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EX-32.2 - Target Acquisitions I, Inc.e610016_ex32-2.htm
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EX-32.1 - Target Acquisitions I, Inc.e610016_ex32-1.htm
EX-31.1 - Target Acquisitions I, Inc.e610016_ex31-1.htm
EXCEL - IDEA: XBRL DOCUMENT - Target Acquisitions I, Inc.Financial_Report.xls
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q/A
 
(Mark One)
 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE QUARTERLY PERIOD ENDED June 30, 2012
OR
 
o
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
FOR THE TRANSITION PERIOD FROM _______ TO ________.
 
COMMISSION FILE NUMBER: 000-53328
 
TARGET ACQUISITIONS I, INC.
(Exact Name of Registrant as Specified in its Charter)

 
 Delaware
26-2895640
(State or other jurisdiction of  
(I.R.S. Employer
 incorporation or organization) 
Identification No.)
   
Chunshugou Luanzhuang Village, Zhuolu County, Zhangjiakou, Hebei Province, China
075600
(Address of principal executive offices)  
(Zip code)
 
Issuer's telephone number: 86-313-6732526 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
 
 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
 
 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 o
 
Accelerated filer o
Non-accelerated filer o (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 o  No x
 
State the number of shares outstanding of each of the issuer's classes of common equity, for the period covered by this report and as at the latest practicable date:
 
At August 13, 2012, we had outstanding 8,000,100 shares of common stock.
 
 
 

 
 
TARGET ACQUISITIONS I, INC.
TABLE OF CONTENTS
 
PART I
FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
   
Consolidated Balance Sheets as of June 30, 2012 and 2011  
1
   
Consolidated Statements of Operations and Other Comprehensive Income (Loss) Three Months and Six Months Ended June 30, 2012 and 2011 (unaudited)
2
   
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2012 and 2011 (audited)  
3
   
Notes to Consolidated Financial Statements
4
   
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
16
   
Item 4. Controls and Procedures
26
 
PART II
OTHER INFORMATION
   
Item 1A. Risk Factors
27
   
Item 6. Exhibits
27
   
Signatures
28
 
Special Note Regarding Forward Looking Statements
 
This report contains forward-looking statements. The forward-looking statements are contained principally in the section entitled “Management's Discussion and Analysis of Financial Condition and Results of Operations.” These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. You should read this report and the documents that we reference and filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.
 
 
TARGET ACQUISITIONS I, INC. AND SUBSIDIARIES
 
CONSOLIDATED BALANCE SHEETS
 
JUNE 30, 2012 (UNAUDITED) AND DECEMBER 31, 2011
 
             
   
2012
   
2011 (Restated)
 
             
ASSETS
           
CURRENT ASSETS
           
Cash & equivalents
  $ 35,602     $ 196,116  
Inventory
    672,800       672,127  
Advance to suppliers
    163,557       -  
Other receivable
    5,506       -  
Total current assets
    877,465       868,243  
NONCURRENT ASSETS
               
Property and equipment, net
    9,081,213       9,596,034  
Intangible assets
    576,289       598,205  
Construction in progress
    658,421       196,004  
Deferred tax assets
    3,236       3,247  
Total noncurrent assets
    10,319,159       10,393,490  
TOTAL ASSETS
  $ 11,196,624     $ 11,261,733  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
               
CURRENT LIABILITIES
               
Accounts payable
  $ 8,427     $ -  
Accrued liabilities and other payables
    433,354       261,759  
Payable to contractors
    869,579       872,891  
Income taxes payable
    130,706       131,201  
Advance from shareholder
    634,635       -  
Total current liabilities
    2,076,701       1,265,851  
Total liabilities
    2,076,701       1,265,851  
CONTINGENCIES AND COMMITMENT
               
STOCKHOLDERS' EQUITY
               
Preferred stock: $0.001 par value; 10,000,000 shares authorized, no shares issued and outstanding
    -       -  
Common stock, $0.001 par value; authorized shares 100,000,000; issued and outstanding 8,000,100
    8,000       8,000  
Paid in capital
    5,296,312       5,296,312  
Statutory reserves
    557,253       557,253  
Accumulated other comprehensive income
    514,472       550,570  
Retained earnings
    2,743,886       3,583,747  
Total stockholders' equity
    9,119,923       9,995,882  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
  $ 11,196,624     $ 11,261,733  

The accompanying notes are an integral part of these consolidated financial statements.
 
 
TARGET ACQUISITIONS I, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
SIX AND THREE MONTHS ENDED JUNE 30, 2012 AND 2011 (UNAUDITED)
 
   
SIX MONTHS ENDED
JUNE 30,
   
THREE MONTHS ENDED
JUNE 30,
 
   
2012
   
2011 (Restated)
   
2012
   
2011 (Restated)
 
Net sales
  $ -     $ 4,377,375     $ -     $ 4,377,375  
Cost of goods sold
            2,219,870               2,219,870  
   Gross profit
    -       2,157,505       -       2,157,505  
Operating expenses
                               
   General and administrative
    838,811       606,911       409,764       273,585  
Income (Loss) from operations
    (838,811 )     1,550,594       (409,764 )     1,883,920  
Non-operating income
                               
   Interest income
    169       1,342       103       540  
   Other expense
    (920 )     -       -       -  
   Financial expense
    (301 )     (74 )     (213 )     (74 )
Total non-operating income (expenses), net
    (1,052 )     1,268       (110 )     466  
Income (loss) before income tax
    (839,863 )     1,551,862       (409,874 )     1,884,386  
Income tax
    -       389,422       -       389,422  
Net income (loss)
    (839,863 )     1,162,440       (409,874 )     1,494,964  
Other comprehensive income
                               
      Foreign currency translation gain (loss)
    (36,098 )     174,484       (45,814 )     109,541  
Comprehensive income (loss)
  $ (875,961 )   $ 1,336,924     $ (455,688 )   $ 1,604,505  
Basic weighted average shares outstanding
    8,000,100       8,000,000       8,000,100       8,000,000  
Basic net earnings (loss) per share
  $ (0.10 )   $ 0.15     $ (0.05 )   $ 0.19  

The accompanying notes are an integral part of these consolidated financial statements.
 
 
TARGET ACQUISITIONS I, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2012 AND 2011
(UNAUDITED)
 
   
2012
   
2011 (Restated)
 
             
CASH FLOWS FROM OPERATING ACTIVITIES:
           
            Net income (loss)
  $ (839,863 )   $ 1,162,440  
            Adjustments to reconcile net income (loss) to net cash
               
            used in (provided by) operating activities:
               
            Depreciation and amortization
    525,094       504,701  
            Change in deferred tax
    -       (513 )
                  (Increase) decrease in current assets:
               
                       Accounts receivable
    -       (1,351,470 )
                       Inventory
    (3,232 )     (268,302 )
                       Other receivable
    (5,521 )     -  
                       Advance to suppliers
    (164,010 )     -  
                   Increase (decrease) in current liabilities:
               
                        Accounts payable
    8,450          
                        Accrued liabilities and other payables
    172,577       693,934  
                        Income taxes payable
    -       621,970  
            Net cash (used in) provided by operating activities
    (306,505 )     1,362,760  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
                        Construction in progress
    (464,446 )     -  
                        Acquisition of property, plant & equipment
    (25,657 )     (581 )
            Net cash used in investing activities
    (490,103 )     (581 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
                        Short term borrowing
    -       128,700  
                        Repayment of long term payable
    -       (1,452,355 )
                        Repayment to related party
    -       (4,736,206 )
                        Proceeds from investors
    -       4,586,385  
                        Advance from related party
    636,395       -  
            Net cash provided by (used in) financing activities
    636,395       (1,473,476 )
                 
EFFECT OF EXCHANGE RATE CHANGE ON CASH & EQUIVALENTS
    (301 )     4,037  
NET DECREASE IN CASH & EQUIVALENTS
    (160,514 )     (107,260 )
CASH & EQUIVALENTS, BEGINNING OF PERIOD
    196,116       283,299  
CASH & EQUIVALENTS, END OF PERIOD
  $ 35,602     $ 176,039  
Supplemental Cash flow data:
               
             Income tax paid
  $ -     $ 139,179  
             Interest paid
  $ -     $ -  

The accompanying notes are an integral part of these consolidated financial statements.
 
 
TARGET ACQUISITIONS I, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF JUNE 30, 2012 (UNAUDITED) AND DECEMBER 31, 2011
  
1.   ORGANIZATION AND DESCRIPTION OF BUSINESS
 
Target Acquisitions I, Inc. (“the Company” or “Target”) was incorporated in the state of Delaware on June 27, 2008 to raise capital intended to be used in connection with its business plan which may include a possible merger, acquisition or other business combination with an operating business.

Effective October 1, 2011, the Company entered into a share exchange with China Real Fortune Mining Limited (“Real Fortune BVI”), and the shareholders of Real Fortune BVI, pursuant to which the Company acquired 100% of the issued and outstanding capital stock of Real Fortune BVI for 8,000,000 of the Company’s common shares.  Immediately prior to the consummation of the share exchange, there were 100 shares of the Company’s common stock outstanding (after retirement of 4,999,900 common shares). Upon completion of the foregoing transactions, the Company had 8,000,100 shares of common stock issued and outstanding.  Real Fortune BVI was incorporated on September 13, 2010 in the British Virgin Islands (“BVI”) to serve as an intermediate holding company.

The acquisition of Real Fortune BVI was accounted for as a recapitalization effected by a share exchange, wherein Real Fortune BVI was considered the acquirer for accounting and financial reporting purposes with no adjustment to the historical basis of its assets and liabilities. Real Fortune BVI’s shareholders become the Company’s majority shareholders and have control of the Company Target was a non-operating public shell prior to the acquisition. As a result of the acquisition of Real Fortune BVI, Target is no longer a shell company. Pursuant to Securities and Exchange Commission (“SEC”) rules, the merger or acquisition of a private operating company into a non-operating public shell with nominal net assets is considered a capital transaction in substance, rather than a business combination. As a result, the accompanying consolidated financial statements were retroactively restated to reflect the recapitalization.

Zhangjiakou Tongda Mining Technologies Service Co., Ltd. (“China Tongda”) was incorporated on August 17, 2010 as a wholly foreign owned entity under the laws of the People’s Republic of China (“PRC”).  China Tongda is 100% owned by Real Fortune Holding Limited (“Real Fortune HK”), a company incorporated and registered in Hong Kong on April 23, 2010 by Changkui Zhu, the CEO of the Company, who then owned 100% of Real Fortune HK. On April 14, 2011, Mr. Zhu sold 100% of his ownership interest in Real Fortune HK to Real Fortune BVI for HKD 10,000 ($1,286), which was the registered share capital of Real Fortune HK. Both China Tongda and Real Fortune HK had no operations at the time of ownership transfer.  Accordingly, since April 14, 2011, Real Fortune HK has been 100% owned by Real Fortune BVI.  Real Fortune BVI is ultimately owned by a group of shareholders who are the shareholders of Zhuolu Jinxin Mining Co., Ltd. (“China Jinxin”). Therefore, China Tongda was directly controlled by Real Fortune HK, and Real Fortune HK was directly controlled by Real Fortune BVI prior to the execution of a series of contractual agreements between China Tongda and China Jinxin in May 2011, described below.
 

 
China Jinxin was incorporated in China on December 21, 2006. China Jinxin is engaged in iron ore processing and concentrate production in the PRC. The main product of China Jinxin is iron ore concentrate.

On May 9, 2011, China Jinxin and its shareholders entered into a series of agreements, including a Management Entrustment, an Exclusive Purchase Option and Equity Pledge Agreements with China Tongda, and each shareholder of China Jinxin granted China Tongda an irrevocable power of attorney to appoint China Tongda as his attorney-in-fact to exercise all of its rights as equity owner of China Jinxin. According to these agreements, Wholly Foreign Owned Enterprise (“WFOE”) acquired management control of China Jinxin whereby WFOE is entitled to all net profits of China Jinxin as a management consultation and technical supporting fee, and is obligated to manage and fund China Jinxin’s operations and pay its debts. As a result of these agreements, China Tongda is considered the primary beneficiary of China Jinxin, and China Tongda must consolidate the results of operations of China Jinxin, as China Tongda contractually controls the management of China Jinxin and China Jinxin granted an irrevocable proxy to China Tongda or its designee as defined in ASC Topic 810, “Consolidation”.  Consolidation of Variable Interest Entities (“VIE”), included in ASC Topic 810, requires certain VIEs to be consolidated by the entity’s primary beneficiary if the equity investors in the entity do not have the characteristics of a controlling financial interest or sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties.
 
The Management Entrustment Agreement is for 30 years, or until May 9, 2041, and will be extended automatically for successive 10 year periods thereafter, except that the agreement will terminate (i) at the expiration of the initial 30-year term, or any 10-year renewal term, if WFOE notifies China Jinxin not less than 30 days prior to the applicable expiration date that it does not want to extend the term, (ii) upon prior written notice from WFOE, or (iii) upon the date WFOE acquires all of the assets, or at least 51% of the equity interests, of China Jinxin. The term of each Exclusive Purchase Option Agreement is 30 years, or until May 9, 2041, and will be extended automatically for successive 10-year periods thereafter, unless WFOE notifies China Jinxin and the shareholder of China Jinxin granting the option at least 30 days prior to the applicable expiration date that it does not want to extend the option.
 
China Jinxin’s results of operations, assets and liabilities are consolidated in the Company’s financial statements from the earliest period presented.  The Group’s structure as of June 30, 2012 is as follows:
 
 
Target Acquisitions I, Inc. (“Target”)
 
           
           
China Real Fortune
Mining Limited
 
(Real Fortune BVI)
       
           
Real Fortune Holding
Limited
 
(Real Fortune HK)
       
         
Off-shore
         
On-shore
Zhangjiakou Tongda
Mining Technologies
Service Co., Ltd
 
(China Tongda or WFOE)
◄------------------------------------►
VIE Agreement
Zhuolu Jinxin Mining
Co., Ltd
 
(China Jinxin)
 

 
Through contractual arrangements between China Tongda and China Jinxin, the Company controls China Jinxin’s operations and financial affairs. As a result of these agreements, China Tongda is considered the primary beneficiary of China Jinxin (see Note 2) and accordingly, China Jinxin’s results of operations and financial condition are consolidated in the group financial statements. All issued and outstanding shares of China Jinxin are ultimately held by 15 Chinese citizens.

The consolidated interim financial information as of June 30, 2012 and for the six and three month periods ended June 30, 2012 and 2011 was prepared without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures, which are normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”) was not included. The interim consolidated financial information should be read in conjunction with the Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011, previously filed with the SEC.
 
In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s consolidated financial position as of June 30, 2012, results of operations and cash flows for the six month periods ended June 30, 2012 and 2011, as applicable, were made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.
 
2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements were prepared in conformity with US GAAP. Target and Real Fortune BVI’s functional currency is the US Dollar (‘‘USD’’ or “$”), Real Fortune HK’s functional currency is Hong Kong Dollar (‘‘HKD’’) and China Tongda’s and China Jinxin’s functional currency is Chinese Renminbi (‘‘RMB’’). The accompanying financial statements were translated from functional currencies and presented in USD.
 
Principles of Consolidation
 
The consolidated financial statements include the financial statements of the Company, its subsidiaries and its VIE for which the Company’s subsidiary China Tongda is the primary beneficiary. All transactions and balances among the Company, its subsidiaries and VIE were eliminated in consolidation.
 
The Company follows  ASC 810 which requires a VIE be consolidated by a company if that company is subject to a majority of the risk of loss from the VIE or is entitled to a majority of the VIE’s residual returns. In determining China Jinxin is the VIE of China Tongda, the Company considered the following indicators, among others:
 
China Tongda has the right to control and administer the financial affairs and operations of China Jinxin and to manage and control all assets of China Jinxin. The equity holders of China Jinxin as a group have no right to make any decision about China Jinxin’s activities without the consent of China Tongda. China Tongda will be paid quarterly, management consulting and technical support fees equal to all pre-tax profits, if any, of that quarter. If there are no earnings before taxes and other cash expenses, then no fee shall be paid. If China Jinxin sustains losses, they will be carried to the next period and deducted from the next service fee. China Jinxin has the right to require China Tongda pay China Jinxin the amount of any loss incurred by China Jinxin.
 
The shareholders of China Jinxin pledged their equity interests in China Jinxin to China Tongda to guarantee China Jinxin’s performance of its obligations under the Equity Pledge Agreement. If either China Jinxin or its equity owners is in breach of the Equity Pledge or Exclusive Purchase Option Agreements, then China Tongda is entitled to require the equity owners of China Jinxin to transfer their equity interests in China Jinxin to it.
 

 
The shareholders of China Jinxin irrevocably granted China Tongda or its designated person an exclusive option to acquire, at any time, all of the assets or outstanding shares of China Jinxin, to the extent permitted by PRC law. The purchase price for the shareholders’ equity interests in China Jinxin shall be the lower of (i) the actual registered capital of China Jinxin or(ii) RMB 500,000 ($78,000), unless an appraisal is required by the laws of China.
 
Each shareholder of China Jinxin executed an irrevocable power of attorney to appoint China Tongda as its attorney-in-fact to exercise all of its rights as equity owner of China Jinxin, including 1) attend the shareholders’ meetings of China Jinxin and/or sign the relevant resolutions; 2) exercise all the shareholder's rights and shareholder's voting rights that the shareholder is entitled to under the laws of the PRC and the Articles of Association of China Jinxin, including but not limited to the sale or transfer or pledge or disposition of the shares in part or in whole; 3) designate and appoint the legal representative, Chairman of the Board of Directors (“BOD”), Directors, Supervisors, the Chief Executive Officer, Financial Officer and other senior management members of China Jinxin; and 4) execute the relevant share purchases and other terms stipulated in the Exclusive Purchase Option and Share Pledge Agreements.
 
Use of Estimates
 
In preparing financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates, required by management, include the recoverability of long-lived assets, allowance for doubtful accounts, and the reserve for obsolete and slow-moving inventories. Actual results could differ from those estimates
  
Cash and Equivalents
 
For financial statement purposes, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
 
Accounts Receivable
 
The Company maintains reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. Based on historical collection activity, the Company had no accounts receivable or bad debt allowances at June 30, 2012 and December 31, 2011.
 
Inventory
 
Inventory consists of iron ore, iron ore concentrate and supplies. Inventory is valued at the lower of average cost or market, cost being determined on a moving weighted average basis method; including labor and all production overheads.
 
Property and Equipment
 
Property and equipment are stated at cost, less accumulated depreciation. Major repairs and betterments that significantly extend original useful lives or improve productivity are capitalized and depreciated over the period benefited. Maintenance and repairs are expensed as incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using shorter of useful live of the property or the unit of depletion method. For shorter-lived assets the straight-line method over estimated lives ranging from 3 to 20 years is used as follows:
 
Office Equipment
3-5 years
Machinery
10 years
Vehicles
5 years
Building                       
20 years
 
 
Impairment of Long-Lived Assets
 
Long-lived assets, which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
 
Recoverability of long-lived assets to be held and used is measured by comparing of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by it. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds its fair value (“FV”). FV is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. Based on its review, the Company believes that, as of June 30, 2012 and December 31, 2011, there were no impairments of its long-lived assets. 
 
Income Taxes
 
The Company utilizes FASB ASC Topic 740, “Income Taxes”, which requires recognition of deferred tax assets and liabilities for expected future tax consequences of events included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
 
When tax returns are filed, it is likely that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about their merits or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50% likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest associated with unrecognized tax benefits are classified as interest expense and penalties are classified in selling, general and administrative expenses in the statements of income. At June 30, 2012 and December 31, 2011 the Company did not take any uncertain positions that would necessitate recording a tax related liability. 
 
Revenue Recognition
 
The Company’s revenue recognition policies are in compliance with FASB ASC Topic 605, “Revenue Recognition”.   Sales are recognized when a formal arrangement exists, which is generally represented by a contract between the Company and the buyer; the price is fixed or determinable; title has passed to the buyer, which generally is at the time of delivery; no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are recorded as unearned revenue. 
 
Sales are the invoiced value of iron ore concentrate, net of value-added tax (“VAT”). All of the Company’s iron ore concentrate sold in the PRC is subject to a value-added tax of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing the finished product. The Company records VAT payable and VAT receivable net of payments in the financial statements. The VAT tax return is filed offsetting the payables against the receivables. Sales and purchases are recorded net of VAT collected and paid as the Company acts as an agent for the government.
  
 
Cost of Goods Sold
 
Cost of goods sold (“COGS”) consists primarily of fuel and power direct material and labor, depreciation of mining plant and equipment, attributable to the production of iron ore concentrate. Write-down of inventory to lower of cost or market is also recorded in COGS.

Concentration of Credit Risk
 
The operations of the Company are in the PRC.  Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, and by the general state of the PRC economy.
 
The Company has cash on hand and demand deposits in accounts maintained with state-owned banks within the PRC. Cash in state-owned banks is not covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in these bank accounts.

Statement of Cash Flows
 
In accordance with FASB ASC Topic 230, “Statement of Cash Flows”, cash flows from the Company’s operations are calculated based upon the local currencies.  As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.  

Fair Value of Financial Instruments
 
Certain of the Company’s financial instruments, including cash and equivalents, accrued liabilities and short-term debt, carrying amounts approximate their fair values due to their short maturities.  FASB ASC Topic 825, “Financial Instruments,” requires disclosure of the FV of financial instruments held by the Company. The carrying amounts reported in the balance sheets for current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and the current market rate of interest.
 
Fair Value Measurements and Disclosures
 
ASC Topic 820, “Fair Value Measurements and Disclosures,” defines FV, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for FV measures. The three levels are defined as follow:

 
Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
 
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
 
Level 3 inputs to the valuation methodology are unobservable and significant to the FV measurement.
 
As of June 30, 2012 and December 31, 2011 the Company did not identify any assets and liabilities that are required to be presented on the balance sheet at FV.
 
Foreign Currency Translation and Comprehensive Income (Loss)
 
The functional currency of China Jinxin is RMB. For financial reporting purposes, RMB were translated into USD as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet dates. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period.
 
Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive income”. Gains and losses resulting from foreign currency transactions are included in income. There was no significant fluctuation in the exchange rate for the conversion of RMB to USD after the balance sheet date. 
 
 
The fluctuation of exchange rates does not imply free convertibility of RMB to other foreign currencies. All foreign exchange transactions continue to take place either through the People’s Bank of China (“PBOC”) or other banks authorized to buy and sell foreign currencies at the exchange rate quoted by the PBOC.
 
The Company uses FASB ASC Topic 220, “Comprehensive Income”.  Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders. Comprehensive income for the six and three months ended June 30, 2012 and 2011 consisted of net income and foreign currency translation adjustments.
 
Earnings (loss) per Share (EPS)
 
Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding for the period. Diluted EPS is computed similar to basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if all the potential common shares, warrants and stock options had been issued and if the additional common shares were dilutive. Diluted EPS are based on the assumption that all dilutive convertible shares and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method for the outstanding options and warrants, and the if-converted method for the outstanding convertible instruments. Under the treasury stock method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later) and as if funds obtained thereby were used to purchase common stock at the average market price during the period. Under the if-converted method, outstanding convertible instruments are assumed to be converted into common stock at the beginning of the period (or at the time of issuance, if later).
 
Segment Reporting
 
FASB ASC Topic 280, “Segment Reporting”, requires use of the “management approach” model for segment reporting.  The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance.  Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.
 
FASB ASC Topic 280 has no effect on the Company’s financial statements as substantially all of its operations are conducted in one industry segment – iron ore mining.
 
New Accounting Pronouncements

In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income”. Under the amendments in this ASU, an entity has two options for presenting its total comprehensive income: to present total comprehensive income and its components along with the components of net income in a single continuous statement, or in two separate but consecutive statements. The amendments in this ASU are to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. There was no material impact on our consolidated financial statements upon adoption.
 
In September 2011, the FASB issued ASU No. 2011-08, Intangibles—Goodwill and Other (Topic 350)—Testing Goodwill for Impairment, to simplify how entities test goodwill for impairment. ASU No. 2011-08 allows entities to first assess qualitative factors to determine whether it is more likely than not that the FV of a reporting unit is less than its carrying amount. If greater than a 50% likelihood exists that the FV is less than the carrying amount then a two-step goodwill impairment test as described in Topic 350 must be performed. The guidance provided by this update is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company adopted this ASU beginning with its Quarterly Report on Form 10-Q for the three months ended March 31, 2012. There was no material impact on our consolidated financial statements upon adoption.
 
 
In December 2011, The FASB issued ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05. ASU 2011-12 defers the requirement a company present reclassification adjustments for each component of accumulated other comprehensive income (“AOCI”) in both net income and other comprehensive income (“OCI”) on the face of the financial statements. All other requirements in ASU No. 2011-05 are not affected by ASU No. 2011-12, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements.  Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this standard did not have a material impact on the Company’s consolidated financial position and results of operations.
 
On July 27, 2012, the FASB issued ASU 2012-02, Intangibles-Goodwill and Other (Topic 350) - Testing Indefinite-Lived Intangible Assets for Impairment.  The ASU provides entities with an option to first assess qualitative factors to determine whether events or circumstances indicate it is more likely than not that the indefinite-lived intangible asset is impaired.  If an entity concludes that it is more than 50% likely that an indefinite-lived intangible asset is not impaired, no further analysis is required.  However, if an entity concludes otherwise, it would be required to determine the fair value of the indefinite-lived intangible asset to measure the amount of actual impairment, if any, as currently required under US GAAP. The ASU is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.  Early adoption is permitted. The adoption of this pronouncement will not have a material impact on its financial statements.

As of June 30, 2012, there are no other recently issued accounting standards not yet adopted that would have a material effect on the Company’s consolidated financial statements.

3.   INVENTORY
 
Inventory consisted of the following at June 30, 2012 and December 31, 2011:
 
   
2012
   
2011
 
Material
  $ 21,256     $ 18,102  
Finished goods
    651,544       654,025  
Total
  $ 672,800     $ 672,127  
 
4.   MINING RIGHTS

The Company is currently negotiating with the Department of Land and Resources of Hebei Province and the local Zhuolu county government to obtain the rights to mine in the location where it currently mines. Pending the final contract, the Company accrued the cost of mining rights based on the quantity of ore extracted. The Company used $0.38 (RMB 2.4 per ton) based on a royalty rate prescribed by the local authority based on purity of ore in the subject mines. If the rate per ton of ore changes when the contract is finalized, the Company will account for the change prospectively as a change in accounting estimate. 

5.   PROPERTY AND EQUIPMENT, NET
 
Property and equipment consisted of the following at June 30, 2012 and December 31, 2011: 
 
   
2012
   
2011
 
Building
  $ 6,895,296     $ 6,921,560  
Production equipment
    4,049,040       4,064,463  
Transportation equipment
    1,219,505       1,206,957  
Office equipment
    97,793       89,675  
      12,261,634       12,282,655  
Less: Accumulated depreciation
    (3,180,421 )     (2,686,621 )
    $ 9,081,213     $ 9,596,034  
 
 
Depreciation for the six months ended June 31, 2012 and 2011 was $505,393 and $485,705, respectively.  Depreciation for the three months ended June 30, 2012 and 2011 was $253,273 and $244,381, respectively.
 
6.   ADVANCE FROM SHAREHOLDER
 
At June 30, 2012, the Company owed one shareholder $634,635 (RMB 4,014,000) for money borrowed to purchase equipment to be used in construction in progress.  This advance was non-interest bearing and payable on demand.
 
7.   INTANGIBLE ASSETS
 
Intangible assets consisted solely of land use rights. All land in the PRC is government-owned and cannot be sold to any individual or company. However, the government grants the user a “land use right” to use the land. The Company acquired land use rights during 2006 for $0.75 million (RMB 5 million).  The Company has the right to use the land for 20 years and is amortizing such rights on a straight-line basis for 20 years.
 
Intangible assets consisted of the following at June 30, 2012 and December 31, 2011:

   
2012
   
2011
 
Land use rights
 
$
943,954
   
$
788,842
 
Less: Accumulated amortization
   
(367,665
)
   
(190,637
)
Net
 
$
576,289
   
$
598,205
 
 
Amortization of intangible assets for the six months ended June 30, 2012 and 2011 was $19,717 and $18,997, respectively.   Amortization of intangible assets for the three months ended June 30, 2012 and 2011 was $9,867 and $9,559, respectively. Annual amortization for the next five years from June 30, 2012, is expected to be: $39,400; $39,400; $39,400;$39,400 and $39,400.

8.   CONSTRUCTION IN PROGRESS

The construction in progress represented purchase of equipment and installation for future iron ore refining business. The Company spent approximately $460,000 for the construction during the six months ended June 30, 2012. The project was estimated to be completed in September of 2012.

9.   DEFERRED TAX ASSETS
 
Deferred tax asset is the difference between the tax and book for accrued mine restoration cost. 
 
10.   ACCRUED LIABILITIES AND OTHER PAYABLES

Accrued liabilities and other payables consisted of the following at June 30, 2012 and December 31, 2011:
 
   
2012
   
2011
 
Accrued payroll
 
$
18,379
   
$
29,380
 
Accrued mining rights
   
69,943
     
70,209
 
Accrued mine restoration fee
    12,942       12,991  
Other payables
   
332,090
     
128,700
 
Other
   
-
     
20,479
 
Total
 
$
433,354
   
$
261,759
 
 
As of June 30, 2012, other payables consisted of a short-term borrowing of $128,700 from a third party for a capital contribution of China Tongda by Real Fortune HK, which bears no interest and is payable on demand; an advance from a third party of $203,390 for the new production line construction, this advance bears no interest and will be repaid when the project is completed.  As of December 31, 2011, other payables consisted of the short-term borrowing of $128,700 from a third party for a capital contribution to China Tongda by Real Fortune HK, which bears no interest and is payable on demand. 
 
 
Under local environmental regulations, the Company is obligated at the end of the mine’s useful life to restore and rehabilitate the land that is used in the mining operation. The Company estimates it would cost $560,000 (RMB 3.5 million) to restore the entire mine after extracting all the economical ore for such efforts.

The Company accrued expense based on the actual production volume during the period. As of June 30, 2012 and December 31, 2011, the accrued liability for environment restoration was $12,942 and $12,991, respectively.
 
11.   PAYABLE TO CONTRACTORS
 
In 2007 and 2008, the Company entered into contracts with an equipment supplier and a construction Company for equipment and construction of a water pipeline for $5.75 million (RMB 38 million). The Company recorded the payable in 2009. In 2010, the Company amended the payment terms and paid $2.2 million (RMB 14.5 million) and agreed to pay the remaining balance as follows: $2.08 million (RMB 13.5 million) on December 31, 2011, and $1.47 million (RMB 10 million) on December 31, 2012, which was recorded as a current liability.  During 2011, the Company paid $2.86 million (RMB 18.0 million). For the six months ended June 30, 2012, the Company did not make any payment for this payable.
 
The Company recorded the restructuring of this payable in accordance with ASC 470-60-35-5, as it was a modification of terms of a payable, it did not involve a transfer of assets or grant of an equity interest. Accordingly, the Company accounted for the effects of the restructuring prospectively from the time of restructuring, and did not change the carrying amount of the payable at the time of the restructuring as the carrying amount did not exceed the total future cash payments specified by the new terms.

12.   INCOME TAXES
 
The Company’s operating subsidiary was governed by the Income Tax Laws of the PRC and various local tax laws. Effective January 1, 2008, China adopted a uniform tax rate of 25% for all enterprises (including foreign-invested enterprises).
 
The following table reconciles the statutory rates to the Company’s effective tax rate for the six months ended June 30, 2012 and 2011:
 
   
2012
   
2011
US statutory rates
   
(34.0)
%
   
34.0
%
Tax rate difference
   
9.0
%
   
(9.0)
%
Other
   
-
%
   
0.1
%
Valuation allowance
   
 25.0
%
   
-
%
Tax per financial statements
   
 -
%
   
25.1
%

The following table reconciles the statutory rates to the Company’s effective tax rate for the three months ended June 30, 2012 and 2011:

   
2012
   
2011
US statutory rates
   
(34.0)
%
   
34.0
%
Tax rate difference
   
9.0
%
   
(9.0)
%
Other
   
-
%
   
(4.3)
%
Valuation allowance
   
 25.0
%
   
-
%
Tax per financial statements
   
 -
%
   
20.7
%
 
 
The provisions for income tax for the six months ended June 30, 2012 and 2011 consisted of the following:

   
2012
   
2011
 
Income tax expense - current
 
$
-
   
$
389,935
 
Income tax benefit - deferred
   
-
     
(513
)
Total income tax expenses
 
$
-
   
$
389,422
 

The provisions for income taxes for the three months ended June 30, 2012 and 2011 consisted of the following:

   
2012
   
2011
 
Income tax expense – current
 
$
-
   
$
389,935
 
Income tax benefit - deferred
   
-
     
(513
)
Total income tax expenses
 
$
-
   
$
389,422
 

Consolidated foreign pretax earnings approximated $0 and $1,336,924 for the six months ended June 30, 2012 and 2011, respectively. Pretax earnings of a foreign subsidiary are subject to US taxation when effectively repatriated. The Company provides income taxes on the undistributed earnings of non-US subsidiaries except to the extent those earnings are invested indefinitely outside the US. At June 30, 2012, $2.74 million of accumulated undistributed earnings of non-US subsidiaries was invested indefinitely. At the existing US federal income tax rate, additional taxes of $521,338 would have to be provided if such earnings were remitted currently.

13. MAJOR CUSTOMER AND VENDORS
 
There were no sales for the six and three months ended June 30, 2012. One customer accounted for 100% of the Company’s sales for the six and three months ended June 30, 2011.

The Company made a long-term (10 year) strategic contract with Handan Steel Group Company (“HSG”) a state-owned enterprise, and agreed to sell all of its output to HSG. The selling price was to be determined based on market prices from time to time at a level that would ensure the Company a proper profit margin. HSG agreed to purchase all the Company’s products regardless of the change of the market. The Company is economically dependent on HSG. However, with the high demand of iron ore concentrate in China, the Company believes there are other buyers available if HSG is unable to execute the contract. The Company had no sales for the three months ended March 31, 2011 due to the PRC government’s energy saving and emission reduction plan. Sales were resumed in the second quarter of 2011. The Company had no sales in the six months ended June 30, 2012 due to the upgrading of its production lines for improving the iron ore refinement and iron ore concentration rate and its continued refusal to deliver concentrate produced during 2011 due to a pricing dispute with HSG. The upgraded production line project will be finished in September 2012. The accounts receivable balance due was $0 at June 30, 2012 and December 31, 2011.
 
Below is a table listing the vendors accounting for over 10% of the Company’s total purchase of raw materials. As of June 30, 2012, there were no account payable balances due to these three vendors.
 
 
Percentage of total purchase
 
Percentage of total purchase
 
Six months ended June 30,
 
Three months ended June 30,
 
2012
 
2011
 
2012
 
2011
ZhuoluTransportation Gas Station
-
 
45%
 
-
 
45%
NanguoTengfei Mining
-
 
38%
 
-
 
38%
Tongyi Lube
-
 
17%
 
-
 
17%
 
 
 
14.   STATUTORY RESERVES
 
Pursuant to the corporate law of the PRC effective January 1, 2006, the Company is now only required to maintain one statutory reserve by appropriating from its after-tax profit before declaration or payment of dividends. The statutory reserve represents restricted retained earnings.
 
Surplus reserve fund

The Company’s Chinese subsidiaries are now required to transfer 10% of net income, as determined under PRC accounting rules and regulations, to a statutory surplus reserve fund until such reserve balance reaches 50% of the Company’s registered capital. The Company’s Chinese subsidiaries are not required to make appropriation to other reserve funds and do not have any intentions to make appropriations to any other reserve funds. There are no legal requirements in the PRC to fund these reserves by transfer of cash to restricted accounts, and the Company’s Chinese subsidiaries do not do so.
  
The surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital.
 
Common welfare fund
 
Common welfare fund is a voluntary fund that the Company can elect to transfer 5% to 10% of its net income, as determined under PRC accounting rules and regulations, to this fund. The Company did not make any contribution to this fund during the six and three months ended June 30, 2012 or 2011. 
 
This fund can only be utilized on capital items for the collective benefit of the Company’s employees, such as construction of dormitories, cafeteria facilities, and other staff welfare facilities. This fund is non-distributable other than upon liquidation.
 
15.   CONTINGENCIES AND COMMITMENTS
 
The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

The Company’s sales, purchases and expenses are denominated in RMB and all of the Company’s assets and liabilities are also denominated in RMB. The RMB is not freely convertible into foreign currencies under the current law. In China, foreign exchange transactions are required by law to be transacted only by authorized financial institutions. Remittances in currencies other than RMB may require certain supporting documentation in order to effect the remittance.
 
 
 
All mineral resources in China are owned by the state.  Thus, the Company’s ability to obtain iron ore is dependent upon the ability to obtain mineral rights from the relevant state authorities or purchase ore from another party that has obtained mining rights from the state.  It is generally not feasible to transport iron ore any significant distance before processing.  The Company has yet to obtain long term rights to any iron mine and there is no assurance that the Company will be able to do so. Although the Company has extracted iron ore from the Zhuolu Mine on which the Company’s production facilities are located, the Company does not have the right to do so and can be subjected to various fines and penalties.  The Company is not able to determine the amount of fines and penalties at current stage; however, the Company believes the fine and penalty is negotiable with the authority. If the Company is not able to obtain mining rights to the Zhuolu Mine in the future, the Company will have to cease mining operations at the Zhuolu Mine and the Company will seek to acquire iron ore from third parties.  The failure to obtain iron ore reserves for processing at all or on reasonably acceptable terms would have a material adverse impact on our business and financial results.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
 
Overview
 
We are a company engaged in iron ore mining, processing and the production of iron ore concentrate in the People’s Republic of China (“PRC”) through our variable interest entity, China Jinxin. Currently, our only product is iron ore concentrate.
 
On October 1, 2011, effective the close of business September 30, 2011, we acquired 100% of the issued and outstanding capital stock of Real Fortune BVI for 8,000,000 shares of our common stock, which effectively constituted 100% of our issued and outstanding capital stock immediately after the consummation of the acquisition.  The Share Exchange was accounted for as a recapitalization of Real Fortune BVI effected by a share exchange, wherein Real Fortune BVI is considered the acquirer for accounting and financial reporting purposes. The assets and liabilities of Real Fortune BVI were brought forward at their book value and no goodwill was recognized.  Consequently, the historical consolidated financial statements of Real Fortune BVI are now the historical financial statements of Target Acquisitions I, Inc.
 
As a result of our acquisition of Real Fortune BVI, we now own all of the issued and outstanding capital stock of Real Fortune BVI, which in turn owns all of the issued and outstanding capital stock of Real Fortune HK, which in turn owns all of the issued and outstanding capital stock of China Tongda. In addition, we effectively control China Jinxin through the VIE Agreements among China Tongda, China Jinxin and the shareholders of China Jinxin.  
 
The following chart reflects our organizational structure as of the date of this report.
 
 
 
Status of Production
 
Through China Jinxin we currently own an iron ore concentrate production line in Zhuolu County with an annual production capacity of 300,000 tons of iron ore concentrate. We began construction of this facility in 2007 and initiated production at it in March 2010.  Our operations to date have been limited. We have not yet obtained the necessary permits to mine any iron ore. Initially we were granted the right to process iron ore recovered during the construction of our production facilities and ancillary roads; however, since August 2010, we have been mining iron ore on the mine upon which our production facilities are located even though we do not have the right to do so. If we are unable to obtain the necessary permits to mine in the areas surrounding our production facilities in the future and are challenged by related government authorities, we will have to purchase iron ores from third parties for processing at our production facilities.

To date, we have received only temporary manufacturing licenses granted by the agencies of the local government, which allow us to process ore that we obtained from Zhuolu Mine or other third parties to utilize our facility.
 
Our ability to profit from this facility is wholly dependent upon our ability to extract and process iron ore from Zhuolu Mine and sell the output for a price that enables us to generate a profit.  To date, all of our sales have been made to a single customer.  We entered into a ten-year contract with this customer which expires in January 2019.  Pursuant to this agreement, we agreed to sell the customer, HSG all of the output from our facility, which it agreed to purchase. The price paid to us by HSG is to be determined by HSG in light of the quality of our product and market prices and result in a proper margin to us. Thus, our ability to profit from our current production facility over the next seven years will be determined by the prices we receive from HSG.  We cannot guarantee that HSG will not offer a price below what it pays to the Company’s competitors. The lower price will reduce the Company’s profit margin. However, if the Company is not satisfied with the price set by HSG, it can attempt to renegotiate the price. In an effort to obtain a higher price from HSG, we refused to deliver iron ore concentrate we produced in the fourth quarter of 2011.

The volume of the iron ore concentrate we sell is determined, in part, by the quality of the crude iron ore we process and the rate at which we process such crude ore.  Inasmuch as the price we sell our concentrate to HSG should result in a gross profit, our ability to operate profitably will be determined by the volume of iron ore concentrate we produce and our operating expenses.  Our facilities began processing crude iron ore in March 2010 and were idle for approximately six months due to a government shutdown of our electricity.    Thus, to date, our facilities have not operated at maximum capacity for a full year on an uninterrupted basis.

Our current production plant can process up to 800,000 tons of iron ore every year. However, during the six months ended June 30, 2012, the Company did not produce any iron ore concentrate or process any iron ore concentrate, for upgrading our production lines to improve its iron ore refinement and iron ore concentration rate. The Company estimates that this upgrade will be finished in September 2012. Therefore, the Company is not likely to resume production prior to October 2012. 

The following table sets forth our tons of iron ore processed and tons of iron ore concentrate we produced, for the years indicated:

   
2010
   
2011
 
Iron ore processed (tons)
    397,860       326,393  
Production volume of iron ore concentrate (tons)
    110,569       70,440  


The following table sets forth our tons of iron ore processed and tons of iron ore concentrate we produced, for the three months ended June 30, 2012 and 2011:

   
2012
   
2011
 
Iron ore processed (tons)
    -       -  
Production volume of iron ore concentrate (tons)
    -       25,283  
 

 
The following table sets forth our tons of iron ore processed and tons of iron ore concentrate we produced, for the six months ended June 30, 2012 and 2011:

   
2012
   
2011
 
Iron ore processed (tons)
    -       168,957  
Production volume of iron ore concentrate (tons)
    -       25,283  

All mineral resources in China are owned by the state. Thus, our ability to obtain iron ore is dependent upon our ability to obtain mineral licenses from the relevant state authorities or purchase ore from another party that has obtained mining rights from the state. It is generally not feasible to transport iron ore any significant distance before processing. We believe, as evidenced by our shareholders willingness to finance the construction of our facilities, that there is sufficient iron ore in the vicinity of our facilities to enable us to operate them at a profit. Nevertheless, we have yet to obtain long term rights to any iron mine and there is no assurance we will be able to do so. Although we have extracted iron ore from the Zhuolu Mine where our production facilities are located, we do not have the right to do so and can be subjected to various fines and penalties. However, given that the Company paid geological survey fees for the local government on the application of the mining rights on Zhuolu Mine and has not received any challenges from any authorities to our mining activities, the Company believes that even if fines and penalties are assessed against us in the future, the amount should be negotiable with the authorities. If we are unable to obtain mining rights to the Zhuolu Mine, we will have to cease mining operations at the Zhuolu Mine and we will seek to acquire iron ore from third parties. The failure to obtain iron ore reserves for processing at all or on reasonably acceptable terms would have a material adverse impact on our business and financial results.
 
To date we have been dependent upon cash advances from the shareholders of China Jinxin and cash generated from the operation of our production facilities.  If we were not to obtain sufficient iron ore for processing, it is likely that our operations would cease unless these individuals continue to provide sufficient funds to maintain our plant and equipment until such time as our operations could be resumed.

We may seek to grow our operations by acquiring mining rights and other production facilities.  The cash necessary to acquire such rights may exceed that which we have on hand.  In such event, we may seek to raise the necessary cash through bank loans or the issuance of equity to the vendors of such rights, our shareholders or third parties.  There can be no assurance such cash will be available to us on reasonable terms, if at all.  The prices and terms at which we issue equity securities and the performance of any rights or facilities we acquire, will determine whether we operate profitably.

The profitability of the mining industry in China in general and of our company in particular, is highly dependent upon the demand for iron ore and other metals within China.  This demand in turn, is heavily influenced by general economic factors, such as the rate of growth of the economy and of the construction industry.  There can be no assurance that China will maintain the rapid rates of growth it has experienced in the recent past.  If the rate of growth of the Chinese economy were to slow demand for iron and steel could fall, adversely impacting our operations.

Results of Operations
 
Comparison of the Three Months Ended June 30, 2012 and 2011
 
                           
Dollar
   
Percentage
 
   
2012
   
% of Sales
   
2011
(Restated)
   
% of Sales
   
Increase (Decrease)
   
Increase (Decrease)
 
Sales 
  $ -       -     $ 4,377,375       100 %   $ (4,377,375 )     (100 )%
Costs of goods sold 
  -       -       2,219,870       51 %     (2,219,870 )     (100 )%
Gross profit 
          -       2,157,505       49 %     (2,157,505 )     (100 )%
Operating expenses 
    409,764       -       273,585       6 %     136,179       50 %
Income (loss) from operations 
    409,764       -       1,883,920       43 %     (2,293,684 )     (122 )%
Other Income (expense), net 
    (110 )     -       466       - %     (576 )     (124 )
Income (loss) before income taxes
    (409,874 )     -       1,884,386       43 %     (2,294,260 )     (122 )%
Income taxes 
                    389,422       9 %     (389,422 )     (100 )%
Net income (loss)
  $ (409,874 )     -     $ 1,494,964       34 %   $ (1,904,838 )     (127 )%
 

 
Sales
 
Our revenues are derived from the sale of iron ore concentrate. We commenced production in March 2010. However, the Company ceased production from September 2010 to March 2011 because the local government implemented an “Energy Saving and Emission Reduction Plan” to reduce local power consumption. The Company installed power equipment to enable it to maintain a stable power supply to our production equipment and management believes the Energy Saving and Emission Reduction Plan is one-time event and disruptions to our access to energy will not have a material impact on our production in the future.  

Sales for the three months ended June 30, 2012 were $0, compared to $4.38 million for the three months ended June 30, 2011, a decrease of $4.38 million or 100%. There were no sales for the three months ended June 30, 2012 because the Company halted production to upgrade the production lines in order to improve its iron ore refinement and iron ore concentration rate and continued to withhold deliveries of concentrate produced during 2011 due to a pricing dispute with HSG. We estimate that this upgrade will be finished in September 2012. Therefore, the Company is not likely to resume production prior to October 2012.
 
Cost of Goods Sold

Cost of goods sold (“COGS”) consists primarily of fuel and power costs, direct material, direct labor, depreciation of production plant items and equipment, and accrual of the mining rights, which are directly attributable to the production of iron ore and iron ore concentrate.
 
We did not have any sales and production for the three months ended June 30, 2012. COGS for the three months ended June 30, 2012 was $0, a decrease of $2.22 million or 100%, compared to COGS of $2.22 million for the comparable period of 2011. The decrease of COGS was mainly the Company halted production to upgrade its production lines to improve its iron ore refinement and iron ore concentration rate.

Gross Profit
 
Gross profit was $0 for the three months ended June 30, 2012, a decrease of $2.16 million from $2.16 million for the comparable period of 2011. Profit margin was 0% for the three months ended June 30, 2012, compared to 49% for the 2011 period, which was the result of no sales and no production during the three months of June 30, 2012.

Operating Expenses

Operating expenses consist mainly of employee salary, depreciation and amortization of items not directly associated with production and utilities.

Operating expenses were $409,764 for three months ended June 30, 2012, compared to $273,585 for the corresponding 2011 period, an increase of $136,179 or 50%. The increase was mainly due to increased expenses for meetings and conference with government officials, training of personnel, employees’ salaries and audit fee.
 
 
Net Income (Loss)

Net loss for the three months ended June 30, 2012 was $409,874, compared to net income of $1,494,964 for the 2011 period, a decrease of $1,904,838 or 127%. The decrease in income was mainly due to no sales and incurring of general and administrative expenses during the second quarter of 2012.
 
Comparison of the Six Months Ended June 30, 2012 and 2011
  
                           
Dollar
   
Percentage
 
   
2012
   
% of Sales
   
2011
(Restated)
   
% of Sales
   
Increase (Decrease)
   
Increase (Decrease)
 
Sales 
 
$
-      
-
   
$
4,377,375
     
100
%
 
$
(4,377,375
)
   
(100
)%
Costs of goods sold 
    -      
-
     
2,219,870
     
51
%
   
(2,219,870
)
   
(100
)%
Gross profit 
           
-
     
2,157,505
     
49
%
   
(2,157,505
)
   
(100
)%
Operating expenses 
   
838,811
     
-
     
606,911
     
14
%
   
231,900
     
38
%
Income (loss) from operations 
   
(838,811
   
-
     
1,550,594
     
35
%
   
(2,389,405
)
   
(154
)%
Other Income (expense), net 
   
(1,052
   
-
     
1,268
     
-
%
   
(2,320
)
   
(183)
Income (Loss) before income taxes
   
(839,863
   
-
     
1,551,862
     
35
%
   
(2,391,725
)
   
(154
)%
Income taxes 
           
-
     
389,422
     
8
%
   
(389,422
)
   
(100
)%
Net income (loss)
 
$
(839,863
   
-
   
$
1,162,440
     
27
%
 
$
(2,002,303
)
   
(172
)%

Sales
 
Sales for the six months ended June 30, 2012 were $0, compared to $4.38 million for the six months ended June 30, 2011, a decrease of $4.38 million or 100%. There were no sales for the six months ended June 30, 2012 due to the upgrade of production and our continued refusal to deliver concentrate produced during 2011 due to a pricing dispute with HSG. We estimate that this upgrade will be finished in September 2012. Therefore, the Company is not likely to resume production prior to October 2012.

Cost of Goods Sold

COGS consists primarily of fuel and power costs, direct material, direct labor, depreciation of production plant items and equipment, and accrual of the mining rights, which are directly attributable to the production of iron ore and iron ore concentrate.
 
Due to the production line upgrade mentioned above and our refusal to deliver concentrate produced during 2011 due to a pricing dispute, for the six months ended June 30, 2012, we did not incur any sales. COGS for the six months ended June 30, 2012 was $0, a decrease of $4.38 million or 100%, compared to COGS of $4.38 million for the 2011 period.

Gross Profit
 
Gross profit was $0 million for the six months ended June 30, 2012, a decrease of $2.16 million from $2.16 million for the 2011 period. Profit margin was 0% for the six months ended June 30, 2012, compared to 49% for the 2011 period, which was the result of no sales and production during the six months ended June 30, 2012.
 
 
Operating Expenses

Operating expenses consists mainly of employee salary, depreciation and amortization of items not directly associated with production and utilities expenses.

Operating expenses were $838,811 for the six months ended June 30, 2012, compared to $606,911 for the corresponding 2011 period, an increase of $231,900 or 38%. The increase was mainly due to higher management and employees’ salary as labor costs increased in China, as well as increased audit and legal fee as a result of the Company being public in US.

Net Income

As a result of the lack of sales and the higher operating expenses discussed above, the Company had net loss of $839,863 for the six months ended June 30, 2012, a decrease of $2,002,303 as compared to the net income of $1,162,440 for the six months ended June 30, 2011.

Liquidity and Capital Resources

The Company’s ability to generate cash from operations is dependent upon its ability to obtain iron ore to process and to maintain the permits necessary to process such ore at its current facilities, neither of which is assured.  If the Company could not obtain iron ore to process or was no longer able to process ore, it would be dependent upon cash infusions from its current shareholders or third parties in the form of loans or equity contributions, or a combination thereof, to maintain its facilities until it can resume operations.  There is no assurance such cash will be available from current shareholders or from third parties and, if it is available, what the terms of any loan or investment might be. If we are unable to obtain the funding required, we may have to curtail or cease our operations.
 
On June 30, 2012, the Company had cash and equivalents of $35,602. We do not anticipate significant cash expenditures in the immediate future on our current production facilities.  Consequently, in the absence of a significant acquisition, the Company believes its cash on hand will be sufficient to satisfy its needs for cash for the immediate future and with anticipated advances from shareholders over the next 12 months.  However, in the future, the Company intends to continue the expansion of operations by acquiring new production facilities and mines. The acquisitions will be paid for with cash or our equity securities, or combinations of both. Although currently all of the acquisitions are in early stages of negotiation, the Company will need outside funding from our current shareholders, bank loans or the issuance of equity securities once we make progress on the acquisitions. Failure to obtain such financing could have a material adverse effect on our business expansion.  The sale by the Company of its equity securities would dilute the interest of its current shareholders.  Further, there is no guarantee the terms on which such an issuance would occur, if at all, would be favorable to the Company’s current shareholders.
 
As of June 30, 2012, cash and equivalents were $35,602, compared to $176,039 as of June 30, 2011. The following is a summary of cash provided by or used in each of the indicated types of activities during six months ended June 30, 2012 and 2011, respectively.
 
   
2012
   
2011 (Restated)
 
Net cash provided (used) in operating activities
  $ (306,505 )   $ 1,362,760  
Net cash used in investing activities
    ( 490,103 )     (581 )
Net cash provided (used) financing activities
    636,395       (1,473,476 )
Exchange rate effect on cash
    (301 )     4,037  
Net cash (outflow) inflow
  $ (160,514 )   $ (107,260 )
 
Net cash used in operating activities
 
Cash has historically been used in operations and for advances to suppliers. Net cash used in operating activities was $306,505 for the six months ended June 30, 2012, compared to net cash provided in operating activities was $1,362,760. The cash outflow from operating activities for the six months ended June 30, 2012 was principally attributable to the net loss of $839,863 and advances to suppliers of $164,010, offset by cash inflow from increased accrued expenses of $172,577.
   
 
Net cash used in investing activities
 
Net cash used in investing activities was $490,103 for the six months ended June 30, 2012, compared to cash used in investing activities was $581 for the six months ended June 30, 2011. The cash outflow during the six months of 2012 was mainly attributable to the purchase and installation of equipment for future iron ore refining.  In the corresponding 2011 period, we spent only $581 for purchasing of small equipments.
 
Net cash provided by financing activities

Net cash provided by financing activities was $636,395 for the six months ended June 30, 2012, compared to $1,473,476 net cash used by financing activities in the comparable period of 2011. The net cash provided by financing activities in the six months ended June 30, 2012 was due to advances from shareholders of $636,395. In the 2011 period, we had cash inflow from short term borrowings of $128,700 and contributions to paid in capital of $4.58 million from shareholders, offset by repayment of long term payables of $1.45 million and repayment to related party of $4.7 million.

At June 30, 2012, we had a working capital deficit of $1,199,236, an increase from the deficit at December 31, 2011 of $397,608 which was driven by increased accrued liabilities and advances from shareholders in the form of loans. The Company had no bank loans at June 30, 2012. Our customer is a state-owned company and has dependable credit. We believe our available funds together with anticipated loans from shareholders will be sufficient to meet our anticipated ongoing operating needs for the next 12 months, and our capital needs, if any, for production facilities at the Zhuolu Mine. Currently, there are no significant capital improvements planned for our production facilities at the Zhuolu Mine. The Company may need to raise additional capital if it decides to make one or more substantial acquisitions of mineral rights or other production facilities. There can be no guarantee we will be able to obtain such funding, whether through the issuance of debt or equity, on terms satisfactory to management and our Board. If we cannot obtain the financing necessary to complete any potential acquisition our ability to expand our operations will be hindered.
 
At December 31, 2010, the Company owed four shareholders $4,677,850 for working capital needs. Those borrowings were non-interest bearing and payable on demand. By December 31, 2011, the Company had paid in full all shareholders’ borrowings with the proceeds from shareholder’s capital contribution. During the six months ended June 30, 2012, the Company borrowed  $634,635 from one of its shareholders for working capital needs. This borrowing was non-interest bearing and payable on demand.

Contractual Obligations

We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We present below a summary of the most significant assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our consolidated financial position, results of operations, and cash flows.
 
The following table summarizes our contractual obligations as of June 30, 2012, and the effect these obligations are expected to have on our liquidity and cash flows in future periods.
 
  
 
Payments Due by Period
 
   
 
Total
   
Less than 1
Year
   
1-3 Years
   
3-5 Years
   
5 Years +
 
   
                             
Contractual Obligations:
                             
Payable to contractor
 
$
869,579
   
$
869,579
   
$
-
   
$
-
   
$
-
 
 
 
Off-Balance Sheet Arrangements
 
We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.
 
Critical Accounting Policies and Estimates

Our management's discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which were prepared in accordance with US GAAP. While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements, we believe the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis. 

On April 5, 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for qualifying public companies. As an “emerging growth company,” we may, under Section 7(a)(2)(B) of the Securities Act, delay adoption of new or revised accounting standards applicable to public companies until such standards would otherwise apply to private companies. We may take advantage of this extended transition period until the first to occur of the date that we (i) are no longer an "emerging growth company" or (ii) affirmatively and irrevocably opt out of this extended transition period. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards. Until the date that we are no longer an "emerging growth company" or affirmatively and irrevocably opt out of the exemption provided by Securities Act Section 7(a)(2)(B), upon issuance of a new or revised accounting standard that applies to our financial statements and that has a different effective date for public and private companies, we will disclose the date on which adoption is required for non-emerging growth companies and the date on which we will adopt the recently issued accounting standard.
 
Basis of Presentations

Our financial statements are prepared in accordance with US GAAP and the requirements of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”).
 
Method of Accounting

We maintain our general ledger and journals with the accrual method of accounting for financial reporting purposes. The financial statements and notes are representations of management. Accounting policies adopted by us conform to US GAAP and were consistently applied in the presentation of financial statements, which are compiled on the accrual basis of accounting.
  
Use of Estimates

In preparing financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates, required by management, include the recoverability of long-lived assets, allowance for doubtful accounts, and the reserve for obsolete and slow-moving inventories. Actual results could differ from those estimates.
 
 
Accounts Receivable
 
The Company maintains reserves for potential credit losses on accounts receivable.  Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.

Inventory
 
Inventory consists of iron ore, iron ore concentrate and supplies. Inventory is valued at the lower of average cost or market, cost being determined on a moving weighted average basis method and including labor costs and all expenditures incurred in the course of production.
 
Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Major repairs and betterments that significantly extend original useful lives or improve productivity are capitalized and depreciated over the period benefited. Maintenance and repairs are expensed as incurred. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using shorter of useful life of the property or the unit of depletion method. For shorter lived assets straight-line method over estimated lives ranging from 3 to 20 years is used as follows:
 
Office Equipment
3-5 years
Machinery
10 years
Vehicles
5 years
Building                       
20 years
  
Revenue Recognition

The Company’s revenue recognition policies are in compliance with SEC Staff Accounting Bulletin (“SAB”) 104 (codified in FASB ASC Topic 605).  Sales are recognized when a formal arrangement exists, which is generally represented by a contract between the Company and the buyer; the price is fixed or determinable; title has passed to the buyer, which generally is at the time of delivery; no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are recorded as unearned revenue.
 
Sales represent the invoiced value of iron ore and iron ore concentrate, net of value-added tax (“VAT”). All of the Company’s iron ore concentrate sold in the PRC is subject to a VAT of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing the finished product. The Company records VAT payable and VAT receivable net of payments in the financial statements. The VAT tax return is filed offsetting the payables against the receivables. Sales and purchases are recorded net of VAT collected and paid as the Company acts as an agent for the government.

Foreign Currency Translation and Comprehensive Income (Loss)

The functional currency is the Renminbi (“RMB”). For financial reporting purposes, RMB were translated into United States Dollars (“USD” or “$”) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period.

Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive income”. Gains and losses resulting from foreign currency transactions are included in income. There has been no significant fluctuation in the exchange rate for the conversion of RMB to USD after the balance sheet date.
 
 
The fluctuation of exchange rates does not imply free convertibility of RMB to other foreign currencies. All foreign exchange transactions continue to take place either through the People’s Bank of China (“PBOC”) or other banks authorized to buy and sell foreign currencies at the exchange rate quoted by the PBOC.

The Company uses FASB ASC Topic 220, “Comprehensive Income”.  Comprehensive income is comprised of net income and all changes to the statements of stockholders’ equity, except those due to investments by stockholders, changes in paid-in capital and distributions to stockholders.

Segment Reporting
 
Disclosures about segments of an enterprise and related information requires use of the “management approach” model for segment reporting, codified in FASB ASC Topic 280.  The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance.  Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.
 
FASB ASC Topic 280 has no effect on the Company’s financial statements as substantially all of its operations are conducted in one industry segment – iron ore refining.
       
Recent Accounting Pronouncements 

In June 2011, the FASB issued ASU No. 2011-05, “Presentation of Comprehensive Income”. Under the amendments in this ASU, an entity has two options for presenting its comprehensive income: to present comprehensive income and its components along with the components of net income in a single continuous statement, or in two separate but consecutive statements. The amendments in this ASU are required to be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. There was no material impact on our consolidated financial statements upon adoption.
  
In September 2011, the FASB issued ASU No. 2011-08, Intangibles—Goodwill and Other (Topic 350)—Testing Goodwill for Impairment, to simplify how entities test goodwill for impairment. ASU No. 2011-08 allows entities to first assess qualitative factors to determine whether it is more likely than not that the fair value (“FV”) of a reporting unit is less than its carrying amount. If greater than 50% likelihood exists that the FV is less than the carrying amount then a two-step goodwill impairment test as described in Topic 350 must be performed. The guidance provided by this update becomes effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company adopted this ASU beginning with its Quarterly Report on Form 10-Q for the three months ended March 31, 2012. There was no material impact on our consolidated financial statements upon adoption.

In December 2011, The FASB issued ASU No. 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other Comprehensive Income in ASU 2011-05. ASU 2011-12 defers the requirement a company present reclassification adjustments for each component of accumulated other comprehensive income (“AOCI”) in both net income and other comprehensive income (“OCI”) on the face of the financial statements. All other requirements in ASU No. 2011-05 are not affected by ASU No. 2011-12, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements.  Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this standard did not have a material impact on the Company’s consolidated financial position and results of operations.

On July 27, 2012, the FASB issued ASU 2012-02, Intangibles-Goodwill and Other (Topic 350) - Testing Indefinite-Lived Intangible Assets for Impairment.  The ASU provides entities with an option to first assess qualitative factors to determine whether events or circumstances indicate that it is more likely than not that the indefinite-lived intangible asset is impaired.  If an entity concludes that it is more than 50% likely that an indefinite-lived intangible asset is not impaired, no further analysis is required.  However, if an entity concludes otherwise, it would be required to determine the fair value of the indefinite-lived intangible asset to measure the amount of actual impairment, if any, as currently required under US GAAP. The ASU is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012.  Early adoption is permitted. The adoption of this pronouncement will not have a material impact on its financial statements.
 
 
Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures.

Management of Target Acquisitions I, Inc. is responsible for maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. In addition, the disclosure controls and procedures must ensure that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial and other required disclosures.

At the end of the period covered by this report, an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13(a)-15(e) and 15(d)-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”)) was carried out under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer. Based on their evaluation of our disclosure controls and procedures, they concluded that during the period covered by this report, such disclosure controls and procedures were not effective.  This was due to our limited resources, including the absence of a financial staff with accounting and financial expertise and deficiencies in the design or operation of our internal control over financial reporting that adversely affected our disclosure controls and that may be considered to be “material weaknesses.”

On October 1, 2011, we, then a public shell company, acquired Real Fortune BVI in a transaction treated as a reverse acquisition. At such time we adopted the system of disclosure controls and procedures of Real Fortune BVI as ours. Such disclosure controls and procedures were not adequate for a public reporting company and our management began the process of upgrading our disclosure controls and procedures.
 
We plan to designate individuals responsible for identifying reportable developments and to implement procedures designed to remediate the material weakness by focusing additional attention and resources in our internal accounting functions. However, the material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

(b) Changes in Internal Control over Financial Reporting. There have not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during our most recently completed fiscal quarter which is the subject of this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There are inherent limitations in any system of internal control. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that its objectives are met. Further, the design of a control system must consider that resources are not unlimited and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgment in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls.
 
 
PART II

OTHER INFORMATION

Item 1A – Risk Factors.

The purchase of our common stock involves a high degree of risk. Before you invest you should carefully consider the risks and uncertainties described in Item 2.01 of our Current Report on Form 8-K/A (Amendment No. 4) reporting the acquisition of Real Fortune BVI filed on July 27, 2012 (the "Form 8-K/A"), and the amendments thereto, under the caption "Risk Factors," our Management's Discussion and Analysis of Financial Condition and Results of Operations set forth in Item 2 of Part I of this report, our consolidated financial statements and related notes included in Item 1 of Part I of this report and our consolidated financial statements and related notes, our Management's Discussion and Analysis of Financial Condition and Results of Operations and the other information in the Form 8-K/A. Readers should carefully review those risks, as well as additional risks described in other documents we file from time to time with the Securities and Exchange Commission.
 
There have been no material changes in the risk factors previously disclosed in the Form 8-K/A.
 
Item 6 - Exhibits

The following exhibits are filed with this report:

31.1
 
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
     
31.2
 
Certification of the Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended.
 
32.1
  
Certification of the Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
32.2
 
Certification of the Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
101
  
Interactive data files pursuant to Rule 405 of Regulation S-T: (i) the Consolidated Statements of Operations for the three month and six months periods ended June 30, 2012 and 2011, (ii) the Consolidated Balance Sheets at June 30, 2012 and December 31, 2011, (iii) the Consolidated Statements of Cash Flows for the six month periods ended June 30, 2012 and 2011 and (iv) the notes to the Consolidated Financial Statements.*
________
 
* In accordance with Rule 406T of Regulation S-T, the XBRL information in Exhibit 101 to this quarterly report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (“Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
 
 
SIGNATURES

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

 
TARGET ACQUISITIONS I, INC.
 
       
Dated: August 21, 2012
By:
/s/ Changkui Zhu
 
   
Changkui Zhu
 
   
Chief Executive Officer
 
 
 
 

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