short-term debt of $2,216,200 from a local bank. The loan is guaranteed by a letter of credit of Yantai Jinao Smelting Limited Company (YJSLC) dated December 12, 2012. The loan bears 6.16% annual interest rate and the maturity is June 4, 2013. The loan had been repaid by the Company on June 4, 2013.
Note 12. Income Taxes
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.
The Company was incorporated in the United States and is subject to United States federal income taxes and hashad 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.
The Company has a U.S net operating loss carryforward of approximately $4,940,000 as As of December 31, 2013 which will expire through 2028.
The deferred tax asset2014, we had net operating losses (“NOL”) carryforwards of approximately $1,540,000 associated with$15,750,000. The NOL carryforwards expire between fiscal year 2015 through 2034. The value of these carryforwards depends on our ability to generate taxable income. Tax laws in both China and United States limit the time during which the net operating loss carryforwards wasmay be applied against future taxes, if we fail to generate taxable income prior to the expiration dates we may not be able to fully reserved asutilize the net operating loss carryforwards to reduce future income taxes. We have 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 December 31, 2014 and 2013.
The approximately tax effects of temporary differences that give rise to the Company's net deferred tax assets as of December 31, 2013 and 2012 are as follows:
| December 31, 2013 | | | December 31, 2012 | |
Deferred tax assets: | | | | | |
Net operating losses carried forward | $ | 1,540,000 | | | $ | 1,243,000 | |
Valuation allowance | | (1,540,000 | ) | | | (1,243,000 | ) |
Net deferred tax assets | $ | - | | | $ | - | |
Note 13. Contingencies
Our articles of incorporation limit the liability of directors to the maximum extent permitted by Delaware law. This limitation of liability is subject to exceptions including intentional misconduct, obtaining an improper personal benefit and abdication or reckless disregard of director duties. Our articles of incorporation and bylaws provide that we may indemnify its directors, officer, employees and other agents to the fullest extent permitted by law. Our bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether the bylaws would permit indemnification. We currently do not have such an insurance policy.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted for our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.
We estimate that expenses in connection with the distribution described in this registration statement (other than brokerage commissions, discounts or other expenses relating to the sale of the shares by the selling security holders) will be as set forth below. We will pay all of these expenses. The amounts shown below, with the exception of the Securities and Exchange Commission registration fee, are estimates.
The following securities were issued within the past three years and were not registered under the Securities Act of 1933.
On January 1, 2013, we issued 50,746,358 common shares to shareholders of Zhen Ding Resources (NV) as consideration for purchasing their shares of that company.
On August 13, 2013, we issued an additional 13,100,000 common shares to the remaining shareholders of Zhen Ding (NV), to complete our acquisition of that company.
On October 23, 2013, we issued a total of 122,440 shares of our common stock to the shareholders of Zhen Ding NV as exchange for 100% of outstanding equity in Zhen Ding NV.
All of the above offerings and sales were deemed to be exempt under Section 4(2) of the Securities Act of 1933, as amended. No advertising or general solicitation was employed in offering the securities. The offerings and sales were made to a limited number of persons, all of whom were accredited investors, business associates of our company or executive officers of our company, and transfer was restricted by our company in accordance with the requirements of the Securities Act of 1933. In addition to representations by the above-referenced persons, we have made independent determinations that all of the above-referenced persons were accredited or sophisticated investors, and that they were capable of analyzing the merits and risks of their investment, and that they understood the speculative nature of their investment.
Except as expressly set forth above, the individuals and entities to which we issued securities as indicated in this section of the registration statement are unaffiliated with us.
*Previously filed.
**Filed herewith.
(1) File, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to:
(ii) reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement; and notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) include any additional or changed material information on the plan of distribution.
(2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.
(b) For determining liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the registrant undertakes that in a primary offering of securities of the registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(1) Any preliminary prospectus or prospectus of the registrant relating to the offering required to be filed pursuant to Rule 424;
(2) Any free writing prospectus relating to the offering prepared by or on behalf of the registrant or used or referred to by the registrant;
(3) The portion of any other free writing prospectus relating to the offering containing material information about the registrant or its securities provided by or on behalf of the registrant; and
(4) Any other communication that is an offer in the offering made by the registrant to the purchaser.
(c) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such a first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.