UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2008
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission File No. 000-05474
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION
Delaware 75-2571032
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Fifth Floor, High-Tech Mansion, Gaoxin Road,
Hi-Tech Zone, Xi'An P. R. China 710075
-----------------------------------------
(Address of principal executive offices)
(86) 29-88331685
--------------------------
(Issuer's telephone number)
Check whether the issuer (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.
[X] YES [ ] NO
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act.
[ ] YES [X] NO
APPLICABLE TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15 (d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
[ ] YES [ ] NO
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: September 30, 2008:
33,216,058
Transitional Small Business Disclosure Format (check one) Yes [ ] No [X]
Table of Contents
10-Q - NORTH AMERICAN GAMING AND ENTERAINMENT CORPORATION FORM 10-Q
PART I
ITEM 1. FINANCIAL STATEMENTS 1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION 8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 14
ITEM 4T.CONTROLS AND PROCEDURES 14
PART II
Items 1 through 5 not applicable.
ITEM 6. EXHIBITS 16
SIGNATURES 16
EX-1 (EXHIBIT 31.1)
EX-2 (EXHIBIT 32.1)
ITEM 1. FINANCIAL STATEMENTS
NORTH AMERICAN GAMING AND ENTERTAINMENT
CORPORATION
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
Sept 30, December 31,
2008 2007
ASSETS unaudited
---------- -----------
CURRENT ASSETS
Cash and cash equivalents 118,520 479,241
Notes receivable - 133,000
Other current asset and prepayment 855,683 532,584
Due from related companies 1,177,585 540,964
---------- -----------
TOTAL CURRENT ASSETS 2,151,788 1,685,789
---------- -----------
FURNITURE AND EQUIPMENT NET 245,416 252,941
---------- -----------
Long term investment 293,328
---------- -----------
LAND USE RIGHT 17,653,100 16,743,482
---------- -----------
GOODWILL 3,342,094 3,115,544
---------- -----------
TOTAL ASSETS 23,685,726 21,797,756
========== ===========
LIABILITY AND EQUITY
CURRENT LIABILITY
Other payable and accrual expense 1,907,323 2,074,561
Notes payable 573,146 573,146
Due to stockholder 2,594,564 1,858,217
Due to related company 4,009,209 2,510,892
Preferred stock 12,700 12,700
Preferred stock dividend payable 15,003 15,003
---------- -----------
TOTAL CURRENT LIABILITY 9,111,945 7,044,519
---------- -----------
COMMITMENT AND CONTIGENCY -
---------- -----------
MINORITY INTEREST 637,386 619,747
---------- -----------
STOCKHOLDERS' EQUITITY
Series C convertible preferred stock ($0.001 per value)
10,000,000 shares authorized, 500,000 share issued 5,000 5,000
as of September 30, 2008
Common stock($0.01 per value,100,000,000 shares authorized,
50,788,552 shares issued, 33,216,058 shares outstanding 507,886 417,886
as of September 30, 2008; and 41,788,552 shares issued,
24,216,058 outstanding as of December 31, 2007)
Additional paid-in capital 23,631,296 23,523,678
---------- -----------
Treasury stock, 17,572,494 shares, at cost (489,258) (489,258)
---------- -----------
Accumulated deficits during the exploration stage (13,240,664) (11,794,802)
---------- -----------
Accumulated other comprehensive income 3,522,135 2,470,986
---------- -----------
TOTAL EQUITY 13,936,395 14,133,490
---------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY 23,685,726 21,797,756
========== ===========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
1
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
Nine months ended Sept Three months ended Sept
2008 2007 2008 2007
----------- ----------- ----------- -----------
OPERATING EXPENSES
General and administrative expenses 226,292 111,871 108,067 34,138
Legal and professional fee 672,882 88
Depreciation 27,749 9,479
Amortization of Land use right 300,725 102,315
----------- ----------- ----------- -----------
Total Operating Expenses 1,227,648 111,871 219,949 34,138
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (1,227,648) (111,871) (219,949) (34,138)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSES)
Interest income 1,339 8,977 575 2,992
Interest expenses (23,004) (33,049) (163) (11,688)
Imputed interest expenses (238,775) (93,757)
----------- ----------- ----------- -----------
Total Other Expenses (260,440) (24,072) (93,345) (8,696)
----------- ----------- ----------- -----------
LOSS
BEFORE MINORITY INTEREST (1,488,088) (135,943) (313,294) (42,834)
Minority interests 42,226 14,650
----------- ----------- ----------- -----------
NET LOSS (1,445,862) (135,943) (298,644) (42,834)
----------- ----------- ----------- -----------
OTHER COMPREHENSIVE INCOME 1,051,148 95,499 -
----------- ----------- ----------- -----------
COMPREHENSIVE LOSS (394,714) (135,943) (203,143) (42,834)
NET LOSS PER SHARE
Basic (0.05463) (0.00561) (0.0113) (0.00177)
Diluted (0.00228) (0.0005)
Weighted average number of shares
outstanding
during the period - basic 26,466,904 24,216,058 26,466,904 24,216,058
during the period - diluted 635,466,904 635,466,904
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
NORTH AMERICAN GAMING AND ENTERTAINMENT CORPORATION AND SUBSIDIARIES
(An Exploration Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine nmonths ended Sept 30,
2008 2007
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (1,445,862) (135,943)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Loss on disposal of discontinued operations
---------- ----------
Stock issued for services 90,000
Depreciation 27,749 1,169
---------- ----------
Amortization of land use rights 300,725
---------- ----------
Imputed interest expenses 238,775
Changes in operating assets and liabilities (Increase) decrease in: -
Other current assets and prepayments (323,098) (8,977)
Other payables and accrued expense (167,238) 32,457
---------- ----------
Net cash (used in) provided by operating activities (1,278,949) (111,294)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Repayment of note receivable 133,000
Purchase of furniture and equipment (8,044)
Due from related parties (636,621)
---------- ----------
Net cash provided by (used in) investing activities (511,664) -
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Due to stockholders 736,347
Due to related parties 1,498,317
Repayment of note payables 112,500
---------- ----------
Net cash provided by financing activities 2,234,664 112,500
---------- ----------
EFFECT OF EXCHANGE RATES ON CASH (804,772)
NET DECREASE IN CASH AND CASH EQUIVALENTS (360,721) 1,206
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 479,241 784
CASH AND CASH EQUIVALENTS AT END OF PERIOD 118,520 1,990
========== ==========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
On February 15, 2008, the Company issued 4,500,000 shares of restricted common
stock in exchange for 3,800,000 shares of common stock which were issued before
the reverse merger.
No addition or disposal of Land-use value for the nine months ended Sept 30,
2008, which means the balances are both RMB130,860,100 at the end of December,
2007 and Sept, 2008. The increase of USD 1,301,007 (19,192,614-
17,891,607=1,301,007) represents the exchange gain during the three
quarters. The goodwill of RMB 22,787,401 represents the difference between
investment of the Dongfang Mining booked by Changjiang and the equity of
Dongfang Mining. The Balance is the same for the end of December 2007 and
Sept
chmetcnvTCSC0NumberType1NegativeFalseHasSpaceFalseSourceValue13UnitNamea2008 in
RMB. And the increase of USD226,550 (3,342,094-3,115,544=226,550) was the
Exchange gain during the three quarters.
3
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF Sept 30, 2008
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with accounting principles generally accepted
in the
chmetcnvTCSC0NumberType1NegativeFalseHasSpaceFalseSourceValue13UnitNameaUnited
States of America for interim financial information and pursuant to the
rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements.
In the opinion of management, the unaudited condensed consolidated
financial statements contain all adjustments consisting only of normal
recurring accruals considered necessary to present fairly the Company's
financial position at Sept 30, 2008, the results of operations for the nine
months ended Sept 30, 2008 and 2007 and cash flows for the nine months
ended Sept 30, 2008 and 2007. The results for the nine months ended Sept 30,
2008 are not necessarily indicative of the results to be expected for the
entire fiscal year ending December 31, 2008.
These financial statements should be read in conjunction with the
Company's annual report on Form 10-KSB as filed with the Securities and
Exchange Commission.
NOTE 2 ORGANIZATION
North American Gaming and Entertainment Corporation ("North American") wa
incorporated under the laws of the State of Delaware
in 1969. North American has had no operations or significant assets since
incorporation to the year ended December 31, 2006.
Hong Kong Wah Bon Enterprise Limited ("Wah Bon") was incorporated in Hong
Kong on July 7, 2006 as an investment holding company.
Shanxi Tai Ping Yang Xin Neng Yuan Development Company Limited ("Tai Ping
Yang") was incorporated as a limited liability company in the People's Republic
of China ("PRC") on July 20, 2007 with its principal activity as an
investment holding company.
Chang Jiang Shi You Neng Yuan Fa Zhan Company Limited
("Chang Jiang") (formerly Weinan Industrial and Commercial Company Limited) was
incorporated as a limited liability company in the PRC on March 19, 1999. The
Company became a joint stock company in January 2006 with its business
activities in investment holding and the development of a theme park in Xian,
PRC.
4
In August 2005, Chang Jiang contributed a piece of land valued at 7,928,532
in lieu of cash to the registered capital of Shanxi Huanghe Wetland Park
Company Limited ("Huanghe"), representing 92.93% of the equity of Huanghe.
Huanghe was incorporated as a limited liability company in the PRC on August
9, 2005 as Shanxi Chang Jiang Petroleum and Energy Development Co.,
Limited and is engaged in the development of a theme park in Xian, PRC.
On February 5, 2007, Chang Jiang entered into an agreement with a third party
to acquire 40% of the equity interest in Dongfang Mining Company Limited
("Dongfang Mining") at a consideration of $3,117,267 payable in cash. Dongfang
Mining is engaged in the exploration of lead, zinc and gold for mining in
Xian, PRC. On March 2007, Chang Jiang entered into an agreement with the
majority stockholder of Chang Jiang to exchange its 92.93% interest in
Huanghe for 20% equity interest in Dongfang Mining owned by this related party.
On August 15, 2007, 97.2% of the stockholders of Chang Jiang entered into a
definitive agreement with Tai Ping Yang and the stockholders of Tai Ping Yang
in which they disposed their ownership in Chang Jiang to Tai Ping
Yang for 98% of ownership in Tai Ping Yang and cash of $1,328,940 payable on or
before December 31, 2007.
On September 2, 2007, Wah Bon acquired 100% ownership of Tai Ping Yang for a
cash consideration of $128,205. The acquisitions of Tai Ping Yang and
placeChang Jiang were accounted for as a reorganization of entities under
common control.
On May 30, 2007, amended to July 5, 2007, North American entered into a
Material Definitive Agreement, pursuant to which the shareholders of Chang
Jiang exchanged all their shares in Chang Jiang for 500,000 shares of series
C convertible preferred stock ("series C shares") in North American which
carries the right of 1,218 votes per share and is convertible to 609,000,000
(pre a one for ten reverse split) common shares. North American will effect a
one for ten reverse stock split after the closing of this transaction
and upon obtaining regulatory approval and approval of the North American
shareholders and the holders will not convert its series C convertible
preferred stock until after the completion of the reverse stock split. In
connection with the exchange, Chang Jiang will also deliver $370,000
to North American and certain non-affiliates of North American will transfer
to North American or its designee a total of 3,800,000 shares of common stock,
par value of $0.01 per share, of North American which had been held for
longer than 2 years by such non-affiliates, in exchange for the issuance by
North American to each of such non-affiliates of 2,250,000 shares of common
stock of North American. Issued and outstanding share of series C preferred
stock shall automatically be converted into that number of fully paid and non-
assessable shares of common stock based upon the conversion rate upon the
filing by the Company of an amendment to its Certificate of Incorporation,
increasing the number of authorized shares of common stock to 800,000,000
shares, changing the Company's name to China Changjiang Mining and New Energy
Company Limited and implementing a one for ten reverse stock split. The
transaction was closed on February 4, 2008 and Wah Bon becomes a wholly owned
subsidiary of North American.
The merger of North American and Wah Bon was treated for accounting purposes as
a capital transaction and recapitalization by Wah Bon ("the accounting
acquirer") and re-organization by North American ("the accounting acquiree").
The financial statements have been prepared as if the reorganization had
occurred retroactively.
Accordingly, the financial statements include the following:
(1) The balance sheet consisting of the net assets of the acquirer at
historical cost and the net assets of the acquiree at historical
cost.
(2) The statement of operations including the operations of the
acquirer for the periods presented and the operations of the
acquiree from the date of the merger.
North American, Wah bon, Tai Ping Yang, Chang Jiang and Dongfang
Mining are hereafter referred to as (the "Company").
NOTE 3 PRINCIPLES OF CONSOLIDATION
The accompanying unaudited condensed consolidated financial statements as of
Sept 30, 2008 and 2007 include the unaudited financial statements of North
American, 100% owned subsidiary Wah Bon, 100% owned subsidiary Tai Ping Yang,
97.2% owned subsidiary Chang Jiang and 58.32% owned subsidiary Dongfang
Mining. The minority interests represent the minority shareholders' 2.8%
and 41.68% share of the results of Chang Jiang and Dongfang Mining
respectively.
All significant inter-company accounts and transactions have been eliminated
in consolidation.
5
NOTE 4 COMMITMENTS AND CONTINGENCIES
Commitments
The Company leases office space from a third party under an operating
lease which expired on May 31, 2008 at a monthly rental of $3,484. No new
leasing agreement has been signed and the Company continues to pay the rental
month by month.
NOTE 5 STOCKHOLDERS' EQUITY
On February 15, 2008, the Company issued 4,500,000 shares of restricted common
stock at a fair value of $90,000 for consultancy services.
On February 15, 2008, the Company also issued 4,500,000 shares of restricted
common stock in exchange for 3,800,000 of common stock which were issued before
the reverse merger.
NOTE 6 RELATED PARTY TRANSACTIONS
The related companies owed the Company $1,177,585 as of Sept 30, 2008 for
advances made on an unsecured basis, repayable on demand and interest free.
The Company owed $2,407,789 to two former stockholders of
Chang Jiang and $1,362,924 to zhang hongjun as of Sept 30,2008, an increase of
$462,949 from June 30, 2008, for advances made to the Company on an
unsecured basis, repayable on demand and interest free. Imputed interest is
charged at 7% per annum on the amounts due.
The Company owed $1,882,410 to five related companies as of Sept 30, 2008 for
advances made to the Company on an unsecured basis, repayable on demand and
interest free. Imputed interest is charged at 7% per annum on the amounts
due.
Total imputed interest recorded as additional paid-in capital amounted to
$238,775 for the nine months ended Sept 30, 2008.
NOTE 7 SEGMENTS REPORTING
The Company operates in only one reportable segment; mining. Though the land
use right accounts for most of the assets owned by the company, the company
has targeted mining now and new energy in the near future. All of the
Company's long-lived assets and customers are located in the PRC. Accordingly,
no geographic information is presented.
NOTE 8 CONCENTRATIONS AND RISKS
During the nine months ended Sept 30, 2008 and 2007, 100% of the Company's
businesses and assets were located in the PRC.
6
NOTE 9 RECENT ACCOUNTING PRONOUNCEMENTS
In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS
No. 160, "Noncontrolling Interests in Consolidated Financial Statements - an
amendment of ARB No. 51". This statement improves the relevance,
comparability, and transparency of the financial information that a reporting
entity provides in its consolidated financial statements by establishing
accounting and reporting standards that require; the ownership interests in
subsidiaries held by parties other than the parent and the amount of
consolidated net income attributable to the parent and to the noncontrolling
interest be clearly identified and presented on the face of the consolidated
statement of income, changes in a parent's ownership interest while the parent
retains its controlling financial interest in its subsidiary be accounted for
consistently, when a subsidiary is deconsolidated, any retained noncontrolling
equity investment in the former subsidiary be initially measured at fair value,
entities provide sufficient disclosures that clearly identify and distinguish
between the interests of the parent and the interests of the noncontrolling
owners. SFAS No. 160 affects those entities that have an outstanding
noncontrolling interest in one or more subsidiaries or that deconsolidate a
subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods
within those fiscal years, beginning on or after December 15, 2008. Early
adoption is prohibited. The adoption of this statement did not have a material
effect on the Company's financial statements.
In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133"
(SFAS 161). This statement is intended to improve transparency in financial
reporting by requiring enhanced disclosures of an entity's derivative
instruments and hedging activities and their effects on the entity's financial
position, financial performance, and cash flows. SFAS 161 applies to all
derivative instruments within the scope of SFAS 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133) as well as related hedged items,
bifurcated derivatives, and nonderivative instruments that are designated and
qualify as hedging instruments. Entities with instruments subject to SFAS 161
must provide more robust qualitative disclosures and expanded quantitative
disclosures. SFAS 161 is effective prospectively for financial statements
issued for fiscal years and interim periods beginning after November 15, 2008,
with early application permitted. We are currently evaluating the disclosure
implications of this statement.
NOTE 10 GOING CONCERN
As reflected in the accompanying consolidated financial statements, the Company
has an accumulated deficit during the exploration stage of $13,240,664 at Sept
30, 2008 which includes a net loss of $298,644 for the three months ended Sept
30, 2008. The Company's current liabilities exceed its current assets by
$6,960,158. These factors raise substantial doubt about its ability to
continue as a going concern. In view of the matters described above,
recoverability of a major portion of the recorded asset amounts shown in the
accompanying consolidated balance sheet is dependent upon continued
operations of the company, which in turn is dependent upon the Company's
ability to raise additional capital, obtain financing and succeed in its future
operations. The financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts or amounts
and classification of liabilities that might be necessary should the Company
be unable to continue as a going concern.
Management has taken steps to revise its operating and financial requirements,
which it believes are sufficient to provide the Company with the ability to
continue as a going concern. The Company is also actively pursuing additional
funding and potential merger or acquisition candidates and strategic partners,
which would enhance stockholders' investment. Management believes that the
above actions will allow the Company to continue operations through the next
fiscal year.
NOTE 11 THE INVESTMENT
In order to carry out the Corporate Strategy of developing the Petroleuem and
New Energy, the Company invested RMB 2,000,000($293,328) to establish a new
company named Shanxi Changjiang Petroleum and New Energy Co., Ltd in
September, 2008, with Shanxi Changfa Industry Stock Co.,Ltd (the "Changfa"),
The registered capital totals RMB 10,000,000(USD 293,328), in which the
Company owns 20%.,and Changfa the other 80% share. The Company has
significant influence on the new Company as it assigned finance and Other
directors in the new Company,and has recorded the investment under the equity
method. The new Company had no income for the nine months ended September 30,
2008 and as the expense was not material, no adjustment has been made .
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
Forward Looking Statements
We make certain forward-looking statements in this report. Statements that
are not historical facts included in this Form 8-K are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform
Act of 1995 that involve risks and uncertainties that could cause actual
results to differ from projected results. Such statements address activities,
events or developments that the Company expects, believes, projects,
intends or anticipates will or may occur, including such matters as future
capital, debt restructuring, pending legal proceedings, business
strategies, expansion and growth of the Company's operations, and cash flow.
Factors that could cause actual results to differ materially ("Cautionary
Disclosures") are described throughout this Form 8-K. Cautionary Disclosures
include, among others: general economic conditions in China
and elsewhere, the Company's ability to license, extract, refine and sell
minerals and precious metals through our intended operations in China,
the strength and financial resources of the Company's competitors,
environmental and governmental regulation, labor relations, availability and
cost of employees, material and equipment, regulatory developments
and compliance, fluctuations in currency exchange rates and legal
proceedings. Statements concerning our future operations, prospects,
strategies, financial condition, future economic performance (including
growth and earnings), demand for our services, and other statements of
our plans, beliefs, or expectations, including the statements
contained under the captions "Risk Factors," "Management's Discussion and
Analysis or Plan of Operation," "Description of Business," as well as captions
elsewhere in this document, are forward-looking statements. In some cases
these statements are identifiable through the use of words such as
"anticipate," "believe," "estimate," "expect," "intend," "plan," "project,"
"target," "can,""could," "may," "should," "will," "would," and similar
expressions. We intend such forward-looking statements to be covered by the
safe harbor provisions contained in Section 27A of
the Securities Act of 1933, as amended (the "Securities Act") and in Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). All written and oral forward-looking statements attributable to
the Company are expressly qualified in their entirety by the
Cautionary Disclosures. The Company disclaims any obligation to update or
revise any forward-looking statement to reflect events or circumstances
occurring hereafter or to reflect the occurrence of anticipated or
unanticipated events.
The nature of our business makes predicting the future trends of our revenues,
expenses, and net income difficult. Thus, our ability to predict results or the
actual effect of our future plans or strategies is inherently uncertain. The
risks and uncertainties involved in our business could affect the matters
referred to in any forward-looking statements and it is possible that our
actual results may differ materially from the anticipated results indicated in
these forward-looking statements. Important factors that could cause actual
results to differ from those in the forward-looking statements include, without
limitation, the factors discussed in the section entitled "Risk Factors" and
the following:
* the effect of political, economic, and market conditions and
geopolitical events;
* legislative and regulatory changes that affect our business;
* the availability of funds and working capital;
* the actions and initiatives of current and potential competitors;
* investor sentiment; and
* our reputation.
We do not undertake any responsibility to publicly release any revisions to
these forward-looking statements to take into account events or circumstances
that occur after the date of this report. Additionally, we do not undertake any
responsibility to update you on the occurrence of any unanticipated events
which may cause actual results to differ from those expressed or implied by any
forward-looking statements.
The following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes thereto as filed with
the SEC and other financial information contained elsewhere in this Form 8-K.
8
OVERVIEW
We are an exploration stage mining company and we have had no revenues and
donot expect revenues until we begin the process of extracting minerals
which will not start until the end of 2008, if at all. We have sustained
considerable losses from our exploration and other activities to date.
Effective August 20, 2001, the Company sold its interests in video gaming
business for cash and notes receivable. During 2003, the Company sold the notes
receivable for cash. As a result, the Company had no on-going operations or
revenues. Thereafter the Company was a "shell" as defined by Rule 405 under
the Securities Act and Rule 12b-2 under the Exchange Act. Its only activity was
to explore for acquisition opportunities and the financing required
buying and supporting an operating business.
On February 4, 2008, (the "Closing Date") we acquired HONGKONG WAH BON
ENTERPRISE LIMITED ("Wah Bon") and its three subsidiaries: SHAANXI TAI PING
YANG XIN NENG YUAN DEVELOPMENT COMPANY LIMITED ("Tai Ping Yang"); SHAANXI CHANG
JIANG SI YOU NENG YUAN FA ZHANG GU FENG YOU XIANG GONG SI ("Chang
Jiang") and DONGFANG MINING COMPANY LIMITED ("Dongfang"). Wah Bon owns 100% of
Tai Ping Yang. Tai Ping Yang owns 97.2% of Chang Jiang; and Chang
Jiang owns 60% of Dongfang. The minority interests represent the minority
shareholders' 2.8% and 41.68% share of the results of Chang
Jiang and Dongfang Mining respectively.
We eplaced our Board of Directors and officers. A filing on Form 14F was
filed with the Securities & Exchange Commission on December 7, 2007.
The new directors are all located in China, and the officers of Dongfang are
familiar with the mining industry in China. All of our assets are in China.
Our subsidiary, Chang Jiang, had acquired a 60% interest in Dongfang Mining in
two separate transactions. On February 5, 2007 we acquired 40% of the net
assets of Dongfang Mining.The acquisition of 40% of Dongfang Mining was
accounted for as a purchase under SFAS No. 141, Business Combinations.
Accordingly, the 40% of operating results of Dongfang Mining have been included
in the consolidated statements of operation and comprehensive losses after the
effective date of the acquisition of February 5, 2007.
The preliminary allocation of 40% of the net assets of Dongfang Mining
acquired is as follows:
Cash and cash equivalents $ 227,233
Other receivables and prepaid expenses 46,309
-----------
Total current assets 273,542
Fixed assets, net 7,432
-----------
Total assets 280,974
Less: Accounts payable and accrued liabilities (3,223)
Due to a stockholder (273,444)
-----------
Net assets acquired 4,307
Minority interest (1,723)
Additional paid in capital (861)
Less: Consideration for acquisition (3,117,267)
-----------
Goodwill $(3,115,544)
-----------
Analysis of the net outflow of cash and cash equivalents in respect of the
business combination is as follows:
Total cash consideration $ 3,117,267
Less: cash consideration payable (1,872,131)
------------------
Cash consideration paid 1,245,136
Less: cash and cash equivalents acquired (227,233)
------------------
Net cash outflow $ 1,017,903
------------------
The acquisition of 40% of Dongfang Mining was accounted for as a purchase
under SFAS No. 141, Business Combinations. Accordingly, the 40% of operating
results of Dongfang Mining have been included in the consolidated statements
of operation and comprehensive income after the effective date of the
acquisition of February 5, 2007.
9
The following table reflects the unaudited pro forma combined results of
operations for the year ended December 31, 2007 and 2006, assuming the
acquisition had occurred at the beginning of 2007 and 2006.
2007 2006
----------- -----------
Revenues $ - $ -
=========== ===========
Net loss $(9,247,007) $(1,676,333)
=========== ===========
Net loss per share - basic $ - $ -
=========== ===========
Net loss per share - diluted $ (0.02) $ -
=========== ===========
In accordance with SFAS No. 142 "Goodwill and other intangible assets",
goodwill is not amortized but is tested for impairment. The Company
performed an assessment on goodwill arising from the acquisition of Dongfang
Mining and concluded there was no impairment to the carrying value of the
goodwill in this reporting period.
On March 22, 2007, the Company entered into an agreement with a principal
stockholder of the Company to exchange the Company's 92.93% interest in
chmetcnvTCSC0NumberType1NegativeFalseHasSpaceFalseSourceValue13UnitNameaShaanxi
Wetland Park Company Limited ("Huanghe") for 20% equity interest in Dongfang
Mining owned by the stockholder. The acquisition of 20% of Dongfang Mining
from the related party was accounted for as a purchase under common control.
As a result of these transactions we recorded goodwill of $3,115,544
in the balance sheet of the Company.
The operations of Huanghe have been reclassified as discontinued operations in
the accompanying consolidated statements of operations for the year ended
December 31, 2006 and are summarized as follows:
Operating expenses $ (282,728)
Loss from operations $ (291,885)
Net loss $ (291,885)
The detailed information on the loss on disposal of Huanghe is as follows:
Cash and cash equivalents $ 1,406,430
Other current assets 31,687
Fixed assets, net 349,024
Land use rights 8,987,826
-------------
Total assets 10,774,967
Less: Accounts payable and accrued liabilities (205,800)
Due to related parties (1,618,037)
Due to a stockholder (4,726)
Minority interests (918,343)
-------------
Book value of net assets disposed 8,028,061
20% of book value of net assets of Dongfang
Mining exchanged
(827)
-------------
Loss on disposal of Huanghe $ 8,027,234
=============
Net cash outflow on disposal of subsidiary
Proceed from disposal $ -
Cash and cash equivalent disposed (1,406,430)
-------------
Net cash outflow $ (1,406,430)
=============
10
We have land use rights for a 67.82 sq.km parcel in the Jiao Shan Zhai Mining
Area, located in Xunyang County in the Shaanxi Province of China. Our land use
rights are amortized over fifty years of the term of the leases. We have
performed tests on the site but we have not begun mining activity.
We originally planned to construct a theme park business on the parcel but
have delayed those plans while we direct our resources on the mining
opportunities. Therefore most of our assets are recorded in the theme park
segment of financial statements although this is no longer the primary
focus of the Company.
The following is a summary of land use rights at Sept 30, 2008:
Cost $ 19,192,614
Less: accumulated amortization (1,539,514)
----------------
Land use rights, net $ 17,653,100
================
The land use rights are amortized over fifty years of the term of leases. The
amortization expense for the three months ended Sept 30, 2008 and 2007 was
$102,315 and zero respectively.
From 2003 until the present Dongfang Mining has held licenses for the
exploration of minerals and precious metals in the Shaanxi Province
of the People's Republic of China. Dongfang Mining was granted an exploration
right to the lead, zinc and gold mines located at Gan Gou and Guan
Zi Gou, Xunyang County, Shaanxi Province, PRC, on December 31, 2006. The
Company engaged Geology and Mineral Bureau of Shaanxi to conduct a
preliminary survey which reported preliminary positive findings for gold, lead
and zinc deposits in the mines.
PLAN OF OPERATIONS
Our efforts over the next nine months will be directed towards completing the
licensure process to begin the extraction operations from the mines and to
acquire the equipment and personnel necessary to commence mining operations. We
have applied for, but not yet obtained, an additional license that will permit
the excavation and extraction of the parcel. We expect to obtain the gold
mining license before the end of 2008 and expect to commence extraction
operations shortly thereafter.
To date we have financed our activities from loans received from related
parties. Until we begin to generate revenues we expect to continue to rely on
loans from our directors and related parties. Our directors have indicated that
they will continue to make loans for the next nine(9) months or until the
Company begins to generate revenues, whichever first occurs. Other than the
oral assurances given by the directors, we have no other sources of capital and
there can be no guarantee that the Company will be able to meet its obligations
or obtain sufficient capital to complete its plan of operations for the next
nine(9) months.
Our plan over the next nine months is: 1. to obtain the gold mining
license at the end of 2008 and then to obtain the lead & zinc mining
license; 2. to finish reconnaissance and evaluation and begin prospecting
the known ore bodies and controlling the trench exploration. We intend to
stress deep drilling and tunnel exploration validation. We hope this will
allow us to enlarge the ore body scale and prove up the anomalous regions. We
expect to accomplish this primarily with Specific implementation methods
which are as follows:
- Enhance the validation of geophysical prospecting abnormities,
especially of the I and II class abnormities, make a conclusion on them
as soon as possible to provide basis for next work;
- Carry out geological investigation in adjacent regions, with attention
to the lead & zinc ore bodies;
- Investigate other metallogenic areas, mainly through surface work,
which may be combined with limited tunnel exploration and drilling;
- Continue construction.
We believe we can find adequate skilled mining personnel in the region. We are
also exploring possible joint venture or similar arrangements with one of the
existing, competitive mining companies that are already operating in the mining
area near our parcel. If so, we would reduce our need for the initial
expenditures and the delay in commencing mining operations may be shortened.
11
LIQUIDITY AND CAPITAL RESOURCES
General: Until August 20, 2001, the Company was engaged in the video gaming
business through its partial ownership of three operating companies. These
companies operated video poker machines located in truck stops in Louisiana.
Effective August 20, 2001, the Company sold its interests in these companies.
From that time until 2008 the Company was engaged in searching for a suitable
candidate for acquisition. On February 4, 2008 the Company acquired Wah Bon
Hongkong and its subsidiaries that are primarily engaged in the mining industry
in the People's Republic of China.
General Condition. The Company ended the quarter with cash and cash
equivalents $118,520, $855,682 in other current assets and prepayments and
$1,177,585 due from related companies. There were $245,416 in furniture and
equipment (net). The Company had $17,653,100 at the end of the quarter in
land use rights which represents the unamortized portion of the land use
grant. Total assets at the end of the quarter were $23,685,725. Total
assets improved approximately $1,887,969 from $21,797,756 at December 31, 2007
to $23,685,725 at Sept 30, 2008. This increase is largely due to the
$462,949 borrowed from Zhang hongjun, the actual controller of the Company.
The Company liquidated the accrued interest receivable and note receivable in
conjunction with the closing of the acquisition. The Company had accrued notes
payable to its prior CEO, Mr. E. H. Hawes, II that were liquidated at
closing pursuant to an Assignment, Bill of Sale and Assumption
Agreement between the Company and Mr. Hawes (the "Assignment Agreement"). The
Company had previously assigned a Note Receivable from Daylighting, Inc.
to Mr. Hawes in consideration of certain advances made by Mr. Hawes. Under
the Assignment Agreement and related documents Mr. Hawes released the notes
payable to him from the Company in exchange for the assignment of the
Daylighting, Inc. note payable and $170,000 in cash paid at closing for
consulting services up to the date of the closing. Mr. Hawes further agreed to
liquidate payables of the Company as of the closing date.
Total current liabilities were $ 9,111,945 at Sept 30, 2008 and consist
of note payable of $573,146, other payable of $1,907,323, due to
stockholders of $2,594,564, due to related companies of $4,009,209, and
preferred stock debenture of $12,700 and preferred stock dividends payable
of $15,003. The Company's current liabilities increased from
approximately $7,044,519 at December 31, 2007 to $9,111,945 at quarter ended
Sept 30, 2008. This increase was due primarily to additional borrowings
from stockholders and related parties.
As part of the closing the Company issued 500,000 shares of Series C
convertible preferred stock ($0.001 par value) and 9,000,000 pre-reverse split
shares of common stock. Each share of preferred stock is permitted votes
equal to 1,218 shares of common stock and each share will be automatically
converted to common stock at a ratio of 1,218 shares of common stock for each
share of preferred stock. As of closing the Board also approved a 10 for 1
reverse stock split of the issued and outstanding shares of Common Stock to be
consummated subsequent to the closing so as to effectively lower the number of
issued and outstanding shares of Common Stock prior to closing to no more than
2,421,606 shares of common stock issued and outstanding. A definitive
Information Statement pursuant to 14C of the Securities Act was filed with
the Securities & Exchange Commission on May 6, 2008. Mr. Charles Barkley,
the lawyer Of NAGM in America, is now dealing with the above issues of
conversion of preferred stock and the 10 for 1 reverse stock split. According
to the plan, both of the issues will be completed at the end of 2008.
CASH FLOWS FROM OPERATING ACTIVITIES. Net cash used in operating activities of
$1,278,949 for the nine-month period ended Sept 30, 2008 was primarily
attributable to a net loss of $1,445,862 the adjustments to reconcile the net
loss to net cash, including depreciation expense of $27,749, amortization
expense of $300,725, imputed interest expense of $238,775, payables and other
liabilities were $167,238.
CASH FLOWS FROM INVESTING ACTIVITIES. Net cash provided by investing activities
of $511,664 for the nine-month period ended Sept 30, 2008 was
primarily attributable to due from related parties of $ 636,621.
CASH FLOWS FROM FINANCING ACTIVITIES. Net cash of $2,234,664 was provided by
financing activities in the nine-month period ended Sept 30, 2008 was largely
attributable to an increase in the amount due to stockholders to $736,347
and amounts due to related parties of $1,498,317.
FINANCING. We are an exploration stage company and have not generated any
revenues as of Sept 30, 2008 with $118,520 of cash and cash equivalents on
our balance sheet. Given our current cash usage rate, it is likely that our
available cash on hand will be insufficient to sustain our operations beyond
December 2008 unless we obtain the permit for extraction and excavation of the
minerals in our land use right area.
12
We have financed the Company from loans and advances from stockholders and our
Board of Directors has indicated that they will continue to fund the Company
during its exploration stage. We have no assurance that these persons will
agree to do so or be financially able to do so when the need arises. We
nonetheless believe that our pro-forma working capital on hand as of the date
of this report, along with further reductions in operating expenses, will
provide us with the capital we need through year end 2008.
We continue to expect the approval of the license to permit excavation in 2008
and the commencement of revenue generation, although we have not assurances
that this will occur. As part of the Company's contingency planning efforts, we
are continuing to explore financing alternatives to maximize shareholder value,
such as raising capital through private or public offerings during 2008. We
have yet to obtain any commitments or formaliz any plans to address these
contingencies and there is no assurance that the Company will be successful in
these endeavors if we do so.
INTERNAL SOURCES OF LIQUIDITY. There is no assurance that funds from our
operations will meet the requirements of our daily operations in the future. In
the event that funds from our operations will be insufficient to meet our
operating requirements, we will need to seek other sources of financing to
maintain liquidity.
EXTERNAL SOURCES OF LIQUIDITY. We will actively pursue all potential financing
options as we look to secure additional funds to stabilize our business
operations. Our management will review any financing options at their disposal
and will judge each potential source of funds on its individual merits. We
cannot assure you that we will be able to secure additional funds from debt or
equity financing, as and when we need to, or if we can, that the terms of such
financing will be favorable to us or our existing shareholders.
INFLATION. Our management believes that inflation has not had a material effect
on our results of operations, and does not expect that it will in fiscal year
2008, except that rising oil and gas prices may materially and adversely impact
the economy generally.
OFF-BALANCE SHEET ARRANGEMENTS. We do not have any off-balance sheet
arrangements.
Our independent accountants have expressed substantial doubt about our ability
to continue as a going concern.
RESULTS OF OPERATIONS
Comparison of the nine months ended Sept 30, 2008, to the nine months
ended Sept 30, 2007.
Operating Expense
The Company recorded an operating loss of $1,488,088 compared to a loss
of $135,943 at Sept 30, 2007. The loss was comprised of general and
administrative costs of $226,292 during the nine months ended Sept 30,
2008, compared to an operating loss of $135,943 also comprised of
general and administrative costs of $111,871 for the nine months ended Sept
30, 2007. Legal and professional fees increased to $672,882 for the nine
months ended Sept 30, 2008, which was the costs of the reverse acquisition
of Wah Bon Hongkong and the various counsel and consultants in the U.
S., China and Hong Kong. Depreciation increased to $9,479 for the
quarter ended Sept 30, 2008 as compared to zero for the quarter ended
Sept 30, 2007. Land use rights amortization increased to $102,315 for the
quarter ended Sept 30. The operating loss Increase was largely associated
with the expenses of the reverse acquisition and Closing that occurred
on February 4, 2008. This largely accounts for the loss From continuing
operations from $135,943 for the nine months ended Sept 30, 2007 to
$1,488,088 for the nine months ended Sept 30, 2008.
Other Expenses
Other expenses increased from $24,072 for the nine months ended Sept 30,
2007 to $260,440 for the nine months ended Sept 30, 2008. The Company
incurred interest expense of $23,004 for the nine months ended Sept 30,
2008, compared to $33,049 for the nine months ended Sept 30, 2007. Imputed
interest expense also increased from none for the nine months ended Sept
30,2007 to $238,775 for the nine months ended Sept 30, 2008. The increase in
interest expense is due to additional borrowings from related and unrelated
parties.
13
Interest Income
The Company recorded interest income of $1,339 for the nine months ended
Sept 30, 2008, related to interest income on the convertible secured promissory
note with U.S. Daylighting, L.L.C., which note and interest were assigned to
the Company's former CEO, Mr. E. H. Hawes, II, at closing.
Discontinued Operations
In September, 2007 the Company disposed of a subsidiary which occasioned a loss
from discontinued operations of $7,867,999. There was no such loss for the
nine months ended Sept 30, 2008.
Net Loss
The net loss for the nine months ended Sept 30, 2008 was $1,445,862 as compared
to a net loss of $135,943 for the nine months ended Sept 30, 2007.
The increase of loss mainly came from the $672,882 of legal and professional
fee incurred during the past three quarters of 2008.
Other Comprehensive Income
The Company experienced an improvement in the foreign exchange
translation gains from none for the nine months ended Sept 30, 2007 to
$1,051,148 for the nine months ended Sept 30, 2008. We translated the Report
in RMB to that in USD by exchange rate of Sept,30,i.e. 6.8183 for B/S except
the capital items, by average exchange rate of Quarter 2,i.e. 6.8396 for P/L
items. The exchange rate for the capital and reserve items is that of
the day when the capital and reserve occurred. And the loss for current period
in B/S directly came from the P/L in USD. As a result, the difference after
the translation in B/S was concluded as foreign exchange translation Gains
in B/S.
Comprehensive Loss
The comprehensive loss for the nine months ended Sept 30, 2007 was
$135,943 as compared to a comprehensive loss of $ 394,714 for the nine
months ended Sept 30, 2008.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not Applicable.
ITEM 4T. CONTROLS AND PROCEDURES.
CONTROLS AND PROCEDURES
Quarterly Evaluation of Controls
As of the end of the period covered by this quarterly report on Form 10-QSB, we
evaluated the effectiveness of the design and operation of (i) our disclosure
controls and procedures ("Disclosure Controls"), and (ii) our internal control
over financial reporting ("Internal Controls"). This evaluation ("Evaluation")
was performed by our President and Chief Executive Officer for the quarter
ending September 30 , 2008, Chen Weidong ("CEO") and by our Chief Financial
Officer for the quarter ending September 30 , 2008. In this section, we
present the conclusions of our CEO based on and as of the date of the
Evaluation, (i) with respect to the effectiveness of our Disclosure Controls,
and (ii) with respect to any change in our Internal Controls that occurred
during the most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect our Internal Controls.
We will engage a CPA firm in the
United States to review our internal controls and to make
recommendations to the Board of Directors as to changes in policy or procedure
that may be needed to maintain effect internal controls. We will undertake this
engagement to consolidate the policies and procedures of the Company during
its period as a "shell" as defined by Section 12b (2) of the Securities Act
of 1934 with the policies and procedures employed by the Company in its
operations conducted in the People's Republic of China, as well
as changes that may be advisable in light of the Company's recent acquisition
of Wah Bon Hongkong and its subsidiaries. We expect the report to be complete
by the end 2008.
CEO and CFO Certifications
Attached to this quarterly report, as Exhibits 31.1 and 31.2, are certain
certifications of the CEO and CFO, which are required in accordance with the
Exchange Act and the Commission's rules implementing such section (the "Rule
13a- 14(a)/15d-14(a) Certifications"). This section of the quarterly report
contains the information concerning the Evaluation referred to in the Rule
13a-14(a)/15d-14(a) Certifications. This information should be read in
conjunction with the Rule 13a- 14(a)/15d-14(a) Certifications for a more
complete understanding of the topic presented.
14
Disclosure Controls and Internal Controls
Disclosure Controls are procedures designed with the objective of ensuring that
information required to be disclosed in our reports filed with the Commission
under the Exchange Act, such as this quarterly report, is recorded, processed,
summarized and reported within the time period specified in the Commission's
rules and forms. Disclosure Controls are also designed with the objective of
ensuring that material information relating to the Company is made known to the
CEO and the CFO by others, particularly during the period in which the
applicable report is being prepared. Internal Controls, on the other hand, are
procedures which are designed with the objective of providing reasonable
assurance that (i) our transactions are properly authorized, (ii) our assets
are safeguarded against unauthorized or improper use, and (iii) our
transactions are properly recorded and reported, all to permit the preparation
of complete and accurate financial statements in conformity with accounting
principles generally accepted in the United States.
Limitations on the Effectiveness of Controls
Our management does not expect that our Disclosure Controls or our Internal
Controls will prevent all error and all fraud. A control system, no matter how
well developed and operated, can provide only reasonable, but not absolute
assurance that the objectives of the control system are met. Further, the
design of the control system must reflect the fact that there are resource
constraints, and the benefits of controls must be considered relative to their
costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances so of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision -making
can be faulty, and that breakdowns can occur because of simple error or
mistake. Additionally, controls can be circumvented by the individual acts of
some persons, by collusion of two or more people, or by management override of
the control. The design of a system of controls also 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 objectives under
all potential future conditions. Over time, control may become inadequate
because of changes in conditions, or because the degree of compliance with the
policies or procedures may deteriorate. Because of the inherent limitations in
a cost-effective control system, misstatements due to error or fraud may occur
and not be detected.
Scope of the Evaluation
The CEO and CFO's evaluation of our Disclosure Controls and Internal Controls
included a review of the controls' (i) objectives, (ii) design, (iii)
implementation, and (iv) the effect of the controls on the information
generated for use in this quarterly report. In the course of the Evaluation,
the CEO and CFO sought to identify data errors, control problems, acts of
fraud, and they sought to confirm that appropriate corrective action, including
process improvements, was being undertaken. This type of evaluation is done on
a quarterly basis so that the conclusions concerning the effectiveness of our
controls can be reported in our quarterly reports on Form 10-QSB and annual
reports on Form 10-KSB. The overall goals of these various evaluation
activities are to monitor our Disclosure Controls and our Internal Controls,
and to make modifications if and as necessary. Our external auditors also
review Internal Controls in connection with their audit and review activities.
Our intent in this regard is that the Disclosure Controls and the Internal
Controls will be maintained as dynamic systems that change (including
improvements and corrections) as conditions warrant.
Among other matters, we sought in our Evaluation to determine whether there
were any significant deficiencies or material weaknesses in our Internal
Controls, which are reasonably likely to adversely affect our ability to
record, process, summarize and report financial information, or whether we had
identified any acts of fraud, whether or not material, involving management or
other employees who have a significant role in our Internal Controls. This
information was important for both the Evaluation, generally, and because the
Rule 13a-14(a)/15d-14(a) Certifications, Item 5, require that the CEO and CFO
disclose that information to our Board (audit committee), and to our
independent auditors, and to report on related matters in this section of the
quarterly report. In the professional auditing literature, "significant
deficiencies" are referred to as "reportable conditions". These are control
issues that could have significant adverse affect on the ability to record,
process, summarize and report financial data in the financial statements. A
"material weakness" is defined in the auditing literature as a particularly
serious reportable condition where the internal control does not reduce, to a
relatively low level, the risk that misstatement cause by error or fraud may
occur in amounts that would be material in relation to the financial statements
and not be detected within a timely period by employee in the normal course of
performing their assigned functions. We also sought to deal with other controls
matters in the Evaluation, and in each case, if a problem was identified; we
considered what revisions, improvements and/or corrections to make in
accordance with our ongoing procedures.
15
Conclusions
Based upon the Evaluation, our disclosure controls and procedures are designed
to provide reasonable assurance of achieving our objectives. Our CEO and CFO
have concluded that our disclosure controls and procedures are effective at
that reasonable assurance level to ensure that material information relating to
the Company is made known to management, including the CEO and CFO,
particularly during the period when our periodic reports are being prepared,
and that our Internal Controls are effective at that assurance level to provide
reasonable assurance that our financial statements are fairly presented
inconformity with accounting principles generally accepted in the United
States. Additionally, there has been no change in our Internal Controls that
occurred during our most recent fiscal quarter that has materially affected, or
is reasonably likely to affect, our Internal Controls.
Forward Looking Statements
Certain statements contained in this Report on Form 10-QSB, including
statements of the Company's current expectations, intentions, plans and
beliefs, and statements containing the words "believes", "anticipates,"
"estimates," "expects," or "may," are forward-looking statements, as defined in
Section 21D of the Securities Exchange Act of 1934. Such forward-looking
statements involve known and unknown risk, uncertainties and other factors
which may cause the actual results, performance, timing or achievements of the
Company to be materially different from any results, performance, timing or
achievements expressed or implied by such forward-looking statements.
PART II - OTHER INFORMATION
Items 1 through 5 not applicable.
ITEM 6. EXHIBITS
(a) Exhibits required to be filed by Item 601 of Regulation S-B:
31.1 Certification of Chief Executive Officer and Chief Financial Officer
Under Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NORTH AMERICAN GAMING ANDENTERTAINMENT CORPORATION
October 31, 2008
/s/ Chen Weidong, President
- ------------------------------
Chen Weidong,
President and Chief Executive Officer
(Principal Executive Officer and Principal Financial and
Accounting Officer)
16