Nevada
|
20-2388650
|
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employee Identification No.)
|
|
Jianqiao Road, Third Floor, Song Yuan City
Economic and Technology Development District
Jilin Province, P.R. China
|
138000
|
|
(Address of principal executive offices)
|
(Zip Code)
|
Large accelerated filer
|
¨
|
Accelerated filer
|
¨
|
Non-accelerated filer
|
¨
|
Smaller reporting company
|
x
|
Class of Securities
|
Number of shares outstanding as of August 12, 2011
|
|
Common stock, par value $0.001 per share
|
31,857,000
|
PART I— FINANCIAL INFORMATION
|
||
Item 1.
|
Financial Statements.
|
1
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
|
8 |
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk.
|
15 |
Item 4.
|
Controls and Procedures.
|
15 |
PART II— OTHER INFORMATION
|
||
Item 6.
|
Exhibits.
|
15 |
SIGNATURES
|
16 |
CHINA DAQING M&H PETROLEUM, INC. AND SUBSIDIARIES
|
||||||||
CONSOLIDATED BALANCE SHEETS
|
||||||||
June 30,
|
September 30,
|
|||||||
2011
|
2010
|
|||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
CURRENT ASSETS:
|
||||||||
Cash
|
$ | 982,481 | $ | 147,326 | ||||
Accounts receivable
|
3,441,405 | 2,717,269 | ||||||
Inventories
|
15,666 | 18,280 | ||||||
Loan receivable - related party
|
199,702 | 256,122 | ||||||
Prepaid expenses and sundry current assets
|
36,664 | 30,198 | ||||||
TOTAL CURRENT ASSETS
|
4,675,918 | 3,169,195 | ||||||
PROPERTY AND EQUIPMENT:
|
||||||||
Oil property and equipment, net of accumulated depletion
|
24,554,731 | 28,024,475 | ||||||
Rental property, net of accumulated amortization
|
343,332 | 20,839 | ||||||
Other property and equipment, net of accumulated depreciation
|
52,814 | 62,248 | ||||||
TOTAL PROPERTY AND EQUIPMENT
|
24,950,877 | 28,107,562 | ||||||
TOTAL ASSETS
|
$ | 29,626,795 | $ | 31,276,757 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Accounts payable
|
$ | 2,899,208 | $ | 7,566,936 | ||||
Other payables and accrued liabilities
|
3,997,122 | 3,466,256 | ||||||
Current portion of long-term debt
|
- | 5,239,500 | ||||||
Loan payable - shareholders - current
|
274,890 | 55,298 | ||||||
TOTAL CURRENT LIABILITIES
|
7,171,220 | 16,327,990 | ||||||
LONG-TERM LIABILITIES:
|
||||||||
Loan payable - shareholders
|
137,054 | 501,436 | ||||||
Deferred income taxes
|
619,102 | 1,091,953 | ||||||
TOTAL LONG-TERM LIABILITIES
|
756,156 | 1,593,389 | ||||||
SHAREHOLDERS' EQUITY:
|
||||||||
Preferred stock, $.001 par value; 10,000,000 shares authorized,
|
||||||||
none issued and outstanding
|
- | - | ||||||
Common stock, $.001 par value; 140,000,000 shares authorized,
|
||||||||
31,857,000 shares issued and outstanding
|
31,857 | 31,857 | ||||||
Additional paid-in capital
|
657,575 | 641,801 | ||||||
Retained earnings
|
18,699,284 | 11,354,791 | ||||||
Accumulated other comprehensive income
|
902,747 | 346,884 | ||||||
TOTAL SHAREHOLDERS' EQUITY OF THE COMPANY
|
20,291,463 | 12,375,333 | ||||||
NONCONTROLLING INTERESTS IN SUBSIDIARY
|
1,407,956 | 980,045 | ||||||
TOTAL SHAREHOLDERS' EQUITY
|
21,699,419 | 13,355,378 | ||||||
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
|
$ | 29,626,795 | $ | 31,276,757 | ||||
CHINA DAQING M&H PETROLEUM, INC. AND SUBSIDIARIES
|
||||||||||||||||
CONSOLIDATED STATEMENT OF INCOME AND OTHER COMPREHENSIVE INCOME
|
||||||||||||||||
(UNAUDITED)
|
||||||||||||||||
For the Three Months Ended June 30,
|
For the Nine Months Ended June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
REVENUES:
|
||||||||||||||||
Oil sales
|
$ | 6,958,420 | $ | 4,704,353 | $ | 18,609,367 | $ | 7,514,076 | ||||||||
Subrental income
|
607,200 | 880,500 | 2,125,200 | 2,640,420 | ||||||||||||
TOTAL REVENUES
|
7,565,620 | 5,584,853 | 20,734,567 | 10,154,496 | ||||||||||||
COST OF SALES:
|
||||||||||||||||
Oil production cost
|
621,100 | 459,090 | 1,866,490 | 947,694 | ||||||||||||
Government oil surcharge
|
1,662,365 | 769,569 | 3,919,645 | 1,173,800 | ||||||||||||
Depletion
|
1,287,166 | 1,288,365 | 4,002,102 | 2,123,890 | ||||||||||||
3,570,631 | 2,517,024 | 9,788,237 | 4,245,384 | |||||||||||||
Subrental expense
|
52,720 | 68,856 | 176,057 | 206,483 | ||||||||||||
TOTAL COST OF SALES
|
3,623,351 | 2,585,880 | 9,964,294 | 4,451,867 | ||||||||||||
GROSS PROFIT
|
3,942,269 | 2,998,973 | 10,770,273 | 5,702,629 | ||||||||||||
OPERATING EXPENSES:
|
||||||||||||||||
General and administrative expenses
|
81,929 | 75,513 | 278,757 | 321,961 | ||||||||||||
INCOME FROM OPERATIONS
|
3,860,340 | 2,923,460 | 10,491,516 | 5,380,668 | ||||||||||||
Interest expense, net of interest income
|
4,807 | 93,719 | 174,125 | 347,880 | ||||||||||||
NET INCOME BEFORE INCOME TAXES
|
3,855,533 | 2,829,741 | 10,317,391 | 5,032,788 | ||||||||||||
Income taxes
|
965,814 | 709,981 | 2,585,129 | 1,286,800 | ||||||||||||
NET INCOME BEFORE NONCONTROLLING INTERESTS
|
2,889,719 | 2,119,760 | 7,732,262 | 3,745,988 | ||||||||||||
Less: net income attributable to noncontrolling interests
|
144,872 | 106,370 | 387,769 | 193,020 | ||||||||||||
NET INCOME ATTRIBUTABLE TO THE COMPANY
|
2,744,847 | 2,013,390 | 7,344,493 | 3,552,968 | ||||||||||||
OTHER COMPREHENSIVE INCOME:
|
||||||||||||||||
Foreign currency translation adjustment
|
359,133 | 42,341 | 596,005 | 42,761 | ||||||||||||
COMPREHENSIVE INCOME
|
3,103,980 | 2,055,731 | 7,940,498 | 3,595,729 | ||||||||||||
Less: other comprehensive income attributable to noncontrolling interests
|
23,135 | 3,467 | 40,142 | 3,491 | ||||||||||||
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY
|
$ | 3,080,845 | $ | 2,052,264 | $ | 7,900,356 | $ | 3,592,238 | ||||||||
BASIC AND DILUTED EARNINGS PER SHARE
|
$ | 0.09 | $ | 0.06 | $ | 0.23 | $ | 0.11 | ||||||||
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
|
||||||||||||||||
BASIC AND DILUTED
|
31,857,000 | 31,857,000 | 31,857,000 | 31,857,000 | ||||||||||||
CHINA DAQING M&H PETROLEUM, INC. AND SUBSIDIARIES
|
||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
(UNAUDITED)
|
||||||||
For the Nine Months Ended June 30,
|
||||||||
2011
|
2010
|
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net income
|
$ | 7,344,493 | $ | 3,552,968 | ||||
Adjustments to reconcile net income to net cash provided by
|
||||||||
operating activities:
|
||||||||
Depletion, oil properties
|
4,002,102 | 2,123,890 | ||||||
Depreciation, rental and other property and equipment
|
69,862 | 79,967 | ||||||
Imputed interest on shareholder loan
|
15,479 | - | ||||||
Net income attributable to noncontrolling interests
|
387,769 | 193,020 | ||||||
Deferred Income taxes
|
(499,775 | ) | 1,203,908 | |||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(621,505 | ) | 243,702 | |||||
Inventories
|
3,164 | (50,616 | ) | |||||
Prepaid expenses and other current assets
|
(5,355 | ) | 94,214 | |||||
Accounts payable
|
(4,828,226 | ) | 2,884,513 | |||||
Other payables and accrued liabilities
|
407,717 | 995,191 | ||||||
NET CASH PROVIDED BY OPERATING ACTIVITIES
|
6,275,725 | 11,320,757 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Acquisition and development of oil properties
|
(53,255 | ) | (9,488,435 | ) | ||||
Acquisition of other property and equipment
|
- | (11,585 | ) | |||||
Loan (to) payment from related party
|
63,756 | (164,425 | ) | |||||
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
10,501 | (9,664,445 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Proceeds (repayment) of loan from shareholders
|
(158,510 | ) | 18,218 | |||||
Repayment of long-term debt
|
(5,313,000 | ) | (1,659,452 | ) | ||||
NET CASH USED IN FINANCING ACTIVITIES
|
(5,471,510 | ) | (1,641,234 | ) | ||||
EFFECT OF EXCHANGE RATE CHANGE ON CASH
|
20,439 | 706 | ||||||
INCREASE IN CASH
|
835,155 | 15,784 | ||||||
CASH - BEGINNING OF PERIOD
|
147,326 | 160,606 | ||||||
CASH - END OF PERIOD
|
$ | 982,481 | $ | 176,390 | ||||
Supplemental disclosure of cash flow information
|
||||||||
Cash paid during the period for:
|
||||||||
Income tax
|
$ | 3,356,192 | $ | 13,800 | ||||
Interest
|
$ | 164,730 | $ | 272,315 | ||||
|
June 30,
|
September 30,
|
||||||
2011
|
2010
|
|||||||
Drill supplies
|
$
|
15,666
|
$
|
18,280
|
||||
Crude oil
|
-
|
-
|
||||||
Total Inventories
|
$
|
15,666
|
$
|
18,280
|
June 30, September 30,
|
||||||||
2011
|
2010
|
|||||||
Oil properties, proved reserves
|
$
|
35,484,269
|
$
|
34,654,026
|
||||
Less: accumulated depletion
|
10,929,538
|
6,629,551
|
||||||
Oil properties, net
|
$
|
24,554,731
|
$
|
28,024,475
|
June 30, September 30,
|
||||||||
2011
|
2010
|
|||||||
Rental properties - drill rights
|
$
|
639,901
|
$
|
250,069
|
||||
Less: accumulated amortization
|
296,569
|
229,230
|
||||||
Rental properties, net
|
$
|
343,332
|
$
|
20,839
|
June 30, September 30,
|
||||||||||
Life
|
2011
|
2010
|
||||||||
Transportation equipment
|
5 years
|
$
|
120,828
|
$
|
116,922
|
|||||
Furniture, fixtures and equipment
|
5 years
|
20,426
|
19,766
|
|||||||
Subtotal
|
|
141,254
|
136,688
|
|||||||
Less: accumulated depreciation
|
88,440
|
74,440
|
||||||||
Other property and equipment, net
|
|
$
|
52,814
|
$
|
62,248
|
|
June 30,
|
September 30,
|
||||||
2011
|
2010
|
|||||||
Outstanding borrowing on $60,000 unsecured line of credit with a shareholder, with no interest and due on demand
|
$
|
55,298
|
$
|
55,298
|
||||
Due to shareholders, bear interest at 5.31% per annum, due by October 30, 2011
|
40,445
|
39,138
|
||||||
Due to shareholders, bear interest at 5.31% per annum, due by December 31, 2011
|
179,147
|
166,500
|
||||||
Due to shareholders, bear interest at 5.31% per annum, due by November 30, 2012
|
137,054
|
295,798
|
||||||
|
411,944
|
556,734
|
||||||
Less: current portion
|
274,890
|
55,298
|
||||||
|
$
|
137,054
|
$
|
501,436
|
|
Three Months Ended June 30,
|
|||||||||||||||
2011
|
2010
|
|||||||||||||||
|
Amount
|
Percentage
|
Amount
|
Percentage
|
||||||||||||
Income before income taxes and noncontrolling interests
|
$ | 3,855,533 | 100.00 |
%
|
$ | 2,829,741 | 100.00 | % | ||||||||
|
|
|
|
|
||||||||||||
U.S. statutory Federal rate
|
1,349,437 | 35.00 | % | 990,409 | 35.00 | % | ||||||||||
Effect of lower tax rate in China
|
(385,553) | (10.00) | % | (282,974 | ) | (10.00) | % | |||||||||
Other
|
1,930 | 0.05 | % | 2,546 | 0.09 | % | ||||||||||
Effective rate
|
$ | 965,814 | 25.05 | % | $ | 709,981 | 25.09 | % |
|
Three Months Ended June 30,
|
|||||||
2011
|
2010
|
|||||||
Current
|
$
|
1,115,527
|
$
|
1,216,293
|
||||
Deferred
|
(149,713)
|
(506,312)
|
||||||
Total
|
$
|
965,814
|
$
|
709,981
|
|
Nine Months Ended June 30,
|
|||||||||||||||
2011
|
2010
|
|||||||||||||||
|
Amount
|
Percentage
|
Amount
|
Percentage
|
||||||||||||
Income before income taxes and noncontrolling interests
|
$ | 10,317,390 | 100.00 | % | $ | 5,032,788 | 100.00 | % | ||||||||
|
|
|
|
|
||||||||||||
U.S. statutory Federal rate
|
3,611,087 | 35.00 | % | 1,761,476 | 35.00 | % | ||||||||||
Effect of lower tax rate in China
|
(1,031,739 | ) | (10.00) | % | (503,279 | ) | (10.00) |
%
|
||||||||
Other
|
5,781 | 0.06 | % | 28,603 | 0.57 | % | ||||||||||
Effective rate
|
$ | 2,585,129 | 25.06 | % | $ | 1,286,800 | 25.57 | % |
|
Nine Months Ended June 30,
|
|||||||
2011
|
2010
|
|||||||
Current
|
$
|
3,084,903
|
$
|
1,299,168
|
||||
Deferred
|
(499,774)
|
(12,368)
|
||||||
Total
|
$
|
2,585,129
|
$
|
1,286,800
|
|
Three Months Ended June 30,
|
|||||||||||||||||||||||
2011
|
2010
|
|||||||||||||||||||||||
|
Extraction and
|
|
Resale of oil
|
Extraction and
|
|
Resale of oil
|
||||||||||||||||||
sale of crude oil
|
Subrental
|
drilling equipments
|
sale of crude oil
|
Subrental
|
drilling equipments
|
|||||||||||||||||||
Net revenues
|
$ | 6,958,420 | $ | 607,200 | $ | - | $ | 4,704,353 | $ | 880,500 | $ | - | ||||||||||||
Operating income (loss)
|
3,311,865 | 551,980 | (3,505 | ) | 2,117,904 | 809,144 | (3,588 | ) | ||||||||||||||||
Identifiable assets
|
29,282,047 | 343,332 | 50 | 32,744,168 | 41,010 | 6,534 |
|
Nine Months Ended June 30,
|
|||||||||||||||||||||||
2011
|
2010
|
|||||||||||||||||||||||
|
Extraction and
|
|
Resale of oil
|
Extraction and
|
|
Resale of oil
|
||||||||||||||||||
sale of crude oil
|
Subrental
|
drilling equipments
|
sale of crude oil
|
Subrental
|
drilling equipments
|
|||||||||||||||||||
Net revenues
|
$ | 18,609,367 | $ | 2,125,200 | $ | - | $ | 7,514,076 | $ | 2,640,420 | $ | - | ||||||||||||
Operating income (loss)
|
8,560,461 | 1,941,643 | (10,588 | ) | 2,992,289 | 2,426,437 | (38,058 | ) | ||||||||||||||||
Identifiable assets
|
29,282,047 | 343,332 | 50 | 32,744,168 | 41,010 | 6,534 |
Remaining oil reserves we
acquired (in million tons) as of
|
Our production (in tons)
|
|||||||||||||||||||||||||||||
September 30, 2008
|
September 30, 2009 | September 30, 2010 | June 30, 2011 |
From
November 28, 2007 to September 30, 2008
|
From
October 1, 2008 to
September 30, 2009
|
From
October 1, 2009 to
September 30, 2010
|
From
October 1, 2010 to
June 30, 2011
|
|||||||||||||||||||||||
1.92
|
1.91
|
1.88
|
1.85
|
9,863
|
14,544
|
28,829
|
32,619
|
|
For the Three Months Ended June 30,
|
|||||||||||||||||||||||||||||||
2011
|
2010
|
|||||||||||||||||||||||||||||||
Extraction
|
Subrental
|
Steel
|
Total
|
Extraction
|
Subrental
|
Steel
|
Total
|
|||||||||||||||||||||||||
Revenue
|
$ | 6,958,420 | $ | 607,200 | $ | - | $ | 7,565,620 | $ | 4,704,353 | $ | 880,500 | $ | - | $ | 5,584,853 | ||||||||||||||||
Gross profit
|
$ | 3,387,789 | $ | 554,480 | $ | - | $ | 3,942,269 | $ | 2,187,329 | $ | 811,644 | $ | - | $ | 2,998,973 | ||||||||||||||||
Gross margin
|
49 | % | 91 | % | - | 52 | % | 46 | % | 92 | % | - | 54 | % |
|
Percentage Change Between the Three Months Ended
|
|||||||||||||||
June 30, 2011 and 2010
|
||||||||||||||||
|
Extraction
|
Subrental
|
Steel
|
Total
|
||||||||||||
Revenue
|
48 | % | -31 | % | - | 35 | % | |||||||||
Gross profit
|
55 | % | -32 | % | - | 31 | % |
|
Three Months Ended June 30,
|
|
||||||||||
Cost of sales of crude oil
|
2011
|
2010
|
% Change
|
|||||||||
Oil production costs
|
$ | 621,100 | $ | 459,090 | 35 | % | ||||||
Government oil surcharge
|
1,662,365 | 769,569 | 116 | % | ||||||||
Depletion
|
1,287,166 | 1,288,365 | -0.1 | % | ||||||||
Subtotal
|
$ | 3,570,631 | $ | 2,517,024 | 42 | % |
|
For the Three Months Ended June 30,
|
|
||||||||||||||||||
General & Administrative Expenses
|
2011
|
% Total
|
2010
|
% Total
|
% Change
|
|||||||||||||||
Salary
|
$ | 30,314 | 37 | % | $ | 31,638 | 42 | % | -4 | % | ||||||||||
Office Expense
|
2,509 | 3 | % | 2,893 | 4 | % | -13 | % | ||||||||||||
Entertainment Expense
|
2,849 | 3 | % | 1,418 | 2 | % | 101 | % | ||||||||||||
Supplies
|
6,381 | 8 | % | 6,673 | 9 | % | -4 | % | ||||||||||||
Travel Expense
|
3,935 | 5 | % | 2,746 | 4 | % | 43 | % | ||||||||||||
Repair and Maintenance
|
3,537 | 4 | % | 9,637 | 13 | % | -63 | % | ||||||||||||
Insurance
|
5,802 | 7 | % | 5,854 | 8 | % | -1 | % | ||||||||||||
Other Expenses
|
26,602 | 32 | % | 14,654 | 19 | % | 82 | % | ||||||||||||
Total
|
$ | 81,929 | 100 | % | $ | 75,513 | 100 | % | 8 | % |
|
Income (loss) from Operations
|
|||||||
Segment
|
Q3, 2011 | Q3, 2010 | ||||||
Extraction
|
$ | 3,311,865 | $ | 2,117,904 | ||||
Subrental
|
551,980 | 809,144 | ||||||
Steel
|
(3,505 | ) | (3,588 | ) | ||||
Corporate
|
- | - | ||||||
Total
|
$ | 3,860,340 | $ | 2,923,460 |
|
For the Nine Months Ended June 30,
|
|||||||||||||||||||||||||||||||
2011
|
2010
|
|||||||||||||||||||||||||||||||
|
Extraction
|
Subrental
|
Steel
|
Total
|
Extraction
|
Subrental
|
Steel
|
Total
|
||||||||||||||||||||||||
Revenue
|
$ | 18,609,367 | $ | 2,125,200 | $ | - | $ | 20,734,567 | $ | 7,514,076 | $ | 2,640,420 | $ | - | $ | 10,154,496 | ||||||||||||||||
Gross profit
|
$ | 8,821,130 | $ | 1,949,143 | $ | - | $ | 10,770,273 | $ | 3,268,692 | $ | 2,433,937 | $ | - | $ | 5,702,629 | ||||||||||||||||
Gross margin
|
47 | % | 92 | % | - | 52 | % | 44 | % | 92 | % | - | 56 | % |
|
Percentage Change between the Nine Months Ended
|
|||||||||||||||
June 30, 2011 and 2010
|
||||||||||||||||
|
Extraction
|
Subrental
|
Steel
|
Total
|
||||||||||||
Revenue
|
148 | % | -20 | % | - | 104 | % | |||||||||
Gross profit
|
170 | % | -20 | % | - | 89 | % |
|
Nine Months Ended June 30,
|
|
||||||||||
Cost of sales of crude oil
|
2011
|
2010
|
% Change
|
|||||||||
Oil production costs
|
$ | 1,866,490 | $ | 947,694 | 97 | % | ||||||
Government oil surcharge
|
3,919,645 | 1,173,800 | 234 | % | ||||||||
Depletion
|
4,002,102 | 2,123,890 | 88 | % | ||||||||
Subtotal
|
$ | 9,788,237 | $ | 4,245,384 | 131 | % |
|
For the Nine Months Ended June 30,
|
|
||||||||||||||||||
General & Administrative Expenses
|
2011
|
% Total
|
2010
|
% Total
|
% Change
|
|||||||||||||||
Salary
|
$ | 87,589 | 31 | % | $ | 114,436 | 36 | % | -23 | % | ||||||||||
Office Expense
|
9,878 | 4 | % | 38,812 | 12 | % | -75 | % | ||||||||||||
Entertainment Expense
|
12,120 | 4 | % | 18,115 | 6 | % | -33 | % | ||||||||||||
Supplies
|
19,598 | 7 | % | 22,313 | 7 | % | -12 | % | ||||||||||||
Travel Expense
|
15,026 | 5 | % | 15,988 | 5 | % | -6 | % | ||||||||||||
Repair and Maintenance
|
20,456 | 7 | % | 47,017 | 15 | % | -56 | % | ||||||||||||
Insurance
|
17,405 | 6 | % | 15,374 | 5 | % | 13 | % | ||||||||||||
Other Expenses
|
96,685 | 35 | % | 49,906 | 16 | % | 94 | % | ||||||||||||
Total
|
$ | 278,757 | 100 | % | $ | 321,961 | 100 | % | -13 | % |
|
Income (loss) from Operations
|
|||||||
Segment
|
Q1-Q3, 2011 | Q1-Q3, 2010 | ||||||
Extraction
|
$ | 8,560,461 | $ | 2,992,289 | ||||
Subrental
|
1,941,643 | 2,426,437 | ||||||
Steel
|
(10,588 | ) | (38,058 | ) | ||||
Corporate
|
- | - | ||||||
Total
|
$ | 10,491,516 | $ | 5,380,668 |
Exhibit No.
|
Description
|
|
31.1
|
Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification of Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification of Principal Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification of Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101 | Interactive Data File (Form 10-Q for the quarterly period ended June 30, 2011 furnished in XBRL). |
CHINA DAQING M&H PETROLEUM, INC.
|
||
Date: August 12, 2011
|
By:
|
/s/ Linan Gong
|
Linan Gong
|
||
Chief Executive Officer and Secretary
|
||
(Duly Authorized Officer and Principal Executive Officer) |
By:
|
/s/ Dehai Yin
|
|
Dehai Yin
|
||
Chief Financial Officer
|
||
(Principal Financial and Accounting Officer)
|
1.
|
I have reviewed this Form 10-Q of China Daqing M&H Petroleum, Inc.;
|
2.
|
Based on my knowledge, this 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 report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this 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 present in this report;
|
4.
|
The registrant’s other certifying officer(s) 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 13-a-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 control over financial reporting, or caused such internal control 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 financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) 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(s) 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 the registrant’s board of directors (or persons performing the equivalent functions):
|
|
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 involved management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 12, 2011
|
/s/ Linan Gong
|
Linan Gong
Chief Executive Officer and Secretary
|
(Principal Executive Officer)
|
1.
|
I have reviewed this Form 10-Q of China Daqing M&H Petroleum, Inc.;
|
2.
|
Based on my knowledge, this 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 report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this 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 present in this report;
|
4.
|
The registrant’s other certifying officer(s) 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 13-a-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 control over financial reporting, or caused such internal control 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 financing reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) 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(s) 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 the registrant’s board of directors (or persons performing the equivalent functions):
|
|
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 involved management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: August 12, 2011
|
/s/ Dehai Yin
|
Dehai Yin
Chief Financial Officer
|
(Principal Financial and Accounting Officer)
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: August 12, 2011
|
/s/ Linan Gong
|
Linan Gong
Chief Executive Officer and Secretary
|
(Principal Executive Officer)
|
(1)
|
The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: August 12, 2011
|
/s/ Dehai Yin
|
Dehai Yin
Chief Financial Officer
|
(Principal Financial and Accounting Officer)
|
Consolidated Balance Sheets Parenthetical (USD $)
|
Jun. 30, 2011
|
Sep. 30, 2010
|
---|---|---|
Statement of Financial Position [Abstract] | Â | Â |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 140,000,000 | 140,000,000 |
Common stock, shares issued | 31,857,000 | 31,857,000 |
Common stock, shares outstanding | 31,857,000 | 31,857,000 |
Consolidated Statement of Income and Other Comprehensive Income (USD $)
|
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2011
|
Jun. 30, 2010
|
Jun. 30, 2011
|
Jun. 30, 2010
|
|
REVENUES: | Â | Â | Â | Â |
Oil sales | $ 6,958,420 | $ 4,704,353 | $ 18,609,367 | $ 7,514,076 |
Subrental income | 607,200 | 880,500 | 2,125,200 | 2,640,420 |
TOTAL REVENUES | 7,565,620 | 5,584,853 | 20,734,567 | 10,154,496 |
COST OF SALES: | Â | Â | Â | Â |
Oil production costs | 621,100 | 459,090 | 1,866,490 | 947,694 |
Government oil surcharge | 1,662,365 | 769,569 | 3,919,645 | 1,173,800 |
Depletion, oil properties | 1,287,166 | 1,288,365 | 4,002,102 | 2,123,890 |
Subrental expenses | 52,720 | 68,856 | 176,057 | 206,483 |
TOTAL COST OF SALES | 3,623,351 | 2,585,880 | 9,964,294 | 4,451,867 |
GROSS PROFIT | 3,942,269 | 2,998,973 | 10,770,273 | 5,702,629 |
OPERATING EXPENSES: | Â | Â | Â | Â |
General and administrative expenses | 81,929 | 75,513 | 278,757 | 321,961 |
INCOME FROM OPERATIONS | 3,860,340 | 2,923,460 | 10,491,516 | 5,380,668 |
Interest expense, net of interest income | 4,807 | 93,719 | 174,125 | 347,880 |
NET INCOME BEFORE INCOME TAXES | 3,855,533 | 2,829,741 | 10,317,391 | 5,032,788 |
Income taxes | 965,814 | 709,981 | 2,585,129 | 1,286,800 |
NET INCOME BEFORE NONCONTROLLING INTERESTS | 2,889,719 | 2,119,760 | 7,732,262 | 3,745,988 |
Net income attributable to noncontrolling interests | 144,872 | 106,370 | 387,769 | 193,020 |
NET INCOME ATTRIBUTABLE TO THE COMPANY | 2,744,847 | 2,013,390 | 7,344,493 | 3,552,968 |
OTHER COMPREHENSIVE INCOME: | Â | Â | Â | Â |
Foreign currency translation adjustments | 359,133 | 42,341 | 596,005 | 42,761 |
COMPEHENSIVE INCOME | 3,103,980 | 2,055,731 | 7,940,498 | 3,595,729 |
Less: other comprehensive income attributable to noncontrolling interests | 23,135 | 3,467 | 40,142 | 3,491 |
COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY | $ 3,080,845 | $ 2,052,264 | $ 7,900,356 | $ 3,592,238 |
BASIC AND DILUTED EARNINGS PER SHARE | $ 0.09 | $ 0.06 | $ 0.23 | $ 0.11 |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: | Â | Â | Â | Â |
BASIC AND DILUTED | 31,857,000 | 31,857,000 | 31,857,000 | 31,857,000 |
Document and Entity Information
|
9 Months Ended | |
---|---|---|
Jun. 30, 2011
|
Aug. 12, 2011
|
|
Document and Entity Information [Abstract] | Â | Â |
Amendment Flag | false | Â |
Current Fiscal Year End Date | --09-30 | Â |
Document Period End Date | Jun. 30, 2011 | |
Entity Current Reporting Status | Yes | Â |
Entity Filer Category | Smaller Reporting Company | Â |
Entity Registrant Name | CHINA DAQING M&H PETROLEUM, INC. | Â |
Entity Central Index Key | 0001341780 | Â |
Entity Common Stock, Shares Outstanding | Â | 31,857,000 |
Document Fiscal Year Focus | 2011 | Â |
Document Fiscal Period Focus | Q3 | Â |
Document Type | 10-Q | Â |
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Business Segment information
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting Disclosure [Text Block] | 7 BUSINESS SEGMENT INFORMATION
All of the Company’s sales are to companies located in China. All sales of crude oil are to one company, China National Petroleum Corporation (“PetroChina”).
The Company operates in three reportable segments which are the extraction and sale of crude oil, resale of oil drilling equipments and subleasing.
The following table presents financial information about the Company’s reportable segments as of and for the three and nine months ended June 30, 2011 and 2010 (unaudited):
|
Property and Equipment
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant and Equipment Disclosure [Text Block] | 3 PROPERTY AND EQUIPMENT
Oil properties
A summary of oil properties at June 30, 2011 and September 30, 2010 is as follows:
Rental properties
A summary of rental properties at June 30, 2011 and September 30, 2010 is as follows:
The previous sublease agreement with Daqing Haihang expired on December 31, 2010. On December 17, 2010, Jilin Yifeng extended the agreement with Daqing Haihang and the extended lease started on January 1, 2011 and will expire on December 31, 2015. The subrental to Daqing Haihang includes 63% of our total property including 12.5 square kilometers of oil field. Appraised value of drill rights $381,479 is allocated to the rented properties under the new sublease agreement and will be amortized through life of the agreement on a straight-line basis.
Other property and equipment
Other property and equipment and the estimated lives used in the computation of depreciation is as follows:
|
Subsequent Events
|
9 Months Ended |
---|---|
Jun. 30, 2011
|
|
Subsequent Events [Abstract] | Â |
Subsequent Events [Text Block] | 8 SUBSEQUENT EVENTS
In accordance with ASC 855, “Subsequent Events”, the Company has evaluated subsequent events that have occurred through the date of issuance of these financial statements and has determined that there were no material events that occurred after the date of the balance sheets included in this report.
|
Significant Accounting Policies
|
9 Months Ended |
---|---|
Jun. 30, 2011
|
|
Accounting Policies [Abstract] | Â |
Significant Accounting Policies [Text Block] | 1 SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year or any subsequent periods. The consolidated balance sheet as of September 30, 2010 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K. These interim financial statements should be read in conjunction with that report.
For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended September 30, 2010 filed on January 5, 2011.
The consolidated financial statements include the accounts of the Company and all of its subsidiaries. All significant inter-company accounts and transactions have been eliminated. These financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. The reporting currency of the Company is the US dollar. The functional currency of China Daqing and ADCI is the US dollar. Daqing Yueyu and Jilin Yifeng use their local currency Chinese Renminbi (“RMB”) as their functional currency.
Certain amounts included in the financial statements for the three and nine months ended June 30, 2010 have been reclassified to conform to the financial statement presentation for the three and nine months ended June 30, 2011.
Uses of estimates in the preparation of financial statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of net revenue and expenses during each reporting period. Actual results could differ from those estimates and changes in these estimates are recorded when known. Significant items subject to such estimates and assumptions include the following:
· Estimates of proved reserves and related estimates of the present value of future net revenues;
· The carrying value of oil properties;
· Estimates of the fair value of reporting units and related assessment of goodwill for impairment;
· Asset retirement obligations;
· Income taxes
|
Loan Payable - Shareholders
|
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2011
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Loans Payable [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Text Block] | 4
LOAN PAYABLE – SHAREHOLDERS
As of June 30, 2011 and September 30, 2010, we had borrowings from shareholders as shown in the following table:
|
Income Taxes
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Income Tax Disclosure [Abstract] | Â | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Text Block] | 5 INCOME TAXES
Substantially all of the Company’s operations are in China and, effective January 1, 2008, are subject to income taxes at the rate of 25%. A reconciliation of the United States statutory Federal tax rate of 35% and the effective tax rate for three and nine months ended June 30, 2011 and 2010 is as follows:
The provision for income taxes are summarized as follows:
The provision for income taxes are summarized as follows:
The Company does not provide for United States income taxes on un-remitted earnings of foreign subsidiaries, as it intends to permanently reinvest these earnings in China.
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Vulnerability Due to Operations in PRC
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9 Months Ended |
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Jun. 30, 2011
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Risks and Uncertainties [Abstract] | Â |
Concentration Risk Disclosure [Text Block] | 6 VULNERABILITY DUE TO OPERATIONS IN PRC
The Company’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than twenty years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRCs political, economic and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective.
Substantially all of the Company’s businesses are transacted in RMB, which is not freely convertible. The People’s Bank of China or other banks are authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts.
Since the Company has its primary operations in the PRC, the majority of its revenues will be settled in RMB, not U.S. Dollars. Due to certain restrictions on currency exchanges that exist in the PRC, the Company’s ability to use revenue generated in RMB to pay any dividend payments to its shareholders outside of China may be limited.
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Inventories
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9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2011
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Inventory Disclosure [Abstract] | Â | |||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Text Block] | 2
INVENTORIES
Inventories, consisting of drill supplies held for use and crude oil, are valued at the lower of cost or market, determined on the first-in, first-out basis. A breakdown of inventories as of June 30, 2011 and September 30, 2010 is as follows:
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