Washington, D.C. 20549
China Changjiang Mining & New Energy Co., Ltd.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
The aggregate market value of the voting common stock held by non-affiliates of the issuer, based on the average bid and asked price of such stock, was $484,321 at June 30, 2013.
At June 30, 2013, the registrant had outstanding 64,629,559 shares of common stock, $0.01 par value.
CHINA CHANGJIANG MINING AND NEW ENERGY COMPANY LTD.
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHINA CHANGJIANG MINING & NEW ENERGY CO., LTD.
CHINA CHANGJIANG MINING & NEW ENERGY CO., LTD.
CHINA CHANGJIANG MINING & NEW ENERGY CO., LTD.
| 1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The accounting policies and methods followed in preparing these unaudited condensed consolidated financial statements are those used by China Changjiang Mining And New Energy company Ltd (the ‘Company’) as described in Special Notes of the notes to consolidated financial statements included in Annual Report on Form 10-K for the year ended December 31,2012. The unaudited condensed consolidated financial statements for the six-months periods ended June 30, 2013 and 2012 have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission and do not confirm in all respects to the disclosure and information that is required for annual consolidated financial statements. The year-end condensed consolidated balance sheet data was derived from audited consolidated financial statements, but does not include all disclosure required by accounting principles generally accepted in the United States of America. These interim condensed consolidated financial statements should be read in conjunction with the most recent annual consolidated financial statements of the Company.
In the opinion of management, all adjustments, all of which are of a normal recurring nature, considered necessary for fair statement have been included in these interim condensed consolidated financial statements. Operating results for the six-months period ended June 30, 2013 are not indicative of the results that may be expected for the full year ending December 31, 2013.
| (a) | Foreign Currency Translation |
Exchange rates applied for the foreign currency translation during the period are as follows:
USD to RMB
| | | June 30, 2013 | | | December 31, 2012 | |
| Period end US$ : RMB exchange rate | | | 6.1787 | | | | 6.2855 | |
| Average periodic US$ : RMB exchange rate | | | 6.2321 | | | | 6.3125 | |
USD to HKD
| | | June 30, 2013 | | | December 31, 2012 | |
| Period end US$ : UHK exchange rate | | | 7.7563 | | | | 7.7522 | |
| Average periodic US$ : UHK exchange rate | | | 7.7543 | | | | 7.7986 | |
HK$ is pegged to US$ and hence there is no significant translation adjustment impact on these consolidated financial statements.
RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.
| (b) | Earning/Loss per share |
Basic earning/loss per share is computed by dividing earning/loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earning/loss per share is computed in a manner similar to basic earning/loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.
| 2. | OTHER CURRENT ASSETS AND PREPAYMENTS |
Other current assets and prepayments of $1,157,551 consists of the temporary short-term borrowings of $825,416 (RMB 5,100,000) to an individual, Lihua, and the small amount advances of $332,135 to the employees and other third parties. The amount to Lihua was borrowed in June, 2013 and repaid in July 2013 without interest.
| 3. | PROPERTY, PLANT AND EQUIPMENT |
The following is a summary of property, plant and equipment:
| | | June 30, 2013 | | | December 31, 2012 | |
| | | | | | | |
| Cost | | $ | | | | $ | | |
| Motor vehicles | | | 262,736 | | | | 258,271 | |
| Office equipment | | | 61,347 | | | | 67,741 | |
| EPC projects equipment | | | 316,689 | | | | | |
| Total | | | 640,772 | | | | 326,012 | |
| | | | | | | | | |
| Accumulated depreciation | | | (236,496 | ) | | | (223,732 | ) |
| | | | | | | | | |
| Preperty, plant & equipment, net | | | 404,276 | | | | 102,280 | |
The additional EPC projects equipment of $316,689 was the installed solar photovoltaic power generation equipments located in Huanghe Bay, Qiachuan County, Shaanxi Province, PRC. It was transferred from Construction In Progress in June,2013.
| 4. | DUE FROM RELATED PARTIES – NON CURRENT |
The balance of $4,719,537 due from related parties represents the loan owned from related parties, which are unsecured and repayable on demand.
Due from related parties consists of the following.
| | | June 30, 2013 | | | December 31, 2012 | | | Interest |
| Du Kang Liquor Development Co., Ltd | | $ | 809,232 | | | | 795,482 | | | interest free for the first year and bear interest in the benchmark lending rate over the same period afterwards |
| Shaanxi Du Kang Liquor Group Co., Ltd | | $ | 1,246,719 | | | | - | | | bearing interest in the benchmark lending rate over the same period |
| Zhongke Aerospace & Agriculture Development Stock Co.,Ltd | | $ | 457,216 | | | | 449,447 | | | interest free |
| Shaanxi Huanghe Bay Springs Lake Theme Park Ltd | | $ | 1,820,771 | | | $ | 1,193,222 | | | interest free |
| Shaanxi Changfa Industrial Co., LTD | | $ | 372,247 | | | | 365,922 | | | interest free |
| Mr Chen Weidong | | $ | - | | | | 45,876 | | | interest free |
| Shaanxi Changjiang Zhongxiayou Investment Co.,Ltd | | $ | 13,352 | | | | 13,125 | | | interest free |
| Total | | | 4,719,537 | | | | 2,863,074 | | | |
| 5. | OTHER PAYABLES AND ACCRUED EXPENSES |
The following is a summary of other payables and accrued liabilities:
| | | June 30, 2013 | | | December 31, 2012 | |
| | | | | | | |
| Tax payable | | $ | 1,138,124 | | | $ | 510,173 | |
| Salary and welfare payable | | | 25,162 | | | | 24,734 | |
| Other payable | | | 329,160 | | | | 170,225 | |
| | | $ | 1,492,446 | | | $ | 705,132 | |
The tax payable of $1,138,124 includes income tax payable of $870,157, business tax payable of $242,365 and other tax payable of $25,602.
The current liability related party notes payable of $434,137 represents the notes payable to a related party, interest rate of 8% per annum, guaranteed by a note receivable from a third party.
The non-current liability balance of $1,846,177 due to related parties represents the loan owed to related parties, which are interest free, unsecured and repayable on demand twelve months after June 30, 2013.
Due to related parties consists of the following.
| | | June 30, 2013 | | | December 31, 2012 | |
| | | | | | | |
| Due to Huiton World Property Superintendent Company | | $ | 404,616 | | | $ | 397,741 | |
| Due to Zhongke Lvxiang Development Stock Co., Ltd | | $ | 1,132,924 | | | | 1,113,674 | |
| Due to Shaanxi Changjiang electricity & new energy Co.,Ltd | | $ | 297,938 | | | | 292,876 | |
| Due to Baishui Du Kang Brand Management Co.,Ltd | | $ | 9,711 | | | | 9,546 | |
| Due to Shaanxi Xidenghui Technology Co. Ltd. | | $ | 988 | | | | 970 | |
| Due to Shaanxi Dukang Liquor Group Co.,Ltd | | $ | - | | | | 44,054 | |
| Total | | $ | 1,846,177 | | | | 1,858,861 | |
The balance of $4,256,928 due to shareholders represents the loan owed to the shareholders, which are interest free, unsecured and repayable on demand twelve months after June 30, 2013.
Due to shareholders consists of the following.
| | | June 30, 2013 | | | December 31, 2012 | |
| | | | | | | |
| Due to Wang Shengli | | $ | 2,230,871 | | | | 2,192,966 | |
| Due to Zhang Hongjun | | | 1,418,907 | | | | 1,394,798 | |
| Due to Chen Min | | $ | 607,150 | | | | 599,143 | |
| | | | 4,256,928 | | | | 4,186,907 | |
| 8. | SALES REVENUE – RELATED PARTY |
The Company entered into a lease and complementary agreements with the related company Huanghe dated July 26, 2010. According to the agreements, a piece of land with the area of 5,706,666.67 square meters was leased to Huanghe for traveling and amusement from January 1, 2011 to December 31, 2029. The annual rent in US dollars is approximately $1.2 million (equivalent to RMB7, 500,000).The rent revenue of $601,723 was recognized for the six months ended June 30, 2013, compared with the rent revenue of $594,022 for the six months ended June 30,2012.
| 9. | GAIN ON DISPOSAL OF ASSETS |
The gain on disposal of assets consists of the total consideration of $2,406,893 (RMB15,000,000) and the related business tax and its surcharges of $ 127,565.
The provision for taxes on earnings consisted of:
| | For the three months ended June 30, | | For the six months ended June 30, | |
| | 2013 | | | 2012 | | 2013 | | | 2012 | |
| PRC Enterprise Income Tax (Benefit) | | $ | 11,261 | | | | (899 | ) | | $ | 587,376 | | | | (8,461 | ) |
| United States Federal Income Tax | | | | | | | - | | | | - | | | | - | |
| Income tax, net | | | 11,261 | | | | (899 | ) | | | 587,376 | | | | (8,461 | ) |
The income taxes expense (benefit), which is all incurred in PRC, consists of the following:
| | | For the three months ended June 30, | | | For the six months ended June 30, | |
| | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
| | | | | | | | | | | | | |
| Current income tax expense | | $ | 11,261 | | | | - | | | $ | 587,376 | | | | - | |
| Deferred income tax expense (benefit) | | | | | | | (899 | ) | | | | | | | (8,461 | ) |
| Income tax, net | | | 11,261 | | | | (899 | ) | | | 587,376 | | | | (8,461 | ) |
| 11. | RELATED PARTY TRANSACTIONS - REVENUE |
In addition to the other transactions and balances disclosed elsewhere in the financial statements, the Company leased the land use right to Huanghe, a company with the same controlling person, and generated rent revenue of $601,723 for the six months ended June 30, 2013.
The Company operates in two reportable segments, Land use right leasing and solar PV energy. Summarized information by business segment for the three and six months ended June 31, 2013 and 2012 is as follows.
| | | For the three months ended June 30, | | | For the six months ended June 30, | |
| | | 2013 | | | 2012 | | | 2013 | | | 2012 | |
| Revenue | | | | | | | | | | | | |
| Land use right leasing | | $ | 303,023 | | | | 296,289 | | | $ | 601,723 | | | | 594,022 | |
| Solar PV energy | | | | | | | | | | | | | | | | |
| Cost of revenue | | | | | | | | | | | | | | | | |
| Land use right leasing | | | 16,970 | | | | 16,592 | | | | 33,697 | | | | 33,265 | |
| Solar PV energy | | | | | | | | | | | | | | | | |
| Gross Profits | | | | | | | | | | | | | | | | |
| Land use right leasing | | | 286,053 | | | | 279,697 | | | | 568,026 | | | | 560,757 | |
| Solar PV energy | | | | | | | | | | | | | | | | |
The Company evaluates segment performance based on income from operations. As a result, the components of operating income for one segment may not be comparable to another segment.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
In addition to the historical information contained herein, we make statements in this Quarterly Report on Form 10-Q that are forward-looking statements. Sometimes these statements will contain words such as "believes," "expects," "intends," "should," "will," "plans," and other similar words. Forward-looking statements include, without limitation, assumptions about our future ability to increase income streams, reduce and control costs, to grow revenue and earnings, and our ability to obtain additional debt and/or equity capital on commercially reasonable terms, none of which is certain. These statements are only predictions and involve known and unknown risks, uncertainties and other factors included in our periodic reports with the SEC. Although forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment, actual results could differ materially from those anticipated in such statements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
The following discussion and analysis should be read in conjunction with our June 30, 2013 unaudited consolidated financial statements and related notes thereto included in the quarterly report and with our consolidated financial statements and notes thereto for the year ended December 31, 2012.
Overview
We have transitioned our business from mining to clean new energy in the middle of 2012, and mainly focused on the solar PV downstream market at the present stage. Though the solar PV business did not generate revenue for the six months ended June 30, 2013, our Huanghe Bay Project was expected to begin the operation in 2013. And at the end of 2013, our Baisui Project is expected to complete its construction works. In the near future, we plan to gradually increase the resource devoted to marketing.
We also hold land use rights in a land parcel and we lease a portion of the land use rights on the 5.7 square kilometer parcel to Shaanxi Huanghe Bay Springs Lake Theme Park Ltd. (“Huanghe”), a company with a common control person. The term of the lease agreement is from January 1, 2011 to December 31, 2029. Our land use rights are amortized over their 50 year term. The Land use right was not only our largest asset, but also the stable operating income to support our other business, with an annual rent of approximately $ 1.2 million (RMB7,500,000).
The following is a summary of the book value of our land use rights as of June 30, 2013:
| Cost | | $ | 20,715,102 | |
| Less: Accumulated amortization | | | (3,856,315) | |
| Land use rights, net | | $ | 16,858,787 | |
Amortization expenses were approximately $205,376 and $202,747 for the six months ended June 30, 2013, and 2012, respectively.
As reflected in the accompanying consolidated financial statements, the Company had an accumulated deficit of $3,788,823 as of June 30, 2013, which includes net income for common stockholders of $1,157,630 for the six months ended June 30, 2013. The Company’s operations used cash of $828,195 for the six months ended June 30, 2013.
We began to generate revenue for the year ended December 31, 2011, of which the revenue from land use right leasing was expected to provide stable cash flow. In the future, we expect that there will no longer be a need for us to continue to rely on loans from our directors and other related parties. We believe that we have adequate capital to assure that we will be able to meet our obligations or obtain sufficient capital to complete our plan of operations for the next twelve (12) months.
RESULTS OF OPERATIONS
Comparison of the Three Months Ended June 30, 2013 and June 30, 2012
Sales revenue
We generated total revenue of $ 303,023 for the three months ended June 30, 2013, compared with the revenue of $ 296,289 for the three months ended June 30, 2012. The revenue was the rent of Land use rights for both of the periods and was related party transactions.
Operating Expenses
Total operating expense for the three months ended June 30, 2013 was $185,115 compared with operating expense of $137,735 for the three months ended June 30, 2012. The increase was partially due to the increased administrative expense from $30,583 to $91,260. The amortization expense for the three months ended June 30, 2013 remained stable, as no addition or disposal occurred for Land use rights. The depreciation for the three months ended June 30, 2013 only increased by $780, compared with the same period of 2012, as the additional EPC project equipment of $316,689 will begin its depreciation in July.
Income before taxes for the three months ended June 30, 2013 was $135,077, compared to an income of $ 141,795 for the three months ended June 30, 2012.
Net Income
We achieved a net income of $123,816 for the three months ended June 30, 2013, compared to a net income of $142,694 for the three months ended June 30, 2012. The decrease was primarily due to the increase in administrative expense for the three months ended June 30, 2013.
Comprehensive Income
Our comprehensive income for the three months ended June 30, 2013 was $330,936 compared with comprehensive income of $ 85,244 for the three months ended June 30, 2012. The comprehensive income (loss) for each period only referred to the foreign currencies translation gain (loss), between the U.S. Dollar and the Chinese Yuan RMB (or Hong Kong Dollar for Wah Bon).
Comparison of the Six Months Ended June 30, 2013 and June 30, 2012
Sales revenue
We generated total revenue of $ 601,723 for the six months ended June 30, 2013, compared with the revenue of $ 594,022 for the six months ended June 30, 2012. The revenue was the rent of Land use rights for both of the periods and was related party transactions.
Operating Expenses
Total operating income for the six months ended June 30, 2013 was $1,853,336 compared with operating expense of $304,540 for the six months ended June 30, 2012. The increase was partially due to a gain of $2,279,328 recognized and an increase in the administrative expense, which increased to $207,085 from $88,305,. The amortization expense for the six months ended June 30, 2013 remained stable, as no addition or disposal occurred for Land use rights. The depreciation for the six months ended June 30, 2013 only increased by $43,compared with the same period of 2012, as the additional EPC project equipment of $316,689 will begin its depreciation in July.
Income before taxes for the six months ended June 30, 2013 was $2,458,405 compared to an income of $243,529 for the six months ended June 30, 2012. The significant increase for our operating results was attributable to the transaction for the disposal of mines recognized in the first quarter of 2013.
Net Income
We achieved a net income of $1,871,029 for the six months ended June 30, 2013, compared to a net income of $251,990 for the six months ended June 30, 2012. The significant increase was primarily due to the transaction for the disposal of mines recognized in the first quarter of 2013.
Comprehensive Income
Our comprehensive income for the six months ended June 30, 2013 was $2,115,425 compared with comprehensive income of $201,718 for the six months ended June 30, 2012. The comprehensive income (loss) for each period only referred to the foreign currencies translation gain (loss), between the U.S. Dollar and the Chinese Yuan RMB (or Hong Kong Dollar for Wah Bon).
Stockholders’ Equity
Stockholders' equity increased to $14,843,961 as of June 30, 2013, or approximately 17%, from $12,728,536 as of December 31, 2012. The significant increase was primarily due to our net income of $1,871,029 generated for the six months ended June 30, 2013.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows From Operating Activities
Net cash used in operating activities of $828,195 for the six months ended June 30, 2013 compared with net cash provided of $813,112 for the six months ended June 30, 2012. The net cash flow in operating activities took a turn for the worse for the six months ended June 30, 2013 because the temporary short-term borrowings of $825,416 (RMB5,100,000) was provided to an individual, Lihua in June, and the adjustment for disposal of mine of $2,279,328 decreased the net cash flow significantly. The other adjustments to reconcile our net income to net cash flow include depreciation expense of $ 13,531, amortization of $ 205,376 for land use rights, an increase in operating assets of $1,068,999, an increase in operating liability of $736,535 and the decrease in advance from customers of $320,919.
Cash Flows From Investing Activities
Net cash provided by investing activities of $453,891 for the six months ended June 30, 2013 was the result of the proceeds from disposal of mine of $2,406,893, cash provided to the related parties of $1,889,453, and the cash paid for the EPC project of $ 63,549.
Cash Flows From Financing Activities
Net cash of $ 12,909 used in financing activities for the six months ended June 30, 2013 resulted from the repayment to related parties of $12,909 .
General
Collectability of our account receivable for the land use right leasing is important to our continuation of operation. In addition, we have access to short and long term loans of cash from our directors or other related parties.
We provided loans of $1,889,453 to our related parties for the six months ended June 30, 2013.
We returned cash of $ 12,909 to our related parties for the six months ended June 30, 2013.
Our current assets decreased by $401,651 and total assets increased by $1,562,564 respectively.
We have cash of $ 1,439,397 and $1,763,381 as of June 30, 2013 and December 31, 2012 respectively.
We believe that we have sufficient cash to fund operations for the next 12 months.
FINANCING
We anticipated the cash generated from operating activities will be sufficient to sustain our daily operations for the next twelve months.
INFLATION
Our management believes that inflation did not have a material effect on our results of operations for the six months ended June 30, 2013.
OFF-BALANCE SHEET ARRANGEMENTS.
We do not have any off-balance sheet arrangements.
CONTRACTUAL OBLIGATIONS
None
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities to comply with generally accepted accounting principles. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from our estimates, which would affect the related amounts reported in our financial statements.
An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimates are made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur, could materially impact the consolidated financial statements. We believe that the following critical accounting policies reflect the significant estimates and assumptions which are used in the preparation of the consolidated financial statements and affect our financial condition and results of operations.
Revenue Recognition
The Company recognizes revenue when the earnings process is complete, both significant risks and rewards of ownership are transferred or services have been rendered and accepted, the selling price is fixed or determinable, and collectability is reasonably assured.
We are currently leasing the land use right to Huanghe for the development and operation of a theme park. We generally collect the annual rent every year, and then recognize land use right leasing revenue over the beneficial period described by the agreement, as the revenue is realized or realizable and earned.
Related Party
A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, member of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting party might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.
Our related parties are the following individuals and entities: (i) Mr. Wang Shengli (a director of the Company), Mr. Chen Weidong (our President, Chief Executive Officer and Chairman of the Board), Ms Li Ping (a director of the Company), and Ms. Chen Min (a director of the Company), all of whom are shareholders of the Company; (ii) Mr. Zhang Hong Jun, who is currently a director of the Company; (iii) Ms Li Ping (our Chief Financial Officer and who has the same name with our Director Ms Li Ping); and (iv) the following companies: Du Kang Liquor Development Co., Ltd., Huiton World Property Superintendent Company, Xi Deng Hui Development Stock Co., Ltd. Zhongke Lvxiang Development Stock Co., Ltd., Shaanxi Du Kang Liquor Group Co., Ltd., Shaanxi Bai Shui Du Kang Brand Management Co., Ltd, Shaanxi Changjiang electricity & new energy Co.,Ltd, Shaanxi Huanghe Bay Springs Lake Theme Park Ltd, Shaanxi Changfa Industrial Co.,LTD, Shaanxi Tangrenjie Advertising Media Co.,Ltd and Zhongke Aerospace & Agriculture Development Stock Co.,Ltd.
Cash flows from due from related parties are classified as cash flows from investing activities. Cash flows from due to related parties are classified as cash flows from financing activities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not required for a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
In connection with the preparation of this Quarterly Report on Form10-Q, an evaluation was carried out by the Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2013. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.
Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2013.
Internal Control over Financial Reporting
Management’s Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers and effected by a company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control – Integrated Framework and Internal Control over Financial Reporting-Guidance for Smaller Public Companies. As a result of this assessment, management identified a material weakness in internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
We note the following deficiencies that management believes to be material weaknesses:
| a) | Various members of the Company’s executive management are also members of its board of directors, including the board’s chairman. This situation prevents a truly independent review of the actions of the Company’s management. |
| b) | The Company does not have an independent audit committee to oversee the external financial reporting process and the internal control over financial reporting as required by the Sarbanes-Oxley Act of 2002. This, in combination with the lack of an independent board of directors, creates a material weakness in the oversight of the Company’s management, its internal control and its financial reporting process. |
| c) | The Company does not have sufficient knowledge of all the necessary financial statement disclosures that are required to be made in accordance with U.S. generally accepted accounting principles. |
Based on the material weakness described above, management has concluded that, as of June 30, 2013, the Company's internal control over financial reporting was not effective based on the criteria in Internal control - Integrated framework issued by the COSO.
The Company intends to take the following steps as soon as practicable to remediate the material weakness we identified as follows:
| 1. | We intend to recruit independent directors such that at least a majority of our Board is independent. |
| 2. | We intend to constitute audit, nominating and compensation committees comprised entirely of independent directors and to adopt committee charters for those committees, in accordance with the corporate governance standards of the New York Stock Exchange. We intend that at least one member of our Audit Committee will qualify as an “Audit Committee financial expert.” |
Changes in Internal Controls over Financial Reporting
There has been no significant change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)- 15(f) of the Exchange Act) that occurred during the six months ended June 30, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II
ITEM 1. LEGAL PROCEEDINGS.
We received a document subpoena dated April 4, 2011, pursuant to which the Enforcement Division of the SEC informed us that it was conducting an investigation of the Company to determine whether the Company has committed a violation of the federal securities laws. The subpoena required us to produce certain documents to the SEC, and we complied and responded on May 2, 2011.
On June 7, 2011, the SEC issued another subpoena in furtherance of its investigation and required the Company to produce additional documents relating to its land use right. We complied with the subpoena and responded on June 24, 2011 to the Los Angeles Regional Office of the SEC.
On September 5, 2012, the Securities and Exchange Commission officially notified us of its termination of the investigation against us that began in April 2011. The SEC also confirmed that it had no intention of recommending any enforcement action by the Commission.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
On December 25, 2009, the Company issued an aggregate of 4,500,000 shares of common stock to Messrs. Donald R. Monroe and Stanley F. Wilson, the principals of Capital Advisory Services, Inc., in connection with our share exchange transaction. To the best of our knowledge, each of them now holds 2,250,000 shares of common stock the shares were issued without registration in reliance on section 4(2) of the Securities Act. All issued and outstanding shares of series C Preferred Stock have been converted into an aggregate amount of 609 million shares of our common stock which were issued without registration in reliance on SEC Regulation S and section 3(a)(9) of the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
CHINA CHANGJIANG MINING AND NEW
ENERGY COMPANY, LTD.
(Registrant)
| Date: August 14, 2013 | By | /s/ Chen Wei Dong | |
| | | Chen Wei Dong |
| | | Chief Executive Officer and President |
| | | |
| Date: August 14, 2013 | By | /s/ Li Ping | |
| | | Li Ping |
| | | Chief Financial Officer (Principal Financial Officer) |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| Name | | Capacity | | Date |
| | | | | |
| /s/ Chen Wei Dong | | Chief Executive Officer President and Chairman of Board of Directors (Principal Executive Officer) | | August 14, 2013 |
| | | | | |
| /s/ Li Ping | | Chief Financial Officer (Principal Financial Officer) | | August 14, 2013 |
| | | | | |
| /s/ Zhang Hong Jun | | Director | | August 14, 2013 |
| | | | | |
| /s/ Wang Sheng Li | | Director | | August 14, 2013 |
| | | | | |
| /s/ Tian Hai Long | | Director | | August 14, 2013 |
| | | | | |
| /s/ Chen Min | | Director | | August 14, 2013 |
| | | | | |
| /s/ Li Ping | | Director | | August 14, 2013 |
