x
|
Quarterly
report under Section 13 or 15(d) of the Securities Exchange Act of
1934
|
¨
|
Transition
report under Section 13 or 15(d) of the Securities Exchange Act of
1934
|
Nevada
|
98-0522950
|
(State
or other jurisdiction of incorporation or
organization)
|
(IRS
Employer Identification No.)
|
No.
57 Xinhua East Street
Hohhot, Inner Mongolia, PRC
|
010010
|
(Address
of principal executive offices)
|
(Zip
Code)
|
0471-466-8870
|
|
(Registrant’s
telephone number including area code)
|
Large accelerated
filer ¨
|
Accelerated filer ¨
|
Non-accelerated filer ¨
|
Smaller reporting company
x
|
|
|
(Do not check if a smaller
|
|
|
|
reporting company)
|
|
Class
|
July 14, 2010
|
|
Common
Stock, $0.001 par value
|
45,000,000
shares
|
PART
I.
|
FINANCIAL
INFORMATION
|
|
|
||
ITEM
1.
|
Financial
Statements
|
1
|
Consolidated
Balance Sheets Income at May 31, 2010 and November 30, 2009
|
1
|
|
Consolidated
Statements of Income For the Six Months Ended May 31, 2010 and May 31,
2009 (Unaudited)
|
2
|
|
Consolidated
Statements of Changes For the Six Months Ended May 31, 2010 and May 31,
2009 (Unaudited)
|
3
|
|
Notes
to Consolidated Financial Statements
|
5
|
|
ITEM
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
22
|
ITEM
3.
|
Quantitative
And Qualitative Disclosure About Market Risk
|
32
|
ITEM
4T
|
Controls
and Procedures
|
32
|
PART
II.
|
OTHER
INFORMATION
|
|
ITEM
1.
|
Legal
Proceedings
|
32
|
ITEM
1A
|
Risk
Factors
|
32
|
ITEM
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
32
|
ITEM
3.
|
Defaults
Upon Senior Securities
|
33
|
ITEM
4.
|
(Removed
and Reserved)
|
33
|
ITEM
5.
|
Other
Information.
|
33
|
ITEM
6.
|
Exhibits
and Reports on Form 8-K
|
33
|
Signatures
|
34
|
|
·
|
general
economic and business conditions, both nationally and in our
markets,
|
|
·
|
government
regulations on coal mining and heat power
sectors,
|
|
·
|
our expectations and estimates
concerning future financial performance, financing plans and the impact of
competition,
|
|
·
|
our ability to implement our
growth strategy,
|
|
·
|
anticipated trends in our
business, and
|
|
·
|
advances in
technologies
|
May
31,
|
November
30,
|
|||||||
2010
|
2009
|
|||||||
(Unaudited)
|
(Audited)
|
|||||||
US$
|
US$
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 10,148,451 | $ | 5,073,645 | ||||
Term
deposit-restricted
|
7,320,108 | - | ||||||
Accounts
receivable, net of allowance for doubtful accounts of $120,782 and
$120,853, respectively
|
7,770,278 | 4,600,667 | ||||||
Other
receivables
|
4,536,142 | 4,447,272 | ||||||
Advance
to suppliers
|
6,000,416 | 5,511,630 | ||||||
Inventories
|
3,995,005 | 5,574,465 | ||||||
Total
current assets
|
39,770,400 | 25,207,679 | ||||||
Fixed
assets:
|
||||||||
Property,
plant and equipment
|
51,058,566 | 50,546,862 | ||||||
Construction
in progress
|
4,993,734 | 4,236,281 | ||||||
56,052,300 | 54,783,143 | |||||||
Less:
accumulated depreciation and depletion
|
(9,344,274 | ) | (7,456,849 | ) | ||||
Net
fixed assets
|
46,708,026 | 47,326,294 | ||||||
Other
assets:
|
||||||||
Investment
property, net of accumulated depreciation of $188,721 and $166,172,
respectively
|
1,912,498 | 1,936,278 | ||||||
Intangible
assets, net of amortization of $936,113 and $787,417,
respectively
|
3,476,360 | 3,627,642 | ||||||
Restricted
cash
|
533,358 | 149,898 | ||||||
Other
long term assets
|
486,077 | 450,021 | ||||||
Notes
receivable
|
13,309,387 | 7,913,100 | ||||||
Total
other assets
|
19,717,680 | 14,076,939 | ||||||
TOTAL
ASSETS
|
$ | 106,196,106 | $ | 86,610,912 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Short
term bank loans
|
$ | 16,104,238 | $ | 12,012,012 | ||||
Accounts
payable
|
10,673,206 | 11,489,568 | ||||||
Notes
payable
|
5,856,087 | - | ||||||
Advance
from customers
|
9,761,577 | 12,125,187 | ||||||
Accrued
liabilities
|
651,448 | 325,539 | ||||||
Other
payables
|
4,501,405 | 387,729 | ||||||
Shareholder
loans
|
10,073,564 | 9,972,279 | ||||||
Current
portion of deferred income
|
852,888 | 822,930 | ||||||
Total
current liabilities
|
58,474,413 | 47,135,244 | ||||||
Deferred
income, net of current portion
|
6,067,091 | 6,224,033 | ||||||
Total
liabilities
|
64,541,504 | 53,359,277 | ||||||
Stockholders’
equity:
|
||||||||
Common
stock (authorized 200,000,000 shares of $0.001 par value; 45,000,000
shares issued and outstanding, respectively)
|
45,000 | 45,000 | ||||||
Additional
paid-in capital
|
8,655,805 | 8,655,805 | ||||||
Paid-in
capital – stock options
|
315,000 | 315,000 | ||||||
Retained
earnings
|
20,749,751 | 12,542,081 | ||||||
Statutory
reserves
|
8,297,853 | 8,078,765 | ||||||
Other
comprehensive income
|
3,591,193 | 3,614,984 | ||||||
Total
stockholders’ equity
|
41,654,602 | 33,251,635 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 106,196,106 | $ | 86,610,912 |
For
the six months ended
May
31,
|
For
the three months ended
May
31,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
US$
|
US$
|
US$
|
US$
|
|||||||||||||
Revenues
|
$ | 41,252,616 | $ | 9,298,621 | $ | 20,483,740 | $ | 4,283,675 | ||||||||
Cost
of revenues
|
(25,852,305 | ) | (8,924,191 | ) | (12,025,898 | ) | (4,236,939 | ) | ||||||||
Gross
profit
|
15,400,311 | 374,430 | 8,457,842 | 46,736 | ||||||||||||
Operating
expenses:
|
||||||||||||||||
Selling
and marketing
|
(2,222,281 | ) | (238,153 | ) | (1,381,564 | ) | (195,516 | ) | ||||||||
General
and administrative
|
(1,731,846 | ) | (1,230,144 | ) | (628,194 | ) | (838,090 | ) | ||||||||
Total
operating expenses
|
(3,954,127 | ) | (1,468,297 | ) | (2,009,758 | ) | (1,033,606 | ) | ||||||||
Income
(loss) from operations
|
11,446,184 | (1,093,867 | ) | 6,448,084 | (986,870 | ) | ||||||||||
Investment
income
|
- | 36,847 | - | 2,496 | ||||||||||||
Non-operating
income
|
682,678 | 325,173 | 569,215 | 164,772 | ||||||||||||
Finance
expenses, net
|
(771,001 | ) | (198,722 | ) | (555,652 | ) | (103,334 | ) | ||||||||
Government
subsidies
|
- | 164,145 | - | 11,121 | ||||||||||||
Non-operating
expenses
|
(175,511 | ) | (757,083 | ) | (131,155 | ) | (56,418 | ) | ||||||||
Income
(loss) before income taxes
|
11,182,350 | (1,523,507 | ) | 6,330,492 | (968,233 | ) | ||||||||||
(Provision
for) benefit from income taxes
|
(2,755,592 | ) | 24,590 | (1,908,020 | ) | 1,666 | ||||||||||
Net
income (loss)
|
$ | 8,426,758 | $ | (1,498,917 | ) | $ | 4,422,472 | $ | (966,567 | ) | ||||||
Other
comprehensive income (loss)
|
||||||||||||||||
Foreign
currency translation adjustment
|
(23,791 | ) | 79,005 | (28,256 | ) | 131,410 | ||||||||||
Total
comprehensive income (loss)
|
$ | 8,402,967 | $ | (1,419,912 | ) | $ | 4,394,216 | $ | (835,157 | ) | ||||||
Net
income (loss) per common share basic
|
$ | 0.19 | $ | (0.03 | ) | $ | 0.10 | $ | (0.02 | ) | ||||||
Net
income (loss) per common share diluted
|
$ | 0.17 | $ | (0.03 | ) | $ | 0.09 | $ | (0.02 | ) | ||||||
Weighted
average common shares outstanding basic
|
45,000,000 | 45,000,000 | 45,000,000 | 45,000,000 | ||||||||||||
Weighted
average common shares outstanding diluted
|
48,423,445 | 45,000,000 | 48,423,445 | 45,000,000 |
Additional
|
Paid
in
capital
|
Other
|
||||||||||||||||||||||||||||||
Shares
|
Amounts
|
Paid
in
capital
|
Stock
options
|
Retained
Earnings
|
Statutory
Reserves
|
Comprehensive
income
|
Total
|
|||||||||||||||||||||||||
Balance
as of December 1, 2009
|
45,000,000 | $ | 45,000 | $ | 8,655,805 | $ | 315,000 | $ | 12,542,081 | $ | 8,078,765 | $ | 3,614,984 | $ | 33,251,635 | |||||||||||||||||
Net
income for the period
|
- | - | - | - | 8,426,758 | - | - | 8,426,758 | ||||||||||||||||||||||||
Other
comprehensive (loss)
|
- | - | - | - | - | - | (23,791 | ) | (23,791 | ) | ||||||||||||||||||||||
Allocation
of statutory reserve
|
- | - | - | - | (219,088 | ) | 219,088 | - | - | |||||||||||||||||||||||
Balance
as of May 31, 2010
|
45,000,000 | $ | 45,000 | $ | 8,655,805 | $ | 315,000 | $ | 20,749,751 | $ | 8,297,853 | $ | 3,591,193 | $ | 41,654,602 |
For
the six months ended
May
31,
|
||||||||
2010
|
2009
|
|||||||
US$
|
US$
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income (loss)
|
$ | 8,426,758 | $ | (1,498,917 | ) | |||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
2,108,233 | 1,441,566 | ||||||
Interest
accrued on shareholder loans
|
109,348 | 106,433 | ||||||
Loss
on disposal of property, plant and equipment
|
- | 744,524 | ||||||
Gain
from short term investments
|
- | (36,847 | ) | |||||
Changes
in operating assets and liabilities:
|
||||||||
(Increase)
in term deposit
|
(7,320,108 | ) | - | |||||
(Increase)
in restricted cash
|
(383,460 | ) | - | |||||
(Increase)
in accounts receivable
|
(3,048,758 | ) | (1,803,791 | ) | ||||
(Increase)
in other receivables
|
(88,870 | ) | (5,097,545 | ) | ||||
Decrease
(increase) in advance to suppliers
|
1,287,107 | (770,088 | ) | |||||
Decrease
(increase) in inventories
|
1,579,460 | (78,612 | ) | |||||
(Decrease)
increase in deferred income
|
(126,984 | ) | 475,131 | |||||
Increase
(decrease) in accounts payable
|
198,588 | (4,133,827 | ) | |||||
(Decrease)
increase in advance from customers
|
(2,363,610 | ) | 838,514 | |||||
Increase
in accrued liabilities and other payables
|
4,439,585 | 415,551 | ||||||
Net
cash provided by (used in) operating activities
|
4,817,289 | (9,397,908 | ) | |||||
Cash
flows from investing activities:
|
||||||||
Purchase
of property, plant and equipment
|
(3,093,625 | ) | (2,186,070 | ) | ||||
Increase
in construction in progress
|
(1,076,171 | ) | (698,877 | ) | ||||
(Increase)
in notes receivable
|
(5,396,287 | ) | (330,560 | ) | ||||
Payments
received on notes receivable
|
- | 893,563 | ||||||
Net
cash (used in) investing activities
|
(9,566,083 | ) | (2,321,944 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from short term bank loans
|
16,112,495 | 12,011,836 | ||||||
Proceeds
from notes payable
|
5,856,087 | - | ||||||
Principal
payments made on short term bank loans
|
(12,011,132 | ) | (2,929,716 | ) | ||||
Advance
from shareholders
|
513,711 | 4,439,636 | ||||||
Repayments
of shareholders loans
|
(517,651 | ) | (594,000 | ) | ||||
Net
cash provided by financing activities
|
9,953,510 | 12,927,756 | ||||||
Effect
of exchange rate changes on cash
|
(129,910 | ) | 33,140 | |||||
Net
increase in cash and cash equivalents
|
5,074,806 | 1,241,044 | ||||||
|
||||||||
Cash
and cash equivalents, beginning of period
|
5,073,645 | 456,802 | ||||||
Cash
and cash equivalents, end of period
|
$ | 10,148,451 | $ | 1,697,846 | ||||
Supplemental
disclosure of cash flow information
|
||||||||
Cash
paid for interest
|
$ | 554,554 | $ | 276,071 | ||||
Cash
paid for income taxes
|
$ | 2,346,087 | $ | - |
1.
|
Organization
and Business
|
2.
|
Summary
of Significant Accounting Policies
|
May
31, 2010
|
May
31, 2009
|
November
30,
2009
|
|||||||
Balance
sheet items, except for the registered capital, additional paid-in
capital, statutory reserves, retained earnings and other comprehensive
income, as of period end
|
US$1=RMB
6.8305
|
US$1=RMB
6.8278
|
US$1=RMB
6.8265
|
||||||
|
|||||||||
Amounts
included in the statements of operations, statements of changes in
stockholders’ equity and statements of cash flows for the
period
|
US$1=RMB
6.8270
|
US$1=RMB
6.8266
|
US$1=RMB
6.8330
|
May
31, 2010
|
November
30, 2009
|
|||||||
Surplus
Reserve and Common Welfare fund
|
$ | 2,447,598 | $ | 2,447,598 | ||||
Safety
and Maintenance fund
|
5,850,255 | 5,631,167 | ||||||
Total
statutory reserves
|
$ | 8,297,853 | $ | 8,078,765 |
Six
Months Ended May 31,
|
||||||||||||||||||||||||
2010
|
2009
|
|||||||||||||||||||||||
Heat
|
Coal
|
Heat
|
Coal
|
|||||||||||||||||||||
Power
|
Group
|
Total
|
Power
|
Group
|
Total
|
|||||||||||||||||||
US$
|
US$
|
US$
|
US$
|
US$
|
US$
|
|||||||||||||||||||
Sales
to external customers
|
7,475,617 | 33,776,999 | 41,252,616 | 6,124,333 | 3,174,288 | 9,298,621 | ||||||||||||||||||
Finance
expense (income), net
|
177,155 | 593,846 | 771,001 | 109,223 | 89,499 | 198,722 | ||||||||||||||||||
Depreciation
and depletion
|
1,358,895 | 749,338 | 2,108,233 | 1,227,834 | 213,732 | 1,441,566 | ||||||||||||||||||
Segment
profit (loss)
|
598,615 | 7,828,143 | 8,426,758 | (1,646,181 | ) | 147,264 | (1,498,917 | ) | ||||||||||||||||
Three
Months Ended May 31,
|
||||||||||||||||||||||||
2010
|
2009
|
|||||||||||||||||||||||
Heat
|
Coal
|
Heat
|
Coal
|
|||||||||||||||||||||
Power
|
Group
|
Total
|
Power
|
Group
|
Total
|
|||||||||||||||||||
US$
|
US$
|
US$
|
US$
|
US$
|
US$
|
|||||||||||||||||||
Sales
to external customers
|
2,954,707 | 17,529,033 | 20,483,740 | 2,639,270 | 1,644,405 | 4,283,675 | ||||||||||||||||||
Finance
expense (income), net
|
126,323 | 429,329 | 555,652 | 57,288 | 46,046 | 103,334 | ||||||||||||||||||
Depreciation
and depletion
|
670,986 | 458,121 | 1,129,107 | 598,236 | 54,369 | 652,605 | ||||||||||||||||||
Segment
profit (loss)
|
(47,877 | ) | 4,470,349 | 4,422,472 | (1,078,798 | ) | 112,231 | (966,567 | ) |
May
31, 2010
|
November
31, 2009
|
|||||||||||||||||||||||
Heat
|
Coal
|
Heat
|
Coal
|
|||||||||||||||||||||
Power
|
Group
|
Total
|
Power
|
Group
|
Total
|
|||||||||||||||||||
US$
|
US$
|
US$
|
US$
|
US$
|
US$
|
|||||||||||||||||||
Segment
assets
|
54,769,439 | 51,426,667 | 106,196,106 | 49,346,842 | 37,264,070 | 86,610,912 | ||||||||||||||||||
Construction
in progress
|
4,300,766 | 692,968 | 4,993,734 | 3,514,152 | 722,129 | 4,236,281 | ||||||||||||||||||
Investment
property, net
|
- | 1,912,498 | 1,912,498 | - | 1,936,278 | 1,936,278 |
4.
|
Shareholder
Loans
|
May
31, 2010
|
November
30, 2009
|
|||||||
Ordos
City YiYuan Investment Co., Ltd.
|
$ | 1,666,191 | $ | 1,634,404 | ||||
Hangzhou
Dayuan Group, Ltd.
|
4,979,281 | 5,428,963 | ||||||
Xinghe
County Haifu Coal Transportation & Sales Co., Ltd.
|
1,841,749 | 1,807,686 | ||||||
Wenxiang
Ding
|
- | 28,565 | ||||||
Yanhua
Li
|
1,539,126 | 1,025,416 | ||||||
Yi
Ding
|
47,217 | 47,245 | ||||||
Total
|
$ | 10,073,564 | $ | 9,972,279 |
May
31, 2010
|
November
30, 2009
|
|||||||||||||||
Balance
|
Interest
rate
|
Balance
|
Interest
rate
|
|||||||||||||
Shareholder
loans – interest free
|
$ | 1,586,343 | 0 | % | $ | 1,101,226 | 0 | % | ||||||||
Shareholder
loans – interest bearing
|
6,470,976 | 5.310 | % | 6,964,156 | 3.155 | % | ||||||||||
Interest
payable
|
2,016,245 | 1,906,897 | ||||||||||||||
Total
|
$ | 10,073,564 | $ | 9,972,279 |
5.
|
Lease
obligation
|
Year
Ending
|
Annual
|
||||
November
30,
|
Amount
|
||||
2010
|
$ | 43,921 | |||
2011
|
87,841 | ||||
2012
|
7,320 | ||||
Total
|
$ | 139,082 |
May
31, 2010
|
November
30, 2009
|
|||||||
Loans
to suppliers and other associated firms
|
$ | 1,439,773 | $ | 1,332,038 | ||||
Deposit
funds to secure agreements
|
510,558 | 509,392 | ||||||
Employee
expense advances
|
199,011 | 217,643 | ||||||
Government
subsidies receivable
|
1,464,022 | 1,464,880 | ||||||
Heat
network access fee receivable
|
922,778 | 923,319 | ||||||
Total
|
$ | 4,536,142 | $ | 4,447,272 |
May
31, 2010
|
November
30, 2009
|
|||||||
Buildings
|
$ | 10,302,813 | $ | 9,682,139 | ||||
Machinery
& equipment
|
39,041,597 | 39,322,399 | ||||||
Automotive
equipment
|
984,474 | 919,922 | ||||||
Office
Equipment
|
729,682 | 622,402 | ||||||
Construction
in progress
|
4,993,734 | 4,236,281 | ||||||
56,052,300 | 54,783,143 | |||||||
Accumulated
depreciation and depletion
|
(9,344,274 | ) | (7,456,849 | ) | ||||
Fixed
assets, net
|
$ | 46,708,026 | $ | 47,326,294 |
May
31, 2010
|
November
30, 2009
|
|||||||
Inner
Mongolia XiangRong Investment Management Co., Ltd.
|
$ | 1,378,092 | $ | 1,378,900 | ||||
Inner
Mongolia Tehong Investment Co., Ltd.
|
8,017,068 | 3,244,785 | ||||||
Inner
Mongolia Tehong Coal Chemical Co., Ltd.
|
1,674,841 | 761,737 | ||||||
QuanYing
Coal Mine
|
301,886 | 916,311 | ||||||
Inner
Mongolia XinKe Kaolin Fabrication Plant
|
1,639,704 | 1,611,367 | ||||||
Inner
Mongolia Tehong Glass Co.,Ltd., with interest at11.16%
|
297,796 | - | ||||||
Total
notes receivable
|
$ | 13,309,387 | $ | 7,913,100 |
May 31,2010
|
November 30, 2009
|
|||||||
Bank
loan due 3/9/11, with interest at 6.372%
|
$ | 5,856,087 | $ | - | ||||
Bank
loan due 4/15/11, with interest at 6.372%
|
7,320,108 | - | ||||||
Bank
loan due 4/22/11, with interest at 6.903%
|
2,928,043 | - | ||||||
Bank
loan due 12/5/09, with interest at 6.696%
|
- | 1,757,855 | ||||||
Bank
loan due 3/15/10, with interest at 6.372%
|
- | 8,789,277 | ||||||
Bank
loan due 4/21/10, with interest at 6.372%
|
- | 1,464,880 | ||||||
Total
|
$ | 16,104,238 | $ | 12,012,012 |
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||
Notes
receivable
|
$ | - | $ | - | $ | 13,309,387 | $ | 13,309,387 | ||||||||
Total
|
$ | - | $ | - | $ | 13,309,387 | $ | 13,309,387 |
Level
1
|
Level
2
|
Level
3
|
Total
|
|||||||||||||
Notes
receivable
|
$ | - | $ | - | $ | 7,913,100 | $ | 7,913,100 | ||||||||
Total
|
$ | - | $ | - | $ | 7,913,100 | $ | 7,913,100 |
Notes
Receivable
|
Total
|
|||||||
Balance,
December 1, 2009
|
$ | 7,913,100 | $ | 7,913,100 | ||||
Purchases,
sales, issuance and settlements (net)
|
5,396,287 | 5,396,287 | ||||||
Balance,
May 31, 2010
|
$ | 13,309,387 | $ | 13,309,387 |
May
31, 2010
|
November
30, 2009
|
|||||||
Deferred
tax assets
|
$ | - | $ | 256,010 | ||||
Valuation
allowance
|
- | (256,010 | ) | |||||
Balance
recognized
|
$ | - | $ | - |
Six
months ended
May
31, 2010
|
Income
Before
Income
Taxes
|
Tax
Provision
|
Rate
of
Tax
|
|||||||||
As
reported on the consolidated statements of
operations
|
$ | 11,182,350 | $ | 2,755,592 | 24.6 | % | ||||||
Gain
not used in calculation of taxable income on the tax
returns
|
(159,982 | ) | - | 0.4 | % | |||||||
As
calculated with statutory rate
|
$ | 11,022,368 | $ | 2,755,592 | 25 | % |
Coal Group
|
Three Months Ended May 31,
|
|||||||||||||||
% to total
|
% to total
|
|||||||||||||||
2010
|
revenue
|
2009
|
revenue
|
|||||||||||||
Revenues
|
$ | 17,529,033 | 86 | 1,644,405 | 38 | |||||||||||
Cost
of revenues
|
$ | 9,041,968 | 44 | 965,883 | 22 | |||||||||||
Gross
Profit
|
$ | 8,487,065 | 42 | 678,522 | 16 |
Heat Power
|
Three Months Ended May 31,
|
|||||||||||||||
% to total
|
% to total
|
|||||||||||||||
2010
|
revenue
|
2009
|
revenue
|
|||||||||||||
Revenues
|
$ | 2,954,707 | 14 | 2,639,270 | 62 | |||||||||||
Cost
of revenues
|
$ | 2,983,930 | 15 | 3,271,056 | 77 | |||||||||||
Gross
Profit
|
$ | (29,223 | ) | (1 | ) | (631,786 | ) | (15 | ) |
Coal Trading
|
Three Months Ended May 31,
|
|||||||||||||||
% to total
|
% to total
|
|||||||||||||||
2010
|
revenue
|
2009
|
revenue
|
|||||||||||||
Revenues
|
$ | 7,699,181 | 38 | 1,141,455 | 26 | |||||||||||
Cost
of revenues
|
$ | 5,198,322 | 25 | 748,247 | 17 | |||||||||||
Gross
Profit
|
$ | 2,500,859 | 13 | 393,208 | 9 |
Coal Production
|
Three Months Ended May 31,
|
|||||||||||||||
% to total
|
% to total
|
|||||||||||||||
2010
|
revenue
|
2009
|
revenue
|
|||||||||||||
Revenues
|
$ | 9,829,852 | 48 | 502,950 | 12 | |||||||||||
Cost
of revenues
|
$ | 3,843,646 | 19 | 217,636 | 5 | |||||||||||
Gross
Profit
|
$ | 5,986,206 | 29 | 285,314 | 7 |
|
Units of
|
|||||||||||||||||||||||||||
|
power
|
|||||||||||||||||||||||||||
|
supplied
|
Revenue
|
||||||||||||||||||||||||||
Unit Price ($/KW.h)
|
(1000KW.h)
|
($)
|
||||||||||||||||||||||||||
Period
|
2010
|
2009
|
2010
|
2009
|
2010
|
2009
|
Variance
|
|||||||||||||||||||||
March
|
0.03
|
0.03
|
9,042
|
14,054
|
294,221
|
421,620
|
(127,399
|
)
|
||||||||||||||||||||
April
|
0.03
|
0.03
|
15,605
|
11,171
|
502,567
|
335,136
|
167,431
|
|||||||||||||||||||||
May
|
0.03
|
0.03
|
11,523
|
9,235
|
361,963
|
277,026
|
84,937
|
|||||||||||||||||||||
Total
|
36,170
|
34,460
|
1,158,751
|
1,033,782
|
124,969
|
|
Unit Price
|
Area (‘000)
|
||||||||||||||||||||||||||
|
($/sq meters
|
sq meters
|
Revenue
|
|||||||||||||||||||||||||
/month)
|
range)
|
($)
|
||||||||||||||||||||||||||
User
|
2010
|
2009
|
2010
|
2009
|
2010
|
2009
|
Variance
|
|||||||||||||||||||||
Residential
|
0.38*
|
0.34
|
2,039
|
1,440
|
1,156,772
|
923,380
|
233,392
|
|||||||||||||||||||||
Commercial
|
0.64
|
0.56
|
350
|
350
|
338,961
|
322,964
|
15,997
|
|||||||||||||||||||||
Municipal
|
0.64
|
0.56
|
310
|
310
|
300,223
|
286,059
|
14,164
|
|||||||||||||||||||||
Total
|
2,699
|
2,100
|
1,795,956
|
1,532,403
|
263,553
|
*
|
This
price does not include subsidy received from
government.
|
|
Three Months Ended May 31,
|
|||||||||||
2010
|
2009
|
Variance
|
||||||||||
Coal
& freight
|
$ | 9,557,244 | 2,526,981 | 7,030,263 | ||||||||
Heat
resource rental
|
439,518 | 252,528 | 186,990 | |||||||||
Depreciation
& depletion
|
1,078,589 | 604,141 | 474,448 | |||||||||
Salaries
|
297,141 | 217,199 | 79,942 | |||||||||
Utilities
|
429,795 | 243,488 | 186,307 | |||||||||
Operating
supplies
|
156,719 | 102,335 | 54,384 | |||||||||
Repairs
|
27,397 | 15,537 | 11,860 | |||||||||
Others
|
39,495 | 274,730 | (235,235 | ) | ||||||||
Total
|
$ | 12,025,898 | 4,236,939 | 7,788,959 |
|
Three Months Ended May 31,
|
|||||||||||
2010
|
2009
|
Variance
|
||||||||||
Transportation
& Storage
|
$ | 864,642 | 159,745 | 704,897 | ||||||||
Sales
tax and other expenses
|
392,623 | 24,347 | 368,276 | |||||||||
Office
|
82,511 | 5,780 | 76,731 | |||||||||
Salaries
and wages
|
37,665 | 5,644 | 32,021 | |||||||||
Depreciation
|
4,123 | - | 4,123 | |||||||||
Total
|
$ | 1,381,564 | 195,516 | 1,186,048 |
Six
Months Ended May 31,
|
||||||||||||
2010
|
2009
|
Variance
|
||||||||||
Office
|
$ | 166,134 | 154,891 | 11,243 | ||||||||
Professional
and other fees
|
171,274 | 377,780 | (206,506 | ) | ||||||||
Salaries
and wages
|
122,210 | 152,108 | (29,898 | ) | ||||||||
Travel
|
70,203 | 46,831 | 23,372 | |||||||||
Depreciation
|
76,109 | 74,807 | 1,302 | |||||||||
Repairs
|
6,466 | 24,654 | (18,188 | ) | ||||||||
Other
|
15,798 | 7,019 | 8,779 | |||||||||
Total
|
$ | 628,194 | 838,090 | (209,896 | ) |
Coal Group
|
Six Months Ended May 31,
|
|||||||||||||||
% to total
|
% to total
|
|||||||||||||||
2010
|
revenue
|
2009
|
revenue
|
|||||||||||||
Revenues
|
$ | 33,776,999 | 82 | 3,174,288 | 34 | |||||||||||
Cost
of revenues
|
$ | 19,375,642 | 47 | 2,554,033 | 27 | |||||||||||
Gross
Margin
|
$ | 14,401,357 | 35 | 620,255 | 7 |
Heat Power
|
Six Months Ended May 31,
|
|||||||||||||||
% to total
|
% to total
|
|||||||||||||||
2010
|
revenue
|
2009
|
revenue
|
|||||||||||||
Revenues
|
$ | 7,475,617 | 18 | 6,124,333 | 66 | |||||||||||
Cost
of revenues
|
$ | 6,476,663 | 16 | 6,370,158 | 69 | |||||||||||
Gross
Margin
|
$ | 998,954 | 2 | (245,825 | ) | (3 | ) |
Coal Trading
|
Six Months Ended May 31,
|
|||||||||||||||
% to total
|
% to total
|
|||||||||||||||
2010
|
revenue
|
2009
|
revenue
|
|||||||||||||
Revenues
|
$ | 18,101,191 | 44 | 2,251,210 | 24 | |||||||||||
Cost
of revenues
|
$ | 13,736,357 | 33 | 2,129,513 | 23 | |||||||||||
Gross
Margin
|
$ | 4,364,834 | 11 | 121,697 | 1 |
Coal Production
|
Six Months Ended May 31,
|
|||||||||||||||
% to total
|
% to total
|
|||||||||||||||
2010
|
revenue
|
2009
|
revenue
|
|||||||||||||
Revenues
|
$ | 15,675,808 | 38 | 923,078 | 10 | |||||||||||
Cost
of revenues
|
$ | 5,639,285 | 14 | 424,520 | 4 | |||||||||||
Gross
Margin
|
$ | 10,036,523 | 24 | 498,558 | 6 |
|
Six Months Ended May 31,
|
|||||||||||
2010
|
2009
|
Variance
|
||||||||||
Coal
& freight
|
$ | 20,654,875 | 5,281,529 | 15,373,346 | ||||||||
Heat
resource rental
|
1,425,169 | 744,148 | 681,021 | |||||||||
Depreciation
& depletion
|
1,935,152 | 1,340,978 | 594,174 | |||||||||
Salaries
|
666,644 | 394,168 | 272,476 | |||||||||
Utilities
|
603,307 | 539,511 | 63,796 | |||||||||
Operating
supplies
|
291,243 | 261,827 | 29,416 | |||||||||
Repairs
|
85,765 | 28,160 | 57,605 | |||||||||
Other
|
190,150 | 333,870 | (143,720 | ) | ||||||||
Total
|
$ | 25,852,305 | 8,924,191 | 16,928,114 |
|
Six Months Ended May 31,
|
|||||||||||
2010
|
2009
|
Variance
|
||||||||||
Transportation
& Storage
|
$ | 1,388,178 | 159,745 | 1,228,433 | ||||||||
Sales
tax and other expenses
|
619,691 | 52,838 | 566,853 | |||||||||
Office
|
144,493 | 6,351 | 138,142 | |||||||||
Salaries
and wages
|
61,911 | 19,219 | 42,692 | |||||||||
Depreciation
|
8,008 | - | 8,008 | |||||||||
Total
|
$ | 2,222,281 | 238,153 | 1,984,128 |
Six
Months Ended May 31,
|
||||||||||||
2010
|
2009
|
Variance
|
||||||||||
Office
|
$ | 468,722 | 210,630 | 258,092 | ||||||||
Professional
and other fees
|
473,298 | 486,087 | (12,789 | ) | ||||||||
Salaries
and wages
|
384,769 | 251,844 | 132,925 | |||||||||
Travel
|
197,141 | 85,151 | 111,990 | |||||||||
Depreciation
|
142,415 | 116,157 | 26,258 | |||||||||
Repairs
|
35,546 | 40,266 | (4,720 | ) | ||||||||
Others
|
29,955 | 40,009 | (10,054 | ) | ||||||||
Total
|
$ | 1,731,846 | 1,230,144 | 501,702 |
Balance
|
Interest
Rate
|
|||||||
Bank
of Communications, due 3/9/11
|
$ | 5,856,087 | 6.372 | % | ||||
HuaXia
Bank, due 4/15/11
|
7,320,108 | 6.372 | % | |||||
China
Construction Bank, due 4/22/11
|
2,928,043 | 6.903 | % | |||||
Total
|
$ | 16,104,238 |
Six
Months Ended
May
31,
|
||||||||
2010
|
2009
|
|||||||
Net
income (loss)
|
$ | 8,426,758 | (1,498,917 | ) | ||||
Depreciation
and amortization
|
2,108,233 | 1,441,566 | ||||||
(Increase)
in term deposit
|
(7,320,108 | ) | - | |||||
(Increase)
in restricted cash
|
(383,460 | ) | - | |||||
(Increase)
in accounts receivable
|
(3,048,758 | ) | (1,803,791 | ) | ||||
(Increase)
in other receivables
|
(88,870 | ) | (5,097,545 | ) | ||||
Decrease
(Increase) in advances to suppliers
|
1,287,107 | (770,088 | ) | |||||
Decrease
(Increase) in inventory
|
1,579,460 | (78,612 | ) | |||||
(Decrease)
Increase in deferred income
|
(126,984 | ) | 475,131 | |||||
Increase
(Decrease) in accounts payable
|
198,588 | (4,133,827 | ) | |||||
(Decrease)
increase in advance from customers
|
(2,363,610 | ) | 838,514 | |||||
Increase
in accrued liabilities and other payables
|
4,439,585 | 415,551 | ||||||
Others
|
109,348 | 814,110 | ||||||
Net
cash provided (used) by operating activities
|
$ | 4,817,289 | (9,397,908 | ) |
|
Balance
|
Interest
Rate
|
||||||
Hangzhou
Dayuan Group, Ltd.
|
$ | 4,979,281 | 5.310 | % | ||||
Xinghe County
Haifu Coal Transportation & Sales Co., Ltd.
|
1,841,749 | 5.310 | % | |||||
Ordos
City YiYuan Investment Co. Ltd.
|
1,666,191 | 5.310 | % | |||||
Yanhua
Li
|
1,539,126 | - | ||||||
Yi
Ding
|
47,217 | - | ||||||
Total
|
$ | 10,073,564 | - |
Exhibit Number
|
Description
|
|
31.1
|
CEO
Section 302 Certification
|
|
31.2
|
CAO
Section 302 Certification
|
|
32.1
|
CEO
and CAO Section 906 Certification
|
|
10.1
|
Independent
Director Agreement of Paul Li
|
|
10.2
|
Independent
Director Agreement of Stephen Markscheid
|
|
10.3
|
Independent
Director Agreement of Brock
Silvers
|
CHINA
ENERGY CORPORATION
|
||
Date:
July 15, 2010
|
||
By:
|
/s/ WenXiang Ding
|
|
WenXiang
Ding
|
||
President,
Chief Executive Officer,
Director
&
|
||
Secretary
|
||
By:
|
/s/ Alex Gong
|
|
Alex
Gong
|
||
Chief
Financial Officer
|
1.
|
I have reviewed this quarterly
report on Form 10-Q of China Energy
Corporation:
|
2.
|
Based on my knowledge, this
quarterly report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
|
3.
|
Based on my knowledge, the
financial statements, and other financial information included in this
quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly
report.
|
4.
|
The registrant’s other certifying
officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and
have:
|
(a)
|
designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the
period in which this report is being
prepared;
|
(b)
|
designed such internal controls
over financial reporting, or caused such internal controls over financial
reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance
with generally accepted accounting
principles.
|
(c)
|
evaluated the effectiveness of
the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based
on such evaluation; and
|
(d)
|
disclosed in this report any
change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting;
and
|
5.
|
The registrant’s other certifying
officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors
and the audit committee of registrant’s board of
directors:
|
(a)
|
all significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial
information; and
|
(b)
|
any fraud, whether or not
material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial
reporting.
|
By:
|
/s/ WenXiang Ding
|
|
WenXiang
Ding, Chief Executive
Officer
|
||
(Principal
Executive Officer)
|
1.
|
I have reviewed this quarterly
report on Form 10-Q of China Energy
Corporation:
|
2.
|
Based on my knowledge, this
quarterly report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not
misleading with respect to the period covered by this quarterly
report;
|
3.
|
Based on my knowledge, the
financial statements, and other financial information included in this
quarterly report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly
report.
|
4.
|
The registrant’s other certifying
officer and I are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15a-15(f)) for the registrant and
have:
|
(a)
|
designed such disclosure controls
and procedures, or caused such disclosure controls and procedures to be
designed under our supervision, to ensure that material information
relating to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly during the
period in which this report is being
prepared;
|
(b)
|
designed such internal controls
over financial reporting, or caused such internal controls over financial
reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance
with generally accepted accounting
principles.
|
(c)
|
evaluated the effectiveness of
the registrant’s disclosure controls and procedures and presented in this
report our conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this report based
on such evaluation; and
|
(d)
|
disclosed in this report any
change in the registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter that has
materially affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting;
and
|
5.
|
The registrant’s other certifying
officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors
and the audit committee of registrant’s board of
directors:
|
(a)
|
all significant deficiencies and
material weaknesses in the design or operation of internal control over
financial reporting which are reasonably likely to adversely affect the
registrant’s ability to record, process, summarize and report financial
information; and
|
(b)
|
any fraud, whether or not
material, that involves management or other employees who have a
significant role in the registrant’s internal control over financial
reporting.
|
By:
|
/s/ Alex Gong
|
|
Alex
Gong
|
||
Chief
Financial Officer
(Principal
Financial and Accounting
Officer)
|
/s/ WenXiang Ding
|
|
WenXiang
Ding
|
|
Chief
Executive Officer
|
|
Date: July
15, 2010
|
/s/
Alex Gong
|
|
Alex
Gong
|
|
Chief
Financial Officer
|
|
Date:
July 15, 2010
|