Zinco do Brasil 10-Q 2014 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended August 31, 2013

¨ TRANSITION REPORT UNDER SECTION 13 or 15(d) OF THE EXCHANGE ACT

For the transition period from ___________ to _____________

Commission file number 000-52630

ZINCO DO BRASIL, INC.

(Exact name of registrant as specified in its charter)

Delaware	26-2524571
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

100 Park Avenue Suite 1600

New York, New York 10017

(Address of principal executive offices)

(212) 984-0628

(Issuer's telephone number)

Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer¨ Accelerated Filer¨ Non-Accelerated Filer¨ Smaller Reporting Companyx

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934) (check one): Yes¨ Nox

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 23,563,850 shares of common stock, par value $0.0001 per share, as of October 21, 2013.

Zinco Do Brasil, Inc.

	Page Number
PART 1 – Financial Information
Item 1 – Unaudited Financial Information:
Consolidated  Balance Sheets as of August 31, 2013 and  May 31, 2013 (Unaudited)	2
Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended August 31, 2013  and 2012 (Unaudited)	3
Consolidated Statement of Stockholders Deficit for the Three Months Ended August 31, 2013 (Unaudited)	4
Consolidated Statements of Cash Flows for the Three Months Ended  August 31, 2013  and 2012 (Unaudited)	5
Notes to the Consolidated Financial Statements (Unaudited)	6
Item 2 - Management’s Discussion and Analysis or Financial Condition and Results of Operations	11
Item 3 - Quantitative and Qualitative Disclosures About Market Risk	13
Item 4 - Controls and Procedures	13
PART II - Other Information (Items 1-6)	14

Zinco Do Brasil, Inc.

Consolidated Balance Sheets

Unaudited

	August 31, 2013			May 31, 2013
ASSETS
Current assets:
Cash	$	18,208		$	687
Total current assets		18,208			687
Other assets:
Deposit on acquisition of Zinco do Brasil, Inc.		210,320			210,320
TOTAL ASSETS	$	228,528		$	211,007
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable and accrued expenses	$	1,286,741		$	1,515,857
Accrued interest		1,178,190			940,089
Related party payable		4,355			35,841
Derivative liabilities		319,888			499,646
Short-term debt		793,740			735,329
Convertible debt - related party, net of unamortized discount of $- and $492 as of August 31, 2013 and May 31, 2013, respectively		32,000			31,508
Convertible debt, net of unamortized discount of $860 and $51,156 as of August 31, 2013 and May 31, 2013, respectively		1,244,140			1,173,844
Total current liabilities		4,859,054			4,932,114
Total liabilities		4,859,054			4,932,114
Stockholders' Deficit:
Series A Preferred stock: $0.0001 par value; 1,000 shares authorized; 0 shares issued and outstanding		-			-
Series B Preferred stock: $0.0001 par value; 1,000 shares authorized; 0 shares issued and outstanding		-			-
Series C Preferred stock: $0.001 par value; 1,100,000 shares authorized; 1,074,999 shares issued and outstanding		1,075			1,075
Series D Preferred Stock: $0.001 par value; 1,200,000 shares authorized; 195,000 and 150,000 shares issued and outstanding as of August 31, 2013 and May 31, 2013, respectively		195			150
Common stock: $0.0001 par value; 300,000,000 shares authorized; 23,563,850 shares issued and outstanding		2,356			2,356
Additional paid-in capital		42,054,854			41,678,431
Accumulated other comprehensive income		212,324			212,324
Accumulated deficit		(46,868,471	)		(46,582,584	)
Total stockholders' deficit of Zinco Do Brasil, Inc.		(4,597,667	)		(4,688,248	)
Non-controlling interest		(32,859	)		(32,859	)
Total equity		(4,630,526	)		(4,721,107	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	228,528		$	211,007

See accompanying notes to the unaudited consolidated financial statements.

2

Zinco Do Brasil, Inc.

Consolidated Statement of Operations and Comprehensive Loss

Unaudited

	Three months ended August 31,
	2013			2012
Professional fees	$	85,453		$	58,404
Selling, general and administrative expenses		230,959			509,581
Total operating expenses		316,412			567,985
Loss from operations		(316,412	)		(567,985	)
Other (income) expense:
Derivatives gain		(274,919	)		(395,200	)
Interest expense		235,534			467,221
Loss on foreign currency transactions		8,860			-
Loss on extinguishment of debt		-			631,476
Debt conversion expense		-			966,747
Total other (income) expense		(30,525	)		1,670,244
Net loss	$	(285,887	)	$	(2,238,229	)
Deemed dividend related to incremental beneficial conversion feature on preferred stock		(95,195	)		-
Preferred dividends		(52,849	)		-
Net loss attributable to common stockholders	$	(433,931	)	$	(2,238,229	)
Basic and diluted net loss per common share	$	(0.02	)	$	(0.18	)
Weighted average number of  common shares  outstanding - basic and diluted		23,563,850			12,301,385
Comprehensive loss
Net loss	$	(285,887	)	$	(2,238,229	)
Foreign currency translation adjustments		-			(17,552	)
Total comprehensive loss	$	(285,887	)	$	(2,255,781	)

See accompanying notes to the unaudited consolidated financial statements.

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Zinco Do Brasil, Inc.

Consolidated Statement of Stockholders' Deficit

For the three months ended August 31, 2013

Unaudited

	Preferred Stock Series A				Preferred Stock Series C				Preferred Stock Series D				Common Stock				Additional Paid-in		Accumulated Other Comprehensive		Accumulated			Non- Controlling			Total Stockholders' Equity
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Capital		Income		Deficit			Interest			(Deficit)
Balance, May 31, 2013		-		-		1,074,999	$	1,075		150,000	$	150		23,563,850	$	2,356	$	41,678,431	$	212,324	$	(46,582,584	)	$	(32,859	)	$	(4,721,107	)
Issuance of Series D convertible preferred stock for cash		-		-		-		-		45,000		45		-		-		354,794		-		-			-			354,839
Stock-based compensation -warrants		-		-		-		-		-		-		-		-		21,629		-		-			-			21,629
Preferred Dividends		-		-		-		-		-		-		-		-		-		-		-			-			-
Deemed dividends on preferred stock due to beneficial conversion feature		-		-		-		-		-		-		-		-		-		-		-			-			-
Net loss		-		-		-		-		-		-		-		-		-		-		(285,887	)		-			(285,887	)
		-	$	-		1,074,999	$	1,075		195,000	$	195		23,563,850	$	2,356	$	42,054,854	$	212,324	$	(46,868,471	)	$	(32,859	)	$	(4,630,526	)

See accompanying notes to the unaudited consolidated financial statements.

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Zinco Do Brasil, Inc.

Consolidated Statements of Cash Flows

Unaudited

	Three months ended
	August 31,			August 31,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(285,887	)	$	(2,238,229	)
Adjustments to reconcile net loss to net cash used in operating activities:
Gain on derivatives		(274,919	)		(395,200	)
Stock-based compensation		21,629			239,084
Amortization of debt discount		52,788			156,826
Loss on debt extinguishment		-			631,476
Loss on foreign currency transactions		8,860			-
Gain on settlement of accrued expenses		-			(24,583	)
Debt conversion expense		-			966,747
Changes in operating assets and liabilities:
Accounts payable and accrued expenses		56,536			401,066
NET CASH USED IN OPERATIONS		(420,993	)		(262,813	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of Series D convertible preferred stock		450,000			-
Proceeds from issuance of convertible debt		20,000			-
Proceeds from issuance of convertible debt - related party		-			32,000
Advances from related parties		15,445			35,100
Payments on advances from related parties		(46,931	)		(103,500	)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		438,514			(36,400	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		17,521			(299,213	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		687			299,298
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	18,208		$	85
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid during the period for:
Income taxes	$	-		$	-
Interest	$	12,884		$	-
NONCASH INVESTING AND FINANCING ACTIVITIES
Debt discount due to common stock issued with debt and beneficial conversion feature	$	-		$	1,953
Derivative liabilities due to warrants issued with Series D Preferred Stock	$	95,161		$	-
Common stock issued to settle accrued expenses	$	-		$	37,917
Conversion of convertible debt and accrued interest to equity	$	-		$	2,013,096
Interest converted to debt principal	$	-		$	25,000
Conversion of Series A Preferred Stock to common stock	$	-		$	6,240

See accompanying notes to the unaudited consolidated financial statements.

5

Zinco Do Brasil, Inc.

Notes to Consolidated Financial Statements

August 31, 2013

(Unaudited)

NOTE 1 - ORGANIZATION AND OPERATIONS

Zinco Do Brasil, Inc. (formerly TurkPower Corporation) (the “Company”) was incorporated in Delaware on November 4, 2004 as Global Ink Supply Company and was organized for the purpose of developing e-commerce website to sell ink printer cartridges and toner. On September 28, 2012, we (i) changed our name to Zinco do Brasil, Inc., (ii) effected a reverse split on a 1:15 basis and (iii) increased the number of our authorized shares of capital stock from 310,000,000 shares to 810,000,000 of which 800,000,000 shares are common stock with a par value $0.0001 per share and 10,000,000 shares are preferred stock with a par value $0.0001 per share.

On August 14, 2012, the Company entered into a Binding Agreement (the “Agreement”) with Ouro do Brasil Holdings Ltd. (“OBH”) and IMS Engenharia Mineral Ltda. (“IMS”) for the proposed acquisition of 99.9% (the “Transaction”) of the capital stock of Zinco do Brasil Mineracao Ltda., a company to be formed under the laws of Brazil (“ZBM”), which will be owned by OBH and IMS. Pursuant to the Agreement, the Company will acquire 99.9% of the total capitalization of ZBM in exchange for (i) 7,166,667 newly issued shares of the Company’s restricted common stock, par value $0.001 per share (the “Common Stock”), to OBH (the “OBH Shares”) and (ii) 1,075,000 shares of a newly-created Series C Preferred Stock, par value $0.0001 per share, to IMS (the “IMS Shares”). At the closing of the Transaction (the “Closing”) all officers, directors and shareholders holding 10% or more of the Company’s Common Stock shall enter into lock-up agreements.

The Company issued 4,711,714 of the OBH Shares to OBH and the IMS Shares to IMS. The balance of the respective shares will be issued to OBH at the Closing pursuant to a Final Transaction Agreement (“Transaction Agreement”) to be executed by the parties upon the formation of ZBM. The Transaction Agreement will contain customary terms, conditions, and covenants for a transaction of this nature.

In connection with the Transaction, the Company will convert an aggregate of approximately $5,000,000 of outstanding debt into approximately 3,333,333 shares of the Company’s Common Stock. In addition, following the closing of the proposed transaction, the Company shall consummate a private placement offering of $300,000 secured convertible notes and, within six months of closing the proposed transaction, the Company must: (i) raise up to $6,000,000 or such amount necessary to satisfy payment to Vale S.A. to complete the acquisition of the zinc mine; and (ii) raise $17,000,000 on or before the anniversary of the closing for working capital and general corporate purposes (collectively, the “Financing Conditions”). If the Financing Conditions are not met, IMS shall have the right of rescission provided that IMS has not converted any of its IMS Shares into Common Stock.

The Agreement has been extended on multiple occasions in part, as a result of the substantial, partial performance made by the Company in its efforts to complete the acquisition, including the delivery of 4,711,714 shares of common stock and 1,074,999 shares of Series C Preferred Stock, as well as the conversion of an aggregate of $4,343,364 of convertible debt and related accrued interest into shares of common stock at $1.50 per share. The Company continues to devote all its efforts and operations toward the preparation of engaging in mining operations upon consummation of the transaction.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying interim consolidated financial statements as of and for the three months ended August 31, 2013 and 2012 are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required for complete financial statements.  In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included.  The results of operations realized during an interim period are not necessarily indicative of results to be expected for a full year.  These financial statements should be read in conjunction with the information filed with the SEC as part of the Company’s Annual Report on Form 10-K/A, which was filed on September 20, 2013.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of its wholly owned US subsidiary, TurkPower USA Corporation and its foreign subsidiary, Turkpower Enerji San. Ve Tic. A.S., of which the Company has a 99.8% controlling interest. All significant intercompany balances and transactions have been eliminated in the consolidation.

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Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 as well as the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Fair value of financial instruments

The carrying value of cash and cash equivalents, accounts payable and accrued expenses, and debt approximate their fair values because of the short-term nature of these instruments. Management believes the Company is not exposed to significant interest or credit risks arising from these financial instruments.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The Company utilizes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable.

●	Level 1 -	Quoted prices in active markets for identical assets or liabilities. These are typically obtained from real-time quotes for transactions in active exchange markets involving identical assets.
●	Level 2 -	Quoted prices for similar assets and liabilities in active markets; quoted prices included for identical or similar assets and liabilities that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. These are typically obtained from readily-available pricing sources for comparable instruments.
●	Level 3 -	Unobservable inputs, where there is little or no market activity for the asset or liability. These inputs reflect the reporting entity’s own beliefs about the assumptions that market participants would use in pricing the asset or liability, based on the best information available in the circumstances.

The following table presents the derivative financial instruments, the Company’s only financial liabilities measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis, and their level within the fair value hierarchy as of August 31, 2013:

	Amount		Level 1		Level 2		Level 3
Embedded conversion derivative liability	$	14,182	$	-	$	-	$	14,182
Warrant derivative liabilities		305,706		-		-		305,706
Total	$	319,888	$	-	$	-	$	319,888

The following table presents the derivative financial instruments, the Company’s only financial liabilities measured and recorded at fair value on the Company’s consolidated balance sheets on a recurring basis, and their level within the fair value hierarchy as of May 31, 2013:

	Amount		Level 1		Level 2		Level 3
Embedded conversion derivative liability	$	67,004	$	-	$	-	$	67,004
Warrant derivative liabilities		432,642		-		-		432,642
Total	$	499,646	$	-	$	-	$	499,646

The following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis using significant unobservable inputs:

Balance at May 31, 2013	$	499,646
Fair value of warrant derivative liabilities at issuance		95,161
Unrealized derivative gains included in other expense		(274,919	)
Balance at August 31, 2013	$	319,888

The fair value of the derivative liabilities are calculated at the time of issuance and the Company records a derivative liability for the calculated value. Changes in the fair value of the derivative liabilities are recorded in other income (expense) in the consolidated statements of operations and comprehensive loss.

Beginning December 1, 2012, the Company used the Lattice model to value derivative instruments issued subsequent to November 30, 2012. The change is considered a change in estimate and is applied prospectively. For warrants issued prior to December 1, 2012, the Company continues to use the Black Scholes model.

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As of August 31, 2013, there were a total of 496,670 derivative warrants outstanding, of which 146,667 were valued using Black Scholes and 350,003 were valued using the Lattice model.

The following are the assumptions used for derivative instruments valued using the Black Scholes option pricing model:

	August 31, 2013			May 31, 2013
Market value of stock on measurement date	$	1.27		$	1.80
Risk-free interest rate		0.02 - 0.03	%		0.04	%
Dividend yield		0	%		0	%
Volatility factor		27 - 74	%		49 - 50	%
Term		0.00 - 0.17 year			0.25 - 0.31 year

The following are the assumptions used for derivative instruments valued using the Lattice model:

	Initial Valuations			August 31, 2013
Market value of common stock on measurement date	$	1.48-$1.67		$	1.27
Adjusted exercise price	$	1.99-$2.25		$	1.99-$2.50
Risk free interest rate		0. 60-0.66	%		0.59-0.79	%
Warrant lives in years		3			2.32-2.82
Expected volatility		158-159	%		140-144	%
Expected dividend yields		0	%		0	%
Offering price range	$	1.32-2.51		$	1.04-2.51

The Company has considered the provisions of ASC 480, Distinguishing Liabilities from Equity, as the conversion feature embedded in each debenture could result in the note principal being converted to a variable number of the Company’s common shares.

Reclassification

Certain accounts in the prior period were reclassified to conform with the current period financial statements presentation.

NOTE 3 - GOING CONCERN

As shown in the accompanying consolidated financial statements, the Company had a net loss of $285,887 for the three months ended August 31, 2013 and had a working capital deficit as of August 31, 2013 of $4,840,846. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The Company intends to raise additional working capital either through debt or equity financing. The consolidated 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 - DEPOSIT ON ACQUISITION OF ZINCO DO BRASIL MINERACAO LTDA.

On August 14, 2012, the Company agreed with OBH and IMS for the proposed acquisition of 99.9% of ZBM, which will be owned by OBH and IMS. Pursuant to the agreement, the Company will acquire 99.9% of ZBM in exchange for (i) 7,166,667common shares to OBH and (ii) 1,075,000 Series C preferred shares to IMS (the “IMS Shares”). The Company also agreed to raise $17 million which will be used to complete the acquisition of the zinc project.

As of the date of this filing, ZBM has not been formed and the transaction has not been completed, although some of the shares have been issued. As of August 31, 2013, 1,074,999 Series C preferred shares and 4,711,714 common shares have been issued. The fair value of OBH shares and IMS shares issued as of May 31, 2013 of $210,320 has been recorded as a deposit on the acquisition.   Since the above transaction has not yet closed and given that the Company has no existing operations, the fair value of the shares issued were based on the enterprise value done by a valuation expert.

In the event that the acquisition is not consummated, IMS shall have the right to rescind the agreement and the obligations of both parties shall be terminated and the contemplated transaction is voided as if the agreement was never entered into.

On February 13, 2013, Zinco, OBH and IMS entered into a modification of the agreement, dated August 14, 2012, to extend the date by which Zinco is required to raise $6,000,000 or such amount necessary to complete the acquisition of the zinc mine, until June 14, 2013. On June 14, 2013, the agreement was further extended to September 14, 2013. The Company is currently working on a further extension of the agreement.

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NOTE 5 - SHORT TERM DEBT

As of August 31, 2013 and May 31, 2013, the Company owes $793,740 and $735,329, respectively, to an unrelated party. The loan is unsecured, bears annual interest at 25.0% and matured on December 15, 2011. While delinquent, the Company is required to pay 2.5% interest per month on the principal balance to the lender. As of August 31, 2013 and May 31, 2013, accrued interest related to this note is $759,816 and$370,042, respectively. The Company recorded interest expense of $104,312 and $72,800 for the three months ended August 31, 2013 and 2012. As of August 31, 2013, this loan is in default.

NOTE 6 - CONVERTIBLE DEBT

Convertible debt consisted of the following:

	August 31, 2013			May 31, 2013
Six-month secured convertible debentures	$	275,000		$	275,000
One-year term debentures		832,000			832,000
180-day promissory notes		150,000			150,000
60-day promissory notes		20,000			-
	$	1,277,000			1,257,000
Less - Debt discount		(860	)		(51,648	)
	$	1,276,140		$	1,208,352
Convertible debt – related party	$	32,000		$	31,508
Convertible debt – third party		1,244,140			1,173,844
	$	1,276,140		$	1,205,352

During the three months ended August 31, 2013, the Company issued a 60-day promissory note to a third party investor for $20,000. This note matured on August 6, 2013, and carries interest at a rate of 8% per annum and a 10% debt discount of $2,000 due on its maturity date. As of August 31, 2013, this note and 180-day promissory notes totaling to $100,000 are currently in default.

As of August 31, 2013, the balance of all convertible debentures was $1,277,000 (including related party debentures totaling $32,000) which includes convertible debentures that are currently in default amounting to $1,027,000, of which $732,000 carries a default interest rate ranging from 20% to 24%.

For the three months ended August 31, 2013 and 2012, debt discount amortization recorded to interest amounted to $52,788 and $156,826, respectively.

NOTE 7 - STOCKHOLDERS’ EQUITY

The Company had the following equity transactions during the three months ended August 31, 2013: 

· The Company received subscriptions from non-related parties of $450,000 for 45,000 shares of the Company’s Series D Convertible Preferred Stock plus warrants to purchase an additional 75,001 common shares at an exercise price of $2.25 per share and a term of three years. The conversion feature of the Preferred Stock was evaluated and it was determined that a beneficial conversion feature exists.  The Company recorded $95,195 as a deemed dividend.  As the Company had a negative retained earnings balance at the date of issuance, the dividends were accounted for as a debit and credit to additional paid-in capital.

During the three months ended August 31, 2013, the Company accrued dividends of $52,849 due on Series D Convertible Preferred Stock. As of August 31, 2013, cumulative dividends due on Series D Convertible Preferred Stock totaled $94,438.

NOTE 8 - STOCK OPTIONS AND WARRANTS

Stock option activity for three months ended August 31, 2013 is presented in the table below:

	Number of Shares		Weighted- average Exercise Price		Weighted- average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at May 31, 2013		829,445	$	5.25		4.16	$	-
Granted		-	$	-		-	$	-
Forfeited		-	$	-		-	$	-
Outstanding at August 31, 2013		829,445	$	5.25		3.91	$	-
Exercisable at August 31 , 2013		462,778	$	5.25		0.66	$	-

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As of August 31, 2013, there was approximately $1,200,180 of total unrecognized compensation cost related to non-vested stock options which is expected to be substantially recognized when certain performance conditions are met or when there is a change of control.

Warrants

Warrant activity is presented in the table below:

	Number of Shares		Weighted- average Exercise Price		Weighted- average Remaining Contractual Term (years)		Aggregate Intrinsic Value
Outstanding at May 31, 2013		758,335	$	3.16		1.84	$	-
Granted		75,001	$	2.25		-	$	-
Outstanding at August 31, 2013		833,336	$	3.08		1.70	$	-
Exercisable at August 31, 2013		833,336	$	3.08		1.70	$	-

NOTE 9 - RELATED PARTY TRANSACTIONS

The Company received non-interest bearing advances from shareholders totaling $15,445 and made repayments of $46,931 during the three months ended August 31, 2013. As of August 31, 2013, amounts due to these shareholders totaled $4,355.

During the three months ended August 31, 2013, the Company made payments to its CEO totaling $70,158, which included reimbursement for expenses paid for by the CEO on behalf of the Company totaling $37,474. Expenses included travel expenses, general administrative expenses, as well as payments to service providers which were initially paid for by the CEO.

NOTE 10 - COMMITMENT AND CONTINGENCIES

On December 26, 2011, the Company commenced a lawsuit against Nalan Oral and Seluck Oral, the shareholders of Avrasya Yapı Yatırım Hizmetleri A.Ş., in the United States District Court for the Southern District of New York alleging the defendants breached the Mine Purchase Agreement and seeking to cancel the 2,666,667 shares of Common Stock and 226,667 warrants issued to the defendants in connection with the Mine Purchase Agreement. The Company is also seeking damages of $6,000,000 from the defendants for breach of contract.

On October 2, 2012, the Company was served with a Summons and Notice of Motion for Summary Judgment in an action entitled Turigay Affiliates Corp. v. TurkPower Corporation , Index No. 653415/2012, Supreme Court, New York County. The Plaintiff is seeking repayment of amounts loaned to the Company’s Turkish subsidiary. The Company has opposed the plaintiff’s motion and asserted a number of defenses including fraud and the forgery of the signatures of certain of the Company’s officers. At a hearing on May 8, 2013, the court granted the Plaintiff’s Motion for Summary Judgment in lieu of complaint for repayment of €450,000. A judgment in the amount of $1,177,352, plus costs and disbursements was entered on October 16, 2013.

The liability related to this loan is reported as short-term debt in the consolidated balance sheets.

Except as disclosed above, the Company is not a party to any other material pending legal proceedings nor is the Company aware of any threatened or contemplated proceeding by any governmental authority against the Company.

NOTE 11 - SUBSEQUENT EVENTS

On October 16, 2013, a judgment in the amount of $1,177,352 plus costs and disbursements was entered against the Company in theaction entitled Turigay Affiliates Corp. v. TurkPower Corporation , Index No. 653415/2012, Supreme Court, New York County.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

This Report contains statements that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities Act) and the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). Various matters discussed in this document and in documents incorporated by reference herein, including matters discussed under the caption “Plan of Operation,” may constitute forward-looking statements for purposes of the Securities Act and the Exchange Act. These statements are based on many assumptions and estimates and are not guarantees of future performance and may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. The words “expect,” “anticipate,” “intend,” “plan,” “believe,” “seek,” “estimate,” and similar expressions are intended to identify such forward-looking statements. The Company’s actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation, the Company’s lack of historically profitable operations, dependence on key personnel, the success of the Company’s business, ability to manage anticipated growth and other factors identified in the Company's filings with the Securities and Exchange Commission, press releases and/or other public communications.

(a) Overview

Zinco Do Brasil, Inc. (formerly TurkPower Corporation) was incorporated in the State of Delaware on November 4, 2004 as Global Ink Supply Company and was organizedto develop an e-commerce website to sell ink printer cartridges and toner. On May 11, 2010, an amendment was filed with the Secretary of State of Delaware to change the name of the Company to TurkPower Corporation. On September 28, 2012, an amendment was filed with and approved by the Secretary of State of Delaware to (i) change the name of the Company to Zinco do Brasil, Inc., (ii) effect a reverse split on a 1:15 basis and (iii) increase the number of the Company’s authorized shares of capital stock from 310,000,000 shares to 810,000,000 of which 800,000,000 shares are common stock with a par value $0.0001 per share and 10,000,000 shares are preferred stock with a par value $0.0001 per share. The amended Articles of Incorporation were approved by the State of Delaware effective September 28, 2012.

Business of the Company

On August 14, 2012, the Company entered into a Binding Agreement (the “Agreement”) with Ouro do Brasil Holdings Ltd. (“OBH”) and IMS Engenharia Mineral Ltda. (“IMS”) for the proposed acquisition of 99.9% (the “Transaction”) of the capital stock of Zinco do Brasil Mineracao Ltda., a company to be formed under the laws of Brazil (“ZBM”), which will be owned by OBH and IMS. Pursuant to the Agreement, the Company will acquire 99.9% of the total capitalization of ZBM in exchange for (i) 7,166,667 newly issued shares of the Company’s restricted common stock, par value $0.001 per share (the “Common Stock”), to OBH (the “OBH Shares”) and (ii) 1,075,000 shares of a newly-created Series C Preferred Stock, par value $0.0001 per share, to IMS (the “IMS Shares”). At the closing of the Transaction (the “Closing”) all officers, directors and shareholders holding 10% or more of the Company’s Common Stock shall enter into lock-up agreements.

The Company issued 4,711,714 of the OBH Shares to OBH and the IMS Shares to IMS. The balance of the respective shares will be issued to OBH at the Closing pursuant to a Final Transaction Agreement (“Transaction Agreement”) to be executed by the parties upon the formation of ZBM. The Transaction Agreement will contain customary terms, conditions, and covenants for a transaction of this nature.

In connection with the Transaction, the Company will convert an aggregate of approximately $5,000,000 of outstanding debt into approximately 3,333,333 shares of the Company’s Common Stock. In addition, following the closing of the proposed transaction, the Company shall consummate a private placement offering of $300,000 secured convertible notes and, within six months of closing the proposed transaction, the Company must: (i) raise up to $6,000,000 or such amount necessary to satisfy payment to Vale S.A. to complete the acquisition of the zinc mine; and (ii) raise $17,000,000 on or before the anniversary of the closing for working capital and general corporate purposes (collectively, the “Financing Conditions”). If the Financing Conditions are not met, IMS shall have the right of rescission provided that IMS has not converted any of its IMS Shares into Common Stock.

Upon execution of the Agreement, Juvenil Felix, Ed Dowling and Jose Mendo de Souza were appointed to the Company’s Board of Directors on or before the Closing; James Davidson was appointed Chairman and Chief Executive Officer; Ryan Hart, the Company’s former Chairman and Chief Executive Officer, was appointed as President; and Adriano Espeschit was appointed a Director and Chief Operations Officer. On September 26, 2012, the Registrant accepted the resignation of Kaveh Meghdadpour as member of the Board of Directors. On December 17, 2012, the Board resolved to remove James Davidson as Chairman and Chief Executive Officer and appointed Ryan Hart as interim Chairman and Chief Executive Officer. On June 17, 2013, the Registrant appointed Daniel J. Kunz as its Executive Chairman of the Board of Directors and, effective December 1, 2013, its Chief Executive Officer. Also on June 17, 2013, Ryan E. Hart was appointed to serve as Vice Chairman of the Board of Directors.

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ZBM will become a wholly-owned subsidiary of the Company, and the Company amended its Articles of Incorporation to change its name to “Zinco do Brasil, Inc.” This change was approved by the State of Delaware effective September 28, 2012.

Further, on or before the second anniversary of the closing, the Company shall divest itself of all current assets and operations in Turkey (the “Turkish Operations”) in exchange of the assumption of any liabilities associated with the Turkish Operations.

As of the date of this filing, ZBM has not been formed and the transaction has not been completed. The fair value of OBH shares and IMS shares of $210,320 has been recorded as a deposit on the acquisition.

On February 13, 2013, Zinco, OBH and IMS entered into a modification of the Agreement, dated August 14, 2012, to extend the date by which Zinco is required to raise $6,000,000 or such amount necessary to satisfy payment to Vale S.A. to complete the acquisition of the zinc mine until June 14, 2013.

On June 14, 2013, the Registrant, OBH and IMS entered into a modification of the Binding Agreement dated August 14, 2012, as amended on February 13, 2013, to extend the date by which the Registrant is required to raise $6,000,000 or such amount necessary to satisfy payment to Vale S.A. to complete the acquisition of the zinc mine, until September 14, 2013. The Company is currently working on a further extension of the agreement.

The extension was granted, in part, as a result of the substantial, partial performance made by the Registrant in its efforts to complete the acquisition, including the delivery of 4,711,714 shares of common stock and 1,074,999 shares of Series C Preferred Stock, as well as the conversion of an aggregate of $4,343,364 of convertible debt and related accrued interest into shares of common stock at $1.50 per share. The Registrant continues to devote all its efforts and operations toward the preparation of engaging in mining operations upon consummation of the transaction. The Registrant owns a minority interest in the Kuluncak mine, an iron ore mine in Turkey formerly owned by Exxaro and is currently in the process of evaluating its options and defining its strategy regarding its asset in Turkey.

(b) Going Concern

As shown in the accompanying consolidated financial statements, the Company had a net loss of $285,887 for the three months ended August 31, 2013 and had a working capital deficit as of August 31, 2013 of $4,840,846. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The Company intends to raise additional working capital either through debt or equity financing. The consolidated 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.

(c) Management’s Discussion and Analysis of Financial Condition and Results of Operation.

For the Three Months Ended August 31, 2013 and 2012

For the three months ended August 31, 2013 and 2012, our professional fees were $85,453 and $58,404, respectively.

For the three months ended August 31, 2013 and 2012, our selling, general and administrative expenses were $230,959 and $509,581, respectively. The decrease was primarily due to the decrease in stock based compensation of $233,179, which decreased as certain stock-based awards were fully amortized in prior periods.

For the three months ended August 31, 2013 and 2012, we recorded other (income) expense of $(30,525) and $1,670,244, respectively. The decrease in other (income) expense was primarily due to (a) a loss on extinguishment of debt of $631,476 and debt conversion expenses of $966,747 for the three months ended August 31, 2012, which were not repeated in the three months ended August 31, 2013, offset by a decrease in the derivative gain of $120,281 in 2013.

(d) Liquidity and Capital Resources

At August 31, 2013, we had cash of $18,208, as compared to $687 at May 31, 2013. This increase was primarily a result of proceeds from the issuance of Series D Preferred Stock of $450,000 and cash used in operations of $420,993.

During the next 12 months we anticipate incurring costs related to the consummation of the acquisition of ZBM, the exploration and development of ZBM’s mineral rights and fundraising activities.

We believe we will be able to meet these costs through the use of funds, to be loaned by or invested in us by our stockholders, management or other investors. However, there can be no assurance that we will be able to secure such funds or that if we do so, that they will be on terms that are favorable to the Company.

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Off-Balance Sheet Arrangements

As of the date of this Quarterly Report, the Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with the Company is a party, under which the Company has (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on the accompanying financial statements.

Critical Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of its wholly owned US subsidiary, TurkPower USA Corporation and its foreign subsidiary, Turkpower Enerji San. Ve Tic. A.S., of which the Company has a 99.8% controlling interest.  All significant intercompany balances and transactions have been eliminated in the consolidation.

Use of estimates

The preparation of financial statements in conformity with U.S. GAAP 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 as well as the reported amount of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Fair value of financial instruments

The carrying value of cash and cash equivalents, receivables, accounts payable and accrued expenses, and debt approximate their fair values because of the short-term nature of these instruments. Management believes the Company is not exposed to significant interest or credit risks arising from these financial instruments.

Seasonality

To date, we have not noted any significant seasonal impacts.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable for smaller reporting companies.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. It should be noted that the design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

As of the end of the period covered by this Quarterly Report, Management has concluded that our disclosure controls and procedures are not effective because of the identification of a material weakness in our internal control over financial reporting, which we view as an integral part of our disclosure controls and procedures. The material weakness relates to the Company not having personnel with knowledge of generally accepted accounting principles. Our executive management does not possess accounting expertise and our Company does not have an audit committee. This weakness was due to our lack of working capital to hire additional staff during the period covered by this report. We intend to obtain this knowledge of generally accepted accounting principles by hiring a contractor and/or hiring additional accounting personnel.

Changes in Internal Controls over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting, known to executive management that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

On December 26, 2011, the Company commenced a lawsuit against Nalan Oral and Seluck Oral, the shareholders of Avrasya Yapı Yatırım Hizmetleri A.Ş., in the United States District Court for the Southern District of New York alleging the defendants breached the Mine Purchase Agreement and seeking to cancel the 2,666,667 shares of Common Stock and 226,667 warrants issued to the defendants in connection with the Mine Purchase Agreement. The Company is also seeking damages of $6,000,000 from the defendants for breach of contract.

On October 2, 2012, the Company was served with a Summons and Notice of Motion for Summary Judgment in an action entitled Turigay Affiliates Corp. v. TurkPower Corporation , Index No. 653415/2012, Supreme Court, New York County. The Plaintiff is seeking repayment of amounts loaned to the Company’s Turkish subsidiary. The Company has opposed the plaintiff’s motion and asserted a number of defenses including fraud and the forgery of the signatures of certain of the Company’s officers. At a hearing on May 8, 2013, the court granted the Plaintiff’s Motion for Summary Judgment in lieu of complaint for repayment of €450,000.On October 16, 2013, a judgment in the amount of $1,177,352.19 plus costs and disbursements was entered against the Company in theaction.

The liability related to this loan is reported as short-term debt in the consolidated balance sheets.

Except as disclosed above, the Company is not a party to any other material pending legal proceedings nor is the Company aware of any threatened or contemplated proceeding by any governmental authority against the Company.

ITEM 1A. RISK FACTORS.

Not required for smaller reporting companies.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

On April 27, 2010, the Company’s Turkish subsidiary borrowed €450,000 ($555,692) from a third party. The loan is unsecured, bears annual interest at 25.0% and was payable in full on October 27, 2010. The interest rate increased to 60% on October 28, 2010, when the loan became in default. On August 2, 2011, the Turkish subsidiary and the lender cancelled the previous loan agreement and agreed to terms for the repayment of the €450,000 short-term debt and related interest by which the Turkish subsidiary agreed to pay the lender €200,000 on August 15, 2011, and €100,000 monthly thereafter through December 15, 2011 after which the Turkish subsidiary will have paid the lender €600,000 in aggregate. In addition the Company agreed to issue the lender 300,000 common shares no later than August 15, 2011. The Turkish subsidiary did not make the scheduled payments and the Company did not issue 300,000 shares to the lender. While delinquent, the Company is required to pay a 2.5% interest per month on the €600,000 loan to the lender. As of August 31, 2013, this loan is in default.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION AND SUBSEQUENT EVENTS

On October 16, 2013, a judgment in the amount of $1,177,352.19 plus costs and disbursements was entered against the Company in theaction entitled Turigay Affiliates Corp. v. TurkPower Corporation , Index No. 653415/2012, Supreme Court, New York County.See Item 1 Legal Proceedings.

EXHIBITS

(a) Exhibit index

Exhibit  Number	Description
31.1	Section 302 Certification Of Chief Executive Officer and Chief Financial Officer
32.1	Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act Of 2002 – Chief Executive Officer and Chief Financial Officer

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SIGNATURES 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: October 21, 2013

ZINCO DO BRASIL, INC.
(Registrant)
By:	/s/Ryan Hart
	Name: Ryan Hart
	Title: President, Chief Executive Officer and Chief Financial Officer
	(Principal Executive Officer and Principal Financial Officer)

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