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 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 its joint venture
partner, Xinzhou Gold, which has rights to explore and mine ore from a property
located in the southwestern part of Anhui province in China.
13
Table of Contents
Our Corporate History and Structure
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. At that
time we estimated that we would require approximately $6,000,000 to realize our
plans. Through the year of 2003, we had not reached our financing goals and
therefore abandoned that particular business plan. Since that time, we have been
seeking suitable candidates for acquisition.
The first decade of the 20th century saw a worldwide recovery in the price of
precious metals, minerals and industrial commodities. Sometimes referred to as a
commodities super cycle, the recovery was fueled, to a large degree, by the
economic awakening of the two most populous nations, China and India and further
bolstered by a sharp decline in the US dollar. The market prices of gold, silver
and copper were especially strengthened. Thus, in early 2010, the business
direction of our company was changed to seek to profit from this revival and we
began to focus our acquisition search in that industry, particularly on
companies engaged in the mining of gold, silver and copper.
In January 2012, our Board of Directors, with authorization from 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.
Thus 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. Thus, 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
Table of Contents
The following illustrates our corporate and share ownership structure:
[[Image Removed]]
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
Table of Contents
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
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.
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 for a tailing pond treatment facility 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 rework 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 and was estimated to cost approximately $1.75 million over two
years. The Company was expecting a ruling on the proposal in 2020, however the
response 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. Subsequently, during the second quarter of 2021, we were
informed by the Land & Resources Bureau that no further consideration would be
given to our proposal or design submission until we provide a cash payment of
$500,000 to finance additional research and due diligence.
Financing and Restructuring Efforts
During fiscal 2019 management entered into negotiations with various related
party lenders regarding a possible restructuring or conversion of related party
debt. Effective December 14, 2020, we issued an aggregate of 46,442,550 shares
of our common stock to ten lenders at the price of $0.02 per share in
consideration for the cancellation of $928,851 of interest bearing debt payable
on demand to the lenders in respect of cash advances made by them to the
Company.
Summary of Operations during the Six Months Ended June 30, 2021
Management has continued to evaluate proposals from prospective investors and
partners seeking to participate in a smaller drilling operation and
extraction-related joint venture projects. However, ongoing health-related
travel restriction across China have resulted in delayed negotiations and the
inability to travel to conduct due diligence. There is no assurance that
negotiations will resume in a timely manner or will be successful, and there is
no assurance that we will re-establish our mineral extraction and refining
operations. As a result, our management continues to seek and identify
alternative businesses opportunities or strategic transactions with a view
toward diversifying our business and optimizing shareholder value.
16
Table of Contents
During the first and second quarters of 2021, management continues to entertain
proposals from prospective partners seeking to participate in a smaller drilling
operation and other joint venture projects. The ongoing COVID-19 outbreak across
China, together with the recent decline in gold prices, however, have continued
to delay negotiations. The Company anticipates resuming negotiations in early
September 2021, however there is no guarantee that negotiations will be
successful.
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 June 30, 2021 compared to the Three Months Ended June 30,
2020
The following table summarizes key items of comparison and their related
increase (decrease) for the three month periods ended June 30, 2021 and 2020:
Percentage Increase
(Decrease) Between
Three Months Three Months Three Month Periods
Ended Ended Ended
June 30, 2021 June 30, 2020 June 30, 2020 and2021
General and administrative $ 11,229 $ 16,674 (32.65)%
Interest expense $ 133,024 $ 138,131 (3.69)%
Other income $ - $ - -
Net loss $ 144,253 $ 154,805 (6.81)%
We had not earned any revenues in the three months ended June 30, 2021 and 2020.
Our lack of revenue was due to the continued idling of our mineral processing
operations, and our inability to secure a renewed permit or financing to resume
our mining activities
We had a net loss of $144,253 for the three months ended June 30, 2021,
representing a 6.81% decrease from our net loss of $154,805 for the three months
ended June 30, 2020. The change in our results over the two periods is a result
of nominal decreases in our general and administrative expense and in our
interest expense during 2021.
Six Months Ended June 30, 2021 compared to the Six Months Ended June 30, 2020
The following table summarizes key items of comparison and their related
increase (decrease) for the six month ended June 30, 2021 and 2020:
Percentage Increase
(Decrease) Between
Six Month Periods
Six Months Six Months Ended
Ended Ended June 30, 2020 and
June 30, 2021 June 30, 2020 June 30, 2021
General and administrative $ 32,572 $ 37,422 (12.96)%
Interest expense $ 264,681 $ 276,489 (4.27)%
Other income $ (3 ) $ (4 ) (25)%
Net loss $ 297,250 $ 313,907 (5.30)%
We had not earned any revenues during the six months ended June 30, 2021 and
2020. Our lack of revenue was due to the continued idling of our mineral
processing operations, and to our inability to secure a renewed permit or
financing to resume our mineral extraction operations.
We had a net loss of $297,250 for the six months ended June 30, 2021,
representing a 5.30% decrease from our net loss of $313,907 for the six months
ended June 30, 2020. The change in our results over the two periods is a result
of a decrease in our general and administrative expense and interest expense.
17
Table of Contents
Liquidity and Capital Resources
Working Capital
At At
June 30, December 31,
2021 2020
Current assets $ 12,794 $ 3,256
Current liabilities 10,129,095 9,720,101
Working capital deficit $ (10,116,301 ) $ (9,716,845 )
As of June 30, 2021, we had current assets of $12,794 consisting of cash and
cash equivalents, current liabilities of $10,129,095 and a working capital
deficit of $10,116,301. This compares to our current assets of $3,256 consisting
of cash and cash equivalents, current liabilities of $9,720,101, and working
capital deficit of $9,716,845 as of December 31, 2020. The increase in cash and
in liabilities during the most recent period resulted primarily from receipt of
third party loans and the accumulation of interest expense on related party
loans.
As of June 30, 2021, we had accumulated and other comprehensive losses of
$20,710,115 since inception. We anticipate generating additional losses and,
therefore, may be unable to continue operations further in the future.
Cash Flows
Six Months Ended
June 30,
2021 2020
Net cash used in operating activities $ (33,892 ) $ (117,355 )
Net cash provided by financing activities $ 41,061 $ 10,073
Net increase in cash during period $ 9,538 $ (3,678 )
Operating Activities
Net cash used in operating activities during the six months ended June 30, 2021
was $33,892, a 71.12% decrease from the $117,355 in net cash outflow during the
six months ended June 30, 2020. The decrease was a result of a increase of
accrued interest during the most recent period. During the six months ended June
30, 2021 and 2020, we had no sales and did not purchase any raw materials.
Financing Activities
Cash provided by financing activities during the six months ended June 30, 2021
was $41,061, which was a 307.63% increase from the $10,073 cash provided by
financing activities during the six months ended June 30, 2020. The increase was
a result of decreased related party loans during the most recent period.
Plan of Operation
Our operating plan for the 12 months beginning from July 1, 2021 is as follows:
Our operating plan for the balance of fiscal 2021 is to seek an investment of
approximately US$3,350,000, 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. upgrade tailings pond and water treatment facility;
2. extend and expand permitted mining area of Xinzhou Gold to access
higher concentrate ore veins;
3. resume ore exploration and extraction activities;
4. re-start the mill;
5. re-test the mill;
6. develop expansion plans for our plant capacity;
7. drill additional holes near the concentration plant; and
8. 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.
18
Table of Contents
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 2021. 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.
We are not aware of any known trends, demands, commitments, events or
uncertainties that will result in or that are reasonably likely to result in our
liquidity increasing or decreasing in any material way.
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.
19
Table of Contents
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.
Revenue Recognition
Revenue is recognized when products are shipped, title and risk of loss is
passed to the customers and collection is reasonably assured. Payments received
prior to the satisfaction of above criteria are deferred.
© Edgar Online, source Glimpses