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 U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 


 
FORM 10-Q
 


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

For the quarterly period ended June 30, 2012

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

For the transition period from                       to                      

Commission file number 000-53136

Oro East Mining, Inc.

Delaware
(State or other jurisdiction of incorporation or organization)

26-2012582
(I.R.S. Employer Identification Number)

1127 Webster Street, Suite 28, Oakland, CA 94607
(Address of Principal Offices)

(510) 544-1516
(Issuer’s Telephone Number)

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer ¨
Accelerated Filer ¨
Non-Accelerated Filer ¨
(Do not check if a smaller
reporting company)
Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨ No x

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 27,916,440 shares of common stock, par value $.0001 per share, outstanding as of July 31, 2012. 
 
 
ORO EAST MINING, INC.
 
Table of Contents -

     
Page(s)
 
PART I – FINANCIAL INFORMATION:
     
         
Item 1.
  1  
         
   
1
 
         
   
2
 
         
   
3
 
         
   
4
 
         
Item 2.
 
6
 
         
Item 3.
 
7
 
         
 Item 4.
 
7
 
         
PART II – OTHER INFORMATION:
     
         
Item 1.
 
8
 
         
Item 1A.
 
8
 
         
Item 2.
  8
 
         
Item 3.
  8
 
         
Item 4.
  8
 
         
Item 5.
  8
 
         
Item 6.
 
8
 
         
 
9
 
 

 
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q of Oro East Mining, Inc., a Deleware corporation (the “Company”), contains “forward-looking statements,” as defined in the United States Private Securities Litigation Reform Act of 1995.  In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “could”, “expects”, “plans”, “intends”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of such terms and other comparable terminology.  These forward-looking statements include, without limitation, statements about our market opportunity, our strategies, competition, expected activities and expenditures as we pursue our business plan, and the adequacy of our available cash resources.  Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.  Actual results may differ materially from the predictions discussed in these forward-looking statements.  The economic environment within which we operate could materially affect our actual results. Additional factors that could materially affect these forward-looking statements and/or predictions include, among other things: the volatility of minerals prices, the possibility that exploration efforts will not yield economically recoverable quantities of minerals, accidents and other risks associated with mineral exploration and development operations, the risk that the Company will encounter unanticipated geological factors, the Company’s need for and ability to obtain additional financing, the possibility that the Company may not be able to secure permitting and other governmental clearances necessary to carry out the Company’s exploration and development plans, the exercise of the approximately 85.4% control the Company’s voting securities the Company’s Chief Executive Officer, Tian Qing Chen, holds, other factors over which we have little or no control; and other factors discussed in the Company’s filings with the Securities and Exchange Commission (“SEC”).

Our management has included projections and estimates in this Form 10-Q, which are based primarily on management’s experience in the industry, assessments of our results of operations, discussions and negotiations with third parties and a review of information filed by our competitors with the SEC or otherwise publicly available.  We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.  We disclaim any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.
 
 
PART I — FINANCIAL INFORMATION
  
Item 1.                          FINANCIAL STATEMENTS

ORO EAST MINING, INC.
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
 
   
June 30,
   
December 31,
 
   
2012
   
2011
 
ASSETS
           
Current assets:
           
Cash
 
$
14,841
   
$
83,633
 
Other current assets
   
754
     
192
 
Total current assets
   
15,595
     
83,825
 
Property and equipment, net of depreciation of $49,885 and $29,611
   
233,889
     
254,163
 
TOTAL ASSETS
 
$
249,484
   
$
337,988
 
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
               
Current liabilities:
               
Accounts payable
 
$
2,877
   
$
3,925
 
Short-term note payable to shareholder
   
82,000
     
82,000
 
Convertible note payable
   
199,169
     
199,169
 
Accrued liabilities
   
38,528
     
12,619
 
Advances-related party
   
250,978
     
118,448
 
Total current liabilities
   
573,552
     
416,161
 
                 
STOCKHOLDERS' DEFICIT
               
Preferred stock, $.0001 par value per share, 10,000,000 shares
    authorized; no shares issued and outstanding
   
 -
     
 -
 
Common stock, $.0001 par value per share, 100,000,000 shares
    authorized; 27,916,440 shares issued and outstanding
   
2,792
     
2,792
 
Additional paid-in capital
   
1,945,425
     
1,820,703
 
Accumulated deficit
   
(2,275,025
)
   
(1,910,151
)
Accumulated other comprehensive income
   
2,740
     
8,483
 
TOTAL STOCKHOLDERS' DEFICIT
   
(324,068
)
   
(78,173
)
                 
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
 
$
249,484
   
$
337,988
 

See accompanying notes to unaudited consolidated financial statements.


ORO EAST MINING, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF EXPENSES AND COMPREHENSIVE LOSS
(Unaudited)
 
                           
February 15,
 
                           
2008
 
                           
(Inception)
 
                           
Through
 
   
Three Months ended June 30,
   
Six Months ended June 30,
   
June 30,
 
 
 
2012
   
2011
   
2012
   
2011
   
2012
 
Operating expenses:
                             
General and administrative
  $ 168,557     $ 176,621     $ 359,144     $ 356,969     $ 1,682,705  
Exploration costs
    -       341,833       -       555,975       577,417  
Total operating expenses
    168,557       518,454       359,144       912,944       2,260,122  
                                         
Other income (expense):
                                       
Interest expense
    (3,018 )     (3,096 )     (6,033 )     (5,989 )     (22,840 )
Foreign currency gain (loss)
    298       1,099       303       45,631       (20,743 )
Gain on disposal of assets
    -       -       -       -       28,680  
Total other income (expense)
    (2,720 )     (1,997 )     (5,730 )     39,642       (14,903 )
                                         
Net loss
    (171,277 )     (520,451 )     (364,874 )     (873,302 )     (2,275,025 )
                                         
Other comprehensive income (loss)
                                       
Foreign currency translation adjustment
    (3,415 )     -       (5,743 )     -       2,740  
                                         
Comprehensive loss
  $ (174,692 )   $ (520,451 )   $ (370,617 )   $ (873,302 )   $ (2,272,285 )
                                         
Basic earnings (loss) per share - Basic and diluted
  $ (0.01 )   $ (0.02 )   $ (0.01 )   $ (0.03 )        
                                         
Weighted average number of common shares outstanding
    27,916,440       27,299,590       27,916,440       27,271,464          
 
See accompanying notes to unaudited consolidated financial statements.

 
ORO EAST MINING, INC.
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
               
February 18,
 
               
2008
 
               
(Inception)
 
               
Through
 
   
Six Months ended
   
March 31,
 
   
2012
   
2011
   
2012
 
CASH FLOW FROM OPERATING ACTIVITES:
                 
   Net loss
 
$
(364,874
)
 
$
(873,302
)
 
$
(2,275,025
)
   Adjustments to reconcile net loss to net cash used in operating activities:
                       
   Depreciation
   
20,274
     
18,800
     
57,974
 
   Gain on disposal of assets
   
-
     
-
     
(28,680
)
   Share-based compensation
   
124,722
     
118,610
     
370,089
 
   Changes in operating assets and liabilities:
                       
   Other current assets
   
(562
)
   
-
     
(754
)
   Accounts payable
   
       (1,048)
     
 31,774
     
 2,877
 
   Accrued liabilities
   
25,909
     
6,147
     
42,971
 
Net cash used in operating activities
   
(195,579
)
   
(697,971
)
   
(1,830,548
)
                         
CASH FLOW USED IN INVESTING ACTIVITES,
                       
   Purchases of property and equipment
   
-
     
-
     
(64,015
)
                         
CASH FLOW FROM FINANCING ACTIVITIES:
                       
   Proceeds from issuance of common stock
   
-
     
629,001
     
1,570,685
 
   Proceeds from short-term note
   
-
     
5,001
     
82,000
 
   Net proceeds from shareholder advances
   
132,530
     
114,989
     
253,979
 
Net cash provided by financing activities
   
132,530
     
748,991
     
1,906,664
 
                         
Effect of exchange rate on cash
   
(5,743
)
   
-
     
2,740
 
                         
NET INCREASE (DECREASE) IN CASH
   
(68,792
)
   
51,020
     
14,841
 
                         
CASH AT BEGINNING OF PERIOD
   
83,633
     
126,355
     
-
 
                         
CASH AT END OF PERIOD
 
$
14,841
   
$
177,375
   
$
14,841
 
                         
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
                       
   Interest paid
 
$
-
   
$
-
   
$
4,100
 
                         
NON-CASH INVESTING AND FINANCING ACTIVITIES:
                       
   Note payable forgiven by shareholder
 
$
-
   
$
7,443
   
$
7,443
 
   Equipment purchased on short-term note payable
 
$
-
   
$
199,169
   
$
199,169
 
   Trade in of truck
 
$
-
   
$
-
   
$
79,682
 

See accompanying notes to unaudited consolidated financial statements.
 

ORO EAST MINING, INC.
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
 
 
NOTE 1                        ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
(a)         Organization and Business
 
Oro East Mining, Inc. (“we”, “our”, or the “Company”) was incorporated in Delaware on February 15, 2008. The Company is currently in the exploration stage and does not have any customers, or revenue.
 
(b)       Emerging Growth Company 

We are an “emerging growth company,” as defined in the Jumpstart our Business Startups Act of 2012, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden
parachute payments not previously approved.

Under the Jumpstart Our Business Startups Act, “emerging growth companies” can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves to this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not “emerging growth companies.”

 (c)         Basis of Consolidation
 
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary.  All significant intercompany accounts and transactions have been eliminated.
 
(d)         Basis of Presentation
 
The accompanying interim consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”). In the opinion of management, all adjustments for a fair statement of the results and operations and financial position for the interim periods presented have been included. All such adjustments are of a normal recurring nature.   The June 30, 2012 interim consolidated financial statements presented herein may not be indicative of the results of the Company for the year ending December 31, 2012. These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed with the SEC on March 30, 2012.
 
(e)         Share-based Compensation
 
The Company recognizes the services received in a share-based payment transaction as the services are received. The services received are measured at the fair value of the equity instruments issued.
 
(f)         Going Concern
 
The accompanying interim consolidated financial statements have been prepared on a going concern basis, which assumes the Company will realize its assets and discharge its liabilities in the normal course of business. As reflected in the accompanying interim consolidated financial statements, the Company has a negative deficit accumulated during the exploration stage of $2,275,025 and has negative working capital of $557,957 at June 30, 2012. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management’s plan includes obtaining additional funds by equity financing and/or related party advances, but there is no assurance of additional funding being available. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying interim consolidated financial statements do not include any adjustments that might arise as a result of this uncertainty.
 
 
(g)         Reclassification

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

NOTE 2                        RELATED PARTY TRANSACTIONS
 
The shareholder and officer of the Company paid expenses on behalf of the Company during the six months ended June 30, 2012. As of June 30, 2012 and December 31, 2011, the Company owed shareholder and officer the amount of $250,978 and $118,448, respectively. The balances are unsecured, non-interest bearing and due on demand.
 
NOTE 3                        EQUITY
 
During the fiscal year 2011 and 2010, the Company entered into consulting agreements with two companies to issue up to 24,440 and 225,000 common shares respectively for services to be received over the period of two years. The shares are forfeitable if the services are not provided. The shares were valued at $2 per share for a total of $498,880. During the six months ended June 30, 2012, the Company recognized $124,722 in share based compensation related to the consulting services.
 
 
Item 2.                          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS    
 
The following discussion provides information that the Company’s management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with the Company’s consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. Undue certainty should not be placed on these forward-looking statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.

Business Overview

We are an exploration stage mining company engaged in the search for gold, copper and other precious or industrial mineral deposits and have not yet generated or realized any revenues from our business.

We do not expect any significant changes or hiring of employees since contracts are given to consultants and sub-contractor specialists in specific fields of expertise for the exploration work. We do not expect to purchase or sell any plant or significant equipment. We intend to lease or rent any equipment, such as backhoe, diamond drill, generators and so on, that we will need in order to carry out our exploration activities.

In October of 2011, we filed a registration statement on the Form S-1 for the public offering of 6,866,440 shares of common stock (“Offering”), and on July 25, 2012 the SEC approved and declared the effectiveness of the registration statement.
 
Results of Operations

The following is a summary of the Company’s operation results for the three and six months ended June 30, 2012 and 2011:

 
Three months ended June 30,
 
Six months ended June 30,
 
 
2012
 
2011
 
2012
 
2011
 
 
(Unaudited)
 
(Unaudited)
 
Total operating expenses
  $ (168,557 )   $ (518,454 )   $ (359,144 )   $ (912,944 )
Total other income (expense)
    (2,720 )     (1,997 )     (5,730 )     39,642  
Net loss
  $ (171,277 )   $ (520,451 )   $ (364,874 )   $ (873,302 )
 
The Company is still in the exploration stage, and no revenue has been generated since the inception of the Company on February 15, 2008. 

Operating expenses decreased by about $350,000 and $550,000 for the three and six months ended June 30, 2012 and 2011 was due to the decrease of about $342,000 and $556,000 in exploration costs for the respective periods.  There were no exploration activities during the first six months of 2012 due to heavy flooding in the Philippines during the first quarter of 2012 and the pending of SEC’s approval of Form S-1 for funding from additional stock issuance.  General and administrative expenses did not change much between the three and six months ended June 30, 2012 and 2011.

Liquidity and Capital Resources

As of June 30, 2012 and December 31, 2011, the Company had a total of $249,484 and 337,988 in assets including $14,841 and $83,633 of cash, respectively.  Decrease of about $89,000 in total assets was due to the $69,000 net cash used for the operations and the $20,000 increase in accumulated depreciation for the first six months of 2012.  The Company also had $573,552 and $416,161 current liabilities as of June 30, 2012 and December 31, 2011, respectively.  Increase of about $157,000 in total current liabilities was due to the increase of $132,000 and $26,000 in related party advances and accrued liabilities, respectively.
 

The following is a summary of the Company's cash flows provided by (used in) operating and financing activities for the six months ended June 30, 2012 and 2011:
 
   
2012
   
2011
 
   
(Unaudited)
 
Net Cash Used In Operating Activities
 
$
(195,579
)
 
$
(697,971
)
Net Cash Provided By Financing Activities
   
132,530
     
748,991
 
Effect of exchange rate on cash
   
(5,743
)
   
-
 
Net increase/(decrease) on cash
 
$
(68,792
)
 
$
51,020
 

Our principal sources of liquidity are our cash and the cash flow provided by the shareholder advances and equity financing.  We believe that further equity financing is needed to satisfy our anticipated cash requirements through the next 12 months.

Total cash decreased by about $69,000 was mainly due to about $196,000 of cash used for funding the operations despite about $132,000 of cash provided by shareholder advances during the six months ended June 30, 2012.  There was no cash used for investing activities during the six months ended June 30, 2012 and 2011.

Critical Accounting Policies

There have been no material changes in the critical accounting policies since December 31, 2011.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Item 3.                          QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

Item 4.                          CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures
 
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of June 30, 2012.   Disclosure controls and procedures means that the material information required to be included in our Securities and Exchange Commission reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms relating to our company, including any consolidating subsidiaries, and was made known to us by others within those entities, particularly during the period when this report was being prepared.  Based on this evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective as of June 30, 2012.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the quarter ended June 30, 2012, that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 

PART II — OTHER INFORMATION

Item 1.                          LEGAL PROCEEDINGS

The Company is not currently subject to any legal proceedings.  From time to time, the Company may become subject to litigation or proceedings in connection with its business, as either a plaintiff or defendant.  There are no such pending legal proceedings to which the Company is a party that, in the opinion of management, is likely to have a material adverse effect on the Company’s business, financial condition or results of operations.

Item 1A.                       RISK FACTORS
 
As a “smaller reporting company” (as defined in Rule 12b-2 of the Exchange Act), the Company is not required to provide information required by this Item 1A.

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

None.

Item 3.                          DEFAULTS UPON SENIOR SECURITIES

None.

Item 4.                          MINE SAFETY DISCLOSURES

None.

Item 5.                          OTHER INFORMATION

None.

Item 6.                          EXHIBITS

(a)  Exhibits required by Item 601 of Regulation SK. 
 
Exhibit
 
Description
3.1.1
 
Certificate of Incorporation (1)
3.1.2
 
Certificate of Amendment to Certificate of Incorporation (2)
3.2
 
Bylaws (1)
31.1
 
31.2
 
32.1
 
     
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  Labels Linkbase Document *
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document *

(1)  Filed and incorporated by reference to the Company’s Registration Statement on Form 10-SB (File No. 000-53136), as filed with the Securities and Exchange Commission on March 19, 2008.

(2)  Filed and incorporated by reference to the Company’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-177509), as filed with the Securities and Exchange Commission on January 30, 2012.

*           Filed herewith

 


 Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Dated: August 10, 2012
 
ORO EAST MINING, INC.
              (Registrant)
     
 
By:
/s/ Tian Q Chen
 
Chief Executive Officer
 
(Principal Executive Officer and Principal
Financial and Accounting Officer)


 



Exhibit
 
Description
3.1.1
 
Certificate of Incorporation (1)
3.1.2
 
Certificate of Amendment to Certificate of Incorporation (2)
3.2
 
Bylaws (1)
31.1
 
31.2
 
32.1
 
     
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  Labels Linkbase Document *
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document *

(1)  Filed and incorporated by reference to the Company’s Registration Statement on Form 10-SB (File No. 000-53136), as filed with the Securities and Exchange Commission on March 19, 2008.

(2)  Filed and incorporated by reference to the Company’s Amendment No. 1 to Registration Statement on Form S-1 (File No. 333-177509), as filed with the Securities and Exchange Commission on January 30, 2012.
 
*           Filed herewith