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EX-32.2 - CERTIFICATION - Grand China Energy Group Ltd | f10q0314a132ii_grandchina.htm |
EX-32.1 - CERTIFICATION - Grand China Energy Group Ltd | f10q0314a132i_grandchina.htm |
EX-31.1 - CERTIFICATION - Grand China Energy Group Ltd | f10q0314a131i_grandchina.htm |
EX-31.2 - CERTIFICATION - Grand China Energy Group Ltd | f10q0314a131ii_grandchina.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
(Mark One)
☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2014
OR
☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission File Number: 000-53490
GRAND CHINA ENERGY GROUP LIMITED
(formerly known as SGB International Holdings, Inc.)
(Exact Name of Registrant as Specified in its Charter)
British Columbia | N/A | |
(State of Incorporation) | (IRS Employer Identification No.) |
Room 1601, 16/F, China Taoping Tower Phase II,
8 Sunning Road, Causeway Bay
Hong Kong
(852) 3691-8831
(Address of principal executive offices and telephone number)
Indicate whether the registrant (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act 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 ☒ 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 ☒ 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. (Check One):
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☐ | Smaller reporting company | ☒ |
(Do not check if a smaller Reporting company) |
Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
There were 373,793,578 shares of common stock issued and outstanding as of May 9, 2014.
EXPLANATORY NOTE
This Amendment No. 1 to Form 10-Q (“Form 10-Q/A”) is being filed by Grand China Energy Group Limited (the “Company”) to amend its Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 filed with the United States Securities and Exchange Commission (“SEC”) on May 13, 2014 (the “Initial Form 10-Q”). Items 1 and 2 of Part 1 of our Initial Form 10-Q have been amended and restated in their entirety for the reasons described in Note 12 to the Consolidated Financial Statements. Other than the Items outlined above, no other changes were made to the Initial Form 10-Q, however, for the convenience of the reader, this Form 10-Q/A also includes those items in the Initial Form 10-Q that are not being amended. Except as otherwise specifically noted, all information contained herein is as of March 31, 2014 and does not reflect any events or changes that have occurred subsequent to that date. We are not required to and we have not updated any forward-looking statements previously included in the Initial Form 10-Q. Prior to August 6, 2014, we were known as SGB International Holdings, Inc.
We have attached to this Form 10-Q/A updated certifications executed as of the date of this Form 10-Q/A by our Principal Executive Officer and Principal Financial Officer as required by Sections 302 and 906 of the Sarbanes Oxley Act of 2002. These updated certifications are attached as Exhibits 31.1/31.2 and 32.1/32.2 to this Form 10-Q/A.
GRAND CHINA ENERGY GROUP LIMITED
QUARTERLY REPORT ON FORM 10-Q/A
FOR THE QUARTER ENDED MARCH 31, 2014
Table of Contents
Page | ||
Number | ||
PART I. FINANCIAL INFORMATION | ||
ITEM 1. | Financial Statements | 3 |
ITEM 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 13 |
ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk | 14 |
ITEM 4. | Controls and Procedures | 14 |
PART II. OTHER INFORMATION | ||
ITEM 1. | Legal Proceedings | 15 |
ITEM 1A. | Risk Factors | 15 |
ITEM 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 15 |
ITEM 3. | Defaults Upon Senior Securities | 15 |
ITEM 4. | Mine Safety Disclosures | 15 |
ITEM 5. | Other Information | 15 |
ITEM 6. | Exhibits | 16 |
SIGNATURES | 17 |
2 |
SGB INTERNATIONAL HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS AT MARCH 31, 2014 AND DECEMBER 31, 2013
(STATED IN US DOLLARS)
March 31 | ||||||||||
2014 (restated) | December 31 2013 | |||||||||
Note | $ | $ | ||||||||
ASSETS | ||||||||||
Current Assets | ||||||||||
Cash and cash equivalents | 4 | 1,728 | 1,793 | |||||||
Receivables | 5 | 330,176 | 330,799 | |||||||
Total Current Assets | 331,904 | 332,592 | ||||||||
Total Assets | 331,904 | 332,592 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY) | ||||||||||
Current Liabilities | ||||||||||
Account payable and accrued liabilities | 6 | 364,680 | 286,372 | |||||||
Amounts due to a related party | 7 | 11,769 | 12,212 | |||||||
Income tax payable | 20,000 | 20,000 | ||||||||
Loan payable – current | 8 | 55,994 | 56,340 | |||||||
Total Current Liabilities | 452,443 | 374,924 | ||||||||
Total Liabilities | 452,443 | 374,924 | ||||||||
Stockholders’ Deficiency | ||||||||||
Common stocks | 9 | 9,138,544 | 9,138,544 | |||||||
Contributed surplus | 100,000 | 100,000 | ||||||||
Additional paid-in capital | 100,000 | 100,000 | ||||||||
Accumulated deficit | (9,432,002 | ) | (9,347,096 | ) | ||||||
Accumulated other comprehensive income | (27,081 | ) | (33,780 | ) | ||||||
Total Stockholders’ Deficiency | (120,539 | ) | (42,332 | ) | ||||||
Total Liabilities and Stockholders’ Deficiency | 331,904 | 332,592 |
The accompanying notes are an integral part of these consolidated financial statements.
3 |
SGB INTERNATIONAL HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(STATED IN US DOLLARS)
Three months ended 31 March | ||||||||
2014 (restated) | 2013 (restated) | |||||||
$ | $ | |||||||
Revenue, net of sales tax | - | - | ||||||
Cost of revenue | - | - | ||||||
Gross profit | - | - | ||||||
Selling expenses | - | (642 | ) | |||||
General and administrative | (87,285 | ) | (32,419 | ) | ||||
Total operating expenses | (87,285 | ) | (33,061 | ) | ||||
Net loss from operations | (87,285 | ) | (33,061 | ) | ||||
Other items: | ||||||||
Interest expense | (1,729 | ) | - | |||||
Exchange gain | 4,108 | - | ||||||
Loss before tax | (84,906 | ) | (33,061 | ) | ||||
Income tax expense | - | - | ||||||
Net loss from continuing operations; | (84,906 | ) | (33,061 | ) | ||||
Net income from discontinued operations | - | 109,361 | ||||||
Net (loss)/ income for the period | (84,906 | ) | 76,300 | |||||
Foreign currency translation adjustment | 6,699 | 49,347 | ||||||
Comprehensive income(loss) | (78,207 | ) | 125,647 | |||||
Earnings Per Share (cents) – Basic and diluted | (0.00 | ) | 0.02 | |||||
Weighted Average Shares Outstanding – Basic and diluted | 373,793,578 | 373,793,578 |
The accompanying notes are an integral part of these consolidated financial statements
4 |
SGB INTERNATIONAL HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(STATED IN US DOLLARS)
Three months Ended 31 March | ||||||||
2014 (restated) | 2013 | |||||||
Cash flows from operating activities | $ | $ | ||||||
Net (loss)/ income for the period –continuing and discontinued operations: | (84,906 | ) | 76,300 | |||||
Items not involving cash: | ||||||||
Depreciation & amortization | - | 312,814 | ||||||
Interest expense | 1,729 | 5,350 | ||||||
Changes in non-cash working capital: | ||||||||
Receivables | (4,149 | ) | 50,732 | |||||
Prepaid expenses, deposit and other receivables | 80,683 | |||||||
Accounts payable , accrued liabilities and income tax payables | 87,326 | (625,421 | ) | |||||
Net cash used in operating activities | - | (99,542 | ) | |||||
Cash flows from investing activities | ||||||||
Purchase of property, equipment and mine development costs | - | (249,175 | ) | |||||
Net cash used in investing activities | (249,175 | ) | ||||||
Cash flows from financing activities | ||||||||
Amounts advanced from a related party | - | 362,371 | ||||||
Net cash used in financing activities | - | 362,371 | ||||||
Increase/(decrease) in cash and cash equivalents | - | 13,654 | ||||||
Effect of exchange rate changes on cash | (65 | ) | 432 | |||||
Cash and cash equivalents – beginning of period | 1,793 | 440,308 | ||||||
Cash and cash equivalents – end of period | 1,728 | 454,394 | ||||||
Supplemental disclosure of cash flow information: | ||||||||
Income tax | - | 15,151 | ||||||
Interest expense | - | - |
The accompanying notes are an integral part of these consolidated financial statements
5 |
SGB INTERNATIONAL HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY(DEFICIENCY)
AS AT MARCH 31, 2014
(STATED IN US DOLLARS)
Common shares | Stocks to | Contributed | Additional Paid-in | Retained earnings (Accumulated | Accumulated other comprehensive | Total Stockholders’ equity | ||||||||||||||||||||||||||||||
Shares | Amount | be issued | surplus | capital | Reserve | Deficit) | income | (deficiency) | ||||||||||||||||||||||||||||
$ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||
Balance at December 31, 2012 | 373,793,578 | 9,138,544 | - | 100,000 | - | 650,182 | 7,527,909 | 565,982 | 17,982,617 | |||||||||||||||||||||||||||
Net loss for the year | - | - | - | - | - | - | (16,875,005 | ) | - | (16,875,005 | ) | |||||||||||||||||||||||||
Disposal of subsidiaries | - | - | - | - | (650,182 | ) | - | - | (650,182 | ) | ||||||||||||||||||||||||||
Imputed interest | - | - | - | - | 100,000 | - | - | - | 100,000 | |||||||||||||||||||||||||||
Currency translation | - | - | - | - | - | - | - | (599,762 | ) | (599,762 | ) | |||||||||||||||||||||||||
Balance at December 31, 2013 | 373,793,578 | 9,138,544 | - | 100,000 | 100,000 | - | (9,347,096 | ) | (33,780 | ) | (42,332 | ) | ||||||||||||||||||||||||
Net loss for the period | - | - | - | - | - | - | (84,906 | ) | - | (84,906 | ) | |||||||||||||||||||||||||
Currency translation | - | - | - | - | - | - | 6,699 | 6,699 | ||||||||||||||||||||||||||||
Balance at March 31, 2014 | 373,793,578 | 9,138,544 | - | 100,000 | 100,000 | - | (9,342,002 | )) | (27,081 | ) | (120,539 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
6 |
1. ORGANIZATION AND PRINCIPAL ACTIVITIES
SGB International Holdings Inc. (“SGB” or the “Company”) was incorporated in British Columbia, Canada on November 6, 1997. Through its subsidiary, the Company is engaged in providing services in relation of the coal business in People’s Republic of China.
On May 11, 2011, the Company completed the acquisition of Dragon International Resources Group Co., Limited (“Dragon International”), a Hong Kong corporation incorporated on October 5, 2010, and its wholly-owned subsidiary through a share exchange which resulted in the former shareholders of Dragon International acquiring the control of SGB. This transaction was accounted for as a reverse takeover transaction (“RTO”) for accounting purpose, as Dragon International was deemed to be the acquirer, and these consolidated financial statements are a continuation of the consolidated financial statements of Dragon International. The carrying amounts of SGB’s assets and liabilities are included in these consolidated financial statements.
Prior to the above noted RTO, and on February 21, 2011, pursuant to a share transfer agreement, Dragon International completed the acquisition of Fujian Huilong Coal Mine Co., Ltd. (“Fujian Huilong”) (formerly known as Yongding Shangzhai Coal Mine Co., Ltd.), a People’s Republic of China corporation and was incorporated on August 4 2005. Upon the completion of the acquisition, Fujian Huilong became the wholly-owned subsidiary of Dragon International and the control in substance was not changed. For accounting purposes, the acquisition has been accounted for using the continuity of interest method, which recognizes Fujian Huilong as the successor. The net assets of Dragon International prior to the acquisition has been accounted as recapitalization as at the date of acquisition.
On October 3, 2013, we incorporated, SGB Investment Limited, which is a wholly owned subsidiary. The principal business of SGB Investment Limited is providing mining related consulting work for the coal mine in Fujian Province as well as engaging in coal trading activities in Fujian Province, People’s Republic of China.
On December 19, 2013, the Company disposed Dragon International and Fujian Huilong.(See note 3)
The Company and its subsidiaries are considered to be operating in one segment based on its organizational structure and strategic decision making method.
These financial statements have been prepared in accordance with U.S. generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As at March 31 2014 and December 31, 2013, the Company had working capital deficiency of 120,539 and $42,332 respectively, and requires additional funds to maintain its operations. In view of the working capital deficiency, the management has reviewed the cash position as at the balance sheet date and the cash flow forecast for the next twelve months and taken into factors that (i) to raise equity financing as required; and (ii) to obtain the principle shareholder’s support in funding the required working capital. After taking the above circumstances and facts into consideration, the management of the Company is satisfied that the Company will have sufficient funds to complete the current development and to meet in full its financial obligation and operations or capital expenditure as they fall due for the foreseeable future.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and preparation
The accompanying unaudited interim consolidated financial statements of the Company have been prepared in accordance with accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the disclosures required by generally accepted accounting principles in the United States for complete financial statements. In the opinion of management, all of the normal and recurring adjustments necessary to fairly present the interim financial information set forth herein have been included. The results of operations for interim periods are not necessarily indicative of the operating results of a full year or of future years.
7 |
These interim consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America and follow the same accounting policies and methods of their application as the most recent annual financial statements. The unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany accounts and transactions are eliminated in consolidation. These interim financial statements should be read in conjunction with the financial statements and related footnotes included in the Annual Report on Form 10-K of the Company for the year ended December 31, 2013.
3. DISCONTINUED OPERATIONS
On December 19, 2013, the Company sold its 100% equity interest in Dragon International and its wholly owned subsidiary Fujian Huilong to an independent third party at a cash consideration of HKD 1,000,000 (approximately USD 129,000). The results for the disposed subsidiaries for the three months ended March 31, 2013 are as follows:
2013 | ||||
$ | ||||
Revenue | 1,876,749 | |||
Income before tax | 124,512 | |||
Income tax | (15,151 | ) | ||
Net income from discontinued operations | 109,361 |
4. CASH AND CASH EQUIVALENTS
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
$ | $ | |||||||
Cash denominated in Canadian Dollars | 1,728 | 1,793 |
5. RECEIVABLES
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
$ | $ | |||||||
Receivable from disposal of subsidiaries(i) | 128,886 | 129,509 | ||||||
Others (i) | 201,290 | 201,290 | ||||||
330,176 | 330,799 |
Notes:
(i) | Unsecured, interest free and repayable on demand. |
8 |
6. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The following is a summary of accounts payable and accrued liabilities:
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
$ | $ | |||||||
Accounts payable | 6,317 | 39,874 | ||||||
Staff costs / wage payable | 28,552 | 29,626 | ||||||
Accrued liabilities | 170,966 | 22,019 | ||||||
Other payable | 158,845 | 194,853 | ||||||
364,680 | 286,372 |
7. AMOUNTS DUE TO A RELATED PARTY
March 31, | December 31, | |||||||
2014 | 2013 | |||||||
$ | $ | |||||||
Amounts due to a related party | 11,769 | 12,212 |
As at March 31, 2014 and December 31, 2013, the amounts are due to the Company’s related Party SGB C&C Investments. The amounts as at March 31, 2014 and December 31, 2013 are unsecured, non-interest bearing and due on demand.
8. LOAN PAYABLE
The following is a summary of term loan:
March 31, | December | |||||||
2014 | 31, 2013 | |||||||
$ | $ | |||||||
Interest bearing loan at 15% per annum, unsecured and due on demand | 55,994 | 56,340 | ||||||
Total | 55,994 | 56,340 | ||||||
Current portion | 55,994 | 56,340 | ||||||
Non-current | - | - |
9. STOCKHOLDERS’ EQUITY
Authorized:
Unlimited number of common shares without par value
Unlimited number of preferred shares without par value
Issued and outstanding
As at March 31, 2014 and December 31, 2013, 373,793,578 common stocks issued and outstanding which were derived from the following transactions:
Prior to the RTO with Dragon International and as at May 11, 2011, SGB had 24,502,446 common shares issued and outstanding.
9 |
On May 11, 2011, SGB completed a reverse acquisition transaction with the shareholders of Dragon International pursuant to which SGB acquired 100% of the issued and outstanding capital stock of Dragon International in exchange for an aggregate of 220,522,000 common shares of SGB, which constituted 90% of SGB’s issued and outstanding capital stock on a fully-diluted basis as of and immediately after the consummation of the reverse acquisition. Prior to the acquisition, SGB has no business with a minimal assets and liabilities which did not meet the definition of a business, therefore, the reverse take-over of SGB by Dragon International has been accounted for as a capital transaction which is deemed Dragon International acquired SGB by issuance of 24,502,446 common shares (issued and outstanding prior to the RTO) for its net assets of $10,789.
Prior to the RTO and on February 21, 2011, Dragon International completed the acquisition of Fujian Huilong and for accounting purpose, the acquisition has been accounted for using the continuity of interest method, which recognizes Fujian Huilong as the successor. The net assets of Dragon International totaling $1,277,694 as at the date of acquisition have been accounted as recapitalization into Fujian Huilong.
Fujian Huilong has a registered and paid-in capital of $123,913 (RMB 1,000,000) prior to being acquired by Dragon International.
As the consolidated financial statements is the continuation of Fujian Huilong, therefore, the share capital of Fujian Huilong has been restated to reflect the 220,522,000 common shares that effected the RTO for the purpose of financial statements presentation and earnings per share calculation.
On September 21, 2011, Fujian Huilong’s registered and paid-in capital was increased by $1,925,447 (RMB 12,278,945) to a total of $2,049,360 (RMB 13,278,945) as at December 31, 2012.
On December 29, 2011, the Company settled $7,726,148 by agreeing to issue 128,769,132 shares of the common stock of the Company at a deemed price of $0.06 per share. The Company has allotted and issued the shares in 2012.
10. RELATED PARTY TRANSACTIONS
During the quarter ended March 31, 2014 and 2013, the Company engaged following related party transactions:
● | Accrued or paid $ nil (March 31 2013: $65,523) in salaries and bonus to senior officers and directors of the Company; |
As at March 31, 2014 and December 31, 2013, following receivable and payable were outstanding:
● | Included in accounts payable and accrued liabilities, $Nil (December 31, 2013: $Nil) were payable to the senior officers and directors of the Company |
● | Included in receivable, $nil was receivable (December 31, 2013: $Nil) from a senior officer and director of the Company. |
11. COMMITMENTS
As at December 31, 2013, the company doesn’t have any capital or operating commitments.
12. RESTATEMENTS
In 2014, following the Company’s December 2013 sale of its equity interests in Dragon International Resources Group Co., Limited and Dragon’s wholly owned subsidiary, Fujian Huilong Coal Mine Co., Ltd, the Company commenced coal trading activities involving the purchase of coal in external markets for resale to the Company’s existing customers. In connection therewith, the Company signed sales and purchase contracts with customers and suppliers. However, the recognition of revenues and expenses by the Company related to these contracts was premature as the required performance obligations thereunder were not completed .Accordingly , the previously reported revenues ,expenses and associated receivables and payables from these contracts have been reversed and the related financial statements have been restated to reflect same
10 |
A reconciliation of the restated figures is presented as follows:
Income Statement for the three months ended 31 March 2014
Previously reported | adjustment | Restated | ||||||||||
$ | $ | $ | ||||||||||
Revenue | 498,015 | (498,015 | ) | - | ||||||||
Cost of revenue | (263,500 | ) | 263,500 | - | ||||||||
Gross Profit | 234,515 | (234,515 | ) | - | ||||||||
Selling expenses | - | - | ||||||||||
General and administrative | (87,285 | ) | - | (87,285 | ) | |||||||
Total operating expenses | (87,285 | ) | - | (87,285 | ) | |||||||
Net income from operations | 147,230 | (234,515 | ) | (87,285 | ) | |||||||
Other items: | ||||||||||||
Interest expenses | (1,729 | ) | - | (1,729 | ) | |||||||
Exchange gain | 4,108 | - | 4,108 | |||||||||
Income before income tax expenses | 149,609 | (234,515 | ) | (84,906 | ) | |||||||
Income tax | (52,700 | ) | 52,700 | - | ||||||||
Net income | 96,909 | (181,815 | ) | (84,906 | ) |
Balance Sheet as at March 31 2014
Previously stated | adjustments | restated | ||||||||||
$ | ||||||||||||
ASSETS | ||||||||||||
Current Assets | ||||||||||||
Cash and cash equivalents | 1,728 | - | 1,728 | |||||||||
Receivables | 473,676 | (143,500 | ) | 330,176 | ||||||||
Total Current Assets | 475,404 | (143,500 | ) | 331,904 | ||||||||
Total Assets | 475,404 | (143,500 | ) | 331,904 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY) | ||||||||||||
Current Liabilities | ||||||||||||
Account payable and accrued liabilities | 273,665 | 91,015 | 364,680 | |||||||||
Amounts due to a related party | 11,769 | - | 11,769 | |||||||||
Income tax payable | 72,700 | (52,700 | ) | 20,000 | ||||||||
Loan payable – current | 55,994 | - | 55,994 | |||||||||
Total Current Liabilities | 414,128 | 38,315 | 452,443 | |||||||||
Total Liabilities | 414,128 | 38,315 | 452,443 | |||||||||
Stockholders’ Deficiency | ||||||||||||
Common stocks | 9,138,544 | - | 9,138,544 | |||||||||
Contributed surplus | 100,000 | - | 100,000 | |||||||||
Additional paid-in capital | 100,000 | - | 100,000 | |||||||||
Accumulated deficit | (9,250,187 | ) | (181,815 | ) | (9,432,002 | ) | ||||||
Accumulated other comprehensive income | (27,081 | ) | - | (27,081 | ) | |||||||
Total Stockholders’ Deficiency | 61,276 | (181,815 | ) | (120,539 | ) | |||||||
Total Liabilities and Stockholders’ Deficiency | 475,404 | (143,500 | ) | 331,904 |
11 |
Cash flow statement for the three months ended March 31, 2014
Previously reported | Adjustments | Restated | ||||||||||
Cash flows from operating activities | $ | $ | $ | |||||||||
Net (loss)/ income for the period–continuing and discontinued operations: | 96,909 | (181,815 | ) | (84,906 | ) | |||||||
Items not involving cash: | ||||||||||||
Depreciation & amortization | - | |||||||||||
Interest expense | 1,729 | 1,729 | ||||||||||
Changes in non-cash working capital: | ||||||||||||
Receivables | (147,649 | ) | 143,500 | (4,149 | ) | |||||||
Prepaid expenses, deposit and other receivables | ||||||||||||
Accounts payable , accrued liabilities and income tax payables | 49,011 | 38,315 | 87,326 | |||||||||
Net cash used in operating activities | - | - | ||||||||||
Cash flows from investing activities | ||||||||||||
Purchase of property, equipment and mine development costs | - | - | ||||||||||
Net cash used in investing activities | - | - | ||||||||||
Cash flows from financing activities | ||||||||||||
Amounts advanced from a related party | - | - | ||||||||||
Net cash used in financing activities | - | - | ||||||||||
Increase/(decrease) in cash and cash equivalents | - | - | ||||||||||
Effect of exchange rate changes on cash | (65 | ) | (65 | ) | ||||||||
Cash and cash equivalents – beginning of period | 1,793 | 1,793 | ||||||||||
Cash and cash equivalents – end of period | 1,728 | 1,728 | ||||||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Income tax | - | - | ||||||||||
Interest expense | - | - |
13. COMPARATIVE FIGURE
As disclosed in note 3, the Company disposed Dragon International and Fujian Huilong on December 19, 2013, for comparative purposes, the Consolidated statement of operations for the three months ended March 31, 2013 was restated. A reconciliation of the restated figures is presented as follows
Previously reported | Discontinued adjustment | Restated | ||||||||||
$ | $ | $ | ||||||||||
Revenue | 1,876,749 | (1,876,749 | ) | - | ||||||||
Cost of revenue | (1,368,401 | ) | 1,368,401 | - | ||||||||
Gross Profit | 508,348 | (508,348 | ) | - | ||||||||
Selling expenses | (64,183 | ) | 63,541 | (642 | ) | |||||||
General and administrative | (352,714 | ) | 320,295 | (32,419 | ) | |||||||
Total operating expenses | (416,897 | ) | 383,836 | (33,061 | ) | |||||||
Net income from operations | 91,451 | (124,512 | ) | (33,061 | ) | |||||||
Income before income tax expenses | 91,451 | (124,512 | ) | (33,061 | ) | |||||||
Income tax | (15,151 | ) | 15,151 | - | ||||||||
Net income | 76,300 | (109,361 | ) | (33,061 | ) |
12 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our Business
Prior to the December 19, 2013 disposal of Dragon International and its subsidiary, Fujian Huilong, our principal operations were those of Fujian Huilong which was engaged in coal production and sales involving the exploration, development and mining of coal properties. Fujian Huilong owns and operates a coal mine, located in Shangzhai Village, Yongding County, Longyan City of Fujian Province, People’s Republic of China.
On October 3, 2013, we incorporated a wholly owned subsidiary, SGB Investment Limited. The principal business of SGB Investment Limited is providing mining related consulting work for the coal mine in Fujian Province as well as engaging in coal trading activities in Fujian Province, People’s Republic of China.
Results of Operations
For the three months ended March 31, 2014 compared with the three months ended March 31, 2013
Gross Revenues
The revenue for the three months ended March 31, 2014 and March 31, 2013 is nil respectively.
Operating Expenses
Operating expenses for the three months ended March 31, 2014 and three months ended March 31, 2013 is $87,285 and $33,061 respectively. The expenses consisted of filing fees, professional fees, payroll and benefits and other general expenses.
We expect that our general and administrative expenses will continue to increase as we incur additional costs to support the growth of the business.
Net Loss
Net Loss for the three months ended March 31, 2014 and three months ended March 31, 2013 is $84,906 and $33,062 respectively
Liquidity and Capital Resources
At March 31, 2014, we had working capital of ($120,539) consisting of cash on hand of $1,728 as compared to working capital of ($42,332) consisting of cash on hand of $1,793 at December 31, 2013.
Current liabilities increased by $77,519 from $374,924 as at December 31, 2013 to $452,443 at March 31, 2014, principally a result of the increased account payable and accrued liabilities.
Net cash provided by (used in) operating activities for the three months ended March 31, 2014 was nil as compared to net cash used in operating activities of ($99,542) for the three months ended March 31, 2013
Net cash provided by (used in) investing activities for the three months ended March 31, 2014 was nil as compared to net cash used in investing activities of ($249,175) for the three months ended March 31, 2013
We will likely require additional capital to continue to operate our business, and to further expand our business. Sources of additional capital through various financing transactions or arrangements with third parties may include equity or debt financing, bank loans or revolving credit facilities. We may not be successful in locating suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means. Our inability to raise additional funds when required may have a negative impact on our operations, business development and financial results. We will likely require additional capital to continue to operate our business, and to further expand our business. Sources of additional capital through various financing transactions or arrangements with third parties may include equity or debt financing, bank loans or revolving credit facilities. We may not be successful in locating suitable financing transactions in the time period required or at all, and we may not obtain the capital we require by other means. Our inability to raise additional funds when required may have a negative impact on our operations, business development and financial results.
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Smaller reporting companies are not required to provide the information required by this item.
ITEM 4. CONTROLS AND PROCEDURES.
Disclosure Controls and Procedures
We maintain “disclosure controls and procedures”, as that term is defined in Rule 13a-15(e), promulgated by the Securities and Exchange Commission pursuant to the Exchange Act. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our company's reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and our principal accounting officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by paragraph (b) of Rules 13a-15 under the Exchange Act, our management, with the participation of our principal executive officer and principal financial officer, evaluated our company’s disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q. Based on this evaluation, our management concluded that as of the end of the period covered by this quarterly report on Form 10-Q, our disclosure controls and procedures were effective.
Our management continues to review processes and intend make necessary changes to strengthen our system of internal controls over financial reporting.
A material weakness is a deficiency or a combination of control 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.
Limitations on Effectiveness of Controls
Our principal executive officer and principal financial officer do not expect that our disclosure controls or our internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
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Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended March 31, 2014 that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
To the best of our knowledge, there are no material pending legal proceedings to which we are a party or of which any of our property is the subject or proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
ITEM 1A. RISK FACTORS.
There were no material changes to the Risk Factors disclosed in “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2013. For more information concerning our risk factors, please see “Item 1A. Risk Factors” of our Annual Report on Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
On April 20, 2014, Mr. Peifeng Huang resigned as a director of our Company.
Also on April 20, 2014, the Board of Directors appointed Mr. Quan Gu, Mr. Wei Gu and Mr. Chang Gu as directors of the Company.
Quan Gu
Mr. Quan Gu, 39 years old, has been our director since April 20, 2014. Mr. Gu graduated from National University of Kyrhyz Republic major in international business. Mr. Gu has focused on mining advisory and exploration since 2004. He served as project management director at Xinjing Zhonghai Mining Company Limited and currently as an executive director and founding member of Beijing Shuntianying Project Management Co. Ltd. Mr. Gu has extensive experience in mining industry and strong networking in the industry.
Wei Gu
Mr. Wei Gu, 47 years old, has been our director since April 20, 2014. Mr. Gu graduated from Xian Institute of Physical Education in sports medicine. Mr. Gu has focused on marketing and human resources development since 1995. He served as the human resources director at Beijing Zhonghai Ziguang Co. Limited and currently serves as the senior project manager in Beijing Shuntianing Project Manage Co. Ltd.
Chang Gu
Chang Gu, 45 years old, has been our director since April 20, 2014. Mr. Gu graduated from Xinjing Normal University in Bachelor of Education. Mr. Gu has focused on marketing and human resources development since 1992. He served in Xinjiang Institute of Politics and Law from 1991 to 1994 and as senior project officer in charge of project schedule management and human resources management from 1994 to 2006. He is currently the executive director of Beijing Shuntianing Project Manage Co. Ltd.
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ITEM 6. EXHIBITS
Exhibits required by Item 601 of Regulation S-K:
Exhibit Number |
Description | |
31.1 | Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 | |
31.2 | Certification pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 | |
32.1* | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
32.2* | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
101.INS | XBRL INSTANCE DOCUMENT | |
101.SCH | XBRL TAXONOMY EXTENSION SCHEMA | |
101.CAL | XBRL TAXONOMY EXTENSION CALCULATION LINKBASE | |
101.DEF | XBRL TAXONOMY EXTENSION DEFINITION LINKBASE | |
101.LAB | XBRL TAXONOMY EXTENSION LABEL LINKBASE | |
101.PRE | XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE |
* In accordance with SEC Release 33-8238, Exhibits 32.1 and 3.2.2 are furnished and not filed.
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SIGNATURES
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.
GRAND CHINA ENERGY GROUP LIMITED | ||
By: | /s/ Shibi Chen | |
Shibi Chen | ||
President, Chief Executive Officer and Director | ||
(Principal Executive Officer) | ||
Date: June 24, 2015 |
By: | /s/ Peifeng Huang | |
Peifeng Huang | ||
Chief Financial Officer and Secretary | ||
(Principal Financial Officer and Principal Accounting Officer) | ||
Date: June 24, 2015 |
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