Bomps Mining, Inc. - FORM 10-Q/A

Attached files

file	filename
EX-32.1 - EXHIBIT 32.1 - Bomps Mining, Inc.	ex321.htm
EX-32.2 - EXHIBIT 32.2 - Bomps Mining, Inc.	ex322.htm
EX-31.1 - EXHIBIT 31.1 - Bomps Mining, Inc.	ex311.htm
EX-31.2 - EXHIBIT 31.2 - Bomps Mining, Inc.	ex312.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q/A

(Mark One)

xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

oTRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER 333-156383

China Chemical Corp.

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

Delaware		26-3018106
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1, Electric Power Road, Zhou Cun District, Zibo, People’s Republic of China 255330

(Address of principal executive offices) (Zip Code)

Issuer’s telephone Number: 86-0533-616899

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

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

Large accelerated filer o		Accelerated filer o

Non-accelerated filer o		Smaller reporting company x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

As of April 4, 2011 the issuer had 30,015,000 outstanding shares of Common Stock, par value $0.0001.

EXPLANATORY NOTE

We are filing this Amendment No. 2 to the Quarterly Report on Form 10-Q/A (the “Amendment”) to amend certain disclosure under Item 2 Management’s Discussion and Analysis of Financial Condition and Result of Operation in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010, originally filed with the Securities and Exchange Commission (the “SEC”) on November 15, 2010 (our “Quarterly Report”), as amended by Amendment No. 1, filed on April 11, 2010.

All other information contained in our Quarterly Report remains unchanged.

This Amendment continues to speak as of the date of the Quarterly Report, and except as expressly set forth herein we have not updated the disclosures contained in this Amendment to reflect any events that occurred at a date subsequent to the filing of the Quarterly Report. The filing of this Amendment is not a representation that any statements contained in items of the Quarterly Report other than that information being amended are true or complete as of any date subsequent to the date of the Quarterly Report.

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Financial Statements	1
Item 2.	Management's Discussion and Analysis of Financial Condition and Result of Operation	2
Item 3.	Quantitive amd Qualitive Disclosures About Market Risk	13
Item 4T.	Controls and Procedures	13

	PART II
Item 1.	Legal Proceedings	14
Item 1A.	Risk Factors	14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	14
Item 3.	Defaults Upon Senior Securities	14
Item 4.	(Removed and Reseved)	14
Item 5.	Other Information	14
Item 6.	Exhibits	15

Signatures		16

PART I

ITEM 1. FINANCIAL STATEMENTS.

CHINA CHEMICAL CORPORATION

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

CONTENTS

PAGE	F - 1-2	CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2010 (UNAUDITED) AND DECEMBER 31, 2009

PAGE	F - 3	CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (UNAUDITED)

PAGE	F - 4-5	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (UNAUDITED)

PAGE	F - 6-32	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (UNAUDITED)

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

	September 30, 2010		December 31, 2009
	(Unaudited)
CURRENT ASSETS
Cash and cash equivalents	$	3,671,225	$	828,921
Restricted cash		67,800,366		31,684,762
Accounts receivable		10,324,196		9,973,984
Inventories		6,843,783		5,226,877
Notes receivable		59,718		132,019
Prepayments for goods, net of allowance of $158,090 and $155,329 at September 30, 2010 and December 31, 2009, respectively		19,985,862		4,107,529
Prepaid expenses and other receivables		134,140		435,286
Due from a related party		20,866,530		19,815,537
Due from an employee		7,464,803		2,933,756
Deferred taxes		91,991		61,834
Total current assets		137,242,614		75,200,505

LONG-TERM ASSETS
Property, plant and equipment, net		49,304,273		52,472,912
Construction in progress		35,652,597		21,362,696
Land use rights, net		3,240,100		3,363,622
Due from a related party		17,427,068		16,682,545
Deferred taxes		551,632		364,240
Total long-term assets		106,175,670		94,246,015

TOTAL ASSETS	$	243,418,284	$	169,446,520

See accompanying notes to condensed consolidated financial statements.

F-1

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

LIABILITIES AND SHAREHOLDERS’ EQUITY

	September 30, 2010		December 31, 2009
	(Unaudited)
CURRENT LIABILITIES
Accounts payable	$	6,614,006	$	2,820,108
Other payables and accrued liabilities		2,889,895		841,931
Short-term bank loans		42,026,843		26,994,508
Customer deposits		907,681		1,079,497
Notes payable		89,386,555		47,317,998
Income tax payable		2,376,580		1,515,007
Payable to contractors		643,138		1,996,155
Due to related parties		289,984		230,208
Current portion of financial obligation, sale-leaseback, net		501,340		-
Current portion of long-term bank loans		4,180,290		1,320,190
Total current liabilities		149,816,312		84,115,602

LONG-TERM LIABILITIES
Long-term portion of financial obligation, sale-leaseback, net		778,324		-
Long-term bank loans		17,915,528		20,682,978
Total long-term liabilities		18,693,852		20,682,978

TOTAL LIABILITIES		168,510,164		104,798,580

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS’ EQUITY
Common stock, $0.0001 par value, 80,000,000 shares authorized, 30,000,000 and 19,861,700 shares issued
and outstanding as at September 30, 2010 and December 31, 2009, respectively		3,000		1,986
Additional paid-in capital		12,102,759		12,103,773
Retained earnings (restricted portion is $1,857,451 at September 30, 2010 and December 31, 2009)		56,388,855		47,349,607
Accumulated other comprehensive income		6,413,506		5,192,574

TOTAL SHAREHOLDERS’ EQUITY		74,908,120		64,647,940

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	243,418,284	$	169,446,520

See accompanying notes to condensed consolidated financial statements.

F-2

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009

REVENUES	$	19,065,901		$	16,395,550		$	51,731,416		$	39,658,046

COST OF GOODS SOLD		14,938,547			12,352,778			41,188,906			32,999,948

GROSS PROFIT		4,127,354			4,042,772			10,542,510			6,658,098

General and administrative expenses		348,420			431,430			966,770			884,573

Selling and distribution expenses		2,980			3,740			8,286			10,885

INCOME FROM OPERATIONS		3,775,954			3,607,602			9,567,454			5,762,640

OTHER INCOME (EXPENSES)

Lease income from a related party, net		713,564			813,760			2,136,161			2,442,604

Interest expense, net		(689,710	)		(432,331	)		(1,481,236	)		(1,019,415	)

Other income (expense), net		6,236			1,812			1,106			(24	)
INCOME BEFORE INCOME TAXES		3,806,044			3,990,843			10,223,485			7,185,805

INCOME TAX EXPENSE		(403,445	)		(480,000	)		(1,184,237	)		(839,978	)

NET INCOME		3,402,599			3,510,843			9,039,248			6,345,827

OTHER COMPREHENSIVE INCOME
Foreign currency translation gain (loss)		938,679			(22,469	)		1,220,932			(156,065	)
OTHER COMPREHENSIVE INCOME (LOSS)		938,679			(22,469	)		1,220,932			(156,065	)

COMPREHENSIVE INCOME	$	4,341,278		$	3,488,374		$	10,260,180		$	6,189,762

WEIGHTED-AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED		19,977,141			19,861,700			19,904,117			19,861,700
NET INCOME PER SHARE, BASIC AND DILUTED	$	0.17		$	0.18		$	0.45		$	0.32

See accompanying notes to condensed consolidated financial statements.

F-3

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended September 30,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	9,039,248		$	6,345,827
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		4,588,875			4,596,351
Deferred taxes		(217,549	)		(53,352	)
Amortization of financial obligation, sale-leaseback		108,627			-

Changes in operating assets and liabilities:
(Increase) Decrease In:
Accounts receivable		(350,212	)		(8,043,677	)
Prepayments for goods		(15,878,333	)		3,950,056
Inventories		(1,616,906	)		2,033,506
Prepaid expenses and other receivables		301,146			30,637
Due from a related party		(3,412,947	)		(3,650,933	)

Increase (Decrease) In:
Accounts payable		3,793,898			62,466
Other payables and accrued liabilities		1,997,760			64,286
Customer deposits		(171,816	)		(72,193	)
Income taxes payable		861,573			275,840
Payable to contractors		(1,353,017	)		-
Due to related parties		59,776			21,332
Net cash (used in) provided by operating activities		(2,249,877	)		5,560,146

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(341,668	)		-
Purchases of construction in progress		(13,787,367	)		(13,129,715	)
Issuance of notes receivable		(1,111,826	)		(11,559,796	)
Repayments of notes receivable		1,185,816			7,730,907
Deposit for a land use right and fixed assets to a related party		-			(9,665,029	)
Due from a related party		2,276,521			(1,468,447	)
Net cash used in investing activities		(11,778,524	)		(28,092,080	)

See accompanying notes to condensed consolidated financial statements.

F-4

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended September 30,
	2010			2009
CASH FLOWS FROM FINANCING ACTIVITIES:
Restricted cash	$	(36,115,604	)	$	917,742
Due from an employee		(4,531,047	)		(2,925,003	)
Proceeds from short-term bank loans		55,811,564			27,379,179
Repayments of short-term bank loans		(41,387,568	)		(28,910,487	)
Proceeds from notes payable		193,911,870			81,510,442
Repayments of notes payable		(153,048,288	)		(72,005,305	)
Capital contribution from shareholders		-			3,320,136
Proceeds from long-term bank loans		-			14,646,650
Repayment of long-term bank loans		(295,959	)		-
Net proceeds from financial obligation sale-leaseback		1,492,960			-
Repayment of financial obligation, sale-leaseback		(271,719	)		-
Net cash provided by financing activities		15,566,209			23,933,354

NET INCREASE IN CASH AND CASH EQUIVALENTS		1,537,808			1,401,420

Effect of exchange rate changes on cash		1,304,496			(79,162	)
Cash and cash equivalents at beginning of period		828,921			149,901

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	3,671,225		$	1,472,159

SUPPLEMENTARY CASH FLOW INFORMATION

Income taxes paid	$	574,512		$	615,251
Interest paid	$	1,693,508		$	1,444,440

See accompanying notes to condensed consolidated financial statements.

F-5

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

China Chemical Corp. (Formerly Bomps Mining, Inc.) was incorporated in the California on July 16, 2008. Effective on September 24, 2010, Bomps Mining, Inc. changed its name to China Chemical Corp. (“CHCC” or the “Company”).

Gold Champ Consultants Limited, a Hong Kong corporation (“Gold Champ”) is a holding company whose asset is 100% of the registered capital of Zibo Costar Information Consulting Co., Ltd. ("Zibo Costar "), a Wholly-Owned Foreign Enterprise ("WOFE") organized under the laws of the People's Republic of China ("PRC").

Zibo Jiazhou Chemical Industry Co., Ltd., a limited liability enterprise organized under the laws of the People's Republic of China ("ZBJZ") is a manufacturing company that is based in Shandong, China. It is principally engaged in the manufacturing of organic chemical compounds.

(a) Share Exchange Agreements

On September 30 2010, CHCC entered into a Share Exchange Agreement (the “share exchange”) with Gold Champ and the shareholders of Gold Champ. As a result of the share exchange, CHCC acquired 100% of the issued and outstanding capital of Gold Champ in exchange for 19,861,700 shares of CHCC’s common stock, par value $0.0001, thereby providing the former shareholders of Gold Champ approximately 66% ownership equity in CHCC at September 30, 2010.

On September 30, 2010, CHCC had outstanding common stock of 3,000,000 shares. On September 24, 2010, CHCC declared a nine share for one share dividend and the dividend was delivered on October 4, 2010. As a result of the stock dividend issuance, CHCC’s outstanding common stock was 30,000,000 on October 4, 2010. The 19,861,700 shares to effectuate the share exchange were transfers of common stock at the time of the stock dividend and not newly issued shares. All comparative common stock amounts have been adjusted to reflect the stock dividend and recapitalization.

F-6

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

(b) Variable Interest Entity Arrangements

On September 30, 2010, Zibo Costar entered into a series of contractual agreements (known as a “variable interest entity” (VIE) arrangement, which are more fully described below) with ZBJZ and its shareholders to govern Zibo Costar’s relationships with ZBJZ. These contractual arrangements allow the Company to obtain effective control over ZBJZ through the ability to exercise all the rights of ZBJZ's shareholders, the rights to absorb substantially all of the economic residual benefits and the obligation to fund all of the expected losses of ZBJZ. Zibo Costar has been determined to be the primary beneficiary of ZBJZ because it is most closely associated with ZBJZ due to its obligation to provide unlimited financial support and its ability to determine strategic business decisions of ZBJZ through voting rights. In accordance with SEC Regulation SX-3A-02 and Accounting Standards Codification ("ASC") topic 810 ("ASC 810"), Consolidation, the Company, through Zibo Costar, consolidates the operating results of ZBJZ.

The VIE arrangements comprise following significant terms:

i.	Exclusive service agreement: Under these agreements Zibo Costar provides exclusive management and technical services and exclusive technology consulting services to ZBJZ in exchange for substantially all of the net income of ZBJZ.

ii.	Equity pledge agreement: As collateral to ensure ZBJZ’s payments under the exclusive service agreements, the shareholders of ZBJZ, through an equity pledge agreement, pledged all of their rights and interests in ZBJZ, including voting rights and dividend rights, to Zibo Costar.

iii.

Exclusive option agreement: In addition, the shareholders of ZBJZ, through an exclusive option agreement, granted to Zibo Costar an exclusive, irrevocable and unconditional right to purchase part or all of the equity interests in ZBJZ when the purchase becomes permissible under the relevant PRC Law.

After the share exchange and VIE arrangements, Gold Champ and Zibo Costar became wholly-owned subsidiaries of CHCC, and ZBJZ became the principal operating VIE. The exchange transaction was accounted for as a reverse acquisition in accordance with ASC 805-10 “Business Combinations”. The acquisition is accounted for as the recapitalization of CHCC. Accordingly, the condensed consolidated statements of income include the results of operations of ZBJZ from January 1, 2010 and 2009, and the results of operations of CHCC from the acquisition date through September 30, 2010.

F-7

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

The following financial statement amounts and balances of the VIE were included in the accompanying condensed consolidated financial statements：

	September 30, 2010		December 31, 2009
	(Unaudited)
Total assets	$	243,308,491	$	169,446,520
Total liabilities	$	168,400,889	$	104,798,580

	Nine Months Ended September 30,
	2010		2009
	(Unaudited)		(Unaudited)
Revenues	$	51,731,416	$	39,658,046
Net income	$	9,039,227	$	6,345,827

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation

The unaudited condensed consolidated financial statements of CHCC, Gold Champ, Zibo Costar and ZBJZ have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Rule 8.03 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements.

However, such information 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. The condensed balance sheet information as of December 31, 2009 was derived from the audited financial statements included in the Form 8-K, filed with the Securities and Exchange Commission on October 1, 2010. The interim financial statements should be read in conjunction with the Form 8-K.

F-8

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b) Principles of Consolidation

The condensed consolidated financial statements include the accounts of CHCC and its subsidiaries and VIE.

Inter-company balances and transactions have been eliminated in consolidation.

The Company has major customers who accounted for the following percentage of total sales and total accounts receivable:

Customers	Sales Nine Months Ended September 30,				Accounts Receivable
	2010		2009		September 30, 2010		December 31, 2009
Company A		25%		32%		39%		7%
Company B		7%		-		30%		-
Company C		20%		-		18%		-
Company D		-		16%		-		56%
Company E		-		21%		-		28%

F-9

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Company has major suppliers who accounted for the following percentage of total purchases and total accounts payable:

Suppliers	Purchases Nine Months Ended September 30,				Accounts Payable
	2010		2009		September 30, 2010		December 31, 2009
Company F		6%		16%		-		33%
Company G		30%		9%		17%		17%
Company H		30%		46%		60%		-

(d) Use of Estimates

The preparation of the financial statements in conformity with generally accepted accounting principles in the United States of America 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 revenues and expenses during the reporting periods.

Management makes these estimates using the best information available at the time the estimates are made. Actual results could differ materially from those estimates.

(e) Fair Value of Financial Instruments

Accounting Standards Codification (“ASC”) 820-10, Fair Value Measurements, establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.

F-10

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(e) Fair Value of Financial Instruments (Continued)

These tiers include:

•Level 1—defined as observable inputs such as quoted prices in active markets;

•Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

•Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

Cash and cash equivalents consist primarily of high rated money market funds at a variety of well-known PRC and international institutions with original maturities of three months or less. Restricted cash represent time deposits on account for bank acceptance notes. The original cost of these assets approximates fair value due to their short-term maturity. See Note 12.

The carrying amounts of other financial assets and liabilities, such as accounts receivable, notes receivable, prepaid expenses and other receivables, due from an employee, due from a related party, accounts payable, other payables and accrued liabilities, short-term bank loans, customer deposits, notes payable, income tax payable, due to related parties, payable to contractors, current portion of financial obligation, sale-leaseback, net and current portion of long-term bank loans, approximate their fair values because of the short-term maturity of these instruments.

(f) Revenue Recognition

Revenue represents the invoiced value of goods sold recognized upon the delivery of goods to customers. Revenue is recognized when all of the following criteria are met:

-Persuasive evidence of an arrangement exists,

-Delivery has occurred or services have been rendered,

-The seller’s price to the buyer is fixed or determinable, and

-Collectability is reasonably assured.

F-11

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(g) Retirement Benefits

Retirement benefits in the form of contributions under defined contribution retirement plans to the relevant authorities are charged to operations as incurred. Retirement benefits amounting to $69,362 and $64,045 were charged to operations for the nine months ended September 30, 2010 and 2009, respectively.

(h) Foreign Currency Translation

The accompanying condensed financial statements are presented in United States dollars. The functional currency of the Company is the Renminbi (RMB). The condensed financial statements are translated into United States dollars from RMB at period-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

	September 30,		December 31,		September 30,
	2010		2009		2009
Period end RMB: US$ exchange rate		6.6981		6.8173		-
Average period RMB: US$ exchange rate		6.7676		-		6.8455

(i) Comprehensive Income

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to recognize under current accounting standards as components of comprehensive income should be reported in a financial statement that is presented with the same prominence as other financial statements. The Company’s current component of other comprehensive income is the foreign currency translation adjustment.

F-12

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(j) Segment

The Company operates in one business segment, the development, manufacture, and commercialization of maleic anhydride and phthalic anhydride and their byproducts in the PRC. The Company had no sales outside of the PRC for the three and nine months ended September 30, 2010 and 2009.

(k) Earning Per Share

Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company does not have dilutive securities for the three and nine months ended September 30, 2010 and 2009.

(l) New Accounting Pronouncements

There were no new accounting pronouncements not yet adopted by the Company that would have a material effect on the Company’s condensed consolidated financial statements as of September 30, 2010.

LIQUIDITY

The Company has a working capital deficit of $12,573,698 at September 30, 2010. This was principally due to the Company’s use of cash to purchase construction in progress. The Company currently generates its cash flow through operating income, and the Company had a net income of $9,039,248 for the nine months ended September 30, 2010. As of the date of this report, the Company has not experienced any liquidity problems in settling payables in the normal course of business or repaying the bank loans when they become due. To improve liquidity, the Company may explore new expansion opportunities and funding sources from which the management may consider seeking external funding and financing.

F-13

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

4.	INVENTORIES

Inventories consist of the following:

	September 30, 2010		December 31, 2009
	(Unaudited)
Raw materials	$	4,244,081	$	3,930,087
Work-in-progress		181,250		175,566
Finished goods		2,418,452		1,121,224
Total inventories	$	6,843,783	$	5,226,877

The net book value of $4,244,081 and $1,834,912 of raw materials inventory is pledged as collateral for a short-term bank loan at September 30, 2010 and December 31, 2009, respectively. See Note 11.

5.	NOTES RECEIVABLE

Notes receivable consist of the following:

	September 30, 2010		December 31, 2009
	(Unaudited)
Bank Acceptance Notes (aggregated by month):
Due March, 2011	$	59,718	$	-
Due June, 2010 (Settled on its due date)		-		14,669
Due May, 2010 (Settled on its due date)		-		88,012
Due March, 2010 (Settled on its due date)		-		29,338
Total notes receivable	$	59,718	$	132,019

All the bank acceptance notes are interest free.

F-14

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

6.	RELATED PARTY TRANSACTIONS

(I) Due From A Related Party

			September 30, 2010		December 31, 2009
			(Unaudited)
Zibo Jiazhou Heat and Power Co., Ltd. (“ZJHP”), no fixed repayment term, interest free, guaranteed by the vice chairman of the Company	a	)	$	20,886,530	$	14,636,667

ZJHP, no fixed repayment term, interest rate at 5.91% per annum, unsecured, subsequently settled	a	)		-		5,178,870
Total due from a related party			$	20,866,530	$	19,815,537

(II) Due From An Employee

	September 30, 2010		December 31, 2009
	(Unaudited)
Current	$	7,464,803	$	2,933,756
Total due from an employee b)	$	7,464,803	$	2,933,756

(III) Due From A Related Party-Long Term

			September 30, 2010		December 31, 2009
			(Unaudited)
Zibo Eagle Textile Co., Ltd. (“Eagle”)	c	)	$	17,427,068	$	16,682,545

(IV) Due To Related Parties

			September 30, 2010		December 31, 2009
			(Unaudited)
Lu Feng	d	)	$	117,627	$	172,065
Due to employees	e	)		172,357		58,143
Total due to related parties			$	289,984	$	230,208

F-15

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

6. RELATED PARTY TRANSACTIONS (CONTINUED)

a) ZJHP is controlled by the vice chairman of the Company.

For the nine months ended September 30, 2010 and 2009, the Company had transactions with ZJHP as follows:

	Nine Months Ended September 30,
	2010		2009
	(Unaudited)		(Unaudited)
Sales of steam to ZJHP	$	5,129,297	$	5,286,920
Lease of equipment to ZJHP		5,071,955		5,365,662
Purchases of electricity from ZJHP		1,716,350		1,635,988
Interest income from ZJHP		162,497		229,207

On January 1, 2010 and January 5, 2009, the Company signed a one year lease agreement for equipment and buildings with ZJHP with an annual rental fee of $5,963,567 and $7,164,973, respectively. During 2010 and 2009, machinery and buildings with a net book value of $33,153,550 and $35,233,127, respectively, were leased to ZJHP. See Note 8. For the nine months ended September 30, 2010 and 2009, depreciation for the property was $2,682,196 and $2,654,775, respectively, and related business tax for the leases were $253,598 and $268,283, respectively. For the nine months ended September 30, 2010 and 2009, the net lease income was $2,136,161 and $2,442,604, respectively.

ZJHP provided a guarantee of certain short-term bank loans borrowed by the Company. See Note 11.

b) Due from an employee represents the time deposits paid to an employee as collateral for two bank acceptance notes and one bank acceptance note at September 30, 2010 and December 31, 2009, respectively. The balances are unsecured, interest free, and have no fixed repayment terms. The balances were subsequently settled. See Note 12.

c) Eagle is controlled by the vice-chairman of the Board of Directors of the Company. On December 23, 2007, the Company entered into an agreement with Eagle to purchase a land use right and fixed assets on the land with a total contract amount of $19,802,852. The balances represent deposits paid to Eagle, and they are unsecured, interest free, and have no fixed repayment term. The land use right and fixed assets were pledged as collateral against certain short-term bank loans borrowed by the Company. The Company estimates the transaction will be closed in June, 2011. See Notes 11 and 16.

F-16

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

6. RELATED PARTY TRANSACTIONS (CONTINUED)

d) Lu Feng is the chairman and CEO of the Company. The balances represent business and travelling related expenses paid by the CEO on behalf of the Company. The outstanding balances are unsecured, interest free and have no fixed repayment terms. The CEO also provided a personal guarantee for short-term bank loans borrowed by the Company. See Note 11.

e) Due to employees are interest-free, unsecured and have no fixed repayment terms. The amounts primarily represent business and travelling related expenses paid by employees on behalf of the Company.

7.	PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment consist of the following:

	September 30, 2010		December 31, 2009
	(Unaudited)
At cost:
Buildings	$	1,285,127	$	1,262,675
Machinery		20,954,643		23,829,638
Motor Vehicles		768,961		755,526
Office equipment		58,535		57,513
Leased fixed assets		43,075,779		42,323,223
Assets recorded under financial obligation, sale-leaseback		3,643,421		-
		69,786,466		68,228,575
Less : Accumulated depreciation
Buildings	$	155,063	$	118,231
Machinery		8,645,479		8,177,410
Motor Vehicles		401,251		326,096
Office equipment		49,554		43,830
Leased fixed assets		9,922,229		7,090,096
Assets recorded under financial obligation, sale-leaseback		1,308,617		-
		20,482,193		15,755,663
Property, plant and equipment, net	$	49,304,273	$	52,472,912

F-17

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

7. PROPERTY, PLANT AND EQUIPMENT, NET (CONTINUED)

For the nine months ended September 30, 2010 and 2009, depreciation expense was $4,407,161 and $4,438,899, respectively. See Notes 8 and 14.

8.	OPERATING LEASE TO A RELATED PARTY

On January 1, 2010 and January 5, 2009, the Company signed a one year lease agreement for buildings and machinery with ZJHP with an annual rental fee of $5,963,567 and $7,164,973 respectively. The Company leased the assets to ZJHP because the Company is not at an operating capacity to fully utilize the assets. In the future the Company may cease leasing the assets if its capacity increases, or they may lease the assets to another company. The Company’s property on operating lease by major classes consists of the following:

	September 30, 2010		December 31, 2009
At cost:
Buildings	$	744,353	$	731,349
Machinery		42,331,426		41,591,874
		43,075,779		42,323,223
Less : Accumulated depreciation
Buildings		85,415		61,035
Machinery		9,836,814		7,029,061
		9,922,229		7,090,096
Leased fixed assets, net	$	33,153,550	$	35,233,127

For the nine months ended September 30, 2010 and 2009, the depreciation expense for the leased fixed assets was $2,682,196 and $2,654,775, respectively, which was netted in the Company’s statements of income and comprehensive income against lease income from a related party, net. See Notes 6 and 7.

F-18

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

9.	LAND USE RIGHTS, NET

Land use rights consist of the following:

	September 30, 2010		December 31, 2009
	(Unaudited)
Cost of land use rights	$	3,874,321	$	3,806,635
Less: Accumulated amortization		634,221		443,013
Land use rights, net	$	3,240,100	$	3,363,622

Amortization expense for the nine months ended September 30, 2010 and 2009 was $181,714 and $157,452, respectively.

Amortization expense for the next five years and thereafter is as follows:


Period ended September 30, 2011	$	244,441
2012		244,441
2013		244,441
2014		244,441
2015		99,364
Thereafter		2,162,972
Total	$	3,240,100

All of land use rights are pledged as collateral for a long-term bank loan at September 30, 2010 and December 31, 2009. See Note 13.

F-19

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

10.	CONSTRUCTION IN PROGRESS

Construction in progress consists of the following:

	September 30, 2010		December 31, 2009
	(Unaudited)
Buildings	$	1,858,347	$	1,206,536
Machinery		33,794,250		20,156,160
Total	$	35,652,597	$	21,362,696

Capitalized interest for the nine months ended September 30, 2010 and 2009 is $1,066,777 and $201,069, respectively. See Notes 13 and 16.

11.	SHORT-TERM BANK LOANS

Short-term bank loans consist of the following:

	September 30, 2010		December 31, 2009
	(Unaudited)
Qishang Bank, due November 25, 2010, interest rate at 9.027% per annum, guaranteed by Shandong Jide Ecological Technology Co., Ltd and Zibo Jiazhou Hotel Co., Ltd.	$	2,687,330	$	-

China Merchant Bank, due December 3, 2010, interest rate at 4.86% per annum, guaranteed by Shandong Jide Ecological Technology Co., Ltd., Zibo Lanyan Group Co., Ltd. and the CEO of the Company (See Note 6)		2,958,921		-

China Citic Bank, due January 20, 2011 interest rate at 5.841% per annum, guaranteed by the CEO of the Company, Zhang Lianfang and secured by raw material inventory (See Notes 4 and 6)		4,478,882		-

F-20

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

11.	SHORT-TERM BANK LOANS (CONTINUED)

	September 30, 2010		December 31, 2009
	(Unaudited)
Agriculture Bank of China, due February 16, 2011, interest rate at 6.903% per annum, guaranteed by Shandong Jide Ecological Technology Co., Ltd.	$	1,866,201	$	-

Rizhao Bank, due February 23, 2011, interest rate at 5.31% per annum, guaranteed by Shandong Jide Ecological Technology Co., Ltd. and the CEO of the Company		4,478,882		-

Agriculture Bank of China, due March 18, 2011, interest rate at 6.903% per annum, guaranteed by Shandong Jide Ecological Technology Co., Ltd.		4,030,994		-

Qishang Bank, due March 25, 2011, interest rate at 9.027% per annum, guaranteed by Shandong Jide Ecological Technology Co., Ltd and Zibo Lanyan Group Co., Ltd		2,090,145		-

Qilu Bank, due April 30, 2011, interest rate at 6.372% per annum, guaranteed by Shandong Jide Ecological Technology Co., Ltd. and Zibo Jiazhou Hotel Co., Ltd.		2,985,921		-

Huaxia Bank, due May 5, 2011, interest rate at 5.31% per annum, guaranteed by Zibo Lanyan Group Co., Ltd.		4,478,882		-

F-21

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

11.	SHORT-TERM BANK LOANS (CONTINUED)

	September 30, 2010		December 31, 2009
	(Unaudited)
Agriculture Bank of China, due May 16, 2011, interest rate at 6.903% per annum, guaranteed by Shandong Jide Ecological Technology Co., Ltd.	$	1,492,961	$	-

Bank Austria Beijing, due June 8, 2011, interest rate at 6.903%, guaranteed by the CEO of the Company (See Note 6), and secured by raw material inventory (See Note 4)		7,464,803		-

Shanghai Pudong Development Bank, due July 20, 2011, interest rate at 5.31% per annum, guaranteed by Shangdong Fengyang Group Ltd and the CEO of the Company (See Note 6)		2,985,921		-

Shanghai Pudong Development Bank, due May 12, 2010, interest rate at 5.84% per annum, guaranteed by Shandong Fengyang Co., Ltd. and the CEO of the Company (See Note 6) (Repaid on its due date)		-		2,933,756

Agriculture Bank of China, due May 12, 2010, interest rate at 6.90% per annum, guaranteed by Shandong Jide Ecological Technology Co., Ltd. (Repaid on its due date)		-		1,466,878

Huaxia Bank, due May 5, 2010, interest rate at 5.31% per annum, guaranteed by Zibo Lanyan Group Co., Ltd. (Repaid on its due date)		-		4,400,634

F-22

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

11.	SHORT-TERM BANK LOANS (CONTINUED)

	September 30, 2010		December 31, 2009
	(Unaudited)
China Citic Bank, due May 4, 2010, interest rate at 5.35% per annum, secured by raw materials inventory (See Note 4) (Repaid on its due date)	$	-	$	4,400,634

Qishang Bank, due April 17, 2010, interest rate at 9.03% per annum, guaranteed by ZJHP and Zibo Lanyan Group Co., Ltd. (Repaid on its due date)		-		2,053,629

Qishang Bank, due April 17, 2010, interest rate at 9.03% per annum, guaranteed by ZJHP, Zibo Jiazhou Hotel Co., Ltd, and Zibo Lanyan Group Co., Ltd. (Repaid on its due date)		-		1,056,152

Agriculture Bank of China, due March 30, 2010, interest rate at 6.90% per annum, guaranteed by Shandong Jide Ecological Technology Co., Ltd. (Repaid on its due date)		-		1,833,597

Agriculture Bank of China, due March 26, 2010, interest rate at 6.90% per annum, guaranteed by Eagle’s land use right and fixed assets (See Note 6) (Repaid on its due date)		-		3,960,570

Agriculture Bank of China, due March 16, 2010, interest rate at 1.83% per annum, guaranteed by Shandong Jide Ecological Technology Co., Ltd. (Repaid on its due date)		-		702,526

F-23

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

11.	SHORT-TERM BANK LOANS (CONTINUED)

	September 30, 2010		December 31, 2009
	(Unaudited)
Agriculture Bank of China, due March 12, 2010, interest rate at 1.83% per annum, guaranteed by Shandong Jide Ecological Technology Co., Ltd. (Repaid on its due date)	$	-	$	702,598

Industrial and Commercial Bank of China, due February 23, 2010, interest rate at 1.26% per annum, guaranteed by Shandong Jide Ecological Technology Co., Ltd. (Repaid on its due date)		-		843,154

Qishang Bank, due January 26, 2010, interest rate at 9.03% per annum, guaranteed by ZJHP and Zibo Jiazhou Hotel Co., Ltd. (Repaid on its due date)		-		2,640,380
Total	$	42,026,843	$	26,994,508

Interest expense for short-term bank loans was $1,693,508 and $1,444,440 for the nine months ended September 30, 2010 and 2009, respectively.

12.	NOTES PAYABLE

Notes payable consist of the following (aggregated by month of maturity):

	September 30, 2010		December 31, 2009
	(Unaudited)
Bank Acceptance Notes:
Due September, 2011, guaranteed by Shandong Jide Ecological Technology Co.,Ltd	$	3,284,514	$	-
Due July, 2011, guaranteed by Shandong Jide Ecological Technology Co., Ltd		895,776		-
Due June, 2011, guaranteed by Shandong Jide Ecological Technology Co., Ltd		2,985,921		-
Due February, 2011		15,049,044		-

F-24

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

12.	NOTES PAYABLE (CONTINUED)

	September 30, 2010		December 31, 2009
	(Unaudited)
Due January, 2011	$	13,436,646	$	-
Due January, 2011, guaranteed by Zibo Lanyan Group Co., Ltd		8,957,764		-
Due January, 2011, guaranteed by an employee’s time deposit (See Note 6)		4,478,882		-
Due December, 2010		9,704,244		-
Due November, 2010		26,873,293		-
Due October, 2010, guaranteed by an employee’s time deposit (See Note 6) (Repaid on its due date)		2,985,921		-
Due before September 30, 2010, subsequently repaid on due dates		-		42,686,150
Subtotal		88,652,005		42,686,150

Notes Payable to Unrelated Companies:
Due December, 2010, interest free, unsecured		317,557		-
Due October, 2010, interest free, unsecured (Repaid on its due date)		416,993		-
Due before September 30, 2010, subsequently repaid on due dates		-		4,631,848
Subtotal		734,550		4,631,848

Total	$	89,386,555	$	47,317,998

All the bank acceptance notes are subject to bank charges of 0.05% of the principal as a commission on each loan transaction. Bank charges for bank acceptance notes were $62,465 and $23,905 for the nine months ended September 30, 2010 and 2009, respectively.

Restricted cash of $66,680,645 and $31,684,762 collateralizes the bank acceptance notes at September 30, 2010 and December 31, 2009, respectively.

Interest expense for notes payable to unrelated companies was $0 and $31,643 for the nine months ended September 30, 2010 and 2009, respectively.

F-25

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

13.	LONG-TERM BANK LOANS

Long-term bank loans consist of the following:

	September 30, 2010		December 31, 2009
	(Unaudited)
Agriculture Bank of China, due July 13, 2013, interest rate at 6.34% per annum, guaranteed by Shandong Qingyuan Group Co., Ltd., Zibo Qingtian Properties Co., Ltd., Shangdong Qingtian Plastic Industry Co., Ltd., and Shandong Qingyuan Asphalt Technology Co., Ltd.. Principal is to be repaid every 3 months in 13 unequal installments from July 13, 2010, and interest is paid quarterly.	$	14,631,015	$	14,668,779

Agriculture Bank of China, due July 13, 2013, interest rate at 6.34% per annum, guaranteed by Zibo Fengyang Color Steel Co., Ltd. and secured by land use rights. (See Note 9) Principal is to be repaid every 3 months in 13 unequal installments from July 13, 2010, and interest is paid quarterly.		7,464,803		7,334,389
Total long-term bank loans		22,095,818		22,003,168

Less: current portion		4,180,290		1,320,190

Long-term portion	$	17,915,528	$	20,682,978

The interest expense for nine months ended September 30, 2010 and 2009 of $1,066,777 and $ 201,069, respectively, was capitalized in construction in progress. See Note 10.

The repayment schedule for the long-term bank loans is as follows:

Period ended September 30, 2011	$	4,180,290
2012		10,450,725
2013		7,464,803
Total	$	22,095,818

F-26

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

14.	FINANCIAL OBLIGATION, SALE-LEASEBACK

In May 2010, the Company refinanced its machinery under a sale-leaseback arrangement. Under the sale-leaseback agreement, the machinery was sold for $2,526,294 and concurrently, the Company leased the machinery back for $2,526,294 with a weighted-average annual interest rate of 13.32%, payable in periodic instalments through June 2013. Of the $2,526,294 selling price, $1,473,058 was received in cash, and the remaining balance of $1,053,236 was treated as a security deposit to be applied to the future lease payments. The transaction was accounted for as a financing arrangement, wherein the property remains on the Company’s books continues to be depreciated. A financial obligation in the amount of $1,279,664, representing the net proceeds of the sale, has been recorded under “Financial obligation, sale-leaseback” in the Company’s Balance Sheets, and is being reduced based on lease payments under the financial obligation. The Company has an option to purchase the machinery for $1,053,236 at the expiration date of the lease.

	September 30, 2010		December 31, 2009
	(Unaudited)
Financial obligation, sale-leaseback	$	1,442,755	$	-
Less: Accumulated amortization		163,091		-
Financial obligation, sale-leaseback, net		1,279,664		-

Less: Current portion		501,340		-
Long-term portion	$	778,324	$	-

As of September 30, 2010, future minimum payments required under non-cancellable sale-leaseback are:

Period ended September 30, 2011	$	782,311
2012		686,762
2013		418,028
Total minimum lease payments		1,887,101

Less: Amount representing interest		607,437
Present value of net minimum lease payments	$	1,279,664

Amortization of the financial obligation for the nine months ended September 30, 2010 was $108,627.

F-27

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

15.

TAXES

(I) Corporation Income Tax (“CIT”)

The CIT rate applicable to the Company is 25%. However, in accordance with the relevant taxation laws in the PRC, from the time that a company has its first profitable tax year, a foreign investment company is exempt from corporate income tax for its first two years and is then entitled to a 50% tax reduction for the succeeding three years. For the Company, the first profitable year for income tax purposes as a foreign investment company was 2006. The tax rate to the Company is 12.5% for the nine months ended September 30, 2010 and 2009.

Effective January 1, 2007, the Company adopted ASC 740-10, Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No.109. The interpretation addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements.

Under ASC 740-10, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740-10 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of September 30, 2010, the Company does not have a liability for unrecognized tax benefits.

Income tax expense for the nine months ended September 30, 2010 and 2009 are summarized as follows:

	Nine Months Ended September 30,
	2010			2009
	(Unaudited)			(Unaudited)
Current CIT expense	$	(1,401,786	)	$	(893,331	)
Deferred CIT benefit		217,549			53,353
Income tax expense	$	(1,184,237	)	$	(839,978	)

The Company’s income tax expense differs from the “expected” tax expense (computed by applying the CIT rate of 25% percent to income before income taxes) as follows

F-28

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

15.	TAXES (CONTINUED)

	Nine Months Ended September 30,
	2010			2009
	(Unaudited)			(Unaudited)
Computed “expected” expense	$	(2,555,871	)	$	(1,796,451	)
Favorable tax rate effect		1,277,936			898,227
Permanent differences		93,698			58,246
Income tax expense	$	(1,184,237	)	$	(839,978	)

The tax effects of temporary differences that give rise to the Company’s net deferred tax assets and liabilities as of September 30, 2010 and December 31, 2009 are as follows:

	September 30, 2010		December 31, 2009
	(Unaudited)
Deferred tax assets (liabilities):
Current:
General and administrative expenses	$	13,320	$	14,758
Cost of goods sold		60,164		46,703
Interest expense		18,507		373
Subtotal		91,991		61,834
Non-current:
Amortization		186,351		64,225
Depreciation		365,281		300,015
Subtotal		551,632		364,240

Net deferred tax assets	$	643,623	$	426,074

F-29

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

15.	TAXES (CONTINUED)

(II) Value Added Tax (“VAT”)

Enterprises or individuals who sell commodities, engage in repair and maintenance or import or export goods in the PRC are subject to a value added tax in accordance with the PRC laws. The value added tax standard rate is 17% of the gross sales price. A credit is available whereby VAT paid on the purchases of semi-finished products or raw materials used in the production of the Company’s finished products can be used to offset the VAT due on the sales of the finished products.

The VAT payable balances of $1,948,812 and $235,295 at September 30, 2010 and December 31, 2009, respectively, are included in other payables and accrued expenses in the accompanying balance sheets.

(III) Tax Holiday

For the nine months ended September 30, 2010 and 2009 the PRC corporate income tax rate was 25%. The Company was entitled to favourable tax rate of 12.5% for the nine months ended September 30, 2010 and 2009.

The combined effects of the favourable tax rate available to the Company for the nine months ended September 30, 2010 and 2009 are as follows:

	Nine Months Ended September 30,
	2010			2009
	(Unaudited)			(Unaudited)
Tax holiday effect	$	(1,277,936	)	$	(898,227	)
Basic net income per share excluding tax holiday effect	$	0.30		$	0.27

F-30

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

16.	COMMITMENTS AND CONTINGENCIES

(I) Contingencies

As of September 30, 2010, the Company provided corporate guarantees for bank loans borrowed by Zibo Lanyan Group Co., Ltd. (“Lanyan”) and Shandong Fengyang Co., Ltd. (“Fengyang”), which are incorporated in the PRC. As a part of the corporate guarantees, Lanyan and Fengyang also provided cross guarantees for the short-term bank loans of $12,540,870 and the note payable of $ 8,957,764 borrowed by the Company. See Notes 11 and 12. If Lanyan or Fengyang defaults on the repayment of its bank loans, the Company is required to repay the outstanding balance. As of September 30, 2010, the guarantee provided for the bank loans borrowed by Lanyan and Fengyang was approximately $12,690,166, which consists of the following:

Due December 14, 2010	$	2,239,441
Due January 24, 2011		7,464,803
Due April 19, 2011		1,492,961
Due May 11, 2011		1,492,961
Total	$	12,690,166

A default by Lanyan and Fengyang is considered remote by the management. Based on the information available to the management, the fair values of the guarantees granted by the Company are not considered material and therefore no liability for the guarantor's obligation under the guarantees was recognized as of September 30, 2010.

(II) Lease Commitments

In April 2007, the Company signed a land lease agreement with Zhoucun District People’s Government Zhoujia Community Committees (“Committees”). The Company leased land from Committees for 35 years. The annual lease fee for the land is RMB286,500 (approximately $42,396). For the nine months ended September 30, 2010 and 2009, the lease expense was $31,797 and $31,472, respectively.

F-31

CHINA CHEMICAL CORP.

(FORMERLY BOMPS MINING, INC.) AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)

16. COMMITMENTS AND CONTINGENCIES (CONTINUED)

(II) Lease Commitments (Continued)

As of September 30, 2010, the Company has outstanding commitments with respect to non-cancellable operating lease for the land, which fall due as follows:


Period ended September 30, 2011	$	42,396
2012		42,396
2013		42,396
2014		42,396
2015		42,396
Thereafter		1,112,897
Total	$	1,324,877

(III) Capital Commitments

As of September 30, 2010, the Company entered into several agreements and made payments of $26,946,336 toward the purchases of production equipment to be used in the maleic anhydride project. The Company is required to pay the remainder of the purchase price of approximately $7,188,274 prior to the delivery of the equipment, which is estimated to occur in 2010. The amount paid is recorded in construction in progress. Through September 30, 2010, the Company used its working capital and borrowed money from a local bank to fund the project. The Company estimates completion of the project by the end of 2010.

On February 16, 2009 and July 25, 2009, respectively, the Company entered two agreements to purchase certain licensed technology and equipment to be used in the butanediol project with a contract amount of Euro 16,650,000 or $20,326,320 and RMB5,750,000 or $846,975, respectively. As of September 30, 2010, the Company made payments of $6,719,519 and $128,395, respectively for the butanediol project. The Company is required to pay the remainder of the purchase price of $8,194,861 and $7,690,538 in the next year and year after, respectively, according to the terms of the agreement. The amount paid is recorded in construction in progress. The Company used its working capital and borrowed money from a local bank to fund the project. The Company estimates completion of the project in 2012.

As of September 30, 2010, the Company entered into an agreement and made payments of $17,427,068 toward the purchase of a land use right and fixed assets from Eagle. The Company is required to pay the remainder of the purchase price of $2,375,784 million in June, 2011. The amount paid is recorded in due from a related party. See Note 6.

F-32

Item 2. Management Discussion and Analysis of Financial Conditions and Results of Operations

The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto and other financial information contained elsewhere in the Form 8-K filed on October 1, 2010.

Our Company engages in the business of manufacturing and selling maleic anhydride (“MAH”) and phthalic anhydride (“PA”) products. The Company’s products are primarily marketed and sold in the PRC.

Our Company currently has the capacity to produce 30,000 tons of maleic anhydride per year and 50,000 tons of phthalic anhydride per year. During the second quarter of fiscal year ended December 31, 2008, the Company started construction to expand the Company’s annual MAH capacity to 60,000 tons per year. The expansion is scheduled to commence operations October, 2010. For the nine months ended September 30, 2010, the Company’s total revenues were $51,731,416.

Forward Looking Statements

We are including the following discussion to inform our existing and potential security holders generally of some of the risks and uncertainties that can affect us and to take advantage of the “safe harbor” protection for forward-looking statements that applicable federal securities law affords. From time to time, our management or persons acting on our behalf make forward-looking statements to inform existing and potential security holders about our Company. These forward-looking statements include information about possible or assumed future results of our operations. All statements, other than statements of historical facts, included or incorporated by reference in this report that address activities, events or developments that we expect or anticipate may occur in the future, including such things as future capital expenditures, business strategy, competitive strengths, goals, growth of our business and operations, plans and references to future successes may be considered forward-looking statements. Also, when we use words such as “anticipate,” “believe,” “estimate,” “intend,” “plan,” “project,” “forecast,” “may,” “should,” “budget,” “goal,” “expect,” “probably” or similar expressions, we are making forward-looking statements. Many risks and uncertainties may impact the matters addressed in these forward-looking statements. Our forward-looking statements speak only as of the date made and we will not update such forward-looking statements unless the securities laws require us to do so.

Some of the key factors which could cause our future financial results and performance to vary from those expected include:

	Ÿ	The loss of primary customers;
	Ÿ	Our ability to implement productivity improvements, cost reduction initiatives or facilities expansions;
	Ÿ	Market developments affecting, and other changes in, the demand for our products and the introduction of new competing products;
	Ÿ	Availability or increases in the price of our primary raw materials or active ingredients;
	Ÿ	The timing of planned capital expenditures;
	Ÿ	Our ability to identify, develop or acquire, and market additional product lines and businesses necessary to implement our business strategy and our ability to finance such acquisitions and development;
	Ÿ	The condition of the capital markets generally, which will be affected by interest rates, foreign currency fluctuations and general economic conditions;
	Ÿ	The ability to obtain registration and re-registration of our products under applicable law;
	Ÿ	The political and economic climate in the foreign or domestic jurisdictions in which we conduct business; and，
	Ÿ	Other People’s Republic of China (“PRC”) or foreign regulatory or legislative developments which affect the demand for our products generally or increase the environmental compliance cost for our products or impose liabilities on the manufacturers and distributors of such products.

The information contained in this report, identifies additional factors that could cause our results or performance to differ materially from those we express in our forward-looking statements. Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions and, therefore, the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements which are included in this report and the exhibits and other documents incorporated herein by reference, our inclusion of this information is not a representation by us or any other person that our objectives and plans will be achieved.

Significant Accounting Policies and Management Estimates

This section should be read together with the Summary of Significant Accounting Policies included as Note 2 to the financial statements included in the Form 8-K filed on October 1, 2010.

These contractual arrangements allow Zibo Costar to obtain effective control over ZBJZ through the ability to exercise all the rights of ZBJZ's shareholders, the rights to absorb substantially all of the economic residual benefits and the obligation to fund all of the expected losses of ZBJZ. Zibo Costar has been determined to be the primary beneficiary of ZBJZ because it is most closely associated with ZBJZ due to its obligation to provide unlimited financial support and its ability to determine strategic business decisions of ZBJZ through voting rights.

i.	Exclusive service agreement: Under these agreements Zibo Costar provides exclusive management and technical services and exclusive technology consulting services to ZBJZ in exchange for substantially all of the net income of ZBJZ.

ii.	Equity pledge agreement: As collateral to ensure ZBJZ’s payments under the exclusive service agreements, the shareholders of ZBJZ, through an equity pledge agreement, pledged all of their rights and interests in ZBJZ, including voting rights and dividend rights, to Zibo Costar.

iii.

We believe that the contractual arrangements with the VIE are in compliance with PRC laws and legally enforceable. The shareholders of the VIE are also shareholders of the Company except YLL Investment Group which is the non-controlling shareholder of Zibo Costar Information Consulting Co., Ltd. and therefore have no current interest in seeking to act contrary to the contractual arrangements. However, uncertainties in the PRC system could limit the Company’s ability enforce these contractual arrangements and if the shareholders of the VIE were to reduce their interest in the Company, their interests may diverge from that of the Company and may potentially increase the risk that they would seek to act contrary to the contractual terms, for example influencing the VIEs not to pay the service fees when required to do so.

Service fees are paid by ZBJZ to Zibo Costar Informational Consulting. Zibo Costar Informational Consulting. pays dividend through Gold Champ up to the Company. Certain payments from our PRC subsidiary to us may be subject to PRC taxes, such as withholding income tax. In addition regulations in the PRC currently permit payment of dividends of a PRC company only out of accumulated distributable after-tax profits as determined in accordance with its articles of association and the accounting standards and regulations of China. Our PRC subsidiary is required to set aside at least 10% of its after-tax profit based on PRC accounting standards every year to a statutory surplus reserve fund until the aggregate amount of such reserve fund reaches 50% of the registered capital of each subsidiary. We do not have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future

Use of Estimates

Management makes these estimates using the best information available at the time the estimates are made. Actual results could differ materially from those estimates.

Estimates affecting accounts receivable and prepayments for goods

The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect our reporting of assets and liabilities. These estimates are particularly significant where they affect the reported net realizable value of the Company’s accounts receivable, prepayments for goods.

At September 30, 2010, the Company provided no reserve against accounts receivable. Management’s estimate of no reserve on accounts receivable at September 30, 2010 was based on the aged nature of these accounts receivable. In making its judgment, management assessed its customers’ ability to continue to pay their outstanding invoices on a timely basis, and whether their financial position might deteriorate significantly in the future, which would result in their inability to pay their debts to the Company.

At September 30 2010, the Company provided an allowance against its prepayments for goods amounting to $158,090. Management’s estimate of the appropriate reserve on the prepayments for goods at September 30, 2010 was based on the aged nature of these prepayments for goods. In making its judgment, management assessed its suppliers’ ability to continue to provide goods or repayment their outstanding debts on a timely basis, and whether their financial position might deteriorate significantly in the future, which would result in their inability to pay their debts to the Company.

While the Company currently believes that there is little likelihood that actual results will differ materially from these current estimates, if the financial condition of our customers or suppliers deteriorates in the near future, the Company could realize significant write downs for uncollectible accounts receivable or prepayments for goods.

Revenue Recognition

Revenue represents the invoiced value of goods sold recognized upon the delivery of goods to customers. Revenue is recognized when all of the following criteria are met:

·	Persuasive evidence of an arrangement exists,

·	Delivery has occurred or services have been rendered,

·	The seller’s price to the buyer is fixed or determinable, and

·	Collectability is reasonably assured.

Management conducts credit background checks for new customers as a means to reduce the subjectivity of assuming collectability. The majorityof the Company's revenue results from sales contracts with customers and revenue is recorded upon the shipment of goods.

New Accounting Pronouncements

There were no new accounting pronouncements not yet adopted by the Company that would have a material effect on the Company’s condensed consolidated financial statements as of September 30, 2010.

RESULTS OF OPERATIONS

Our operating results are presented for the nine months ended September 30, 2010, as compared to the same period ended September 30, 2009.

The following table sets forth the amounts and the percentage relationship to revenues of certain items in our statements of operations for the nine months ended September 30, 2010 and 2009.

		Nine Months Ended September 30,										Comparisons
		2010		Percentage of Revenue			2009		Percentage of Revenue			Change in Amount		Change in Percentage
REVENUES	$	51,731,416		100.00	%	$	39,658,046		100.00	%	$	12,073,370		30.44	%
COST OF GOODS SOLD		41,188,906		79.62	%		32,999,948		83.21	%		8,188,958		24.82	%
GROSS PROFIT		10,542,510		20.38	%		6,658,098		16.79	%		3,884,412		58.34	%
General and administrative expenses		966,770		1.87	%		884,573		2.23	%		82,197		9.29	%
Selling and distribution expenses		8,286		0.02	%		10,885		0.03	%		(2,599	)	(23.88	%)
INCOME FROM OPERATIONS		9,567,454		18.49	%		5,762,640		14.53	%		3,804,814		66.03	%
OTHER INCOME (EXPENSES)
Lease income from a related party, net		2,136,161		4.13	%		2,442,604		6.16	%		(306,443	)	(12.55	%)
Interest expense, net		(1,481,236	)	(2.86	%)		(1,019,415	)	(2.57	%)		(461,821	)	45.30	%
Other income (expense), net		1,106		0.00	%		(24	)	0.00	%		1,130		(4708.33	%)
INCOME BEFORE INCOME TAXES		10,223,485		19.76	%		7,185,805		18.12	%		3,037,680		42.27	%
INCOME TAX EXPENSE		(1,184,237	)	(2.29	%)		(839,978	)	(2.12	%)		(344,259	)	40.98	%
NET INCOME	$	9,039,248		17.47	%	$	6,345,827		16.00	%	$	2,693,421		42.44	%

Revenue

The Company’s revenue for the nine months ended September 30, 2010 was $51,731,416, which represented an increase of 30.44% from the same period in the prior year. The increase was due to the following factors: (i) the increase in the sales volume of the processes of maleic anhydride and phthalic anhydride as compared to last year; (ii) the increase in sales price of maleic anhydride and phthalic anhydride as compared to the same period of last year.

The sales of phthalic anhydride increased by 14.58% to $22,636,862 for the nine months ended September 30, 2010 from $19,755,889 for the nine months ended September 30, 2009. The decrease in sales volume of 0.45% was due to the stable sales for the nine months ending September 30, 2010 from September 30, 2009. The increase in sales price of 15.03% was due to the increase in average price per metric ton for the nine months ended September 30, 2010 and 2009, respectively.

The sales of maleic anhydride increased by 68.58% to $18,324,221 for the nine months ended September 30, 2010 from $10,870,005 for the nine months ended September 30, 2009. The increase in sales volume of 9.97% was due to the increased demand for the nine months ended September 30, 2010 from September 30, 2009. The increase in sales price of 58.61% was due to the increase in average price per metric ton for the nine months ending September 30, 2010 and 2009, respectively.

Cost of Goods Sold (COGS)

Cost of goods sold for the nine months ended September 30, 2010 was $41,188,906 which is 79.62% of total revenues and represents a 24.82% increase as compared to $32,999,948 which is 83.21% of total revenues for the nine months ended September 30, 2009. This was due to an increase in the price of raw materials for the same period of last year.

The stability in volume of the raw material, o-xylene, used for the production of PA decreased by 0.45% due to the stable sales for the nine months ended September 30, 2010 from September 30, 2009. The increase in cost of o-xylene was 9.35% was due to the increase in average price per metric ton for the nine months ending September 30 and 2009, respectively.

The increase in volume of the raw material, coking benzene, used for the production of MAH was 9.97% due to the increase of production for the nine months ended September 30, 2010 from September 30, 2009. The increase in cost of coking benzene of 49.41% was due to the increase in average price per metric ton for the nine months ending September 30, 2010 and 2009, respectively.

Cost of goods sold as a percentage of revenue may fluctuate in the future. This fluctuation may primarily be due to changes in the price of raw materials, which can have a significant impact on the cost of goods sold.

Gross Profit

The Company’s gross profit increased by $3,884,412, or 58.34%, to $10,542,510 for the nine months ended September 30, 2010 as compared to $6,658,098 for the nine months ended September 30, 2009. The increase was due to an increase in sales volume as compared to the same period of last year.

Operating Income

The Company’s operating income for the nine months ended September 30, 2010 increased 66.03% to $9,567,454 from $5,762,640 reported for the nine months ended September 30, 2009. The increase was due to the increase of sales price and sales volume of products as compared to the same period of last year.

Operating Expenses

General and administrative expenses

The Company incurred general and administrative expenses of $966,770 for the nine months ended September 30, 2010, representing an increase of $82,197, or 9.29%, as compared to $884,573 for the nine months ended September 30, 2009. The increase was primarily due to an increase of a consulting fee of $58,930 in the financial department of the Company compared to the same period of last year.

Selling and distribution expenses

The Company incurred selling and distribution expenses of $8,286 for the nine months ended September 30, 2010, representing a decrease of $2,599, or 23.88%, as compared to $10,885 for the nine months ended September 30, 2009.

Lease Income from a Related Party, Net

The Company has lease income, net of $2,136,161 for the nine months ended September 30, 2010, representing a decrease of $306,443, or 12.55%, as compared to $2,442,604 for the nine months ended September 30, 2009. The decrease was due to the decrease in the rental fee.

Interest Expense, Net

Interest expense for the nine months ended September 30, 2010 was $1,481,236 which represents a 45.30% increase from $1,019,415 for last year. The increase of $461,821 was mainly due to the increase in the average balances of short and long term bank loans during this period.

Other Income (Expenses), Net

Other income for the nine months ended September 30, 2010 was $1,106, which represents a 4,708.33% increase from expense of $(24) for the nine months ended September 30, 2009.

Income Tax

The Company incurred income tax expense of $1,184,237, for the nine months ended September 30, 2010, an increase of $344,259, or 40.98%, as compared to income tax expense of $839,978 for the nine months ended September 30, 2009. This was attributed to the increase in income before income tax. Our effective tax rate was 12.5% for the nine months ended September 30, 2010 and 2009.

Net Income

The Company’s net income of $9,039,248, for the nine months ended September 30, 2010 represented an increase of $2,693,421, or 42.44%, as compared to $6,345,827, for the nine months ended September 30, 2009. This increase was due to the increase in the sales price and sales volume of products as compared to the same period of last year.

Our operating results are presented for the three months ended September 30, 2010, as compared to the same period ended September 30, 2009.

	Three Months Ended September 30,												Comparisons
	2010			Percentage of Revenue			2009			Percentage of Revenue			Change in Amount			Change in %
REVENUES	$	19,065,901			100.00	%	$	16,395,550			100.00	%	$	2,670,351			16.29	%
COST OF GOODS SOLD		14,938,547			78.35	%		12,352,778			75.34	%		2,585,769			20.93	%
GROSS PROFIT		4,127,354			21.65	%		4,042,772			24.66	%		84,582			2.09	%
General and administrative expenses		348,420			1.83	%		431,430			2.63	%		(83,010	)		(19.24	%)
Selling and distribution expenses		2,980			0.02	%		3,740			0.02	%		(760	)		(20.32	%)
INCOME FROM OPERATIONS		3,775,954			19.80	%		3,607,602			22.00	%		168,352			4.67	%
OTHER INCOME (EXPENSES)
Lease income from a related party, net		713,564			3.74	%		813,760			4.96	%		(100,196	)		(12.31	%)
Interest expense, net		(689,710	)		(3.62	%)		(432,331	)		(2.64	%)		(257,379	)		59.53	%
Other income, net		6,236			0.03	%		1,812			0.01	%		4,424			244.15	%
INCOME BEFORE INCOME TAXES		3,806,044			19.96	%		3,990,843			24.34	%		(184,799	)		(4.63	%)
INCOME TAX EXPENSE		(403,445	)		(2.12	%)		(480,000	)		(2.93	%)		76,555			(15.95	%)
NET INCOME	$	3,402,599			17.85	%	$	3,510,843			21.41	%	$	(108,244	)		(3.08	%)

Revenue

The Company’s revenue for the three months ended September 30, 2010 was $19,065,901, which represented an increase of 16.29% from the same period in the prior year. The increase was due to the increase in sales price of maleic anhydride and phthalic anhydride as compared to the same period of last year.

The sales of phthalic anhydride decreased by 15.48% to $7,050,293 for the three months ended September 30, 2010 from $8,341,716 for the three months ended September 30, 2009. The decrease in volume of 17.00% was due to the lower production for the three months ending September 30, 2010 from September 30, 2009. The increase in sales price of 1.52% was due to the increase in average price per metric ton for the three months ended September 30, 2010 and 2009, respectively.

The sales of maleic anhydride increased by 25.65% to $6,631,211 for the three months ended September 30, 2010 from $5,277,570 for the three months ended September 30, 2009. The decrease in volume of 6.14% was due to the decrease of production three months ended September 30, 2010 from September 30, 2009. The increase in sales price of 31.79% was due to the increase in average price per metric ton for the three months ending September 30, 2010 and 2009, respectively.

Cost of Goods Sold (COGS)

Cost of goods sold for the three months ended September 30, 2010 was $14,938,547 which is 78.35% of total revenues and represents a 20.93% increase as compared to $12,352,778 which is 75.34% of total revenues for the three months ended September 30, 2009. This was due to an increase of the price of raw materials as compared to the same period of last year. Cost of goods sold as a percentage of revenue may fluctuate in the future. This fluctuation may primarily be due to the changes in the price of raw materials, which can have a significant impact on the cost of goods sold.

The decrease in volume of the raw material, o-xylene, used for the production of PA was 17.00% due to the decrease in production for the three months ended September 30, 2010 from September 30, 2009. The increase in cost of o-xylene was 6.00% and was due to the increase in average price per metric ton for the three months ending September 30, 2010 and 2009, respectively.

The decrease in volume of the raw material, coking benzene, used for the production of MAH was 6.14% due to the increase of production for the three months ended September 30, 2010 from September 30, 2009. The increase in cost of coking benzene of 41% was due to the increase in average price per metric ton for the three months ending September 30, 2010 and 2009, respectively.

Gross Profit

The Company’s gross profit increased by $84,582, or 2.09%, to $4,127,354 for the three months ended September 30, 2010 as compared to $4,042,772 for the three months ended September 30, 2009. The increase was due to an increase in sales volume compared to the same period of last year.

Operating Income

The Company’s operating income for the three months ended September 30, 2010 increased 4.67% to $3,775,954 from $3,607,602 reported for the three months ended September 30, 2009. The increase was due to the increase in sales prices as compared to the same period of last year

Operating Expenses

General and administrative expenses

The Company incurred general and administrative expenses of $348,420 for the three months ended September 30, 2010, representing a decrease of $83,010, or 19.24%, as compared to $431,430 for the three months ended September 30, 2009. The decrease was due to a decrease in a consulting fee of $96,215 for the same period of last year.

Selling and distribution expenses

The Company incurred selling and distribution expenses of $2,980 for the three months ended September 30, 2010, representing a decrease of $760, or 20.32%, as compared to $3,740 for the three months ended September 30, 2009.

Lease Income from a Related Party, Net

The Company has lease income, net of $713,564 for the three months ended September 30, 2010, representing a decrease of $100,196, or 12.31%, as compared to $813,760 for the three months ended September 30, 2009. The decrease was due to the decrease in the rental fee.

Interest Expense, Net

Interest expense for the three months ended September 30, 2010 was $689,710, which represents a 59.53% increase from $432,331 for the same period of last year. The increase of $257,379 was mainly due to the increase in the average balances of short and long term bank loans during this period.

Other Income, Net

Other income for the three months ended September 30, 2010 was $6,236 which represents a 244.15% increase from $1,812 for the three months ended September 30, 2009.

Income Tax

The Company incurred income tax expense of $403,445 for the three months ended September 30, 2010, representing a decrease of $76,555, or 15.95%, as compared to income tax expense of $480,000 for the three months ended September 30, 2009. The decrease was due to a decrease in operating income. There was no significant change in the effective tax rate for the three months ended September 30, 2010 and 2009.

Net Income

The Company’s net income of $3,402,599 for the three months ended September 30, 2010 represented a decrease of $108,244, or 3.08%, as compared to $3,510,843 for the three months ended September 30, 2009. This decrease was due to an increase of interest expense.

LIQUIDITY AND CAPITAL RESOURCES FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010

Liquidity

We have entered into the loan agreements with our primary lenders including but not limited to the Agricultural Bank of China, Bank Austria Beijing and Qishang Bank. As of September 30, 2010, we had an aggregate principal amount of $64,122,661 outstanding under both the long-term and short-term loan agreements, with maturities from November 2010 to July 2013 and interest rates from 4.86% to 9.027% per annum. The loan agreements contain customary affirmative and negative covenants and are mainly guaranteed by third parties and individual persons or secured by a lien on our restricted cash, raw material inventories, and land use rights. Historically, all debt due have been paid back by the Company on a timely manner. All short-term bank loans are revolving loans whose terms (at due date of payment) are extended by the lender. As of September 30, 2010, we were in material compliance with the terms of our loan agreements. As such, management expects all unpaid short-term bank loans balances can be extended at the due date, but reserves the right to negotiate with other banks on favorable terms. Depending on the capital needs, the Company evaluates whether to apply for additional long-term bank loans they are paid back. The Company currently has sufficient lines of credits with the banks for both short-term and long-term borrowings.

We have entered into the notes payable agreements with banks to the amount of $88,652,005 for bank acceptance notes and $734,550 to third parties. As of September 30, 2010, we had an aggregate principal amount of $89,386,555 outstanding under the notes payable agreements, with maturities from October 2010 to September 2011 and are charged 0.05% of the principal for a total of $62,465 and interest expense of $-0- for the year ended September 30, 2010. The bank acceptance notes payable agreements contain customary affirmative and negative covenants and are mainly guaranteed by the Company’s restricted cash, third parties and an employee’s time deposit. Historically, all notes payable debts due have been paid back by the Company on a timely manner. All notes payable are whose terms (at due date of payment) are extended by the lender. As of September 30, 2010, we were in material compliance with the terms of our notes payable agreements. As such, management expects all unpaid notes payable balances can be extended at the due date, but reserves the right to negotiate with other third parties on favorable terms.

Capital Resources

As of September 30, 2010, our total assets were $243,418,284 and our total liabilities were $168,510,164. Our debt to asset ratio, calculated as total liabilities (including short-term debt and payables) over total assets, was 0.6923. Our operating revenue was $51,731,416 reflecting a total asset turnover of 0.2125.

The Company currently generates its cash flow through operations and the Company believes that its cash flow generated from operations will be sufficient to sustain operations for the next twelve months.

Capital Expenditures

Capital expenditures are related to increasing the manufacturing capacity to 60,000 metric tons per year for producing MAH, which is expected to be completed by the end of 2010 and the prepayment for the 1-4 butanediol construction. These projects were funded by long-term bank loans.

The expansion for the MAH facility will cost approximately $27 million and will be completed in the fourth quarter in 2010. The costs that were expended at December 31, 2009 was $15 million. The costs that were expended for the nine months ended September 30, 2010 was $12 million.

The total cost of building the BDO facility is approximately $90 million. The costs that were expended at December 31, 2009 was $7 million. The costs that were expended for the nine months ended September 30, 2010 was $0 million. The costs that were expended for the year ending December 31, 2010 were $23 million. The costs that will be expended for the year ending December 31, 2011 will be $27 million. The remainder of the purchase price of $33 million will be paid by the end of 2012.

As of September 30, 2010, the Company entered into an agreement and made payments of $17,427,068 toward the purchase of a land use right and fixed assets from Eagle. The Company is required to pay the remainder of the purchase price of approximately $2.3 million by the end of 2011. As of September 30, 2010, the Company does not have any financing commitments in place nor can it provide any assurance that such financing will be available on terms acceptable to the Company if at all.

Dividends

Our assets are predominately located inside China. Under the laws governing VIEs in China, dividend distribution and liquidation are allowed but subject special procedures under the relevant laws and rules. Any dividend payment will be subject to the decision of the board of directors and subject to foreign exchange rules governing such repatriation. Any liquidation is is subject to both the relevant government agency’s approval and supervision as well the foreign exchange control. Certain payments from our PRC subsidiary to us may be subject to PRC taxes, such as withholding income tax. In addition regulations in the PRC currently permit payment of dividends of a PRC company only out of accumulated distributable after-tax profits as determined in accordance with its articles of association and the accounting standards and regulations of China. Our PRC subsidiary is required to set aside at least 10% of its after-tax profit based on PRC accounting standards every year to a statutory surplus reserve fund until the aggregate amount of such reserve fund reaches 50% of the registered capital of each subsidiary. We do not have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. This generates additional risk for our investors in case of a dividend payment or liquidation.

Due from related parties

ZJHP generated through the nonpayment of the current balances of the sales of steam and lease of equipment to ZJHP less the purchases of electricity and interest income from ZJHP starting in 2007. This balance was the amount built up over the time period from 2007 to just prior to the merger that occurred on September 30, 2010. Mr. Lu Lingliang executed a personal guarantee for the total amount.

Prepayment of goods

The prepaid of goods represents the deposits for the raw material used in the processes of manufacturing maleic anhydride (“MAH”) and pythalic anhydride (“PA”), The balance has significantly increased due to the expansion of the MAH from 30,000 metric tons to 60,000 metric tons that was moved into the startup phase in October, 2010. This extra raw material supply is needed to insure enough supply to maintain operational performance and at a lower price.

Cash Flows

	September 30, 2010			September 30, 2009
Net cash (used in) provided by
Operating Activities	$	(2,249,877	)	$	5,560,146
Investment Activities	$	(11,778,524	)	$	(28,092,080	)
Financing Activities	$	15,566,209		$	23,933,354


Net increase in cash and cash equivalents	$	1,537,808		$	1,401,420

Effect of exchange rate changes on cash	$	1,304,496		$	(79,162	)

Cash and cash equivalents at the beginning of the nine month period	$	828,921		$	149,901

Net cash and cash equivalents at nine month period end	$	3,671,225		$	1,472,159

Operating Activities

Net cash used in operating activities was approximately $2.2 million for the nine months ended September 30, 2010, which was primarily attributable to our net income of $9 million adjusted by a non-cash depreciation and amortization of $4.6 million and an increase in accounts payable of $4 million, offset an increase in prepayment of goods of $16 million and an increase in due from a related party of $3 million.

1.	An increase of $4 million in accounts payable.

The increase was mainly due to the Company purchased more raw materials to meet the demand of production.

2.	An increase of $16 million in prepayments.

The increase was due to 1) the sales in 2010 increased and the Company estimated the sales will increase in 2011 as well. Therefore, the Company prepaid more to the vendors to meet the future demand of production; 2) the Company prepaid more to purchase raw materials for the new production for the new MA project completed at the end of 2010.

3.	An increase of $3 million in due from a related party.

The Company sells steam of $5 million to ZJHP and also purchases electric power of $2 million from ZJHP. The increase was mainly due to the increase of sales in this period.

Investing Activities

Net cash used in investing activities was approximately $11.8 million for the nine months ended September 30, 2010, which was primarily attributable to purchases of construction in progress of $13.8 million and offset by due from a relate party of $2.3 million.

Financing Activities

Net cash provided by financing activities was approximately $16 million for the nine months ended September 30, 2010, which was primarily attributable from proceeds from notes payable of $194 million, proceeds of short-term bank loans in the amount of $56 million, net proceeds from financial obligations sale leaseback in the amount of $1.5 million, offset by a restricted cash of $36 million, due from an employee $4.5 million, repayments of short-term bank loans of $41 million, and repayments of notes payable in amount of $153 million.

Capital Expenditures

Quantitative and Qualitative Disclosures about Market Risk

The resin and polyvinyl chloride market segments have indirect influences over the demand for products MAH and PA produced by the Company. The markets for these segments are increasing due to the growth demands of China; though it is uncertain how long this trend will remain. We have put more effort into building a 1,4-butanediol (“BDO”) plant over the next 18 months and to increase revenues to the Company. BDO is used in the manufacturing of industrial solvents, high performance paints and adhesives, pharmaceuticals, cosmetic herbicides, etc.

All the Company’s current products are manufactured using benzene as feedstock material. The market price of benzene has shown a stable trend; which will have a direct link to the cost of producing BDO. The Company intends to use its production of the MAH as feed stock to manufacture BDO. Recently, the People’s Republic of China has announced a policy to increase the import tariffs on BDO.

Both MAH and PA products have been experiencing an increase in sales volume. The sales volume has been steadily increasing since 2008 and the economic crisis. The Company intends to continue selling MAH and PA products, and intends to increase MAH capacity to follow the current trend.

Off Balance-Sheet Financing Arrangements

The Company does not have any off-balance sheet financing arrangements.

Interest Rates Risk

Our exposure to interest rate risk for changes in interest rates relates primarily to the interest bearing bank loans and interest income generated by the bank deposits. We have not used any derivative financial instruments in our investment portfolio or for cash management purposes. Interest-earning instruments carry a degree of interest rate risk. We have not been exposed, and do not anticipate being exposed to material risks due to changes in interest rates. However, our future interest expense or interest income may expect to be increased of expectations due to changes in interest rates in the PRC.

Material Commitments/Tabular Disclosure of Contractual Obligations

	Payments Due by Period
			Less Than 1			1-3		3-5	More than 5
	Total		Year		Years		Years		Years
Bank Indebtedness
Short-term bank loans	$	42,026,843	$	42,026,843	$	-	$	-	$	-
Interest payment of short-term bank loans	$	1,581,837	$	1,531,837	$	-	$	-	$	-
Notes Payable	$	89,386,555	$	89,386,555	$	-	$	-	$	-
Long-term bank loans	$	22,095,818	$	4,180,290	$	17,915,528	$	-	$	-
Interest payment of long-term bank loans	$	3,912,197	$	1,399,991	$	2,512,206	$	-	$	-
Operating Obligations
Land lease obligations	$	1,324,877	$	42,396	$	84,792	$	84,792	$	1,112,897
Purchase Obligations
Purchase obligations of equipments	$	23,073,673	$	15,383,135	$	7,690,538	$	-	$	-
Purchase obligations of land use right and fixed assets	$	2,375,784	$	2,375,784	$	-	$	-	$	-
Capital Lease Obligations
Financial obligations, sale-leaseback	$	1,279,664	$	501,340	$	778,324	$	-	$	-

We have entered into the loan agreements with our primary lenders including but not limited to the Agricultural Bank of China, Bank Austria Beijing and Qishang Bank. As of September 30, 2010, we had an aggregate principal amount of $64,122,661 outstanding under both the long-term and short-term loan agreements, with maturities from November 2010 to July 2013 and interest rates from 4.86% to 9.027% per annum. The loan agreements contain customary affirmative and negative covenants and are mainly guaranteed by third parties and individual persons or secured by a lien on our restricted cash, raw material inventories and land use rights. Historically, all debts due have been paid back by the Company on a timely manner. All short-term bank loans are revolving loans whose terms (at due date of payment) are extended by the lender. As of September 30, 2010, we were in material compliance with the terms of our loan agreements. As such, management expects all unpaid short-term bank loans balances can be extended at the due date, but reserves the right to negotiate with other banks on favorable terms. Depending on the capital needs, the Company evaluates whether to apply for additional long-term bank loans they are paid back. The Company currently has sufficient lines of credits with the banks for both short-term and long-term borrowings.

We have entered into the notes payable agreements with our banks in the amount of $88,652,005 for bank acceptance notes and $734,550 to third parties including but not limited to the Shandong Jide Ecological Technology Co. Ltd and Zibo Lanyan Group Co. Ltd. As of September 30, 2010, we had an aggregate principal amount of approximately $89,386,555 outstanding under both the notes payable agreements, with maturities from October 2010 to September 2011 and are charged 0.05% of the principal for a total of $62,465 and interest expense of $-0- for the nine months ended September 30,2010. The notes payable agreements contain customary affirmative and negative covenants and are mainly guaranteed by restricted cash, third parties and an an employee’s time deposit. Historically, all notes payable debts due have been paid back by the Company on a timely manner. All notes payable are whose terms (at due date of payment) are extended by the lender. As of September 30, 2010, we were in material compliance with the terms of our notes payable agreements. As such, management expects all unpaid notes payable balances can be extended at the due date, but reserves the right to negotiate with other third parties on favorable terms

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

N/A

ITEM 4T. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures. Under the supervision and with the participation of our management, including our President, Chief Financial Officer and Secretary, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the end of the period covered by this report. Based upon that evaluation, our President, Chief Financial Officer and Secretary concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective such that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management to allow timely decisions regarding disclosure. A controls system cannot provide absolute assurance, however, that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

Changes in Internal Control Over Financial Reporting. During the most recent quarter ended September 30, 2010, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) ) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS.

We are not a party to any pending legal proceeding, nor is our property the subject of a pending legal proceeding, that is not in the ordinary course of business or otherwise material to the financial condition of our business. None of our directors, officers or affiliates is involved in a proceeding adverse to our business or has a material interest adverse to our business.

ITEM 1A. RISK FACTORS.

N/A

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 4. (REMOVED AND RESERVED)

ITEM 5. OTHER INFORMATION.

None

ITEM 6. EXHIBITS.

Exhibit Number		Description of Exhibit

	31.1	Section 302 Certification of Principal Executive Officer
	31.2	Section 302 Certification of Principal Financial Officer
	32.1	Section 906 Certification of Principal Executive Officer
	32.2	Section 906 Certification of Principal Financial Officer

SIGNATURES

Pursuant to the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	China Chemical Corp.

May 23, 2011	By:	/s/ Lu Feng
		Lu Feng
		Chief Executive Officer
		(Principle Executive Officer)



May 23, 2011	By:	/s/ Dean Huge
		Dean Huge
		Chief Financial Officer
		(Principle Financial Officer)

Bomps Mining, Inc. - FORM 10-Q/A - May 23, 2011

Attached files

Bomps Mining, Inc. Reports