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.
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
☒
The aggregate market value of Common Stock
held by non-affiliates of the Registrant on June 30, 2017 was $0 based on a $0 average bid and asked price of such common equity,
as of the last business day of the registrant’s most recently completed second fiscal quarter.
Indicate the number of shares outstanding of each of the registrant’s
classes of common stock as of the latest practicable date.
This annual report contains forward-looking
statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking
statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”,
“believes”, “estimates”, “predicts”, “potential” or “continue” or the
negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks,
uncertainties and other factors, including the risks in the section entitled “Risk Factors” that may cause our or our
industry’s actual results, levels of activity, performance or achievements to be materially different from any future results,
levels of activity, performance or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations
reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance
or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to
update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are stated in
United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this annual report, unless otherwise
specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to
the common shares in our capital stock.
As used in this current report and unless
otherwise indicated, the terms “we”, “us” and “our” mean Zhen Ding Resources Inc. and our subsidiaries,
Z&W Zhen Ding Corporation and Zhen Ding Mining Co. Ltd., unless otherwise indicated.
General Overview
The Company, then known as Robotech Inc.,
entered into negotiations with Zhen Ding Resources Inc., a Nevada entity (“Zhen Ding NV”). Zhen Ding NV indirectly
owns 70% of a Chinese Joint Venture entity, Zhen Ding Mining Co. Ltd. (“Zhen Ding JV” or “JXZD”) through
a 100% owned subsidiary in California, Zhen Ding Corporation (“Z&W CA”). During 2012 and 2013, total issued and
outstanding common stock of Zhen Ding NV were tendered to our Company. On October 28, 2013, our Company dissolved Zhen Ding NV
by merging it into our Company and we changed our name from Robotech Inc. to Zhen Ding Resources Inc.
Our Company, now through Zhen Ding NV’s
wholly owned subsidiary, Z&W CA, participates in a joint venture with Jing Xian Xinzhou Gold Co., Ltd. (“Xinzhou Gold”),
a company organized under the laws of the People’s Republic of China (“PRC”). The joint venture company JXZD
is 70% held by our Company through Z&W CA who has the mineral exploration, mineral mining and gold mining rights to a property
located in the southwestern part of Anhui province in China, near the town of Jing Xian. Xinzhou Gold, the other 30% partner of
JXZD is the actual named owner of the various licenses used by JXZD and transferred all rights emanating from these licenses as
part of the joint venture agreement between Z&W CA and Xinzhou Gold.
Our Company’s primary activity, through
JXZD, is ore processing and production in China. We
are engaged in seeking business partnership
opportunities with companies that are in the field of exploration and extraction of precious and/or base metals, primarily in China,
which are in need of funding and improved management. We seek to provide the necessary management expertise and assist
in financing efforts of these mining operations. In exchange, we seek to acquire metal ores produced by these mines
and process the ores in our ore milling plant and sell the ore concentrates to metal refineries. Our only operating
company is Zhen Ding
Mining Co. Ltd.
, which engages in the processing of metal ore
and the selling of ore concentrates of gold, silver, lead, zinc and copper at purity levels ranging from 65% to 80%. Zhen
Ding
Mining Co. Ltd.
purchases metal ore in rock form from its joint venture partner
Jing Xian Xinzhou Gold Co., Ltd
, which has rights to explore and mine ore from a property
located in the southwestern part of Anhui province in China.
At the beginning of fiscal 2015, we idled
our mineral processing plant due to an overall downturn in the demand and market prices for our concentrates
.
At the beginning of fiscal 2017, we shut down the mineral processing plant in China due to insufficient working capital.
Our
principal office is located at 353 St. Nicolas, Suite 205, Montreal, Quebec H2Y 2P1. Our operational offices are located
at: Zhen Ding Mining Co. Ltd., Wuxi County, Town of Langqiao, Jing Xian, Anhui Province, China, Tel: 86-6270-9018.
The
following illustrates our corporate and share ownership structure:
Our Current Business
Current Operations
Presently, we conduct our operations exclusively
through Zhen Ding JV, our joint venture company. However, we continue to look for other attractive potential acquisition targets
in the mining industry.
Our joint venture, Zhen Ding JV, is equipped
to process ore mined by our joint venture partner Xinzhou Gold when in operation. Zhen Ding JV purchases the ore in
rock form from Xinzhou Gold and processes the ore into our final product, which is a gold, silver, lead, zinc and copper ore concentrate.
We estimate that our processed product is 65% to 80% pure. The product is then sold to refineries which further purify and separate
the concentrate. Zhen Ding JV also arranges all exploration, mining process and operations, and financial and administrative
support for Xinzhou Gold’s mine, known as the Wuxi Gold Mine.
We purchase all of our raw material from
Xinzhou Gold for our ore processing operation and rely solely on Xinzhou Gold for our supply of ores. The veins most recently excavated
by Xinzhou Gold in the permitted areas of our mines are very low grade and, as such, the production is minimal. The higher yielding
and therefore more profitable veins run outside Xinzhou Gold’s permitted mining area boundaries under its current license.
Xinzhou Gold applied for an extension of the permitted mining area, however, the application was rejected by the government in
December 2016 due to Xinzhou Gold’s insufficient working capital. Xinzhou Gold intends to reapply for an extension of the
permitted mining area when it is able to demonstrate sufficient working capital to drill the extended area. However, if sufficient
working capital is unavailable, or should the application be denied on other grounds, we would not be able to secure another source
with higher grade ores for our processing plant, which would severely limit our ability to execute our plan of operation and our
potential profitability.
At the beginning of fiscal 2015, we idled
our mineral processing plant due to an overall downturn in the demand and market prices for our concentrates. This downturn coincided
with an overall economic recession in China and downturn in the global commodities market during fiscal 2015 through 2016.
Summary of the 12 Months Ended December
31, 2018
During the twelve months ended December
31, 2018, we actively sought an investment of approximately $3,000,000, which we believe is required to expand Xinzhou Gold’s
mining permit, and which would allow us to resume our ore extraction and refinery activities. However, as at the date of this report
we have not successfully secured any financing commitment.
On
May 9, 2018, De Gang Wei resigned as Chairman, Chief Financial Officer and Director of the Company and Zhou Zhi Bin resigned as
a director of the Company. The resignations did not result from any disagreement with our company regarding our operations,
policies, practices or otherwise.
Due to our continued inability to raise
sufficient financing to expand Xinzhou Gold’s mining permit, Xinzhou Gold elected to reapply for a new drilling permit based
on a scaled-down drilling plan. The resulting new permit application, which was submitted to the Anhui Province Land & Resources
Bureau for approval on March 8, 2017, seeks renewed permission to continue drilling in the areas directly adjacent to our concentration
plant.
We intend to resume selling processed ore
concentrate as soon as possible in order to supply Zhen Ding JV with the cash flow needed to keep its plant running and to maintain
a viable work force for future expansion. However, we are not able to predict at this time when economic conditions will allow
us to resume our ore refinery operation.
As at the date of this report, Xinzhou
Gold and we continue to seek investment of approximately $3,000,000, which would allow Xinzhou Gold to resume drilling under its
anticipated permit, and allow us to resume refinery activities. In anticipation of financing and permit approval, our joint venture
engaged contractors during the twelve months ended December 31, 2018 to conduct safety inspections and repairs, and to plan anticipated
drilling locations. We also engaged Mr. Dai Honglin as Chief Engineer and general manager of Xinzhou Gold’s and our gold
mining operations.
Mr. Dai brings over thirty years’
experience to our company in the evaluation, development and exploration of gold, copper, zinc, and lithium projects throughout
China and South Africa. He completed training in mineral exploration at the Heilongjiang Institute of Mines in 1983. Mr. Dai also
currently holds the position of the chairman of Beijing Hongbang Pile Geotechnical Engineering Co., Ltd.
Going forward, we will continue to seek
sufficient financing to re-establish our mineral extraction and refining operations. We will also seek to identify and evaluation
businesses opportunities and other strategic transactions on an ongoing basis with a view toward diversifying our business and
optimizing shareholder value.
Competition
The mining industry is intensely competitive.
We compete with numerous individuals and companies, including many major mining companies, which have substantially greater technical,
financial and operational resources and staffs. Accordingly, there is a high degree of competition for access to funds. There are
other competitors that have operations in the area and the presence of these competitors could adversely affect our ability to
compete for financing and obtain the service providers, staff or equipment necessary for the exploration and exploitation of our
properties.
Compliance with Government Regulation
The following summary discusses all
regulations that materially affect the business of our Company.
Chinese Regulations Affecting Our
Company
Environmental Regulations
We are subject
to a variety of governmental regulations related to environmental protection. The major PRC environmental regulations applicable
to us include the Environmental Protection Law and the Environmental Impact Appraisal Law.
The Environmental
Protection Law sets out the legal framework for environmental protection in the PRC. The Ministry of Environmental Protection (“MEP”)
of the PRC is primarily responsible for the supervision and administration of environmental protection work nationwide and formulating
national waste discharge limits and standards. Local environmental protection authorities at the county level and above are responsible
for the environmental protection in their jurisdictions.
Companies that
discharge contaminants must report and register with the MEP or the relevant local environment protection authorities. Companies
discharging contaminants in excess of the discharge limits prescribed by the central or local authorities must pay discharge fees
for the excess in accordance with applicable regulations, and are also responsible for the treatment of the excessive discharge.
Government authorities can impose different penalties on individuals or companies in violation of the Environmental Protection
Law, depending on the individual circumstances of each case and the extent of contamination. Such penalties include warnings, fines,
impositions of deadlines for remedying the contamination, orders to stop production or use, orders to re-install contamination
prevention and treatment facilities which have been removed without permission or left unused, administrative actions against relevant
responsible persons or companies, or orders to close down those enterprises. Where the violation is serious, the persons or companies
responsible for the violation may be required to pay damages to victims of the contamination. Where serious environmental contamination
occurs in violation of the provisions of the Environmental Protection Law which results in serious loss of public and private property,
persons or enterprises directly responsible for such contamination may be held criminally liable.
Restriction
on Foreign Ownership
The principal
regulation governing foreign ownership of our business in the PRC is the Foreign Investment Industrial Guidance Catalogue, effective
as of April 10, 2015 (the “Catalogue”). Investment activities in the PRC by foreign investors are principally governed
by the Catalogue, which was promulgated and is amended from time to time by the Ministry of Commerce and the National Development
and Reform Commission (“NDRC”). The Catalogue divides industries into three categories: encouraged, restricted and
prohibited. Industries not listed in the Catalogue are generally deemed as constituting a fourth “permitted” category
and open to foreign investment unless specifically restricted by other PRC regulations. Our Company, in consultation
with its PRC legal advisor, the Guizhou Zhonggong Law Office, has determined that the business of Zhen Ding JV, ore processing,
is not listed in the Catalogue or otherwise restricted by other PRC regulations. As a result, our business is deemed
to be a “permitted” industry. This status has effectively been confirmed by the PRC State Administration
for Industry and Commerce (“SAIC”), which has issued a business license for Zhen Ding JV, as a foreign invested joint
venture, to engage in ore milling activities.
The NDRC and MOFCOM
periodically jointly revise the Catalogue. As such, there is a possibility that our company’s business may fall outside the
scope of the definition of a permitted industry in the future. Should this occur, we would face a limit or restriction on foreign
investment, the likes of which we are currently not subject to. However, based on our observation of past practices
of the Chinese government, any new guidelines or changes to foreign ownership restrictions will likely be applied prospectively,
and companies such as our Company with existing foreign investments are unlikely to be affected by such changes. Also, we are not
aware of any reason why ore processing would in the future be considered a sensitive industry justifying its inclusion in the restricted
or prohibited categories.
Draft Law
on Foreign Investment
In January 2015,
MOFCOM issued a draft Law on Foreign Investment which is expected to be finalized in the near future without major changes. The
draft Law on Foreign Investment would liberalize foreign investment in PRC businesses by reducing or eliminating the need for administrative
approvals of the form of such investments, provided such investments do not involve investment in a restricted or prohibited industry. Because
our Company is engaged in a permitted industry, and after consultation with our PRC counsel, we do not expect any adverse consequences
resulting from the final passage of the Law on Foreign Investment.
Regulation
of Foreign Currency Exchange and Dividend Distribution
Foreign Currency
Exchange
The principal
regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations (1996), as amended,
and the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996). Under these regulations, Renminbi
are freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related
foreign exchange transactions, but not for most capital account items, such as direct investment, loan, repatriation of investment
and investment in securities outside China, unless the prior approval of SAFE or its local counterparts is obtained. In addition,
any loans to an operating subsidiary in China that is a foreign invested enterprise, cannot, in the aggregate, exceed the difference
between its respective approved total investment amount and its respective approved registered capital amount. Furthermore, any
foreign loan must be registered with SAFE or its local counterparts for the loan to be effective. Any increase in the amount of
the total investment and registered capital must be approved by MOFCOM or its local counterpart. We may not be able to obtain these
government approvals or registrations on a timely basis, if at all, which could result in a delay in the process of making these
loans.
The dividends
paid by the subsidiary to its shareholder are deemed shareholder income and are taxable in China. Pursuant to the Administration
Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), foreign-invested enterprises in China may purchase or remit
foreign exchange, subject to a cap approved by SAFE, for settlement of current account transactions without the approval of SAFE.
Foreign exchange transactions under the capital account are still subject to limitations and require approvals from, or registration
with, SAFE and other relevant PRC governmental authorities.
Dividend Distribution
The principal
regulations governing the distribution of dividends by foreign holding companies include the Wholly Foreign Owned Enterprise Law
(1986), as amended, and the Administrative Rules under the Wholly Foreign Owned Enterprise Law (1990), as amended.
Under these regulations,
WFOEs in China may pay dividends only out of their retained profits, if any, determined in accordance with PRC accounting standards
and regulations. In addition, WFOEs in China are required to allocate at least 10% of their respective retained profits each year,
if any, to fund certain reserve funds unless these reserves have reached 50% of the registered capital of the enterprises. These
reserves are not distributable as cash dividends.
M&A
Regulations and Overseas Listings
On August 8,
2006, six PRC regulatory agencies, including the Ministry of Commerce, the State Assets Supervision and Administration Commission,
the State Administration for Taxation, the State Administration for Industry and Commerce, CSRC and SAFE, jointly issued the Regulations
on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, which became effective on September 8,
2006 and were amended in 2009. This M&A Rules, among other things, include provisions that purport to require that an offshore
special purpose vehicle formed for purposes of overseas listing of equity interests in PRC companies and controlled directly or
indirectly by PRC companies or individuals obtain the approval of CSRC prior to the listing and trading of such special purpose
vehicle’s securities on an overseas stock exchange.
On September 21,
2006, CSRC published on its official website procedures regarding its approval of overseas listings by special purpose vehicles.
The CSRC approval procedures require the filing of a number of documents with the CSRC and it would take several months to complete
the approval process. The application of this new PRC regulation remains unclear with no consensus currently existing among leading
PRC law firms regarding the scope of the applicability of the CSRC approval requirement.
Our company is
not an offshore special purpose vehicle under current PRC laws and regulations, as we currently control our Chinese operating entity
through a joint venture arrangement which is permitted under Chinese regulations regarding foreign ownership. As a result, we are
not required to obtain the approval of CSRC prior to the listing and trading of our securities on an overseas stock exchange.
Our company, in
consultation with our PRC legal advisor, the Guizhou Zhonggong Law Office, has determined that we are not required to obtain PRC
approvals and registrations in connection with the CSRC, SAFE, and SAIC for our joint venture arrangement under PRC regulations
regarding foreign ownership, and that our company is not an offshore special purpose vehicle under PRC regulations.
This is the case
because Zhen Ding JV was established as a joint venture enterprise in 2005 with the approval of the relevant PRC government agencies,
with 70% of the joint venture owned by Zhen Ding CA, a California entity with foreign ownership, and 30% of the joint venture owned
by Xinzhou Gold, a domestic PRC company. In connection with the formation of Zhen Ding JV, the Anhui Provincial People’s
Government issued a Certificate of Approval for Foreign Investment in China in 2005 and a business license was subsequently issued
by the SAIC for the period from 2005 to 2025. In connection with the formation of Zhen Ding JV, Zhen Ding CA did not
acquire any existing PRC domestic company or equity or assets, but rather established a new joint venture entity with foreign and
domestic partners with funds contributed by Zhen Ding CA (70%) and Xinzhou Gold (30%). Zhen Ding CA did not acquire
an interest in Xinzhou Gold, but rather established a new joint venture company with Xinzhou Gold as the other partner. Hence
there was no acquisition of a PRC domestic company or assets that would implicate the relevant rules on foreign ownership.
The M&A Rules
include provisions that purport to require that an offshore special purpose vehicle formed for the purpose of an overseas listing
of securities in a PRC company obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s
securities on an overseas stock exchange. However, CSRC approval is not required in the context of the current offering
covered by this Registration Statement because when our company acquired Zhen Ding CA, it acquired the previously established foreign
ownership in a government approved joint venture and not an interest in a PRC domestic company. Accordingly, our Company
is not an “offshore special purpose vehicle” and the relevant PRC agencies are not concerned with a change of ownership
in a foreign owned joint venture partner.
Our company’s
PRC legal advisor, the Guizhou Zhonggong Law Office, also made inquiries with official representatives of each of the CSRC, SAFE,
and SAIC and those official representatives all confirmed that there was no requirement for our company to obtain the approval
of or register with such agency.
For the foregoing
reasons, our company is not required to obtain PRC approvals and registrations in connection with the CSRC, SAFE, and SAIC for
its joint venture arrangement under PRC regulations regarding foreign ownership.
Regulations
on Offshore Parent Holding Companies’ Direct Investment in and Loans to Their PRC Subsidiaries
An offshore company
may invest equity in a PRC company, which will become the PRC subsidiary of the offshore holding company after investment. Such
equity investment is subject to a series of laws and regulations generally applicable to any foreign-invested enterprise in China,
which include the Wholly Foreign Owned Enterprise Law, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Contractual
Joint Venture Enterprise Law, all as amended from time to time, and their respective implementing rules; the Tentative Provisions
on the Foreign Exchange Registration Administration of Foreign-Invested Enterprise; and the Notice on Certain Matters Relating
to the Change of Registered Capital of Foreign-Invested Enterprises.
Under the aforesaid
laws and regulations, the increase of the registered capital of a foreign-invested enterprise is subject to the prior approval
by the original approval authority of its establishment. In addition, the increase of registered capital and total investment amount
shall both be registered with SAIC and SAFE.
Shareholder loans
made by offshore parent holding companies to their PRC subsidiaries are regarded as foreign debts in China for regulatory purposes,
which are subject to a number of PRC laws and regulations, including the PRC Foreign Exchange Administration Regulations, the Interim
Measures on Administration on Foreign Debts, the Tentative Provisions on the Statistics Monitoring of Foreign Debts and its implementation
rules, and the Administration Rules on the Settlement, Sale and Payment of Foreign Exchange.
Under these regulations,
the shareholder loans made by offshore parent holding companies to their PRC subsidiaries shall be registered with SAFE. Furthermore,
the total amount of foreign debts that can be borrowed by such PRC subsidiaries, including any shareholder loans, shall not exceed
the difference between the total investment amount and the registered capital amount of the PRC subsidiaries, both of which are
subject to the governmental approval.
U.S. Regulations
Affecting Our Company
FCPA Policy
The Foreign Corrupt
Practices Act, or the FCPA, prohibits companies and individuals subject to FCPA jurisdiction from providing to foreign officials
any “corrupt payments” (
i.e
., bribes, kickbacks, and similar benefits) in order to obtain any unfair advantage
with respect to government contracts, regulatory approvals, licenses, and other government actions for the purpose of obtaining
or retaining business. The FCPA applies to: (1) “issuers” – U.S. and foreign companies subject to SEC jurisdiction;
(2) “domestic concerns” – individuals who are citizens, nationals or residents of the United States and companies
with a principal place of business in the United States or organized under U.S. law; and (3) “other persons” –
foreign companies or persons who act in the United States to further a corrupt payment. The term “other persons” has
been interpreted broadly to include foreign entities that send an email in furtherance of a corrupt act to a U.S. recipient, or
that clear a corrupt payment through a U.S. bank. The FCPA requires issuers to maintain accurate books and records that do not
misrepresent their payments or expenses. Issuers are also liable for the accuracy of their majority-owned subsidiaries’ books
and records and are required to act in good faith to encourage their minority-owned subsidiaries to adopt reasonable internal accounting
controls intended to avoid corrupt payments. Issuers, domestic concerns and other persons may be liable for the actions of their
foreign subsidiaries and agents if they know or should know that a subsidiary or agent is likely to make a corrupt payment to a
foreign official.
Issuers, domestic
concerns and other persons subject to the FCPA are subject to severe criminal and civil penalties for violations of the FCPA. Entities
that make corrupt payments may be fined as much as $2 million per violation, or twice the amount of the benefit sought in return
for the payment. Individuals may be fined up to $100,000 and/or imprisoned for up to five years. Issuers who violate the FCPA’s
books and records requirements are subject to fines up to $25 million, and individuals can be fined up to $5 million and/or imprisoned
for up to 20 years. Companies may not indemnify their officers or employees for FCPA violations.
Research and Development
We did not incur any research or development
expenditures over the last two fiscal years.
Intellectual Property
We do not currently have any intellectual
property, other than our domain name and website, www.zhendingresources.com.
Employees
Currently we have
no paid employees. Our management team consists of our CEO and CFO and they currently do not receive compensation for their services.
We intend to provide compensation to our CEO and CFO in the future and formalize their employment relationship with our company
at that time.
None of the management
employees have employee contracts.
Our company may from time to time hire
paid consultants to assist it in achieving various goals. Victor Sun has performed consulting services for our company
in our very early days, including assisting with the establishment of the Zhen Ding JV, and, due in part to his other business
activities in Anhui, China, Mr. Sun is currently assisting our company by helping to co-ordinate certain business activities and
functions between our company and Zhen Ding JV. Zhen Ding JV has also employed Wei Dong Sun, a Professor of Geochemistry
at the Guangzhou Institute of Geochemistry, as a consultant with respect to certain geological matters at its Wuxi Gold Mine project.
Item 1A. Risk Factors
Our business operations are subject to
a number of risks and uncertainties, including, but not limited to those set forth below:
Risks Relating
To Our Company
We Are Still
Considered To Be A Start-Up Company And Have Little Operating History On Which To Evaluate Our Potential For Future Success.
Our company was
formed in 1996. During the years ended December 31, 2018 and 2017, we did not derive any revenue from the processing and sale of
ore concentrates. We have had limited operating history under our proposed business model upon which you can adequately evaluate
our business and prospects. Our limited operating history may prevent a meaningful evaluation of our business, financial performance
and prospects.
You must also
consider all the risks and uncertainties frequently encountered by developing companies in a very competitive field, such as ours.
Our inability to find viable or profitable acquisition candidates and then finding the necessary funding for these purchases may
adversely affect our ability to progress.
Our acquisition
of Zhen Ding NV provided us with our first business operations. Despite this acquisition, we are still operating at
a loss. Until we are able to integrate Zhen Ding JV and obtain enough funding to execute our business plan for Zhen
Ding JV, we will not generate sufficient revenue to cover our operating expenses.
Doubts exist about
our ability to continue as a going concern.
If We Do Not
Obtain Additional Capital, We May Be Unable To Sustain Our Business.
Our operating
plan for 2017 and 2018 is focused on restarting the Wuxi ore milling operations through the permitting and exploration of further
reserves by Xinzhou Gold and the subsequent expansion of the mill. We estimate we will require a minimum of approximately $3,000,000
to support this plan for the next 12 months. We are actively seeking additional funding, but to date have not entered into any
agreements or other arrangements for such financing. There can be no assurance that the required additional financing will be available
on terms favorable to us, or if found at all.
Without additional
funding, our company will not be able to pursue its business model. If adequate funds are not available or are not available on
acceptable terms when required, we would be required to significantly curtail our operations and would not be able to fund the
development of the business envisioned by our business model. These circumstances could have a material adverse effect on our business
and our ability to continue to operate as a going concern. If additional funds are raised through the issuance of equity
or convertible debt securities, our existing shareholders may experience substantial dilution, and such securities may have rights,
preferences and privileges senior to those of our common stock.
If we cannot obtain
additional funding, we may be required to:
• reduce
or possibly eliminate our expenditures on exploration; and
• seek
other businesses opportunities and other strategic transactions with a view toward diversifying our business and attracting new
investment.
Even if we do
find a source of additional capital, we may not be able to negotiate acceptable terms and conditions for receiving the additional
capital. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our
existing shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights,
preferences and privileges senior to our common stock. We cannot give you any assurance that any additional financing will be available
to us, or if available, will be on terms favorable to us.
We May Have
Difficulty Raising Necessary Capital To Fund Operations As A Result Of Market Price Volatility Of Our Shares Of Common Stock.
The price per
share of our shares on the OTC market may at any time become subject to volatility resulting from purely market forces over which
we will have no control. Such volatility may make it more difficult to find investors willing to invest in our common stock, or
to negotiate equity financing or terms that are acceptable to us, furthering hampering our plans of expansion and growth.
We Have Incurred
Losses In Certain Prior Periods And May Incur Losses In The Future.
We incurred net
losses of approximately $19 million from inception. As at December 31, 2017 we had a working capital deficit of $8,678,497. We
may incur additional losses in the future. We expect our costs and expenses to increase as we expand our operations. Our ability
to achieve profitability depends on the ability to raise necessary funding, our ability to integrate new projects, the extensiveness
of any reserves, and the global pricing of precious and base metals. We may not be able to achieve or sustain profitability on
a quarterly or annual basis.
Our Profitability
Is Heavily Dependent On The World Price Of Commodities.
The selling price that we will
obtain for any metal production is almost totally dependent on the world price. Should the price of gold, silver, or copper,
our main interests, fall below the cost of production, we may have to cease all mining and milling activities. Our future, at
that point, will become extremely doubtful.
We Have Not
Properly Explored The Potential Resources On The Wuxi Property
Most established
and experienced mining enterprises expend time and resources exploring and drilling to establish likely reserves within a given
prospect. The method of mining chosen by the previous owners of the Wuxi property, stated in common terms, is to ”follow
the veins”, a technique that is cost effective, yet has the very real risk of mining activities being suddenly curtailed
as the “veins” may narrow and yields per ton suddenly become unprofitable.
This may cause us to
terminate extraction and milling activities at this site.
We Cannot Assure
You That Our Growth Strategy Will Be Successful.
Our growth strategy
is primarily through the acquisition of new mines and their expandability. However, many obstacles exist to incorporating any new
entity into our existing operations. Acquisitions of businesses or other material operations may require debt financing or additional
equity financing, resulting in leverage or dilution of ownership. Integration of acquired business operations could disrupt our
business by diverting management away from day-to-day operations. The difficulties of integration may be increased by the necessity
of coordinating geographically dispersed organizations, integrating personnel with disparate business backgrounds and combining
different corporate cultures. We also may not be able to maintain key employees or customers of an acquired business or realize
cost efficiencies or synergies or other benefits we anticipated when selecting our acquisition candidates. In addition, we may
need to record write-downs from future impairments of intangible assets, which could reduce our future reported earnings. At times,
acquisition candidates may have liabilities or adverse operating issues that we fail to discover through due diligence prior to
the acquisition which will be required to comply with laws of PRC, to the extent applicable. There can be no assurance that any
proposed acquisition will be able to comply with PRC requirements, rules and/or regulations, or that we will successfully obtain
governmental approvals to the extent required, which may be necessary to consummate such acquisitions.
We cannot, therefore,
assure you that we will be able to successfully overcome such obstacles and establish these new additions. Our inability to successfully
implement our growth strategy may have a negative impact on existing operations and our future financial condition, results of
operations or cash flows.
If We Are Not
Able To Implement Our Strategies To Achieve Our Business Objectives, Our Business Operations And Financial Performance May Be Adversely
Affected.
Our business plan
and growth strategy is based on currently prevailing circumstances and the assumption that certain circumstances will or will not
occur, as well as the inherent risks and uncertainties involved in various stages of development. However, there is no assurance
that we will be successful in implementing our strategies or that our strategies, even if implemented, will lead to the successful
achievement of our objectives. If we are not able to successfully implement our strategies, our business operations and financial
performance may be adversely affected.
We Depend On
Our Key Management Personnel And The Loss Of Their Services Could Adversely Affect Our Business.
We place substantial
reliance upon the efforts and abilities of our executive officers, Mr. De Gang Wei, our Chairman and key member of Management of
our mining operations and CFO; and Ms. Wen Mei Tu, our President and CEO. The loss of the services of any of our executive officers
could have a material adverse effect on our business, operations, revenues or prospects. We do not maintain key man life insurance
on the lives of these individuals. As well, both Mr. Wei and Ms. Tu have significant activities outside our company that put demands
on their time that could detract from their management of our company’s business.
Failure To
Attract And Retain Personnel Could Have An Adverse Impact On Our Operations.
Our future success
depends on our ability to identify, attract, hire, retain and motivate other well-qualified managerial, technical, and operational
personnel. There is intense competition for these individuals, and there can be no assurance that these professionals will
be available in the market or that we will be able to meet their compensation requirements.
We Are An Emerging
Growth Company As Defined Under The Jumpstart Our Business Startups Act.
An “emerging
growth company” is an issuer whose initial public offering was or will be completed after December 8, 2011, and had
total annual gross revenues of less than $1 billion during its most recently completed fiscal year. An issuer’s EGC status
terminates on the earliest of:
·
The
last day of the first fiscal year of the issuer during which it had total annual gross revenues of $1 billion or more;
·
The
last day of the fiscal year of the issuer following the fifth anniversary of the date of the issuer’s initial public offering;
·
The
date on which such issuer has issued more than $1 billion in non-convertible debt securities during the prior three-year period
determined on a rolling basis; or
·
The
date on which the issuer is deemed to be a “large accelerated
filer” under the Exchange Act, which
means, among other things, that it has a public float in excess of $700 million.
Pursuant to the
Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), as an emerging growth company our Company can elect to
opt out of the extended transition period for any new or revised accounting standards that may be issued by the PCAOB or the SEC.
Our Company has elected not to opt out of such extended transition period which means that when a standard is issued or revised
and it has different application dates for public or private companies, our Company, as an emerging growth company, can adopt the
standard for the private company. This may make comparison of our Company's financial statements with any other public company
which is not either an emerging growth company nor an emerging growth company which has opted out of using the extended transition
period difficult or impossible as possible different or revised standards may be used.
Our Company has
elected to use the extended transition period for complying with new or revised financial accounting standards available under
Section 102(b)(2)(B) of the JOBS Act. Among other things, this means that our Company's independent registered public accounting
firm will not be required, as with smaller reporting companies, to provide an attestation report on the effectiveness of our Company's
internal control over financial reporting so long as it qualifies as an emerging growth company, which may increase the risk that
weaknesses or deficiencies in the internal control over financial reporting go undetected. Likewise, so long as it qualifies as
an emerging growth company, our Company may elect not to provide certain information, including certain financial information and
certain information regarding compensation of executive officers that would otherwise have been required to provide in filings
with the SEC, which may make it more difficult for investors and securities analysts to evaluate our Company. As a result, investor
confidence in our Company and the market price of our common stock may be adversely affected.
In addition to
qualifying as an emerging growth company, we also currently qualify as a Smaller Reporting Company under Rule 12b-2 of the Securities
Exchange Act of 1934, as amended. Rule 12b-2 defines a Smaller Reporting Company as an issuer that is not an investment
company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that:
·
Had
a public float of less than $75 million as of the last business day of its most recently completed second fiscal quarter, computed
by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the
price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market
for the common equity; or
·
In the
case of an initial registration statement under the Securities Act or Exchange Act for shares of its common equity, had a public
float of less than $75 million as of a date within 30 days of the date of the filing of the registration statement, computed by
multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a
Securities Act registration statement, the number of such shares included in the registration statement by the estimated public
offering price of the shares; or
·
In the
case of an issuer whose public float as calculated under paragraph (1) or (2) of this definition was zero, had annual revenues
of less than $50 million during the most recently completed fiscal year for which audited financial statements are available.
As long as we
remain a Smaller Reporting Company, we may take advantage of certain scaled or reduced disclosure requirements, some of which are
the same as the reduced disclosure requirements applicable to an Emerging Growth Company. In the event that we cease
to be an Emerging Growth Company as a result of a lapse of the five year period, but continue to be a Smaller Reporting Company,
we would continue to take advantage of the scaled disclosure requirements applicable to a Smaller Reporting Company.
Other Risks
Related To Our Business
Reserves And
Mineralization Estimates Are Uncertain.
We rely on Xinzhou
Gold for our supply of ores. There are numerous uncertainties inherent in estimating proven and probable reserves and
mineralization, including many factors beyond our control. The estimation of reserves and mineralization is a subjective process
and the accuracy of any such estimates is a function of the quality of available data and of engineering and geological interpretation
and judgment. Results of drilling, metallurgical testing and production and the evaluation of mine plans subsequent to the date
of any estimate may justify revision of such estimates. No assurances can be given that the volume and grade of reserves recovered
and rates of production will not be less than anticipated. Assumptions about prices are subject to great uncertainty and gold prices
have fluctuated widely in the past. Declines in the market price of gold or other precious metals also may render reserves or mineralization
containing relatively lower grades of ore uneconomic to exploit. Changes in operating and capital costs and other factors including,
but not limited to, short-term operating factors such as the need for sequential development of ore bodies and the processing of
new or different ore grades, may materially and adversely affect Xinzhou Gold’s mine reserves and as a result affect our
production.
We Potentially
Face Intense Competition From Other Companies In The Mining Field That Have Greater Resources Than Us.
Most of our potential
competitors have substantially greater financial, technical, production and other resources than we do.
Greater size in some cases
provides them with a competitive advantage with respect to production costs because of their economies of scale and their ability
to purchase raw materials at lower prices. These companies may be more attractive for qualified and experienced personnel. Companies
with greater financial resources may readily outbid us for potential lucrative acquisitions.
Acts Of Terrorism,
Responses To Acts Of Terrorism And Acts Of War May Impact Our Business And Our Ability To Raise Capital.
Future acts of
war or terrorism, national or international responses to such acts, and measures taken to prevent such acts may harm our ability
to raise capital or our ability to operate, especially to the extent we depend upon activities conducted in foreign countries,
such as China. In addition, the threat of future terrorist acts or acts of war may have effects on the general economy or
on our business that are difficult to predict. We are not insured against damage or interruption of our business caused by
terrorist acts or acts of war.
Risks Relating
To The People's Republic Of China
Currency Conversion
And Exchange Rate Volatility Could Adversely Affect Our Financial Condition.
The PRC government
imposes control over the conversion of Renminbi into foreign currencies. Under the current unified floating exchange rate system,
the People's Bank of China publishes an exchange rate, which we refer to as the People's Bank of China exchange rate, based on
the previous day's dealings in the inter-bank foreign exchange market. Financial institutions authorized to deal in foreign currency
may enter into foreign exchange transactions at exchange rates within an authorized range above or below the People's Bank of China
exchange rate according to market conditions. Pursuant to the Foreign Exchange Control Regulations of the PRC issued by the
State Council which came into effect on April 1, 1996, and the Regulations on the Administration of Foreign Exchange Settlement,
Sale and Payment of the PRC which came into effect on July 1, 1996, regarding foreign exchange control, conversion of Renminbi
into foreign exchange by Foreign Investment Enterprises, for use on current account items, including the distribution of and profits
to foreign investors, is permissible. Conversion of Renminbi into foreign currencies for capital account items, including direct
investment, loans, and security investment, is still under certain restrictions. On January 14, 1997, the State Council amended
the Foreign Exchange Control Regulations and added, among other things, an important provision, which provides that the PRC government
shall not impose restrictions on recurring international payments and transfers under current account items.
Enterprises in
the PRC (including Foreign Investment Enterprises) which require foreign exchange for transactions relating to current account
items, may, without approval of the State Administration of Foreign Exchange, or SAFE, effect payment from their foreign exchange
account or convert and pay at the designated foreign exchange banks by providing valid receipts and proofs.
To The Extent
Our Assets Are Located In China, Any Dividends Or Proceeds From Liquidation Is Subject To The Approval Of The Relevant Chinese
Government Agencies.
If we pursue our
plans to operate mainly in China, our assets will be predominantly located inside China. Under the laws governing foreign invested
enterprises in China, dividend distribution and liquidation are allowed but subject to special procedures under the relevant laws
and rules. Any dividend payment will be subject to the decision of the board of directors and subject to foreign exchange rules
governing such repatriation. Any liquidation is subject to both the relevant government agency's approval and supervision as well
the foreign exchange control. This may generate additional risk for our investors in case of dividend payment and liquidation.
China’s
Economic Policies Could Affect Our Business.
To the extent
our assets will be located in China and to the extent our revenue will be derived from our operations in China, our results of
business and prospects would be subject to the economic, political and legal developments in China.
While China's
economy has experienced a significant growth in the past twenty years, growth has been irregular, both geographically and among
various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide
the allocation of resources. Some of these measures benefit the overall economy of China, but may also have a negative effect on
us. For example, our sales results and financial condition may be adversely affected by the government control over capital investments
or changes in tax regulations with our future investors and/or customers.
The economy of
China has been transitioning from a planned economy to a more market-oriented economy. In recent years the Chinese government has
implemented measures emphasizing the utilization of market forces for economic reform and the reduction of state ownership of productive
assets and the establishment of corporate governance in business enterprises; however, a substantial portion of productive assets
in China are still owned by the Chinese government. In addition, the Chinese government continues to play a significant role in
regulating industry development by imposing industrial policies. It also exercises significant control over China's economic growth
through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and
providing preferential treatment to particular industries or companies.
We May Face
Obstacles From The Communist System In The People's Republic Of China.
Foreign companies
conducting operations in The People's Republic of China face significant political, economic and legal risks. The Communist regime
in The People's Republic of China includes a stifling bureaucracy that may discourage Western investment.
We May Have
Difficulty Establishing Adequate Management, Legal And Financial Controls In The People's Republic Of China.
The People's Republic
of China historically has been deficient in Western style management and financial reporting concepts and practices, as well as
in modern banking, computer and other control systems. We may have difficulty in hiring and retaining a sufficient number of qualified
employees to work in The People's Republic of China. As a result of these factors, we may experience difficulty in establishing
management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate
records and instituting business practices that meet Western standards.
Because Our
Assets And Operations Are Located In China, You May Have Difficulty Enforcing Any Civil Liabilities Against Us Under The Securities
And Other Laws Of The United States Or Any State.
All of our assets
are currently located in the Republic of China. In addition, our directors and officers are non-residents of the United States,
and all or a substantial portion of the assets of these non-residents are located outside the United States. As a result, it may
be difficult for investors to effect service of process within the United States upon these non-residents, or to enforce against
them judgments obtained in United States courts, including judgments based upon the civil liability provisions of the securities
laws of the United States or any state.
There is uncertainty
as to whether courts of the Republic of China would enforce:
·
Judgments
of United States courts obtained against us or these non-residents based on the civil liability provisions of the securities laws
of the United States or any state; or
·
In original
actions brought in the Republic of China, liabilities against us or non-residents predicated upon the securities laws of the United
States or any state. Enforcement of a foreign judgment in the Republic of China also may be limited or otherwise affected by applicable
bankruptcy, insolvency, liquidation, arrangement, moratorium or similar laws relating to or affecting creditors' rights generally
and will be subject to a statutory limitation of time within which proceedings may be brought.
The PRC Legal
System Embodies Uncertainties, Which Could Limit Law Enforcement Availability.
The PRC legal
system is a civil law system based on written statutes. Unlike common law systems, decided legal cases have little precedence.
In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general.
The overall effect of legislation over the past 27 years has significantly enhanced the protections afforded to various forms of
foreign investment in China. Each of our PRC operating subsidiaries and affiliates is subject to PRC laws and regulations. However,
these laws and regulations change frequently and the interpretation and enforcement involve uncertainties. For instance, we may
have to resort to administrative and court proceedings to enforce the legal protection that we are entitled to by law or contract.
However, since PRC administrative and court authorities have significant discretion in interpreting statutory and contractual terms,
it may be difficult to evaluate the outcome of administrative court proceedings and the level of law enforcement that we would
receive in more developed legal systems. Such uncertainties, including the inability to enforce our contracts, could affect our
business and operation. In addition, intellectual property rights and confidentiality protections in China may not be as effective
as in the United States or other countries. Accordingly, we cannot predict the effect of future developments in the PRC legal system,
particularly with regard to the industries in which we operate, including the promulgation of new laws. This may include changes
to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties
could limit the availability of law enforcement, including our ability to enforce our agreements with the government entities and
other foreign investors.
Any Dividends
And Other Distributions From Any Subsidiaries In China Are Subject To Various Legal And Contractual Restrictions And Uncertainties,
And Our Ability To Pay Dividends Or Make Other Distributions To Our Shareholders Are Negatively Affected By Those Restrictions
And Uncertainties.
We plan to operate
in China through PRC subsidiaries. As a result, our profits available for distribution to our shareholders are dependent
on the profits available for distribution from PRC subsidiaries. If the subsidiary incurs debt on its own behalf, the debt
instruments may restrict its ability to pay dividends or make other distributions, which in turn would limit our ability to pay
dividends on our shares. Under the current PRC laws, because we are incorporated in the Delaware, any PRC subsidiaries would
be regarded as Sino-foreign joint venture enterprises in China. Although dividends paid by foreign invested enterprises,
such as wholly foreign-owned enterprises and Sino-foreign joint ventures, are not subject to any PRC corporate withholding tax,
the PRC laws permit payment of dividends only out of net income as determined in accordance with PRC accounting standards and regulations.
Determination of net income under PRC accounting standards and regulations may differ from determination under U.S. GAAP
in significant aspects, such as the use of different principles for recognition of revenues and expenses. In addition, if
we make additional capital contributions to PRC subsidiaries, (which may occur through the capitalization of undistributed profits),
then additional approval of the PRC government would be required due to an increase in our registered capital and total investment
. Under the PRC laws, a Sino-foreign joint venture enterprise is required to set aside a portion of its net income each year
to fund designated statutory reserve funds. These reserves are not distributable as cash dividends. As a result, our
primary internal source of funds of dividend payments from PRC subsidiaries are subject to these and other legal and contractual
restrictions and uncertainties, which in turn may limit or impair our ability to pay dividends to our shareholders. Moreover,
any transfer of funds from us to PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, is subject
to registration with or approval by PRC governmental authorities. We currently do not intend on paying any dividends in the future
and expect to retain all available funds to support our operations and to finance growth and development of our business. We have
never declared dividends or paid cash dividends. Our board of directors will make any future decisions regarding dividends.
We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate
paying any cash dividends in the near future. Therefore, any gains on an investment in our common stock will likely occur
through an increase in our stock price, which may or may not occur.
We May Be Exposed
To Liabilities Under The Foreign Corrupt Practices Act, And Any Determination That We Violated The Foreign Corrupt Practices Act
Could Have A Material Adverse Effect On Our Business.
We are subject
to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments
and their officials and political parties by U.S. persons and issuers as defined by the statute, for the purpose of obtaining or
retaining business. We have operations, agreements with third parties and we make sales in China. Our activities in
China create the risk of unauthorized payments or offers of payments by the employees, consultants, sales agents or distributors
of our Company, even though they may not always be subject to our control. It is our policy to implement safeguards to discourage
these practices by our employees. However, our existing safeguards and any future improvements may prove to be less than
effective, and the employees, consultants, sales agents or distributors of our Company may engage in conduct for which we might
be held responsible. Violations of the FCPA may result in severe criminal or civil sanctions, and we may be subject to other
liabilities, which could negatively affect our business, operating results and financial condition. In addition, the U.S. government
may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we
acquire.
Risks Related
To Corporate And Stock Matters
Our Common
Stock Is A Penny Stock. Trading Of Our Stock May Be Restricted By The SEC’s Penny Stock Regulations That May Limit A Stockholder’s
Ability To Buy And Sell Our Stock.
Our common shares
are deemed “a penny stock”. The SEC has adopted Rule 15g-9 which generally defines “penny stock” to be
any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per
share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice
requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The
term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with
a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized
risk disclosure document in a form prepared by the SEC which provides information about penny stocks and the nature and level of
risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the
penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing
the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer
and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules
require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special
written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written
agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the
secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the
ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit
the marketability of our common stock.
In addition, we
intend to apply for our common stock to be quoted on NASDAQ (FINRA)’s the Over-the-Counter Bulletin Board (OTCBB). There
can be no assurance that we will succeed in this effort. Failure to list our shares on the OTCBB may impair the liquidity
of our common stock.
NASD Sales
Practice Requirements May Also Limit A Stockholder’s Ability To Buy And Sell Our Stock.
Section 15(g)
of the Securities Exchange Act of 1934, as amended, and Rule 15g-2 promulgated thereunder by the SEC require broker-dealers dealing
in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed
and dated written receipt of the document before effecting any transaction in a penny stock for the investor’s account.
Potential investors
in our common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be “penny
stock.” Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions
in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the
investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably
determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has
sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide
the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above;
and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s
financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult
for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.
Shares Eligible
For Future Sale May Adversely Affect The Market Price Of Our Common Stock, As The Future Sale Of A Substantial Amount Of Our Restricted
Stock In The Public Marketplace Could Reduce The Price Of Our Common Stock.
From time to time,
certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage
transactions in the open market pursuant to Rule 144, promulgated under the Securities Act (“Rule 144”), subject to
certain limitations. In general, pursuant to Rule 144, a stockholder (or stockholders whose shares are aggregated) who has satisfied
a one-year holding period may, under certain circumstances, sell within any three-month period a number of securities which does
not exceed the greater of 1% of the then outstanding shares of common stock or the average weekly trading –volume of the
class during the four calendar weeks prior to such sale. Rule 144 also permits, under certain circumstances, the sale of securities,
without any limitations, by a non-affiliate of our company that has satisfied a two-year holding period. Any substantial sale of
common stock pursuant to Rule 144 or pursuant to any resale prospectus may have an adverse effect on the market price of our securities.
You May Not
Be Able To Liquidate Your Investment Since There Is No Assurance That A Public Market Will Develop For Our Common Stock Or That
Our Common Stock Will Ever Be Approved For Trading On A Recognized Exchange.
There is no established
public trading market for our securities. After this document is declared effective by the U.S. Securities and Exchange Commission,
we intend to seek a market maker to apply for a quotation on the OTCBB in the United States. We cannot assure you that a market
maker will agree to file the necessary documents with the OTCBB, nor can there be any assurance that such an application for quotation
will be approved or that a regular trading market will develop or that if developed, will be sustained. In the absence of a trading
market, you may be unable to liquidate its investment, which will result in the loss of your investment.
Our Directors
And Executive Officers, Collectively, Own Approximately 34% Of Our Outstanding Common Stock And May Be Able To Control Our Management
And Affairs.
As of December 31, 2018, our executive
officers and directors beneficially owned an aggregate of approximately 34.0% of our outstanding common stock. As a result, our
directors and executive officers, acting together, may be able to control our management and affairs, including the election of
directors and approval of significant corporate transactions, such as mergers, consolidation, and sale of all or substantially
all of our assets. Consequently, this concentration of ownership may have the effect of delaying or preventing a change of control,
including a merger, consolidation or other business combination involving us, even if such a change of control would benefit our
stockholders. It could also deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale
of our company and it may affect the market price of our common stock. In deciding how to vote on such matters, those shareholders’
interests may conflict with yours.
|
Item 1B.
|
Unresolved Staff Comments
|
As a “smaller reporting company”,
we are not required to provide the information required by this Item.
Our principal office is located at 353
St. Nicolas, Suite 205, Montreal, Quebec H2Y 2P1. The offices in Montreal are not under written lease but are rented through
a verbal agreement, on a month to month basis, from 150206 Canada Inc. at $500 per month, due and payable at each calendar
quarter end. The occupancy began October 1, 2013.
Mineral Properties
Description
of the Property of the Wuxi Gold Project
Zhen Ding JV relies
on Xinzhou Gold for its supply of metal ores and its processing plant is located on the site of the underground mine where Xinzhou
Gold has licenses to explore and mine ore (the “Wuxi Gold Project”) to reduce transportation cost. The Wuxi
Gold Project is located in Jingxian county, situated in the southeastern part of Anhui Province, PRC. The site is 63km southwest
of the city of Xuancheng, a significant city of about 2.8 million inhabitants, and is 15 km south of the town of Jingxian. The
project site falls under the administration of the township of Langqaio and is located near the village of Wuxi (see Figure 1).
Figure 1- Location
of Wuxi
The geographical
position of the Wuxi Gold Project is located within the area bounded by the coordinates: 118°24′20″ to 118°27′20″
E and 30°31′30″ to 30°35′30″ N.
Access to the
site from the city of Huangshan, the nearest city with regular air service, is by Express Highway #205 for approximately 125km
to the village of Wuxi and subsequently by a 2 km all-weather road to the project site. All roads are public roads. Access is also
available through the rail system at Xuancheng. (Please refer to Figure 2 for access to Wuxi via highways).
The area was eroded
by glacial activity and subsequently by meteoric waters to a rolling landform. The elevations in the Wuxi Gold Project area are
generally higher in the east and lower in the west. The highest elevation, in the area, is less than 300m above sea
level.
Gullies and creeks
are well developed and are recharged by meteoric water. A river near the Wuxi Gold Project site will, via surface channel, conduit
sufficient water for process and mining purposes. All rivers, gullies and creeks in the area flow into the Shuiyang river system.
The area has a
mild climate. The highest temperatures occur in July and August reaching highs of + 41ºC and the lowest are during January
and February reaching lows of –8ºC. Annual precipitation varies between 1348.2mm and 1422.8mm, concentrated from April
to August.
The Wuxi Gold
Project is located near the village of Wuxi and the work force comes from this and other nearby villages. A plentiful, although
inexperienced, work force is available locally.
Electric power
is supplied by the local power grid and additional demand can be met by existing infrastructure. Energy cost is low and reliability
is reportedly good. No backup power supply is provided or required on site. Telephone lines are available. Cellular phone coverage
is good. Required roads, power lines, and water lines are in place.
Our joint venture
partner, Xinzhou Gold mined ores at the Wuxi Gold Project under two permits: (1) Mining License No. C3400002009114110049341 (the
“Mining License”) and (2) Gold Mining License No. (2005) 42 (the “Gold Mining License”).
The Mining License
was valid from November 20, 2014 until November 20, 2017 and was issued by the Mining Resources Department of Anhui Province. This
license allowed ore to be mined in a specific area spanning 0.744 square kilometers with an ore extraction limit of 60,000 tons
per year. The Mining License allows for underground mining.
The Gold Mining
License was issued by the National Commission on National Development and Reform and specifically grants the right to
extract gold ore up to 200 tons a day in the Wuxi Gold Mine and was valid from June 3, 2005 until June 3, 2015. The permit extension
application is currently in process. Without a valid Gold Mining License, Xinzhou Gold may not mine any gold ore from
the Wuxi Gold Mine and therefore would not have any gold ore available for sale to us, which could have a material adverse effect
on our revenues and income.
In December, 2016, the application to expand Xinzhou Gold’s
permit was rejected due to the company’s insufficient working capital. Xinzhou Gold intends to reapply for an extension
of the permitted mining area when it is able to demonstrate sufficient working capital to drill the extended area. As such,
mining of ore has been reduced awaiting an expansion of the working area permitted under the Mining License. However, if
sufficient working capital is unavailable, or should the application be denied on other grounds, we would not be able to secure
another source with higher grade ores for our processing plant, which would severely limit our ability to execute our plan of operation
and our potential profitability.
History of the Wuxi Gold Project
Initial regional
geologic work began, in this area, in the 1930’s. Geologists, including Li Yuyao and Wang Hengjie, began investigations into
the origin of the carbonaceous zone in southern Anhui. Mineral exploration work began subsequent to the investigation for coal
by Zhaoxian Bian and Yunyuan Liu in the 1940’s.
Additional regional
geology and mineral geological surveys were performed between 1960 and 1965, by the Anhui Regional Geological Survey Team. This
team provided a detailed Lithological/Stratigraphic study of the area. Concomitantly, this team performed stream sampling and investigations
of old mine workings as well as additional mineral prospecting which has laid the basis for all subsequent geological work.
Since that time,
there have been sporadic geological investigations primarily for the purpose of scientific research. Official regional geologic
survey mapping is limited to a 1:50000 scale survey map; this limitation is indicative of the minor amounts of previous geological
work performed in the area.
In 1998, the Anhui
Exploration (Nuclear Technology) Institute discovered gold and poly-metallic deposits in the district. The mineral resource, subject
of this report, was located primarily by surface exploration techniques, primarily surface trenching.
In March of 1999,
the Anhui Exploration (Nuclear Technology) Institute sought additional investors; their involvement resulted in the formation of
our joint venture partner, Xinzhou Gold. Senior management and owners of Xinzhou Gold are also our partner in Zhen Ding JV and
also form part of the senior management of Zhen Ding DE.
In 2010, an additional
financial partner was admitted to the Wuxi Gold Project and committed to expending up to US$4,000,000 to firm up the mining tunnels,
for additional drilling and building an ore processing (concentration) plant. Zhen Ding JV has spent about $27.5 million RMB (about
US$4.3 million) over the past 3 years.
The Physical
Plant at the Wuxi Gold Project
The processing
of the ore is through a gravity concentration plant which has been built on the northeast side of the mountain located within the
Zhen Ding JV prospect. The plant is owned by Zhen Ding JV and is approximately six years old.
In the PRC, land
use rights are the legal rights for an entity to use land for a fixed period of time. The PRC has adopted a dual land tenure system
under which land ownership is independent of land use rights. The land is either owned by the state or by rural collective economic
organizations. As of December 31, 2017, the Zhen Ding JV did not have any land use rights agreements with
the PRC for the buildings owned by our Company. The Government owns the land where our Company’s buildings are located and
allows our Company free usage of the land.
The overview of
milling process is for the ore to be extracted and brought to the plant and initially passed through two crushers, one coarse and
one more refined, which is then fed into one of three grinding mills, where the ore is ground into powder form. At the grinding
process, the powdered ore is mixed with chemicals and then fed into a floatation machine. After the chemical treatment, output
from the floatation machine goes through a filter and drying machine. The output of the drying produces our final product, which
is a gold, silver, lead, zinc and copper concentrate. We do not produce pure metal. We estimate our extracted ore is 65-80% pure
and is sold to refineries that further purify and separate the concentrate. Tailing are sent directly to a tailing pond near the
entrance side of the plant. There is no hazardous waste produced by our concentration plant and we recycle nearly all of the waste
water.
The plant was
completed, tested, and inspected by authorities during 2012. Milling activity commenced during the summer of 2012. In the
five months ended December 31, 2012, Zhen Ding JV milled and sold $2,101,200 of metal concentrate. However, mining and production
decreased at year end as Xinzhou Gold exhausted its higher concentrated gold deposits and needed to extract beyond the areas permitted
by the mining license.
At the beginning
of fiscal 2015, we idled our mineral processing plant due to an overall downturn in the demand and market prices for our concentrates.
This downturn has coincided with an overall economic recession in China and downturn in the global commodities market over the
past 12 months. A
t the beginning of fiscal 2017, we shut down the mineral processing
plant in China due to insufficient working capital.
Due to our continued
inability to raise sufficient financing to expand Xinzhou Gold’s mining permit, Xinzhou Gold elected to reapply for a new
drilling permit based on a scaled-down drilling plan. The resulting new permit application, which was submitted to the Anhui
Province Land & Resources Bureau for approval on March 8, 2017, seeks renewed permission to continue drilling in the areas
directly adjacent to our concentration plant.
We currently have
a local investor who has shown interest in investing in our company however, such investment would be only made upon the approval
of the permit.
We intend to resume
selling processed ore concentrate as soon as possible in order to supply Zhen Ding JV with the cash flow needed to keep its plant
running and to maintain a viable work force for future expansion. However, we are not able to predict at this time when economic
conditions will allow us to resume our ore refinery operation.
As at the date
of this report, Xinzhou Gold and we continue to seek investment of approximately $3,500,000, which would allow Xinzhou Gold to
resume drilling under its anticipated permit, and allow us to resume refinery activities. In anticipation of financing and
permit approval, our joint venture engaged contractors during the nine months ended September 30, 2017 to conduct safety inspections
and repairs, and to plan anticipated drilling locations. We also engaged Mr. Dai Honglin as Chief Engineer and general manager
of Xinzhou Gold’s and our gold mining operations.
Mr. Dai brings
over thirty years’ experience to our company in the evaluation, development and exploration of gold, copper, zinc, and lithium
projects throughout China and South Africa. He completed training in mineral exploration at the Heilongjiang Institute of Mines
in 1983. Mr. Dai also currently holds the position of the chairman of Beijing Hongbang Pile Geotechnical Engineering Co., Ltd.
Going forward,
we will continue to seek sufficient financing to re-establish our mineral extraction and refining operations. We will also
seek to identify and evaluation businesses opportunities and other strategic transactions on an ongoing basis with a view toward
diversifying our business and optimizing shareholder value.
Operations
At the beginning
of fiscal 2015, we idled our mineral processing plant due to an overall downturn in the demand and market prices for our concentrates.
At the beginning of fiscal 2017, we shut down the mineral processing plant in China due to insufficient working capital.
As at the date of this report, we are actively
seeking an investment of approximately US$3,000,000, which we believe is required to restart our mineral processing plant in China
and extend Xinzhou Gold’s mining permit, which would allow us to resume our ore extraction and refinery activities, although
we have not secured any financing commitment thus far.
Although we do
not currently produce pure metals, it is part of our development plan to do so when general economic conditions and our cash resources
permit.
|
Item 3.
|
Legal Proceedings
|
From time to time, we may become involved
in litigation relating to claims arising out of its operations in the normal course of business. We are not involved in any
pending legal proceeding or litigation and, to the best of our knowledge, no governmental authority is contemplating any proceeding
to which we area party or to which any of our properties is subject, which would reasonably be likely to have a material adverse
effect on us.
|
Item 4.
|
Mine Safety Disclosures
|
Not applicable.
Item 5. Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common shares are quoted on the OTC
Markets under the symbol “RBTK.” The following quotations, obtained from Stockwatch, reflect the high and low bids
for our common shares based on inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual
transactions.
The following table reflects the high and
low bid information for our common stock obtained from Stockwatch and reflects inter-dealer prices, without retail mark-up, markdown
or commission, and may not necessarily represent actual transactions.
The high and low bid prices of our common
stock for the periods indicated below are as follows:
OTC Markets
|
Period Ended
|
High
|
Low
|
December 31, 2018
|
*
|
*
|
September 30, 2018
|
*
|
*
|
June 30, 2018
|
*
|
*
|
March 31, 2018
|
*
|
*
|
December 31, 2017
|
*
|
*
|
September 30, 2017
|
$2.01
|
$2.01
|
June 30, 2017
|
$1.45
|
$1.45
|
March 31, 2017
|
$1.40
|
$1.40
|
December 31, 2016
|
$1.50
|
$0.25
|
* No trades occurred during this period.
Our shares are issued in registered form. Worldwide Stock Transfer,
LLC, One University Plaza, Suite 505, Hackensack, NJ 07601, Telephone: (201) 820-2008; Facsimile: (201) 820-2010is the registrar
and transfer agent for our common shares.
On April 15, 2018, the shareholders’
list showed 193 registered shareholders with 63,968,798 common shares outstanding.
Dividend Policy
We have not paid any cash dividends on our common stock and
have no present intention of paying any dividends on the shares of our common stock. Our current policy is to retain earnings,
if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time
to time by our board of directors.
Equity Compensation Plan Information
We do not have a stock option plan in favor
of any director, officer, consultant or employee of our company.
Convertible Securities
As of December 31, 2018, we did not have
any convertible securities outstanding.
Recent Sales of Unregistered Securities;
Use of Proceeds from Registered Securities
We did not sell any equity securities which
were not registered under the Securities Act during the year ended December 31, 2018 that were not otherwise disclosed on our quarterly
reports on Form 10-Q or our current reports on Form 8-K filed during the year ended December 31, 2017.
Purchase of Equity Securities by the
Issuer and Affiliated Purchasers
We did not purchase any of our shares of
common stock or other securities during our fourth quarter of our fiscal year ended December 31, 2018.
|
Item 6.
|
Selected Financial Data
|
As a “smaller reporting company”,
we are not required to provide the information required by this Item.
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
The following discussion should be read
in conjunction with our consolidated audited financial statements and the related notes that appear elsewhere in this annual report.
The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results
could differ materially from those discussed in the forward looking statements. Factors that could cause or contribute to such
differences include, but are not limited to those discussed below and elsewhere in this annual report, particularly in the section
entitled “Risk Factors” beginning on page 6 of this annual report.
Our consolidated audited financial statements
are stated in United States Dollars and are prepared in accordance with United States Generally Accepted Accounting Principles.
Plan of Operations and Cash Requirements
Our operating plan for the balance of fiscal
2018 is to seek an investment of approximately US$3,000,000, which we believe is required to restart our mineral processing plant
in China and extend Xinzhou Gold’s mining permit, which would allow us to resume our ore extraction and refinery activities,
although we have not secured any financing commitment thus far.
The funds raised would be used to:
(1) extend
and expand permitted mining area of Xinzhou Gold to access higher concentrate ore veins;
(2) resume
ore exploration and extraction activities;
(3) re-start
the mill;
(4) re-test
the mill;
(5) develop
expansion plans for our plant capacity;
(6) drill
additional holes near the concentration plant; and
(7) undertake
at least three deep drill holes in the permitted area to re-commence greater milling operations as soon as possible.
This will involve re-testing the plant
equipment and re-hiring all personnel that was laid off as a result of the mining halt. We will reactively seek partnerships with
mining enterprises primarily active in the gold, silver and/or copper fields and subject to the general parameters described earlier
to increase our supply of raw material. In addition, we will look for a partner in the natural resources field in order to enhance
our future capability to access necessary funding and seek other businesses opportunities and other strategic transactions with
a view toward diversifying our business and attracting new investment.
Cash Requirements
Our net cash provided by financing activities
during the year ended December 31, 2017 was $325,913 as compared to $82,135 during the year ended December 31, 2017. We had
current assets consisting of $6,812 (including $5,931 in cash) as at December 31, 2018, and current liabilities of $8,906,320.
This compares to current assets consisting entirely of $7,669 in cash as at December 31, 2017, and current liabilities of $8,686,166.
Our working capital deficit as at December 31, 2018 was $8,899,508 as compared to $8,678,497 as at December 31, 2017.
In order to execute our business plan over
the next twelve months we expect to expend funds as follows:
Estimated Net Expenditures During
the Next Twelve Months
|
|
$
|
|
Restart mill and mining related operations
|
|
|
3,000,000
|
|
General, Administrative Expenses
|
|
|
100,000
|
|
Consulting & Permit Fees
|
|
|
150,000
|
|
Misc
|
|
|
100,000
|
|
|
|
|
|
|
Total
|
|
|
3,350,000
|
|
In light of our nominal cash resources,
we expect that we will be required to raise approximately $3,500,000 in order to execute our proposed business plan during fiscal
2019. In the event that we are unable to raise sufficient funds to carry out our planned investment in drilling equipment
and our planned exploration program, we anticipate that we will require a minimum of $350,000 to maintain our current business
operations without engaging in any significant exploration activities or investment. We have suffered recurring losses from operations.
The continuation of our company is dependent upon our company attaining and maintaining profitable operations and raising additional
capital as needed.
The continuation of our business is dependent
upon obtaining further financing, a successful program of exploration and/or development, and, finally, achieving a profitable
level of operations. The issuance of additional equity securities by us could result in a significant dilution in the equity interests
of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities
and future cash commitments.
There are no assurances that we will be
able to obtain further funds required for our continued operations. As noted herein, we are pursuing various financing alternatives
to meet our immediate and long-term financial requirements. There can be no assurance that additional financing will be available
to us when needed or, if available, that it can be obtained on commercially reasonable terms. If we are not able to obtain the
additional financing on a timely basis, we will be unable to conduct our operations as planned, and we will not be able to meet
our other obligations as they become due. In such event, we will be forced to scale down or perhaps even cease our operations.
Results of Operations - Years Ended
December 31, 2018 and 2017
The following summary of our results of
operations should be read in conjunction with our financial statements for the years ended December 31, 2018 and 2017, which are
included herein.
Our operating results for the years ended
December 31, 2018 and 2017, and the changes between those periods for the respective items are summarized as follows:
|
|
Year Ended
December 31,
2018
|
|
|
Year Ended
December 31,
2017
|
|
|
Change
Between
Years Ended
December 31,
2017 and
December 31,
2018
|
|
|
|
|
|
|
|
|
|
|
|
General and administration
|
|
$
|
118,575
|
|
|
$
|
71,317
|
|
|
$
|
47,258
|
|
Interest expense
|
|
|
569,266
|
|
|
$
|
562,585
|
|
|
|
6,681
|
|
Other expenses (income)
|
|
|
23,051
|
|
|
$
|
458
|
|
|
|
(22,593
|
)
|
Net loss
|
|
$
|
664,790
|
|
|
$
|
633,444
|
|
|
$
|
31,346
|
|
Our financial statements report a net loss
of $664,790 for the year ended December 31, 2018 as compared to a net loss of $633,444 for the year ended December 31, 2017.
Our losses have increased by $31,346, primarily as a result of a increased professional fees during the most recent fiscal year.
Our operating expenses for the year ended
December 31, 2018 were $118,575 compared to $71,317 for the year ended December 31, 2017. The change in our results between the
two years is was due to increased legal fees and other professional fees during 2018 related to our securities reporting requirements
in Canada and the United States.
Our interest expense for the year ended
December 31, 2018 was $569,266 compared to $562,585 during fiscal 2017.
Liquidity and Financial Condition
Working Capital
|
|
At
December 31,
2018
|
|
|
At
December 31,
2017
|
|
Current assets
|
|
$
|
6,812
|
|
|
$
|
7,669
|
|
Current liabilities
|
|
|
8,906,320
|
|
|
|
(8,686,166
|
)
|
Working capital (deficit)
|
|
$
|
8,899,508
|
|
|
$
|
(8,678,497
|
)
|
As of December 31 2018, we had accumulated losses of approximately
$19,518,729 since inception. We anticipate generating losses and, therefore, may be unable to continue operations further in the
future.
Cash Flows
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Net cash used in operating activities
|
|
$
|
(325,913
|
)
|
|
$
|
(81,430
|
)
|
Net cash provided by financing activities
|
|
|
(119,604
|
)
|
|
|
82,135
|
|
Foreign currency translation
|
|
|
443,779
|
|
|
|
46
|
|
Net increase change in cash
|
|
$
|
(1,738
|
)
|
|
$
|
751
|
|
Operating Activities
Net cash used in operating activities was
$325,913 for the year ended December 31, 2018 compared to $81,430 for the year ended December 31, 2017. The increase was a result
of increased professional expense incurred during the most recent period.
Financing Activities
Net cash provided by financing activities
was $119,104 for the year ended December 31, 2018 compared net cash provided by financing activities of $82,135 in the same period
in 2017. The nominal increase resulted from an increase in borrowing from related parties during the most recent period.
Contractual Obligations
As a “smaller reporting company”,
we are not required to provide tabular disclosure obligations.
Going Concern
These financial statements have been prepared
on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next
twelve months. As of December 31, 2018, the Company had accumulated losses of $19,518,729 since inception and had a working capital
deficit of $8,899,508. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern.
The continuation of the Company as a going concern is dependent upon financial support from its stockholders, the ability of the
Company to obtain necessary debt or equity financing to continue operations, and the attainment of profitable operations. Realization
value may be substantially different from carrying values as shown and these financial statements do not include any adjustments
to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern.
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.
Critical Accounting Policies
The discussion and analysis of our financial
condition and results of operations are based upon our financial statements, which have been prepared in accordance with the accounting
principles generally accepted in the United States of America. Preparing financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. These estimates and assumptions
are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the
estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our
financial statements.
Principles of Consolidation
The consolidated financial statements include
the accounts of our company, our wholly subsidiary Z&W Zhen Ding Corporation and our majority owned subsidiary Zhen Ding Mining
Co. Ltd. All inter-company transactions and balances were eliminated. The portion of the income applicable to non-controlling interests
in subsidiary undertakings is reflected in the consolidated statements of operations.
Foreign Currency Adjustments
Assets and liabilities recorded in foreign
currencies are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates
of exchange prevailing during the year. Any translation adjustments are reflected as a separate component of stockholders’
equity (deficit) and have no effect on current earnings. Gains and losses resulting from foreign currency transactions are included
in current results of operations.
Non-controlling Interest
Non-controlling interests in our company’s
subsidiaries are reported as a component of equity, separate from the parent’s equity. Purchase or sale of equity interests
that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the minority
interest are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest
retained, if any, will be reported at fair value with any gain or loss recognized in earnings.
|
Item 7A.
|
Quantitative and Qualitative Disclosures About Market Risk
|
As a “smaller reporting company”,
we are not required to provide the information required by this Item.
|
Item 8.
|
Financial Statements and Supplementary Data
|
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors
Zhen Ding Resources Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheet of Zhen Ding Resources Inc. (“the Company”), as of December 31, 2018, and the related statements of operations,
changes in stockholder’s deficit and cash flows for the year then ended and the related notes (collectively referred to as
the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the
consolidated financial position of the Company as of December 31, 2018, and the consolidated results of its operations and its
cash flows for the year ended December 31, 2018, in conformity with U.S generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required
to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures
to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
Matter of Emphasis
The accompanying financial statements have
been prepared assuming the Company will continue as a going concern. As discussed in Note #3 to the consolidated financial statements,
the Company has limited operations and has yet to attain profitability. This raises substantial doubt about its ability to continue
as a going concern. Management’s plan in regard to these matters is also described in Note #3. The consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Thayer O’Neal Company, LLC
We have served as the Company's auditor
since 2018
Houston, Texas
April 16, 2019
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Stockholders and the Board of Directors of
Zhen Ding Resources Inc.
Montreal, Quebec
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheet of Zhen Ding Resources Inc. (the "Company") as of December 31, 2017, the related consolidated statements
of operations and comprehensive loss, stockholders’ deficit, and cash flows for the year then ended, and the related notes
(collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in
all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its
cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks
of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to
those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis
for our opinion.
Other matters
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company
has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The consolidated financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ GBH CPAs, PC
We served as the Company's auditor from 2012 to 2018.
GBH CPAs, PC
www.gbhcpas.com
Houston, Texas
April 10, 2018
Zhen Ding Resources Inc.
|
Balance Sheets
As of December 31, 2018 and 2017
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
5,931
|
|
|
$
|
7,669
|
|
Other current asset
|
|
|
881
|
|
|
|
-
|
|
Total current assets
|
|
|
6,812
|
|
|
|
7,669
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
6,812
|
|
|
$
|
7,669
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
604,396
|
|
|
$
|
313,787
|
|
Accounts payable and accrued liabilities-related parties
|
|
|
3,572,385
|
|
|
|
3,479,101
|
|
Deferred revenues
|
|
|
131,824
|
|
|
|
154,619
|
|
Due to related parties
|
|
|
777,942
|
|
|
|
799,282
|
|
Short term debt
|
|
|
72,500
|
|
|
|
-
|
|
Short-term debt-related parties
|
|
|
3,747,273
|
|
|
|
3,939,377
|
|
Total current liabilities
|
|
|
8,906,320
|
|
|
|
8,686,166
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit:
|
|
|
|
|
|
|
|
|
Common stock, 150,000,000 authorized, $0.0001 par value,
63,968,798 shares issued and outstanding
|
|
|
6,397
|
|
|
|
6,397
|
|
Additional paid-in capital
|
|
|
12,762,875
|
|
|
|
12,762,875
|
|
Subscriptions receivables
|
|
|
(5,431
|
)
|
|
|
(5,431
|
)
|
Accumulated other comprehensive loss
|
|
|
504,405
|
|
|
|
193,802
|
|
Accumulated deficit
|
|
|
(19,518,729
|
)
|
|
|
(19,011,152
|
)
|
Total deficit attributable to Zhen Ding Resources Inc.
|
|
|
(6,250,483
|
)
|
|
|
(6,053,509
|
)
|
Non-controlling interests
|
|
|
(2,649,025
|
)
|
|
|
(2,624,988
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders’ deficit
|
|
|
(8,899,508
|
)
|
|
|
(8,678,497
|
))
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ deficit
|
|
$
|
6,812
|
|
|
$
|
7,669
|
|
The accompanying
notes are an integral part of these consolidated financial statements.
Zhen Ding Resources Inc.
|
Consolidated Statements of Operations and Comprehensive Loss
|
For the years ended December 31, 2018 and 2017
|
|
|
2018
|
|
|
2017
|
|
Operating expenses:
|
|
|
|
|
|
|
General and administrative
|
|
$
|
118,575
|
|
|
$
|
71,317
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
118,575
|
|
|
|
71,317
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(118,575
|
)
|
|
|
(71,317
|
)
|
|
|
|
|
|
|
|
|
|
Other expense:
|
|
|
|
|
|
|
|
|
Interest expenses
|
|
|
(569,266
|
)
|
|
|
(562,585
|
)
|
Other income (expenses)
|
|
|
23,051
|
|
|
|
458
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(664,790
|
)
|
|
|
(633,444
|
)
|
|
|
|
|
|
|
|
|
|
Loss attributable to non-controlling
interests
|
|
|
157,213
|
|
|
|
152,697
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Zhen Ding
Resources Inc.
|
|
$
|
(507,577
|
)
|
|
$
|
(480,747
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted weighted average number
|
|
|
|
|
|
|
|
|
of common shares outstanding
|
|
|
63,968,798
|
|
|
|
63,968,798
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(664,790
|
)
|
|
$
|
(633,444
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
443,779
|
|
|
|
(472,856
|
)
|
Total comprehensive loss
|
|
|
(221,011
|
)
|
|
|
(1,106,300
|
)
|
Comprehensive
loss attributable to non-
controlling interest
|
|
|
24,037
|
|
|
|
294,554
|
|
Comprehensive loss attributable to
Zhen Ding Resources Inc.
|
|
$
|
(196,974
|
)
|
|
$
|
(811,746
|
)
|
The accompanying
notes are an integral part of these consolidated financial statements.
Zhen Ding Resources Inc.
|
Consolidated Statement of Stockholders’ Deficit
|
For the years ended December 31, 2018 and 2017
|
|
|
|
Common Stock
|
|
|
Additional Paid
in
|
|
|
Subscriptions
|
|
|
Accumulated
Other
Comprehensive
|
|
|
Accumulated
|
|
|
Non-
controlling
|
|
|
Total
Stockholders'
|
|
|
|
Shares
|
|
|
Par
|
|
|
Capital
|
|
|
Receivable
|
|
|
Income
|
|
|
Deficit
|
|
|
Interest
|
|
|
Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2016
|
|
|
63,968,798
|
|
|
$
|
6,397
|
|
|
$
|
12,762,875
|
|
|
|
(5,431
|
)
|
|
|
524,801
|
|
|
|
(18,530,405
|
)
|
|
|
(2,330,434
|
)
|
|
|
(7,572,197
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(330,999
|
)
|
|
|
-
|
|
|
|
(141,857
|
)
|
|
|
(472,856
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(480,747
|
)
|
|
|
(152,697
|
)
|
|
|
(633,444
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2017
|
|
|
63,968,798
|
|
|
$
|
6,397
|
|
|
$
|
12,762,875
|
|
|
$
|
(5,431
|
)
|
|
$
|
193,802
|
|
|
$
|
(19,011,152
|
)
|
|
$
|
(2,624,988
|
)
|
|
$
|
(8,678,497
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
310,603
|
|
|
|
-
|
|
|
|
133,176
|
|
|
|
443,779
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(507,577
|
)
|
|
|
(157,213
|
)
|
|
|
(664,790
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, December 31, 2018
|
|
|
63,968,798
|
|
|
$
|
6,397
|
|
|
$
|
12,762,875
|
|
|
$
|
(5,431
|
)
|
|
$
|
504,405
|
|
|
$
|
(19,518,729
|
)
|
|
$
|
(2,649,025
|
)
|
|
$
|
(8,899,508
|
)
|
The accompanying notes are an integral part
of these consolidated financial statements.
Zhen Ding Resources Inc.
|
Consolidated Statements of Cash Flows
For the years ended December 31, 2018 and 2017
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
|
2017
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(664,790
|
)
|
|
$
|
(633,444
|
)
|
Adjustment to reconcile net loss to net cash used in
operating activities:
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
(881
|
)
|
|
|
-
|
|
Accounts payables and accrued liabilities
|
|
|
290,609
|
|
|
|
(10,571
|
)
|
Accounts payables and accrued liabilities-related parties
|
|
|
71,944
|
|
|
|
562,585
|
|
Deferred revenue
|
|
|
(22,795
|
)
|
|
|
-
|
|
Net cash used in operating activities
|
|
|
(325,913
|
)
|
|
|
(81,430
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Net change in advances from related parties
|
|
|
-
|
|
|
|
(45
|
)
|
Principal payments on debt
|
|
|
(192,104
|
)
|
|
|
-
|
|
Proceeds from borrowings on short term debt
|
|
|
72,500
|
|
|
|
-
|
|
Proceeds from borrowings on short-term debt – related parties
|
|
|
-
|
|
|
|
82,180
|
|
Net cash provided by financing activities
|
|
|
(119,604
|
)
|
|
|
82,135
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation
|
|
|
443,779
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
(1,738
|
)
|
|
|
751
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - beginning of the year
|
|
|
7,669
|
|
|
|
6,918
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents - end of the year
|
|
$
|
5,931
|
|
|
$
|
7,669
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
Zhen Ding Resources Inc.
Notes to Consolidated
Financial Statements
Note 1. Description of
Business
Zhen Ding Resources Inc. (formerly
Robotech Inc.) (the “Company”, “Zhen Ding DE”, or “ZDRI”) was incorporated in the State of
Delaware in September 1996 and began its business activities in the development and marketing of specialized technological equipment.
In early 2010, the business direction of our Company was changed to seek opportunities to focus particularly on searching for companies
engaged in the mining of gold, silver and copper.
The Company indirectly owns 70% of
a Chinese Joint Venture entity, Zhen Ding Mining Co. Ltd. (“Zhen Ding JV” or “JXZD”). This indirect ownership
is through a 100% ownership of a California company Z&W, Zhen Ding Corporation (“Z&W CA”).
Our Company, through Z&W CA, participates
in a joint venture with Jing Xian Xinzhou Gold Co., Ltd. (“Xinzhou Gold”), a company organized under the laws of the
People’s Republic of China (“PRC”). The joint venture company, JXZD, is 70% held by our Company through Z&W
CA who has the mineral exploration, mineral mining and gold mining rights to a property located in the southwestern part of Anhui
province in China, near the town of Jing Xian. Xinzhou Gold, the other 30% partner of JXZD is the actual named owner of the various
licenses used by JXZD and transferred all rights emanating from these licenses as part of the joint venture agreement between Z&W
CA and Xinzhou Gold. Our Company’s primary activity, through JXZD, is ore processing and production in China.
In 2017, the Company shut down its
mineral processing plant in China due to insufficient working capital. The Company had limited operations and plans to resume selling
processed ore concentrate as soon as possible to provide Zhen Ding JV the cash flow needed to keep its plant operating and to maintain
a viable work force for future expansion.
Note 2. Summary of Significant Accounting
Policies
The summary of significant accounting
policies presented below is designed to assist in understanding the Company’s consolidated financial statements. Such financial
statements and accompanying notes are the representations of the Company’s management, which is responsible for the integrity
and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America
(“U.S. GAAP”) in all material respects and have been consistently applied in preparing the accompanying financial statements.
Basis of Presentation and Principles
of Consolidation
The accompanying consolidated financial
statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States
of America (“U.S. GAAP”).
The consolidated financial statements
include the accounts of the Company, its wholly-owned subsidiaries Z&W CA and its majority owned subsidiary JXZD. All inter-company
transactions and balances were eliminated. The portion of the income applicable to non-controlling interests in subsidiary undertakings
is reflected in the consolidated statements of operations.
Use of Estimates and Assumptions
The Company prepares its financial
statements in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Foreign Currency Adjustments
Assets and liabilities recorded in foreign currencies are translated
at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during
the year. Any translation adjustments are reflected as a separate component of stockholders’ deficit and have no effect on
current earnings. Gains and losses resulting from foreign currency transactions are included in current results of operations.
During the years ended December 31, 2018 and 2017, the Company had aggregate foreign currency translation gains of $443,779 and
$(472,856), respectively.
Cash and Cash Equivalents
The Company considers all highly liquid
investments purchased with an original maturity of three months or less to be cash equivalents.
Income Taxes
An asset and liability approach is
used for financial accounting and reporting for income taxes. Deferred income taxes arise from temporary differences between income
tax and financial reporting and principally relate to recognition of revenue and expenses in different periods for financial and
tax accounting purposes and are measured using currently enacted tax rates and laws. In addition, a deferred tax asset can be generated
by net operating loss carry forwards. If it is more likely than not that some portion or all of a deferred tax asset will not be
realized, a valuation allowance is recognized. The Company has tax losses that may be applied against future taxable income. The
potential tax benefit arising from these loss carryforwards are offset by a valuation allowance due to uncertainty of profitable
operations in the future.
Fair Values of Financial Instruments
Management believes that the carrying
amounts of the Company’s financial instruments, consisting primarily of cash, account receivable and accounts payable, approximated
their fair values as of December 31, 2018 and 2017, due to their short-term nature.
Non-controlling Interests
Non-controlling interests in the Company’s
subsidiaries are reported as a component of equity, separate from the parent’s equity. Purchase or sale of equity interests
that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the minority
interest are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest
retained, if any, will be reported at fair value with any gain or loss recognized in earnings.
Basic and Diluted Loss Per Common
Share
The basic net loss per common share
is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share
is computed by dividing the net loss adjusted on an “as converted” basis, by the weighted average number of common
shares outstanding plus potential dilutive securities. For all periods presented, there were no potentially dilutive securities
outstanding.
Subsequent Events
The Company evaluated events subsequent
to December 31, 2018 through the date the financial statements were issued for disclosure consideration.
Recently Issued Accounting Pronouncements
In February 2016, FASB issued ASU No. 2016-02
Leases
(Topic
842), which creates new accounting and reporting guidelines for leasing arrangements. The standard requires that a lessee recognize
the assets and liabilities that arise from operating leases. A lessee should recognize on its balance sheet a liability to make
lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease
term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying
asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure
leases at the beginning of the earliest period presented using a modified retrospective approach. The guidance in ASU 2016-02 is
effective for annual and interim reporting periods beginning after December 15, 2018. The Company’s evaluation does not indicate
that the adoption of this standard will have any impact on its consolidated financial statements.
Note 3. Going Concern
These financial statements have been
prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations
for the next twelve months. As of December 31, 2018, the Company had accumulated losses of $19,518,729 since inception and had
a working capital deficit of $8,899,508. These factors raise substantial doubt regarding the Company’s ability to continue
as a going concern. The continuation of the Company as a going concern is dependent upon financial support from its stockholders,
the ability of the Company to obtain necessary debt or equity financing to continue operations, and the attainment of profitable
operations. Realization value may be substantially different from carrying values as shown and these financial statements do not
include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.
Note 4. Short Term Debts
The following table represents the
details of the short-term debts at December 31, 2018:
Issuance date
|
|
Maturity
|
|
Interest Rate
|
|
Amount
|
|
January 31, 2018
|
|
January 31, 2019
|
|
1% per month
|
|
$
|
27,500
|
|
May 18, 2018
|
|
May 18, 2019
|
|
1% per month
|
|
|
25,000
|
|
September 14,
2018
|
|
September 13, 2019
|
|
1% per month
|
|
|
20,000
|
|
|
|
|
|
|
|
|
72,500
|
|
During the twelve months ended December
31, 2018, the Company recorded interest expense and accrued interest of $5,338.
Note 5. Related Party Transactions
Accounts payable
As of December 31, 2018 and December
31, 2017, the Company had payables of $777,942 and $799,282, respectively, to Xinzhou Gold. These payables bear no interest, are
unsecured and are due on demand.
Short-term debts – related
parties
As of December 31, 2018 and December
31, 2017, the Company had short-term debts to related parties of $3,747,273 and $3,939,377, respectively. The details of the loans
are described as below.
At December 31, 2018:
Name
|
Relationship to the Company
|
|
Amount
|
|
|
Interest Rate
|
|
Start Date
|
Maturity
|
Short-term debt – related party
|
|
|
|
|
|
|
|
|
Wei De Gang
|
Former CFO & Legal person of
JXZD
|
|
$
|
2,614,271
|
|
|
|
15
|
%
|
May 31, 2011
|
May 31,
2014
|
Zhao Yan Ling
|
Former office manager of JXZD,
wife of Zhou Zhi Bin
|
|
|
15,267
|
|
|
|
15
|
%
|
January 1, 2011
|
December 31,
2013
|
Zhou Zhi Bin
|
Former CEO & Legal person of
JXZD
|
|
|
7,270
|
|
|
|
15
|
%
|
January 1, 2011
|
December 31,
2013
|
Tang Yong Hong
|
Manager of JXZD
|
|
|
312,977
|
|
|
|
15
|
%
|
February 28,
2015
|
February 28,
2016
|
Wen Mei Tu
|
President & shareholder of ZDRI
|
|
|
370,800
|
|
|
|
12
|
%
|
Various
|
Various
|
Importation
Tresor Plus Inc
|
Shareholder of ZDRI
|
|
|
30,000
|
|
|
|
12
|
%
|
July 9, 2012
|
July 12, 2013
|
Tony Ng Man
Kin
|
Shareholder of ZDRI
|
|
|
25,000
|
|
|
|
12
|
%
|
February 27,
2013
|
February 27,
2014
|
Wei Tai Trading
Inc.
|
Shareholder of ZDRI
|
|
|
12,000
|
|
|
|
12
|
%
|
June 3, 2015
|
September 3,
2015
|
JYS Technologies
Inc.
|
Wen Mei Tu’s brother in law owned
|
|
|
6,000
|
|
|
|
12
|
%
|
May 22, 2015
|
July 19, 2016
|
Philip Pak
|
Consultant & shareholder of ZDRI
|
|
|
41,000
|
|
|
|
12
|
%
|
Various
|
Various
|
Victor Sun
|
Consultant & shareholder of ZDRI
|
|
|
3,923
|
|
|
|
0
|
%
|
January 1, 2013
|
On Demand
|
Helen Chen
|
President of Z&W CA
|
|
|
17,965
|
|
|
|
0
|
%
|
January 1, 2011
|
On Demand
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debts – related parties
|
|
|
|
|
|
|
|
|
|
|
Zhou Qiang
|
Office manager of JXZD
|
|
|
290,800
|
|
|
|
15
|
%
|
December 18,
2012
|
December
18, 2015
|
Total
|
|
|
$
|
3,747,273
|
|
|
|
|
|
|
|
At December 31,
2017:
Name
|
Relationship to the Company
|
|
Amount
|
|
|
Interest Rate
|
|
Start Date
|
Maturity
|
Short-term debt
|
|
|
|
|
|
|
|
|
|
Wei De Gang
|
Former CFO & Legal person of
JXZD
|
|
$
|
2,761,708
|
|
|
|
15
|
%
|
May 31, 2011
|
May 31,
2014
|
Zhao Yan Ling
|
Former office manager of JXZD,
wife of Zhou Zhi Bin
|
|
|
16,128
|
|
|
|
15
|
%
|
January 1, 2011
|
December
31, 2013
|
Zhou Zhi Bin
|
Former CEO & Legal person of
JXZD
|
|
|
7,680
|
|
|
|
15
|
%
|
January 1, 2011
|
December
31, 2013
|
Tang Yong Hong
|
Manager of JXZD
|
|
|
330,628
|
|
|
|
15
|
%
|
February 28,
2015
|
February 28,
2016
|
Yan Chun Yan
|
Accountant of JXZD
|
|
|
9,345
|
|
|
|
15
|
%
|
August 31, 2014
|
August 31,
2015
|
Wen Mei Tu
|
President & shareholder of ZDRI
|
|
|
370,800
|
|
|
|
12
|
%
|
Various
|
Various
|
Importation
Tresor Plus Inc
|
Shareholder of ZDRI
|
|
|
30,000
|
|
|
|
12
|
%
|
July 9, 2012
|
July 12,
2013
|
Tony Ng Man
Kin
|
Shareholder of ZDRI
|
|
|
25,000
|
|
|
|
12
|
%
|
February 27,
2013
|
February 27,
2014
|
Wei Tai Trading
Inc.
|
Shareholder of ZDRI
|
|
|
12,000
|
|
|
|
12
|
%
|
June 3, 2015
|
September
3, 2015
|
JYS Technologies
Inc.
|
Wen Mei Tu’s brother in law owned
|
|
|
6,000
|
|
|
|
12
|
%
|
May 22, 2015
|
July 19,
2016
|
Philip Pak
|
Shareholder of ZDRI
|
|
|
41,000
|
|
|
|
12
|
%
|
Various
|
Various
|
Victor Sun
|
Consultant & shareholder of ZDRI
|
|
|
3,923
|
|
|
|
0
|
%
|
January 1, 2013
|
On Demand
|
Helen Chen
|
President of Z&W CA
|
|
|
17,965
|
|
|
|
0
|
%
|
January 1, 2011
|
On Demand
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
|
|
|
|
Zhou Qiang
|
Office manager of JXZD
|
|
|
307,200
|
|
|
|
15
|
%
|
December 18,
2012
|
December 18,
2015
|
Total
|
|
|
$
|
3,939,377
|
|
|
|
|
|
|
|
As of December 31, 2018 and December
31, 2017, the Company had accrued interest payable to the related parties of $3,572,385 and $3,479,101, respectively. For the years
ended December 31, 2018 and 2017, the Company recorded interest expenses of $569,266 and $562,585, respectively.
Note 6. Deferred Revenues
As of December 31, 2018 and 2017,
the Company had deferred revenue of $131,824 and $154,619 related to receipts of payment for unprocessed ore from Xinzhou Gold
Co. Ltd, respectively, related to advances that the Company received from its customers. The Company has received no demands for
repayment of deferred revenues.
Note 7. Contingencies
Concentration of Credit Risk
Substantially all of the Company’s
bank accounts are in banks located in The People’s Republic of China and are not covered by protection similar to that provided
by the FDIC on funds held in United States banks.
Note 8. Income Taxes
The Company and its subsidiaries are
subject to income taxes on an "entity" basis that is, on income arising in or derived from the tax jurisdiction in which
each entity is domiciled. It is management's intention to reinvest all the income earned by the Company's subsidiaries outside
of the US. Accordingly, no US federal income taxes have been provided on earnings of the foreign based subsidiaries.
On December 22, 2017, new federal tax
reform legislation was enacted in the United States (the “2017 Tax Act”), resulting in significant changes from previous
tax law. The 2017 Tax Act reduces the federal corporate income tax rate to 21% from 35% effective January 1, 2018.
The Company was incorporated in the
United States and is subject to United States federal income taxes and has incurred operating losses since its inception. The Company's
joint venture in China is subject to
a 25% statutory PRC
enterprise income
tax rate and has also incurred operating losses since its inception. As of December 31, 2018, the Company had net operating losses
(“NOL”) carryforwards of approximately $19 million. The NOL carryforwards expire between fiscal year 2018 through 2035.
The value of these carryforwards depends on the Company’s ability to generate taxable income. Tax laws in both China and
United States limit the time during which the net operating loss carryforwards may be applied against future taxes, if the Company
fails to generate taxable income prior to the expiration dates, the Company may not be able to fully utilize the net operating
loss carryforwards to reduce future income taxes. The Company has had cumulative losses and there is no assurance of future taxable
income; therefore, valuation allowances have been recorded to fully offset the deferred tax asset at December 31, 2018 and 2017.
The approximately tax effects of temporary
differences that give rise to the Company's net deferred tax assets as of December 31, 2018 and 2017 are as follows:
|
|
December 31,
2018
|
|
|
December 31,
2017
|
|
Deferred tax assets:
|
|
|
|
|
|
|
Net operating losses carried forward
|
|
$
|
2,964,000
|
|
|
$
|
2,786,000
|
|
Valuation allowance
|
|
|
(2,964,000
|
)
|
|
|
(2,786,000
|
)
|
Net deferred tax assets
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Item 9.
|
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
|
There were no disagreements related to
accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the
two fiscal years and interim periods.
|
Item 9A.
|
Controls and Procedures
|
Management’s Report on Disclosure
Controls and Procedures
We maintain disclosure controls and procedures
that are designed to ensure that information required to be disclosed in our reports filed under the
Securities Exchange Act
of 1934
, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules
and forms, and that such information is accumulated and communicated to our management, including our president and chief executive
officer (our principal executive officer) and our chief financial officer (our principal financial officer and principle accounting
officer) to allow for timely decisions regarding required disclosure.
As of December 31, 2018, the end of our
fiscal year covered by this report, we carried out an evaluation, under the supervision and with the participation of our president
and chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer
and principle accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures.
Based on the foregoing, our president (our principal executive officer, principal financial officer and principle accounting officer)
concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this annual report
due to the material weakness in our control environment and financial reporting process consisting of the following:
1) lack of a functioning audit committee due to a lack of a
majority of independent members and a lack of a majority of outside directors on our Board of Directors, resulting in ineffective
oversight in the establishment and monitoring of required internal control and procedures;
2) inadequate segregation of duties consistent with control
objectives;
3) ineffective controls over period end financial disclosure
and reporting processes; and
4) lack of accounting personnel with adequate
experience and training.
Management’s Report on Internal
Control Over Financial Reporting
Our management is responsible for establishing
and maintaining adequate internal control over financial reporting responsibility, estimates and judgments by management are required
to assess the expected benefits and related costs of control procedures. The objectives of internal control include providing management
with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, and
that transactions are executed in accordance with management’s authorization and recorded properly to permit the preparation
of consolidated financial statements in conformity with accounting principles generally accepted in the United States. Our management
assessed the effectiveness of our internal control over financial reporting as of December 31, 2018. In making this assessment,
our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”)
in
Internal Control-Integrated Framework
. Our management has concluded that, as of December 31, 2018, our internal control
over financial reporting is not effective. Our management reviewed the results of their assessment with our board of directors
due to the material weakness in our control environment and financial reporting process consisting of the following:
1) lack of a functioning audit committee due to a lack of a
majority of independent members and a lack of a majority of outside directors on our Board of Directors, resulting in ineffective
oversight in the establishment and monitoring of required internal control and procedures;
2) inadequate segregation of duties consistent with control
objectives;
3) ineffective controls over period end financial disclosure
and reporting processes; and
4) lack of accounting personnel with adequate
experience and training.
This annual report does not include an attestation report of
our company’s registered public accounting firm regarding internal control over financial reporting. Management’s report
was not subject to attestation by our company’s registered public accounting firm pursuant to temporary rules of the SEC
that permit our company to provide only management’s report in this annual report.
Inherent Limitations on Effectiveness
of Controls
Internal control over financial reporting
has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation
of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors.
Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in
judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion
or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent
or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process
and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems
determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control Over Financial
Reporting
There have been no changes in our internal
controls over financial reporting that occurred during the year ended December 31, 2018 that have materially or are reasonably
likely to materially affect, our internal controls over financial reporting.
|
Item 9B.
|
Other Information
|
None.
PART III
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
All directors of our company hold office
until the next annual meeting of the security holders or until their successors have been elected and qualified. The officers of
our company are appointed by our board of directors and hold office until their death, resignation or removal from office. Our
directors and executive officers, their ages, positions held, and duration as such, are as follows:
Name
|
Position Held
with the Company
|
Age
|
Date First Elected or Appointed
|
Tu, Wen Mei
|
President, Chief Executive
Officer, Treasurer,
Secretary and Director
|
67
|
August 13, 2012
|
Zhou, Qiang
|
Director
|
71
|
August 13, 2012
|
Business Experience
The following is a brief account of the
education and business experience during at least the past five years of each director, executive officer and key employee of our
company, indicating the person’s principal occupation during that period, and the name and principal business of the organization
in which such occupation and employment were carried out.
Wen Mei Tu - President, Chief Executive
Officer, Treasurer, Secretary and Director
Ms. Tu has a B.A. in Business Administration
from McGill University in Montreal, Quebec. Ms. Tu has worked both in the private and public sectors, and has held various
management positions. In 1990, she established the groundwork for several companies by forming her own business to develop and
finance projects in the Far East. She has established strong and close relationships with many contacts in both the private and
government sectors in China and Taiwan. This extensive experience and entrepreneurial spirit is the basis of potential implementation
of joint ventures and strategic partnerships. From 1997 to present, she was the Chairman and CEO of Trantech Ltd., a private high
tech research and development company in Solar, Chips & Non-vacuum production process field.
Qiang Zhou –Director
Mr. Zhou graduated from Shanghai Gymnastic
University with a degree in Phys-Ed Management. From 1989 to 1996, he was the assistant general manager for Shanghai Hui Feng Co.
Ltd., an international trading company. From 1996 to 2002, he was the assistant General Manager for Shanghai Heng De Investment
Co. Ltd.., an international investment company dealing with office and residential real estate and small manufacturing business
investment. Subsequently he became one of the co-founders and a director of Xinzhou Gold Co. He has worked as consultant
for the JV in since its founding in 2005, and is currently also a director of the Company.
Employment Agreements
We have no formal employment agreements with any of our directors
or officers.
Family Relationships
There are no family relationships between
any of our directors, executive officers and proposed directors or executive officers.
Involvement in Certain Legal Proceedings
To the best of our knowledge, none of our
directors or executive officers has, during the past ten years:
|
1.
|
been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding
traffic violations and other minor offences);
|
|
2.
|
had any bankruptcy petition filed by or against the business or property of the person, or of any
partnership, corporation or business association of which he was a general partner or executive officer, either at the time of
the bankruptcy filing or within two years prior to that time;
|
|
3.
|
been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated,
of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending
or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings
and loan, or insurance activities, or to be associated with persons engaged in any such activity;
|
|
4.
|
been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity
Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed,
suspended, or vacated;
|
|
5.
|
been the subject of, or a party to, any federal or state judicial or administrative order, judgment,
decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private
litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation
respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order
of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition
order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
|
|
6.
|
been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended
or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26)), any
registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29)), or any equivalent exchange,
association, entity or organization that has disciplinary authority over its members or persons associated with a member.
|
Compliance with Section 16(A) of the Securities Exchange
Act of 1934
Our common stock is not registered pursuant
to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, our officers, directors,
and principal stockholders are not subject to the beneficial ownership reporting requirements of Section 16(a) of the Exchange
Act.
Code of Ethics
We have not yet adopted a code of ethics
that applies to our sole officer and director, or persons performing similar functions because we are in the start-up phase and
are in the process of establishing our operations. We plan to adopt a code of ethics as and when our company grows to a sufficient
size to warrant such adoption.
Board and Committee Meetings
Our board of directors held no formal meetings
during the year ended December 31, 2017. All proceedings of the board of directors were conducted by resolutions consented to in
writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing
by the directors entitled to vote on that resolution at a meeting of the directors are, according to the Delaware Corporation Law
and our Bylaws, as valid and effective as if they had been passed at a meeting of the directors duly called and held.
Nomination Process
As of December 31, 2018, we did not effect
any material changes to the procedures by which our shareholders may recommend nominees to our board of directors. Our board of
directors does not have a policy with regards to the consideration of any director candidates recommended by our shareholders.
Our board of directors has determined that it is in the best position to evaluate our company’s requirements as well as the
qualifications of each candidate when the board considers a nominee for a position on our board of directors. If shareholders wish
to recommend candidates directly to our board, they may do so by sending communications to the president of our company at the
address on the cover of this annual report.
Audit Committee and Audit Committee
Financial Expert
We do not currently have an audit committee
or a committee performing similar functions. The board of directors as a whole participates in the review of financial statements
and disclosure.
Our board of directors has determined that
it does not have a member of its audit committee that qualifies as an “audit committee financial expert” as defined
in Item 407(d)(5)(ii) of Regulation S-K, and is “independent” as the term is used in Item 7(d)(3)(iv) of Schedule 14A
under the Securities Exchange Act of 1934, as amended.
We believe that the sole member of our
board of directors is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures
for financial reporting. We believe that retaining an independent director who would qualify as an “audit committee financial
expert” would be overly costly and burdensome and is not warranted in our circumstances given the early stages of our development
and the fact that we have not generated any material revenues to date. In addition, we currently do not have nominating, compensation
or audit committees or committees performing similar functions nor do we have a written nominating, compensation or audit committee
charter. Our sole director does not believe that it is necessary to have such committees because believes the functions of such
committees can be adequately performed by the sole member of our board of directors
|
Item 11.
|
Executive Compensation
|
The particulars of the compensation paid
to the following persons:
|
(a)
|
our principal executive officer;
|
|
(b)
|
each of our two most highly compensated executive officers who were serving as executive officers
at the end of the years ended December 31, 2018 and 2017; and
|
|
(c)
|
up to two additional individuals for whom disclosure would have been provided under (b) but for
the fact that the individual was not serving as our executive officer at the end of the years ended December 31, 2018 and 2017,
who we will collectively refer to as the named executive officers of our company, are set out in the following summary compensation
table, except that no disclosure is provided for any named executive officer, other than our principal executive officers, whose
total compensation did not exceed $100,000 for the respective fiscal year:
|
SUMMARY COMPENSATION TABLE
|
Name
and Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive
Plan
Compensa-
tion
($)
|
Change in
Pension
Value and
Nonqualifie
d Deferred
Compensa-
tion
Earnings
($)
|
All
Other
Compensa-
tion
($)
|
Total
($)
|
De Gang Wei
Former
Chairman
and Director
(1)
|
2018
2017
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Wen Mei Tu
President,
CEO,
Treasurer,
Secretary and
Director
|
2018
2017
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
Nil
Nil
|
|
(1)
|
De Gang Wei served as Chairman and as a Director of our Company from August 13, 2012 to May 9, 2018.
|
There are no arrangements or plans in which
we provide pension, retirement or similar benefits for directors or executive officers. Our directors and executive officers may
receive share options at the discretion of our board of directors in the future. We do not have any material bonus or profit sharing
plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except that share
options may be granted at the discretion of our board of directors.
Grants of Plan-Based Awards
During the fiscal year ended December 31,
2018 we did not grant any stock options.
Stock Option Plan
Currently, we do not have a stock option
plan in favor of any director, officer, consultant or employee of our company.
Option Grants
We have not granted any options or stock
appreciation rights to our named executive officers or directors since inception. We do not have any stock option plans.
Management Agreements
We have not entered into any management
agreements with any of our executive officers.
Compensation of Directors
We do not have any agreements for compensating
our directors for their services in their capacity as directors, although such directors are expected in the future to receive
stock options to purchase shares of our common stock as awarded by our board of directors.
We have determined that none of our directors
are independent directors, as that term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the
Securities Exchange Act of
1934
, as amended, and as defined by Rule 4200(a)(15) of the NASDAQ Marketplace Rules.
Pension, Retirement or Similar Benefit
Plans
There are no arrangements or plans in which
we provide pension, retirement or similar benefits to our directors or executive officers. We have no material bonus or profit
sharing plans pursuant to which cash or non-cash compensation is or may be paid to our directors or executive officers, except
that stock options may be granted at the discretion of the board of directors or a committee thereof.
Compensation Committee
We do not currently have a compensation
committee of the board of directors or a committee performing similar functions. The board of directors as a whole participates
in the consideration of executive officer and director compensation.
Indebtedness of Directors, Senior Officers,
Executive Officers and Other Management
None of our directors or executive officers
or any associate or affiliate of our company during the last two fiscal years is or has been indebted to our company by way of
guarantee, support agreement, letter of credit or other similar agreement or understanding currently outstanding.
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
The following table sets forth, as of April
16, 2019 certain information with respect to the beneficial ownership of our common shares by each shareholder known by us to be
the beneficial owner of more than 5% of our common shares, as well as by each of our current directors and executive officers as
a group. Each person has sole voting and investment power with respect to the shares of common stock, except as otherwise indicated.
Beneficial ownership consists of a direct interest in the shares of common stock, except as otherwise indicated.
Name and Address of Beneficial Owner
|
Amount and Nature of
Beneficial Ownership
|
Percentage
of Class
(1)
|
De Gang Wei
(2)
Gong Shan Zhen, DagongcunAPPX
Anhui Province 244011 China
|
8,400,000
(3)
Common Shares
|
9.69%
|
Qiang Zhou
No. 6 Long 774
Chang Le Lu, Jing An Qu
Shanghai China
|
5,100,000
(4)
Common Shares
|
8.0%
|
Zhi Bin Zhou
(5)
5-37 Hao du guo ji hua yuan
qing pu qu, Xu jin zhen
Shanghai China
|
7,000,000
(6)
Common Shares
|
9.38%
|
Name and Address of Beneficial Owner
|
Amount and Nature of
Beneficial Ownership
|
Percentage
of Class
(1)
|
Wen Mei Tu
7308 Rostand
Brossard Quebec J4X 2R6 Canada
|
1,232,000 Common Shares
|
1.90%
|
Directors and Executive Officers as a Group
|
21,732,000
Common Shares
|
34.0%
|
Felicia Fitzpatrick
4020 Rue Orly
Brossard Quebec J4Y 2K7 Canada
|
8,919,233 Common Shares
|
13.94%
|
Shareholders Holding Over 5%
|
8,919,233 Common Shares
|
13.94%
|
|
(1)
|
Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly,
through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the
power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the
disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons
share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person
if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which
the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to
include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As
a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s
actual ownership or voting power with respect to the number of shares of common stock actually outstanding on April 3, 2018. As
of April 3, 2018 there were 63,968,798 shares of our company’s common stock issued and outstanding.
|
|
(2)
|
De Gang Wei served as Chairman and as a Director of our Company from August 13, 2012 to May 9,
2018.
|
|
(3)
|
Includes 2,200,000 common shares held by his wife Ms. Wei.
|
|
(4)
|
Includes 2,100,000 common shares held by his wife Ms. Yao Zi Wang.
|
|
(5)
|
Zhi Bin Zhou served as a Director of our Company from August 13, 2012 to May 9, 2018.
|
|
(4)
|
Includes 1,000,000 common shares held by his wife Ms. Yan Ling Zhao.
|
Changes in Control
We are unaware of any contract or other
arrangement or provisions of our Articles or Bylaws the operation of which may at a subsequent date result in a change of control
of our company. There are not any provisions in our Articles or Bylaws, the operation of which would delay, defer, or prevent a
change in control of our company.
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Except as disclosed herein, no director,
executive officer, shareholder holding at least 5% of shares of our common stock, or any family member thereof, had any material
interest, direct or indirect, in any transaction, or proposed transaction since the year ended December 31, 2018, in which the
amount involved in the transaction exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets
at the year-end for the last three completed fiscal years.
Accounts payable
As of December 31, 2018 and December
31, 2017, the Company had payables of $777,942 and $799,282, respectively, to Xinzhou Gold. These payables bear no interest, are
unsecured and are due on demand.
Short-term debt
As of December 31, 2018 and December
31, 2017, the Company had short-term debts to related parties of $3,747,273 and $3,939,377, respectively. The details of the loans
are described as below.
At December 31, 2018:
Name
|
Relationship to the Company
|
|
Amount
|
|
|
Interest Rate
|
|
Start Date
|
Maturity
|
Short-term debt – related party
|
|
|
|
|
|
|
|
|
Wei De Gang
|
Former CFO & Legal person of
JXZD
|
|
$
|
2,614,271
|
|
|
|
15
|
%
|
May 31, 2011
|
May 31,
2014
|
Zhao Yan Ling
|
Former office manager of JXZD,
wife of Zhou Zhi Bin
|
|
|
15,267
|
|
|
|
15
|
%
|
January 1, 2011
|
December 31,
2013
|
Zhou Zhi Bin
|
Former CEO & Legal person of
JXZD
|
|
|
7,270
|
|
|
|
15
|
%
|
January 1, 2011
|
December 31,
2013
|
Tang Yong Hong
|
Manager of JXZD
|
|
|
312,977
|
|
|
|
15
|
%
|
February 28,
2015
|
February 28,
2016
|
Wen Mei Tu
|
President & shareholder of ZDRI
|
|
|
370,800
|
|
|
|
12
|
%
|
Various
|
Various
|
Importation
Tresor Plus Inc
|
Shareholder of ZDRI
|
|
|
30,000
|
|
|
|
12
|
%
|
July 9, 2012
|
July 12, 2013
|
Tony Ng Man
Kin
|
Shareholder of ZDRI
|
|
|
25,000
|
|
|
|
12
|
%
|
February 27,
2013
|
February 27,
2014
|
Wei Tai Trading
Inc.
|
Shareholder of ZDRI
|
|
|
12,000
|
|
|
|
12
|
%
|
June 3, 2015
|
September 3,
2015
|
JYS Technologies
Inc.
|
Wen Mei Tu’s brother in law owned
|
|
|
6,000
|
|
|
|
12
|
%
|
May 22, 2015
|
July 19, 2016
|
Philip Pak
|
Consultant & shareholder of ZDRI
|
|
|
41,000
|
|
|
|
12
|
%
|
Various
|
Various
|
Victor Sun
|
Consultant & shareholder of ZDRI
|
|
|
3,923
|
|
|
|
0
|
%
|
January 1, 2013
|
On Demand
|
Helen Chen
|
President of Z&W CA
|
|
|
17,965
|
|
|
|
0
|
%
|
January 1, 2011
|
On Demand
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
|
|
|
|
Zhou Qiang
|
Office manager of JXZD
|
|
|
290,800
|
|
|
|
15
|
%
|
December 18,
2012
|
December
18, 2015
|
Total
|
|
|
$
|
3,747,273
|
|
|
|
|
|
|
|
At December 31,
2017:
Name
|
Relationship to the Company
|
|
Amount
|
|
|
Interest Rate
|
|
Start Date
|
Maturity
|
Short-term debt
|
|
|
|
|
|
|
|
|
|
Wei De Gang
|
Former CFO & Legal person of
JXZD
|
|
$
|
2,761,708
|
|
|
|
15
|
%
|
May 31, 2011
|
May 31,
2014
|
Zhao Yan Ling
|
Former office manager of JXZD,
wife of Zhou Zhi Bin
|
|
|
16,128
|
|
|
|
15
|
%
|
January 1, 2011
|
December
31, 2013
|
Zhou Zhi Bin
|
Former CEO & Legal person of
JXZD
|
|
|
7,680
|
|
|
|
15
|
%
|
January 1, 2011
|
December
31, 2013
|
Tang Yong Hong
|
Manager of JXZD
|
|
|
330,628
|
|
|
|
15
|
%
|
February 28,
2015
|
February 28,
2016
|
Yan Chun Yan
|
Accountant of JXZD
|
|
|
9,345
|
|
|
|
15
|
%
|
August 31, 2014
|
August 31,
2015
|
Wen Mei Tu
|
President & shareholder of ZDRI
|
|
|
370,800
|
|
|
|
12
|
%
|
Various
|
Various
|
Importation
Tresor Plus Inc
|
Shareholder of ZDRI
|
|
|
30,000
|
|
|
|
12
|
%
|
July 9, 2012
|
July 12,
2013
|
Tony Ng Man
Kin
|
Shareholder of ZDRI
|
|
|
25,000
|
|
|
|
12
|
%
|
February 27,
2013
|
February 27,
2014
|
Wei Tai Trading
Inc.
|
Shareholder of ZDRI
|
|
|
12,000
|
|
|
|
12
|
%
|
June 3, 2015
|
September
3, 2015
|
JYS Technologies
Inc.
|
Wen Mei Tu’s brother in law owned
|
|
|
6,000
|
|
|
|
12
|
%
|
May 22, 2015
|
July 19,
2016
|
Philip Pak
|
Shareholder of ZDRI
|
|
|
41,000
|
|
|
|
12
|
%
|
Various
|
Various
|
Victor Sun
|
Consultant & shareholder of ZDRI
|
|
|
3,923
|
|
|
|
0
|
%
|
January 1, 2013
|
On Demand
|
Helen Chen
|
President of Z&W CA
|
|
|
17,965
|
|
|
|
0
|
%
|
January 1, 2011
|
On Demand
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
|
|
|
|
|
|
|
|
|
Zhou Qiang
|
Office manager of JXZD
|
|
|
307,200
|
|
|
|
15
|
%
|
December 18,
2012
|
December 18,
2015
|
Total
|
|
|
$
|
3,939,377
|
|
|
|
|
|
|
|
As of December 31, 2018 and December
31, 2017, the Company had accrued interest payable to the related parties of $3,572,385 and $3,479,101, respectively. For the years
ended December 31, 2018 and 2017, the Company recorded interest expenses of $569.266 and $562,585, respectively.
Director Independence
We currently act with two directors, consisting
of Wen Mei Tu and Qiang Zhou.
We have determined that Qiang Zhou and
Zhi Bin Zhou are each independent directors, as that term is used in Rule 4200(a)(15) of the Rules of National Association of Securities
Dealers.
Currently our audit committee consists
of our entire board of directors. We currently do not have nominating, compensation committees or committees performing similar
functions. There has not been any defined policy or procedure requirements for shareholders to submit recommendations or nomination
for directors.
From inception to present date, we believe
that the members of our audit committee and the board of directors have been and are collectively capable of analyzing and evaluating
our financial statements and understanding internal controls and procedures for financial reporting.
|
Item 14.
|
Principal Accounting Fees and Services
|
The aggregate fees billed for the most
recently completed fiscal year ended December 31, 2018 and for fiscal year ended December 31, 2017 for professional services rendered
by the principal accountant for the audit of our annual financial statements and review of the financial statements included in
our quarterly reports on Form 10-Q and services that are normally provided by the accountant in connection with statutory and regulatory
filings or engagements for these fiscal periods were as follows:
|
Year Ended
|
|
December 31, 2018
|
December 31, 2017
|
Audit Fees
|
$40,390
|
$39,670
|
Audit Related Fees
|
Nil
|
Nil
|
Tax Fees
|
Nil
|
Nil
|
All Other Fees
|
Nil
|
Nil
|
Total
|
$40,390
|
$39,670
|
Our board of directors pre-approves all
services provided by our independent auditors. All of the above services and fees were reviewed and approved by the board of directors
either before or after the respective services were rendered.
Our board of directors has considered the
nature and amount of fees billed by our independent auditors and believes that the provision of services for activities unrelated
to the audit is compatible with maintaining our independent auditors’ independence.