Yinfu Gold Corp. - Quarter Report: 2011 December (Form 10-Q)

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 ACT OF 1934

For the quarterly period ended December 31, 2011

or

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

For the transition period from __________ to __________

Commission File Number: 333-152242

YINFU GOLD CORPORATION

(Exact name of registrant as specified in its charter)

852 2251 1695

(Registrant’s telephone number, including area code)

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 short period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x            No ¨

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-c of the Act).

Yes ¨         No x

As of February 10, 2012 there were outstanding 88,048,000 shares of the registrant’s common stock, $.001 par value.

YINFU GOLD CORPORATION AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2011

INDEX

YINFU GOLD CORP.

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2011

(STATED IN US DOLLARS)

YINFU GOLD CORP.

YINFU GOLD CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31 AND MARCH 31, 2011

YINFU GOLD CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31 AND MARCH 31, 2011

(CONTINUED)

See accompanying notes to the condensed consolidated financial statement

YINFU GOLD CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2011 AND 2010

See accompanying notes to the consolidated financial statement

YINFU GOLD CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2011 AND 2010

See accompanying notes to the condensed consolidated financial statements

YINFU GOLD CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY FOR THE PERIOD MARCH 31, 2009 TO DECEMBER 31, 2011

See accompanying notes to the condensed consolidated financial statement

YINFU GOLD CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY FOR THE PERIOD SEPTEMBER 30, 2009 TO DECEMBER 31, 2011

(CONTINUED)

See accompanying notes to the condensed consolidated financial statement

YINFU GOLD CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2011

1. QUARTERLY FINANCIAL INFORMATION

These unaudited condensed consolidated quarterly financial statements should be read in conjunction with the 31 March 2011 financial statements and the notes included therein. In the opinion of the Management, all material adjustments necessary for a fair statement of the results of operations for the three-month periods ended 31 December 2011 have been included. The results of operations for quarterly period are not necessarily indicative of the results to be expected for the full year.

The Company’s financial statements are presented on a going concern basis, which assumes that the Company will continue to realize its assets and discharge its liabilities in the normal course of operations.

These financial statements and related notes are prepared in conformity with accounting principles generally accepted in the United States generally accepted accounting principles (“GAAP”) and are expressed in U.S. dollars. The Company’s fiscal year-end is March 31. The Company will only consolidate investments once control of the management of the investment concerned has been placed in the hands of the Company’s management.

In 2010, the Company entered into a Share Exchange Agreement with Joyous Fame International Limited (“Joyous Fame”), the shareholders of Joyous Fame transferred all their shares of Joyous Fame, representing the entire issued share capital of Joyous Fame, to the Company in exchange for an aggregate of 76,500,000 shares of restricted common shares of the Company, thus causing Joyous Fame to become a wholly-owned subsidiary of the Company.

The acquisition of Joyous Fame is being accounted as a reverse acquisition of Yinfu Gold Corp. by Joyous Fame International Limited, since the stockholders of Joyous Fame will own the majority of the outstanding shares of the Company’s common stock immediately following the acquisition. Joyous Fame is deemed to be the acquirer in the reverse merger.

YINFU GOLD CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2011

2. FINANCIAL INFORMATION OF THE DISCONTINUED OPERATION

The following presents the financial information of the discontinued subsidiary of the Company, Yantai Muping Yinlong Investment Consulting Company Limited, as of December 31 and March 31, 2011.

3. CASH

4. PROPERTY, PLANT AND EQUIPMENT

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

YINFU GOLD CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2011

5. MINING

The Company’s subsidiary, Penglai Huwei, currently holds a mining permit conferring rights to carry out gold mining activities and an exploration permit conferring rights to carry out gold exploration activities in a mine close to the city of Penglai, Shandong, PRC. The mining permit covers an area of 0.2224 sq km and will expire on January 22, 2015. The exploration permit covers an area of 3.40 sq km, which includes the 0.2224 sq km covered by the mining permit. No amortization is accrued as the mine is in suspension.

6. INVESTMENT

On June 1, 2010 and June 11, 2010, the Company acquired 100% equity interest of Joyous Fame International Limited at the carrying value US$78,795,000 and 28% equity interest of Legarleon Precious Metals Limited (“LPM”) at the carrying value of US$3,458,700. In September, the Company acquired a 23% equity interest in LPM at the carrying value of US$2,841,300.

In January, 2011, the Company’s management lost its control over investment in LPM and thus, it has been recorded as investments of the Company rather than related subsidiary. And since then, the Company has not regained control over LPM, as a result, the subsidiary has not been consolidated during the year ended March 31, 2011.

On October 23, 2011, the Board discussed a proposal put forward by Mr Lo Lin Kong, minority stockholders of LPM for the settlement by the transfer of 1,800,000 shares of the Company (formerly known as Element92 Resources) back to the Company by Mr Lo Lin Kong and the transfer of 51% shares of LPM to Mr Lo Lin Kong by the Company, in view of the failure of the Chinese Gold and Silver Exchange Society in registering the Company as the owner of the 51% equity interest of LPM and the continuing business decline of LPM since the acquisition of shares by the Company. Since the Company has issued 2,000,000 shares and only 1,800,000 shares will be transferred back, the Company will have an investment loss of US$630,000 (200,000 *3.15/share).

YINFU GOLD CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2011

6. INVESTMENT(Continued)

On November 1, 2011, the Company entered into an agreement with Mr Lo Lin Kong, minority shareholders of LPM. Under the agreement, Mr Lo Lin Kong shall transfer back the 1,800,000 shares of the Company and in exchange the Company shall transfer back 51% shares of LPM. However, due to the fact that the legal procedures are still underway, investment is still booked in the Company’s book.

7. RELATED PARTY TRANSACTIONS

During the three months ended December 31, 2011 and the year ended March 31, 2011, due to related parties are as followings:

YINFU GOLD CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2011

8. OTHER COMPREHENSIVE INCOME

Based on the Board resolutions on September 28, 2011, to relieve the financial pressure of the payment term caused by the “Transfer of Mining Permit Agreement” signed on December 31, 2009; and after taking the potential risk raised of additional injected resources and exploration , which involved a long duration of process from exploration, refining and finally available for sale into consideration, the Company resolved that such potential risk should not be the exclusive responsibility of itself.

The Board has reached an agreement with the original seller that a “Mutual exploration and Mutual Benefits Agreement” will replace the original Agreement. The original seller confirmed that the mining permit which has been transferred to the Company’s subsidiary is a conditioned usage right and the Company becomes a solely funding party for the exploration and refining.

The Company will further process the ore explored until it is commercially available for sale. The Company will pay the former mine owners 30% of the annual total value of the ore in cash or in physical products with a total value not higher than USD22,210,677. However, this payment term should be limited to 5 years in principle.

After that, if there are still outstanding payables, both parties will make further negotiations and arrangements on resolving the issue. Director Wilson Huang will be responsible for arranging the management of the Company to follow and complete these legal procedures by December 15, 2011.

As a result of the above change, such long term payable no longer satisfied the definition of liabilities in FASB concepts Statement No.6. Paragraph 35-43 and therefore it is presented in Other Comprehensive Income in the financial statements.

YINFU GOLD CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2011

9. SUBSEQUENT EVENTS

As of October 2011, the Company signed a letter of intent on the transfer of equity interest of one of its subsidiaries, Yantai Muping Yinlong Investment Consulting Company Limited, to a third party.

Closing of the transfer will be subject to certain conditions. The parties agreed to use their best efforts to effect the closing on a timely basis, but there is no assurance that the parties will complete the transactions as discussed.

In November, 2011, the Company’s former CEO, Daniel Mckinney, filed a complaint in Clark County, Nevada to claim for seeking reimbursement of US$73,877.64 against money either in the form of cash advance or the payment of company's expense by him on behalf of the company US$ 73, 877.64, alleging that he was to be reimbursed by the Company for certain Company expenses that he had paid. On January 24, 2012, it was ordered and adjudged by the court a default judgment was entered against the Company in favor of Daniel McKinney in the amount of USD 73,877.64 together with interest accruing thereon at the highest legal rate until paid in full. The Company is in discussion with Mr. McKinney in an effort to find a mutually satisfactory resolution of this matter.

As of December 31, 2011, the Company has accrued a payable for Daniel McKinney in the amount of USD 109,666.06, including the attorney’s fee and other costs.

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

The following management discussion and analysis provides information on the activities of Yinfu Gold Corporation (formerly known as “Element92 Resources Corp.”), or the “Company”, and should be read in conjunction with the financial statements and notes thereto for the three months ended December 31, 2011. Readers are cautioned that management’s discussion and analysis contains forward-looking statements and that actual events may vary from management’s expectations.

Overview

We were incorporated in the State of Wyoming on September 1, 2005 and established a fiscal year at the end of March 31. Yinfu Gold Corporation (formerly known as “Element92 Resources Corp.”), was originally incorporated under the laws of the State of Wyoming as Ace Lock & Security. On March 5, 2007, we filed a Certificate of Amendment with the Wyoming Secretary of State to change our name to Element92 Resources Corp. and increase our authorized capital to 1,000,000,000 common shares. On November 18, 2010, the Company received a notification from the Financial Industry Regulatory Authority (“FINRA”) that the Company’s change of name from Element92 Resources Corp. to Yinfu Gold Corp. has been posted as effective with FINRA. The Company is a development  stage company engaged in the search for commercially viable minerals. The Company has the rights to 14 mineral claims in the Province of Quebec, Canada. We have no property other than an option to acquire the claims. There is no assurance that a commercially viable mineral deposit exists on the Quebec claims or can be shown to exist until sufficient and appropriate exploration has been done and a comprehensive evaluation of such work concludes the economic and legal feasibility. The Company will proceed only if minerals have been found and their extraction has been deemed economically feasible.

On January 25, 2010, the Company entered into a sales and purchase agreement to acquire three gold mines, namely, Rongcheng gold mine, Penglai gold mine and Wendeng gold mine, in exchange for 90,000,000 restricted shares of the Company’s common stock. The acquisition of Wendeng gold mine was terminated on March 30, 2010 and the number of shares was concurrently reduced to 76,500,000 pursuant to a revised sales and purchase agreement dated March 31, 2010. On June 15, 2010, the acquisition of Penglai gold mine was closed. Based on data from due diligence, the management of the Company determined that the value of Rongcheng gold mine was far below the agreed purchase value and they stepped into negotiation with the owners of Rongcheng for price reduction. On February 4, 2011, the owners of Rongcheng gold mine elected to terminate the sale of the mine in accordance with the terms of the sale and purchase agreement and returned the shares to the Company at the purchase price of the gold mine.

The Company intends to seek other gold mines in an effort to expand the production capacity in the future.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with the accounting principles generally accepted in the United States, or US GAAP.

We believe that the following accounting policies are critical to aid you in fully understanding and evaluating this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Basis of Presentation

The Company’s financial statements have been stated in United States Dollars and prepared in accordance with generally accepted accounting principles in the United States of America.

Use of Estimates

The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition

Revenue is recognized when all of the following criteria are met:

- Persuasive evidence of an arrangement exists;

- Delivery has occurred or services have been rendered;

- The seller's price to the buyer is fixed or determinable; and

- Collectability is reasonably assured.

The Company continually performs analyses of returns and allowances and records a provision at the time of sale if necessary. The Company reviews this estimate regularly and adjusts it if conditions change.

Mining and Exploration Costs

Mining and Exploration costs are charged as costs when incurred and included in operating costs.

Results of Operations

The acquisition of Penglai gold mine was closed on June 15, 2010. However, it has been closed temporarily for condition inspection and improvement to ensure full compliance with the local safety regulations. The revenue for this quarter was generated by the selling of inventories that have been lent to the former mine owners in the previous quarters. Due to the low production capacity in the previous quarters, the cost of mining and exploration was higher than revenue, which has led to a negative gross profit at this quarter.

Huwei (or “Wujia”) Gold Mine and Processing Plant

Status: Huwei Gold Mine (referred to as the “Wujia Gold Mine” in some reports) was granted a mining license in late 2009, and commenced mining by using typical Chinese underground mining methods. During a site inspection, Huwei was constructing a shaft to mine vein No.2 and had developed 4 layers in it. The maximum mining depth is 215 m below the ground.

Location: Huwei Gold Mine and Processing Plant are located 70 km in the west of Yantai City and are accessible by a paved road which connects the mine and processing plant.

Licenses and Permits: An area of 0.34 km² has obtained an exploration license, of which 0.222 km² has been granted the mining permit to conduct mining activities. The Mining License and Exploration License are both owned by Huwei Mineral Invest Co., Ltd.

South Shijing Gold Exploration Area (Rongcheng)

Status: The South Shijing Gold Exploration Area is an early stage exploration project which is now undergoing exploration to identify and define gold mineralization within the existing lease areas. Limited surface mapping, trench sampling and exploration are now being conducted.

Location: The South Shijing Exploration Area is located in an area called Datuan in Rongcheng, Shandong Province and it is only accessible by a simple dirt road.

Licenses and Permits: Management indicated that an Exploration License covering a total area of 5.48 km² has been in place and will be valid from December 22, 2009 to September 30, 2011.  

Geology: In the southern part of the Shijing exploration area, there is a reservoir which divides the exploration area into two parts, namely, the East Exploration Area and West Exploration Area. Currently, the No. 6 Geological Bureau of Shandong Province is now conducting exploration activities in this area.

Based on data from due diligence, the management of the Company determined that the value of Rongcheng gold mine was far below the agreed purchase value and they stepped into negotiation with the owners of Rongcheng for price reduction. On February 4, 2011, the owners of Rongcheng gold mine elected to terminate the sale of the mine in accordance with the terms of the sale and purchase agreement and returned the shares to the Company at the purchase price of the gold mine.

Results of Operations for the period Ended December 31, 2011 And 2010

Revenue, Costs of Sales and Gross profit

Following is comparison of our revenue, costs of sales and gross profit for the periods ended December 31, 2011 and 2010.

Due to the inspection of the gold mine for compliance with local government safety regulations and ensuring compliance with those regulations, Penglai gold mine has been closed temporarily this year.

The following table reconciles gross profit to income before income taxes.

Sales and Administrative Expenses

Administrative expenses for the three and nine months ended December 31, 2011 amounted to US$157,472 and US$708,090, respectively, compared with US$753,339 and US$1,786,880 for the correspondingly period of 2010. The administrative expenses are primarily due to travelling expense caused by the frequent financing activities by management.

Income Tax Expense

All of our income was generated within mainland China and was generally subject to tax at a statutory rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments.

The income tax expense amounted to US$Nil and US$Nil for the three and nine months ended December 31, 2011 as no profit was made this year.

Liquidity and Capital Resources

As of December 31, 2011 we had cash and bank balances of US$33,639. The following table provides detailed information about our net cash flow for all financial statement periods presented in this report.

The following table sets forth a summary of our cash flows for the periods indicated.

Operating Activities

Due to the inspection of the mine for compliance with local government safety regulations and ensuring compliance with those regulations, the Company has temporarily closed the Penglai gold mine this year.

The Company needs to raise additional funds in order to manage its operations and cash resources in a manner consistent with its expectation to satisfy cash requirements throughout the fiscal year 2011. The main operating costs for the Company include:

There will be no significant capital equipment purchases expected within the next 12 months. The Company may consider an additional equity offering within the next 12 months. In such case, the use of proceeds would focus on the acceleration of work on the claims and meeting our regulatory obligations. We will continue to seek Joint Venture partners to assist our initiative to explore and develop our claims.

Investing Activities

Net cash used in investing activities was US$Nil and US$ Nil for the three and nine months ended December 31, 2011, compared to the amount of US$Nil and US$Nil, respectively, for the same period of 2010.

Financing Activities

Net cash provided by financing activities was US$Nil and US$Nil for the three and nine months ended December 31, 2011, compared to the amount of US$ Nil and US$477,383, respectively, for the same period of 2010.

In order to proceed with our planned exploration activities we will need to raise additional capital either through loans, equity financing or seeking a joint venture partner. Unless we are able to raise additional capital or find a joint venture partner with sufficient funds there is no assurance that we will be able to maintain operations at a level sufficient for an investor to obtain a return on their investment in our common stock. Furthermore, we may continue to be unprofitable. The company does not plan to make any capital expenditures for new mineral claims or equipment during the next twelve months.

The recent weakening of economic conditions in the U.S. and around the world could have harmful effects on our ability to raise money to fund our planned operations. If it happens, we would likely go out of business and our investors will lose their entire investment in our company.

We believe that recent decreases in value of the common shares of many companies worldwide will make selling shares of our common stock increasingly difficult. If we are not able to sell enough of our shares to meet our financial needs, we will have to consider borrowing the money we need. A tightening of credit conditions has also been experienced in the economy recently. Because of the recent credit crisis, it is possible that we would not be able to borrow adequate amounts to fund our operations on terms and at rates of interest acceptable to and in the best interests of our company. If we are unable to obtain the amount of money to fund our operations, we will likely go out of business and investors will lose their entire investment in our company.

We do not expect that the difficult economic conditions to improve significantly in the near future. Further deterioration of the economy and consumer fear that the economy will deteriorate further could intensify the adverse effects of these difficult market conditions.

Economy and Inflation

The recent weakening of economic conditions in the U.S. and around the world could have harmful effects on our ability to raise money to fund our planned operations. If this happens, we would likely go out of business and our investors will lose their entire investment in our company.

We believe that recent decrease in value of the common shares of many companies worldwide will make selling shares of our common stock increasingly difficult. If we are not able to sell enough of our shares to meet our financial needs, we will have to consider borrowing the money we need. The economy has recently experienced a tightening of credit conditions. Because of the recent credit crisis, it is possible that we would not be able to borrow adequate amounts to fund our operations on terms and at rates of interest acceptable to and in the best interests of our company. If we are unable to obtain the amount of money that we need to fund our operations, we will likely go out of business and investors will lose their entire investment in our company.

We do not expect that the difficult economic conditions to improve significantly in the near future. Further deterioration of the economy and consumer fear that the economy will deteriorate further could intensify the adverse effects of these difficult market conditions.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have, or are reasonably likely to have a current or future effect on our financial statements.

Seasonality

Our operating results and operating cash flows historically have not been subject to significant seasonal variations.  

Recent Accounting Pronouncements

We do not have any accounting pronouncement recently.

Going Concern

We continue to operate without attaining profitable operations and are dependent upon obtaining financing to pursue exploration activities. For these reasons, our auditors believe that there is substantial doubt that we will be able to continue as a going concern.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not Applicable

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, as appropriate, to allow timely decisions regarding required disclosure. Our management, with the participation and supervision of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report and determined that our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

No changes of internal control over financial reporting were made in the nine months ended December 31, 2011.

Inherent Limitations On Effectiveness Of Controls

Our management, including our CEO and CFO, do not expect that our disclosure controls or our internal control over financial reporting will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected.

These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

PART II — OTHER INFORMATION

In November, 2011, the Company’s former CEO, Daniel Mckinney, filed a complaint in Clark County, Nevada (Case No. 650958-C) seeking reimbursement of US$73,877.64, alleging that he was to be reimbursed by the Company for certain Company expenses that he had paid. On January 24, 2012, a default judgment was entered against the Company in favor of Daniel Mckinney in the amount of US$73,877.64 together with interest accruing thereon at the highest legal rate until paid in full. The Company is in discussion with Mr. Mckinney in an effort to find a mutually acceptable resolution of his claims.

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

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.