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EXCEL - IDEA: XBRL DOCUMENT - HK BATTERY TECHNOLOGY INCFinancial_Report.xls
EX-10.1 - EXHIBIT 10.1 PROMISSORY NOTE - HK BATTERY TECHNOLOGY INCf10q063014_ex10z1.htm
EX-31.2 - EXHIBIT 31.2 SECTION 302 CERTIFICATION - HK BATTERY TECHNOLOGY INCf10q063014_ex31z2.htm
EX-32.2 - EXHIBIT 32.2 SECTION 906 CERTIFICATION - HK BATTERY TECHNOLOGY INCf10q063014_ex32z2.htm
EX-31.1 - EXHIBIT 31.1 SECTION 302 CERTIFICATION - HK BATTERY TECHNOLOGY INCf10q063014_ex31z1.htm
EX-32.1 - EXHIBIT 32.1 SECTION 906 CERTIFICATION - HK BATTERY TECHNOLOGY INCf10q063014_ex32z1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


  X . QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2014


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:  000-52636


HK Battery Technology Inc.

(Exact name of registrant as specified in its charter)


Delaware

 

20-3724068

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)


800 E. Colorado Blvd., Suite 888

 

 

Pasadena, CA

 

91101

(Address of principal executive offices)

 

(Zip Code)


 

626-683-7330

 

(Registrant’s telephone number, including area code)


_______________________________

(Former name, former address and former fiscal year, if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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  X . No      .


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


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. 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  X . No      .


As of August 19, 2014, there were 42,865,074 shares of the registrant’s common stock, par value $0.001 per share, outstanding.





HK BATTERY TECHNOLOGY INC.

Form 10-Q

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2014


TABLE OF CONTENTS


 

 

PAGE

 

 

 

 

PART I - FINANCIAL INFORMATION

3

 

 

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

3

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

10

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

12

 

 

 

Item 4.

Controls and Procedures

12

 

 

 

 

PART II - OTHER INFORMATION

13

 

 

 

Item 1.

Legal Proceedings

13

 

 

 

Item 1A.

Risk Factors

14

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

14

 

 

 

Item 3.

Defaults Upon Senior Securities

14

 

 

 

Item 4.

Mine Safety Disclosures

14

 

 

 

Item 5.

Other Information

14

 

 

 

Item 6.

Exhibits

15

 

 

 

 

SIGNATURES

16




2




PART I—FINANCIAL INFORMATION (Unaudited)


Item 1.

Financial Statements.


ITEM 1. FINANCIAL STATEMENTS


The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in our Form 10-K for the fiscal year ended December 31, 2013 filed with the SEC on April 15, 2014. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the periods presented have been reflected herein. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year.


TABLE OF CONTENTS


 

PAGE

 

 

Condensed Consolidated Balance Sheet as of June 30, 2014 (unaudited) and December 31, 2013

4

 

 

Condensed Consolidated Statement of Operations for the three and six month period ended June 30, 2014 and 2013 (unaudited) and for the period from October 2, 2008 (inception) to June 30, 2014 (unaudited)

5

 

 

Condensed Consolidated Statement of Cash Flows for the six month period ended June 30, 2014 and 2013 (unaudited) and for the period from October 2, 2008 (inception) to June 30, 2014 (unaudited)

6

 

 

Notes to the Condensed Consolidated Financial Statements (unaudited)

7-9




3




 

HK Battery Technology Inc.

(A Development Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEET

 

 

 

June 30,

 

December 31,

 

 

2014

 

2013

 

 

(unaudited)

 

 

ASSETS

Current assets

 

 

 

 

 Cash

$           62,376

 

$           48,528

 

 Notes receivable - related party

200,000

 

200,000

 

 Accrued interest receivable - related party

16,052

 

13,052

 

  Other Receivable

2,365

 

13,792

Total current assets

280,792

 

275,372

 

 

 

 

 

 

 

 

 

 

 Total assets

$         280,792

 

$         275,372

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable

$           20,451

 

$           20,451

 

Note payable - ACI

2,785,000

 

2,195,000

 

Advance from ACI

78,575

 

67,915

 

Other payables

5,950

 

4,250

 

Accrued expenses and other liabilities

88,325

 

51,625

Total current liabilities

2,978,300

 

2,339,241

 

 

 

 

 

Total liabilities

2,978,300

 

2,339,241

 

 

 

 

 

Stockholders' deficit

 

 

 

 

Preferred stock, $.001 par value; 10,000,000 shares authorized, no shares issued and outstanding as of June 30, 2014 and December 31, 2013

-

 

-

 

Common stock, $.001 par value; 1,200,000,000 shares authorized, 42,865,074 shares issued and outstanding as of June 30, 2014 and December 31, 2013

42,865

 

42,865

 

Additional paid-in capital

5,287,302

 

5,287,302

 

Accumulated deficit

(8,027,675)

 

(7,394,036)

Total stockholders' deficit

(2,697,508)

 

(2,063,869)

 

 

 

 

 

 Total liabilities and stockholders' deficit

$         280,792

 

$         275,372

 

 

 

 

 

The accompanying notes are integral part of these condensed consolidated financial statements




4




HK Battery Technology Inc.

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

 

For three months ended June 30

 

For three months ended June 30

 

For six months
ended June 30

 

For six months
ended June 30

 

From Inception on October 2, 2008 Through June 30, 2014

 

2014

 

2013

 

2014

 

2013

 

 

 

 

 

 

 

 

 

 

 

Revenues

$                     -

 

$                       -

 

$                       -

 

$               -

 

$                 -

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

Research and development

-

 

-

 

 

 

 

 

653,988

General and administrative

255,931

 

316,212

 

599,952

 

624,777

 

6,940,874

Total operating expenses

255,931

 

316,212

 

599,952

 

624,777

 

7,594,862

 

 

 

 

 

 

 

 

 

 

Loss from operations

(255,931)

 

(316,212)

 

(599,952)

 

(624,777)

 

(7,594,862)

 

 

 

 

 

 

 

 

 

 

Interest income (expense)

 

 

 

 

 

 

 

 

 

Interest income  

1,506

 

1,506

 

3,013

 

3,013

 

34,906

Other income

-

 

-

 

-

 

-

 

2,367

Gain on settlement of derivative liability

-

 

-

 

-

 

-

 

112,500

Interest expense

(19,513)

 

(9,786)

 

(36,700)

 

(16,725)

 

(582,586)

Total interest income (expense)

(18,006)

 

(8,280)

 

(33,687)

 

(13,712)

 

(432,813)

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

(273,938)

 

(324,492)

 

(633,639)

 

(638,489)

 

(8,027,675)

 

 

 

 

 

 

 

 

 

 

Provision for income taxes

-

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

 

Net loss

$                 (273,938)

 

$                   (324,492)

 

$         (633,639)

 

$      (638,489)

 

$      (8,027,675)

 

 

 

 

 

 

 

 

 

 

Net loss per share of common stock:

 

 

 

 

 

 

 

 

 

Basic

$              (0.01)

 

$                (0.01)

 

$                (0.01)

 

$            (0.01)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding

42,865,074

 

42,865,074

 

42,865,074

 

42,865,074

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are integral part of these condensed consolidated financial statements




5




HK Battery Technology Inc.

(A Development Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

Unaudited

 

 

 

 

 

 

 

For six months ended June 30, 2014

 

For six months ended June 30, 2013

 

From Inception on October 2, 2008 Through June 30, 2014

 

 

 

Operating Activities

 

 

 

 

 

Net Income

$          (633,639)

 

$         (638,489)

 

$         (8,027,675)

Adjustments to reconcile net income to net cash used by operating activities:

 

 

 

 

 

Stock based compensation

-

 

-

 

131,508

Common stock issued for services

-

 

-

 

290,589

Contributed services or common stock contributed for services

-

 

-

 

125,000

Gain on change in derivative liability

-

 

-

 

(112,500)

Interest expense related to intrinsic value of converted promissory notes

-

 

-

 

300,000

Changes in operating assets and liabilities:

 

 

 

 

 

Accrued interest receivable - related party

(3,000)

 

(5,260)

 

(16,052)

Other Receivable

11,427

 

-

 

(2,365)

Accounts payable and accrued interest payable

36,700

 

(6,196)

 

105,038

Advance from ACI

10,660

 

-

 

78,574

Other payable

1,700

 

(499)

 

(9,578)

Accrued expenses and other liabilities

-

 

(53,933)

 

51,625

Net cash used by operating activities

(576,152)

 

(704,377)

 

(7,085,834)

 

 

 

 

 

 

Investing Activities

 

 

 

 

 

Notes receivables - related parties

-

 

-

 

(200,000)

Net cash provided (used) by investing activities

-

 

-

 

(200,000)

 

 

 

 

 

 

Financing Activities

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

-

 

-

 

4,313,210

Proceeds from notes payable

590,000

 

738,860

 

3,235,000

Payments on notes payable

-

 

-

 

(200,000)

Net cash provided by financing activities

590,000

 

738,860

 

7,348,210

 

 

 

 

 

 

Net change in cash

13,848

 

34,483

 

62,376

 

 

 

 

 

 

Cash at the beginning of year

48,528

 

7,412

 

-

 

 

 

 

 

 

Cash at the end of year

$              62,376

 

$            41,895

 

$               62,376

 

 

 

 

 

 

The accompanying notes are integral part of these condensed consolidated financial statements

 



6



HK Battery Technology Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

(A Development Stage Company)

For the six month period ended June 30, 2014

(Unaudited)


NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Organization, Nature of Business and Trade Name


HK Battery Technology Inc. (“Company”), a development stage company, was incorporated under the laws of the State of Delaware on April 16, 2004.  Nevada Gold Enterprises, Inc., a Nevada corporation, was incorporated under the laws of the State of Nevada on October 2, 2008.  On December 31, 2008, Nevada Gold Acquisition Corp., a Nevada corporation formed on December 18, 2008, and a wholly owned subsidiary of Nevada Gold Holdings, Inc., merged with and into Nevada Gold Enterprises, Inc. Nevada Gold Enterprises, Inc. was the surviving corporation in the Merger. As a result of the Merger, Nevada Gold Enterprises, Inc., became a wholly-owned subsidiary of Nevada Gold Holdings, Inc. The Merger was treated as a reverse merger and recapitalization for financial accounting purposes. As a result of the merger, the Company recorded an aggregate stock issuance of 2,626,263 shares of common stock with a net value of $(180,978). The negative recapitalization net value recognized was the result of the Company restating the equity structure of the legal subsidiary using the exchange ratio established in the acquisition agreement to reflect the number of shares of the legal parent issued in the reverse acquisition.  Nevada Gold Enterprises, Inc. was considered the acquirer for accounting purposes, and Nevada Gold Holdings, Inc. was considered the surviving company for legal purposes. Accordingly, the accompanying financial statements present the historical financial statements of Nevada Gold Enterprises, Inc., as the historical financial statements of Nevada Gold Holdings, Inc., i.e. a reverse merger. The Company was previously engaged in the acquisition, exploration and development of gold mining claims in Nevada. In February 2013, the Company withdrew from the gold exploration business to explore opportunities in the battery technology field. On August 7, 2013, the Company was approved to change its name to HK Battery Technology Inc.


Basis of Presentation


The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include all the notes required by generally accepted accounting principles for complete financial statements.  The Company’s consolidated financial statements reflect all adjustments that management believes are necessary for the fair presentation of their financial condition and results of operations for the periods presented.


Use of Estimates


The preparation of unaudited condensed consolidated financial statements in accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. A change in management’s estimates or assumptions could have a material impact on the Company’s financial condition and results of operations during the period in which such changes occurred. Actual results could differ from those estimates.


Principles of Consolidation


The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary Nevada Gold Enterprises, Inc.  All significant intercompany transactions have been eliminated.


The Company is in the development stage in accordance with Financial Accounting Standards Board Accounting Standard Codification (“ASC”) Topic No. 915, Accounting and Reporting by Development Stage Enterprises.


Loss Per Share


Basic loss per share is computed by dividing net loss available to common shareholders (numerator) by the weighted average number of shares outstanding (denominator) during the period. We calculated the loss per share as $0.01 as of June 30, 2014. No Diluted EPS has been calculated for the reported period.




7



NOTE 2 - GOING CONCERN


The Company sustained operating losses during the second quarter of 2014 and incurred negative cash flows from operations. The company’s continuation as a going concern is dependent on its ability to generate sufficient cash flows from operations to meet its obligations and/or obtain additional financing, as may be required.


The accompanying unaudited condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern; however, the above condition raises substantial doubt about the Company’s ability to do so. The unaudited condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.


During the next three quarter, the Company’s foreseeable cash requirements will relate to continual development of the operations of its business, maintaining its good standing and making the requisite filings with the Securities and Exchange Commission, and the payment of expenses associated with research and development. The Company may experience a cash shortfall and be required to raise additional capital.


Through future public or private offerings of the Company’s stock or through loans from private investors, although there can be no assurance that it will be able to obtain such financing. The Company’s failure to do so could have a material adverse effect upon it and its shareholders.


NOTE 3 – NOTES RECEIVABLE – RELATED PARTIES


On January 26, 2011, the Company made a loan of $200,000 to Hybrid Kinetic Motors Corporation, a related party.  The loan is unsecured and due on demand with 3% interest per annum. The balance of the accrued interest is $16,052 and $13,052 as of June 30, 2014 and December 31, 2013 respectively.


NOTE 4 – NOTES PAYABLE


The Company converted the old payables to American Compass Inc. (“ACI”) with the amount of $775,000 to a new Note at the end of 2012. In 2013, the Company borrowed additional amounts from ACI at a 3% per year interest rate. As of December 31, 2013, the balance of the Note to ACI was $2,195,000.  The Notes are unsecured with an interest rate of 3%. The total accrued interest was $88,325 and $51,625 for the quarter ended June 30, 2014 and the year ended December 31, 2013, respectively. The Notes are payable on demand and there is no maturity date. American Compass Inc. and HK Battery Inc. are related parties because they are both controlled by the same shareholder.


On March 25, 2014, the Company entered into a Demand Promissory Note with American Compass, Inc., borrowing the amount of $360,000 (the “Note”) in order to cover the Company’s operating expenses. The Note provides for interest of three percent (3%) per annum and is due upon demand from American Compass Inc. The Company will use the proceeds of the loan to fund the general and administrative expenses of the Company as the Company does not currently generate any revenues.


On June 25, 2014, the Company entered into a Demand Promissory Note with American Compass, Inc., borrowing the amount of $230,000 (the “Additional Note”) in order to cover the Company’s operating expenses. The Additional Note provides for interest of three percent (3%) per annum and is due upon demand from American Compass Inc. The Company will use the proceeds of the loan to fund the general and administrative expenses of the Company as the Company does not currently generate any revenues.


NOTE 5 – STOCKHOLDER’S DEFICIT


On August 7, 2013, the Company approved an increase in authorized capitalization from 300,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share, to 1,200,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share.



8



As of December 31, 2013 and 2012, the Company had 42,865,074 shares of common stock and 0 share of preferred stock issued and outstanding, respectively.


On October 29, 2010 the Company consummated a private placement offering (“the offering”) whereby the Company issued 37,751,986 units at $0.10 per unit for total proceeds of $3,883,337.  The proceeds consisted of $3,450,000 in cash, conversions of $313,337 in convertible notes payable, and $120,000 as credit on certain of the Company’s trade payables.  Each unit consists of one share of the Company’s common stock and one warrant to purchase one share of the Company’s common stock at $.10 per share, exercisable for a period of five years from the date of closing.  The company has not issue any stock or warrants through for the second quarter ended June 30, 2014.


NOTE 6 – TERMINATION OF TEMPO MINERAL LEASE


On February 15, 2013, Gold Standard Royalty terminated the lease on the Tempo Mineral Prospect with the Company. Currently, the Company does not hold any mineral lease. The Company filed a Current Report on Form 8-K to disclose the termination on March 4, 2013. There is no financial impact on the Consolidated Balance Sheet and Consolidated Statements of Operation for the year ended December 31, 2013.


On March 30, 2012, we received a notice from the Committee on Foreign Investment in the United States (“CFIUS”) that an agency notice had been submitted to CFIUS on March 28, 2012 (the “Notice”) pursuant to Section 721 of the Defense Production Act of 1950, as amended, with regard to the acquisition in October 2010 by Far East Golden Resources, in a private placement offering of shares equal to approximately 88.4% (at the time) of the outstanding common stock of Nevada Gold (the “Transaction”); and on April 26, 2012, we received another notice from CFIUS that CFIUS was undertaking an investigation of that transaction.


We believe that the termination of the Tempo lease in February 2013 renders CFIUS’ concerns moot, and we have notify CFIUS as well as the US Department of Defense of the termination of the Tempo lease. We believe the case is now closed.


NOTE 7– COMMITMENTS AND CONTINGENCIES


The Company is not currently a party to any legal action.  


The Company is in a lease agreement for its office space. Lease term is 69 month starting from May 1, 2011. Rent increases by 2.7% per year. The rents are payable in installments of $29,280.67 per month (from May 1, 2011 to April 30, 2012). The lease will terminate on Jan 31, 2017.


Annual minimum lease commitment for 5 years:

 

 

12/31/2013

367,350

12/31/2014

377,269

12/31/2015

387,455

12/31/2016

397,916

12/31/2017

33,453

Total annual Lease commitments

$1,563,444


NOTE 8 – RELATED PARTY TRANSACTIONS


Far East Golden Resources is the Company’s controlling stockholder which is also a subsidiary of Hybrid Kinetic Group Ltd. Hybrid Kinetic Group Ltd. controls 100% of all outstanding shares of Far East Golden Resources Investment Limited. There are a total of 25,000,000 shares issued and outstanding (nominal value one Hong Kong dollar per share).


NOTE 9 – SUBSEQUENT EVENTS


On July 21, 2014, the board of directors of the Company, and stockholders holding a majority of the Company’s outstanding shares of common stock (the “Majority Stockholders”), respectively, approved an amendment to the Company’s certificate of incorporation to effect a 1-for-100 Reverse Stock Split at any time within the sixty (60) day period after July 21, 2014.  The board determined the split ratio based upon a review of the capital structure of the Company, including current market share price, general market conditions and the potential benefits from the reverse split.  The Company filed a charter amendment for the reverse stock split with the Delaware Secretary of State, with a future effective date and time of 5:00 p.m. Eastern Time on September 5, 2014.



9



Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.


This report contains forward-looking statements. All statements other than statements of historical facts included in this Quarterly Report on Form 10-Q, including without limitation, statements in this Management’s Discussion and Analysis of Financial Condition and Results of Operations regarding our financial position, estimated working capital, business strategy, the plans and objectives of our management for future operations and those statements preceded by, followed by or that otherwise include the words “believe,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” “target,” “goal,” “plans,” “objective,” “should,” or similar expressions or variations on such expressions are forward-looking statements. We can give no assurances that the assumptions upon which the forward-looking statements are based will prove to be correct. Because forward-looking statements are subject to risks and uncertainties including those related to changes in economic conditions, new business opportunities and general financial and business conditions, actual results may differ materially from those expressed or implied by the forward-looking statements.


Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. We believe the information contained in this Form 10-Q to be accurate as of the date hereof. Changes may occur after that date. We will not update that information except as required by law in the normal course of its public disclosure practices.


Additionally, the following discussion regarding our financial condition and results of operations should be read in conjunction with the financial statements and accompanying notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and accompanying notes included our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, filed with the SEC.


Unless the context otherwise requires, the terms “the Company,” “we,” “us” and “our” refer to HK Battery Technology Inc. (formerly Nevada Gold Holdings, Inc.)


OVERVIEW AND RECENT DEVELOPMENTS


We are a development stage company.  During the fiscal year ended December 31, 2013, we engaged in limited oil and gas activities, had minimal operations, and generated no revenues. We did not pay to the Tempo property lessor, Gold Standard Royalty Corporation, an Advance Minimum Royalty Payment of approximately $150,000 that was due by January 15, 2013, and as of February 15, 2013, Gold Standard Royalty Corporation terminated our lease of the 206 contiguous unpatented lode claims on the Tempo Mineral Prospect.  As a result, the Company does not hold any mineral lease or property, and our Board has determined that we will not in the future hold any mineral lease or property.  Management, along with the Board of Directors, determined it was in the best interest of the Company and its shareholders to explore opportunities in the battery technology field. Current members of management and of the Board of Directors have experience in this field.


The Company at this time intends to seek a merger, combination or other business transaction with a company that develops and/or manufactures battery packs with advanced technologies, and believe that the change of our name will facilitate such efforts.  However, the Company has not yet entered into any agreement, nor does it have any commitment to enter into or become engaged in such a transaction with any party.


Our Board of Directors may at any time determine to redirect the Company’s efforts to find a combination or acquisition target to another business or industry.  We may not restrict our potential candidate target companies to any specific business, industry or geographical location and, thus, may acquire any type of business.  Further, we may acquire or combine with a venture that is in its preliminary or development stage, one that is already in operation or one that is in a more mature stage of its corporate existence. Accordingly, business opportunities may be available in many different industries and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities difficult and complex. See Part I, Item 1, “Business—Our Business Plan,” and Part I, Item 1A, “Risk Factors,” in the 2013 Form 10-K for additional information and risks associated with our proposed business plan.  



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Our Board of Directors, by written consent on May 31, 2013, has approved, and stockholders holding 30,000,000 shares (approximately 68.4%) of our outstanding shares of common stock on that date, have consented in writing to, an amendment to our certificate of incorporation (the “Charter Amendment”) to (i) change our corporate name to HK Battery Technology Inc., and (ii) increase our authorized capitalization from 300,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share, to 1,200,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share.  We mailed a definitive information statement on Schedule 14C to our stockholders on August 7, 2013, and in accordance with the regulations under the Securities Exchange Act of 1934, as amended, the Charter Amendment will not become effective until at least 20 days after that mailing date.  The Charter Amendment was filed with the Delaware Secretary of State on August 7, 2013.  


We expect that we will need to raise funds in order to effectuate a business plan.  We may seek additional investors to purchase our stock to provide us with working capital to fund our operations.  Thereafter, we will seek to establish or acquire businesses or assets with additional funds raised either via the issuance of shares or debt.  There can be no assurance that additional capital will be available to us at all or on acceptable terms.  We may seek to raise the required capital by other means.  We may have to issue debt or equity or enter into a strategic arrangement with a third party.  We currently have no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since we have no such arrangements or plans currently in effect, our inability to raise funds will have a severe negative impact on our ability to remain a viable company.  In pursuing the foregoing goals, we may seek to expand or change the composition of the Board or make changes to our current capital structure, including issuing additional shares or debt and adopting a stock option plan.


We do not expect to generate any revenues over the next twelve months.  Our principal business objective for the next twelve months will be to seek, investigate and, if such investigation warrants, engage in a business combination with a private entity whose business presents an opportunity for our shareholders.


Going Concern


In the course of its development activities, the Company has sustained losses and expects such losses to continue through at least the end of 2014.  The Company expects to finance its operations primarily through one or more future financings.  However, there exists substantial doubt about the Company’s ability to continue as a going concern for at least the next twelve months, because the Company will be required to obtain additional capital in the future to continue its operations and there is no assurance that it will be able to obtain such capital, through equity or debt financing, or any combination thereof, or on satisfactory terms or at all.  Our independent auditors have included an explanatory paragraph in their report on our consolidated financial statements included in this report that raises substantial doubt about our ability to continue as a going concern.  Our financial statements do not include any adjustments that may result from the outcome of this uncertainty.  We have generated no operating revenues since our inception.  We had an accumulated deficit of $8,027,675 as of June 30, 2014.  Our continuation as a going concern is dependent upon future events, including our ability to raise additional capital and to generate positive cash flows.  Our unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles applicable to a going concern, which implies we will continue to meet our obligations and continue our operations for the next twelve months.  Realization values may be substantially different from carrying values as shown, and our unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability or classification of recorded asset amounts or the amount and classification of liabilities that might be necessary as a result of the going concern uncertainty.


Results of Operations


Three Months Ended June 30, 2014 and Three Months Ended June 30, 2013


We are still in our development stage and have generated no revenues to date.


We incurred general and administrative expenses of $255,931 and $316,212 for the three months ended June 30, 2014 and 2013, respectively. These expenses consisted of legal and other professional fees and operating costs incurred in connection with the day to day operation of our business and the preparation and filing of our periodic reports.


Our net loss for the three months ended June 30, 2014 and 2013 was $273,938and $324,492, respectively. The increase in net loss from the 2013 to the 2014 for the three month period is primarily attributable to general and administrative expenses.



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Six Months Ended June 30, 2014 compared to Six Months Ended June 30, 2013


Revenues and Other Income


During the six month period ended June 30, 2014, the Company remained in the developing stage and we did not realize any revenues from operations. Similarly, we have not realized any revenues from operations during the period from inception through June 30, 2014.


Expenses


Operating expenses, consisting entirely of general and administrative expenses, totaled $599,952 in the six month period ended June 30, 2014, compared to $624,777 in the six month period ended June 30, 2013, which consisted primarily of general and administrative expenses. The decrease in operating expenses was primarily due to increased cost efficiency.


Net Losses


As a result of the foregoing, the Company incurred a net loss of $633,639 or ($0.01) per share, for the six months ended June 30, 2014, compared to a net loss of $638,489, or ($0.01) per share, for the corresponding period ended June 30, 2013.


Liquidity and Capital Resources


As of June 30, 2014, we have $62,376 of cash on hand.


We may be unable to secure additional financing on terms acceptable to us, or at all, at times when we need such financing. Our inability to raise additional funds on a timely basis could prevent us from achieving our business objectives and could have a negative impact on our business, financial condition, results of operations and the value of our securities.


If we raise additional funds by issuing additional equity or convertible debt securities, the ownership percentages of existing stockholders will be reduced and the securities that we may issue in the future may have rights, preferences or privileges senior to those of the current holders of our Common Stock. Such securities may also be issued at a discount to the market price of our Common Stock, resulting in possible further dilution to the book value per share of Common Stock. If we raise additional funds by issuing debt, we could be subject to debt covenants that could place limitations on our operations and financial flexibility.


Item 3. Quantitative and Qualitative Disclosures about Market Risk


As a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide disclosure under this Item 3.


Item 4. Controls and Procedures.


Under the supervision and with the participation of our principal executive officer and our principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of June 30, 2014 (the “Evaluation Date”).  Based on this evaluation, such officers concluded as of the Evaluation Date that our disclosure controls and procedures were not effective to ensure that the information relating to us, including our consolidated subsidiaries, required to be disclosed by us in the reports filed or submitted by us under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow timely decisions regarding required disclosure.


We are a small organization with limited personnel. We were unable to implement an effective system of disclosure controls and procedures as of the Evaluation Date.  Nevertheless, management believes that this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report.


With the participation of our principal executive officer and our principal financial officer, we evaluated any change in our internal control over financial reporting that occurred during the fiscal quarter covered by this Report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  There has been no such change in our internal control over financial reporting identified in connection with that evaluation.



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PART II—OTHER INFORMATION


Item 1. Legal Proceedings.


From time to time we may be involved in claims arising in connection with our business. There can be no assurance as to the ultimate outcome of any such claim. The amount of reasonably possible losses in connection with any actions that may be brought against us could be material to our consolidated financial condition, operating results and/or cash flows.


As of the date of this Report, except as described below, there are no material pending legal proceedings to which the Company or any of its subsidiaries is a party or of which any of their property is the subject, nor are there any such proceedings known to be contemplated by governmental authorities.


CFIUS Matter


As previously reported, on March 30, 2012, we received a notice from the Committee on Foreign Investment in the United States (“CFIUS”) that an agency notice had been submitted to CFIUS on March 28, 2012 (the “Notice”) pursuant to Section 721 of the Defense Production Act of 1950, as amended, with regard to the acquisition in October 2010 by Far East Golden Resources, in a private placement offering of shares equal to approximately 88.4% (at the time) of the outstanding common stock of Nevada Gold (the “Transaction”); and on April 26, 2012, we received another notice from CFIUS that CFIUS was undertaking an investigation of that transaction.


On May 30, 2012, we received a notification from CFIUS (the “Notice”) proposing that Hybrid Kinetic Group Limited, a limited liability company incorporated in Bermuda (“Hybrid Kinetic”) (the ultimate controlling entity of Far East Golden Resources) and the U.S. Department of Defense (“DoD”) enter into a National Security Agreement as a measure to mitigate asserted risks to the national security of the United States determined to exist by CFIUS due to the fact that our Tempo property is in proximity to U.S. Naval Air Station Fallon, which agreement would have required, among other things, that Hybrid Kinetic and Nevada Gold take actions to sell, break or abandon all leases and claims at or near our Tempo mine site (the “Tempo Leases and Claims”) through the disavowal, transfer, or sale of all interests in the Tempo Leases and Claims.


On June 11, 2012, Hybrid Kinetic, Far East Golden Resources and Nevada Gold (collectively, the “Companies”) submitted to CFIUS a request to withdraw the Notice, in which Hybrid Kinetic and Far East Golden Resources agreed to undertake certain actions to divest their interests in Nevada Gold, in lieu of a disposition or abandonment by Nevada Gold of the Tempo Leases and Claims.  CFIUS, by letter dated June 11, 2012, granted the request for withdrawal, based upon the representations and commitments made by the Companies in the withdrawal request and subject to the terms and conditions imposed by CFIUS in an Order dated June 11, 2012.


Specifically, among other things, Hybrid Kinetic and its subsidiaries agreed, within 90 days from June 11, 2012, to divest all their interests in Nevada Gold. The Companies agreed to notify the U.S. Department of Defense and the U.S. Department of the Treasury (the “USG Agencies”) of any proposed divestment no less than 10 calendar days in advance of effecting such divestment. The parties agreed that they may proceed to complete the transfer after the 10 calendar day period expires if: (a) the USG Agencies do not object to the proposed transferee during the 10 calendar day advance notice period; (b) the proposed transferee is a U.S. citizen who is not a dual citizen or is an entity that is wholly owned by U.S. citizens who are not dual citizens; and (c) the proposed transferee has no prior direct or indirect contractual, financial, employment, familial, or other relationship with Hybrid Kinetic or persons that own or are employed by Hybrid Kinetic. In all other circumstances, Hybrid Kinetic agreed that it will not complete the transfer until the USG Agencies inform Hybrid Kinetic in writing that the USG Agencies have no objection to the proposed transfer.  Further, no personnel, employee or agent of Hybrid Kinetic may access the property conveyed by the Tempo Leases and Claims or any other leases or claims in which Hybrid Kinetic has acquired any direct or indirect interest as a result of the Transaction or through Nevada Gold (collectively, the “Nevada Gold Leases and Claims”) without prior approval by the USG Agencies.  In addition, Hybrid Kinetic, including contractors and business representatives acting on its behalf, agreed that it would not obtain, through any means, any ownership interest or control over Nevada Gold, including any representation on our Board of Directors, or any Nevada Gold Leases and Claims.



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The Order is enforceable, through injunctive or other judicial relief, and failure to comply with the Order may result in the imposition of civil or criminal penalties.


Hybrid Kinetic has submitted to CFIUS a proposed purchaser of Far East Golden Resources’s interests in Nevada Gold, and CFIUS reviewed the qualifications of the purchaser. Hybrid Kinetic informed us that it intended to comply with the terms of the Order in a timely fashion.


On November 6, 2012, Hybrid Kinetic received a notice from CFIUS that in order to give Hybrid Kinetic additional time to comply with the divestment requirement, CFIUS granted an extension of the time frame within which Hybrid Kinetic must divest all interest in Nevada Gold, as specified in the Order, to Tuesday, November 20, 2012.  This modification does not affect any other provision of the Order or the application of any provision thereof.


On March 13, 2013, Hybrid Kinetic received a notice from CFIUS that CFIUS does not object to Hybrid Kinetic’s transfer of all its interest in Nevada Gold to an unrelated third party. This unrelated third party is conducting due diligence on the purchase of the shares currently owned by Hybrid Kinetic. Further, immediately upon completing the divestment, the parties are required to provide CFIUS copies of the documents effectuating the divestment and a signed statement by a Hybrid Kinetic officer certifying that Hybrid Kinetic has divested all of its interest in Nevada Gold.


On June 7, 2013, Hybrid Kinetic received a letter from CFIUS granting Hybrid Kinetic's request to amend the June 2012 Order. On the same day, Hybrid Kinetic received an Amended and Restated Order from CFIUS. Under the June 7, 2013, Amended and Restated Order, Hybrid Kinetic and Nevada Gold Holdings, Inc., are required, among other things, to appoint a security director, to sell, break or abanadon all NGHI claims and leases, and to conduct an annual audit to ensure compliance with Order. NGHI has submitted a nominee for the security director to CFIUS. NGHI has also notified CFIUS of the termination of the Tempo Lease.


Item 1A. Risk Factors.


There have been no material changes from Risk Factors as previously disclosed in our 2013 Form 10-K.


Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.


Other than as previously reported in our Current Reports on Form 8-K, we have not sold any of our equity securities during the period covered by this Report.


Item 3. Defaults upon Senior Securities.


None.


Item 4. Mine Safety Disclosures.


Neither the Company nor its subsidiary is currently the operator of any mine.


Item 5. Other Information.


Our Board of Directors, by written consent on May 31, 2013, has approved, and stockholders holding 30,000,000 shares (approximately 68.4%) of our outstanding shares of common stock on that date, have consented in writing to, an amendment to our certificate of incorporation (the “Charter Amendment”) to (i) change our corporate name to HK Battery Technology Inc., and (ii) increase our authorized capitalization from 300,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share, to 1,200,000,000 shares of common stock, par value $0.001 per share, and 10,000,000 shares of preferred stock, par value $0.001 per share.  The information regarding the Charter Amendment set forth in Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Overview,” is incorporated herein by reference.




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Item 6. Exhibits


The following exhibits are included with this quarterly report.


Exhibit
No.

 

Description

 

 

 

10.1

 

Demand Promissory Note dated June 25, 2014*

31.1

 

Certification of Principal Executive Officer pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**

31.2

 

Certification of Principal Financial Officer pursuant to SEC Rules 13a-14(a) and 15d-14(a), adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002**

32.1

 

Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

32.2

 

Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002**

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 Label Linkbase Document***

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document***


*Filed herewith.


** This certification is being furnished and shall not be deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.


*** Pursuant to Rule 406T of Regulation S-T, this XBRL related information shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed part of a registration statement, prospectus or other document filed under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filings.




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SIGNATURE


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.



HK BATTERY TECHNOLOGY INC.



Date: August 19, 2014

By:

/s/ Jianguo Xu

 

 

Jianguo Xu

 

 

Chief Executive Officer

 

 

 

Date: August 19, 2014

By:

/s/ Jimmy Wang

 

 

Jimmy Wang

 

 

Chief Financial Officer




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