U.S. China Mining Group, Inc.

Filed March 29, 2012, this says the board concluded on March 27, 2012 that the 10-Qs for the quarters ended March 31, June 30 and September 30, 2011 can no longer be relied on, and they will be restated. A $3,000,000 California Bank & Trust revolving credit line (note dated May 25, 2011, borrowed in full June 26, 2011, secured by $3,000,000 cash deposit) was left off as a liability. The warrants from the January 2011 placement should have been recorded as a derivative liability. The company's own estimates show derivative liabilities of about $3.6 to 7.6 million and net income higher by $5.6 million, $6.5 million and $9.5 million for the three quarters, which are expected figures, not final. The filing also discloses a May 31, 2011 agreement with Majestic Machinery Inc. to broker US coal trading and investments, with $3,000,000 of the loan proceeds paid in and refundable in stated cases, plus commissions of 3% on trades and 1.5% on investments. This is a second restatement after the one announced in September 2009, and the amended 10-Qs have not been filed yet.

financial restatement

On January 7, 2011 the company sold 3,375,000 units at $4.00 each in a private placement to investors, with Euro Pacific Capital as placement agent. Each unit is one common share plus a five-year warrant for 0.5 share at $6.80, and the filing states net proceeds of $13,653,000 after $1,347,000 of commissions and costs. It also issued 375,000 warrants at $6.80 to the placement agents and 120,000 shares to Greenview Capital for consulting on the deal, so existing shareholders are diluted. The company must file a resale registration within 45 days of closing or pay penalties of 1% per 30 days up to 10%. The filing does not say what the money is for. The unit count and proceeds were corrected the next day.

capital raising announcement

On May 19, 2010 Songzai agreed to buy the Liujiaqu Coal Mine in Inner Mongolia for $30 million cash and 10,000,000 common shares. The seller also gets 30% of the mine's net profits. The share count may fall if the stock averages above $7.00 over the 10 days before closing. Closing depends on government approvals and the company obtaining financing it finds acceptable, and either side can terminate if it has not closed by September 30, 2010. The company's press release says the mine would more than double the company's size and projects over $50 million of revenue in 2011; these are management's expectations.

material agreement

Songzai said on September 18, 2009 that its 2008 annual results and four quarterly reports (periods ended June 30 and September 30, 2008, March 31 and June 30, 2009) should no longer be relied on, and it will restate them. The issues are how mining rights and asset retirement obligations are amortized, and how the April 2008 reverse acquisition of the Hong Yuan and Sheng Yu mines was accounted for. No restated figures are given. The Xing An deal agreed in December 2007 is described here as an April 2008 reverse acquisition.

financial restatement

Songzai agreed on December 31, 2007 to buy 90% of two Heilongjiang coal mining companies, Hong Yuan and Sheng Yu (Xing An Group), for $30 million in interest-free notes plus 80,000,000 common shares. The notes are due $18 million six months after closing and $12 million at one year, or sooner if the company raises at least $30 million. The shares are held in escrow for two years as security for the sellers' indemnity obligations, and the sellers will hold the remaining 10% in trust for the company. The mines are licensed for up to 450,000 and 150,000 tons a year. Closing is conditional and not assured, and either side can terminate if it has not occurred by January 31, 2008. This is a large new acquisition beyond the Tong Gong mine.

material agreement

Songzai filed the terms of the Series A Preferred Stock issued for the coal mine deal. Each of the 400,000 shares converts into 100 common shares, has no vote except as the filing provides, and the holders must approve changes to their rights. The filing says that if converted, the preferred shares will effectively give Chairman Hong Wen Li voting control. Note that this filing describes the acquisition as 100% of Tong Gong, while the April 2005 filing described 75% plus a 25% net profits interest, and it says the company is 'obligated to issue' the shares, whereas the earlier filing said they were issued in September 2004.

security holder rights change

Songzai says the coal mine purchase first agreed in April 2004 is now complete: a business license issued March 30, 2005 to Heilongjiang Tong Gong Coal Mining Co., Ltd. was the final step. The company issued 400,000 convertible preferred shares (convertible into 40,000,000 common) on September 23, 2004 to the sellers, including Chairman Hong Wen Li, for 75% of the mine company, and also received a 25% net profits interest from Harbin Green, which Li controls. Chairman Li now holds 46.9% on a fully converted basis, and he and his brother Hong Jun Li together hold 50.7%, a change in majority ownership; the board has not changed since September 23, 2004.

asset acquisition disposition

Songzai agreed to buy a non-operating coal mine near Heihe City, Heilongjiang (formerly Heihe Jinchang) from its Chairman Hong Wen Li and Songzai Metal Products, paying with 400,000 convertible preferred shares, each convertible into 100 common shares. A consultant's report estimates about 3,157,000 tons of recoverable reserves; the mine has been idle since 1998 and needs dewatering and environmental work with costs not yet determined. The deal depends on title documents and government approvals, and the seller is a related party (the Chairman). Authorized common shares would rise from 200,000,000 to 1,000,000,000.

asset acquisition disposition

The Yong Heng share exchange announced in September 2003 was completed: 67,000,000 shares were issued to Yong Heng's owners (98.4%) and Yong Heng became a subsidiary. Hong Chang became CEO, Hong Wen Li became Chairman, and Patel and Gessner stepped down. The name change and increase in authorized shares to 200,000,000 took effect; 68,103,748 shares are outstanding, trading on the OTC Bulletin Board as SGZI.

asset acquisition disposition

Heritage disclosed a Plan of Exchange under which the shareholders of Harbin Yong Heng (a Chinese company) would receive 67,000,000 shares, 98.4% of the company, making Yong Heng a wholly-owned subsidiary. Chairman Rohit Patel would hand back his 1,188,088 shares for cancellation in return for $450,000 paid by Yong Heng and/or its shareholders. The company would be renamed Songzai International Holding Group and authorized shares raised from 20,000,000 to 200,000,000. Existing shareholders would be left with about 1.6% of the company, and control would change.

business combination

Heritage Companies (the company's name at this time) gave up its 80% stake in Blair Consulting Group, LLC by transferring it to E-Myth, LLC, which is controlled by two of its own directors, Cary Daniel and James Windmiller. E-Myth takes on Blair's liabilities and returns 93,751 Heritage shares held by Blair; both directors resigned from the board.

asset acquisition disposition