[X]
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QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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[
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TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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Nevada
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20-2934409
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(State of Other
Jurisdiction of incorporation or organization)
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(I.R.S. Employer
I.D. No.)
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TABLE
OF CONTENTS
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Page
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PART
I. FINANCIAL INFORMATION
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Item
1. Financial Statements
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Condensed
Consolidated Balance Sheets as of March 31, 2009 (Unaudited)
and December 31, 2008
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3
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Condensed Consolidated
Statements of Operations for the three months ended March
31, 2009 and 2008 (Unaudited) and From inception to March 31,
2009
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4
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Consolidated
Statements of Cash Flows for the three months ended March 31, 2009
and 2008 (Unaudited) and From inception to March 31, 2009
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5 |
Notes
to Condensed Consolidated Financial Statements
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6-11 |
Item
2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
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12
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Item
3. Quantitative and Qualitative Disclosures About Market
Risks
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14
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Item
4. Controls and Procedures
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14
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PART
II. OTHER INFORMATION
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Item
1. Legal Proceedings
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15 |
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
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15 |
Item
3. Defaults Upon Senior Securities
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15 |
Item
4. Submission of Matters to a Vote of Security Holders
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15 |
Item
5. Other Information
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15 |
Item
6. Exhibits
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15 |
Signatures 15
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CHINA
YILI PETROLEUM COMPANY AND SUBSIDIARIES
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||||||||
(
A DEVELOPMENT STAGE COMPANY)
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||||||||
CONSOLIDATED
BALANCE SHEET
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||||||||
March
31,
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December
31,
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|||||||
2009
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2008
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|||||||
(Unaudited)
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(Audited)
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|||||||
ASSETS
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||||||||
CURRENT
ASSETS:
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Cash
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$ | 3,265 | $ | 6,057 | ||||
Other
sundry current assets
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337 | 246 | ||||||
TOTAL
CURRENT ASSETS
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3,602 | 6,303 | ||||||
Property
and equipment, net of accumulated depreciation
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8,915,670 | 8,948,336 | ||||||
TOTAL
ASSETS
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8,919,272 | 8,957,639 | ||||||
LIABILITIES
AND STOCKHOLDERS' EQUITY
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||||||||
CURRENT
LIABILITIES:
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Accounts
payable
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1,679,375 | 1,683,564 | ||||||
Due
to shareholder
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412,772 | 365,912 | ||||||
Accrued
expenses
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84,252 | 87,280 | ||||||
TOTAL
CURRENT LIABILITIES
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2,176,399 | 2,136,756 | ||||||
STOCKHOLDERS'
EQUITY:
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Common
stock, $0.001 par value, 100,000,000 shares
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authorized,
29,748,348 shares issued
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and
outstanding at March 31, 2009 and December 31,
2008
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29,748 | 29,748 | ||||||
Preferred
stock, $0.001 par value, 4,700,000 shares
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authorized,
0 shares issued and outstanding
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Preferred
stock, Series A, $0.001 par value, 300,000 shares
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authorized,
0 shares issued and
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||||||||
outstanding
at March 31, 2009 and December 31, 2008
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- | - | ||||||
Additional
paid-in capital
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6,772,103 | 6,767,198 | ||||||
Accumulated
deficit
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(959,693 | ) | (896,801 | ) | ||||
Accumulated
other comprehensive income
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900,715 | 920,738 | ||||||
TOTAL
STOCKHOLDERS' EQUITY
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6,742,873 | 6,820,883 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY
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$ | 8,919,272 | $ | 8,957,639 | ||||
The accompanying notes are an integral part of financial statements |
CHINA
YILI PETROLEUM COMPANY AND SUBSIDIARIES
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(A
DEVELOPMENT STAGE COMPANY)
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CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
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(Unaudited)
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From
Inception
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Three
months ended
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May
27, 2005
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March
31,
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To
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2009
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2008
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March
31, 2009
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Revenue
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$ | - | $ | - | $ | - | ||||||
COSTS
AND EXPENSES
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General
and administrative expenses
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57,987 | 73,095 | 937,503 | |||||||||
Imputed
Interest expense - stockholders
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4,905 | - | 22,190 | |||||||||
TOTAL
COSTS AND EXPENSES
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62,892 | 73,095 | 959,693 | |||||||||
LOSS
FROM CONTINUING OPERATIONS
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$ | (62,892 | ) | $ | (73,095 | ) | $ | (959,693 | ) | |||
INCOME (LOSS) FROM DISCONTINUED OPERATIONS | (171,616) | 57,430 | ||||||||||
NET
LOSS
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$ | (62,892 | ) | $ | (244,711 | ) | $ | (902,263 | ) | |||
OTHER
COMPREHENSIVE INCOME :
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Foreign
currency translation adjustments
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(20,023 | ) | 278,615 | 900,715 | ||||||||
TOTAL
COMPREHENSIVE INCOME (LOSS)
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$ | (82,915 | ) | $ | 33,904 | $ | (1,548 | ) | ||||
Basic
and diluted loss per common share:
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Continuing
operations
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$ | (0.00 | ) | (0.00 | ) | |||||||
Discontinued
operations
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- | (0.01 | ) | |||||||||
Weighted
average number of shares outstanding
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29,748,348 | 20,736,969 | ||||||||||
The accompanying notes are an integral part of financial statements | ||||||||||||
CHINA
YILI PETROLEUM COMPANY AND SUBSIDIARIES
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(
A DEVELOPMENT STAGE COMPANY)
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CONSOLIDATED
STATEMENTS OF CASH FLOWS
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(Unaudited)
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For
three months ended
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From
Inception
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March
31,
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May
27, 2005
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To
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2009
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2008
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March
31, 2009
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OPERATING
ACTIVITIES:
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Net
loss
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$ | (62,892 | ) | $ | (244,711 | ) | (902,263 | ) | ||||
(Income)
Loss from discontinued operations
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- | 171,616 | (57,430 | ) | ||||||||
Net
income (loss) from continuing operations
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(62,892 | ) | (73,095 | ) | (959,693 | ) | ||||||
Adjustments
to reconcile net loss to net
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cash
provided by (used in) operating activities:
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Depreciation
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10,396 | 9,925 | 115,018 | |||||||||
Imputed
interest
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4,905 | - | 22,190 | |||||||||
Changes
in operating assets and liabilities:
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Other
sundry current assets
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(90 | ) | 30,517 | (337 | ) | |||||||
Accounts
payable
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- | (20,977 | ) | 1,679,375 | ||||||||
Accrued
expenses
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(2,811 | ) | 118,057 | 84,253 | ||||||||
Deferred
revenue
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- | (45,103 | ) | - | ||||||||
Net
effect of discontinued operations
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- | (51,021 | ) | - | ||||||||
NET
CASH USED IN OPERATING ACTIVITIES
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(50,492 | ) | (31,697 | ) | 940,806 | |||||||
INVESTING
ACTIVITIES:
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Acquisition
of property and equipment
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- | (21,949 | ) | (9,030,688 | ) | |||||||
NET
CASH USED IN INVESTING ACTIVITIES
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- | (21,949 | ) | (9,030,688 | ) | |||||||
FINANCING
ACTIVITIES:
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Proceeds
from notes payable-stockholders
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- | 62,432 | - | |||||||||
Loan
received from stockholder
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47,702 | 46,410 | 412,772 | |||||||||
Payament
received from related party
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58,163 | |||||||||||
Capital
contributions
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- | - | 6,779,661 | |||||||||
Net
effect of discontinued operations
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- | (120,595 | ) | - | ||||||||
NET
CASH PROVIDED BY FINANCING ACTIVITIES
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47,702 | 46,410 | 7,192,433 | |||||||||
EFFECT
OF EXCHANGE RATE ON CASH
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(2 | ) | 2,523 | 900,715 | ||||||||
INCREASE
(DECREASE) IN CASH
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(2,792 | ) | (4,713 | ) | 3,265 | |||||||
CASH
- BEGINNING OF PERIOD
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$ | 6,057 | 47,091 | - | ||||||||
CASH
- END OF PERIOD
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$ | 3,265 | $ | 42,378 | $ | 3,265 | ||||||
The accompanying notes are an
integral part of financial statements
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March
31, 2009
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December
31, 2008
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Life
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Right
to use land
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$ | 246,590 | $ | 247,205 |
50
years
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Building
and building improvements
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1,767,418 | 1,771,826 |
39
years
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Machinery
and equipment
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4,728,385 | 4,736,644 |
7
years
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Office
equipment and furniture
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57,720 | 61,398 |
7
years
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Automobiles
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153,708 | 154,092 |
7
years
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6,953,821 | 6,971,165 | ||||||||
Accumulated
depreciation and amortization
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(115,018 | ) | (104,878 | ) | |||||
6,838,803 | 6,866,287 | ||||||||
Construction
in progress
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2,076,867 | 2,082,047 | |||||||
$ | 8,915,670 | $ | 8,948,336 |
ITEM
2.
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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·
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Inventory. Yili
Asphalt will have to fund the carrying cost of a large inventory of
products, including the investment in raw petroleum, the cost of storage,
and the cost of transportation.
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·
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Marketing. Yili
Asphalt intends to engage in direct marketing of all products
lines. Management expects that its direct marketing program
will prove to be more efficient over the long term than a distribution
network. However, the initial burden on its working capital
will be considerable, as Yili Asphalt will have to carry the full cost of
a sales staff, the expenses of their marketing activities, such as travel,
entertainment, and promotion, and the expenses attendant to sales
accounting.
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·
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Potentially
Inefficient Use of Facilities. To optimize the utilization of
our refinery, we will have to generate sales of our products in the
proportions in which the refinery is designed to produce
them: roughly 6:3:2 for fuel, asphalt and lubricants
respectively. It is unlikely that sales will occur naturally in
those proportions. If sales in one or two of the categories lag
the other(s), management will face the Hobson’s choice of delaying
production in the faster selling category, thus losing the benefit of the
demand for that category, or tolerating excess inventories of the slower
selling categories. This situation would result in additional
demands on our working capital.
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·
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Additional
Working Capital for Growth. We believe there is a high demand
for our products in Inner Mongolia and the neighboring
provinces. If we are correct, then demand could enable us to
quickly expand our operations to full capacity. Growth at that
rapid rate would require a commitment of many millions of Dollars for
working capital. Our management will have to assess the value
of the market opportunities that present themselves, and weight them
against the cost of such capital as may be made available to
us.
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·
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Construction
of Dedicated Rail Line. The government of Inner Mongolia has
committed to construct a rail line that will have a siding at our
refinery. Construction is rescheduled in 2009. The
benefit to us in terms of reduced transportation costs would be
substantial. The government’s proposal, however, contemplates
that Yili Asphalt will make a substantial capital contribution toward the
construction project. The amount of the contribution has not
been determined.
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·
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Acquisition
of Refinery. Chunshi Li, our Chairman, has committed to
purchase Mongolia Kailu Yili Asphalt Co., Ltd., an asphalt company with a
production capacity of 100,000 tons. He intends to assign his rights in
Mongolia Kailu to Yili Asphalt if we are able to fund the
cost. The purchase price will be 20 million RMB (approximately
$2.7 million). In addition, Mongolia Kailu is currently
unproductive due to deterioration of its facilities. In order
to bring it back online, we will have to fund the construction of a
waterproof coiled material production line at its plant, which will entail
an investment of several million more
Renminbi.
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31
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Rule
13a-14(a) Certification
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32
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Rule
13a-14(b) Certification
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China
Yili Petroleum Company
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Date : May 20, 2009 | /s/Chunshi Li |