UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||
| For the quarterly period ended | ||
| or | ||
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
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| x | |
¨ | No |
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Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court.
| ¨ | Yes | ¨ | No |
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
common shares issued and outstanding as of May 9, 2024
ZHEN DING RESOURCES INC.
FORM 10-Q
TABLE OF CONTENTS
Contents
| PART I - FINANCIAL INFORMATION | |||
| Item 1. | Unaudited Condensed Consolidated Financial Statements | 3 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 13 | |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 20 | |
| Item 4. | Controls and Procedures | 20 | |
| PART II - OTHER INFORMATION | |||
| Item 1. | Legal Proceedings | 21 | |
| Item 1A. | Risk Factor | 21 | |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 21 | |
| Item 3. | Defaults Upon Senior Securities | 21 | |
| Item 4. | Mine Safety Disclosures | 21 | |
| Item 5. | Other Information | 21 | |
| Item 6. | Exhibits | 22 | |
| SIGNATURES | 23 | ||
PART I - FINANCIAL INFORMATION
| Item 1. | Financial Statements |
Our unaudited interim financial statements for the three month period ended March 31, 2024 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with generally accepted accounting principles in the United States.
| 3 |
Zhen Ding Resources Inc.
Condensed Consolidated Balance Sheets
(In US Dollars, except for number of shares)
As of March 31, 2024 and December 31, 2023
| March 31, | December 31, | |||||||
2024 (Unaudited) |
2023 (Audited) |
|||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Total Current Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Accounts payable and accrued liabilities-related parties | ||||||||
| Deferred revenue | ||||||||
| Due to related parties | ||||||||
| Short-term debt | ||||||||
| Short-term debt-related parties | ||||||||
| Total Current Liabilities | ||||||||
| Commitments and Contingencies | - | - | ||||||
| Stockholders’ deficit: | ||||||||
| Common stock, authorized, $ par value, shares issued and outstanding | ||||||||
| Additional paid-in capital | ||||||||
| Subscriptions receivable | ( |
) | ( |
) | ||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( |
) | ( |
) | ||||
| Total deficit attributable to Zhen Ding Resources Inc. | ( |
) | ( |
) | ||||
| Non-controlling interests | ( |
) | ( |
) | ||||
| Total Stockholders’ deficit | ( |
) | ( |
) | ||||
| Total Liabilities and Stockholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 4 |
Zhen Ding Resources Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In US Dollars, except for number of shares)
For the three months ended March 31, 2024 and March 31, 2023
(Unaudited)
| March 31, 2024 | March 31, 2023 | |||||||
| Operating expenses: | ||||||||
| General and administrative | $ | $ | ||||||
| Total operating expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other expense: | ||||||||
| Interest expenses | ( | ) | ( | ) | ||||
| Net loss | ( | ) | ( | ) | ||||
| Loss attributable to non-controlling interests | ||||||||
| Net loss attributable to Zhen Ding Resources Inc. | $ | ( | ) | $ | ( | ) | ||
| Basic and diluted loss per common share | $ | ) | $ | ) | ||||
| Basic and diluted weighted average number of common shares outstanding | ||||||||
| Comprehensive loss: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Other comprehensive income (loss): | ||||||||
| Foreign currency translation adjustments | ( | ) | ||||||
| Total comprehensive loss | ( | ) | ||||||
| Comprehensive loss attributable to non-controlling interest | ( | ) | ||||||
| Comprehensive loss attributable to Zhen Ding Resources Inc. | $ | $ | ( | ) | ||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
Zhen Ding Resources Inc.
Condensed Consolidated Statements of Cash Flows
(In US Dollars)
For the three months ended March 31, 2024 and March 31, 2023
(Unaudited)
| March 31, | March 31, | |||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustment to reconcile net loss to net cash used in operating activities: | ||||||||
| Accounts payable and accrued liabilities | ||||||||
| Accounts payable and accrued liabilities-related parties | ||||||||
| Deferred revenue | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from borrowings on short-term debt – related parties | ||||||||
| Net cash provided by financing activities | ||||||||
| Foreign currency translation | ( | ) | ( | ) | ||||
| Net change in cash | ( | ) | ( | ) | ||||
| Cash - beginning of the period | ||||||||
| Cash - end of the period | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
Zhen Ding Resources Inc .
Condensed Consolidated Statement of Stockholders’ Deficit
(In US Dollars, except for number of shares)
For the periods ended March 31, 2024 and March 31, 2023
(Unaudited)
| 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, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Foreign currency translation adjustment | - | |||||||||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balances, March 31, 2024 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| 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, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Foreign currency translation adjustment | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Net loss | - | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balances, March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
The accompanying notes are an integral part of
these unaudited condensed consolidated financial statements.
| 7 |
Zhen Ding Resources Inc.
Notes to Consolidated Financial Statements
(Unaudited)
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
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
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
Basis of Presentation
These unaudited condensed consolidated financial statements have been prepared in accordance with rules and regulations of the Securities and Exchange Commission (“SEC”) and generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Regulation S-X. Accordingly, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the Company has included all adjustments considered necessary for a fair presentation and such adjustments are of a normal recurring nature. These unaudited condensed consolidated financial statements should be read in conjunction with the condensed consolidated financial statements for the year ended December 31, 2023 and notes thereto. The results of operations for the three months ended March 31, 2024, are not necessarily indicative of the results to be expected for the full fiscal year ended December 31, 2024.
The summary of significant accounting policies presented below is designed to assist in understanding the Company’s 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.
Principles of Consolidation
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.
| 8 |
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.
During the periods ended March 31, 2024 and 2023, the Company had aggregate foreign currency translation gains (loss) of $
Cash
Cash consists of amounts denominated in US dollars. The Company does not, at any time, maintain cash in deposit accounts in excess of Federal Deposit Insurance Corporation (“FDIC”) limits. The Company has not experienced any losses on such accounts. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. At March 31, the Company had no 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.
The Company follows the FASB guidance for how uncertain ta positions should be recognized, measured and presented in the financial statements. This requires the evaluation of tax positions taken or expected be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained “when challenged” or “when examined” by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax expense and liability in the current year. Management has evaluated the Company’s tax positions and concluded that the Company has taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance as of March 31, 2024. The Company is not currently under audit by any tax jurisdiction.
Stock-Based Compensation
We account for stock-based compensation under the fair value method which requires all such compensation to employees, including the grant of employee stock options, to be calculated based on its fair value at the measurement date (generally the grant date), and recognized in the consolidated statement of operations over the requisite service period.
Fair Values of Financial Instruments
Management believes that the carrying amounts of the Company’s financial instruments, consisting primarily of cash, other receivable, due to related parties, short term debt and short term debt – related parties, approximated their fair values as of March 31, 2024 and December 31, 2023, 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.
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.
| 9 |
Recently Issued Accounting Pronouncements
In March 2022, the FASB issued ASU 2022-02, ASC Subtopic 326 “Credit Losses”: Troubled Debt Restructurings and Vintage Disclosures. Since the issuance of Accounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, the Board has provided resources to monitor and assist stakeholders with the implementation of Topic 326. Post-Implementation Review (PIR) activities have included forming a Credit Losses Transition Resource Group, conducting outreach with stakeholders of all types, developing educational materials and staff question-and-answer guidance, conducting educational workshops, and performing an archival review of financial reports. ASU No. 2022-02 is effective for annual and interim periods beginning after December 15, 2022. The Company does not expect the standard to have a significant impact on its financial statements.
The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material 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 March 31, 2024, the Company had accumulated losses of $
Note 4. Short-Term Debt
The following table represents the details of the short-term debts at March 31, 2024 and December 31, 2023:
| Issuance date | Maturity | Interest Rate | 03.31.2024 | 12.31.2023 | |||||||||
| $ | $ | ||||||||||||
| $ | $ | ||||||||||||
According to the loan agreements, there is not any additional interest and penalty for the loans passing maturity date.
During the three months ended March 31, 2024
and 2023, the Company recorded interest expense and accrued interest of $
| 10 |
Note 5. Related Party Transactions
Accounts payable
As of March 31, 2024 and December 31, 2023,
the Company had payables of $
Short-term debt
As of March 31, 2024 and December 31, 2023, the Company had short-term debts to related parties of $ and $, respectively. The details of the loans are described as below.
At March 31, 2024:
Name | Relationship to the Company | Amount | Interest Rate | Start Date | Maturity | |||||||||
| Shor-term debt | ||||||||||||||
| Wei De Gang | $ | |||||||||||||
| Zhao Yan Ling | ||||||||||||||
| Zhou Zhi Bin | ||||||||||||||
| Tang Yong Hong | ||||||||||||||
| Yan Chun Yan | ||||||||||||||
| Victor Sun | On Demand | |||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Current portion of long-term debt | ||||||||||||||
| Zhou Qiang | ||||||||||||||
| Total | $ | |||||||||||||
| 11 |
At December 31, 2023:
Name | Relationship to the Company | Amount | Interest Rate | Start Date | Maturity | |||||||||
| Shor-term debt | ||||||||||||||
| Wei De Gang | $ | |||||||||||||
| Zhao Yan Ling | ||||||||||||||
| Zhou Zhi Bin | ||||||||||||||
| Tang Yong Hong | ||||||||||||||
| Yan Chun Yan | ||||||||||||||
| Victor Sun | On Demand | |||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Victor Sun | ||||||||||||||
| Current portion of long-term debt | ||||||||||||||
| Zhou Qiang | ||||||||||||||
| Total | $ | |||||||||||||
As of March 31, 2024
and December 31, 2023, the Company had accrued interest payable to the related parties of $
Note 6. Accounts Payable and Accrued Liabilities
As of March 31, 2024 and December 31, 2023, the
Company had accounts payable of $
Note 7. Deferred Revenues
As of March 31, 2024 and December 31, 2023,
the Company had deferred revenue of $
Note 8. 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 9. Revision
Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications had no impact on net earnings (loss) or and financial position.
Note 10. Subsequent Events
The Company does not have any events subsequent to March 31, 2024 through May 9, 2024 the date the financial statements were issued for disclosure consideration.
| 12 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
FORWARD LOOKING STATEMENTS
This quarterly 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 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 unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
In this quarterly 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 quarterly report, the terms “we”, “us”, “our” and “our company” mean Zhen Ding Resources Inc., unless otherwise indicated.
General Overview
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 would provide the necessary management expertise and assist in financing efforts of these mining operations. In exchange, we would 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 JV which, has engaged 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 JV purchased metal ore in rock form from its joint venture partner, Xinzhou Gold, which holds rights to explore and mine ore from a property located in the southwestern part of Anhui province in China.
Corporate Background
Our principal office is located at Suite 111, 3900 Place De Java, Second Floor, Brossard, Quebec, Canada J4Y 9C4. 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.
We were incorporated in September 1996 as Robotech Inc., and began our business in the development and marketing of specialized technological equipment. By 2003 we had not reached our financing goals and therefore abandoned our former business plan.
| 13 |
In January 2012, our Board of Directors, following the approval of a majority of our shareholders, made an offer to the shareholders of Zhen Ding Resources Inc., a Nevada corporation (“Zhen Ding NV”), to acquire, at the very least, the majority of their common shares, and, if available, up to 100% ownership.
Zhen Ding NV through its wholly owned subsidiary, Z&W Zhen Ding Corporation, a California corporation (“Zhen Ding CA”), has been engaged 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, Zhen Ding Mining Co. Ltd. (“Zhen Ding JV”) is 70% held by Zhen Ding NV through Zhen Ding CA. It is a common practice in China to append the name of the town or city where an enterprise is located to its legally incorporated name. Therefore many documents referencing Zhen Ding JV may refer to it as Jing Xian Zhen Ding Mining Co. Ltd. Zhen Ding JV 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 JV purchases metal ore in rock form from Xinzhou Gold.
On March 8, 2012, we changed our name from Robotech, Inc. to Zhen Ding Resources Inc., in anticipation of the acquisition of Zhen Ding NV. Our trading symbol, RBTK, however remained unchanged.
During 2012, a total of 50,746,358 shares of the issued and outstanding common stock of Zhen Ding NV were tendered to our company. On August 13, 2013, an additional 13,100,000 shares were tendered to us. Therefore, as of August 13, 2013 the shareholders of Zhen Ding NV had tendered 100% of the issued and outstanding shares of common stock, representing 100% of the issued and outstanding equity of Zhen Ding NV to us.
On October 23, 2013, we issued 122,440 shares of our common stock, on a one-for-one basis, to the tendering shareholders of Zhen Ding NV making Zhen Ding NV a wholly owned subsidiary of our company.
On October 28, 2013, we dissolved Zhen Ding NV by merging it with and into Zhen Ding DE. As a result, Zhen Ding CA became a wholly-owned subsidiary of Zhen Ding DE. Zhen Ding CA continues to exist as an intermediate holding company with no operations of its own, but which in turn owns our 70% interest in Zhen Ding JV.
| 14 |
Our Current Business
Background
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.
| 15 |
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.
Recent Activities
Since idling our mineral processing plant, we have actively sought an investment of between $3,000,000 and $4,000,000, 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.
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, sought renewed permission to continue drilling in the areas directly adjacent to our concentration plant. That application was subsequently rejected due to environmental concerns regarding wastewater runoff onto nearby agricultural lands. Accordingly, during the last six months of fiscal 2019, the Company was primarily devoted to refining its environmental impact compliance proposal and design in consultation with government officials. A new proposal and design was submitted to the environmental protection authorities on June 30, 2019.
During the fall of 2019, the Zhen Ding JV received feedback from the Land & Resource Bureau regarding its June 30, 2019 proposal and design submission. The authorities requested certain improvements to the tailing pond and wastewater treatment facility on the proposed drilling site as a condition of granting any new drilling permit. Zhen Ding JV subsequently retained a new environmental expert to re-design the tailing pond treatment facility. The new design would employ automated pumping systems to optimize water transfer while lowering both cost and risk. The design affords immediate control of pressure and flowrate, as well as real-time monitoring of pump speed, flowrate, inlet/outlet water pressures, water temperature, engine performance, and engine fuel level. The improved water treatment design report was submitted to the government in December 2019 with an estimated budget of approximately $1.75 million over two years. The Company expected a ruling on the new proposal in March 2020, however the ruling was delayed due to COVID-19 containment measures in Anhui province which resulted in reduced staffing and operations across all levels of the public service. More recently, the Company was advised that no ruling would be provided on the proposal without additional 3rd party geo-technical research to support the viability of the Company’s design. The estimated cost of such additional research is $500,000.
Financing and Restructuring Efforts
In light of robust gold prices during 2022 and 2023, management has been entertaining proposals from prospective investors and partners seeking to participate in a smaller drilling operation and other joint venture projects and transactions.
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.
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Summary of Operations during the Three Months Ended March 31, 2024
In light of the continued strength of gold prices during the first quarter of 2024, our management continues to seek proposals from prospective investors and partners seeking to participate in a smaller drilling operation and other joint venture projects and transactions. However, there is no assurance that a suitable opportunity will be identified or secured.
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.
Results of Operations
Three Months Ended March 31, 2024 compared to the Three Months Ended March 31, 2023
The following table summarizes key items of comparison and their related increase (decrease) for the three-month periods ended March 31, 2024 and 2023, respectively:
| Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | |||||||
| General and administrative expense | $ | (14,797 | ) | $ | (12,364 | ) | ||
| Interest Expense | $ | (124,775 | ) | $ | (127,838 | ) | ||
| Net loss | $ | (139,572 | ) | $ | (140,202 | ) | ||
We did not earn any revenues during the three months ended March 31, 2024 or 2023.
We had a net loss of $139,572 for the three months ended March 31, 2024, representing nominal decrease from our net loss of $140,202 for the three months ended March 31, 2023. The change in our results over the two periods corresponded with a decrease in our interest expense during 2024, which increase was almost entirely offset by an increase in our general & administrative expense.
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Liquidity and Capital Resources
Working Capital
| At March 31, 2024 | At December 31, 2023 | |||||||
| Current assets | $ | 4,898 | $ | 10,740 | ||||
| Current liabilities | $ | (10,581,074 | ) | $ | (10,514,367 | ) | ||
| Working capital deficit | $ | (10,576,176 | ) | $ | (10,503,627 | ) | ||
As of March 31, 2024, we had current assets of $4,898 consisting of cash and cash equivalents, current liabilities of $10,514,367 and a working capital deficit of $10,576,176. This compares to our current assets of $10,740 (consisting of cash and cash equivalents), current liabilities of $10,514,367, and working capital deficit of $10,503,627as of December 31, 2023. The decrease in cash and increase in liabilities during the most recent period corresponded with an increase in accounts payable and accrued liabilities to related parties.
As of March 31, 2024, we had accumulated losses of $22,556,801 since inception. We anticipate generating losses and, therefore, may be unable to continue operations further in the future.
Cash Flows
| Three Months Ended | ||||||||
| March 31, | ||||||||
| 2024 | 2023 | |||||||
| Net cash from (used in) operating activities | $ | (12,854 | ) | $ | (10,189 | ) | ||
| Net cash provided by (used in) financing activities | $ | 15,000 | $ | 13,500 | ||||
| Foreign currency translation | $ | (3,541 | ) | $ | (6,283 | |||
| Net increase (decrease) in cash during period | $ | (1,395 | ) | $ | (2,972 | ) | ||
Operating Activities
Net cash used in operating activities during the three months ended March 31, 2024 was $12,854 compared to $10,189 in net cash used in operating during the three months ended March 31, 2023. The increase corresponded with an general and administrative expenses and, in particular, professional fees during the most recent period. During the three months ended March 31, 2024 and 2023, we had no sales and did not purchase any raw materials.
Investing Activities
No cash was received from or used in investing activities during the three months ended March 31, 2024.
Financing Activities
Cash provided by financing activities during the three months ended March 31, 2024 was $15,000, compared to $13,500 cash provided by financing activities during the three months ended March 31, 2023. The increase was a result of an increase is short-term loans from related parties received during the most recent period.
Plan of Operation
Our operating plan for the 12 months beginning from April 1, 2024 is as follows:
Our operating plan for the balance of fiscal 2024 is to seek an investment of approximately US$4,500,000, 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.
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The funds raised would be used to:
| 1. | upgrade tailings pond and water treatment facility; |
| 2. | design and implement groundwater remediation and protection measures; |
| 3. | extend and expand permitted mining area of Xinzhou Gold to access higher concentrate ore veins; |
| 4. | resume ore exploration and extraction activities; |
| 5. | re-start the mill; |
| 6. | re-test the mill; |
| 7. | develop expansion plans for our plant capacity; |
| 8. | drill additional holes near the concentration plant; and |
| 9. | 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.
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
| $ | ||||
| Implementation of Environmental Planning, Remediation, and Protection Measures | 1,000,000 | |||
| Restart mill and mining related operations | 3,000,000 | |||
| General, Administrative Expenses | 100,000 | |||
| Consulting & Permit Fees | 150,000 | |||
| Contingency | 250,000 | |||
| Total | 4,500,000 | |||
In light of our nominal cash resources, we expect that we will be required to raise approximately $4,500,000 in order to execute our proposed business plan during fiscal 2024. 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.
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Future Financings
We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.
We presently do not have any arrangements for additional financing for the expansion of our exploration operations, and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations.
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, and capital expenditures or capital resources that are material to stockholders.
Critical Accounting Policies
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 3. | 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 4. | 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 Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our president (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 the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (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 management concluded that our internal controls are not effective. due to material weaknesses in our control environment and financial reporting process, lack of a functioning audit committee, a majority of independent members and a majority of outside directors on our Board of Directors, resulting in ineffective oversight in the establishment, and lack of monitoring of required internal control and procedures.
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Changes in Internal Control Over Financial Reporting
During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
| Item 1. | Legal Proceedings |
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, executive officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
| Item 1A. | Risk Factors |
For a summary of the Company’s risk factors, please refer to Item 9A of our Form 10-K for the year ended December 31, 2023.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
None.
| Item 3. | Defaults Upon Senior Securities |
None.
| Item 4. | Mine Safety Disclosures |
Not applicable.
| Item 5. | Other Information |
None
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| Item 6. | Exhibits |
| Exhibit Number |
Description | |
| (3) | Articles of Incorporation and Bylaws | |
| 3.1 | Articles of Incorporation filed with the Secretary of State of the State of Delaware on September 6, 1996 (Incorporated by reference to our Registration Statement on Form S-1 filed January 6, 2014) | |
| 3.2 | Bylaws (Incorporated by reference to our Registration Statement on Form S-1 filed January 6, 2014) | |
| 3.3 | Certificate of Amendment of Certificate of Incorporation filed with the Secretary of State of the State of Delaware on November 4, 1996 (Incorporated by reference to our Registration Statement on Form S-1 filed January 6, 2014) | |
| 3.4 | Certificate of Amendment of Certificate of Incorporation filed with the Secretary of State of the State of Delaware on February 28, 2012 (Incorporated by reference to our Registration Statement on Form S-1 filed January 6, 2014) | |
| 3.5 | Certificate of Amendment of Certificate of Incorporation filed with the Secretary of State of the State of Delaware on March 20, 2012 (Incorporated by reference to our Registration Statement on Form S-1 filed January 6, 2014) | |
| 3.6 | Certificate of Ownership and Merger filed with the Secretary of State of the State of Delaware on October 28, 2013 (Incorporated by reference to our Registration Statement on Form S-1 filed January 6, 2014) | |
| (10) | Material Contracts | |
| 10.1 | The Contract for Sino-Foreign Equity Joint Venture dated as of November 12, 2004 by and between Zhen Ding Corporation and Jing Xiang Xin Zhou Gold Co. Ltd. (Incorporated by reference to our Registration Statement on Form S-1 filed January 6, 2014) | |
| 10.2 | Articles of Association for Zhen Ding JV dated as of October 12, 2006 by and between Z&W Zhen Ding Corporation and Jing Xiang Xin Zhou Gold Co. Ltd. (Incorporated by reference to our Registration Statement on Form S-1/A filed on February 13, 2015) | |
| 10.3 | Supply Contract of Gold Concentrate Fines dated July 20, 2012 between Zhen Ding Mining Co., Ltd. and Yantai Jin Ao Metallurgical Co. Ltd.(Incorporated by reference to our Registration Statement on Form S-1/A filed on February 13, 2015) | |
| 10.4 | Mining License No. C3400002009114110049341 dated November 5, 2014 in favor of Jing Xiang Xin Zhou Gold Co. Ltd. (Incorporated by reference to our Registration Statement on Form S-1/A filed on February 13, 2015) | |
| 10.5 | Gold Mining License No. (2005) 042 in favor of Jing Xiang Xin Zhou Gold Co. Ltd. (Incorporated by reference to our Registration Statement on Form S-1/A filed on February 13, 2015) | |
| 10.6 | Form of Loan Agreements between Wen Mei Tu and Zhen Ding Resources Inc. (Incorporated by reference to our Registration Statement on Form S-1/A filed on February 13, 2015) | |
| 10.7 | Business License Registration No. 3425004000003061(1-1) dated November 17, 2014 in favor of Zhen Ding Mining Co. Ltd. (Incorporated by reference to our Registration Statement on Form S-1/A filed June 9, 2015) | |
| (21) | List of Subsidiaries | |
| 21.1 | Z&W Zhen Ding Corporation, a California corporation (100% held) | |
| 21.2 | Zhen Ding Mining Co. Ltd., a PRC corporation (70% held) | |
| (31) | Rule 13a-14 (d)/15d-14d) Certifications | |
| 31.1* | Section 302 Certification by the Principal Executive Officer | |
| 31.2* | Section 302 Certification by the Principal Financial Officer and Principal Accounting Officer | |
| (32) | Section 1350 Certifications | |
| 32.1* | Section 906 Certification by the Principal Executive Officer | |
| 32.2* | Section 906 Certification by the Principal Financial Officer and Principal Accounting Officer | |
| 101* | Interactive Data File | |
| 101.INS | XBRL Instance Document | |
| 101.SCH | XBRL Taxonomy Extension Schema Document | |
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document |
*Filed herewith.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| ZHEN DING RESOURCES INC. | |
| (Registrant) | |
| Dated: May 9, 2024 | /s/ Victor Sun |
| Victor Sun | |
| President, Treasurer, Secretary and Director | |
| (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) |
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