UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended June 30, 2017

 

Or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ____________ to_____________

 

Commission File Number: 000-52807

 

China Changjiang Mining & New Energy Company, Ltd.

(Exact name of registrant as specified in its charter)

 

Nevada		75-2571032
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
Twenty-fourth Floor, Block B, Xinhui Mansion, No.33 Gaoxin Road Hi-Tech Zone, Xi’An P.R. China 71005		+86(29) 8833-1685
(Address of Principal Executive Offices; Zip Code)		(Registrant’s Telephone Number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes 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 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

(Check one):
Large accelerated filer	¨	Accelerated filer	¨
		(Do not check if a smaller reporting company)
Non-accelerated filer	¨	Smaller reporting company	x
		Emerging growth company	x

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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). Yes ¨ No x

 

At August 14, 2017, the registrant had outstanding 64,629,559 shares of common stock, $0.01 par value.

 

 

CHINA CHANGJIANG MINING & NEW ENERGY COMPANY, LTD.

 

FORM 10-Q

 

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2017

 

 TABLE OF CONTENTS

 

				Page
PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS			3
ITEM 2.	MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			4
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			8
ITEM 4.	CONTROLS AND PROCEDURES			9
PART II. OTHER INFORMATION

 

ITEM 1.	LEGAL PROCEEDINGS			10
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			10
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES			10
ITEM 4.	MINE SAFETY DISCLOSURES			10
ITEM 5.	OTHER INFORMATION			10
ITEM 6.	EXHIBITS			11
SIGNATURES				12
EX-31.1 (CERTIFICATION)
EX-31.2 (CERTIFICATION)
EX-32.1 (CERTIFICATION)
EX-32.2 (CERTIFICATION)

 

2

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

CHINA CHANGJIANG MINING & NEW ENERGY COMPANY, LTD.

 

FINANCIAL STATEMENTS

 

		PAGE
Consolidated Balance Sheets as of June 30, 2017 (Unaudited) and December 31, 2016			F-1 - F-2
Consolidated Statements of Income and Comprehensive Income (Loss) For the Three and Six Months Ended June 30, 2017 and 2016 (Unaudited)			F-3
Consolidated Statements of Cash Flows For the Six Months Ended June 30, 2017 and 2016 (Unaudited)			F-4
Notes to Consolidated Financial Statements (Unaudited)			F-5 - F-9

 

3

 

CHINA CHANGJIANG MINING & NEW ENERGY COMPANY, LTD.

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2017 AND DECEMBER 31, 2016

(Stated in US Dollars)

 

		June 30,				December 31,
		2017				2016
		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents		$	12,983			$	12,512
Other current assets and prepayments			2,195				1,210
Total Current Assets			15,178				13,722
Property, plant and equipment, net			191,730				201,006
Land use rights, net			13,859,729				13,711,122
TOTAL ASSETS		$	14,066,637			$	13,925,850

 

See accompanying notes to the unaudited consolidated financial statements.

 

F-1

Table of Contents

 

CHINA CHANGJIANG MINING & NEW ENERGY COMPANY, LTD.

CONSOLIDATED BALANCE SHEETS

AS OF JUNE 30, 2017 AND DECEMBER 31, 2016 (Continued)

(Stated in US Dollars)

 

		June 30,				December 31,
		2017				2016
		(Unaudited)
LIABILITIES AND EQUITY
Current Liabilities
Other payables and accrued liabilities			1,249,413				1,205,719
Total Current Liabilities			1,249,413				1,205,719
Non-current liabilities
Due to related parties			660,688				592,410
Due to shareholders			1,923,244				1,880,311
Total Non-current Liabilities			2,583,932				2,472,721
TOTAL LIABILITIES		$	3,833,345			$	3,678,440
EQUITY
Series C convertible preferred stock ($0.01 par value, 10,000,000 shares authorized, no shares outstanding as of June 30, 2017 and December 31, 2016)			-				-
Common stock ($0.01 par value, 250,000,000 shares authorized, 64,629,559 shares issued and outstanding as of June 30, 2017 and December 31,2016)			646,295				646,295
Treasury stock			(489,258	)			(489,258	)
Additional paid-in capital			15,968,106				15,968,106
Accumulated deficit			(8,179,478	)			(7,926,794	)
Accumulated other comprehensive income			1,393,564				1,140,899
TOTAL SHAREHOLDERS' EQUITY			9,339,229				9,339,248
Non-controlling interest			894,063				908,162
TOTAL EQUITY			10,233,292				10,247,410
TOTAL LIABILITIES AND EQUITY		$	14,066,637			$	13,925,850

 

See accompanying notes to the unaudited consolidated financial statements

 

F-2

Table of Contents

 

CHINA CHANGJIANG MINING & NEW ENERGY COMPANY, LTD.

CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016

(Stated in US Dollars)

 

		For The Three Months Ended June 30,								For The Six Months Ended June 30
		2017				2016				2017				2016
		(Unaudited)				(Unaudited)				(Unaudited)				(Unaudited)
Sales revenue - related party		$	-			$	7,506			$	-			$	7,506
Cost of revenue			-				1,882				-				1,882
Gross profit			-				5,624				-				5,624
Operating expenses
General and administrative expenses			32,239				37,038				66,195				69,199
Depreciation			6,895				7,601				14,022				16,108
Amortization			93,283				97,984				186,190				195,845
Total operating expenses			132,417				142,623				266,407				281,152
Loss from operations			(132,417	)			(136,999	)			(266,407	)			(275,528	)
Other expenses
Interest income			9				9				13				9
Interest expenses			(115	)			(332	)			(389	)			(452	)
Total other expenses			(106	)			(323	)			(376	)			(443	)
Loss before tax			(132,523	)			(137,322	)			(266,783	)			(275,971	)
Income tax expense (benefit)			-				-				-				-
Net loss		$	(132,523	)		$	(137,322	)		$	(266,783	)		$	(275,971	)
Net loss attributable to:
Non-controlling interests			(7,057	)			(4,611	)			(14,099	)			(11,899	)
Common shareholders			(125,466	)			(132,711	)			(252,684	)			(264,072	)
Comprehensive income (loss):
Foreign currency translation adjustments			172,159				(338,987	)			252,665				(263,551	)
Total comprehensive income (loss)		$	39,636			$	(476,309	)		$	(14,118	)		$	(539,522	)
Weighted average shares-basic			64,629,559				64,629,559				64,629,559				64,629,559
Weighted average shares-diluted			64,629,559				64,629,559				64,629,559				64,629,559
Earnings per share,
Basic		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.00	)
Diluted		$	(0.00	)		$	(0.00	)		$	(0.00	)		$	(0.00	)

 

See accompanying notes to the unaudited consolidated financial statements.

 

F-3

Table of Contents

 

CHINA CHANGJIANG MINING & NEW ENERGY COMPANY, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016

(Stated in US Dollars)

 

		For the Six Months Ended June 30,
		2017				2016
		(Unaudited)				(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(266,783	)		$	(275,971	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			200,212				211,953
Changes in operating assets and liabilities:
Due from related party			-				(5,624	)
Other current assets and prepayments			(942	)			621
Other payables and accrued liabilities			13,819				1,051
CASH USED IN OPERATING ACTIVITIES			(53,694	)			(67,970	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from related parties			52,936				65,796
CASH PROVIDED BY FINANCING ACTIVITIES			52,936				65,796
Effect of exchange rate changes on cash and cash equivalents			1,229				(1,150	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS			471				(3,324	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		$	12,512			$	13,550
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	12,983			$	10,226
Supplementary Disclosures for Cash Flow Information:
Income taxes paid		$	-			$	-
Interest paid		$	-			$	-
Non-cash Transactions
Extinguishment of related party loan		$	-			$	55,313

 

See accompanying notes to the unaudited consolidated financial statements.

 

F-4

Table of Contents

 

CHINA CHANGJIANG MINING & NEW ENERGY COMPANY, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

 

The accounting policies and methods followed in preparing these unaudited consolidated financial statements are those used by China Changjiang Mining & New Energy Company, Ltd. and its consolidated subsidiaries (the “Company”) as described in the notes to consolidated financial statements included in Annual Report on Form 10-K for the year ended December 31, 2016. The unaudited consolidated financial statements for the six-month period ended June 30, 2017 and 2016 have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission and do not conform in all respects to the disclosure and information that is required for annual consolidated financial statements. The year-end consolidated balance sheet data was derived from audited consolidated financial statements, but does not include all disclosure required by accounting principles generally accepted in the United States of America. These interim consolidated financial statements should be read in conjunction with the most recent annual consolidated financial statements of the Company.

 

In the opinion of management, all adjustments, all of which are of a normal recurring nature, considered necessary for fair statement have been included in these interim consolidated financial statements. Operating results for the six-month period ended June 30, 2017 are not indicative of the results that may be expected for the full year ending December 31, 2017.

 

(a) Going Concern

 

The Company had a working capital deficit of $1,234,235 as of June 30, 2017 and had a negative cash flow from operating activities amounted to $53,694 for the six months ended June 30, 2017. If the Company cannot generate enough cash flow from its operating activities, it will need to consider other financing methods such as borrowing from banking institutions or raising additional capital through new equity issuance. There are no assurances that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us. The Company plans to continue to control its administrative expenses in the coming periods as well as further develop its sales from its main business.

 

These conditions and uncertainties raise substantial doubt as to the Company's ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

(b) Foreign Currency Translation

 

Exchange rates applied for the foreign currency translation during the period are as follows:

 

USD to RMB

 

		June 30, 2017				December 31, 2016
Period end USD: RMB exchange rate			6.7769				6.9437
		June 30, 2017				June 30, 2016
Average periodic USD: RMB exchange rate			6.8743				6.5354

 

F-5

Table of Contents

 

USD to HKD

 

		June 30, 2017				December 31, 2016
Period end USD: HKD exchange rate			7.8057				7.7543
		June 30, 2017				June 30, 2016
Average periodic USD: HKD exchange rate			7.7731				7.7670

 

HKD is pegged to USD and hence there is no significant translation adjustment impact on these consolidated financial statements.

 

RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation.

 

(c) Earnings/Loss per share

 

Basic earnings/loss per share is computed by dividing earnings/loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings/loss per share is computed in a manner similar to basic earnings/loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

 

(d) Recent Accounting Pronouncements

 

In January 2017, the FASB issued ASU 2017-03, “Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323)”. This pronouncement amends the SEC’s reporting requirements for public filers in regard to new accounting pronouncements or existing pronouncements that have not yet been adopted. Companies are required to provide qualitative disclosures if they have not yet implemented an accounting standards update. Companies should disclose if they are unable to estimate the impact of a specific pronouncement, and provide disclosures including a description of the effect on accounting policies that the registrant expects to apply. These provisions apply to all pronouncements that have not yet been implemented by registrants. There are additional provisions that relate to corrections to several other prior FASB pronouncements. The Company has incorporated language into other recently issued accounting pronouncement notes, where relevant for the corrections in FASB ASU 2017-03. The Company is implementing the updated SEC requirements on not yet adopted accounting pronouncements with these consolidated financial statements.

 

2. LAND USE RIGHTS, NET

 

The following is a summary of land use rights, net:

 

		June 30,				December 31,
		2017				2016
Cost of Land Use Rights		$	18,886,571			$	18,432,882
Accumulated Amortization of Land Use Rights			(5,026,842	)			(4,721,760	)
Land Use Rights, Net		$	13,859,729			$	13,711,122

 

The difference for the balance of cost was mainly due to the fluctuation of exchange rate of USD to RMB.

 

Amortization expenses were $186,190 and $195,845 for the six months ended June 30, 2017 and 2016, respectively.

 

F-6

Table of Contents

 

3. DUE FROM RELATED PARTIES

 

(1)	Office spaces provided by related parties

 

In April 2015, Shaanxi Changjiang moved to a new office that is owned by Shaanxi Baishui Dukang Liquor Co., Ltd., a related company. Shaanxi Changjiang is allowed to occupy the space for free.

 

The office space occupied by Shaanxi Pacific is a property owned by Zhang Hongjun. The Company is allowed to use it for free.

 

The office space occupied by Changjiang PV is a property owned by Shaanxi Xi Deng Hui Development Stock Co., Ltd., a related party. The Company is allowed to use it for free.

 

(2)	Sales revenue from related parties

 

The Company provided solar power to one of its related parties, Heyang County Huanghe Bay Resort Hotel Co., Ltd. since 2014. As of December 31, 2016, no collection has been received. The Company decided to write off all the uncollected receivables related to solar power in the amount of RMB 205,424 (approximately $30,809) and decided not to recognize such revenue going forward.

 

4. DUE TO RELATED PARTIES

 

The balance of $660,688 due to related parties represents the loans owed to related parties, which are interest free, unsecured and the Company does not intend to be repay within twelve months from June 30, 2017.

 

Due to related parties consists of the following.

 

		June 30,				December 31,
		2017				2016
Baishui Dukang Marketing Management Co., Ltd. (Previously Huitong World Property Superintendent Co.,Ltd.), controlled by Zhang Hongjun, the Director and principal shareholder of the Company		$	368,900			$	360,039
Heyang County Huanghe Bay Resort Hotel Co., Ltd., controlled by Zhang Hongjun, the Director and principal shareholder of the Company			12,739				12,433
Shaanxi Huanghe Bay Ecological Agriculture Co., Ltd. (Previously Shaanxi Huanghe Bay Spring Lake Park Co., Ltd.), controlled by Zhang Hongjun, the Director and principal shareholder of the Company			38,366				37,444
Baishui Du Kang Brand Management Co., Ltd., controlled by Zhang Hongjun, the Director and principal shareholder of the Company			59,319				31,683
Shaanxi Du Kang Liquor Group Co., Ltd., controlled by Zhang Hongjun, the Director and principal shareholder of the Company			60,372				58,921
Shaanxi Xi Deng Hui Development Stock Co., Ltd., 29.74% equity interest of which is owned by Zhang Hongjun, the Director and principal shareholder of the Company, and senior executives of which are Wang Shengli, Li Ping and Tian Hailong, the directors and shareholders of the Company			900				879
Shaanxi Dukang Liquor Trading Co., Ltd., controlled by Zhang Hongjun, the Director and principal shareholder of the Company			120,092				91,011
Total		$	660,688			$	592,410

 

F-7

Table of Contents

 

As of December 31, 2016, the balance of due to Shaanxi Dukang Liquor Trading Co., Ltd. was RMB 626,950 (approximately $90,290). On January 16, 2017, the Company signed a Loan Extension Agreement with Shaanxi Dukang Liquor Trading Co., Ltd., pursuant to which the loan would be extended to December 31, 2018 and could be further extended with mutual consent after December 31, 2018 if needed. No interest was charged during the period of validity.

 

The Company borrowed additional loans of $52,936 from related parties for the six months ended June 30, 2017.

 

Heyang County Huanghe Bay Resort Hotel Co., Ltd., paid salaries to the PV power station maintainers on behalf of the Company. The balance of $12,739 represents the salary expense owed to the Heyang County Huanghe Bay Resort Hotel Co., Ltd. as of June 30, 2017. The Company stopped providing solar power since 2017.

 

5. DUE TO SHAREHOLDERS

 

The balance of $1,923,244 due to shareholders represents the loans owed to the shareholders, which are interest free and unsecured. The management does not intend to repay the loans within twelve months from June 30, 2017.

 

Due to shareholders consists of the following:

 

		June 30,				December 31,
		2017				2016
Due to Wang Shengli		$	462,436			$	451,328
Due to Zhang Hongjun			895,248				873,742
Due to Chen Min		$	565,560			$	555,241
Total		$	1,923,244			$	1,880,311

 

6. INCOME TAXES

 

The Company did not have income tax expense or income tax payable due to the use of net loss carryover from prior years.

 

As of June 30, 2017, the Company had net taxable operating loss carry forwards of approximately $2,073,981. The PRC income tax allows the enterprises to offset their future taxable income with taxable operating losses carried forward in a 5-year period. The management believes that the Company’s cumulative losses arising from recurring business in recent years constituted significant negative evidence that most of the deferred tax assets would not be realizable and this evidence outweighed the expectations that the Company would generate future taxable income. The valuation allowance of $518,495 was recorded.

 

F-8

Table of Contents

 

Components of the Company’s net deferred tax assets are set forth below:

 

		June 30,				December 31,
		2017				2016
Deferred tax assets
Net operating loss carry-forward		$	518,495			$	440,140
Total of deferred tax assets		$	518,495			$	440,140
Less: valuation allowance		$	(518,495	)		$	(440,140	)
Net deferred tax assets		$	-			$	-

 

7. SUBSEQUENT EVENTS

 

On July 19, 2017, the Company borrowed $14,804 (RMB100,000) from Shaanxi Dukang Liquor Trading Co., Ltd., a related party of the Company, for daily operation purposes. The loan is due on July 18, 2018 without interest.

 

F-9

Table of Contents

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS

 

In addition to the historical information contained herein, we make statements in this Quarterly Report on Form 10-Q that are forward-looking statements. Sometimes these statements will contain words such as "believes," "expects," "intends," "should," "will," "plans," and other similar words. Forward-looking statements include, without limitation, assumptions about our future ability to increase income streams, reduce and control costs, to grow revenue and earnings, and our ability to obtain additional debt and/or equity capital on commercially reasonable terms, none of which is certain. These statements are only predictions and involve known and unknown risks, uncertainties and other factors included in our periodic reports with the SEC. Although forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment, actual results could differ materially from those anticipated in such statements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

The following discussion and analysis should be read in conjunction with our June 30, 2017 unaudited consolidated financial statements and related notes thereto included in this quarterly report and with our consolidated financial statements and notes thereto for the year ended December 31, 2016.

 

Overview

 

We have transitioned our business from mining to clean new energy, and mainly focus on the solar photovoltaic, or “PV”, downstream market at present stage. We are currently in the development stage with the goal of becoming a turnkey developer and Engineering, Procurement and Construction contractor of solar PV energy facilities. We intend to design, engineer, construct, market and sell high-quality PV energy facilities for commercial and utility applications to local markets.

 

Before June 1, 2012, we were engaged in exploration for commercially recoverable metal-bearing mineral deposits. On June 1, 2012, we entered into an agreement with XunyangYongjin Mining Co., Ltd to transfer our mining exploration rights for a cash payment of $2,380,612 (RMB 15,000,000). Further, on December 30, 2013, our subsidiary, Shaanxi Changjiang Mining & New Energy Co., Ltd. ("Shaanxi Changjiang"), entered into Equity Transfer Agreements with each of Zhang Hongjun, a director of the Company and owner of a controlling interest in the Company (holding 54.42% as of June 30, 2017), and Wang Shengli, a director and shareholder of the Company (holding 2.36% as of June 30, 2017), to sell Shaanxi Changjiang's entire 60% interest in Shaanxi East Mining Co., Ltd., ("East Mining" and formerly referred to as "Dongfang Mining") for a total consideration of $885,696 (RMB 5,400,000). The consideration payable to the Company was used to offset amounts owed to each of the acquirers. Each of the acquirers obtained 30% equity in this transaction.

 

We also hold land use rights in a land parcel and we lease a portion of the land use rights on the 5.7 square kilometer parcel to Shaanxi Huanghe Bay Ecological Agriculture Co., Ltd (previously Shaanxi Huanghe Bay Spring Lake Park Co., Ltd.), a company with a common control person. The term of the lease agreement is from January 1, 2011 to December 31, 2029. Our land use rights are amortized over their 50-year term. The Land use right was our largest asset, with an annual rent of approximately $1.2 million (RMB 7,500,000).

 

As of June 30, 2017, we only received rent payment of 2011 and no collection afterwards. Due to the uncertain collectability, we decided to write off all the receivable related to land lease of $3,618,818 (equivalent to RMB 22,500,000) and decided not to recognize any revenue for the years ended December 31, 2015 and 2016, and for the six months ended June 30, 2017.

 

4

Table of Contents

 

The following is a summary of the book value of our land use rights as of June 30, 2017:

 

		June 30,
		2017
Cost of Land Use Rights		$	18,886,571
Accumulated Amortization of Land Use Rights			(5,026,842	)
Land Use Rights, Net		$	13,859,729

 

Amortization expenses were $186,190 and $195,845 for the six months ended June 30, 2017 and 2016, respectively.

 

As reflected in the accompanying consolidated financial statements, the Company had an accumulated deficit of $8,179,478 as of June 30, 2017, which includes net loss for common stockholders of $252,684 for the six months ended June 30, 2017. The Company’s operations used cash of $53,694 for the six months ended June 30, 2017.

 

In the past, the Company relied on the loan received from the related parties, and cash generated from operations to meet its operating requirements. Although the Company was successful in the past in obtaining financing, there can be no assurance that it will be able to obtain adequate financing in the future or that the terms of such financings will still be favorable. However, in the event that we have insufficient cash to meet our operating requirements, our related companies and shareholders will commit to provide loan to maintain liquidity.

 

We believe that we have adequate capital to assure that we will be able to meet our obligations or obtain sufficient capital to complete our plan of operations for the next twelve (12) months.

 

RESULTS OF OPERATIONS

 

Comparison of the Three Months Ended June 30, 2017 and June 30, 2016

 

Sales revenue

 

We did not recognize land use right leasing revenue and solar PV energy revenue for the three months ended June 30, 2017 due to uncertainty of collectability, and we recognized solar PV energy revenue of $7,506 for the three months ended June 30, 2016.

 

Operating Expenses

 

Total operating expense for the three months ended June 30, 2017 was $132,417 compared with operating expense of $142,623 for the three months ended June 30, 2016, representing a decrease of $10,206 or 7%. Administrative expense decreased by $4,799 or 13% for the quarter ended June 30, 2017. The amortization expense decreased by $4,701 or 5%, for the three months ended June 30, 2017, due to depreciation of RMB against USD, in spite of the fact that no addition or disposal occurred for land use rights. The depreciation for the three months ended June 30, 2017 decreased by $706 or 9%, compared with the same period of 2016, which was mainly due to full depreciation provided for some fixed assets for the year ended December 31, 2016.

 

Loss from operation for the three months ended June 30, 2017 was $132,417, compared to loss from operation of $136,999 for the three months ended June 30, 2016.

 

5

Table of Contents

 

Net Loss

 

We incurred net loss of $132,523 for the three months ended June 30, 2017, compared to net loss of $137,322 for the three months ended June 30, 2016.

 

Other Comprehensive Income (Loss)

 

Our other comprehensive gain (foreign currencies translation gain) was $172,159 for the three months ended June 30, 2017, compared to other comprehensive loss of $338,987 for the three months ended June 30, 2016. The comprehensive income (loss) for each period referred to net income (loss) plus the foreign currencies translation gain (loss), between the U.S. Dollar and the Chinese Yuan RMB (or Hong Kong Dollar for Wah Bon).

 

Comparison of the Six Months Ended June 30, 2017 and June 30, 2016

 

Sales revenue

 

We did not recognize land use right leasing revenue and solar PV energy revenue for the six months ended June 30, 2017, due to uncertainty of collectability, and we recognized solar PV energy revenue of $7,506 for the six months ended June 30, 2016.

 

Operating Expenses

 

Total operating expense for the six months ended June 30, 2017 was $266,407 compared with operating expense of $281,152 for the six months ended June 30, 2016, representing a decrease of $14,745 or 5%. Administrative expense decreased by $3,004 or 4% for the six months ended June 30, 2017. The amortization expense decreased by $9,655 or 5%, for the six months ended June 30, 2017, due to depreciation of RMB against USD, in spite of the fact that no addition or disposal occurred for land use rights. The depreciation for the six months ended June 30, 2017 decreased by $2,086 or 13%, compared with the same period of 2016, which was mainly due to full depreciation provided for some fixed assets for the year ended December 31, 2016.

 

Loss from operation for the six months ended June 30, 2017 was $266,407, compared to loss from operation of $275,528 for the six months ended June 30, 2016.

 

Net Loss

 

We incurred net loss of $266,783 for the six months ended June 30, 2017, compared to net loss of $275,971 for the six months ended June 30, 2016.

 

Other Comprehensive Income (Loss)

 

Our other comprehensive gain (foreign currencies translation gain) was $252,665 for the six months ended June 30, 2017, compared to other comprehensive loss of $263,551 for the six months ended June 30, 2016. The comprehensive income (loss) for each period referred to net income (loss) plus the foreign currencies translation gain (loss), between the U.S. Dollar and the Chinese Yuan RMB (or Hong Kong Dollar for Wah Bon).

 

Total Equity

 

Total equity decreased to $10,233,292 as of June 30, 2017, from $10,247,410 as of December 31, 2016, representing a decrease of $14,118. The decrease was mainly due to the net loss of $266,783, offset by other comprehensive gain (foreign currencies translation gain) of $252,665, for the six months ended June 30, 2017.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Cash Flows From Operating Activities

 

Net cash used in operating activities of $53,694 for the six months ended June 30, 2017, decreased by $14,276 or 21%, compared with net cash used of $67,970 for the six months ended June 30, 2016. The adjustments to reconcile our net loss to net cash flow mainly include depreciation expense of $14,022, amortization of $186,190 for land use rights and an increase in operating liability of $13,819.

 

Cash Flows From Investing Activities

 

There was no cash flow in investing activities for the six months ended June 30, 2017 and 2016.

 

Cash Flows From Financing Activities

 

The Company borrowed $52,936 and $65,796 from its related parties for the six months ended June 30, 2017 and 2016, respectively.

 

General

 

As in previous year, we have access to short and long term loans of cash from our directors or other related parties.

 

The Company borrowed $52,936 from related parties for the six months ended June 30, 2017. 

 

6

Table of Contents

 

Our current assets increased by $1,456 and total assets increased by $140,787, respectively.

 

We have cash of $12,983 and $12,512 as of June 30, 2017 and December 31, 2016, respectively.

 

We believe that we have sufficient cash to fund operations for the next twelve (12) months.

 

FINANCING

 

We anticipated the cash generated from operating activities and from our related parties will be sufficient to sustain our daily operations for the next twelve (12) months.

 

INFLATION

 

Our management believes that inflation did not have a material effect on our results of operations for the six months ended June 30, 2017.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

We do not have any off-balance sheet arrangements.

 

CONTRACTUAL OBLIGATIONS

 

None.

 

CRITICAL ACCOUNTING POLICIES

 

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities to comply with generally accepted accounting principles. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from our estimates, which would affect the related amounts reported in our financial statements.

 

An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimates are made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur, could materially impact the consolidated financial statements. We believe that the following critical accounting policies reflect the significant estimates and assumptions which are used in the preparation of the consolidated financial statements and affect our financial condition and results of operations.

 

7

Table of Contents

 

Revenue Recognition

 

The Company recognizes revenue when the earnings process is complete, both significant risks and rewards of ownership are transferred or services have been rendered and accepted, the selling price is fixed or determinable, and collectability is reasonably assured.

 

We are currently leasing the land use right to Huanghe for the development and operation of a theme park. We generally collect the annual rent every year, and then recognize land use right leasing revenue over the beneficial period described by the agreement, as the revenue is realized or realizable and earned.

 

The Company supplied electricity power by its solar PV energy segment. The electricity revenue is earned and recognized upon transmission of electricity to Heyang County Huanghe Bay Resort Hotel Co., Ltd., a related company or the power grid controlled and owned by the respective regional or provincial grid companies. The Company stopped providing such service since 2017.

 

Related Party

 

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, member of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting party might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

 

Our related parties are the following individuals and entities: (i) Mr. Wang Shengli (a director of the Company), Mr. Chen Weidong (our President, Chief Executive Officer and Chairman of the Board), Ms. Li Ping (a director of the Company), and Ms. Chen Min (a director of the Company), all of whom are shareholders of the Company; (ii) Mr. Zhang Hongjun, who is currently a director and controlling shareholder of the Company; (iii) Ms. Li Ping (our Chief Financial Officer and who has the same name with our Director Ms. Li Ping); and (iv) the following companies: Shaanxi Jiuzu Shaokang Liquor Co., Ltd.(Previously Shaanxi Baishui Dukang Liquor Development Co., Ltd.), Shaanxi Baishui Dukang Marketing Management Co., Ltd.(Previously Huitong World Property Superintendent Co., Ltd.), Shaanxi Xi Deng Hui Development Stock Co., Ltd., Shaanxi Baishui Du Kang Brand Management Co., Ltd., Zhongke Aerospace & Agriculture Development Stock Co., Ltd., Shaanxi Huanghe Bay Ecological Agriculture Co., Ltd. (Previously Shaanxi Huanghe Bay Spring Lake Park Co., Ltd.), Shaanxi Changfa Industrial Co., Ltd., Shaanxi Tangrenjie Advertising Media Co., Ltd. (Previously "Shaanxi Changjiang Zhongxiayou Investment Co., Ltd.), Shaanxi Dukang Liquor Trading Co., Ltd., Shaanxi East Mining Co., Ltd. (officially canceled on April 29, 2016), Heyang County Huanghe Bay Resort Hotel Co., Ltd., Shaanxi Baishui Dukang Liquor Co., Ltd., Shaanxi Baishui Dukang Old Workshop Liquor Co., Ltd., Shaanxi Jiusheng Brand Operation Management Co., Ltd., Shaanxi Lantian Poverty Alleviation Investment Co., Ltd., Heyang County Huanghe Bay Resort Training Reception Center Co., Ltd. and Shaanxi Du Kang Liquor Group Co., Ltd.

 

Cash flows from due from related parties are classified as cash flows from investing activities. Cash flows from due to related parties are classified as cash flows from financing activities.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not required for a smaller reporting company.

 

8

Table of Contents

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

In connection with the preparation of this Quarterly Report on Form 10-Q, an evaluation was carried out by the Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2017. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

 

Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2017 due to the material weaknesses as disclosed in the Company’s Annual Report on Form 10-K filed with the SEC on March 31, 2017.

 

Changes in Internal Controls over Financial Reporting

 

During the three months ended June 30, 2017, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

 

9

Table of Contents

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we may be a defendant and plaintiff in various legal proceedings arising in the normal course of our business. We are currently not a party to any material legal proceedings or government actions, including any bankruptcy, receivership, or similar proceedings. In addition, we are not aware of any known litigation or liabilities involving the operators of our properties that could affect our operations. Furthermore, as of the date of this Quarterly Report, our management is not aware of any proceedings to which any of our directors, officers, or affiliates, or any associate of any such director, officer, affiliate, or security holder is a party adverse to our company or has a material interest adverse to us. 

 

ITEM 1A. RISK FACTORS.

 

There are no material changes to the risk factors as set forth in the Annual Report on Form 10-K filed with the SEC on March 31, 2017.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

There were no unregistered sales of the Company’s equity securities during the three months ended June 30, 2017, that were not otherwise disclosed in the Company’s Form 8-K.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

There has been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default, with respect to any indebtedness of the Company. 

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

There is no other information required to be disclosed under this item which was not previously disclosed. 

 

10

Table of Contents

 

ITEM 6. EXHIBITS

 

Exhibit No.		Description
31.1		Certification of Principal Executive Officer pursuant to Section 302 the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer pursuant to Section 302 the Sarbanes-Oxley Act of 2002
32.1*		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as 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, as 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

___________

* In accordance with the SEC Release 33-8238, deemed being furnished and not filed.

 

11

Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

	CHINA CHANGJIANG MINING & NEW ENERGY COMPANY., LTD. (Registrant)
Date: August 14, 2017	By:	/s/ Chen Wei Dong
	Name:	Chen Wei Dong
	Title:	Chief Executive Officer and President (Principal Executive Officer)
Date: August 14, 2017	By:	/s/ Li Ping
	Name:	Li Ping
	Title:	Chief Financial Officer (Principal Financial Officer)

 

 

12