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EXCEL - IDEA: XBRL DOCUMENT - Oro East Mining, Inc. | Financial_Report.xls |
EX-31.2 - EX-31.2 - Oro East Mining, Inc. | ex31-2.htm |
EX-32.1 - EX-32.1 - Oro East Mining, Inc. | ex32-1.htm |
EX-32.2 - EX-32.2 - Oro East Mining, Inc. | ex32-2.htm |
EX-31.1 - EX-31.1 - Oro East Mining, Inc. | ex31-1.htm |
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 000-53136
Oro East Mining, Inc.
Delaware
(State or other jurisdiction of incorporation or organization)
26-2012582
(I.R.S. Employer Identification Number)
7817 Oakport Street, Suite 205, Oakland, CA 94621
(Address of Principal Offices)
(510) 638-5000
(Issuer’s Telephone Number)
(Former name, former address and former fiscal year, if changed since last report)
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.
Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ¨
|
Accelerated Filer ¨
|
Non-Accelerated Filer ¨
(Do not check if a smaller
reporting company)
|
Smaller Reporting Company x
|
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x
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: 560,442,800 shares of common stock, par value $.0001 per share, outstanding as of August 11, 2014.
ORO EAST MINING, INC.
- Table of Contents -
Page(s)
|
||||
PART I – FINANCIAL INFORMATION:
|
||||
Item 1.
|
1
|
|||
1
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||||
2
|
||||
3
|
||||
4
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Item 2.
|
6
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Item 3.
|
8
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Item 4.
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8
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PART II – OTHER INFORMATION:
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||||
Item 1.
|
9
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Item 1A.
|
9
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Item 2.
|
9
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Item 3.
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9
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Item 4.
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9
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Item 5.
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9
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Item 6.
|
9
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10
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q of Oro East Mining, Inc., a Delaware corporation (the “Company”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of such terms and other comparable terminology. These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Actual results may differ materially from the predictions discussed in these forward-looking statements. The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: the volatility of minerals prices, the possibility that exploration efforts will not yield economically recoverable quantities of minerals, accidents and other risks associated with mineral exploration and development operations, the risk that the Company will encounter unanticipated geological factors, the Company’s need for and ability to obtain additional financing, the possibility that the Company may not be able to secure permitting and other governmental clearances necessary to carry out the Company’s exploration and development plans, the exercise of the approximately 84.1% control the Company’s voting securities the Company’s Chief Executive Officer, Tian Qing Chen, holds, other factors over which we have little or no control; and other factors discussed in the Company’s filings with the Securities and Exchange Commission (“SEC”).
Our management has included projections and estimates in this Form 10-Q, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the SEC or otherwise publicly available. We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
PART I — FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
ORO EAST MINING, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30,
|
December 31,
|
|||||||
2014
|
2013
|
|||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash
|
$
|
22,575
|
$
|
57,972
|
||||
Accounts receivable
|
-
|
24,633
|
||||||
Inventories
|
82,736
|
19,578
|
||||||
Prepaid expenses
|
1,650
|
99,162
|
||||||
Deposit on equipment purchase
|
27,088
|
-
|
||||||
Other current assets
|
127,419
|
48,926
|
||||||
Total current assets
|
261,468
|
250,271
|
||||||
Property and equipment, net of accumulated depreciation of $177,667 and $119,349, respectively
|
826,699
|
397,218
|
||||||
TOTAL ASSETS
|
$
|
1,088,167
|
$
|
647,489
|
||||
LIABILITIES AND STOCKHOLDERS' DEFICIT
|
||||||||
Current liabilities:
|
||||||||
Current portion of long-term debt
|
$
|
13,468
|
$
|
11,661
|
||||
Current portion of capital lease obligation
|
3,866
|
3,576
|
||||||
Accounts payable
|
139,401
|
205,102
|
||||||
Short-term notes payable
|
1,400,000
|
200,000
|
||||||
Convertible note payable, net of unamortized discount of $77,500
|
-
|
282,500
|
||||||
Accrued consulting costs
|
112,384
|
112,385
|
||||||
Other accrued liabilities
|
182,414
|
144,572
|
||||||
Advances-related party
|
373,001
|
-
|
||||||
Total current liabilities
|
2,224,534
|
959,796
|
||||||
Capital lease obligation, less current portion
|
5,342
|
7,350
|
||||||
Long-term debt, less current portion
|
25,173
|
32,392
|
||||||
TOTAL LIABILITIES
|
2,255,049
|
999,538
|
||||||
STOCKHOLDERS' DEFICIT
|
||||||||
Preferred stock, $.0001 par value per share, 10,000,000 shares
authorized; no shares issued and outstanding
|
-
|
-
|
||||||
Common stock, $.0001 par value per share, 2,000,000,000 shares
authorized; 546,125,800 and 543,365,800 shares issued
and outstanding, respectively
|
54,613
|
54,337
|
||||||
Additional paid-in capital
|
4,788,150
|
4,345,176
|
||||||
Accumulated deficit
|
(5,945,206
|
)
|
(4,723,329
|
)
|
||||
Accumulated other comprehensive loss
|
(21,745
|
)
|
(21,759
|
)
|
||||
Total Oro East Mining Inc. stockholders’ deficit
|
(1,124,188
|
)
|
(345,575
|
)
|
||||
Noncontrolling interest
|
(42,694
|
)
|
(6,474)
|
|||||
TOTAL STOCKHOLDERS' DEFICIT
|
(1,166,882
|
)
|
(352,049
|
)
|
||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
|
$
|
1,088,167
|
$
|
647,489
|
See accompanying notes to unaudited consolidated financial statements.
ORO EAST MINING, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
Three Months ended June 30,
|
Six Months ended June 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
Revenues:
|
||||||||||||||||
Sales of metal concentrates, net
|
$
|
-
|
$
|
-
|
$
|
1,874
|
$
|
-
|
||||||||
Operating expenses:
|
||||||||||||||||
General and administrative
|
608,821
|
333,183
|
1,107,825
|
536,988
|
||||||||||||
Exploration costs
|
-
|
57,213
|
-
|
405,972
|
||||||||||||
Total operating expenses
|
608,821
|
390,396
|
1,107,825
|
942,960
|
||||||||||||
Other income (expense):
|
||||||||||||||||
Interest expense
|
(85,807
|
)
|
-
|
(151,960
|
)
|
-
|
||||||||||
Foreign currency gain (loss)
|
1
|
(710
|
)
|
(186
|
)
|
(661
|
)
|
|||||||||
Total other expense
|
(85,806
|
)
|
(710
|
)
|
(152,146
|
)
|
(661
|
)
|
||||||||
Net loss
|
(694,627
|
)
|
(391,106
|
)
|
(1,258,097
|
)
|
(943,621
|
)
|
||||||||
Net loss attributable to noncontrolling interest
|
(21,278
|
)
|
-
|
(36,220
|
)
|
-
|
||||||||||
Net loss attributable to Oro East Mining Inc.
|
(673,349
|
)
|
(391,106
|
)
|
(1,221,877
|
)
|
(943,621
|
)
|
||||||||
Other comprehensive income (loss),
|
||||||||||||||||
Foreign currency translation adjustment
|
37
|
(2,822
|
)
|
14
|
(11,992
|
)
|
||||||||||
Comprehensive loss
|
$
|
(673,312
|
)
|
$
|
(393,928
|
)
|
$
|
(1,221,863
|
)
|
$
|
(955,613
|
)
|
||||
Net loss attributable to Oro East Mining Inc. common stockholder per share - Basic and diluted
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
$
|
(0.00
|
)
|
||||
Weighted average number of common shares outstanding
|
544,254,591
|
565,067,240
|
543,812,651
|
562,281,520
|
See accompanying notes to unaudited consolidated financial statements.
ORO EAST MINING, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months ended June 30,
|
||||||||
2014
|
2013
|
|||||||
CASH FLOW FROM OPERATING ACTIVITES:
|
||||||||
Net loss
|
$
|
(1,221,877
|
)
|
$
|
(943,621
|
)
|
||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Net loss attributable to noncontrolling interest
|
(36,220
|
)
|
-
|
|||||
Depreciation
|
58,318
|
21,863
|
||||||
Share-based compensation
|
83,250
|
7,074
|
||||||
Amortization of debt discount
|
77,500
|
-
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
24,633
|
-
|
||||||
Inventories
|
(63,158
|
)
|
-
|
|||||
Deposits
|
(27,088
|
)
|
-
|
|||||
Prepaid expenses and other current assets
|
19,019
|
71,560
|
||||||
Accounts payable
|
(65,701
|
)
|
13,266
|
|||||
Accounts payable – related party
|
-
|
(11,000
|
)
|
|||||
Accrued liabilities
|
37,841
|
(475,624
|
)
|
|||||
Net cash used in operating activities
|
(1,113,483
|
)
|
(1,316,482
|
)
|
||||
CASH FLOW USED IN INVESTING ACTIVITES,
|
||||||||
Purchases of property and equipment
|
(487,799
|
)
|
(5,243
|
)
|
||||
CASH FLOW FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds from issuance of common stock
|
-
|
1,281,900
|
||||||
Stock redemption
|
-
|
(150
|
)
|
|||||
Proceeds from short-term note
|
1,200,000
|
-
|
||||||
Principal payments under capital lease obligation
|
(1,718
|
)
|
-
|
|||||
Repayment of convertible notes
|
-
|
(199,169
|
)
|
|||||
Repayment of long-term debt
|
(5,412
|
)
|
-
|
|||||
Net proceeds from (repayment of) shareholder advances
|
373,001
|
(72,472
|
)
|
|||||
Net cash provided by financing activities
|
1,565,871
|
1,010,109
|
||||||
Effect of exchange rate on cash
|
14
|
(11,992
|
)
|
|||||
NET DECREASE IN CASH
|
(35,397
|
)
|
(323,608
|
)
|
||||
CASH AT BEGINNING OF PERIOD
|
57,972
|
374,748
|
||||||
CASH AT END OF PERIOD
|
$
|
22,575
|
$
|
51,140
|
||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Interest paid
|
$
|
28,572
|
$
|
17,874
|
||||
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
||||||||
Share issuance for conversion of convertible note
|
$
|
360,000
|
$
|
-
|
See accompanying notes to unaudited consolidated financial statements.
ORO EAST MINING, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The accompanying interim consolidated financial statements are unaudited and 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. In the opinion of management, all adjustments for a fair statement of the results and operations and financial position for the interim periods presented have been included. All such adjustments are of a normal recurring nature. The June 30, 2014 interim consolidated financial statements presented herein may not be indicative of the results of the Company for the year ending December 31, 2014. These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 filed with the SEC on April 9, 2014.
(b) Stock Split
A twenty-for-one forward stock split was effected on June 12, 2014. All share and per share information has been adjusted retroactively to reflect the stock split.
(c) Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
NOTE 2 GOING CONCERN
The accompanying interim consolidated financial statements have been prepared on a going concern basis, which assumes the Company will realize its assets and discharge its liabilities in the normal course of business. As reflected in the accompanying interim consolidated financial statements, the Company has an accumulated deficit of $5,945,206 and a negative working capital of $1,963,066 at June 30, 2014. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management’s plan includes obtaining additional funds by equity and debt financing and/or related party advances, but there is no assurance of additional funding being available. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying interim consolidated financial statements do not include any adjustments that might arise as a result of this uncertainty.
NOTE 3 SHORT-TERM NOTES PAYABLE
A summary of the short-term notes payable is as follows:
As of June 30, 2014
|
As of December 31, 2013
|
|||||||
Fixed-rate 12% note, due September 30, 2014 (1)
|
$ | 50,000 | $ | 50,000 | ||||
Fixed-rate 12% note, due September 30, 2014 (1)
|
50,000 | 50,000 | ||||||
Fixed-rate 15% note, due May 15, 2014 (2)
|
50,000 | 50,000 | ||||||
Fixed-rate 15% note, due May 31, 2014 (2)
|
50,000 | 50,000 | ||||||
Fixed-rate 12% note, due August 1, 2014
|
100,000 | - | ||||||
Fixed-rate 12% note, due August 15, 2014
|
100,000 | - | ||||||
Fixed-rate 8.25% note, due August 5, 2014 (3)
|
1,000,000 | - | ||||||
$ | 1,400,000 | $ | 200,000 |
(1) | The notes with original maturity of January 31 and March 15, 2014, respectively, were extended to be due on September 30, 2014. The extension of the notes did not qualify as a substantial modification. |
(2) | The notes were paid off on July 16, 2014. |
(3) | On May 6, 2014, the Sale and Purchase Agreement was amended to convert the $1,000,000 advanced payment from the buyer to a secured short-term note with the assets of the Company as collateral. Please refer to the Form 8-K filed on February 5 and May 8, 2014 for details of the agreement and amendment, respectively. The note and all accrued interest were paid off on August 1, 2014. |
All except for the $1,000,000 notes are unsecured. The Company has accrued interest of $54,733 as of June 30, 2014.
NOTE 4 CONVERTIBLE NOTE PAYABLE
The Company issued a $360,000 principal amount of 12% convertible note in 2013 and due June 5, 2014 (“Convertible Note”). The Convertible Note has a beneficial conversion feature resulted in the recognition of $90,000 debt discount, which has all been amortized as of June 30, 2014. The principal of the Convertible Note was converted into 2,400,000 common stock of the Company at $0.15 per share, and interest totaling $21,600 was paid by cash after the maturity of the note.
NOTE 5 RELATED PARTY TRANSACTIONS
The shareholder and officer of the Company paid expenses on behalf of the Company during the six months ended June 30, 2014. As of June 30, 2014, the Company owed a shareholder and officer the amount of $373,001. The balances are unsecured, non-interest bearing and due on demand.
NOTE 6 EQUITY
The Company entered into consulting agreements with two individuals in February and April 2014 to issue up to 200,000 and 420,000 common shares for services to be received over a period of ten and twenty-one months, respectively. The services can be terminated at any time with or without cause, and issued shares are forfeitable if the services are not provided. The shares were valued at $0.15 per share for a total of $93,000. 200,000 and 60,000 shares were issued in April and July 2014, respectively.
The Company recognized $83,250 in share-based compensation during the six months ended June 30, 2014.
NOTE 7 SUBSEQUENT EVENTS
On July 3, 2014, the Company entered into consulting and finder’s fee agreements with two foreign corporations and issued 6,750,000 and 7,500,000 restricted common shares for services to be received over a period of two years, respectively. The shares are forfeitable if the services are not provided. The shares were valued at $0.10 per share for a total of $1,425,000.
On July 14, 2014, the Company issued a $500,000 principal amount of 12% convertible note and due January 14, 2015. The note is unsecured and may be paid in full by the Company at any time prior to its maturity date without penalty. Upon maturity of the note, the holder may convert all the outstanding principal and interest due at $0.20 per share into common stock of the Company.
On August 1, 2014, the Company entered into a promissory note for a principal sum of $800,000 with a 15% interest payment per annum on the unpaid principal. The note is unsecured and due on February 1, 2015.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion provides information that the Company’s management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with the Company’s consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. Undue certainty should not be placed on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.
Business Overview
The Company’s primary business focus at present is the development of its three substantial piles of crushed gold ores at an aggregate mine in Carson Hill, California (the “Carson Hill Project”) owned and managed by the Company’s privately held subsidiary, Oro East Mariposa, LLC, a California limited liability company. The real property that the crushed gold ores and Carson Hill Project is situated on is owned by Sutton Enterprises, located on the south side of Highway 49 in the central Sierra foothills of Calaveras County. The Company, through Oro Eat Mariposa, LLC has obtained a right of entry and access to the crushed ores, which are personal property now owned by Oro East Mariposa, LLC.
Previously Oro East Mariposa, LLC had worked with the Central Valley Regional Water Quality Control Board (“Regional Water Board”) to reclassify the mining waste held in the crushed ores. In early 2014 a proposal was made to the California Water Board and Central Valley Regional Water Quality Control Board to conduct a pilot study consisting of a field scale flotation plant and portable filter press for the processing of 15,000 tons of ore to recover the gold values at Carson Hill. The crushed ores potentially contain significant gold values and concentrates that Oro East Mariposa, LLC seeks to recover. It was proposed that the wet processing it would conduct would remove sulfides and generate tailings that met the criteria for Group C classification of mining waste in accordance with Section 22480 of Title 27 of the California Code of Regulations.
On May 27, 2014, the board of directors with the majority of voting power held by the stockholders of the Company approved an amendment to the Company’s Certificate of Incorporation (i) increasing the number of authorized shares of common stock from 100,000,000 to 2,000,000,000, and (ii) effecting a twenty-for-one (20:1) forward split of the Company’s issued and outstanding shares of common stock. The forward split was effective with the Financial Industry Regulatory Authority as of the opening of business on June 12, 2014. As a result of the forward stock split, each share of the Company’s common stock issued and outstanding at the close of business on June 12, 2014 was split into 20 shares of the Company’s common stock.
On July 3, 2014, the Company executed a Consulting Agreement with Hobson Consultants Limited (“Hobson”), a Hong Kong consulting firm, for a two-year engagement of consulting services to help the Company build strategic relationships in East Asia. Hobson would be compensated $675,000 paid in shares of Company stock, or 6,750,000 restricted shares at $0.10 per share.
Also on July 3, 2014, the Company executed a Finder’s Fee Agreement with Smarteam Asia Limited (“Smarteam”), a Hong Kong investor relations management company, for a two-year engagement of services to help the Company promote and fund raise in East Asia. Smarteam would be compensated $750,000 paid in shares of Company stock, or 7,500,000 restricted shares at $0.10 per share. In addition, Smarteam would be compensated with a finder’s fee equivalent to 10% of any total funding raised by the direct promotional efforts of Smarteam, payable as Company stock at $0.15 per share.
On July 14, 2014, the Company entered into a Convertible Note Purchase Agreement with an individual investor. Under the terms of the Agreement, the Company offered and sold a Convertible Promissory Note (the “Note”) for aggregate proceeds of $500,000. The Note bears interest at 12% annually, which interest compounds annually, and all principal and interest is due not later than January 14, 2015. All principal and interest due under the Note is convertible, at the election of the holder of the Note, into shares of common stock of the Company at a rate of $0.20 (Twenty Cents) per share.
On August 1, 2014, the Company entered into a promissory note for a principal sum of $800,000 (Eight Hundred Thousand U.S. Dollars) with a 15% interest payment per annum on the unpaid principal, calculated yearly and not in advance. Said promissory note and interest accrued shall be paid in full on or before February 1, 2015 without pre-payment penalty.
The Sale and Purchase Agreement with Royal Asset Management (“RAM”), a trading company based in Dubai, the United Arab Emirates, executed on January 31 with the May 6 amendment converting the $1,000,000 payment advanced to the Company was paid off effective August 1, 2014.
Results of Operations
The following is a summary of the Company’s operation results for the three and six months ended June 30, 2014 and 2013:
Three Months ended June 30,
|
Six Months ended June 30,
|
|||||||||||||||
2014
|
2013
|
2014
|
2013
|
|||||||||||||
(Unaudited)
|
(Unaudited)
|
|||||||||||||||
Total revenues
|
$ | - | $ | - | $ | 1,874 | $ | - | ||||||||
Total cost of revenues
|
- | - | - | - | ||||||||||||
Gross profit
|
- | - | 1,874 | - | ||||||||||||
Total operating expenses
|
(608,821 | ) | (390,396 | ) | (1,107,825 | ) | (942,960 | ) | ||||||||
Total other expense
|
(85,806 | ) | (710 | ) | (152,146 | ) | (661 | ) | ||||||||
Net loss
|
$ | (694,627 | ) | $ | (391,106 | ) | $ | (1,258,097 | ) | $ | (943,621 | ) |
Operating expenses increased by about $218,000 and $165,000 for the three and six months ended June 30, 2014 and 2013 was due to the decrease of about $57,000 and $405,000 in exploration costs and increase of $275,000 and $570,000 in general and administrative expenses, respectively. As explained in our 2013 annual report, we ceased mining exploration at our Philippine site and focused on producing gold concentrates from the mining waste and leached ore at the Carson Hill site in California. During the three and six months ended June 30, 2014 and 2013, general and administrative expenses increased was due to the increase of about $46,000 and $145,000 in payroll expense, $52,000 and $75,000 in share-based compensation, $25,000 and $35,000 in depreciation, and $244,000 and $410,000 in equipment, repair and maintenance and supplies for the refinery operations at the Carson Hill site, and decrease of $92,000 and $95,000 in donations, respectively
Other expenses increased by about $85,000 and $151,000 during the three and six months ended June 30, 2014 and 2013 was due the increase in interest expenses for the respective periods.
Liquidity and Capital Resources
As of June 30, 2014 and December 31, 2013, the Company had a total of $1,088,167 and 647,489 in assets including $22,575 and $57,972 of cash, respectively. Increase of about $440,000 in total assets was due to the $35,000, $25,000 and $98,000 decrease in cash, accounts receivable and prepaid expenses and the $63,000, $27,000, $488,000, $58,000, and $78,000 increase in inventories, deposits, property and equipment, accumulated depreciation, and other receivables for the first six months of 2014. The Company also had $2,224,534 and $959,796 current liabilities as of June 30, 2014 and December 31, 2013, respectively. Increase of about $1,264,000 in total current liabilities was mainly due to the increase of $1,200,000, $373,000 and $38,000 in short-term note payable, related party advance and accrued liabilities, and the decrease of $282,000 and $65,000 in convertible note and accounts payable, respectively.
The following is a summary of the Company's cash flows provided by (used in) operating, investing, and financing activities for the six months ended June 30, 2014 and 2013:
2014
|
2013
|
|||||||
(Unaudited)
|
||||||||
Net Cash Used In Operating Activities
|
$
|
(1,113,483
|
)
|
$
|
(1,316,482
|
)
|
||
Net Cash Used In Investing Activities
|
(487,799
|
)
|
(5,243
|
)
|
||||
Net Cash Provided By Financing Activities
|
1,565,871
|
1,010,109
|
||||||
Effect Of Exchange Rate On Cash
|
14
|
(11,992
|
)
|
|||||
Net Decrease In Cash
|
$
|
(35,397
|
)
|
$
|
(323,608
|
)
|
Our principal sources of liquidity are our cash and the cash flow provided by the shareholder advances and debt and equity financing. We believe that further debt and equity financing is needed to satisfy our anticipated cash requirements through the next 12 months.
Total cash decreased by about $35,000 before the effect of exchange rate was mainly due to about $1,113,000, $7,000 and $488,000 of cash used for funding the operations, repayment of debts and purchases of property and equipment, respectively, despite about $1,200,000 and $373,000 of cash provided by short-term notes issuances and shareholder/officer advance during the six months ended June 30, 2014.
Critical Accounting Policies
There have been no material changes in the critical accounting policies since December 31, 2013.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of June 30, 2014. Disclosure controls and procedures means that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, including any consolidating subsidiaries, and was made known to us by others within those entities, particularly during the period when this report was being prepared. Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are ineffective as of June 30, 2014.
Changes in Internal Control over Financial Reporting
There were no changes in our internal controls over financial reporting that occurred during the quarter ended June 30, 2014, that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On or about July 11, 2014, Oro East Mariposa, LLC, a private subsidiary of the Company, filed a civil complaint against Allied Business Financial Services, Inc. for breach of contract and other claims. The suit was filed in the Superior Court of California in the County of Orange, Case Number 30-2014-00733630-CU-BC-CJC.
Item 1A. RISK FACTORS
As a “smaller reporting company” (as defined in Rule 12b-2 of the Exchange Act), the Company is not required to provide information required by this Item 1A.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. MINE SAFETY DISCLOSURES
None.
Item 5. OTHER INFORMATION
None.
(a) Exhibits required by Item 601 of Regulation SK.
Exhibit
|
Description
|
|
3.1.1
|
Certificate of Incorporation (1)
|
|
3.1.2
|
Certificate of Amendment to Certificate of Incorporation (2)
|
|
3.2
|
Bylaws (1)
|
|
31.1
|
||
31.2
|
||
32.1
|
||
32.2
|
||
101.INS
|
XBRL Instance Document *
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document. *
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document *
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document *
|
|
101.LAB
|
XBRL Taxonomy Extension Labels Linkbase Document *
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document *
|
(1) Filed and incorporated by reference to the Company’s Registration Statement on Form 10-SB (File No. 000-53136), as filed with the Securities and Exchange Commission on March 19, 2008.
(2) Filed and incorporated by reference to the Company’s Form 8-K (File No. 000-53136), as filed with the Securities and Exchange Commission on June 17, 2014.
* Filed herewith
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: August 13, 2014
|
|||
ORO EAST MINING, INC.
(Registrant)
|
|||
By:
|
/s/ Tian Q. Chen
|
||
Name: Tian Q. Chen
Title: Chief Executive Officer
|
|||
(Principal Executive Officer)
|
By:
|
/s/ Rex Yuen
|
||
Name: Rex Yuen
Title: Chief Financial Officer
|
|||
(Principal Accounting and Financial Officer)
|
EXHIBIT INDEX
Exhibit
|
Description
|
|
3.1.1
|
Certificate of Incorporation (1)
|
|
3.1.2
|
Certificate of Amendment to Certificate of Incorporation (2)
|
|
3.2
|
Bylaws (1)
|
|
31.1
|
||
31.2
|
||
32.1
|
||
32.2
|
||
101.INS
|
XBRL Instance Document *
|
|
101.SCH
|
XBRL Taxonomy Extension Schema Document. *
|
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document *
|
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document *
|
|
101.LAB
|
XBRL Taxonomy Extension Labels Linkbase Document *
|
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document *
|
(1) Filed and incorporated by reference to the Company’s Registration Statement on Form 10-SB (File No. 000-53136), as filed with the Securities and Exchange Commission on March 19, 2008.
(2) Filed and incorporated by reference to the Company’s Form 8-K (File No. 000-53136), as filed with the Securities and Exchange Commission on June 17, 2014.
* Filed herewith
11