UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended March 31, 2015

 

Or

 

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

 

For the transition period from ____________ to_____________

 

Commission File Number: 000-52807

 

China Changjiang Mining & New Energy Co., Ltd.

(Exact name of registrant as specified in its charter)

 

Nevada		75-2571032
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
Seventeenth Floor, Xinhui Mansion, Gaoxin Road Hi-Tech Zone, Xi’An P.R. China 71005		+86(29) 8833-1685
(Address of Principal Executive Offices; Zip Code)		(Registrant’s Telephone Number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 ¨

 

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 such shorter period that the registrant was required to submit and post such files). Yes x  No ¨

 

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

 

(Check one):
Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)

 

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

 

At May 14, 2015, the registrant had outstanding 64,629,559 shares of common stock, $0.01 par value.

 

 

 

 

CHINA CHANGJIANG MINING AND NEW ENERGY COMPANY LTD.

 

FORM 10-Q

 

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2015

 

 TABLE OF CONTENTS 

 

			Page
PART I. FINANCIAL INFORMATION
ITEM 1.	FINANCIAL STATEMENTS			3
ITEM 2.	MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			15
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			18
ITEM 4.	CONTROLS AND PROCEDURES			19
PART II. OTHER INFORMATION

 

ITEM 1.	LEGAL PROCEEDINGS		20
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			20
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES			20
ITEM 4.	MINE SAFETY DISCLOSURES			20
ITEM 5.	OTHER INFORMATION			20
ITEM 6.	EXHIBITS			21
SIGNATURES				23
EX-31.1 (CERTIFICATION)
EX-31.2 (CERTIFICATION)
EX-32.1 (CERTIFICATION)
EX-32.2 (CERTIFICATION)

 

2

  

PART 1. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

CHINA CHANGJIANG MINING & NEW ENERGY CO., LTD.

 

FINANCIAL STATEMENTS

 

		PAGE
Consolidated Balance Sheets as of March 31, 2015 (Unaudited) and December 31, 2014			4 - 5
Consolidated Statements of Income and Comprehensive Income (Loss) for the three months ended March 31, 2015 and March 31, 2014 (Unaudited)			6
Consolidated Statements of Cash Flows for the three months ended March 31, 2015 and March 31, 2014 (Unaudited)			7
Notes to Consolidated Financial Statements (Unaudited)			8

 

3

  

CHINA CHANGJIANG MINING & NEW ENERGY CO., LTD.

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2015 AND DECEMBER 31, 2014

(Stated in US Dollars)

 

		March 31,				December 31,
		2015				2014
ASSETS		(Unaudited)
Current assets
Cash and cash equivalents		$	52,647			$	72,156
Other current assets and prepayments (Note 2)			80,312				80,535
Total Current Assets			132,959				152,691
Property, plant and equipment, net (Note 3)			302,850				314,480
Land use rights, net (Note 4)			16,317,568				16,323,725
Due from related parties (Note 5)			6,943,055				6,609,329
TOTAL ASSETS		$	23,696,432			$	23,400,225

 

See accompanying notes to the unaudited consolidated financial statements

 

4

  

CHINA CHANGJIANG MINING & NEW ENERGY CO., LTD.

CONSOLIDATED BALANCE SHEETS

AS OF MARCH 31, 2015 AND DECEMBER 31, 2014 (Continued)

(Stated in US Dollars)

 

		March 31, 2015				December 31, 2014
LIABILITIES & SHAREHOLDERS’ EQUITY		(Unaudited)
Current Liabilities
Other payables and accrued liabilities (Note 6)			438,672				419,235
Total Current Liabilities			438,672				419,235
Non-current liabilities
Due to related parties (Note 7)			3,294,974				3,275,191
Due to shareholders (Note 8)			3,411,766				3,391,992
Total Long-term Liabilities			6,706,740				6,667,183
SHAREHOLDERS’ EQUITY
Series C convertible preferred stock ($0.01 par value,10,000,000 shares authorized, no shares outstanding as of March 31, 2015 and December 31, 2014)			-				-
Common stock ($0.01 par value, 250,000,000 shares authorized, 64,629,559 shares issued and outstanding as of March 31, 2015 and December 31, 2014)			646,295				646,295
Treasury stock			(489,258	)			(489,258	)
Additional paid-in capital			15,410,640				15,410,640
Retained earnings			(2,766,774	)			(2,902,291	)
Non-controlling interests			1,103,737				1,102,122
Accumulated other comprehensive income			2,646,380				2,546,299
TOTAL SHAREHOLDERS’ EQUITY			16,551,020				16,313,807
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	23,696,432			$	23,400,225

 

See accompanying notes to the unaudited consolidated financial statements

 

5

  

CHINA CHANGJIANG MINING & NEW ENERGY CO., LTD.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014

(Stated in US Dollars)

 

		For the Three Months Ended March 31,				For the Three Months Ended March 31,
		2015				2014
		(Unaudited)				(Unaudited)
Sales revenue - related party (Note 9)		$	309,183			$	306,147
Cost of revenue			17,113				17,144
Gross Profit			292,070				289,003
Operating expenses
Administrative expenses			36,945				59,742
Depreciation			13,470				14,019
Amortization			104,300				104,492
Total operating expenses			154,715				178,253
Income from operations			137,355				110,750
Other Income (Expenses)
Interest income			91				24
Interest expenses			(314	)			(335	)
Total Other Expense			(223	)			(311	)
Income before tax			137,132				110,439
Income tax expense (benefit)			-				-
Net Income		$	137,132			$	110,439
Net income attributable to:
Non-controlling interests			1,615				(3,058	)
Common Stockholders			135,517				113,497
Other comprehensive income/(loss)
Foreign currency translation adjustments			100,081				(125,524	)
Total Comprehensive Income		$	237,213			$	(15,085	)
Weighted average shares-Basic			64,629,559				64,629,559
Weighted average shares-Diluted			64,629,559				64,629,559
Earnings per share,
Basic			0.00				0.00
Diluted			0.00				0.00

 

See accompanying notes to the unaudited consolidated financial statements

 

6

  

CHINA CHANGJIANG MINING & NEW ENERGY CO., LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014

(Stated in US Dollars)

 

		For the Three Months Ended March 31,				For the Three Months Ended March 31,
		2015				2014
		(Unaudited)				(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income		$	137,132			$	110,439
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			117,770				118,511
Changes in operating assets and liabilities:
Due from Huanghe Bay			(309,183	)			(306,147	)
Other current assets and prepayments			706				(8,568	)
Other payables and accrued liabilities			16,831				15,983
CASH USED IN OPERATING ACTIVITIES			(36,744	)			(69,782	)
CASH FLOWS FROM INVESTING ACTIVITIES
Due from related parties			16,657				41,253
CASH PROVIDED BY INVESTING ACTIVITIES			16,657				41,253
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from related parties			-				8,164
Proceeds from shareholders			-				1,226
CASH PROVIDED BY FINANCING ACTIVITIES			-				9,390
Effect of exchange rate changes on cash and cash equivalents			578				(1,189	)
NET DECREASE IN CASH			(19,509	)			(20,328	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		$	72,156			$	159,866
CASH AND CASH EQUIVALENTS AT END OF PERIOD		$	52,647			$	139,538
Supplementary Disclosures for Cash Flow Information:
Income taxes paid		$	-			$	-
Interest expense		$	-			$	-

 

See accompanying notes to the unaudited consolidated financial statements

 

7

 

CHINA CHANGJIANG MINING & NEW ENERGY CO., LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The accounting policies and methods followed in preparing these unaudited condensed consolidated financial statements are those used by China Changjiang Mining And New Energy Company Ltd (the ‘Company’) as described in Special Notes of the notes to consolidated financial statements included in Annual Report on Form 10-K for the year ended December 31, 2014. The unaudited condensed consolidated financial statements for the three-month period ended, March 31, 2015 and 2014 have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission and do not conform in all respects to the disclosure and information that is required for annual consolidated financial statements. The year-end condensed consolidated balance sheet data was derived from audited consolidated financial statements, but does not include all disclosure required by accounting principles generally accepted in the United States of America. These interim condensed consolidated financial statements should be read in conjunction with the most recent annual consolidated financial statements of the Company.

 

In the opinion of management, all adjustments, all of which are of a normal recurring nature, considered necessary for fair statement have been included in these interim condensed consolidated financial statements. Operating results for the three-month period ended March 31, 2015 are not indicative of the results that may be expected for the full year ending December 31, 2015.

 

(a) Going Concern

 

The Company incurred net income of $137,132 for the three months ended March 31, 2015 and had an accumulated deficit of approximately $2.77 million as of March 31, 2015. In addition, the Company had a working capital deficit of $305,713 as of March 31, 2015. The Company has cash and cash equivalents balance of $52,647 and net cash used in operating activities amounted to $36,744. If the Company cannot generate enough cash flow from its operating activities, it will need to consider other financing methods such as borrowing from banking institutions or raising additional capital through new equity issuance. There are no assurances that additional funds will be available when needed from any source or, if available, will be available on terms that are acceptable to us. The Company plans to continue to control its administrative expenses in the coming periods as well as further develop its sales from its main business.

 

(b) Foreign Currency Translation

 

Exchange rates applied for the foreign currency translation during the period are as follows:

 

USD to RMB

 

		March 31, 2015				December 31, 2014
Period end USD : RMB exchange rate			6.1091				6.1460
Average periodic USD : RMB exchange rate			6.1358				6.1457

 

8

  

USD to HKD

 

		March 31, 2015				December 31, 2014
Period end USD : HKD exchange rate			7.7542				7.7580
Average periodic USD : HKD exchange rate			7.7553				7.7519

 

HKD is pegged to USD and hence there is no significant translation adjustment impact on these consolidated financial statements.

 

RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation.

 

(c) Earning/Loss per share

 

Basic earning/loss per share is computed by dividing earning/loss available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earning/loss per share is computed in a manner similar to basic earning/loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

 

2. OTHER CURRENT ASSETS AND PREPAYMENTS

 

Other current assets and prepayments of $80,312 mainly represent the small amount of advances to the employees.

 

3. PROPERTY, PLANT AND EQUIPMENT

 

The following is a summary of property, plant and equipment:

 

		March 31,				December 31,
		2015				2014
Cost			-				-
Motor vehicles		$	238,905			$	237,471
Office equipment			21,915				21,783
EPC projects equipment			320,421				318,498
Total		$	581,241			$	577,752
Accumulated depreciation			(278,391	)			(263,272	)
Property, plant & equipment, net		$	302,850			$	314,480

 

9

 

The EPC projects equipment of $320,421 was the installed solar photovoltaic power generation equipment located in Huanghe Bay, Qiachuan County, Shaanxi Province, PRC.

 

4. INTANGIBLE ASSET

 

The following is a summary of intangible asset:

 

		March 31, 2015				December 31, 2014
Cost of Land use right		$	20,951,106			$	20,825,318
Accumulated Amortization of Land use right			(4,633,358	)			(4,501,593	)
Intangible Asset, net		$	16,317,568			$	16,323,725

 

The difference for the balance of cost was mainly due to the fluctuation of exchange rate of USD to RMB.

 

Amortization expenses were $104,300 and $104,492 for the three months ended March 31, 2015, and 2014, respectively.

 

5. DUE FROM RELATED PARTIES – NON CURRENT

 

The balance of $6,943,055 due from related parties represents the loans owed from related parties, which are unsecured and repayable on demand.

 

Due from related parties consists of the following:

 

		March 31,				December 31,
		2015				2014			Interest
Du Kang Liquor Development Co., Ltd.		$	818,451			$	813,537		interest free for the first year and bear interest in the benchmark lending rate over the same period afterwards
Shaanxi Du Kang Liquor Group Co., Ltd.		$	1,236,822			$	1,246,025		bearing interest in the benchmark lending rate over the same period
Zhongke Aerospace & Agriculture Development Stock Co., Ltd.		$	462,425			$	459,649		interest free
Shaanxi Huanghe Bay Springs Lake Theme Park Ltd.		$	3,989,948			$	3,660,918		interest free
Shaanxi Changfa Industrial Co., Ltd.		$	376,488			$	374,227		interest free
Shaanxi East Mining Co., Ltd.		$	22,917			$	22,779		interest free
Shaanxi Tangrenjie Advertising Co. (Previously “Shaanxi Changjiang Zhongxiayou Investment Co., Ltd.)		$	5,320			$	5,288		interest free
Heyang County Huanghe Bay Resort Hotel Co., Ltd.			30,684				26,906		interest free
Total		$	6,943,055			$	6,609,329

 

10

 

6. OTHER PAYABLES AND ACCRUED LIABILITIES

 

The following is a summary of other payables and accrued liabilities:

 

		March 31, 2015				December 31, 2014
Tax payable		$	292,185			$	273,358
Salary and welfare payable			320				318
Other payable			146,167				145,559
		$	438,672			$	419,235

 

7. DUE TO RELATED PARTIES

 

The balance of $3,294,974 due to related parties represents the loans owed to related parties, which are interest free, unsecured and repayable on demand twelve months after March 31, 2015.

 

Due to related parties consists of the following.

 

		March 31,				December 31,
		2015				2014
Huitong World Property Superintendent Company		$	409,226			$	406,769
Zhongke Lvxiang Development Stock Co., Ltd		$	1,145,832			$	1,138,952
Shaanxi Dukang Liquor Trading Co., Ltd		$	16,860			$	16,759
Shaanxi East Mining Co., Ltd		$	1,712,236			$	1,701,956
Baishui Du Kang Brand Management Co., Ltd		$	9,821			$	9,762
Shaanxi Xidenghui Technology Co., Ltd		$	999			$	993
Total		$	3,294,974			$	3,275,191

 

11

 

8. DUE TO SHAREHOLDERS

 

The balance of $3,411,766 due to shareholders represents the loans owed to the shareholders, which are interest free, unsecured and repayable on demand twelve months after March 31, 2015.

 

Due to shareholders consists of the following:

 

		March 31, 2015				December 31, 2014
Due to Wang Shengli		$	1,806,140			$	1,795,296
Due to Zhang Hongjun			993,109				987,147
Due to Chen Min		$	612,517			$	609,549
		$	3,411,766			$	3,391,992

 

9. SALES REVENUE – RELATED PARTY

 

The Company entered into a lease and complementary agreements with the related company Shaanxi Huanghe Bay Springs Lake Theme Park Ltd (“Huanghe”) dated July 26, 2010. According to the agreements, a piece of land with the area of 5,706,666.67 square meters was leased to Huanghe for traveling and amusement from January 1, 2011 to December 31, 2029. The annual rent in US dollars is approximately $1.2 million (equivalent to RMB7, 500,000). The rent revenues of $305,584 were recognized for the three months ended March 31, 2015, compared with the rent revenues of $306,147 for the three months ended March 31, 2014.

 

The Company provided solar power to Heyang County Huanghe Bay Resort Hotel Co., Ltd., a company with the same controlling person as the Company, with revenue of $3,599 for the quarter ended March 31, 2015. 

 

10. INCOME TAX

 

The provision for taxes on earnings consisted of:

 

		For the three months ended March 31,
		2015				2014
PRC Enterprise Income Tax		$	-			$	-
United States Federal Income Tax			-				-
Income tax expense, net		$	-			$	-

 

12

 

The income taxes expense (benefit), which is all incurred in PRC, consists of the following:

 

		For the three months ended March 31,
		2015				2014
Current income tax expense		$	-			$	-
Deferred income tax benefit			-				-
Income tax expense, net		$	-			$	-

 

The Company did not have income tax expense due to the use of net loss carry over from prior years

 

As of March 31, 2015, the Company had net taxable operating losses of approximately $394,303 carried forward for the future years. The PRC Income Tax allows the enterprises to offset their future taxable income with taxable operating losses carried forward in a 5-year period. The Management believes that the Company’s cumulative losses arising from recurring business in recent years constituted significant negative evidence that most of the deferred tax assets would not be realizable and this evidence outweighed the expectations that the Company would generate future taxable income. The valuation allowance of $98,576 was recorded.

 

Components of the Company’s net deferred tax assets are set forth below:

 

		March 31, 2015				December 31, 2014
Deferred tax assets
Net operating loss carry-forward		$	98,576			$	185,148
Total of Deferred tax assets		$	98,576			$	185,148
Less: valuation allowance		$	(98,576	)		$	(185,148	)
Net deferred assets		$	-			$	-

 

13

 

11. SEGMENT INFORMATION

 

The Company operates in two reportable segments, land use right leasing and solar PV energy. Summarized information by business segment for the three months ended March 31, 2015 and 2014 is as follows.

 

		For three months ended March 31,
		2015				2014
Revenue		$				$
Land use right leasing			305,584				306,147
Solar PV energy			3,599				-
Cost of revenue
Land use right leasing			17,113				17,144
Solar PV energy			-				-
Gross Profits
Land use right leasing			288,471				289,003
Solar PV energy			3,599				-

 

The Company evaluates segment performance based on income from operations. As a result, the components of operating income for one segment may not be comparable to another segment.

 

12. SUBSEQUENT EVENT

 

The balance of $1.3M (RMB7,900,000), owned from Shaanxi Du Kang Liquor Group Co., Ltd, a related party of the Company, expired in March 31, 2015, has been extended to the end of December 2015, with the interest rate changed from bank benchmark rate over the same period to interest free (see Note 5).

 

14

 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

In addition to the historical information contained herein, we make statements in this Quarterly Report on Form 10-Q that are forward-looking statements. Sometimes these statements will contain words such as "believes," "expects," "intends," "should," "will," "plans," and other similar words. Forward-looking statements include, without limitation, assumptions about our future ability to increase income streams, reduce and control costs, to grow revenue and earnings, and our ability to obtain additional debt and/or equity capital on commercially reasonable terms, none of which is certain. These statements are only predictions and involve known and unknown risks, uncertainties and other factors included in our periodic reports with the SEC. Although forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment, actual results could differ materially from those anticipated in such statements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

 

The following discussion and analysis should be read in conjunction with our March 31, 2015 unaudited consolidated financial statements and related notes thereto included in this quarterly report and with our consolidated financial statements and notes thereto for the year ended December 31, 2014.

 

Overview

 

We have transitioned our business from mining to clean new energy, and mainly focus on the solar photovoltaic, or “PV”, downstream market at present stage. We are currently in the development stage with the goal of becoming a turnkey developer and Engineering, Procurement and Construction contractor of solar PV energy facilities. We intend to design, engineer, construct, market and sell high-quality PV energy facilities for commercial and utility applications to local markets. Our Huanghe Bay Project has generated revenue for the quarter ended March 31, 2015.

 

We also hold land use rights in a land parcel and we lease a portion of the land use rights on the 5.7 square kilometer parcel to Shaanxi Huanghe Bay Springs Lake Theme Park Ltd. (“Huanghe”), a company with a common control person. The term of the lease agreement is from January 1, 2011 to December 31, 2029. Our land use rights are amortized over their 50 year term. The land use right was not only our largest asset, but also the stable operating income to support our other business, with an annual rent of approximately $1.2 million (RMB 7,500,000).

 

The following is a summary of the book value of our land use rights as of March 31, 2015:

 

Cost		$	20,951,106
Less: Accumulated amortization			(4,633,538	)
Land use rights, net		$	16,317,568

 

Amortization expenses were approximately $104,300 and $104,492 for the three months ended March 31, 2015, and 2014, respectively.

 

As reflected in the accompanying consolidated financial statements, the Company had an accumulated deficit of $2,766,774 as of March 31, 2015, which includes net income for common stockholders of $135,517 for the three months ended March 31, 2015. The Company’s operations used cash of $36,744 for the three months ended March 31, 2015.

 

We began to generate revenue for the year ended December 31, 2011, of which the revenue from land use right leasing was expected to provide stable cash flow. In the future, we expect that there will no longer be a need for us to continue to rely on loans from our directors and other related parties. We believe that we have adequate capital to assure that we will be able to meet our obligations or obtain sufficient capital to complete our plan of operations for the next twelve (12) months.

 

15

  

RESULTS OF OPERATIONS

 

Comparison of the Three Months Ended March 31, 2015 and March 31, 2014 for continuing operations

 

Sales revenue

 

We generated total revenue of $309,183 for the three months ended March 31, 2015, compared with revenue of $306,147 for the three months ended March 31, 2014. Of the total revenue of $309,183, revenue of $305,584 was generated by land use right leasing, the other revenue of $3,599 was generated by solar PV energy. Both of the revenues for land use right leasing and solar PV energy are related party transactions. They are provided by Shaanxi Huanghe Bay Springs Lake Theme Park Ltd and Heyang County Huanghe Bay Resort Hotel Co., Ltd, respectively, both of which are companies with the same controlling person as the Company.

 

Operating Expenses

 

Total operating expense for the three months ended March 31, 2015 was $154,715 compared with operating expense of $178,253 for the three months ended March 31, 2014. Administrative expense decreased by $23,538 for the first quarter of 2015, which was mainly due to lesser professional fee incurred for the three months ended March 31,2015. The amortization expense for the three months ended March 31, 2015 remained stable, as no addition or disposal occurred for land use rights. The depreciation for the three months ended March 31, 2015 slightly decreased by $549 or 4%, compared with the same period of 2014, which was mainly due to the fluctuation of exchange rate.

 

Income before taxes for the three months ended March 31, 2015 was $137,132, compared to income of $110,439 for the three months ended March 31, 2014.

 

Net Income

 

We achieved net income of $137,132 for the three months ended March 31, 2015, compared to net income of $110,439 for the three months ended March 31, 2014. The increase in net income was primarily due to decrease in administrative expense for the three months ended March 31, 2015.

 

Comprehensive Income

 

Our comprehensive income for the three months ended March 31, 2015 was $237,213, while comprehensive loss for the three months ended March 31, 2014 was $15,085. The comprehensive income (loss) for each period referred to net income plus the foreign currencies translation gain (loss), between the U.S. Dollar and the Chinese Yuan RMB (or Hong Kong Dollar for Wah Bon).

 

Stockholders’ Equity

 

Stockholders' equity increased to $16,551,020 as of March 31, 2015, from $16,313,807 as of December 31, 2014. The slight increase was due to the net income of $137,132 generated, and other comprehensive income (foreign currency translation income) of $100,081 occurred, for the three months ended March 31, 2015.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Cash Flows From Operating Activities

 

Net cash used in operating activities of $36,744 for the three months ended March 31, 2015, slightly decreased by $33,038 or 47%, compared with net cash used of $69,782 for the three months ended March 31, 2014.The adjustments to reconcile our net income to net cash flow include increased receivables of $309,183 from Huanghe Bay, depreciation expense of $13,470, amortization of $104,300 for land use rights, a decrease in operating assets of $706 and an increase in operating liability of $16,831.

 

16

  

Cash Flows From Investing Activities

 

Net cash provided by investing activities of $16,657 for the three months ended March 31, 2015 was the result of the proceeds from related parties.

 

Cash Flows From Financing Activities

 

There was no cash borrowed or returned for the three months ended March 31, 2015.

 

General

 

Collectability of our account receivable for the land use right leasing is important to our continuation of operation. In addition, we have access to short and long term loans of cash from our directors or other related parties.

 

We received cash of $16,657 from our related parties for the three months ended March 31, 2015.

 

Our current assets decreased by $19,732 and total assets increased by $296,207 respectively.

 

We have cash of $52,647 and $72,156 as of March 31, 2015 and December 31, 2014 respectively.

 

We believe that we have sufficient cash to fund operations for the next 12 months.

 

FINANCING

 

We anticipated the cash generated from operating activities will be sufficient to sustain our daily operations for the next twelve months.

 

INFLATION

 

Our management believes that inflation did not have a material effect on our results of operations for the three months ended March 31, 2015.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

We do not have any off-balance sheet arrangements.

 

CONTRACTUAL OBLIGATIONS

 

None

 

CRITICAL ACCOUNTING POLICIES

 

Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which are prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities to comply with generally accepted accounting principles. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from our estimates, which would affect the related amounts reported in our financial statements.

 

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An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimates are made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur, could materially impact the consolidated financial statements. We believe that the following critical accounting policies reflect the significant estimates and assumptions which are used in the preparation of the consolidated financial statements and affect our financial condition and results of operations.

 

Revenue Recognition

 

The Company recognizes revenue when the earnings process is complete, both significant risks and rewards of ownership are transferred or services have been rendered and accepted, the selling price is fixed or determinable, and collectability is reasonably assured.

 

We are currently leasing the land use right to Huanghe for the development and operation of a theme park. We generally collect the annual rent every year, and then recognize land use right leasing revenue over the beneficial period described by the agreement, as the revenue is realized or realizable and earned.

 

The Company supplied electricity power by its solar PV energy segment. The electricity revenue is earned and recognized upon transmission of electricity to Heyang County Huanghe Bay Resort Hotel Co., Ltd., a related company or the power grid controlled and owned by the respective regional or provincial grid companies.

 

Related Party

 

A party is considered to be related to the Company if the party directly or indirectly or through one or more intermediaries, controls, is controlled by, or is under common control with the Company. Related parties also include principal owners of the Company, its management, member of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting party might be prevented from fully pursuing its own separate interests. A party which can significantly influence the management or operating policies of the transacting parties or if it has an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests is also a related party.

 

Our related parties are the following individuals and entities: (i) Mr. Wang Sheng Li (a director of the Company), Mr. Chen Weidong (our President, Chief Executive Officer and Chairman of the Board), Ms Li Ping (a director of the Company), and Ms. Chen Min (a director of the Company), all of whom are shareholders of the Company; (ii) Mr. Zhang Hong Jun, who is currently a director and controlling shareholder of the Company; (iii) Ms. Li Ping (our Chief Financial Officer and who has the same name with our Director Ms. Li Ping); and (iv) the following companies: Du Kang Liquor Development Co., Ltd., Huitong World Property Superintendent Company, Xi Deng Hui Development Stock Co., Ltd., Zhongke Lvxiang Development Stock Co., Ltd., Shaanxi Du Kang Liquor Group Co., Ltd., Shaanxi Bai Shui Du Kang Brand Management Co., Ltd., Shaanxi Changjiang electricity & new energy Co., Ltd., Shaanxi Huanghe Bay Springs Lake Theme Park Ltd., Shaanxi Changfa Industrial Co., Ltd., Shaanxi Tangrenjie Advertising Media Co., Ltd and Zhongke Aerospace , Shaanxi East Mining Co., Ltd., Agriculture Development Stock Co., Ltd., Shaanxi Du Kang Wine Trading Co., Ltd & Heyang County Huanghe Bay Resort Hotel Co., Ltd.

 

Cash flows from due from related parties are classified as cash flows from investing activities. Cash flows from due to related parties are classified as cash flows from financing activities.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not required for a smaller reporting company.

 

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ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

In connection with the preparation of this Quarterly Report on Form10-Q, an evaluation was carried out by the Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2015. Disclosure controls and procedures are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

 

Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2015.

 

Limitations on Effectiveness of Controls and Procedures

 

Our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), does not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints 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, but are not limited to, the realities that judgments 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 control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

Changes in Internal Controls

 

During the fiscal quarter ended March 31, 2015, there have been no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

 

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PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

From time to time, we may be a defendant and plaintiff in various legal proceedings arising in the normal course of our business. We are currently not a party to any material legal proceedings or government actions, including any bankruptcy, receivership, or similar proceedings. In addition, we are not aware of any known litigation or liabilities involving the operators of our properties that could affect our operations. Furthermore, as of the date of this Quarterly Report, our management is not aware of any proceedings to which any of our directors, officers, or affiliates, or any associate of any such director, officer, affiliate, or security holder is a party adverse to our company or has a material interest adverse to us. 

 

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

 

We made no sales of unregistered securities during the quarter ended March 31, 2015.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

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ITEM 6. EXHIBITS

 

In reviewing the agreements included as exhibits to this Form 10-Q, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about the Company or the other parties to the agreements. The agreements may contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the parties to the applicable agreement and:

 

	·	should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
	·	have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
	·	may apply standards of materiality in a way that is different from what may be viewed as material to you or other investors; and
	·	were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

  

Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about the Company may be found elsewhere in this Form 10-Q and the Company’s other public filings, which are available without charge through the SEC’s website at http://www.sec.gov.

 

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The following exhibits are included as part of this report:

 

Exhibit No.		Description
31.1		Certification of Principal Executive Officer pursuant to Section 302 the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer pursuant to Section 302 the Sarbanes-Oxley Act of 2002
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

101.INS **		XBRL Instance Document
101.SCH **		XBRL Taxonomy Extension Schema Document
101.CAL **		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF **		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB **		XBRL Taxonomy Extension Label Linkbase Document
101.PRE **		XBRL Taxonomy Extension Presentation Linkbase Document

_________________

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

 

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SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

	CHINA CHANGJIANG MINING AND NEW ENERGY COMPANY, LTD. (Registrant)
Date: May 14, 2015	By:	/s/ Chen Wei Dong
	Name:	Chen Wei Dong
	Title:	Chief Executive Officer and President (Principal Executive Officer)
Date: May 14, 2015	By:	/s/ Li Ping
	Name:	Li Ping
	Title:	Chief Financial Officer (Principal Financial Officer)

 

 

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