RBTK 10-Q Quarterly Report Sept. 30, 2016 | Alphaminr
ZHEN DING RESOURCES INC.
ALPHAMINR

RBTK 10-Q Quarter ended Sept. 30, 2016

Balance Sheet
Cash Flow
Income Statement
Debt
ZHEN DING RESOURCES INC.
10-Q 1 zd11216210q.htm FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2016
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)

☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 2016
or
☐
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.
☒
YES
☐
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).
☒
YES
☐
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
☐
Accelerated filer
☐
Non-accelerated filer
☐
(Do not check if a smaller reporting company)
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
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.
☐
YES
☐
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 November 4, 2016
ZHEN DING RESOURCES INC.
FORM 10-Q
TABLE OF CONTENTS
Contents
3
3
13
19
19
20
20
20
20
20
20
20
20
22
PART I - FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements
Our unaudited interim financial statements for the nine month period ended September 30, 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.
Balance Sheets
(Unaudited)
September 30,
December 31,
2016
2015
Assets
Current Assets:
Cash and cash equivalents
$
26,063
$
4,320
Total current assets
26,063
4,320
Total assets
$
26,063
$
4,320
Liabilities and Equity (Deficit)
Current Liabilities:
Accounts payable and accrued liabilities
$
340,666
$
327,739
Accrued interest-related parties
2,705,340
2,353,997
Deferred revenues
150,894
155,021
Due to related parties
740,803
761,066
Short-term debt-related parties
3,773,944
3,784,937
Total current liabilities
7,711,647
7,382,760
Equity (Deficit):
Common stock, 150,000,000 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 loss
329,398
200,882
Accumulated deficit
(18,403,193
)
(18,034,800
)
Total deficit attributable to Zhen Ding Resources Inc.
(5,309,954
)
(5,070,077
)
Non-controlling interests
(2,375,630
)
(2,308,363
)
Total equity (deficit)
(7,685,584
)
(7,378,440
)
Total liabilities and equity (deficit)
$
26,063
$
4,320
The accompanying notes are an integral part of these consolidated financial statements.
Zhen Ding Resources Inc.
Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)

Three months ended
Nine months ended
September 30,
2016
September 30,
2015
September 30,
2016
September 30,
2015
Operating expenses:
General and administrative
20,592
24,373
81,305
135,990
Depreciation
-
83,370
-
253,817
Total operating expenses
20,592
107,743
81,305
389,807
Operating loss
(20,592
)
(107,743
)
(81,305
)
(389,807
)
Other expense:
Interest expenses
(132,475
)
(142,277
)
(409,434
)
(428,344
)
Net loss
(153,067
)
(250,020
)
(490,739
)
(818,151
)
Loss attributable to non-controlling interests
39,262
60,040
122,346
208,144
Net loss attributable to Zhen Ding
Resources Inc.
$
(113,805
)
$
(189,980
)
$
(368,393
)
$
(610,007
)
Basic and diluted loss per common share
$
(0.00
)
$
(0.00
)
$
(0.01
)
$
(0.01
)
Basic and diluted weighted average number
of common shares outstanding
63,968,798
63,968,798
63,968,798
63,968,798
Comprehensive loss:
Net loss
$
(153,067
)
$
(250,020
)
$
(490,739
)
$
(818,151
)
Other comprehensive income (loss):
Foreign currency translation adjustments
22,088
186,728
183,595
167,667
Total comprehensive loss
(130,979
)
(63,292
)
(307,144
)
(650,484
)
Comprehensive loss attributable to non-
controlling interests
32,635
4,030
67,267
157,847
Comprehensive loss attributable to Zhen
Ding Resources Inc.
$
(98,344
)
$
(59,262
)
$
(239,877
)
$
(492,637
)
The accompanying notes are an integral part of these consolidated financial statements.
Zhen Ding Resources Inc.
Consolidated Statements of Cash Flows
(Unaudited)

September 30,
2016
September 30,
2015
Cash flows from operating activities
Net loss
$
(490,739
)
$
(818,151
)
Adjustment to reconcile net loss to net cash used in operating
activities:
Depreciation
-
253,817
Change in operating assets and liabilities
Accounts receivable
-
(98
)
VAT receivables
-
115
Accounts payable and accrued liabilities
20,845
(8,220
)
Accrued interest-related parties
411,138
433,839
Net cash used in operating activities
(58,756
)
(138,698
)
Cash flows from financing activities
Proceeds from borrowings on short-term debt – related parties
80,515
149,133
Net cash provided by financing activities
80,515
149,133
Foreign currency translation
(16
)
(23
)
Net change in cash
21,743
10,412
Cash and cash equivalents - beginning of the period
4,320
8,199
Cash and cash equivalents - end of the period
$
26,063
$
18,611
Supplemental cash flow information:
Cash paid for interest
$
-
$
-
Cash paid for income tax
$
-
$
-

The accompanying notes are an integral part of these 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 nine months ended September 30, 2016 and 2015, the Company had aggregate foreign currency translation gains of $183,595 and $167,667, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of six 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 September 30, 2016 and December 31, 2015, the Company fully reserved the accounts receivable $184,343 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 September 30, 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 Company’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 September 30, 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 September 30, 2016, the Company had accumulated losses of $18,403,193 since inception and had a working capital deficit of $7,685,584. 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 September 30, 2016 and December 31, 2015, the Company fully reserved the VAT receivable of approximately $162,000 and $175,000, respectively, due to uncertainty of recovering this receivable from future revenues.

Note 5. Property, plant and Equipment

Property, plant and equipment consisted of the following as of:


September 30,
December 31,
2016
2015
Buildings
$
1,275,914
$
1,310,813
Motor vehicles
60,299
61,649
Production and office equipment
1,252,125
1,286,310
Construction in progress
160,801
165,199
Subtotal
2,749,139
2,823,971
Less:  Accumulated depreciation
(1,114,023
)
(1,144,493
)
Less:  Impairment of long-lived assets
(1,635,116
)
(1,679,478
)
Property, plant and equipment, net
$
-
$
-

For the nine months ended September 30, 2016 and 2015, the Company recorded depreciation expense of $0 and $253,817, 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 September 30, 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, plant 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.

In 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 September 30, 2016 and December 31, 2015, the Company had payables of $740,803 and $761,066, respectively, to Xinzhou Gold. These payables bear no interest, are unsecured and are due on demand.

Short-term debt

As of September 30, 2016 and December 31, 2015, the Company had short-term debts to related parties of $3,773,945 and $3,784,937, respectively. The details of the loans are described as below.

At September 30, 2016:

Annual
Name
Relationship to the Company
Amount
Interest
Rate
Start Date
Maturity
Wei De Gang
CEO & Legal person of JXZD
$
2,695,180
15
%
May 31, 2012
On Demand
Zhao Yan Ling
Former office manager of JXZD, wife of Zhou Zhi Bin
15,740
15
%
January 1, 2012
On Demand
Zhou Zhi Bin
Former CEO & Legal person of JXZD
7,495
15
%
January 1, 2012
On Demand
Tang Yong Hong
Manager of JXZD
322,664
15
%
February 28, 2014
On Demand
Yan Chun Yan
Accountant of JXZD
6,377
15
%
August 31, 2014
On Demand
Wen Mei Tu
President & shareholder of ZDRI
331,800
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.
Wen Mei Tu’s brother in law owned
6,000
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
299,800
15
%
December 18, 2012
On Demand
Total
$
3,773,944
At December 31, 2015:
Annual
Name
Relationship to the Company
Amount
Interest
Rate
Start Date
Maturity
Wei De Gang
CEO & Legal Person of JXZD
$
2,768,900
15
%
May 31, 2012
On Demand
Zhao Yan Ling
Former Office Manager in JXZD, wife of Zhou Zhi Bin
16,170
15
%
January 1, 2012
On Demand
Zhou Zhi Bin
Former CEO & Legal Person of JXZD
7,700
15
%
January 1, 2012
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
On Demand
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 September 30, 2016 and December 31, 2015, the Company had accrued interest payable to the related parties of $2,705,340 and $2,353,997, respectively. For the nine months ended September 30, 2016 and 2015, the Company recorded interest expense of $409,434 and $428,344, respectively.

Note 7. Deferred Revenues

As of September 30, 2016 and December 31, 2015, the Company had deferred revenue of $150,894 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 September 30, 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 September 30, 2016 and December 31, 2015.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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.

We were incorporated in September 1996 as Robotech Inc., and began our business in the development and marketing of specialized technological equipment. At that time we estimated that we would require approximately $6,000,000 to realize our plans. Through the year of 2003, we had not reached our financing goals and therefore abandoned that particular business plan. Since that time, we have been seeking suitable candidates for acquisition.

In the past decade there has been a worldwide recovery in the price and interest in precious metals, minerals and industrial commodities. Such interest has been fueled to a large degree, by the economic awakening of the two most populous nations, China and India and further bolstered by a sharp decline in the US dollar. A particular beneficiary of this revival has been the market prices of gold, silver and copper. Thus, in early 2010, the business direction of our company was changed to seek to profit from this revival and we began to focus our acquisition search in that industry, particularly on companies engaged in the mining of gold, silver and copper.

In January 2012, our Board of Directors, with authorization from a majority of our shareholders, made an offer to the shareholders of Zhen Ding Resources Inc., a Nevada corporation (“Zhen Ding NV”), to acquire, at the very least, the majority of their common shares, and, if available, up to 100% ownership.

Zhen Ding NV through its wholly owned subsidiary, Z&W Zhen Ding Corporation, a California corporation (“Zhen Ding CA”), has been engaged in a joint venture with Jing Xian Xinzhou Gold Co., Ltd. (“Xinzhou Gold”), a company organized under the laws of the People’s Republic of China (“PRC”). The joint venture company, Zhen Ding Mining Co. Ltd. (“Zhen Ding JV”) is 70% held by Zhen Ding NV through Zhen Ding CA.  It is a common practice in China to append the name of the town or city where an enterprise is located to its legally incorporated name. Thus many documents referencing Zhen Ding JV may refer to it as Jing Xian Zhen Ding Mining Co. Ltd. Zhen Ding JV engages in the processing of metal ore and the selling of ore concentrates of gold, silver, lead, zinc and copper at purity levels ranging from 65% to 80%.  Zhen Ding JV purchases metal ore in rock form from Xinzhou Gold.

On March 8, 2012, we changed our name from Robotech, Inc. to Zhen Ding Resources Inc., in anticipation of the acquisition of Zhen Ding NV. Our trading symbol, RBTK, however remained unchanged.

During 2012, a total of 50,746,358 shares of the issued and outstanding common stock of Zhen Ding NV were tendered to our company. On August 13, 2013, an additional 13,100,000 shares were tendered to us. Thus, as of August 13, 2013 the shareholders of Zhen Ding NV had tendered 100% of the issued and outstanding shares of common stock, representing 100% of the issued and outstanding equity of Zhen Ding NV to us.

On October 23, 2013, we issued 122,440 shares of our common stock, on a one-for-one basis, to the tendering shareholders of Zhen Ding NV making Zhen Ding NV a wholly owned subsidiary of our company.

On October 28, 2013, we dissolved Zhen Ding NV by merging it with and into Zhen Ding DE.  As a result, Zhen Ding CA became a wholly-owned subsidiary of Zhen Ding DE.  Zhen Ding CA continues to exist as an intermediate holding company with no operations of its own, but which in turn owns our 70% interest in Zhen Ding JV.

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% to 80% pure. The product is then sold to refineries which further purify and separate the concentrate.  Zhen Ding JV also arranges all exploration, mining process and operations, and financial and administrative support for Xinzhou Gold’s mine, known as the Wuxi Gold Mine.  Although we do not currently produce pure metals, it is part of our development plan to do so when general economic conditions and our cash resources permit.
At the beginning of fiscal 2015, we idled our mineral processing plant due to an overall downturn in the demand and market prices for our concentrates.  This downturn coincided with an overall economic recession in China and downturn in the global commodities market.  We intend to resume selling processed ore concentrate as soon as possible in order to supply Zhen Ding JV with the cash flow needed to keep its plant running and to maintain a viable work force for future expansion.  However, we are not able to predict at this time when economic conditions will allow us to resume our ore refinery operation.  As at the date of this report, we are actively seeking an investment of approximately $3,000,000 to resume our ore extraction and refinery activities, although we have not secured any financing commitment thus far.

In the meantime, we are identifying and evaluating businesses opportunities and other strategic transactions on an ongoing basis with a view toward diversifying our business and optimizing shareholder value.


Results of Operations

Three Months Ended September 30, 2016 compared to the Three Months Ended September 30, 2015

We had a net loss of $153,067 for the three month period ended September 30, 2016, which was $96,953 less than the net loss of $250,020 for the three month period ended September 30, 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 September 30, 2016 and 2015:

Three Months
Ended
September 30,
2016
Three Months
Ended
September 30,
2015
Percentage Increase
(Decrease) From
Three Month Period
Ended
September 30, 2015 to
Three Month Period
Ended September 30,
2016
General and administrative
$
20,592
$
24,373
(15.51%)
Depreciation
Nil
83,370
(100%)
Interest expense
132,475
142,277
(6.89%)
Net loss
$
153,067
$
250,020
(38.77%)

Nine Months Ended September 30, 2016 compared to the Nine Months Ended September, 2015

We had a net loss of $490,739 for the nine month period ended September 30, 2016, which was $327,412 less than the net loss of $818,151 for the nine month period ended September 30, 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 nine month periods ended September 30, 2016 and 2015:

Nine Months
Ended
September 30,
2016
Nine Months
Ended
September 30,
2015
Percentage Increase
(Decrease) From
Nine Month Period
Ended
September 30, 2016 to
Nine Month Period
Ended
September 30, 2015
General and administrative
$
81,305
$
135,990
(40.21%)
Depreciation
Nil
253,817
(100%)
Interest expense
409,434
428,344
(4.41%)
Net loss
$
490,739
$
818,151
(40.02%)
Revenue

We have not earned any revenues in the nine months ended September 30, 2016 or September 30, 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 September 30, 2016 reflects current assets of $26,063 and a working capital deficit in the amount of $7,685,584.  Our current assets consisted entirely of cash and cash equivalents. We have insufficient working capital to carry out our stated plan of operation for the next twelve months.

Working Capital

At
September 30,
2016
At
December 31,
2015
Current assets
$
26,063
$
4,320
Current liabilities
7,711,647
7,382,760
Working capital
$
(7,685,584
)
$
(7,378,440
)

As of September 30, 2016, we had accumulated losses of $18,403,193 since inception. We anticipate generating losses and, therefore, may be unable to continue operations further in the future.

Cash Flows

Nine Months Ended
September 30,
2016
2015
Net cash used in operating activities
$
(58,756
)
$
(138,698
)
Net cash provided by financing activities
80,515
149,133
Foreign currency transaction
(16
)
(23
)
Net increase in cash during period
$
21,743
$
10,412

Operating Activities

Net cash used in operating activities during the nine months ended September 30, 2016 was $58,756, a 57.63% decrease from the $138,698 net cash outflow during the nine months ended September 30, 2015.  T he decrease was a result of an overall reduction in our business activities during the most recent period. During the nine months ended September 30, 2016, we had no sales and did not purchase any raw materials.

Financing Activities

Cash provided by financing activities during the nine months ended September 30, 2016 was $80,515, which was a 46.01% decrease from the $149,133 cash provided by financing activities during the nine months ended September 30, 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 October 1, 2016 is as follows:

• Continue to pursue potential financing opportunities in order to raise approximately $3,000,000

• The funds raised would be used to (i) identify additional veins; (ii) to re-start the mill; (iii) re-test the mill; (iv) re-hire laid off mill employees; (v) resume milling operations; (vi) develop expansion plans for our plant capacity;(vii) drill additional holes near the concentration plant; and (viii) undertake at least three deep drill holes in the permit area.

• 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.

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 $26,063 as of September 30, 2016 and our current burn rate, we estimate that we will require approximately $250,000 to sustain our current operations for the next twelve months, or approximately $3,000,000 to execute our above described exploration plan. As at the date of this report, we have not secured any portion of the $3,000,000 we are seeking to raise.

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

Use of Estimates and Assumptions

Our 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 nine months ended September 30, 2016 and 2015, the Company had aggregate foreign currency translation gains of $183,595 and $167,667, respectively.

Non-controlling Interests

Non-controlling interests in the Company’s subsidiaries are reported as a component of equity, separate from the Company’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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 4. Controls and Procedures

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 principal 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 principal 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.

C hanges 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

Item 1. Legal Proceedings

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.

Item 1A. Risk Factors

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.
Item 6. Exhibits
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)
Exhibit
Number
Description
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)
(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.

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.
ZHEN DING RESOURCES INC.
(Registrant)
Dated: November 4, 2016
/s/Wen Mei Tu
Wen Mei Tu
President, Treasurer, Secretary and Director
(Principal Executive Officer, Principal Financial Officer
and Principal Accounting Officer)
Dated: November 4, 2016
De Gang Wei
De Gang Wei
Chairman, Chief Financial Officer and Director
(Principal Financial Officer and Principal Accounting
Officer)

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