---

 U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

---

 

FORM 10-Q

---

 

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification Number)

(Address of Principal Offices)

 

(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.

 

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).

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.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

 

ORO EAST MINING, INC.

 

- Table of Contents -

 

 

 

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 81% 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.

 

 

 

 

 

  

Item 1.             FINANCIAL STATEMENTS

ORO EAST MINING, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

See accompanying notes to unaudited consolidated financial statements.

ORO EAST MINING, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

 

See accompanying notes to unaudited consolidated financial statements.

 

ORO EAST MINING, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

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 March 31, 2016 interim consolidated financial statements presented herein may not be indicative of the results of the Company for the year ending December 31, 2016. 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, 2015 filed with the SEC on March 30, 2016.

(b)         Reclassification

Certain prior period amounts have been reclassified to conform with current period presentation.

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 $9,923,039 and a negative working capital of $3,593,243 at March 31, 2016. 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:

 

 

(1)	The note was extended in December, 2015 from its previous maturity date

(2)	The notes were extended in April 2016 from their previous maturity dates (see Note 7)

 

All notes are unsecured, and the Company has accrued interest of $260,790 as of March 31, 2016.

 

NOTE 4          CONVERTIBLE NOTES PAYABLE

A summary of the convertible notes payable, which are all held by an unrelated party, is as below:

NOTE 5          RELATED PARTY TRANSACTIONS

 

The shareholder and officer of the Company paid expenses on behalf of the Company during the three months ended March 31, 2016. As of March 31, 2016, the Company still owed the shareholder and officer the amount of $218,415. The balances are unsecured, non-interest bearing and due on demand.

 

NOTE 6          EQUITY

The Company issued a total of 60,000 common shares for services received from non-employees and recognized a total of $105,504 in share-based compensation during the three months ended March 31, 2016.

NOTE 7          SUBSEQUENT EVENTS

In April 2016, the $500,000, $20,000, $40,000 and $60,000 convertible notes were extended to October 14, 14, 23, and 26, 2016, respectively, with the conversion price all changed to $0.02/share. On May 3 and 7, 2016, the $30,000 and $40,000 convertible notes were extended to November 3 and 7, 2016, respectively, with the conversion price all changed to $0.03/share.

On April 30, 2016, the $800,000, $100,000 and $100,000 promissory notes were extended to October 30, 2016 with no change in their terms and conditions.

On April 12, 2016, the Company issued a $15,000 principal amount of 8% convertible note and due October 12, 2016. The note is unsecured and may be paid in full at any time prior to their maturity date without penalty. Upon maturity of the note, the holder may convert all outstanding principal and interest due at $0.02/share.

On May 4, 2016, the Company issued a $20,000 principal amount of 10% promissory note and due November 4, 2016. The note is unsecured and may be paid in full at any time prior to their maturity date without penalty.

 

 

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

Due to the devastating drought from the year prior, the Company has had to delay both the Carson Hill and Red Bank Mine projects. The Company, through its subsidiary Golden Steps, LLC, which was acquired on or about October 19, 2015, continues to work with Shenzhen Citic International Travel Co. Ltd. (“Shenzhen CITC”) to set up a tourist attraction along Route 49 in California, including Company-held mine sites, to offer tourists a view of the history and legacy of California gold mining. Given unforeseen setbacks in the mining industry, the Company is now seeking to expand its business strategies and generate revenue through innovative and dynamic means.

Results of Operations

The following is a summary of the Company’s operation results for the three months ended March 31, 2016 and 2015:

Operating expenses decreased by about $24,000 for the three months ended March 31, 2016 and 2015 was due to a decrease of $24,000 in general and administrative expenses.  During the three months ended March 31, 2016 and 2015, general and administrative expenses decreased due to the decrease of about $8,000 in payroll expense, $14,000 in professional fees, and $19,000 in other operating expenses, respectively offset by about $17,000 increase in share-based compensation.

Other expenses decreased by about $68,000 during the three months ended March 31, 2016 and 2015 due to about $72,000 decrease in interest expenses for the amortization of debt discount offset by about $4,000 increase in interest expenses.

 

The following is a summary of the Company's cash flows provided by (used in) operating and financing activities for the three months ended March 31, 2016 and 2015:

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 increased by about $17,000 before the effect of exchange rate was mainly due to about $90,000 of cash provided by convertible note issuance, and $67,000 and $6,000 of cash used for funding the operations, repayment of debts, respectively, during the three months ended March 31, 2016.

 

Critical Accounting Policies

There have been no material changes in the critical accounting policies since December 31, 2015.

 

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 March 31, 2016.   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 March 31, 2016.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the quarter ended March 31, 2016,  that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Item 1.             LEGAL PROCEEDINGS

On or about April 18, 2016, Oro East Mariposa, LLC and Tons Per Hour, Inc. have resolved their legal proceeding and settled the matter out of court. The complaint was originally filed by Tons Per Hour in the Superior Court of California, County of Placer, Case Number SCV0036008. A dismissal is forthcoming, pending the performance of certain settlement obligations of the parties.

 

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

None.

Item 3.             DEFAULTS UPON SENIOR SECURITIES

None.

Item 4.             MINE SAFETY DISCLOSURES

None.

Item 5.             OTHER INFORMATION

None. 

 

Item 6.             EXHIBITS

(a)  Exhibits required by Item 601 of Regulation SK. 

 

(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.

 

 

 

 

(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