Attached files
file | filename |
---|---|
EX-31.2 - CERTIFICATION - CHINA CHANGJIANG MINING & NEW ENERGY COMPANY, LTD. | chji_ex312.htm |
EX-32.1 - CERTIFICATION - CHINA CHANGJIANG MINING & NEW ENERGY COMPANY, LTD. | chji_ex321.htm |
EX-31.1 - CERTIFICATION - CHINA CHANGJIANG MINING & NEW ENERGY COMPANY, LTD. | chji_ex311.htm |
EXCEL - IDEA: XBRL DOCUMENT - CHINA CHANGJIANG MINING & NEW ENERGY COMPANY, LTD. | Financial_Report.xls |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2012
Or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to_____________
Commission File Number: 000-52807
China Changjiang Mining & New Energy Co., Ltd.
(Exact name of registrant as specified in its charter)
Nevada
|
75-2571032
|
|
(State or Other Jurisdiction of Incorporation or Organization)
|
(I.R.S. Employer Identification No.)
|
|
Seventeenth Floor, Xinhui Mansion, Gaoxin Road
Hi-Tech Zone, Xi’An P.R. China 71005
|
+86(29) 8833-1685
|
|
(Address of Principal Executive Offices; Zip Code)
|
(Registrant’s Telephone Number, including area code)
|
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
|
Name of each exchange on which registered
|
|
None
|
None
|
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, par value $0.01 per share
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No x
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files). Yes o No x
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.
(Check one):
|
|||
Large accelerated filer
|
o
|
Accelerated filer
|
o
|
Non-accelerated filer
|
o
|
Smaller reporting company
|
x
|
(Do not check if a smaller reporting company)
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
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 March 31, 2012.
At March 31, 2012, the registrant had outstanding 64,629,559 shares of common stock, $0.01 par value.
CHINA CHANGJIANG MINING AND NEW ENERGY COMPANY LTD.
For the Quarter Ended March 31, 2012
TABLE OF CONTENTS
PART I | |||||
ITEM 1,
|
FINANCIAL STATEMENTS
|
3 | |||
ITEM 2,
|
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
|
14 | |||
ITEM 3,
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
18 | |||
ITEM 4,
|
CONTROLS AND PROCEDURES
|
18 | |||
PART II
|
|||||
ITEM 1,
|
LEGAL PROCEEDINGS
|
20 | |||
ITEM 1A,
|
RISK FACTORS
|
20 | |||
ITEM 2,
|
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|
21 | |||
ITEM 3,
|
DEFAULTS UPON SENIOR SECURITIES
|
21 | |||
ITEM 4,
|
(REMOVED AND RESERVED).
|
21 | |||
ITEM 5,
|
OTHER INFORMATION
|
21 | |||
ITEM 6,
|
EXHIBITS
|
21 | |||
SIGNATURES
|
22 | ||||
EX-31.1 (CERTIFICATION)
|
|||||
EX-31.2 (CERTIFICATION)
|
|||||
EX-32.1 (CERTIFICATION)
|
2
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STAEMENT
CHINA CHANGJIANG MINING & NEW ENERGY CO., LTD.
FINANCIAL REPORT
At March 31, 2012 and December 31, 2011
For the Three Months Ended March 31, 2012 and 2011
INDEX
PAGE
|
||||
CONSOLIDATED BALANCE SHEETS
|
4-5 | |||
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
|
6 | |||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
7 | |||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
8-13 |
3
CHINA CHANGJIANG MINING & NEW ENERGY CO., LTD.
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2012 AND DECEMBER 31, 2011
(Stated in US Dollars)
March 31,
|
December 31,
|
||||||||||
Notes
|
2012
|
2011
|
|||||||||
ASSETS
|
(Unaudited)
|
(Audited)
|
|||||||||
Current assets
|
|||||||||||
Cash and cash equivalents
|
$ | 840,363 | $ | 20,932 | |||||||
Deferred tax assets
|
7,567 | - | |||||||||
Other current assets and prepayments
|
2 | 103,807 | 198,266 | ||||||||
Total Current Assets
|
951,737 | 774,674 | |||||||||
Property, plant and equipment, net
|
120,170 | 145,336 | |||||||||
Land use rights, net
|
17,057,528 | 17,141,227 | |||||||||
Long-term investment
|
312,679 | 317,415 | |||||||||
Due from related parties
|
3 | 2,500,488 | 2,780,554 | ||||||||
TOTAL ASSETS
|
$ | 20,942,602 | $ | 20,603,730 |
See accompanying notes to the unaudited consolidated financial statement
4
CHINA CHANGJIANG MINING & NEW ENERGY CO., LTD
CONSOLIDATED BALANCE SHEETS (continued)
AS OF MARCH 31, 2012 AND DECEMBER 31, 2011
(Stated in US Dollars)
March 31,
|
December 31,
|
||||||||||
Notes
|
2012
|
2011
|
|||||||||
LIABILITIES & SHAREHOLDERS’ EQUITY
|
(Unaudited)
|
(Audited)
|
|||||||||
Current Liabilities
|
|||||||||||
Other payables and accrued liabilities
|
4 | 529,994 | 602,496 | ||||||||
Notes payable - related parties
|
434,137 | 434,137 | |||||||||
Total Current Liabilities
|
964,131 | 1,036,633 | |||||||||
Non-current liabilities
|
|||||||||||
Due to related parties
|
5 | 2,389,272 | 2,100,486 | ||||||||
Due to shareholders
|
6 | 4,181,244 | 4,176,700 | ||||||||
Payable on acquisition of a subsidiary
|
1,984,295 | 1,982,725 | |||||||||
Total Long-term Liabilities
|
8,554,811 | 8,259,911 | |||||||||
SHAREHOLDERS’ EQUITY
|
|||||||||||
Series C convertible preferred stock ($0.01 par value,
10,000,000 shares authorized, no shares outstanding as of
December 31, 2011 and March 31,2012)
|
- | - | |||||||||
Common stock ($0.01 par value, 250,000,000 shares authorized,
64,629,559 shares issued and outstanding as of December 31, 2011
and March 31,2012)
|
646,295 | 646,295 | |||||||||
Treasury stock
|
(489,258 | ) | (489,258 | ) | |||||||
Additional paid-in capital
|
13,916,844 | 13,916,844 | |||||||||
Retained earnings
|
(5,446,643 | ) | (5,564,337 | ) | |||||||
Non-controlling interests
|
608,935 | 617,334 | |||||||||
Accumulated other comprehensive income
|
2,187,487 | 2,180,308 | |||||||||
TOTAL SHAREHOLDERS’ EQUITY
|
11,423,660 | 11,307,186 | |||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
$ | 20,942,602 | $ | 20,603,730 |
See accompanying notes to the unaudited consolidated financial statement
5
CHINA CHANGJIANG MINING & NEW ENERGY CO., LTD.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(Stated in US Dollars)
For the Three Months Ended March 31,
|
For the Three Months Ended March 31,
|
||||||||||
Notes
|
2012
|
2011
|
|||||||||
Unaudited
|
Unaudited
|
||||||||||
Sales revenue
|
7 | 297,732 | $ | 664,570 | |||||||
Cost of revenue
|
16,673 | 37,216 | |||||||||
Gross Profit
|
281,059 | 627,354 | |||||||||
Operating expenses
|
|||||||||||
Administrative expenses
|
57,723 | 149,743 | |||||||||
Depreciation
|
7,463 | 8,871 | |||||||||
Amortization
|
101,620 | 97,211 | |||||||||
Total operating Expenses (Income)
|
166,806 | 255,825 | |||||||||
Income from operations
|
114,253 | 371,529 | |||||||||
Other Income (Expenses)
|
|||||||||||
Interest income
|
- | 145 | |||||||||
Interest expenses
|
- | (368 | ) | ||||||||
Other expenses
|
(12,521 | ) | - | ||||||||
Total Other Income (Expense)
|
(12,521 | ) | (223 | ) | |||||||
Income before tax
|
101,732 | 371,306 | |||||||||
Income tax expense (benefit)
|
8 | (7,563 | ) | 15,128 | |||||||
Net Income
|
$ | 109,295 | $ | 356,178 | |||||||
Net income attributable to:
|
|||||||||||
Non-controlling interests
|
(8,399 | ) | 137,495 | ||||||||
Common Stockholders
|
$ | 117,694 | $ | 218,683 | |||||||
Other comprehensive income/(loss)
|
|||||||||||
Foreign currency translation adjustments
|
7,179 | (722,560 | ) | ||||||||
Total Comprehensive Income (loss)
|
$ | 116,474 | $ | (366,382 | ) | ||||||
Weighted average shares-Basic
|
64,629,559 | 3,774,625 | |||||||||
Weighted average shares-Diluted
|
64,629,559 | 64,629,559 | |||||||||
Earnings (loss) per share, | |||||||||||
Basic
|
$ | 0.00 | $ | 0.09 | |||||||
Diluted
|
$ | 0.00 | $ | 0.01 |
See accompanying notes to the unaudited consolidated financial statements
6
CHINA CHANGJIANG MINING & NEW ENERGY CO., LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011
(Stated in US Dollars)
For the Three Months Ended
March 31,
|
|||||||||||
Notes |
2012
|
2011
|
|||||||||
Unaudited
|
Unaudited
|
||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|||||||||||
Net income
|
$ | 109,295 | $ | 356,178 | |||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
|||||||||||
Depreciation and amortization
|
109,083 | 106,082 | |||||||||
Deferred tax assets
|
(7,575 | ) | - | ||||||||
Changes in operating assets and liabilities:
|
|||||||||||
Other current assets and prepayments
|
94,558 | 454,752 | |||||||||
Other payables and accrued liabilities
|
(72,578 | ) | 1,170,188 | ||||||||
CASH PROVIDED BY OPERATING ACTIVITIES
|
232,783 | 2,087,200 | |||||||||
CASH FLOWS FROM INVESTING ACTIVITIES
|
|||||||||||
Purchase of property, plant and equipment
|
- | (397 | ) | ||||||||
Due from related parties
|
280,360 | (692,216 | ) | ||||||||
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
280,360 | (692,613 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES
|
|||||||||||
Due to related parties
|
289,088 | (1,883,343 | ) | ||||||||
Proceeds from shareholders
|
- | 1,290,648 | |||||||||
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
289,088 | (592,695 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents
|
17,200 | (879,514 | ) | ||||||||
NET INCREASE (DECREASE) IN CASH
|
819,431 | (77,622 | ) | ||||||||
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
|
$ | 20,932 | $ | 97,174 | |||||||
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD
|
$ | 840,363 | $ | 19,552 | |||||||
Supplementary Disclosures for Cash Flow Information:
|
|||||||||||
Income taxes paid
|
$ | - | $ | - | |||||||
NON-CASH INVESTING AND FINANCING ACTIVITIES
|
|||||||||||
Conversion from Preferred stock to Common Stock
|
$ | - | $ | - |
See accompanying notes to the unaudited consolidated financial statements
7
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 31,2011. The unaudited condensed consolidated financial statements for the three-months periods ended March 31, 2012 and 2011 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 three-month period ended March 31, 2012 are not indicative of the results that may be expected for the full year ending December 31, 2012.
Certain prior period amounts have been reclassified to conform to the current year presentation.
Foreign Currency Translation
Exchange rates applied for the foreign currency translation during the period are as follows:
USD to RMB
March 31,
2012
|
December 31,
2011
|
|||||
Period end US$ : RMB exchange rate
|
6.2943 | 6.3009 | ||||
Average periodic US$ : RMB exchange rate
|
6.2976 | 6.3761 |
USD to HKD
March 31,
2012
|
December 31,
2011
|
|||||
Period end US$ : UHK exchange rate
|
7.7650
|
7.7694
|
||||
Average periodic US$ : UHK exchange rate
|
7.7681
|
7.7763
|
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.
8
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 mainly represents the small amount advances to the employees.
3.
|
DUE FROM RELATED PARTIES – NON CURRENT
|
The balance of $2,500,488 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.
March 31,
2012
|
December 31,
2011
|
Interest
|
||||||||
Du Kang Liquor Development Co., Ltd
|
$ | 794,370 | 793,537 |
interest free for the first year and bear interest in the
|
||||||
Shaanxi Du Kang Liquor Group Co., Ltd
|
$ | - | 573,001 | benchmark lending rate over the same period afterwards | ||||||
Zhongke Aerospace & Agriculture Development Stock Co.,Ltd
|
$ | 448,819 | 448,349 |
interest free
|
||||||
Shaanxi Huanghe Bay Springs Lake Theme Park Ltd
|
847,591 | 555,476 |
interest free
|
|||||||
Shaanxi Changfa Industrial Co., LTD
|
$ | 365,410 | 365,027 |
interest free
|
||||||
Mr Chen Weidong
|
$ | 31,350 | 32,229 |
interest free
|
||||||
Shaanxi Changjiang Zhongxiayou Investment Co.,Ltd
|
$ | 12,948 | 12,935 |
interest free
|
||||||
Total
|
2,500,488 | 2,780,554 |
The balance of $31,350 as of March 31, 2012 was the advance to our CEO for the Company's business.
9
4.
|
OTHER PAYABLES AND ACCRUED EXPENSES
|
The following is a summary of other payables and accrued liabilities:
March 31,
2012
|
December 31,
2011
|
|||||||
Tax payable
|
$ | 459,407 | $ | 442,263 | ||||
Salary and welfare payable
|
24,700 | 24,674 | ||||||
Other payable
|
45,887 | 135,559 | ||||||
$ | 529,994 | $ | 602,496 |
The tax payable of $459,407 includes income tax payable of $286,927, business tax payable of $172,378 and other tax payable of $102.
5.
|
DUE TO RELATED PARTIES
|
The balance of $2.389,272 due to related parties represents the loan owed to related parties, which are interest free, unsecured and repayable on demand twelve months after March 31, 2012.
Due to related parties consists of the following.
March 31,
2012
|
December 31,
2011
|
|||||||
Due to Huiton World Property Superintendent Company
|
$ | 397,185 | $ | 396,769 | ||||
Due to Zhongke Lvxiang Development Stock Co., Ltd
|
$ | 1,112,117 | 1,110,952 | |||||
Due to Shaanxi Changjiang electricity & new energy Co.,Ltd
|
$ | 293,248 | 294,883 | |||||
Due to Du Kang Liquor Development Co., Ltd
|
$ | - | 65,200 | |||||
Due to Du Kang Liquor Marketing co.,Ltd
|
$ | 463,912 | 130,140 | |||||
Due to Baishui Du Kang Brand Management Co.,Ltd
|
$ | 101,679 | 101,573 | |||||
Due to Shaanxi Xidenghui Technology Co. Ltd.
|
$ | 970 | 969 | |||||
Due to Shaanxi Dukang Liquor Group Co.,Ltd
|
$ | 20,161 | - | |||||
Total
|
$ | 2,389,272 | 2,100,486 |
10
6.
|
DUE TO SHAREHOLDERS
|
The balance of $4,181,244 due to shareholders represents the loan owed to the shareholders, which are interest free, unsecured and repayable on demand twelve months after March 31, 2012.
Due to shareholders consists of the following.
March 31,
2012
|
December 31,
2011
|
|||||||
Due to Wang Shengli
|
$ | 2,181,956 | 2,187,606 | |||||
Due to Zhang Hongjun
|
1,392,184 | 1,391,389 | ||||||
Due to Chen Min
|
$ | 607,104 | 597,705 | |||||
4,181,244 | 4,176,700 |
7.
|
SALES REVENUE
|
The details of Sales revenue are as follows:
For the three months ended March 31,
2012
|
For the three months ended March 31,
2011
|
|||||||
Land use right leasing
|
$
|
297,732
|
$
|
284,816
|
||||
Mines exploitation compensation
|
-
|
379,754
|
||||||
Total
|
$
|
297,732
|
$
|
664,570
|
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 $297,732 was recognized for the quarter ended March 31, 2012.
11
8.
|
INCOME TAX
|
The provision for taxes on earnings consisted of:
For the three month ended March 31,
2012
|
For the three months ended March 31,
2011
|
|||||||
PRC Enterprise Income Tax
|
$ | (7,563 | ) | $ | 15,128 | |||
United States Federal Income Tax
|
$ | - | $ | - | ||||
Income tax expense (benefit), net
|
$ | (7,563 | ) | $ | 15,128 |
The income taxes expense (benefit), which is all incurred in PRC, consists of the following:
For the three months ended March 31,
2012
|
For the three months ended March 31,
2011
|
|||||||
Current income tax expense
|
$ | - | $ | 85,763 | ||||
Deferred income tax benefit
|
$ | (7,563 | ) | $ | (70,635 | ) | ||
Income tax, net
|
$ | (7,563 | ) | $ | 15,128 |
12
9.
|
RELATED PARTY TRANSACTIONS
|
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 $297,732 for the three months ended March 31, 2012.
10.
|
SEGMENT INFORMATION
|
The Company operates in two reportable segments, Land use right leasing and exploration for mineral ores. Summarized information by business segment for the three months ended March 31, 2012 and 2011 is as follows.
For the three months ended March 31,
2012
|
For the three months ended March 31,
2011
|
|||||||
Revenue
|
||||||||
Land use right leasing
|
$
|
297,732
|
$
|
284,816
|
||||
Mines exploitation compensation
|
-
|
379,754
|
||||||
Cost of revenue
|
||||||||
Land use right leasing
|
16,673
|
15,950
|
||||||
Mines exploitation compensation
|
-
|
21,266
|
||||||
Gross Profits
|
||||||||
Land use right leasing
|
281,059
|
268,866
|
||||||
Mines exploitation compensation
|
-
|
358,488
|
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.
11.
|
SUBSEQUENT EVENT
|
On June 1, 2012, the Company entered into an agreement with Xunyang Yongjin Mining Co., Ltd to transfer the exploration rights at a consideration of $2,383,109 (RMB15,000,000). Pursuant to the agreement, both parties would be exempted from the liabilities for breach of agreement, and the agreement would be terminated in advance, in case the transaction could not be approved by the Department of Land and Resources of Shaanxi Province. Up to present, the deposit of $317,748 (RMB2,000,000) has been settled and the second payment of $1,112,117 (RMB7,000,000) has been deposited in the condominium account. However, the administrative approval has not been obtained and the management could not determine if and when it would be approved.
As of September 5, 2012, the Securities and Exchange Commission (“SEC”) officially notified the Company of termination of the investigation against the Company, which began in April 2011. The SEC also confirmed that there was no intention of recommending any enforcement action by the Commission.
The Company established a subsidiary, named Shaanxi Weinan Changjiang Solar Photovoltaic Energy Applied Science and Technology Co., Ltd (“Weinan Changjiang”), to develop the new energy business in April 2012. Shaanxi Changjiang accounted for 51% shares of Weinan Changjiang, and Mr. Zhang Hongjun, the actual controlling person, accounted for the other 49% shares.
13
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 March 31, 2012 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, 2011 and 2012.
Overview
Through our majority-controlled subsidiary, Dongfang Mining, we are engaged in the exploration for commercially recoverable metal-bearing mineral deposits, such as zinc, lead and gold. To date, our activities have not resulted in the location of proven reserves. We cooperated with Shaanxi Western Mining & Energy Co., Ltd (“Western Mining”) to develop our mines by providing the exploration rights, technical support and related information.
Since 2003, Dongfang Mining has held licenses for the exploration of minerals and precious metals in the Shaanxi Province of China. Dongfang Mining was granted an exploration right for zinc, lead and gold at Gan Gou and Guan Zi Gou, Xunyang County, Shaanxi Province, PRC, on December 31, 2006.
As of March 31, 2012, we had applied for, but had not yet obtained, a license that will permit the excavation and extraction of minerals. Issuance of that license will depend, in part, on the results of exploration for zinc, lead and gold at the site. We have performed limited tests on the site but we have not yet determined if the site contains adequate mineralization to support mining activity.
We intended to transfer the exploration rights in the near future in order that we can direct our resources on the new clean energy business and we are trying to obtain the exploration rights transfer approval from the government currently.
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).
14
The following is a summary of the book value of our land use rights as of March 31, 2012:
Cost
|
$
|
20,331,273
|
||
Less: Accumulated amortization
|
3,273,745
|
|||
Land use rights, net
|
$
|
17,057,528
|
Amortization expenses were approximately $101,620 and $97,211 for the three months ended March 31, 2012, and 2011, respectively.
As reflected in the accompanying consolidated financial statements, the Company had an accumulated deficit of $5,446,643 as of March 31, 2012, which includes net income of $109,295 for the three months ended March 31, 2012. The Company’s operations provided cash of $232,783 for the three months ended March 31, 2012.
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 March 31, 2012 and March 31, 2011
Sales revenue
We generated total revenue of $297,732 for the three months ended March 31, 2012, compared with the revenue of $664,570 for the three months ended March 31, 2011. This decrease was due to the termination of our mines exploitation compensation business at the end of 2011, which we have subsequently disposed in the middle of 2012.
Operating Expenses
Total operating expenses for the three months ended March 31, 2012 decreased to $166,806 from $255,825 for the three months ended March 31, 2011. The decrease was partially due to a decrease in the administrative expense, which decreased to $57,723 from $149,743, due to our more stringent cost control in the first quarter of 2012. The amortization expense for the three months ended March 31, 2012 remained stable, as no addition or disposal occurred for Land use rights and the depreciation for the three months ended March 31, 2012 decreased by $1,408, as one of the cars was disposed in February, 2012.
Income before taxes for the three months ended March 31, 2012 was $101,732 as compared to an income of $371,306 for the three months ended March 31, 2011. The significant decrease for our operating results was attributable to the termination of our mine exploitation compensation business at the end of 2011.
15
Net Income
We achieved a net income of $109,295 for the three months ended March 31, 2012, compared to a net income of $356,178 for the three months ended March 31, 2011. The significant decrease was primarily due to the termination of our mine exploitation compensation business at the end of 2011.
Comprehensive Income
Our comprehensive income for the three months ended March 31, 2012 was $116,474 compared with comprehensive loss of $366,382 for the three months ended March 31, 2011. 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 $11,423,660 as of March 31, 2012, or approximately 1%, from $11,307,186 as of December 31, 2011. The significant increase was primarily due to our net income of $109,295 generated for the three months ended March 31, 2012.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows From Operating Activities
Net cash provided by operating activities of $232,783 for the three months ended March 31, 2012 was primarily attributable to the daily expense without revenue received in the first quarter of 2012. The adjustments to reconcile our net income to net cash flow mainly include depreciation expense of $7,463, amortization expense of $101,620 for land use rights, and a decrease in operating assets of $94,558 and a decrease in operating liability of $72,578.
Cash Flows From Investing Activities
Net cash provided by investing activities of $280,360 for the three months ended March 31, 2012 was the cash received from the related parties.
Cash Flows From Financing Activities
Net cash of $289,088 provided by financing activities for the three months ended March 31, 2012 resulted from $289,088 proceeds from related parties.
16
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 received loans of $289,088 from our related parties for the three months ended March 31, 2012.
Our current assets increased by $732,538 and total assets increased by $338,872 respectively.
We have cash of $840,363 and $20,932 as of March 31, 2012 and December 31, 2011 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, if we do not invest to expand the scale of operations.
INFLATION
Our management believes that inflation did not have a material effect on our results of operations for the three months ended March 31, 2012.
OFF-BALANCE SHEET ARRANGEMENTS.
We do not have any off-balance sheet arrangements.
CONTRACTUAL OBLIGATIONS
None.
17
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 March 31, 2012. 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 March 31, 2012.
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 March 31, 2012. 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.
18
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 March 31, 2012, 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 three months ended March 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
19
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 1A. RISK FACTORS.
Not Applicable
20
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. (REMOVED AND RESERVED).
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS
21
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: May 15, 2013
|
By
|
/s/ Chen Wei Dong
|
|
Chen Wei Dong
|
|||
Chief Executive Officer and President
|
|||
Date: May 15, 2013
|
By
|
/s/ Li Ping
|
|
Li Ping
|
|||
Chief Financial Officer
|
|||
(Principal Financial Officer)
|
22