U.S. Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, 2011

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From ____to _____

Commission File Number 000-52350

JINTAI MINING GROUP, INC.

(Exact name of small business issuer as specified in its charter)

Delaware

(State or other jurisdiction of

incorporation or organization)

27-2987974

(I.R.S. employer

identification number)

No. 48 Qiaodong Road, Sien Town,

Huanjiang County Hechi City,

Guangxi Province, China 547100

(Address of principal executive offices and zip code)

+(86 778) 220- 5911

(Registrant’s telephone number, including area code)

Indicate by check mark if the registrant is a well-know seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes [ ] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act

Yes [ ] No [X]

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [X]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files).

Yes [ ] No [X]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 if Regulation S-K (229.405 of this Chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy of information statements incorporated by reference in Part III of this Form 10-Q or any amendments to this Form 10-Q.

Yes [ ] No [X]

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

Large accelerated filer	£
Non-accelerated filer	£(Do not check if a smaller reporting company)
Accelerated filer	£
Smaller reporting company	S

Indicate by check mark whether the registrant is a shell company (as defined in rule 12b-2 of the exchange act).

Yes [ ] No [X]

Number of shares of common stock outstanding as of December 31, 2011 are 36,000,000.

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION

The discussion contained in this 10-Q under the Securities Exchange Act of 1934, as amended, contains forward-looking statements that involve risks and uncertainties. The issuer's actual results could differ significantly from those discussed herein. These include statements about our expectations, beliefs, intentions or strategies for the future, which we indicate by words or phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe," "the Company believes," "management believes" and similar language, including those set forth in the discussions under "Notes to Financial Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as those discussed elsewhere in this Form 10-Q. We base our forward-looking statements on information currently available to us, and we assume no obligation to update them. Statements contained in this Form 10-Q that are not historical facts are forward-looking statements that are subject to the "safe harbor" created by the Private Securities Litigation Reform Act of 1995.

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Table of Contents

PART I	Page No.

Item 1. Financial Statements	2

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	10

Item 3. Quantitative and Qualitative Disclosures About Market Risk	11

Item 4. Controls and Procedures	11

PART II
Item 1. Legal Proceedings	14

Item 1A. Risk Factors	14

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	14

Item 3. Defaults Upon Senior Securities	14

Item 4. (Removed and Reserved)	14

Item 5. Other Information	14

Item6. Exhibits	14

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ITEM 1. FINANCIAL STATEMENTS

INDEX TO JINTAI MINING GROUP, INC. FINANCIAL STATEMENTS

JINTAI MINING GROUP, INC.	PAGE

Balance Sheets		4

Statements of Operations		5

Statements of Cash Flows		7

Notes to Financial Statements		8

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ITEM 1. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Jintai Mining Group, Inc. and Subsidiaries
Consolidated Balance Sheet
As of December 30, 2011 and March 31, 2011
(Expressed in USD Dollars)
	As of
ASSETS	12/31/2011 (Unaudited)			3/31/2011 (Audited )
CURRENT ASSETS
Cash and cash equivalents	$	181,102		$	3,601,657
Accounts receivable, net		14,802,604			13,816,063
Inventory		11,019,516			11,411,998
Prepaid expenses		1,233,224			883,044
Paid in advance		19,894,008			8,860,462
Other receivable		1,428,432			461,747
Environment restoration deposit		291,178			279,831
TOTAL CURRENT ASSETS		48,850,064			39,314,802

NON-CURRENT ASSETS
Land,equipment, and mining claims		17,378,192			16,285,198
Accumulated depreciation		(2,590,692	)		(1,798,118	)
Land, equipment, and mining claims, net		14,787,500			14,487,080

Construction in progress		43,937,767			42,225,532
Accounts receivable, non-current		688,157			151,919
Other receivable, non-current		211,963			934
Paid in advance, non-current		453,303			442,433
Other non-current assets		115,961			194,800
TOTAL NON-CURRENT ASSETS		60,194,651			57,502,698

TOTAL ASSETS	$	109,044,715		$	96,817,500

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable		14,389,505			10,135,230
Salary payable		33,380			22,721
Tax payable		9,994,800			8,400,243
Received in advance		1,034,816			4,225,681
Other payable		1,115,383			186,963
Common stock warrant liability		1,125,803			1,257,728
Accured expenses and other liabilities		465,590			284,429
Due to related party		1,388,682			937,259
Convertible Note		—			20,377,036
Discount on Convertible Note		—			(1,427,683	)
TOTAL CURRENT LIABILITIES		29,547,959			44,399,607

TOTAL LIABILITIES		29,547,959			44,399,607

STOCKHOLDERS' EQUITY
Preferred Stock; 1,000,000 shares authorized at
$0.0001 par value, no share issued and outstanding
Common Stock; 100,000,000 shares authorized at		3,600			3,200
$0.0001 par value, 36,000,000 shares issued and outstanding
Paid in capital		20,242,491			242,891
Statutory reserves		144,882			144,882
Accumulated other comprehensive Income		5,146,802			3,128,523
Retained earnings		53,958,981			48,898,397
TOTAL STOCKHOLDERS' EQUITY		79,496,756			52,417,893

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	109,044,715		$	96,817,500

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

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Jintai Mining Group, Inc. and Subsidiaries
Unaudited Consolidated Statements of Operations
For The Three and Nine Months Ended December 31, 2011 and 2010
(Expressed in USD Dollars)

	Three months ended December 30,						Nine months ended December 31,
	2011 (Unaudited)			2010 (Unaudited)			2011 (Unaudited)			2010 (Unaudited)
Revenues
Sales	$	3,146,613		$	12,620,289		$	23,640,712		$	33,321,830
Cost of goods sold		2,472,608			5,986,241			14,105,809			13,266,412
Gross profits	$	674,005		$	6,634,048		$	9,534,903		$	20,055,418

Operating expenses
Selling and marketing		74,990			70,749			234,411			142,013
General and administrative		408,234			696,803			2,180,927			2,420,192
Impairment loss		—			—			—			2,492,287
Total Operating Expenses	$	483,224		$	767,552		$	2,415,338		$	5,054,492


Income (Loss) from continuing operations		190,781			5,866,496			7,119,565			15,000,926

Other income (expenses)
Change in fair value of warrant liability		291,825			2,518			179,517			2,518
Gain (loss) on disposal of fixed assets		—			—			—			—
Interest (expenses)					(191,744	)		(243,896	)		(191,744	)
Other Income		901			2,222			13,496			2,222
Other (expenses)		(28,750	)		(97,354	)		(7,586	)		(105,181	)
Total other income (loss)		263,976			(284,358	)		(58,469	)		(292,185	)

Income (loss) before income tax provision		454,757			5,582,138			7,061,096			14,708,741

Income taxes		114,612			1,091,948			2,000,512			3,501,998

Net Income		340,145			4,490,190			5,060,584			11,206,743

Other comprehensive income (loss)
Foreign currency translation gain (loss)		681,103			554,867			2,018,279			1,319,034
Unrealized gain (loss) on stock warrant
Comprehensive income (loss)	$	1,021,248		$	5,045,057		$	7,078,863		$	12,525,777

Earnings per common share
Basic	$	0.01		$	0.14		$	0.15		$	0.35
Diluted	$	0.01		$	0.13		$	0.15		$	0.34

Weighted average common shares outstanding
Basic		36,000,000			32,000,000			34,577,778			32,000,000
Diluted		36,000,000			34,777,778			34,577,778			33,148,148

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

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Jintai Mining Group, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
For the Nine months ended December 31, 2011 and 2010
(Expressed in USD Dollars)

	For The Nine Months Ended December 31
	2011			2010
Cash flows from operating activities:
Net income (loss) from continued operations		5,060,583			11,206,743

Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Change of Common stock warrant liability		(179,517	)		(2,518)
Amortization of discount on debt		77,431			64,621
Loss on fixed assets abandoned					2,492,287
Depreciation		706,249			103,907
Accounts receivable ,trade		(938,557	)		(5,573,035	)
Other receivable		(1,137,354	)		(4,208,071	)
Inventory		839,298			(389,252	)
Paid in advance		(10,468,389	)		(3,892,926	)
Prepaid expense		(308,515	)
Amortization of mining right		—			28,769

Accounts payable		3,771,669			2,735,733
Other payable		903,677			889,285
Salary payable		9,556			(5,402	)
Tax payable		1,230,561			5,753,002
Accrued expenses		166,465			129,167
Deferred tax		85,121
Received in advance		(3,299,556	)		677,675
Net cash provided by operating activities		(3,481,278	)		10,009,985

Cash flows from investing activities:
Construction in Progress		—			(8,058,226	)
Purchase of property, plant and equipment		(424,571	)		(383,727	)
Net cash provided by (used in) investing activities		(424,571	)		(8,441,953	)

Cash flows from financing activities:
Cash from investor		—			4,463
convertible note		—			19,793,827
Proceed from short-term loan		5,871,223
payment to short-term loan		(5,871,223	)
Due to related party		405,713			(395,486	)
Net cash provided by financing activities		405,713			19,402,804

Foreign currency translation adjustment		79,581			601,514

Net increase (decrease) in cash and cash equivalents		(3,420,555	)		21,572,350

Cash and cash equivalents:
Beginning of period		3,601,657			6,355,927
End of period		181,102			27,928,277

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Interest		—			—
Income tax		592,330			99,426
Non-cash financing activity:
Common stock issued for conversion of convertible debt	$	20,000,000		$	—

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

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NOTES TO FINANCIAL STATEMENTS

NOTE 1 -Business Summary

Jintai Mining Group, Inc. (The Company) was incorporated in the state of Delaware on June 14, 2010. The operations of the Company are based in China. The Company is a large vertically-integrated mining and refined zinc and lead mineral producer with exploration, mining, separating, smelting and further processing operations. For consolidation purpose, Jintai Mining Group, Inc. includes the following subsidiaries.

Jintai Mining Co., Limited (Jintai HK)

Jintai HK was incorporated in Hong Kong on April 28, 2010. We operate our business through our wholly-owned subsidiary, Jintai HK, a Hong Kong limited liability company, and other subsidiaries owned and controlled by it. Jintai HK is a holding company, in turn, operates through its wholly-owned subsidiary, Guangzhou Xiangguang Corporate Management Co., Ltd., which controls our operating entity, Huanjiang Jintai through a series of variable interest entity (VIE) contractual arrangements.

Guangzhou Xiangguang Corporate Management Co., Ltd. (Xiangguang)

Xiangguang was incorporated in the People’s Republic of China (“PRC”) on August 24, 2010. Xiangguang’s relationship with Huanjiang Jintai and its shareholders is governed by a series of contractual arrangements, also known as VIE agreements, under which Xiangguang is granted the right to manage Huanjiang Jintai and entitled to receive the revenue and control the asset of Huanjiang Jintai. Under this corporate structure, neither Jintai nor Xiangguang owns any equity interest in Huanjiang Jintai. Xiangguang’s contractual arrangements with Huanjiang Jintai are designed to provide Xiangguang with the power, rights and obligations equivalent in all material respects to those it would possess as the sole equity holder of Huanjiang Jintai, including absolute control rights and the rights to the assets, property and revenue of Huanjiang Jintai. The VIE agreements constitute valid and binding obligations of the parties to such agreements, and are enforceable and valid in accordance with the laws of the PRC.

Huanjiang Jintai Mining Co., Ltd.

Huanjiang Jintai Mining Co. Ltd. (Huanjiang Jintai) was incorporated as a limited liability company in the People’s Republic of China (“PRC”) on November 27, 2003 with its principal place of business in Hechi city, Guangxi Province, the PRC. The principal activity of Huanjiang Jintai is mining, separating, and smelting of zinc and lead ore. The main products are zinc and lead concentrates, zinc calcine, zinc dust and sands, pyrites and sulphuric acid. Huanjiang Jintai’s operations are organized and managed according to its product category and geographic locations: Shangchao zinc and lead ore mine of Huanjiang County; Yagang concentrator and Xingda concentrator; and Duchuan smelter.

Jintai Mining Group Inc. and Jintai Mining Co., Limited and its shareholders entered into a Share Exchange Agreement on August 3, 2010. As a result of the Share Exchange, Jintai Mining Co. Limited becomes the wholly owned subsidiary of Jintai Mining Group Inc.

The Company, through its subsidiaries and variable interest entity, is principally engaged in the provision of management consulting for metal mining industry and metal trading in the People’s Republic of China (the “PRC”)

Details of Subsidiaries and variable interest entity:

Name	Place of incorporation and kind of legal entity	Principal activities and place of operation	Particulars of issued/registered capital	Effec tive interest held
Jintai Mining Group, Inc. (USA)	USA, incorporation company	Engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.	USD $3,200	100%
Jintai Mining Co., Limited (Hong Kong)	Hong Kong, a limited company	Hong Kong holding company of Guangzhou Xiangguang Corporate Management Co., Ltd.	HK $10,000	100%
Guangzhou Xiangguang Corporate Management Co., Ltd.	The PRC, a limited company	Provision of business consulting service in the PRC	HK $1,500,000	100%
HuanJiang Jintai Mining Co., Ltd. #	The PRC, a limited liability company	In Hechi City, Guangxi Province, the PRC	RMB 2,000,000

# represents variable interest entity

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NOTE 2 - Summary of Significant Accounting Policies

Basis of presentation

The accompanying consolidated financial statements have been prepared by management in accordance with both the Generally Accepted Accounting Principles in United States (US GAAP). Certain information and note disclosures normally included in audited financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information not misleading.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications have no effect on net income or cash flows.

Use of estimates

In preparing these consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the year reported. Actual results may differ from these estimates. On an ongoing basis, management reviews estimates. Changes in facts and circumstances may alter such estimates and affect results of operations and financial position in future periods.

4. Cash Equivalents

Cash and cash equivalents represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. We routinely monitor and evaluate counterparty credit risk related to the financial institutions by which our short-term investment securities are held.

Basis of consolidation

The consolidated financial statements include the financial statements of the Company and its subsidiaries and variable interest entity (“VIE”). All significant inter-company balances and transactions within the Company have been eliminated upon consolidation.

The Company has adopted the Accounting Standards Codification (“SAC”) ASC Topic 810-10-25 “Variable Interest Entities” (“ASC 810-10-25”). ASC 810-10-25 requires a variable interest entity or VIE to be consolidated by a company if that company is subject to a majority of the risk of loss for the VIEs or is entitled to receive a majority of the VIE’s residual returns.

Variable interest entity

The Company assesses the terms of its interest in the entity to determine if the Company is the primary beneficiary as prescribed by ASC 810-10-25. Variable interests are the ownership, contractual, or other pecuniary interests in an entity that change with changes in the fair value of the entity’s net assets excluding variable interests. The primary beneficiary of a variable interest entity is the party that absorbs a majority of the entity’s expected losses, receives a majority of its expected residual returns, or both, as a result of holding variable interests.

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Inventories

Inventories consist of raw materials, work in process and finished goods and are valued at lower of cost or market value, cost being determined on the weighted moving average cost method.

Raw materials inventory – products from ore mine include the following costs: stripping costs recorded into inventory produced during the period the costs are incurred, ore expansion costs, labour costs related to excavation of ore, electricity, raw ore transportation costs from mining site to concentrator, amortization of mine right costs, depreciation of mine infrastructure costs.

Work in progress inventory – products from concentrator facilities include the following costs: stripping costs, ore expansion labour cost related to excavation of ore as well as concentrator operation wages, electricity, water costs, transportation cost from mine to concentrator facility, amortization of mine right costs, depreciation expense of mine infrastructure cost as well as depreciation related to concentrator facility as well as cost related to tailing deposit warehouse.

Finished goods inventory - products from smelter facility include the following costs: stripping costs, ore expansion labour costs related to excavation of ore as well as smelter operation wages, electricity, water costs, transportation costs from mine to smelting facility, amortization of mine right costs, depreciation expense of mine infrastructure costs as well as depreciation related to smelting facility.

Accounts receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. An allowance for doubtful accounts is established and determined based on managements’ assessment of known requirements, aging of receivables, payment history, and the economic environment. The Company does not record its allowance for doubtful accounts receivable at the time a sale is made based on the agreed payment terms at the outset of the arrangement. The Company’s accounting policy for recording allowance for doubtful accounts receivable is determined on the basis of bad debts history which helps it to predict the probabilities of non-payment. Management’s accounting policy is that the Company records an allowance for accounts receivable due within certain periods from the latest fiscal year end of its accounting period. Currently, the amount of allowance is calculated as 5% for Accounts receivables which are due within 1 year, 10% for those due from 1 to 2 year, and 15% for those due from 2 to 3 year. Accounts receivable, which are due more than 3 years, are fully written off as bad debt. Accounts receivable with balance due more than 1 year are recorded as non-current assets.

Capitalized development and ore access costs

In accordance with ASC 930-330 Ore access costs during the development of a mine, before production begins, are capitalized as a part of the depreciable cost of building, developing and constructing a mine. These capitalized costs are amortized over the productive life of the mine using the units of production method. The depletion base for the units of production method consists of proven and probable reserves. The productive phase of a mine is deemed to have begun when saleable minerals are extracted (produced) from an ore body, regardless of the level of production. The production phase does not commence with the removal of de minimi saleable mineral material that occurs in conjunction with the removal of overburden or waste material for purposes of obtaining access to an ore body. The costs incurred in the production phase of a mine are variable production costs included in the costs of the inventory produced (extracted) during the period that the costs are incurred.

Ore access costs related to expansion of a mining asset of proven and probable reserves is variable production costs that are included in the costs of the inventory produced during the period that the stripping costs are incurred.

Our criteria to determine whether activities related to expand reserves are exploration costs or development costs are:

Exploration is the search for resources suitable for commercial exploitation. It includes:

• Researching and analyzing historic exploration data.

• Conducting topographical, geological, geochemical and geophysical studies.

• Exploratory drilling, trenching, and sampling.

Evaluation means determining the technical feasibility and commercial viability of a mineral resource:

• Determining volume and grade of deposits.

• Examining and testing extraction methods and metallurgical or treatment processes.

• Surveying transportation and infrastructure requirements.

• Conducting market and finance studies.

The Company expenses all exploration and evaluation costs as incurred.

Development means establishing access to the mineral reserve and other preparations for commercial production.

• Commencement - Phase commences when it is determined that commercially recoverable reserves exist (usually through completion of a feasibility study) and a decision is taken by management to develop the mine.

• Conclusion – This phase concludes upon the commencement of sustainable production from the resource.

Basic costs included in the development phase:

•Advance removal of overburden and waste rock.

•Infrastructure development (road building).

•Shaft sinking

Development costs are usually carried forward until the mine is commissioned (production begins) because the expenditure is for future benefit from the mineral extraction.

• Capitalized development costs are then amortized using the units-of-production (UOP) method when the resources are mined.

Our estimates for mineral reserves are a key component in determining our units of production depreciation rates. Our estimates of proven and probable ore reserves may change, possibly in the near term, resulting in changes to depreciation and depletion rates in future reporting periods.

10.

Land, plant and equipment, mining right, and exploration right

Mining right, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values:

	Depreciable life	Residual value
Mining right	9 years	0%
Plant and machinery	20 years	3%
Furniture, fixture and equipment	10 years	5%

Expenditure for maintenance and repairs

Cost related to mine infrastructure such as roads, administrative buildings and mills and smelters utilized in processing ore and concentrate are capitalized and depreciated over the estimated useful life.

Cost incurred for the performance of surface reconnaissance, drilling and sampling costs as well as preparation of feasibility and engineering studies are expensed as incurred.

Exploration rights are permits to explore the ore capacity underground but without the actual mining right. Application fees and other expenses related to exploration activities are expensed when occurred.

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11.

Impairment of long lived assets

In accordance with guidance issued by the FASB, long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to estimated discounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.

12.

Revenue recognition

The Company sells its products pursuant to sales contracts entered into with customers. Revenues for the Company’s products are recognized when the title and risk of loss pass to the customer and when collectability is reasonable assured. The passing of title and risk of loss to the customer is based on terms of the sales contract generally upon shipment or delivery of product. There is no right of return once produce is sold.

13.

Comprehensive income (loss)

FASB ASC 220, “Reporting Comprehensive Income”, establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during the year from non-owner sources. Accumulated comprehensive income, as presented in the accompanying consolidated statement of stockholders’ equity consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

14.

Income taxes

The Company conducts all its operating business in China. The Company is governed by the income tax laws of the PRC and do not have any deferred tax assets or deferred tax liabilities under the income tax of the PRC because there are no temporary differences between financial statement carrying amounts and the tax bases of existing assets and liabilities. The Company by itself does not have any business operating activities in the United States and is therefore not subject to United States Income Tax.

15.

Earnings per share

The Company computes earnings per share (EPS) in accordance with ASC 260, “Earnings per share”. ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutives effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

16.

Foreign currencies translation

The Company follows ASC 830, “Foreign Currency Translation”, for the translation and re-measurement of balance sheet and income statement items into U.S. dollars.

The reporting currency of the Company is the United States dollar (“U.S. dollars”). The Company’s subsidiary maintains its books and records in its local currency, Hong Kong dollar (“HKD”) and the Renminbi Yuan (“RMB”). The Renminbi Yuan (“RMB”) is functional currency as being the primary currency of the economic environment in which its operations are conducted. Transactions denominated in currency other than functional currency are translated (re-measurement) first into the functional currency at the prevailing exchanges rates when transaction occurred, with the transaction gain or loss being included in determining net income for the period in which the exchange rate changes (ASC 830-20-35-1). During consolidation, the Company translates the subsidiary’s assets and liabilities into U.S. dollars using the applicable exchange rates prevailing at the balance sheet date, and the statement of operations is translated at average exchange rates during the reporting period. Adjustments resulting from the translation of the subsidiary’s financial statements are recorded as a component of accumulated other comprehensive income.

17.

Retirement plan costs

Contributions to retirement schemes (which are defined contribution plans) are charged to general and administrative expenses in the statements of income and comprehensive income as and when the related employee service is provided.

18.

Related parties

Parties, which can be a corporation or individual, are considered to be related if the Company has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Companies are also considered to be related if they are subject to common control or common significant influence.

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19.

Fair value of financial instruments

The Company values its financial instruments as required by FASB ASC 825, “Disclosures about Fair Value of Financial Instruments”. The estimated fair value amounts have been determined by the Company, using available market information and appropriate valuation methodologies. The estimates presented herein are not necessarily indicative of amounts that the Company could realize in a current market exchange.

The Company’s financial instruments primarily include cash and cash equivalents, accounts receivable, advance to a third party, inventories, accounts payable, other payables and accrued liabilities.

As of the balance sheet date, the estimated fair values of financial instruments were not materially different from their carrying values as presented due to short maturities of these instruments.

20.

Fair Value of Common Stock Warrant Liability

The Company accounts for common stock warrants in accordance with applicable accounting guidance provided in ASC 815 - “Derivatives and Hedging — Contracts in Entity’s Own Equity”. The Company values its warrants based on open form option pricing models which, based on the relevant inputs, render the fair value estimate Level 3. The Company bases its estimates of fair value for liabilities on the amount it would pay a third-party market participant to transfer the liability and incorporates inputs such as equity prices, historical and implied volatilities, dividend rates and prices of convertible securities issued by comparable companies maximizing the use of observable inputs when available. Changes in the fair value of the warrants are reflected in the consolidated statement of operations as “Gain (loss) from change in fair value of common stock warrant liability.”

21.

Recently issued accounting standards

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations.

In May 2011, FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurements (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”). ASU 2011-04 changes the wording used to describe many of the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. ASU 2011-04 also expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively. The Company anticipates that the adoption of this standard will not materially expand its financial statement note disclosures.

In June 2011, FASB issued ASU No. 2011-05, “Comprehensive Income (ASC Topic 220): Presentation of Comprehensive Income” (“ASU 2011-05”), which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the statement of shareholders’ equity. Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be effective for public companies during the interim and annual periods beginning after December 15, 2011, with early adoption permitted. The Company is reviewing ASU 2011-05 to ascertain its impact on the Company’s financial position, results of operations or cash flows as it only requires a change in the format of the current presentation.

In September 2011, the FASB issued ASU 2011-08 which provides an entity the option to first assess qualitative factors to determine whether it is necessary to perform the current two-step test for goodwill impairment. If an entity believes, as a result of its qualitative assessment, that it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount, the quantitative impairment test is required. Otherwise, no further testing is required. The revised standard is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We do not expect that the adoption of this standard will have a material impact on our results of operations, cash flows or financial condition.

In December 2011, FASB issued Accounting Standards Update 2011-11, “Balance Sheet - Disclosures about Offsetting Assets and Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity's balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such, we do not expect that the adoption of this standard will have a material impact on our results of operations, cash flows or financial condition.

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NOTE 3 - Ore Reserve Determination

Methodology

The following general methodology used to complete the ore estimate is summarized as follows:

A study of the regional and local geology.

Lithological units within the mine area

Statistical analysis

Reference to China reserve/resource estimation handbook

Professional experience with the type of deposit

The geological modeling and basic materials and data for resource estimation are based on the Prospecting Report for Shangchao-Gangshan Lead-Zinc Mining Area of Huanjiang County in Guangxi Zhuang Autonomous Region submitted in 2004, the Review Report for Resource/Reserve of Shangchao Lead-Zinc Mining Area in Huanjiang County in Guangxi Zhuang Autonomous Region submitted in July of 2008 and the complementary survey, sampling and assay program conducted by Jintai Mining Co., Ltd under supervision of a BOYD senior mining representative in the period August through October, 2010.

Datamine Corporate Limited (Datamine) software was employed for generation of the geologic model of the deposit. The Datamine software has been accepted since 2001 for estimation of resources/reserves in China.

The ore body occurs in biogenic reef limestone and marilite as well as fine to coarse crystalline dolomite in the argillaceous limestone cover layer. The ore body further extends along strike and dip directions, but is strictly controlled by biogenic reef, dolomite and F4 fault. Striking in an approximately north-east direction, the ore body is approximately stratified in shape. Its middle portion is dissected by fault or fracture (F9) along the strike, leading to south-westward displacement of the lower ore body.

Under the lithological and structural control and in combination with sampling deployment and grade situations, it is believed that the grades of the ore body are even and continuous. Thus, the mathematical three-dimensional finite difference method is adopted for modeling. In order to better control the boundaries, the ore body is delineated in a horizontal plane (mining levels), leading to confinement of the grade estimation domain. The grade estimation, employing geostatistical three-dimensional variographical methods, is undertaken for the creation of the geological block model.

The basic geological work did not provide bulk density determination. The tested bulk density value of 3.0t/m3 described in the exploration report for the neighboring Beishang deposit, whose ore types are similar to the Shangchao’s deposit, is accepted for this study.

Sample point coordinate data for the drives and crosscuts submitted to BOYD for this study, included the two endpoints and the middle coordinates of the openings. Correction for deviation of the survey data was not required based on our judgment of the minimal deviations observed in the openings. The primary database for the block modeling including collar, assay, survey and geology tables are built through methodical sorting and calculation of the data-sets. Sampling lengths average approximately 2 meters.

The ore body, manually delineated by stringing up the sampled segments of the drives/crosscuts on the plan map of roadway engineering, is transformed into a wireframe to form a three-dimensional boundary. A prototype model is used to fill the enclosed (solid) wireframe to form a blank model. The sampling data taken within the delineated ore body are interpolated in three-dimensional space to form the final model.

A delineation method is utilized to capture the contact between ore body and the wall rock in the workings. Linear and/or curve connections are projected between drives/crosscuts openings; the thickness of the ore body between openings was not larger than the average thickness of the ore body within drives/crosscuts openings on both sides. In the places where the sampling is insufficient, the location of F4 fault and biogenetic reef and the distribution of dolomite are considered.

For differentiation of the ore body and the wall rock, boundary grades are utilized. Cut-off grades of Zn>0.5% or Pb>0.5%, are utilized in defining the boundary of the ore body; when both Zn and Pb grades are less than 0.55, the wall rock is defined. On the whole, the boundary between the ore body and the wall rock is quite distinct.

The sampling data from the deposit did not include instances of extremely high metal grades, eliminating the need to consider special treatment of extremely high metal grades prior to the grade estimation exercise. It was determined that the sampling data supported determination of probable reserves of Zn and Pb ore.

The following parameters are used in the block modeling:

Grade estimation method: inverse distance squared method

Grade estimation ellipsoid occurrence: dip direction 160°, dip angle 80°

Basic grade estimation radius for indicated resource: 25m×25m×10m (strike×dip×thickness)

Grade estimation radius for inferred resource: 75m×75m×30m (strike×dip×thickness)

Minimum amount of samples for grade estimation: 1

Maximum amount of samples for grade estimation: 20

Grade estimation quadrant limit: samples were from at least two quadrants and each quadrant had a minimum of 1 sample and a maximum of 20 samples to be involved in the grade estimation

Basis unit dimensions: XD=10m, YD=10m, ZD=10m

Sub-block sizes at the X, Y and Z directions: 2.5m, 2.5m, 2.5m

Bulk density: the average value of 3t/m3 was adopted

SEC Guidelines

The United States Securities and Exchange Commission (SEC) have established guidelines contained in Industry Guide No. 7 to assist registered companies as they estimate ore reserves. These guidelines set forth technical, legal and economic criteria for determining whether the Company’s ore reserves can be classified as proven or probable.

The SEC’s economic guidelines have not historically constrained the Company’s ore reserves, and did not constrain the ore reserves at March 31, 2010. Under these guidelines, ore may be classified as proven or probable if extraction and sale result in positive cumulative undiscounted cash flow. The Company believes that it is appropriate to use a moving average price for measuring ore reserves as such a price, better matches the period over which the reserves will ultimately be mined.

The Company’s board of directors met several times during the year with the management team and outside experts to review ore reserve methodology, to identify best practices in the industry and to receive reports on the progress and results of the Company’s mine development efforts.

The March 31, 2010, ore reserves were reviewed by J.T. Boyd Company (“J.T. Boyd"), a third party independent consultant, who are experts in mining, geology and ore reserve determination. The Company has utilized J.T. Boyd to carry out independent reviews and inventories of the Company’s ore reserves since May 2010. J.T. Boyd has consented to be a named expert herein.

J. T. Boyd has provided a reserve report for the Shangchao Mine. As of March 31, 2010, the Company’s total probable zinc and lead reserves were 1,886,000 ROM ore tonnes containing 1.19% lead and 5.19% zinc on a diluted basis. The zinc and lead ore reserves are sulphide-based.

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Note 4 - Mining Operations Disclosure

1. Mining properties and licenses

(1) Mining license property --- Shangchao zinc and lead mine

The Shangchao Mine is located 50 km (direct distance) north of Huanjiang County, Guangxi Province, or 70 km in road distance from Huanjiang. From Hechi City, the mine is situated approximately 80 km away. The mine area falls under the jurisdiction of Shangchao Township of Huanjiang County.

Hechi City is connected to Shangchao by a dedicated railway line. The mine area has a very convenient transportation network system, with third-class roads traversing Hechi, Huanjiang, and Shangchao. The Shangchao Railway Station is only 1 km away from the mine site and a simple highway connects Shangchao Town and the mine site. A commercial airport exists at Nanning, capital city of Guangxi Province. Nanning is about three and half hours by road to Hechi City. Road access to both Hechi and to major highways and rail systems from the mining area is considered adequate. Power from existing national grid is adequate and readily available to the operations and is provided to the mine by the Shangchao transformer substation of the Huanxian Power Supply Company, which is part of the PRC power network. Water supply for mining and processing comes from the Huanjiang River, which is near Shangchao village.

The Shangchao Zinc/Lead Mine mining right covers a land area of 2.8313 square km and has the following boundary description:

Abscissa (X) Ordinate (Y)

2794802.66 36520076.17

2795601.56 36520074.87

2795602.16 36520494.67

2796063.76 36520493.97

2796063.76 36520928.37

2796742.66 36520928.37

2796742.66 36521928.37

2794792.66 36521928.37

The mining right certificate authorizes a mining depth of between elevations 458.271 m and 219.971m above sea level, and an authorized output level of 30,000 tpa. The mining right term extends to December 2018 and is generally renewable for a subsequent nine-year term for a medium scale zinc/lead mine upon the payment of the rental fee. BOYD understands that the mine operator intends to apply for both extension of the existing certificate and expansion of the mining rights to possible mineral deposits below the 220m elevation after its expiration.

Mining license: On December 12, 2009, Huanjiang Jintai renewed its mining rights over the Ore Mine, which license will expire on December 12, 2018. This mining license is subject to periodic renewal. An application for renewal needs to be submitted at least 30 days before the expiration date and the extension will be approved if the applicant satisfies all applicable requirements and pays the appropriate resource fee. Ten, twenty and thirty years are the maximum periods of time for mining licenses for small, medium and large deposits of ore mines, respectively.

(2) Exploration license properties --- Shangchao-Gangshan Lead Ore Deposit; Shangchao Lead Ore Deposit; and Dongjiang Zinc Ore Deposit.

These three exploration license properties are located at Huanjiang Mao Nan Autonomous County.

(3) Concentrator and smelter properties --- Yagang concentrator, Xingda concentrator and Duchuan smelter

Yagang concentrator locates at Leyang town, Huanjiang County; Xingda concentrator at Xunle town, Shangchao; and Duchuan smelter at Cunshan town, Huanjiang County.

Other licenses needed to be hold for mining operations: In order to conduct business, especially mining and exploration activities in the PRC, the Company is required to maintain various licenses from the appropriate government authorities, including general business licenses, valid mining licenses, exploration licenses, pollutant emission licenses, safety production licenses and other relevant licenses and permits to conduct mining extraction and exploration activities. On the other hand, the relevant Land and Resources Law of PRC allows for two-year extensions of an exploration rights license. As per the Regulations for Administration of Mineral Resources of Guangxi Zhuang Autonomous Region, the granting of an extension of an exploration rights license is dependent upon the exploration stage a company is at. At the first two stages (reconnaissance and prospecting), no extensions are allowed. However, once a company enters the third stage (general exploration) and/or the fourth stage (detailed exploration), it is permitted to extend its license up to two times, each for two year periods. To successfully renew exploration license, minimum expenditures are required to be met. The minimum expenditure requirement prescribed by the applicable PRC laws is as follows: i) RMB 2,000 per square kilometer during the first year of having the exploration license; ii) RMB 5,000 per square kilometer during the second year of having the exploration license; and iii) RMB 10,000 per square kilometer during the third year of having the exploration license. Normally, RMB 500,000 is estimated to be the minimum investment amount for any exploration project conducted.

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The Company owns 100% of all above properties.

2. Historical and current geological work

(1) Prior Work

Chronologically, historic geological work at the Shangchao Mine Site is as listed below:

• 1959 – 1968: Guizhou and Guangxi geological survey teams successively conducted geological surveys with maps prepared at a scale of 1:200000, yielding the Rongjiang and Luocheng geological maps. These maps cover the Shangchao mining area and formed the basic data for the work on geology and mineralization determination in the subject area.

• 1987 – 1988: Guangxi geophysical prospecting team and Guangxi No. 6 geological team successively completed geochemical investigations in the area, resulting in 1:200,000 scale Luocheng and Rongjiang geochemical maps. These maps were the source for identifying seven mineralization areas where elements such as Cu, Pb, Zn, etc., were delineated. This provided valuable data for further prospecting work.

• 1989 – 1992: Guangxi No. 7 geological team completed a regional geologic survey and associated 1:50,000 scale mapping, and this work systematically categorized strata and sedimentary facies.

• 2002 – 2004: Guangxi No. 7 geological team and Geophysical/ Geochemical Prospecting Institute, a subsidiary of Guangxi Geological Exploration Institute, probed the Shangchao Zinc/Lead Mine area and submitted the report entitled: “The Investigation Report of Shangchao Zinc/Lead Mine Area of Huanjiang County in Guangxi Province.” A total resource of 129.9 Kt, at contained metal of 6.1654 kt (Pb + Zn), representing 332 plus 333 category (based on the Chinese standard) was reported. This report is said to have been approved and adopted as the official document Gui Reserve Review Committee File No. 8 (2004) and was recorded in the Land and Resources Department of Guangxi.

The 2002 − 2004 prospecting/exploration work primarily included geological mapping (revision of local geology), geophysical survey, investigation of old underground openings, refurbishment of old underground openings, and diamond drilling (three drill holes with an average depth of 380 m). The exploration program also included analysis of geochemical sampling. The following summarizes the reported work completed in the prospecting/exploration program:

• Geological Mapping (revision of local geology) – 12.30 km2.

• Investigation of Old Underground Openings – 4674.1 m.

• Refurbishment of Old Underground Openings – 2369.9 m.

• Drilling – 1140.38 m (drill holes ZK6510, ZK6508 and ZK6613).

• Geophysical Survey (well) – 780.38 m.

• Drilling Platform (sketch) – 497.38 m2.

• Access Roads (drilling) – 1,388 m.

• Geochemical Sample Analysis – 200 (pieces).

• Rock Specimen – 82 (pieces).

• Exploration Line Survey – 1 (Length 527 m).

(2) Recent Prospecting/Exploration Work

Mine development commenced in October 2005, on a small scale at an output level of less than 300 ktpa.

In 2008, while mining was actively in progress, Jintai Mining Co. Ltd conducted a further underground geological probe on the levels of 245 m and 265m in order to augment the resource base of the Company. This additional work led to the preparation of a resource validation report. This work involved crosscutting and drifting, with channel samples taken for assay. The 2008 work program is summarized below:

• Tunnelling – 291.5 m (drifting: 165.00 m; crosscutting: 126.50 m).

• Mined-out Area Survey – 9 (survey points).

• Crosscut Mapping/Logging – 126.50 m (drifts not sampled).

• Investigation of Old Underground Openings – 2,500 m.

• Sampling – 86.

• Assays – 86.

In August of 2010, Jintai Mining Co., Ltd conducted additional sampling and assay work in the drifts and crosscuts in the 305~318 midsections. The sampling involved 8 cross-cutting projects, with a total of 173 samples.

Mining Method Description

The rock strata in the underground Shangchao Mine is composed principally of granite; which is strong, stable and competent, thereby providing favorable geotechnical conditions at the mine. Structures controlling the ore bodies are determined to be moderately wide and relatively steeply dipping. The ore body has an average width of about 17m. The grades are fairly constant throughout the ore bodies and there exists a reasonably distinct contact between the ore bodies and hanging-wall/footwall. The dip of the deposit averages 65 o. Based on preceding attributes of the ore bodies, Shangchao Mine has chosen to employ two mining methods contemporaneously, Shrinkage Stoping (primary) and Sublevel Open Stoping (secondary) and/or a variation of the two methods in some places.

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Shrinkage Stoping

Mining method in which broken ore is temporarily retained in the stope to provide a working platform and/or to offer temporary support to the stope walls during active mining since the ore swells when broken, the muck pile in the stope is shrunk a corresponding amount (about a third) by drawing some of the broken ore out as the stope is advanced upwards/up-dip. Eventually, when the entire vein has been blasted, filling the stope with broken ore, the ore is extracted by a process similar to block caving from chutes beneath the undercut.

Sublevel Stoping

This mining method entails providing access to the ore body at various sub-levels between the main haulage levels in order to drill and blast the intervening ore. Stope drilling is carried out from drilling drifts on the sublevels and the ore is blasted in slices towards an open face, which generally is vertical on the up holes. The blasted ore falls to the bottom of the stope and is collected through draw-points.

Development

The development work necessary to prepare sublevel stoping in comparison to shrinkage stoping is generally more extensive and the development primarily entails drifting to prepare sublevels. On the whole, shrinkage stoping is widely used at Shangchao Mine.

Development at Shangchao is performed efficiently in an environment of multiple stopes on two levels. Currently developed mining levels are 280m, 265m, 245m and 225m. The dimension of the main drive is 2.2 x 2.2m; production drift (crosscut) 2.0 x 2.2m; and rib raise 2.0 m x 2.0 m. Where sub-level stoping is employed, sub-level height of 5 to 7m is used and the draw-points are at 5m intervals (center to center).

• Crown pillar: 3m,

• Rib Pillar: 6m,

• Sill Pillar: 5m.

• Stope length: 50 - 60m

Crosscuts are driven off the haulage (main) drift as soon as practicable into rib pillars to access to neighboring ore bodies and stope raises. The haulage drift is continued, driving to the first draw-point with the drift. This draw point is driven on the edge of the rib pillar and completely through the ore in order to connect the chute of the stope to facilitate the raise mucking and also serve as a starting point for the stope sill. The remaining draw-points are driven as they are reached by the haulage drift.

Upon completion of the haulage drift and draw-points, the stope sill is begun from the No.1 draw-point; the silling operation commences at a drift elevation height of 2m and is performed by the same crew as developed the drift. The initial sill width is limited to the ore contacts of the ore width. The sill breaks into each boxhole as it is reached. When the sill is complete, the stoping operation begins with undercutting followed by slotting.

Where sublevel stoping is employed, boxholes are developed within the rib pillar at designated sublevel heights for further development of the sublevel.

Short/Longhole drilling and Blasting

A domestically manufactured pneumatic drill is used to drill the ore section above the undercut/sublevel in a fan spread or parallel pattern vertically upwards or tilted (tilting angle between 25o and 30o). For shrinkage stoping, blastholes are spaced 0.8 m to 1 m apart, with blasthole length ranging between 1.5 m to 2.5 m; 400 mm tamping is employed.

The production cycle is summarized as follows: Drill and Blast → Ventilation → Ore Drawing → Scaling/Roof Inspection.

Drilling is performed independently of other activities; often well ahead of explosive loading. Drilling, explosives loading, and blasting are timed in accordance with the mine’s production schedules. Blasting of the ore body on each sublevel starts at the hanging wall, with mining retreating toward the footwall. BOYD’s site visit observations indicate that drilling and blasting are handled by competent drilling/blasting crews.

Currently, there are 20 production stopes distributed over multiple levels within the nine mining portals yielding roughly 2,000 tonnes of ore per day. The No. 2 ore body is being extracted currently.

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Ore handling

Ore handling involves discharging broken ore from ore chutes into 0.7 m³ mine cars, for transportation on haulage levels and subsequent hoisting to the surface through an incline shaft. Two mine cars are hoisted to the surface at each time.

Underground conditions at Shangchao are ideal for the type of mining operations conducted. Ore chute locations are designed with distances matching haulage equipment in use (rail haulage). Roof scaling and broken ore levelling in stopes, like other procedures in Shangchao Mine, are efficient. The haulage equipment is maintained in continuous operation. When a stope is depleted, the broken ore is extracted and where necessary, backfilled with waste rock from drift development. Ore dilution at Shangchao approximates 10%; ore recovery approximates 90%, depending on local conditions.

The production cycle for our ore mining activities is summarized as follows: Drill and Blast —+ Ventilation —+ Ore Drawing Scaling/Roof Inspection.

Ore Processing

Ore processing activities are considered to be the second stage in the mining operation. Ore processing entails the physical extraction of ore from the Company’s mine, which is then converted into nonferrous metals concentrates, known as zinc and lead concentrates and then processed into final products. In order to produce the zinc and lead concentrates, the Company segregates the usable components of ores from waste rock through physical (such as magnetic separation) or chemical methods, or a combination of the two.

After segregation, usable metal ores are transported to one of the Company’s three principal processing facilities, known as (a) the Yagang concentrator; (b) the Xingda concentrator; and (c) the Duchuan smelter facility, for the production of finished products. At these processing facilities, the Company produces the following main products: zinc calcine, zinc dust and sand, electrically collected zinc dust, sulfuric acid, zinc oxide, zinc and lead concentrate and pyrite.

4. Regional/Local Geology and Mineralization

(1) Regional/Local Geology

The mine area is located in the western extreme of the Luocheng depression belt, which forms part of the Gui northeast - Gui middle depression belonging to the South China fold system and/or it reposes in the eastern wing of the southern end of the Shangfu ~ Kenyue Anticline.

(2) Strata

The mine right area is mainly underlain by strata of the middle series of the Devonian system, followed by the upper series of Devonian system and, to a lesser extent, some strata in the lower series of Carboniferous system.

There is a biogenetic reef feature occurring in Beishan village. A list of the strata from bottom to top is as follows:

- Donggangling formation (D2d) of middle series of Devonian system.

- Guilin formation (D3g) of upper series of Devonian system.

- Rongxian formation (D3r) of Upper series of Devonian system.

- Raoyunling (C1y) of lower series of Carboniferous system v Shangchao formation of lower series of Carboniferous system (C1sh)

- Shangchao formation of lower series of Carboniferous system (C1sh).

(3) Structure

The regional structure is relatively complex. Moderately developed folds and faults, occurring in a tight linear and reversed manner along the NNE direction (strike), are present. The strata range in dip from between 8 and 30 degrees (at the extreme ends where faulting is pronounced). The folds are mainly in the area impacted by the Shangfu ~ Kenyue Anticline. The main anticline axis crosses the site of Kenyue village in the south of the concession area, further running through Shangfu village, where it extends to Guizhou Province. The length of this anticline in Guangxi Province is 32 km with a width of 8 km. The Sipai formation of lower series of the Devonian system and Donggangning formation of the middle series of Devonian system form the strata underlying the axis.

(4) Magmatic Rock

Magmatic rock exposure in the tenement is non-existent. However, deductions made based on available gravity and magnetic data indicate the occurrence of concealed granite in the Beishan area, which is thought to have contributed to the genesis of mineralization in the area by providing needed hydrothermal condition for the transportation of magmatic fluids (molten ore).

(5) Metamorphisms and Alteration of Surrounding Rock

Regional metamorphism occurs only in the strata of Lijiapo formation (Z1j) of Sinian system that is situated in the northern periphery of the mining right area. Lithologically, the rock is gray to grayish-green in color, with constituents being solely varying grain sizes of weakly metamorphosed conglomeratic argillaceous sandstone. No obvious metamorphism occurs in the area, but alteration of surrounding rock is relatively obvious and pronounced. Alteration of the surrounding rock occurs mainly in the form of dolomitization, retrograded dolomitization, and pyritization.

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(6) Ore Deposit Characteristics

The reported main area of mineralization being exploited by the Shangchao Zinc/Lead Mine is the No. II deposit. This mineralization deposit occurs between exploratory lines No. 65 and No. 66 and is controlled by the following engineering works, PD60-1, CD1, CD2, CD4, YD265-CD1, and YD245-CD1. The deposit is stratified, striking north–south, but tilts toward the northeast (NE) at some places. The direction of dip ranges between 99 and 140 degrees, with an inclination of 50 to 78 degrees. The strike length of the deposit is 135 m, with a thickness ranging between 1.09 m and 44.02 m, averaging 16.63 m. It is located at a depth of between 318.8 m and 389.8 m from the topographical surface and it is said to be truncated by fault F9 in exploratory line No. 66. The deposit occurs in biogenic reef limestone, marilite, and fine to coarse grain dolomite overlain by argillaceous limestone. The ore body is strictly controlled by biogenic reef, dolomite occurrences, and faulting.

(7) Mineral Composition of Ore

The mineral constituents of the zinc/lead-bearing ore are predominantly pyrite and sphalerite, with minor amounts of galena. Mineralized veins include dolomite, traces of calcite, quartz, and carbonaceous material.

Following is a general description of the primary mineral constituents:

		Grain
Mineral	Color	Type	Size (mm)
Pyrite	Light Yellow	Hypidiomorphic to allotriomorphic	0.1~2
Sphalerite	Chocolate Brown	Allotriomorphic (some idiomorphic)	0.1~0.8
Galena	Lead Gray	Hypidiomorphic w/partial idiomorphic	0.1~0.5
Dolomite	Gray White	Hypidomorphic and idiomorphic	10
Calcite	Light Gray	Allotriomorphic	~0.5
Quartz	Ivory	Allotriomorphic	0.5

Quartz often occurs in cementation with carbon and argillaceous material. Carbon also occurs irregularly in dolomite grains with a content level of less than 10%.

(8) Chemical Composition of Ore

The grade of the deposit is reported to be between 0.16% and 2.083% for lead, averaging 0.98%, and between 1.05% and 8.60%, averaging 4.61%, for zinc.

(9) Ore Type and Grade

The grades of the zinc/lead ore were classified based on Chinese standards, as follows:

- Equivalent grade Pb+Zn<4% classified as lean ore.

- Equivalent grade Pb+Zn 4%~ 8% classified as medium ore.

- Equivalent grade Pb+Zn> 8% classified as rich ore.

The combined grade Pb+Zn of most of the ore blocks of the No. II deposit is reported to be between 4.68% and 6.29%; hence, it is classified as medium ore in terms of grade.

(10) Country Rock and Gangue Material

The country rock is primarily reef dolomite and brecciated dolomite. The deposit thickness ranges from several meters to tens of meters, with the footwall composed of biological clastic limestone, with localized altered dolomite. The boundary between the deposit and the country rock is distinct and distinguishable by visual inspection. There is virtually no gangue material embedded in the No.II deposit.

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NOTE 5 - Cash on Hand

Various routine business transactions are conducted in cash such as sales of material and purchases of materials, cash on hand as of December 31, 2011 was $8,987 (RMB 56,628).

NOTE 6 - Accounts Receivable, Net

The majority of the Company’s sales are on open credit terms and in accordance with terms specified in the contracts governing the relevant transactions. At the balance sheet date, all of the accounts receivables were related to PRC wholesaling and their credit period is usually ranged from one year to three years. Based upon the aforementioned criteria, management has determined that as follows:

	31-Dec-11		31-Mar-11
Accounts receivable, gross	$	16,356,436	$	14,719,296
Less: allowance for doubtful accounts		-865,675		-751,314
Accounts receivable, net		15,490,761		13,967,982
Accounts receivable is separated as current and non-current assets
Accounts receivable, net (current)		14,802,604		13,816,063
Accounts receivable, net (non-current)		688,157		151,919
Total	$	15,490,761	$	13,967,982

NOTE 7 - Prepaid expenses

The company has balances of $1,233,224 and $883,044 as of December 31, 2011 and March 31, 2011 in prepaid expense, respectively. These expenses represent utilities, rent, and other expenses related to the company’s operation.

NOTE 8 - Paid in advance

The balances of $20,347,311 and $9,302,895 as of December 31, 2011 and March 31, 2011, respectively, represent prepaid supplies and other items.

	31-Dec-11		31-Mar-11
Materials & Supplies purchases	$	3,939,104	$	1,328,674
Equipment purchases		5,720,495		7,850,678
Mining Project		10,687,712		123,543
Total	$	20,347,311	$	9,302,895
Paid in advance is separated as current and non-current assets
Paid in advance (current)		19,894,008	$	8,860,462
Paid in advance (non-current)		453,303		442433
Total	$	20,347,311	$	9,302,895

NOTE 9 - Other receivables

The Company makes deposits to government agencies and other unrelated parties, and makes advances to its employees during its operation. These amounts are recorded in other receivable. As of December 31, 2011 and March 31, 2011, other receivables are consisted of the followings:

	31-Dec-11		31-Mar-11
Deposit	$	47,735	$	87,987
Employee advance		33,380		186,292
Others		1,559,280		188,401
Total		1,640,395		462,681
Other receivable is separated into current and non-current assets
Other receivable (current)		1,428,432		461,747
Other receivable (non-current)		211,963		934
Total	$	1,640,395	$	462,681

Employee advances are given to the sales and procurement personnel for down payments on raw material procurement and daily operating expenses. By the time the procurement is fully completed, the Company capitalizes such employee advances as ‘Inventory’ on its balance sheet. The advances if unused after 30 to 60 days are returned to the accounting department. All the amounts are unsecured, interest free, and have no fixed repayment terms.

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NOTE 10 - Inventories

As of December 31, 2011 and March 31 2011, the Company’s inventory is consisted of followings:


	31-Dec-11		31-Mar-11
Raw materials	$	4,495,396		5,096,343
Work in process		6,271,827		6,048,150
Finished goods		252,293		267,506
Total	$	11,019,516	$	11,411,998

NOTE 11 - Land, plant and equipment, mining right and exploration right

As of December 31, 2011 and March 31, 2011, the Company’s non-current assets have followings:


	31-Dec-11		31-Mar-11
Land, plant and equipment	$	17,378,192	$	16,285,198
Less: accumulated depreciation		-2,590,692		-1,798,118
Land, plant and equipment, net		14,787,500		14,487,080
Construction in process		43,937,767		42,225,532
Mining right (in other non-current assets)		0		0
Total	$	58,725,267	$	56,712,612

The Company bought one mining right in 2005 in amount of 1,180,000RMB. At the time, the Company estimated the total useful life of 5 years. In December 2010, the estimation of its useful life was re-evaluated to be consistent with the mining right of 9 years. Conversely, the remaining balance of the mining right was considered immaterial and it was fully amortized in the current year to simplify the accounting procedure. As of December 31, 2011 and March 31, 2011, the mining right were fully amortized. The Company also has three mineral exploration rights, including: Shangchao lead ore, Shangchao Gangshan lead ore and Dongxiang Zinc ore. The exploration rights expire in 2 years and can be renewed at expiration. Application fees and other expense related to exploration activities are expensed when occurred.

Construction in progress is stated at cost, which includes the cost of construction and other direct costs attributable to the construction. No provision for depreciation is made on construction in progress until such time as the relevant assets are completed and put into use.

NOTE 12 - Short Term Loan

On June 21^st, 2011, the Company signed a short term loan agreement for the mine development projects. The loan bears no interest and is due in one month, 6% monthly interest will be accrued if the loan is overdue. The loan has been repaid in July, 2011.

NOTE 13 - Other Payables

As of December 31, 2011 and March 31, 2011, other payables are consisted, of the following:


	30-Dec-11		31-Mar-11
Payable for mining site construction	$	0	$	15,252
Other		1,115,383		171,711
Total	$	1,115,383	$	186,963

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NOTE 14 - Environment Restoration Deposit

In September 2009, $283,497 (1,786,286 RMB) was paid to local environment protection department as environment restoration deposit. The full amount will be refunded when the Company fully restored the environment after its mining activities.

NOTE 15 - Due To Related Party

The balances due to stockholders represented unsecured advances which are interest-free and due on demand. As of December 31, 2011 and March 31, 2011, the balances due to stockholders were $1,388,682 and $937,259 respectively.

NOTE 16 - Convertible Notes and Warrants

On November 26, 2010, the Company issued a second convertible debt in amount of $10,000,000. In total, the Company issued $20,000,000 convertible debt. On July 7, 2011, the Company approves and authorizes the conversion of $20,000,000 represented by those certain convertible debt into 4,000,000 shares of Common Stock at a conversion price same of $5 per share.

Interest payable on this Note shall accrue at the rate of 3% per annum and shall be payable on the Maturity Date. As of December 31, 2011, the balance of accrued interest was $465,590.

The discount on notes payable is related to warrants granted to the lender in association with the issuance of the term note. The Company provided the lender with warrants to purchase up to 800,000 shares of common stock at 110% of IPO price per share. The following table summarizes the changes in the warrants outstanding at December 31, 2011.


Range of Exercise Prices		Number Outstanding		Weighted Average Exercise Price		Weighted Average Remaining Life		Number Exercisable		Weighted Average Exercise Price
	5.50		400,000		5.50		1.67		400,000		5.50
	5.50		400,000		5.50		1.91		400,000		5.50

			800,000				1.79		800,000

We adopted the provisions of ASC Topic 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value under GAAP and enhances disclosures about fair value measurements.

Under ASC Topic 820, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

The Company values its warrants based on open form option pricing models which, based on the relevant inputs, render the fair value estimate Level 3. The Company bases its estimates of fair value for liabilities on the amount it would pay a third-party market participant to transfer the liability and incorporates inputs such as equity prices, historical and implied volatilities, dividend rates and prices of convertible securities issued by comparable companies maximizing the use of observable inputs when available. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value.

(a)

Level 1 – Quoted prices in active markets for identical assets and liabilities. Level 1 is generally considered the most reliable measurement of fair value under ASC 820.

(b)

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

(c)

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

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The Company used Monte Carlo Simulation to generate a refined fair value calculation with the following assumptions:


Assumptions
Maturity (years)	3
Interest Rate	0.60%
Volatility	55.79%
Dividend yield	N/A

Fair Value on a Recurring Basis

The table below categorizes assets and liabilities measured at fair value on a recurring basis as of December 31, 2011:

	Fair Value		Fair value measurement using
	31-Dec-11		Level 1		Level 2		Level 3
Common stock warrant liability	$	1,125,803		—		—	$	1,125,803

The following table summarizes the activity of Level 3 inputs measured on a recurring basis for the period ended December 31, 2011:


(in thousands)		Common Stock Warrants
Balance at September 30, 2011		$1,411,029
Change in fair value of common stock warrant liability		-285,226
Exercise of common stock warrants
Balance at December 31, 2011		1,125,803

NOTE 17 - Gross profit margin

For the three and nine months ended December 31, 2011, the Company recorded a gross profit margin at 28% and 41.98%, respectively. The sales of zinc and lead products, such as zinc calcine, zinc dust and sand, sulphuric acid, lead concentrate, pyrites and oxidized ores, accounted for 91.27% of total revenue as of December 31, 2011. The other 8.11% of sales revenue was attributed to the sale of tailings for the same period ended December 31, 2011.

NOTE 18 - Income Taxes

The Company conducts all its operating business in China. The Hk subsidiary is incorporated in Hong Kong and is subject to Hong Kong tax law. The PRC subsidiaries are governed by the income tax laws of the PRC and do not have any deferred tax assets or deferred tax under the income tax “laws” of the PRC because there are no temporary differences between financial statement carrying amounts and the tax bases of existing assets and liabilities. The Company by itself does not have any business operating activities in the United States and is therefore not subject to United States Income Tax.

Prior to March 31, 2010, all of the Company’s profits were contributed by Huanjiang Jintai, which enjoyed a favourable tax reduction benefit introduced by the State Administration of Taxation of Guangxi province to encourage companies engaged in the non-ferrous metals industry in the Zhuang autonomous region. The aggregate preferential tax amount from fiscal year 2004 to 2010 is $5,956,061. The per share effect due to the tax incentives before dilution is $0.19 and $0.18 after dilution. From January 1, 2004 to December 31, 2006, Huanjiang Jintai was exempt from the corporate income tax; from January 1, 2007 to December 31, 2010, Huanjiang Jintai enjoyed a preferential corporate income tax rate of 15%. As for the year ended March 31, 2011, the Company’s financial statements were consolidated from four legal entities, which included Huanjiang Jintai, Xiangguang, Jintai HK, and Jintai Mining Group, Inc. Since Xiangguang is located in Guangdong province, it did not enjoy any tax incentives and had a normal income tax rate of 25%. Hence, the effective tax rate increased to 21.5% approximately. In addition, according to the PRC government tax bureau, the tax holiday ended on December 31, 2010, and from January 1, 2011, all income tax rates are at the level of 25%.

The Company generated all of its net income from its PRC operation and has recorded income tax provision for the nine months ended December 31, 2011 and year ended March 31, 2011.

The components of (loss) income before income taxes separating U.S, HK and PRC operations are as follows:

	31-Dec-11	31-Mar-11
Loss subject to U.S operation	-$405	-$61,987
Loss subject to Hk operation	-565,038	-1,179,455
Income (loss) subject to PRC operation	7,626,539	22,208,722
Income (loss)before income taxes	$7,061,096	$20,967,280

United States of America

The Company is registered in the state of Delaware and is subject to United States of America tax law.

As of December 31, 2011, the parent company has a $62,387 of net operating losses available for federal tax purposes, which are available to offset future income taxable income. It can be carried forward up to 20 years from the year the loss is incurred. Management believes the realization of the benefits from these losses is uncertain due to the Company’s limited operating history.

Hong Kong Subsidiary

Jintai Mining Co. , Limited is incorporated in Hong Kong and is subject to Hong Kong tax law.

As of December 31, 2011, the subsidiary has recorded a net operating loss of $1,797,600. The tax losses can be carried forward without any time limit.

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PRC Subsidiary

The consolidated foreign pre-tax earnings are approximately $7,626,539 for the nine months ended December 31, 2011 and $22,208,722 for the year ended March 31, 2011.

The reconciliation of income tax rate to the effective income tax rate based on pre-tax earnings stated in the consolidated statement of operations for the nine months ended December 31, 2011 and year ended March 31, 2011 are as follows:

	31-Dec-11	31-Mar-11
Income (loss) before income taxes	$7,626,539	$22,208,722
Statutory income tax rate	25%	25%
Income tax at statutory rate	1,906,635	5,552,181

Tax exempted at 15% statutory rate before December 31, 2010		(1,028,318)
Adjustments not deductible for tax purposes:
Effect of tax losses	93,877	(6,279)

Income Tax expenses	$2,000,512	$4,517,584

The following table reconciles the U.S statutory rates to the Company’s effective tax rate for the Six months ended December 30, 2011 and year ended March 31, 2011.

	31-Dec-11	31-Mar-11
U.S Statutory rate	34.0%	34.0%
Foreign income not recognized in USA	-34.0%	-34.0%
HK Statutory rate	16.5%	16.5%
Effect of net Operating loss	-16.5%	-16.5%
PRC Income tax	25.0%	25.0%
Effect of PRC tax losses	1.2%
Effect of PRC tax incentive
FY 2011		-4.7%
Effective Tax Rate	26.2%	20.3%

NOTE 19 – Capital Transactions

The company has authorized to issue 1,000,000 shares of preferred stock. Our board of directors is expressly authorized to provide for the issuance the remaining shares of the preferred stock in one or more series, and to fix the number of shares or alter-voting powers, preferences, rights, limitations, or restrictions thereof as may be permitted by the Delaware General Corporation Law. The board of directors is also expressly authorized to increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series.

In June, 2010, the Company has issued 32,000,000 shares common stock with $0.0001 par value.

NOTE 20 - Related party transactions

Huanjiang Jintai Mining Co., Ltd. and Guangzhou Xiangguang Corporate Management Co., Ltd. entered into VIE agreements. During September 2011 to December 2011, Huanjiang Jintai Mining Co., Limited sold oxidized ores with $1,083,413 to Guangzhou Xiangguang Corporate Management Co., Ltd.

The agreements consist of:

Consulting Services Agreement

Pursuant to the Consulting Services Agreement, Xiangguang provides Huanjiang Jintai with general consulting services relating to its day-to-day business operations and management, on an exclusive basis. For services rendered to it by Xiangguang under the Consulting Services Agreement, Huanjiang Jintai pays a quarterly consulting service fee, denominated in RMB, equal to its net income for such quarter.

Operating Agreement

Pursuant to the Operating Agreement, Xiangguang agrees to guarantee the performance by Huanjiang Jintai of itsobligations under any agreements or arrangements entered into by it with any third party. In return, Huanjiang Jintai has (a) pledged all of its assets and accounts receivable to Xiangguang as counter-guaranty; and (b) the shareholders of Huanjiang Jintai are granted the right to designate individuals recommended by Xiangguang as directors and officers of Huanjiang Jintai. In addition, under the Operating Agreement, Xiangguang provides guidance and instructions on Huanjiang Jintai’s daily operations, financial management and employment issues. Moreover, Huanjiang Jintai has agreed not to engage in any transactions that could materially affect its assets, liabilities, rights or operations without Xiangguang’s prior consent, including without limitation, incurrence or assumption of any indebtedness, sale or purchase of any assets or rights, incurrence of any encumbrance on any of its assets or exploration license in favor of a third party or transfer of any agreements relating to its business operation to any third party

Equity Pledge Agreement

Under the Equity Pledge Agreement, the various shareholders of Huanjiang Jintai pledged all of their equity interests in Huanjiang Jintai to Xiangguang to guarantee the performance of Huanjiang Jintai’s obligations under the Consulting Services Agreement. Under the terms of the agreement, in the event that Huanjiang Jintai or its shareholders breach their respective contractual obligations, Xiangguang, as pledgee, will be entitled to certain rights, including, but not limited to, the right to vote, control and sell the pledged equity interests. The shareholders of Huanjiang Jintai also agreed that upon occurrence of any event of default, as set forth in the Equity Pledge Agreement, Xiangguang has further been granted an exclusive, irrevocable power of attorney to take actions in the place and stead of the shareholders of Huanjiang Jintai, to carry out the security provisions of the Equity Pledge Agreement, and take any action and execute any instrument as required by Xiangguang to accomplish the purposes of the agreement. The shareholders of Huanjiang Jintai further agreed not to dispose of the pledged equity interests or take any actions that would prejudice Xiangguang’s interest.

Proxy Agreement

Pursuant to the Proxy Agreement, the shareholders of Huanjiang Jintai irrevocably granted a Xiangguang designee the right to exercise all voting rights as the shareholders with respect to their ownership interests in accordance with applicable laws and each Huanjiang Jintai company’s governing charters. The Proxy Agreement is valid for fifteen (15) years. The Proxy Agreement may be extended only upon Xiangguang’s written confirmation prior to the expiration and the length of the extended term shall be determined by Xiangguang. This agreement may not be terminated without the unanimous consent of both parties, except that Xiangguang may terminate the Proxy Agreement with or without cause upon 30-day written notice to the shareholders of Huanjiang Jintai.

The Board of Directors of HJM adopted a board resolution on August 9, 2010 authorizing HJM to enter into the Consulting Services Agreement, Equity Pledge Agreement, Operating Agreement, Option Agreement and Proxy Agreement, which constitute the VIE contractual arrangement. All shareholders of HJM also unanimously adopted a shareholder resolution on August 9, 2010 adopting the Board’s resolution authorizing the entry into these various agreements. In such resolutions, the board and all shareholders of HJM recognized that no direct economic benefits flow to HJM by virtue of the operation of the VIE agreements.

The various VIE agreements were executed on August 25, 2010, immediately after Xiangguang received its business license from the appropriate PRC government authority.

NOTE 21 - Statutory Reserves

The laws and regulations of the PRC require that before an enterprise distributes profits to its owners, it must first satisfy all tax liabilities, provide for losses in previous years, and make allocations. The statutory reserves include a surplus reserve fund and a common welfare fund. These statutory reserves restricted retained earnings. As of December 31, 2011 and March 31, 2011, the balances of statutory reserve stay at $144,882.

NOTE 22 - Commitments and Contingencies

The Company rents office spaces from unrelated parties under a non-cancellable operating lease agreement.

On November 27, 2009, the Company leased its office space in Huanjiang town from an individual for approximately $894 per year. The lease expires on November 26, 2012.

On December 10, 2008, the Company leased its office space in Hechi city from an individual for approximately $1,788 per year. The lease expires on December 9, 2013.

On April 22, 2009, the Company leased its office space in Shangchao town from local transportation bureau for approximately $1,192 per year. The lease expires on April 21, 2013.

On September 1, 2010, the Company leased its office space in Guangzhou from an individual for approximately $1,608 per year. The lease expires on May 31, 2012

Future five years annual lease payments are as follows:


Year ending March 31		Lease payment
2012		4,143
2013		3,567
2014		1,305
2015		0
2016		0
Total		9,015

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NOTE 23 – Concentration and Risk

(a)

Major customers

For the nine months ended December 31, 2011, 100% of the Company’s assets were located in the PRC and 100% of the Company’s revenues were derived from customers located in the PRC.

For the nine months ended December 31, 2011, major customers whose sales amounts exceed 10% of our total revenue are presented as follows:

Customers	Revenue
Customer A	$3,902,317	16%
Customer B	3,820,307	16%
Customer C	3,147,391	13%
Total	$10,635,774	45%

For the years end March 31, 2011, major customers whose sales amounts exceed 10% of our total revenue are presented as follows:


Customers	Revenue
Customer A	$10,680,597	22%
Customer B	6,912,631	14%
Customer C	5,602,993	12%
Total	$23,196,221	48%

(b)

Credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and trade accounts receivable. The Company performs ongoing credit evaluations of its customers’ financial condition, but does not require collateral to support such receivables.

NOTE 24 - Segment Report

In June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, “Disclosures about Segments of an Enterprise and Related Information.” This statement requires companies to report information about operating segments in interim and annual consolidated financial statements. It also requires segment disclosures about products and services, geographic areas, and major customers.

The Company reported its revenue for each product during the nine months ended December 31, 2011 and 2010 as the following:

	For the nine months ended Dec 31, 2011						For the nine months ended Dec 31, 2010
Products		Revenue		Cogs	Gross Margin			Revenue		Cogs	Gross Margin
Lead concentrate	$	1,388,124	$	826,673.00	40	%	$	1,550,077	$	541,876	65	%
Oxidized ore		3,060,239		371,222.00	88	%		12,975,024		1,605,447	88	%
Pyrite		2,413,073		570,006.00	76	%		787,685		213,070	73	%
Tailings		1,917,684		539,875.00	72	%		2,103,036		1,080,980	49	%
Zinc calcine		11,929,460		9,906,326.00	17	%		12,957,369		7,895,548	39	%
Zinc dust and sand		1,768,164		1,419,470.00	20	%		2,294,170		1,587,080	31	%
Electric dust		144,289		109,322.00	24	%		108,793		84,386	22	%
Sulphuric acid		1,019,680		362,915.00	64	%		545,676		258,025	53	%
Total		23,640,712		14,105,809	40.33	%		33,321,830		13,266,412	60.19	%

Since the Company has a complete production chain beginning from the most upper part of mine extraction to delivery of refined zinc and related products from the smelter and the Company is operated in a vertically integrated business model. The Company does not make its operation decisions by reviewing separate financial information on its production process but rather as a whole group. The Company reports its profit and loss as a whole group and it is not applicable to conduct reportable segment disclosure.

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

The following management’s discussion and analysis should be read in conjunction with our consolidated financial statements and the notes thereto and the other financial information appearing elsewhere in this item. These statements relate to our future plans, objectives, expectations and intentions. These statements may be identified by the use of words such as “may”, “will”, “could”, “expect”, “anticipate”, “intend”, “believe”, “estimate”, “plan”, “predict”, and similar terms or terminology, or the negative of such terms or other comparable terminology. Although we believe the expectations expressed in these forward-looking statements are based on reasonable assumptions within the bounds of our knowledge of our business, our actual results could differ materially from those discussed in these statements. Factors that could contribute to such differences include, but are not limited to, those discussed in the “Risk Factors” section of the Prospectus. We undertake no obligation to update publicly any forward-looking statements for any reason even if new information becomes available or other events occur in the future.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States. See “Exchange Rate Information” section for information concerning the exchanges rates at which Renminbi (“RMB”) were translated into U.S. Dollars (“USD”) at various pertinent dates and for pertinent periods.

RESULTS OF OPERATIONS

NINE MONTHS ENDED DECEMBER 31, 2011 COMPARED WITH NINE MONTHS ENDED DECEMBER 31, 2010

Revenues

Revenues for the nine months ended Dec 31, 2011 were $23.64 million, representing a decrease of 9.68 million, or 29%, as compared to $33.32 million for the same period ended in 2010. On the other hand, revenues for the three months ended Dec 31, 2011 were $3.15 million, representing a decrease of $9.47 million, or 75.04%, as compared to $12.62 million for the same period ended in 2010. The revenues drop dramatically from October to December because of the lack of electrical power so that we cannot produce enough products for sale. Due to the implementation of electricity restriction in heavy industry from August, 2011, the decrease output of product leaded to limited supply in market and sales drop. For the nine months ended Dec 31, 2011, we sold $11.93 million of zinc calcine, $1.77 million of zinc dust and sand, $3.06 million of oxidized ore, $2.41 million of pyrite, $1.02 million of sulfuric acid, $1.39 million of lead concentrates, $0.14 million of electric dust, and $1.92 million of tailings. The sales revenue of zinc, lead and other related products accounted for 78.94% of total revenue. The other 21.06% of sales revenue was attributed to the sales of oxidized ores and tailings. During the same period ended Dec 31, 2010, we sold $12.96 million of zinc calcine, $2.30 million of zinc dust and sand, $12.98 million of oxidized ores, $1.55 million of lead concentrates and $0.55 million of sulfuric acid which represented a sales proportion of 54.75% for zinc and lead related products and 45.25% for oxidized ores and tailings.

Cost of Goods Sold

Cost of goods sold recorded at $14.11 million during the nine months ended Dec 31, 2011 compared to $13.27 million for the same period ended Dec 31, 2010. The cost of goods sold for the nine months ended Dec 31, 2011 represented a slightly increase of $0.84 million, or 6.3%. The increase in cost of goods sold was mainly due to the decrease output of all the products. On the other hand, cost of goods sold for the three months ended Dec 31, 2011 were $2.47 million, representing a decrease of $3.52 million, or 58.76%, as compared to $5.99 million for the same period ended in 2010. The reason of cost decrease is production decrease. Due to the implementation of electricity restriction in heavy industry from August, 2011, the output of all the products dropped and the overall cost of production increased during the power outage period. As the decrease of output and increase of overall cost accompanied by a large increase in the cost of per product, the cost of goods sold increased.

Gross Profit and Gross Profit Margin

For the nine months ended Dec 31, 2011, gross profit was $9.53 million, representing a decrease of approximately $10.52 million, or 52.46%, as compared to $20.06 million for the same period ended in 2010. On the other hand, gross profit for the three months ended Dec 31, 2011 were $0.67 million, representing a decrease of $5.96 million, or 89.89%, as compared to $6.63 million for the same period ended in 2010. Due to lack of electrical power, decrease of production leaded to increase in overall cost and decrease in gross profit. As of Dec 31, 2011, we recognize a gross profit margin of 40.33%, and for the same period in 2010, the gross profit margin was 60.19%. The main reason for the sharply decrease in gross profit margin is increase in cost of goods sold and decrease in sales due to lacking power to produce.

General and Administrative Expenses

General and administrative expenses were recorded $1.74 million for the nine months ended Dec 31, 2011, and for the same period of FY 2011, we recorded $2.42 million. On the other hand, general and administrative expenses were recorded $0.41 million for the nine months ended Dec 31, 2011 and for the same period of FY2011, we recorded $0.70 million. The general and administrative expenses were mainly composed of bad debt expenses and expenses related to our efforts in becoming a publicly reporting company, such as legal costs associated with the filing of the registration statement covering the shares sold under this prospectus, costs related to engaging an auditing firm and costs related to the production of the necessary mining report.

Foreign Currency Translation Adjustment

The accompanying financial statements are presented in U.S. Dollars. Our functional currency is the RMB of the PRC. The financial statements are translated into U.S. Dollars from RMB at period-end exchange rates for assets and liabilities, and weighted average exchange rates for revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. For the nine months ended Dec 30, 2011, we recorded a foreign currency translation gain of $2.02 million, as compared to $1.32 million for the same period in 2010. On the other hand, for the three months ended Dec 30, 2011, we recorded a foreign currency translation gain of $0.68 million, as compared to $0.55million for the same period in 2010.

Income Tax

Income tax expense was $2.00 million for the nine months ended Dec 31, 2011 compared to $3.50 million for the nine months ended Dec 31, 2010. On the other hand, income tax expense was $0.11 million for the three months ended Dec 31, 2011 compared to $1.09 million for the three months ended Dec 31, 2010.The effective tax rate for the first nine months of FY 2012 was 26.2% because from January 1, 2011, all income tax rates were at a rating of 25.00%. For the same period of FY 2011, the effective tax rate recorded at 20% since Huangjiang Jintai enjoyed a favorable tax reduction benefit introduced by the State Administration of Taxation of Guangxi province to encourage companies engaged in the non-ferrous metals industry in the Zhuang autonomous region. The tax holiday ended on December 31, 2010, so the effective tax rate recorded lower compared to FY 2012.

Net Income

Net income for the nine months ended Dec 31, 2011 was $5.06 million, a decrease of $6.15 million, or 54.84%, compared to $11.20 million for the same period in 2010. On the other hand, net income for three months ended Dec 31, 2011 was $0.34 million, a decrease of $4.15 million, or 92.4%, compared to $4.49 million for the same period in 2010. Such decrease was mainly due to the increase of our cost of goods sold and the dramatically decrease of sales.

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Liquidity and Capital Resources

For the Nine months ended Dec 31, 2011

Cash and Cash Equivalents

Cash and cash equivalents were $0.18 million as of Dec 30, 2011, a decrease of $3.42 million as compared to the balance of $3.60 million as of Dec 31, 2010. The decrease in cash position was mainly due to the large amount used in operating activities.

Net Cash Used by Operating Activities

Net cash used by operating activities for the first nine months of FY 2012 was $3.47 million, as compared to a positive amount of $10.01 million used by operating activities for the same period of FY 2011. The decrease in net cash used by operating activities was mainly due to a decrease in accounts receivable. The decrease in accounts receivable had led to an increase in cash flow by $4.63 million. And the decrease in other receivable made an increase by $3.07 million. In addition, there was a further reduction in cash flow by $3.98 million of received in advance and a sharply increase by $6.58 million of paid in advance. On the other hand, this was partially offset by an increase of $1.04 million in the accounts payable. Most of the accounts payable will be due when the mining constructions are completed and inspected by engineers.

As a result, we recorded an increase in cash flow from operations for the nine months ended Dec 31, 2011. The company plans to increase its mining output and separating capacity up to 6,000 tons per day respectively in year 2015. In order to reach the aiming capacity, the company carried out a series of projects early this year, including performing exploration work within its exploration properties, acquiring mines which meet its long-term development strategies, expanding its tunnels, upgrading the ventilation and safety facilities as well as expanding its concentrators. Due to the process dealing with SEC to clear questions for months and the delay of funding from the IPO, the company had to use most of its self-generated cash flow to support these projects.

Net Cash Used In Investing Activities

For the first nine months of FY 2012, we used $0.43 million in investing activities, as compared to $8.44 million used in investing activities in the same period from the previous year. This decrease of cash used was mainly due to construction projects that have been carrying out by schedule.

Net Cash Provided By Financing Activities

For the first nine months of FY 2012, the related party provided us $0.41 million

We generated a net operating profit of approximately $5.06 million for the nine months ended Dec 31, 2011 and $11.21 million for the same period ended Dec 31, 2010.

Off Balance Sheet Arrangement.

None.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

(a) Conclusions regarding disclosure controls and procedures. Our management, with the participation of our chief executive officer and chief financial officer (collectively, the “Certifying Officers”) respectively, evaluated the effectiveness of our disclosure controls and procedures. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports, such as this report, that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on that evaluation, the Certifying Officers concluded that despite improvements in areas of previously identified weakness in internal control over financial reporting identified (described in Item 9A of our Annual Report on Form 10-K for the year ended March 31, 2011), our disclosure controls and procedures were not effective as of December 31, 2011.

(b) Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended December 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. To our knowledge, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of our executive officers or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or any of our companies or our companies’ subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

ITEM 1A. RISK FACTORS

The information to be reported under this item has not changed since the previously filed 10K, for the year ended March 31, 2011.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. (REMOVED AND RESERVED)

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

31.1. Certifications of Chief Executive Officer

31.2. Certifications of Chief Financial Officer

32.1. Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

32.2. Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

Reports on Form 8-K

(1) On November 21, 2011, we filed a current report on Form 8-K to announce that Suk Joo Sung, as a member of the Company’s Board of Directors, Compensation Committee, and Nominating and Governance Committee, and Cha Hwa Chong, as a member of the Company’s Board of Directors, and as a chairman of the Company’s Audit Committee, were removed from their positions with the Company. The removals without cause were effective as of November 15, 2011. The Company and Mr. Sung, and Mr. Chong, do not have any disagreements. Neither Mr. Sung nor Mr. Chong has furnished the Company with any written correspondence concerning the circumstances surrounding his removal,

(2) On October 31, 2011, we filed a current report on Form 8-K to announce that Jintai Mining Group, Inc. (the “Company”) changed its business e-mail address to Jintai-mining@189.cn. Effective from the Announcement Date, only the messages sent through the e-mail as stated above can be relied upon by recipients. Messages from any other e-mail accounts do not speak for the Company.

(3) On August 16, 2011, we filed a Current Report on Form 8-K to announce that no securities were sold pursuant to the Company’s Registration Statement which was declared effective by the Securities and Exchange Commission (“SEC”) on June 28, 2011. The Company and Maxim Group, LLC (the “Underwriter”) are in discussions with a view towards methods for completing the Company's IPO.

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SIGNATURES

Pursuant to the requirements 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.

	JINTAI MINING GROUP, INC. (Registrant)

Date: May 7, 2012	By:	/s/ Yuan Lin
		Yuan Lin Chief Executive Officer and Director


Date: May 7, 2012	By:	/s/ Shaoying Li
		Shaoying Li Chief Financial Officer

Index to Exhibits

Exhibit No. Description

31.1. Certifications of Chief Executive Officer

31.2. Certifications of Chief Financial Officer

32.1. Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

32.2. Statement required by 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002

Jintai Mining Group, Inc. 10-Q