ZHEN DING RESOURCES INC. - FORM 10-Q - May 16, 2016

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EX-31.2 - EXHIBIT 31.2 - ZHEN DING RESOURCES INC.ex31_2.htm
EX-32.2 - EXHIBIT 32.2 - ZHEN DING RESOURCES INC.ex32_2.htm
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
(Mark One)

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
March 31, 2016
 
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
333-188152

ZHEN DING RESOURCES INC.
(Exact name of registrant as specified in its charter)

Delaware
  
11-335926
(State or other jurisdiction of incorporation or organization)
  
(IRS Employer Identification No.)

Suite 205, 353 St. Nicolas, Montreal, Quebec, Canada
H2Y 2P1
(Address of principal executive offices)
(Zip Code)

438-882-4148
(Registrant’s telephone number, including area code)
 
N/A
(Former name, former address and former fiscal year, if changed since last report)
 
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. x YES     o 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 for such shorter period that the registrant was required to submit and post such files). x YES     o NO
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small 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) o YES     x NO
 
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
 
Check whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. o YES     o NO
 
APPLICABLE ONLY TO CORPORATE ISSUERS
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
 
63,968,798 common shares issued and outstanding as of May 9, 2016
 
 
 
 
 
 
FORM 10-Q
 
TABLE OF CONTENTS
 
 
Contents
2
   
   
2
       
 
12
       
 
18
       
 
18
       
18
   
 
18
       
 
18
                            
 
18
       
 
19
       
 
19
       
 
19
       
 
19
       
21
 
 
PART I - FINANCIAL INFORMATION
 
 
Our unaudited interim financial statements for the three month periods ended March 31, 2016 form part of this quarterly report. They are stated in United States Dollars (US$) and are prepared in accordance with generally accepted accounting principles in the United States.
 
 
Zhen Ding Resources Inc.
Consolidated Balance Sheets
As of March 31, 2016 and December 31, 2015
(Unaudited)
 
   
March 31,
    
December 31,
  
   
2016
    
2015
  
Assets
            
             
Current Assets:
            
Cash and cash equivalents
  
$
17,748
    
$
4,320
  
Accounts receivable, net of allowance of $190,639 and
$201,191, respectively
    
-
      
-
  
VAT receivable, net of allowance of $166,735 and
$174,896, respectively
    
-
      
-
  
Total current assets
    
17,748
      
4,320
  
                 
Property, plant and equipment, net of accumulated
depreciation and impairment
    
-
      
-
  
                 
Total assets
  
$
17,748
    
$
4,320
  
                 
Liabilities and Equity (Deficit)
                
                 
Current Liabilities:
                
Accounts payable and accrued liabilities
  
$
332,182
    
$
327,739
  
Accrued interest – related parties
    
2,510,424
      
2,353,997
  
Deferred revenues
    
156,048
      
155,021
  
Due to related party
    
766,106
      
761,066
  
Short-term debt-related parties
    
3,843,281
      
3,784,937
  
Total current liabilities
    
7,608,041
      
7,382,760
  
                 
Equity (Deficit):
                
Common stock, 150,000,000 shares authorized,
    $0.0001 par value, 63,968,798 shares issued and
outstanding
    
6,397
      
6,397
  
Additional paid-in capital
    
12,762,875
      
12,762,875
  
Subscriptions receivable
    
(5,431
)
    
(5,431
)
Accumulated other comprehensive gain
    
167,594
      
200,882
  
Accumulated deficit
    
(18,157,539
)
    
(18,034,800
)
Total deficit attributable to Zhen Ding Resources Inc.
    
(5,226,104
)
    
(5,070,077
)
Non-controlling interests
    
(2,364,189
)
    
(2,308,363
)
                 
Total equity (deficit)
    
(7,590,293
)
    
(7,378,440
)
                 
Total liabilities and equity (deficit)
  
$
17,748
    
$
4,320
  
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
Zhen Ding Resources Inc.
Consolidated Statements of Operations and Comprehensive Loss
For the Three Months ended March 31, 2016 and 2015
(Unaudited)

   
Three Months
Ended
    
Three Months
Ended
  
   
March 31, 2016
    
March 31, 2015
  
             
Operating expenses:
            
General and administrative
     26,183       62,034  
Depreciation
     -       85,000  
                 
Total operating expenses
     26,183       147,034  
                 
Operating loss
     (26,183 )     (147,034 )
                 
Other expense:
                
Interest expense
     (138,115 )     (141,953 )
                 
Total other expense
     (138,115 )     (141,953 )
                 
Net loss
     (164,298 )     (288,987 )
                 
Loss attributable to non-controlling interests
     41,559       75,400  
                 
Net loss attributable to Zhen Ding Resources Inc.
   $ (122,739 )   $ (213,587 )
                 
Basic and diluted net loss per common share
   $ (0.00 )   $ (0.00 )
                 
Basic and diluted weighted average number
                
of common shares outstanding
     63,968,798       63,968,798  
                 
Comprehensive loss:
                
Net loss
   $ (164,298 )   $ (288,987 )
Other comprehensive loss
                
Foreign currency translation adjustments
     (47,555 )     (16,465 )
Total comprehensive loss
     (211,853 )     (305,452 )
Comprehensive loss attributable to non-controlling interest
     55,826       80,340  
Comprehensive loss attributable to Zhen Ding Resources Inc.
   $ (156,027 )   $ (225,112 )

The accompanying notes are an integral part of these unaudited consolidated financial statements.


Zhen Ding Resources Inc.
Consolidated Statements of Cash Flows
For the Three Months ended March 31, 2016 and 2015
(Unaudited)

   
Three Months
Ended
    
Three Months
Ended
  
   
March 31, 2016
    
March 31, 2015
  
Cash flows from operating activities
            
Net loss
  
$
(164,298
)
  
$
(288,987
)
Adjustment to reconcile net loss to net cash used in
operating activities:
                
Depreciation expense
    
  -
      
85,000
  
Change in operating assets and liabilities
                
VAT receivables
    
  -
      
(729
)
Accounts payable and accrued liabilities
    
2,337
      
6,377
  
Accrued interest-related parties
    
139,820
      
147,448
  
Net cash used in operating activities
    
(22,141
)
    
(50,891
)
                 
Cash flows from financing activities
                
Proceeds from borrowings on short-term debt – related
parties
    
35,571
      
56,840
  
Net cash provided by financing activities
    
35,571
      
56,840
  
                 
Foreign currency translation adjustments
    
(2
)
    
3
  
                 
Net change in cash and cash equivalents
    
13,428
      
5,952
  
                 
Cash and cash equivalents - beginning of the year
    
4,320
      
8,199
  
                 
Cash and cash equivalents - end of the year
  
$
17,748
    
$
14,151
  
                 
Supplement cash flows information:
                
Cash paid for interest
  
$
-
    
$
-
  
Cash paid for income taxes
  
$
-
    
$
-
  
                 
Non-cash investing and financing transactions:
                
Reclassification of construction in progress to fixed assets
  
$
-
    
$
22,471
  

The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
 
Zhen Ding Resources Inc.
Notes to Consolidated Financial Statements
(Unaudited)


Note 1.  Description of Business

Zhen Ding Resources Inc. (formerly Robotech Inc.) (the “Company”, “Zhen Ding DE”, or “ZDRI”) was incorporated in the State of Delaware in September 1996 and began its business activities in the development and marketing of specialized technological equipment. In early 2010, the business direction of our Company was changed to seek opportunities to focus particularly on searching for companies engaged in the mining of gold, silver and copper.

Our Company entered into negotiations with Zhen Ding Resources Inc. (a Nevada entity) (“Zhen Ding NV”), which indirectly owns 70% of a Chinese Joint Venture entity, Zhen Ding Mining Co. Ltd. (“Zhen Ding JV” or “JXZD”). This indirect ownership is through a 100% ownership of a California company Z&W, Zhen Ding Corporation (“Z&W CA”). During 2012 and 2013, total issued and outstanding common stock of Zhen Ding NV were tendered to our Company. On October 28, 2013, our Company dissolved Zhen Ding NV by merging it into our Company.
 
Our Company, now through Zhen Ding NV’s wholly owned subsidiary, Z&W CA, participates in a joint venture with Jing Xian Xinzhou Gold Co., Ltd. (“Xinzhou Gold”), a company organized under the laws of the People’s Republic of China (“PRC”). The joint venture company JXZD is 70% held by our Company through Z&W CA who has the mineral exploration, mineral mining and gold mining rights to a property located in the southwestern part of Anhui province in China, near the town of Jing Xian. Xinzhou Gold, the other 30% partner of JXZD is the actual named owner of the various licenses used by JXZD and transferred all rights emanating from these licenses as part of the joint venture agreement between Z&W CA and Xinzhou Gold. Our Company’s primary activity, through JXZD, is ore processing and production in China. The Company had limited operations and plans to resume selling processed ore concentrate as soon as possible to provide Zhen Ding JV the cash flow needed to keep its plant operating and to maintain a viable work force for future expansion.


Note 2. Summary of Significant Accounting Policies

The summary of significant accounting policies presented below is designed to assist in understanding the Company’s financial statements. Such financial statements and accompanying notes are the representations of the Company’s management, which is responsible for the integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America (“U.S. GAAP”) in all material respects and have been consistently applied in preparing the accompanying financial statements.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim unaudited consolidated financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. The unaudited consolidated financial statements furnished reflect all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2015 and notes thereto contained in the Company’s Annual Report on Form 10-K.

The consolidated financial statements include the accounts of the Company, its wholly subsidiaries Z&W CA and its majority owned subsidiary JXZD. All inter-company transactions and balances were eliminated. The portion of the income applicable to non-controlling interests in subsidiary undertakings is reflected in the consolidated statements of operations.
 
 
Use of Estimates and Assumptions

The Company prepares its financial statements in conformity with U.S. GAAP, which requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Foreign Currency Adjustments

Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the year. Any translation adjustments are reflected as a separate component of stockholders’ equity (deficit) and have no effect on current earnings. Gains and losses resulting from foreign currency transactions are included in current results of operations. During the three months ended March 31, 2016 and 2015, the Company had aggregate foreign currency translation losses of $47,555 and $16,465, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivable are stated at the amount the Company expects to collect. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Management considers the following factors when determining the collectability of specific customer accounts: customer credit-worthiness, past transaction history with the customer, current economic industry trends, and changes in customer payment terms. Past due balances over 90 days and other higher risk amounts are reviewed individually for collectability. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required. Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to a valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. As of March 31, 2016 and December 31, 2015, the Company had an allowance of $190,639 and $201,191, respectively, for doubtful accounts.

Property, plant and Equipment

Property, plant and equipment is stated at the historical cost, less accumulated depreciation. Depreciation on property, plant and equipment is provided using the straight-line method over the estimated useful lives of the assets for both financial and income tax reporting purposes as follows:
 
Buildings
20 years
Motor vehicles
5 years
Production and office Equipment
5 years
 
Expenditures for normal repairs and maintenance are charged to expense as incurred.  Significant renewals and improvements are capitalized.  The costs and related accumulated depreciation of assets retired or otherwise disposed of are eliminated from the accounts, and any resulting gain or loss is recognized in the year of disposal.

Impairment of Long-Lived Assets

Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be realizable or at a minimum annually during the fourth quarter of the year.  If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the asset’s carrying value to determine if an impairment of such asset is necessary.  The effect of any impairment would be to expense the difference between the fair value of such asset and its carrying value.
 
 
Income Taxes

An asset and liability approach is used for financial accounting and reporting for income taxes. Deferred income taxes arise from temporary differences between income tax and financial reporting and principally relate to recognition of revenue and expenses in different periods for financial and tax accounting purposes and are measured using currently enacted tax rates and laws. In addition, a deferred tax asset can be generated by net operating loss carry forwards. If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized. The Company has tax losses that may be applied against future taxable income. The potential tax benefit arising from these loss carryforwards are offset by a valuation allowance due to uncertainty of profitable operations in the future.

Fair Values of Financial Instruments

Management believes that the carrying amounts of the Company’s financial instruments, consisting primarily of cash, account receivable and accounts payable, approximated their fair values as of March 31, 2016 and December 31, 2015, due to their short-term nature.

Non-controlling Interests

Non-controlling interests in the Company’s subsidiaries are reported as a component of equity, separate from the parent’s equity. Purchase or sale of equity interests that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the minority interest are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair value with any gain or loss recognized in earnings.

Revenue Recognition

Revenue is recognized when products are shipped, title and risk of loss is passed to the customers and collection is reasonably assured. Payments received prior to the satisfaction of the above criteria are deferred.

Basic and Diluted Earnings (Loss) Per Common Share

The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an “as converted” basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For all periods presented, there were no potentially dilutive securities outstanding.

Subsequent Events

The Company evaluated events subsequent to March 31, 2016 through the date the financial statements were issued for disclosure consideration.

Recently Issued Accounting Pronouncements

In April 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-09, “Compensation – Stock Compensation” (topic 718). The FASB issued this update to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees. Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows. The updated guidance is effective for annual periods beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption of the update is permitted. The Company is currently evaluating the impact of the new standard.
 

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers (Topic 606).” The new guidance provides new criteria for recognizing revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new guidance requires expanded disclosures to provide greater insight into both revenue that has been recognized and revenue that is expected to be recognized in the future from existing contracts. Quantitative and qualitative information will be provided about the significant judgments and changes in those judgments that management made to determine the revenue that is recorded. This accounting standard update, as amended, will be effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The new revenue standard may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption. Early adoption is permitted, but no earlier than fiscal 2017. The Company is currently assessing the provisions of the guidance and has not determined the impact of the adoption of this guidance on its consolidated financial statements.


Note 3. Going Concern

These financial statements have been prepared on a going concern basis, which implies the Company will continue to meet its obligations and continue its operations for the next twelve months. As of March 31, 2016, the Company had accumulated losses of $18,150,557 since inception and had a working capital deficit of $7,590,293. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The continuation of the Company as a going concern is dependent upon financial support from its stockholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. Realization value may be substantially different from carrying values as shown and these financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.


Note 4. VAT Receivables

The VAT receivables are the input tax of VAT to the purchased materials and property and equipment. As of March 31, 2016 and December 31, 2015, the Company fully reserved the VAT receivable of approximately $175,000 due to uncertainty of recovering this receivable from the local tax authority.


Note 5. Property, plant and Equipment

Property and equipment consisted of the following as of:

   
March 31,
    
December 31,
  
   
2016
    
2015
  
             
Buildings
  
$
1,319,495
    
$
1,310,813
  
Motor vehicles
    
62,359
      
61,649
  
Production and office equipment
    
1,294,815
      
1,286,310
  
Construction in progress
    
166,294
      
165,199
  
Subtotal
    
2,842,963
      
2,823,971
  
Less:  Accumulated depreciation
    
(1,152,074
)
    
(1,144,493
)
Less:  Impairment of long-lived assets
    
(1,690,889
)
    
(1,679,478
)
Property, plant and equipment, net
  
$
-
    
$
-
  

For the periods ended March 31, 2016 and 2015, the Company recorded depreciation expenses of $0 and $85,000, respectively.

In the PRC, land use rights, are the legal rights for an entity to use land for a fixed period of time. The PRC adopts a dual land tenure system under which land ownership is independent of land use rights. The land is either owned by the state (“State Land”) or by a rural collective economic organization (“Collective Land”). As of March 31, 2016, the Company does not have any land use rights agreements with the PRC for the office buildings owned by the Company. The Government owns the land where the Company’s buildings are located and allows the Company free usage of the land.
 
 
Property and equipment mainly consisted of equipment or buildings in relation to the ore processing operation in Anhui, China. The Company only had access to lower quality ore powder and concluded the probability to sell the low quality processed ore powder is low. Accordingly, the Company had no production during 2016 and 2015.

The Company determined that the long-lived assets have been impaired because of the reduction in the production, projections of declining future cash flows and the uncertainty of continuing operations. Accordingly, the Company evaluated the ongoing value of the property and equipment associated with its ore processing operation and determined that assets with a carrying amount of approximately $1.7 million were no longer recoverable and were impaired. Accordingly, the Company determined it would be required to write the assets down to their estimated fair value.

Fair value was based on expected future cash flows using Level 3 inputs under ASC 820. The cash flows are those expected to be generated by the market participants, discounted at the risk-free rate of interest. At December 31, 2015, the Company recorded an approximately $1.7 million impairment loss on the assets.


Note 6. Related Party Transactions

Accounts payable

As of March 31, 2016 and December 31, 2015, the Company had payables of $766,106 and $761,066, respectively, to Xinzhou Gold. These payables bear no interest, are unsecured and are due on demand.

Short-term debt

As of March 31, 2016 and December 31, 2015, the Company had short-term debts to related parties of $3,842,281 and $3,784,937, respectively. The details of the loans are described as below.

At March 31, 2016:
             
Annual
        
Name
  
Relationship to the Company
  
Amount
    
Interest Rate
  
Start Date
  
Maturity
Shor-term debt
                  
Wei De Gang
  
CEO & Legal person of JXZD
   $ 2,787,274     15%  
May 31, 2011
  
On Demand
Zhao Yan Ling
  
Former office manager of JXZD, wife of Zhou Zhi Bin
     16,277     15%  
January 1, 2011
  
On Demand
Zhou Zhi Bin
  
Former CEO & Legal person of JXZD
     7,751     15%  
January 1, 2011
  
On Demand
Tang Yong Hong
  
Manager of JXZD
     333,685     15%  
February 28, 2014
  
On Demand
Yan Chun Yan
  
Accountant of JXZD
     5,401     15%  
August 31, 2014
  
On Demand
Wen Mei Tu
  
President & shareholder of ZDRI
     288,000     12%  
Various
  
Various
Importation Tresor Plus Inc
  
Shareholder of ZDRI
     30,000     12%  
July 9, 2012
  
On Demand
Tony Ng Man Kin
  
Shareholder of ZDRI
     25,000     12%  
February 27, 2013
  
On Demand
Wei Tai Trading Inc.
  
Shareholder of ZDRI
     12,000     12%  
June 03, 2015
  
On Demand
YYC Technologies Inc.
  
Owned by Wen Mei Tu’s brother-in-law
     6,000     12%  
May 22, 2015
  
May 22, 2016
Victor Sun
  
Consultant & shareholder of ZDRI
     3,888     0%  
January 1, 2013
  
On Demand
Helen Chen
  
President of Z&W CA
     17,965     0%  
January 1, 2011
  
On Demand
Zhou Qiang
  
Office manager of JXZD
     310,040     15%  
December 18, 2012
  
On Demand
Total
       $ 3,843,281              
 
 
At December 31, 2015:
             
Annual
        
Name
  
Relationship to the Company
  
Amount
    
Interest Rate
  
Start Date
  
Maturity
Shor-term debt
                  
Wei De Gang
  
CEO & Legal Person of JXZD
   $ 2,768,900     15%  
May 31, 2011
  
On Demand
Zhao Yan Ling
  
Former Office Manager in JXZD, wife of Zhou Zhi Bin
     16,170     15%  
January 1, 2011
  
On Demand
Zhou Zhi Bin
  
Former CEO & Legal Person of JXZD
     7,700     15%  
January 1, 2011
  
On Demand
Tang Yong Hong
  
Manager of JXZD
     331,489     15%  
February 28, 2014
  
On Demand
Yan Chun Yan
  
Accountant of JXZD
     4,790     15%  
August 31, 2014
  
On Demand
Wen Mei Tu
  
President & shareholder of ZDRI
     253,000     12%  
Various
  
Various
Importation Tresor Plus Inc
  
Shareholder of ZDRI
     30,000     12%  
July 9, 2012
  
On Demand
Tony Ng Man Kin
  
Shareholder of ZDRI
     25,000     12%  
February 27, 2013
  
On Demand
Wei Tai Trading Inc
  
Shareholder of ZDRI
     12,000     12%  
June 03, 2015
  
On Demand
YYC Technologies Inc.
  
Owned by Wen Mei Tu’s brother-in-law
     6,000     12%  
May 22, 2015
  
May 22, 2016
Victor Sun
  
Consultant & shareholder of ZDRI
     3,923     0%  
January 1, 2013
  
On Demand
Helen Chen
  
President of Z&W CA
     17,965     0%  
January 1, 2011
  
On Demand
Zhou Qiang
  
Office manager of JXZD
     308,000     15%  
December 18, 2012
  
On Demand
Total
       $ 3,784,937              

As of March 31, 2016 and December 31, 2015, the Company had accrued interest payable to the related parties of $2,510,424 and $2,353,997, respectively. For the three months ended March 31, 2016 and 2015, the Company recorded interest expenses of $138,115 and $141,953, respectively.


Note 7. Deferred Revenues

As of March 31, 2016 and December 31, 2015, the Company had deferred revenue of $156,048 and $155,021, respectively, related to advances that the Company received from its customers.


Note 8. Contingencies

Vulnerability Due to Operations in PRC

The Company’s operations in China may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than twenty years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective in the future.


Note 9. Income Taxes

The Company and its subsidiaries are subject to income taxes on an "entity" basis that is, on income arising in or derived from the tax jurisdiction in which each entity is domiciled. It is management's intention to reinvest all the income earned by the Company's subsidiaries outside of the US. Accordingly, no US federal income taxes have been provided on earnings of the foreign based subsidiaries.

The Company was incorporated in the United States and is subject to United States federal income taxes and has incurred operating losses since its inception. The Company's joint venture in China is subject to a 25% statutory PRC enterprise income tax rate and has also incurred operating losses since its inception. As of March 31, 2016, the Company had net operating losses (“NOL”) carryforwards of approximately $18 million. The NOL carryforwards expire between fiscal year 2016 through 2035. The value of these carryforwards depends on the Company’s ability to generate taxable income. Tax laws in both China and United States limit the time during which the net operating loss carryforwards may be applied against future taxes, if the Company fails to generate taxable income prior to the expiration dates, the Company may not be able to fully utilize the net operating loss carryforwards to reduce future income taxes. The Company has had cumulative losses and there is no assurance of future taxable income; therefore, valuation allowances have been recorded to fully offset the deferred tax asset at March 31, 2016 and December 31, 2015.
 
 
FORWARD LOOKING STATEMENTS
 
This quarterly report contains forward-looking statements. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
 
Our unaudited financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles. The following discussion should be read in conjunction with our financial statements and the related notes that appear elsewhere in this quarterly report. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this quarterly report.
 
Our financial statements are stated in United States Dollars (US$) and are prepared in accordance with United States Generally Accepted Accounting Principles.
 
In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to “common shares” refer to the common shares in our capital stock.
 
As used in this quarterly report, the terms “we”, “us”, “our” and “our company” mean Zhen Ding Resources Inc., unless otherwise indicated.
 
General Overview
 
We are engaged in seeking business partnership opportunities with companies that are in the field of exploration and extraction of precious and/or base metals, primarily in China, which are in need of funding and improved management.  We would provide the necessary management expertise and assist in financing efforts of these mining operations.  In exchange, we would acquire metal ores produced by these mines and process the ores in our ore milling plant and sell the ore concentrates to metal refineries.  Our only operating company is Zhen Ding JV, which engages in the processing of metal ore and the selling of ore concentrates of gold, silver, lead, zinc and copper at purity levels ranging from 65% to 80%.  Zhen Ding JV purchases metal ore in rock form from its joint venture partner, Xinzhou Gold, which has rights to explore and mine ore from a property located in the southwestern part of Anhui province in China.
 
Our Corporate History and Structure
 
Our principal office is located at 353 St. Nicolas, Suite 205, Montreal, Quebec H2Y 2P1.  The offices in Montreal are not under written lease but are rented through a verbal agreement, on a month to month basis, from 150206 Canada Inc. at $500 per month, due and payable at each calendar quarter end. The occupancy began October 1, 2013.
 
Our operational offices are located at:  Zhen Ding Mining Co. Ltd., Wuxi County, Town of Langqiao, Jing Xian, Anhui Province, China, Tel: 86-6270-9018.
 
Zhen Ding Resources Inc. (formerly Robotech Inc.) (the “Company”, “Zhen Ding DE”, or “ZDRI”) was incorporated in State of Delaware in September 1996 and began our business activities in the development and marketing of specialized technological equipment. At that time we estimated that we would require approximately $6,000,000 to realize our plans. Through the year 2003, we had not reached our financing goals and therefore abandoned that particular business plan. Since that time, we have been seeking suitable candidates for acquisition.
 
 
In early 2010, the business direction of our company was changed to seek to profit from precious metals, minerals and industrial commodities and we began to focus our acquisition search in that industry, particularly on companies engaged in the mining of gold, silver and copper.
 
In January 2012, our Board of Directors, with authorization from a majority of our shareholders, made an offer to the shareholders of Zhen Ding Resources Inc., a Nevada corporation (“Zhen Ding NV”), to acquire, at the very least, the majority of their common shares, and, if available, up to 100% ownership.
 
Zhen Ding NV through its wholly owned subsidiary, Z&W Zhen Ding Corporation, a California corporation (“Zhen Ding CA”), has been engaged in a joint venture with Jing Xian Xinzhou Gold Co., Ltd. (“Xinzhou Gold”), a company organized under the laws of the People’s Republic of China (“PRC”). The joint venture company, Zhen Ding Mining Co. Ltd. (“Zhen Ding JV”) is 70% held by Zhen Ding NV through Zhen Ding CA.  It is a common practice in China to append the name of the town or city where an enterprise is located to its legally incorporated name. Thus many documents referencing Zhen Ding JV may refer to it as Jing Xian Zhen Ding Mining Co. Ltd. Zhen Ding JV engages in the processing of metal ore and the selling of ore concentrates of gold, silver, lead, zinc and copper at purity levels ranging from 65% to 80%.  Zhen Ding JV purchases metal ore in rock form from Xinzhou Gold.
 
On March 8, 2012, we changed our name from Robotech, Inc. to Zhen Ding Resources Inc., in anticipation of the acquisition of Zhen Ding NV. Our trading symbol, RBTK, however remained unchanged.
 
During 2012, a total of 50,746,358 shares of the issued and outstanding common stock of Zhen Ding NV were tendered to our company. On August 13, 2013, an additional 13,100,000 shares were tendered to us. Thus, as of August 13, 2013 the shareholders of Zhen Ding NV had tendered 100% of the issued and outstanding shares of common stock, representing 100% of the issued and outstanding equity of Zhen Ding NV to us.
 
On October 23, 2013, we issued 122,440 shares of our common stock, on a one-for-one basis, to the tendering shareholders of Zhen Ding NV making Zhen Ding NV a wholly owned subsidiary of our company.
 
On October 28, 2013, we dissolved Zhen Ding NV by merging it with and into Zhen Ding DE.  As a result, Zhen Ding CA became a wholly-owned subsidiary of Zhen Ding DE.  Zhen Ding CA continues to exist as an intermediate holding company with no operations of its own, but which in turn owns our 70% interest in Zhen Ding JV.
 
 
The following illustrates our corporate and share ownership structure:

 
Current Operations
 
Presently, we are conducting our operations exclusively through Zhen Ding JV, our joint venture company. However, we continue to look for other attractive potential acquisition targets in the mining industry.
 
Our joint venture, Zhen Ding JV, is equipped to process ore mined by our joint venture partner Xinzhou Gold.  Zhen Ding JV purchases the ore in rock form from Xinzhou Gold and processes the ore into our final product, which is a gold, silver, lead, zinc and copper ore concentrate. We estimate that our processed product is 65-80% pure and is sold to refineries that further purify and separate the concentrate.  Zhen Ding JV also arranges all exploration, mining process and operations, and financial and administrative support for the Wuxi Gold Mine operations.
 
We plan to resume selling processed ore concentrate as soon as possible to provide Zhen Ding JV the cash flow needed to keep its plant operating and to maintain a viable work force for future expansion.
 
Although we do not currently produce pure metals, it is part of our development plan to do so in the future.
 
 
Plan of Operation
 
Our operating plan for the balance of 2016 is as follows:
 
 
1.
to continue to pursue potential financing activities. The funds raised would be used to:
 
 
a.
identify additional veins;
 
 
b.
re-start the mill;
 
 
c.
re-test the mill;
 
 
d.
develop expansion plans for our plant capacity;
 
 
e.
drill additional holes near the concentration plant; and
 
 
f.
undertake at least three deep drill holes in the permitted area.
 
 
2.
to re-commence greater milling operations as soon as possible. This is expected to be in the last quarter of 2015. This will involve re-testing the plant equipment and re-hiring all personnel that was laid off as a result of the mining halt;
 
 
3.
to actively seek partnerships with mining enterprises primarily active in the gold, silver and/or copper fields and subject to the general parameters described earlier to increase our supply of raw material. The extent of this program is dependent on the successful completion of the $3,000,000 financing efforts currently underway; and
 
 
4.
to look for a partner in the natural resources field in order to enhance our future capability to access necessary funding.
 
Results of Operations
 
Three Months Ended March 31, 2016 compared to the Three Months Ended March 31, 2015
 
We had a net loss of $164,298 for the three months ended March 31, 2016, which was $124,689 less than the net loss of $288,987 for the three months ended March 31, 2015. The change in our results over the two periods is a result of a decrease in general and administrative expense, depreciation and interest expense caused by an overall decrease in our business operations leading up to, and during, the current period.
 
The following table summarizes key items of comparison and their related increase (decrease) for the three month periods ended March 31, 2016 and 2015:
 
   
Three Months
Ended
March 31,
2016
    
Three Months
Ended
March 31,
2015
    
Percentage Increase
(Decrease) Between
Three Month Periods
Ended
March 31, 2016 and
March 31, 2015
  
General and administrative
   $ 26,183     $ 62,034       (57.79%)  
Depreciation
     -       85,000       (100%)  
Interest expense
     (138,115 )     (141,953 )     (2.70%)  
Net loss
   $ (164,398 )   $ (288,987 )     (43.15%)  
 
Revenue
 
We have not earned any revenues in the three months ended March 31, 2016 or March 31, 2015.  Our lack of revenue is due to our inability to find better quality materials for our production.
 
 
Liquidity and Capital Resources
 
Our balance sheet as of March 31, 2016 reflects current assets of $17,748.  We had cash and cash equivalents in the amount of $17,748 and a working capital deficit in the amount of $7,590,293 as of March 31, 2016. We have insufficient working capital to carry out our stated plan of operation for the next 12 months.
 
Working Capital
 
   
At
March 31,
2016
    
At
December 31,
2015
  
Current assets
   $ 17,748     $ 4,320  
Current liabilities
     7,608,041       7,382,760  
Working capital deficit
   $ (7,590,293 )   $ (7,378,440 )
 
As of March 31, 2016, we had accumulated losses of $18,157,539 since inception. We anticipate generating losses and, therefore, may be unable to continue operations further in the future.
 
Cash Flows
 
   
Three Months Ended
  
   
March 31,
  
   
2016
    
2015
  
Net cash used in operating activities
   $ (22,141 )   $ (50,891 )
Net cash provided by financing activities
   $ 35,571     $ 56,840  
Net increase in cash during period
   $ 13,428     $ 5,952  
 
Operating Activities
 
Net cash used in operating activities during the three months ended March 31, 2016 was $22,141, a 56% decrease from the $50,891 net cash outflow during the three months ended March 31, 2015.  The decrease was a result of an overall reduction in our business activities during the most recent period.  During the three months ended March 31, 2016, we had no sales and did not purchase any raw materials.
 
Financing Activities
 
Cash provided by financing activities during the three months ended March 31, 2016 was $35,571, which was a 37% decrease from the $50,891 cash provided by financing activities during the three months ended March 31, 2015.  The decrease was a result of fewer related party loans during the most recent period.
 
Plan of Operation
 
Our operating plan for the 12 months beginning from April 1, 2016 is as follows:
 
• Continue to pursue potential financing activities.
 
• The funds raised would be used to (a) identify additional veins, (b) to re-start the mill, (c) re-test the mill, (d) develop expansion plans for our plant capacity, (e) drilling additional holes near the concentration plant and (f) undertake at least three deep drill holes in the permit area.
 
• To re-commence greater milling operations as soon as possible. This is expected in 2016. This will involve re-testing the plant equipment and re-hiring all personnel laid off as a result of the mining halt.
 
 
• Actively seek partnerships with mining enterprises primarily active in the gold, silver and/or copper fields and subject to the general parameters described earlier to increase our supply of raw material.
 
The extent of this program is dependent on the success of the US$3,000,000 financing efforts currently underway, as describer earlier.
 
Accordingly, we estimate that our operating expenses and working capital requirements for the next 12 months to be as follows:
 
Estimated Net Expenditures During The Next Twelve Months
  
   
      
General and administrative expenses
   $ 1,000,000  
Exploration expenses: identify additional veins; re-start mill; re-test mill;
develop expansion plan for plant capacity
   $ 2,000,000  
Total
   $ 3,000,000  
 
To date we have relied on proceeds from the sale of our shares and on loans from our directors and officers in order to sustain our basic minimum operating expenses; however, we cannot guarantee that we will secure any further sales of our shares or that our related parties with provide us with any future loans.  We estimate that the cost of maintaining our current operations and reporting requirements will be approximately $20,000 per month.   Due to our cash position of $17,746 as of March 31, 2016, we estimate that we will require approximately $223,000 to sustain our current operations for the next twelve months, or approximately $3,000,000 to execute our above described exploration plan.
 
We are not aware of any known trends, demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in our liquidity increasing or decreasing in any material way.
 
Future Financings
 
We anticipate continuing to rely on equity sales of our common stock in order to continue to fund our business operations. Issuances of additional shares will result in dilution to our existing stockholders. There is no assurance that we will achieve any additional sales of our equity securities or arrange for debt or other financing to fund our planned business activities.
 
We presently do not have any arrangements for additional financing for the expansion of our exploration operations, and no potential lines of credit or sources of financing are currently available for the purpose of proceeding with our plan of operations.
 
Off-Balance Sheet Arrangements
 
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, and capital expenditures or capital resources that are material to stockholders.
 
Critical Accounting Policies
 
Foreign Currency Adjustments

Assets and liabilities recorded in foreign currencies are translated at the exchange rate on the balance sheet date. Revenue and expenses are translated at average rates of exchange prevailing during the year. Any translation adjustments are reflected as a separate component of stockholders’ equity (deficit) and have no effect on current earnings. Gains and losses resulting from foreign currency transactions are included in current results of operations.
 
Non-controlling Interest
 
Non-controlling interests in our company’s subsidiaries are reported as a component of equity, separate from the parent’s equity. Purchase or sale of equity interests that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the minority interest are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair value with any gain or loss recognized in earnings.
 
 
Revenue Recognition
 
Revenue is recognized when products are shipped, title and risk of loss is passed to the customers and collection is reasonably assured. Payments received prior to the satisfaction of above criteria are deferred.
 
 
As a “smaller reporting company”, we are not required to provide the information required by this Item.
 
 
Management’s Report on Disclosure Controls and Procedures
 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our president (our principal executive officer) and our chief financial officer (our principal financial officer and principle accounting officer) to allow for timely decisions regarding required disclosure.
 
As of the end of the quarter covered by this report, we carried out an evaluation, under the supervision and with the participation of our president (our principal executive officer) and our chief financial officer (our principal financial officer and principle accounting officer), of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our management concluded that our internal controls are not effective due to us having material weaknesses in our control environment and financial reporting process due to lack of a functioning audit committee, a majority of independent members and a majority of outside directors on our Board of Directors, resulting in ineffective oversight in the establishment and monitoring of required internal control and procedures.
 
Changes in Internal Control Over Financial Reporting
 
During the period covered by this report there were no changes in our internal control over financial reporting that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
 
PART II - OTHER INFORMATION
 
 
We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, executive officers or affiliates, or any registered or beneficial stockholder, is an adverse party or has a material interest adverse to our interest.
 
 
As a “smaller reporting company”, we are not required to provide the information required by this Item.
 
 
None.
 
 
 
None.
 
 
Not applicable.
 
 
None.
 
 
Exhibit 
Number
  
Description
(3)
  
Articles of Incorporation and Bylaws
3.1
  
Articles of Incorporation filed with the Secretary of State of the State of Delaware on September 6, 1996  (Incorporated by reference to our Registration Statement on Form S-1 filed January 6, 2014)
3.2
  
Bylaws  (Incorporated by reference to our Registration Statement on Form S-1 filed January 6, 2014)
3.3
  
Certificate of Amendment of Certificate of Incorporation filed with the Secretary of State of the State of Delaware on November 4, 1996 (Incorporated by reference to our Registration Statement on Form S-1 filed January 6, 2014)
3.4
  
Certificate of Amendment of Certificate of Incorporation filed with the Secretary of State of the State of Delaware on February 28, 2012 (Incorporated by reference to our Registration Statement on Form S-1 filed January 6, 2014)
3.5
  
Certificate of Amendment of Certificate of Incorporation filed with the Secretary of State of the State of Delaware on March 20, 2012 (Incorporated by reference to our Registration Statement on Form S-1 filed January 6, 2014)
3.6
  
Certificate of Ownership and Merger filed with the Secretary of State of the State of Delaware on October 28, 2013 (Incorporated by reference to our Registration Statement on Form S-1 filed January 6, 2014)
(10)
  
Material Contracts
10.1
  
The Contract for Sino-Foreign Equity Joint Venture dated as of November 12, 2004 by and between Zhen Ding Corporation and Jing Xiang Xin Zhou Gold Co. Ltd. (Incorporated by reference to our Registration Statement on Form S-1 filed January 6, 2014)
10.2
  
Articles of Association for Zhen Ding JV dated as of October 12, 2006 by and between Z&W Zhen Ding Corporation and Jing Xiang Xin Zhou Gold Co. Ltd. (Incorporated by reference to our Registration Statement on Form S-1/A filed on February 13, 2015)
10.3
  
Supply Contract of Gold Concentrate Fines dated July 20, 2012 between Zhen Ding Mining Co., Ltd. and Yantai Jin Ao Metallurgical Co. Ltd.(Incorporated by reference to our Registration Statement on Form S-1/A filed on February 13, 2015)
10.4
  
Mining License No. C3400002009114110049341 dated November 5, 2014 in favor of Jing Xiang Xin Zhou Gold Co. Ltd. (Incorporated by reference to our Registration Statement on Form S-1/A filed on February 13, 2015)
10.5
  
Gold Mining License No. (2005) 042 in favor of Jing Xiang Xin Zhou Gold Co. Ltd. (Incorporated by reference to our Registration Statement on Form S-1/A filed on February 13, 2015)
10.6
  
Form of Loan Agreements between Wen Mei Tu and Zhen Ding Resources Inc. (Incorporated by reference to our Registration Statement on Form S-1/A filed on February 13, 2015)
10.7
  
Business License Registration No. 3425004000003061(1-1) dated November 17, 2014 in favor of Zhen
Ding Mining Co. Ltd. (Incorporated by reference to our Registration Statement on Form S-1/A filed
June 9, 2015)

*Filed herewith.

 
Exhibit 
Number
  
Description
(31)
  
Rule 13a-14 (d)/15d-14d) Certifications
31.1*
  
Section 302 Certification by the Principal Executive Officer
31.2*
  
Section 302 Certification by the  Principal Financial Officer and Principal Accounting Officer
(32)
  
Section 1350 Certifications
32.1*
  
Section 906 Certification by the Principal Executive Officer
32.2*
  
Section 906 Certification by the Principal Financial Officer and Principal Accounting Officer
101*
  
Interactive Data File
101.INS
  
XBRL Instance Document
101.SCH
  
XBRL Taxonomy Extension Schema Document
101.CAL
  
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF
  
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB
  
XBRL Taxonomy Extension Label Linkbase Document
101.PRE
  
XBRL Taxonomy Extension Presentation Linkbase Document

*Filed herewith.

 
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
     
ZHEN DING RESOURCES INC.
     
(Registrant)
       
       
Dated: May 16, 2016
    
/s/Wen Mei Tu
     
Wen Mei Tu
     
President, Treasurer, Secretary and Director
     
(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)
       
       
Dated: May 16, 2016
    
/s/De Gang Wei
     
De Gang Wei
     
Chairman, Chief Financial Officer and Director
(Principal Financial Officer and Principal Accounting Officer)
 
 
21

ZHEN DING RESOURCES INC. Reports