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<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center><B></B>&nbsp;</P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center><B></B>&nbsp;</P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center><B>UNITED STATES</B></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center><B>SECURITIES AND EXCHANGE COMMISSION</B></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center><B>Washington, D.C. 20549</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center><B>Form
10</B>-<B>Q</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><U>X</U>
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934</P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt" align=center>For the
quarter ended September 30, 2008</P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center>_
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center>For the
transition period from ____ to _____</P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center><B>LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED</B></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center>&nbsp;(Name of small business issuer in its charter)</P>
<P style="MARGIN: 0px"><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=242></TD>
<TD width=183></TD>
<TD width=219></TD></TR>
<TR>
<TD vAlign=top width=242>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center>Colorado</P></TD>
<TD vAlign=top width=183>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center>0-31751</P></TD>
<TD vAlign=top width=219>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center>84-1536518</P></TD></TR>
<TR>
<TD vAlign=top width=242>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center>(State or other jurisdiction of incorporation)</P></TD>
<TD vAlign=top width=183>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center>(Commission File Number)</P></TD>
<TD vAlign=top width=219>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center>(IRS Employer Identification Number)</P></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=219>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top colSpan=3>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center>No.30 Guanghua Street, Xiaojingyu Xiang, Wanbailin
District</P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center>Taiyuan City, Shanxi Province, China P.C. 030024</P></TD></TR>
<TR>
<TD vAlign=top colSpan=3>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center>(Address of principal executive
offices)</P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt"
align=center>Registrant&#146;s telephone number, including area code: &nbsp;(303)
885-5501</P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. &nbsp;See the
definitions of &#147;large accelerated filer,&#148; &#147;accelerated filer&#148; and &#147;smaller
reporting company&#148; in Rule 12b-2 of the Exchange Act.</P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Large Accelerated
Filer&nbsp;&nbsp;&nbsp;[ &nbsp;]
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Accelerated
Filer&nbsp;&nbsp;&nbsp;[ &nbsp;]&nbsp;&nbsp;&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Non-Accelerated
Filer&nbsp;&nbsp; [ &nbsp;] (Do not check if a smaller reporting company)
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Smaller reporting
company &nbsp;&nbsp;[ &nbsp;]</P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Yes__ No <U>X</U></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Indicate the number
of shares outstanding of each of the issuer's classes of stock, as of the latest
practicable date.</P>
<P style="MARGIN: 0px"><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=338></TD>
<TD width=286></TD></TR>
<TR>
<TD vAlign=top width=338>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Class of Securities</P></TD>
<TD vAlign=top width=286>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Shares Outstanding at October 31, 2008</P></TD></TR>
<TR>
<TD vAlign=top width=338>
<P>&nbsp;</P></TD>
<TD vAlign=top width=286>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=338>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Common Stock, no par value</P></TD>
<TD vAlign=top width=286>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>76,205,000</P></TD></TR></TABLE>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=center>- 1 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 10px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 0px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 13pt"><B>PART
1 - FINANCIAL INFORMATION</B></P>
<P style="MARGIN: 0px"><BR></P><A name=_Toc133030767></A><A
name=_Toc195698085></A>
<P
style="MARGIN-TOP: 10px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -17px; LINE-HEIGHT: 13pt"><B>ITEM
1. </B></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 96px; LINE-HEIGHT: 13pt"><B>FINANCIAL
STATEMENTS</B></P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: normal">(a)
The unaudited financial statements of registrant for three months ended
September 30, 2008, follow. &nbsp;The financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented<FONT
style="FONT-SIZE: 12pt">.</FONT></P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=center><BR><BR>&nbsp;</P>
<P style="MARGIN: 0px" align=center>- 2 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center>INDEX</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><BR></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><BR></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -17px; LINE-HEIGHT: 13pt"><A
href="#_Toc195698084">PART 1 - FINANCIAL INFORMATION</A></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 616px; LINE-HEIGHT: 13pt"><A
href="#_Toc195698084">2</A></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -17px; LINE-HEIGHT: 13pt"><A
href="#_Toc195698085">ITEM 1. </A></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -17px; TEXT-INDENT: 80px; LINE-HEIGHT: 13pt"><A
href="#_Toc195698085">FINANCIAL STATEMENTS</A></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 616px; LINE-HEIGHT: 13pt"><A
href="#_Toc195698085">2</A></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -17px; LINE-HEIGHT: 13pt"><A
href="#_Toc195698086">BALANCE SHEETS AS OF SEPTEMBER 30, <A
name=_Hlt198027324></A><A name=_Hlt198027325></A>2008 AND JUNE 30, 2008</P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 616px; LINE-HEIGHT: 13pt"><A
href="#_Toc195698086">4</A></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -17px; LINE-HEIGHT: 13pt">UNAUDITED
<A href="#_Toc195698087">STATEMENTS OF INCOME AND COMPREHENSIVE INCOME<A
name=_Hlt198027364></A></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 616px; LINE-HEIGHT: 13pt"><A
href="#_Toc195698087">5</A></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -17px; LINE-HEIGHT: 13pt">UNAUDITED
<A href="#_Toc195698088">STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY</A></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 616px; LINE-HEIGHT: 13pt"><A
href="#_Toc195698088">6</A></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -17px; LINE-HEIGHT: 13pt">UNAUDITED
<A href="#_Toc195698089">STATEMENTS OF CASH FLOWS</A></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 616px; LINE-HEIGHT: 13pt"><A
href="#_Toc195698089">7</A></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -17px; LINE-HEIGHT: 13pt"><A
href="#_Toc195698090">NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS</A></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 616px; LINE-HEIGHT: 13pt"><A
href="#_Toc195698090">8</A></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=center><BR>&nbsp;</P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P><A name=_Toc180382994></A>
<P
style="MARGIN-TOP: 10px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 0px; LINE-HEIGHT: 13pt"
align=center><B></B>&nbsp;</P>
<P style="MARGIN: 6px" align=center><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 3 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 6px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 6px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 13pt"
align=center><B>LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED</B></P><A
name=_Toc195698086></A>
<P style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 0px" align=center><B>BALANCE
SHEETS</B></P>
<P style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 0px" align=center><B>AS OF SEPTEMBER
30, 2008 AND JUNE 30, 2008</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=0.6></TD>
<TD width=407></TD>
<TD width=13></TD>
<TD width=15></TD>
<TD width=124></TD>
<TD width=5></TD>
<TD width=17></TD>
<TD width=138></TD>
<TD width=0.667></TD></TR>
<TR>
<TD vAlign=top width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P>&nbsp;</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>September 30, 2008</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>June 30, 2008</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P>&nbsp;</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center>(Unaudited)</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"><B>ASSETS</B></P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Current
assets:</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 13px; LINE-HEIGHT: 13pt">Cash
and cash equivalents</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=bottom width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>8,010,731</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8,632,879
</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 13px; LINE-HEIGHT: 13pt">Accounts
receivable</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>19,785,012</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12,134,507 </P></TD></TR>
<TR>
<TD vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 13px; LINE-HEIGHT: 13pt">Inventories</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>23,928,820</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;29,052,841 </P></TD></TR>
<TR>
<TD vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 13px; LINE-HEIGHT: 13pt">Advance
to suppliers</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>34,792,293</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;28,327,067 </P></TD></TR>
<TR>
<TD vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 13px; LINE-HEIGHT: 13pt">Deposits</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>12,739,510</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>12,610,984
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;&nbsp;&nbsp;&nbsp;Other
receivables </P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>-</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;72,896
&nbsp;</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Total current
assets</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>99,256,366</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;90,831,174 </P></TD></TR>
<TR>
<TD vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P>&nbsp;</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Property, plant
and equipment, net</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>2,568,460</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>2,637,326</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P>&nbsp;</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Total
assets</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=15>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>101,824,826</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=17>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;93,468,500 </P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P>&nbsp;</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"><B>LIABILITIES
AND STOCKHOLDERS&#146; EQUITY</B></P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Current
liabilities:</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 13px; LINE-HEIGHT: 13pt">Accounts
payable</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=top width=124>
<P
style="PADDING-RIGHT: 7px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>-</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;165,231
</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P
style="PADDING-LEFT: 23px; FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: -9px; LINE-HEIGHT: 13pt">Accrued
payables</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>770,496</P></TD>
<TD vAlign=bottom width=5>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;798,436
</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P
style="PADDING-LEFT: 23px; FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: -9px; LINE-HEIGHT: 13pt">Convertible
notes payable, net of discount of $254,697 and $636,742,
respectively</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>1,911,353</P></TD>
<TD vAlign=bottom width=5>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1,508,135
</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 13px; LINE-HEIGHT: 13pt">Taxes
payable</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>4,040,375</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,455,223
</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P>&nbsp;</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Total current
liabilities</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>6,722,224</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,927,025
</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P>&nbsp;</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Total
liabilities</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>6,722,224</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,927,025
</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P>&nbsp;</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P>&nbsp;</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"><B>STOCKHOLDERS&#146;
EQUITY </B></P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P
style="PADDING-LEFT: 17px; FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: -17px; LINE-HEIGHT: 13pt">Common
Stock; no par value, 100,000,000 shares authorized, 76,205,000 and
76,205,000 shares issued and outstanding as of 09/30/08 and 06/30/08,
respectively</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>7,008,712</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>7,008,712</P></TD></TR>
<TR>
<TD vAlign=top width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Additional
paid-in capital</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>1,528,180</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>1,528,180</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Retained
earnings</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>74,233,130</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;68,742,653 </P></TD></TR>
<TR>
<TD vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Accumulated
other comprehensive income </P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>12,332,580</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11,261,930 </P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P>&nbsp;</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Total
stockholders&#146; equity </P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>95,102,602</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>88,541,475</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=0.6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=407>
<P>&nbsp;</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=124>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Total
liabilities and stockholders&#146; equity</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=15>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=124>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>101,824,826</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=17>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;93,468,500
</P></TD></TR></TABLE>
<P style="MARGIN-TOP: 10px; MARGIN-BOTTOM: 0px"><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center>See
accompanying notes to the financial statements<A name=eolPage74></A></P>
<P style="MARGIN: 0px" align=center><BR></P><A name=_Toc180382995></A>
<P style="MARGIN: 0px" align=center><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 4 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B></B>&nbsp;</P>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED</B></P><A
name=_Toc195698087></A>
<P style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 0px" align=center><B>UNAUDITED
STATEMENTS<A name=FIS_INCOME_STATEMENT></A> OF INCOME AND COMPREHENSIVE
INCOME</B></P>
<P style="MARGIN: 0px" align=center><B>FOR THREE MONTHS</B><FONT
style="FONT-FAMILY: SimSun"><B> </FONT>ENDED SEPTEMBER 30, 2008 AND 2007</B></P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=center><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=0.733></TD>
<TD width=206></TD>
<TD width=1></TD>
<TD width=16></TD>
<TD width=102></TD>
<TD width=10></TD>
<TD width=9></TD>
<TD width=90></TD>
<TD width=9></TD>
<TD width=1></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=6>
<P style="MARGIN: 0px" align=right><B>Three months ended September
30,</B></P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=102>
<P style="MARGIN: 0px" align=right><B>2008</B></P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=9>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=3>
<P style="MARGIN: 0px" align=right><B>2007</B></P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Net revenues:</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=top width=102>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=9>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 12px; MARGIN: 0px">Product sales</P></TD>
<TD vAlign=top width=16>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>42,526,196</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32,110,699
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 12px; MARGIN: 0px">Agency service</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>1,949,290</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4,377,973
&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-TOP: #000000 1px solid" vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD style="BORDER-TOP: #000000 1px solid" vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>44,475,486</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD style="BORDER-TOP: #000000 1px solid" vAlign=bottom width=9>
<P style="MARGIN: 0px" align=right></P></TD>
<TD style="BORDER-TOP: #000000 1px solid" vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>36,488,672</P></TD></TR>
<TR>
<TD style="BORDER-TOP: #000000 1px solid" vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Cost of revenues</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 12px; MARGIN: 0px">Product sales</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>34,835,475</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25,434,493 </P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 12px; MARGIN: 0px">Agency service</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>-</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=3>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;259,397
&nbsp;</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>34,835,475</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=9>
<P style="MARGIN: 0px" align=right></P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>25,693,890</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Gross profit</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>9,640,011</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>&nbsp;&nbsp;10,794,782</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Operating Expenses</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 12px; MARGIN: 0px">Salaries</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>45,798</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;36,009
</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 24px; MARGIN: 0px; TEXT-INDENT: -12px">Other
selling, general and administrative expenses</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=102>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2,121,349
&nbsp;</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=9>
<P style="MARGIN: 0px" align=right></P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>321,425</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>2,167,147</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=9>
<P style="MARGIN: 0px" align=right></P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>357,434</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Operating profit</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>7,472,864</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>10,437,348</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Other income and (expenses)</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Interest income</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>3,836</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>&nbsp;&nbsp;19,000</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Interest expense</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>(21,594)</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>-</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Other income/(expense)</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>(17,758)</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 1px solid"
vAlign=bottom width=9>
<P style="MARGIN: 0px" align=right></P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>19,000</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Income before income taxes</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>7,455,106</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>10,456,348</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Income taxes</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>(1,964,629)</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=9>
<P style="MARGIN: 0px" align=right></P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>&nbsp;&nbsp;(3,437,578)</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Net income</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>5,490,477</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>7,018,770</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Other comprehensive income</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 30px; MARGIN: 0px; TEXT-INDENT: -6px">Foreign
currency translation adjustment</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>1,070,650</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=9>
<P style="MARGIN: 0px" align=right></P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>&nbsp;&nbsp;&nbsp;781,958</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Comprehensive income</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=16>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>6,561,127</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=9>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>7,800,728</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Basic net income per share</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=16>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>0.07</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=9>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>0.10</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 18px; MARGIN: 0px; TEXT-INDENT: -18px">Weighted
average number of shares outstanding</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>76,205,000</P></TD>
<TD vAlign=bottom width=10>
<P style="MARGIN: 0px" align=right>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>69,000,000</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=102>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Diluted net income per share</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=16>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>0.07</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=9>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>0.10</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=0.733>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 18px; MARGIN: 0px; TEXT-INDENT: -18px">Diluted
weighted average number of shares outstanding</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=16>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=102>
<P style="MARGIN: 0px" align=right>80,705,000</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=9>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom colSpan=3>
<P style="MARGIN: 0px" align=right>69,000,000</P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center>See accompanying notes to the financial
statements</P>
<P style="MARGIN: 0px" align=center>&nbsp;</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 0.05pt"><BR></P><A name=eolPage75></A>
<P
style="MARGIN: 0px; LINE-HEIGHT: 0.05pt"><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 5 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 0.05pt"
align=right><BR></P><A name=FIS_STOCKHOLDERS_EQUITY></A><A
name=_Toc180382996></A>
<P
style="MARGIN-TOP: 10px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 0px; LINE-HEIGHT: 13pt"
align=center><B>LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED</B></P><A
name=_Toc195698088></A>
<P style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 0px" align=center><B>UNAUDITED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY</B></P>
<P style="MARGIN: 0px" align=center><B>FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2008</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=211></TD>
<TD width=66></TD>
<TD width=10></TD>
<TD width=66></TD>
<TD width=12></TD>
<TD width=64></TD>
<TD width=13></TD>
<TD width=67></TD>
<TD width=7></TD>
<TD width=8></TD>
<TD width=98></TD>
<TD width=6></TD>
<TD width=12></TD>
<TD width=78></TD></TR>
<TR>
<TD vAlign=top width=211>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=66>
<P style="MARGIN: 0px" align=center>Common stock </P>
<P style="MARGIN: 0px" align=center>shares</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=66>
<P style="MARGIN: 0px" align=center>Common stock amount</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=12>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=64>
<P style="MARGIN: 0px" align=center>Additional paid-in capital</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=67>
<P style="MARGIN: 0px" align=center>Retained earnings</P></TD>
<TD vAlign=top width=7>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=8>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=98>
<P style="MARGIN: 0px" align=center>Accumulated other </P>
<P style="MARGIN: 0px" align=center>comprehensive income</P></TD>
<TD vAlign=top width=6>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=12>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=78>
<P style="MARGIN: 0px" align=center>Total stockholders&#146; equity</P></TD></TR>
<TR>
<TD vAlign=top width=211>
<P>&nbsp;</P></TD>
<TD vAlign=top width=66>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=66>
<P>&nbsp;</P></TD>
<TD vAlign=top width=12>
<P>&nbsp;</P></TD>
<TD vAlign=top width=64>
<P>&nbsp;</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=67>
<P>&nbsp;</P></TD>
<TD vAlign=top width=7>
<P>&nbsp;</P></TD>
<TD vAlign=top width=8>
<P>&nbsp;</P></TD>
<TD vAlign=top width=98>
<P>&nbsp;</P></TD>
<TD vAlign=top width=6>
<P>&nbsp;</P></TD>
<TD vAlign=top width=12>
<P>&nbsp;</P></TD>
<TD vAlign=top width=78>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=211>
<P style="MARGIN: 0px">Balance at June 30, 2008</P></TD>
<TD vAlign=bottom width=66>
<P style="MARGIN: 0px" align=right>76,205,000</P></TD>
<TD vAlign=bottom width=10>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD vAlign=bottom width=66>
<P style="MARGIN: 0px" align=right>7,008,712</P></TD>
<TD vAlign=bottom width=12>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD vAlign=bottom width=64>
<P style="MARGIN: 0px" align=right>1,528,180</P></TD>
<TD vAlign=bottom width=13>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD vAlign=bottom width=67>
<P style="MARGIN: 0px" align=right>68,742,653</P></TD>
<TD vAlign=bottom width=7>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=8>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD vAlign=bottom width=98>
<P style="MARGIN: 0px" align=right>11,261,930</P></TD>
<TD vAlign=bottom width=6>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=12>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px" align=right>88,541,475</P></TD></TR>
<TR>
<TD vAlign=bottom width=211>
<P style="MARGIN: 0px">Net income for the period</P></TD>
<TD vAlign=bottom width=66>
<P style="MARGIN: 0px" align=right>-</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=66>
<P style="MARGIN: 0px" align=right>-</P></TD>
<TD vAlign=bottom width=12>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=64>
<P style="MARGIN: 0px" align=right>-</P></TD>
<TD vAlign=bottom width=13>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=67>
<P style="MARGIN: 0px" align=right>5,490,477</P></TD>
<TD vAlign=bottom width=7>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=8>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=98>
<P style="MARGIN: 0px" align=right>-</P></TD>
<TD vAlign=bottom width=6>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=12>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=78>
<P style="MARGIN: 0px" align=right>5,490,477</P></TD></TR>
<TR>
<TD vAlign=bottom width=211>
<P
style="PADDING-RIGHT: 26px; PADDING-LEFT: 16px; MARGIN: 0px; TEXT-INDENT: -16px">Foreign
currency translation adjustment</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=66>
<P style="MARGIN: 0px" align=right>-</P></TD>
<TD vAlign=bottom width=10>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=66>
<P style="MARGIN: 0px" align=right>-</P></TD>
<TD vAlign=bottom width=12>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=64>
<P style="MARGIN: 0px" align=right>-</P></TD>
<TD vAlign=bottom width=13>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=67>
<P style="MARGIN: 0px" align=right>-</P></TD>
<TD vAlign=bottom width=7>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=8>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=98>
<P style="PADDING-LEFT: 18px; MARGIN: 0px; TEXT-INDENT: -3px"
align=right>1,070,650</P></TD>
<TD vAlign=bottom width=6>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=12>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=78>
<P style="PADDING-LEFT: 18px; MARGIN: 0px; TEXT-INDENT: -3px"
align=right>1,070,650</P></TD></TR>
<TR>
<TD vAlign=bottom width=211>
<P style="MARGIN: 0px">Balance at September 30,2008</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=66>
<P style="MARGIN: 0px" align=right>76,205,000</P></TD>
<TD vAlign=bottom width=10>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=66>
<P style="MARGIN: 0px" align=right>7,008,712</P></TD>
<TD vAlign=bottom width=12>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=64>
<P style="MARGIN: 0px" align=right>1,528,180</P></TD>
<TD vAlign=bottom width=13>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=67>
<P style="MARGIN: 0px" align=right>74,233,130</P></TD>
<TD vAlign=bottom width=7>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=8>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=98>
<P style="MARGIN: 0px" align=right>12,332,580</P></TD>
<TD vAlign=bottom width=6>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=12>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=78>
<P style="MARGIN: 0px" align=right>95,102,602</P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR>&nbsp;</P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR>&nbsp;</P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center>See
accompanying notes to the financial statements</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 0.05pt"><BR></P>
<P style="MARGIN: 0px" align=center><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 6 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B></B>&nbsp;</P>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED</B></P>
<P style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 0px" align=center><B>UNAUDITED <A
name=_Toc180382997></A><A name=_Toc195698089></A>STATEMENTS OF CASH
FLOWS</B></P>
<P style="MARGIN: 0px" align=center><B>FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2008 AND 2007</B></P>
<P style="MARGIN: 0px" align=center><BR></P><A name=eolPage77></A><A
name=FIS_UNIDENTIFIED_TABLE_25></A>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=52></TD>
<TD width=265></TD>
<TD width=21></TD>
<TD width=8></TD>
<TD width=13></TD>
<TD width=2></TD>
<TD width=10></TD>
<TD width=11></TD>
<TD width=23></TD>
<TD width=5></TD>
<TD width=11></TD>
<TD width=87></TD>
<TD width=5></TD>
<TD width=11></TD>
<TD width=66></TD>
<TD width=54></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=11>
<P style="MARGIN: 0px" align=center><B>Three Months ended September
30,</B></P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=87>
<P style="MARGIN: 0px" align=center><B>2008</B></P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=center><B>2007</B></P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Operating activities</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Net income</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD vAlign=top width=87>
<P style="MARGIN: 0px" align=right>5,490,477</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>7,018,770</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 15px; MARGIN: 0px; TEXT-INDENT: -12px">Adjustments
to reconcile net income from operations to net cash used in operating
activities:</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 21px; MARGIN: 0px">Depreciation</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P style="MARGIN: 0px" align=right>96,466</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>89,634</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 21px; MARGIN: 0px">Warrant expense</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P style="MARGIN: 0px" align=right>382,045</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>-</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 21px; MARGIN: 0px">Accrued interest</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P style="MARGIN: 0px" align=right>21,173</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>-</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 3px; MARGIN: 0px">Changes in operating assets and
liabilities</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 21px; MARGIN: 0px">Accounts receivable</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P style="MARGIN: 0px" align=right>(7,526,834)</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>(10,781,567)</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 21px; MARGIN: 0px">Other receivable</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P style="MARGIN: 0px" align=right>73,639</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>-</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 21px; MARGIN: 0px">Inventory</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P style="MARGIN: 0px" align=right>5,420,116</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px" align=right>2,921,429</P></TD></TR>
<TR>
<TD vAlign=bottom width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 21px; MARGIN: 0px">Advance to suppliers</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P style="MARGIN: 0px" align=right>(6,176,527)</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px" align=right>(2,907,038)</P></TD></TR>
<TR>
<TD vAlign=bottom width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 21px; MARGIN: 0px">Prepaid taxes</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P style="MARGIN: 0px" align=right>-</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px" align=right>1,475,158</P></TD></TR>
<TR>
<TD vAlign=bottom width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 21px; MARGIN: 0px">Accounts payable</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P style="MARGIN: 0px" align=right>-</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>240,596</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 21px; MARGIN: 0px">Other payable</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P style="MARGIN: 0px" align=right>(105,230) </P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>-</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 21px; MARGIN: 0px">Advance from customers</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P style="MARGIN: 0px" align=right>-</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>(416,397)</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 21px; MARGIN: 0px">Taxes payable</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P style="MARGIN: 0px" align=right>1,560,129</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>2,089,847</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 21px; MARGIN: 0px">Other current
liabilities</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=87>
<P style="MARGIN: 0px" align=right>13,654</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>-</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Net cash used in operating activities</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P style="MARGIN: 0px" align=right>(750,892)</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>(269,568)</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Investing activities</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 21px; MARGIN: 0px">Purchase of equipment</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=87>
<P style="MARGIN: 0px" align=right>(721)</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>(15,622)</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Net cash used in investing activities</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P style="MARGIN: 0px" align=right>(721)</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>(15,622)</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Effect of exchange rate changes in cash</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=87>
<P style="MARGIN: 0px" align=right>129,465</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>783,252</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Net increase (decrease) in cash and cash
equivalents</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P style="MARGIN: 0px" align=right>(622,148)</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>498,062</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Cash and cash equivalents, beginning of the
period</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=87>
<P style="MARGIN: 0px" align=right>8,632,879</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>6,060,428</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Cash and cash equivalents, end of the period</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=11>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=87>
<P style="MARGIN: 0px" align=right>8,010,731</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=11>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>6,558,490</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px"><B>Supplemental disclosure of cash flow
information</B></P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px">Cash paid during the period:</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=87>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=52>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="PADDING-LEFT: 15px; MARGIN: 0px">Income taxes paid</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=top width=10>
<P>&nbsp;</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=23>
<P>&nbsp;</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=11>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=87>
<P style="MARGIN: 0px" align=right>1,722,707</P></TD>
<TD vAlign=top width=5>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=11>
<P style="MARGIN: 0px" align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top colSpan=2>
<P style="MARGIN: 0px" align=right>1,714,612</P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR>&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center>See
accompanying notes to the financial statements</P><A name=eolPage76></A><A
name=FIS_CASH_FLOW></A><A name=eolPage78></A><A
name=FIS_NOTES_TO_FINANCIAL_STATEMENT></A><A name=_Toc180382998></A>
<P style="MARGIN: 0px" align=center><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 7 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B></B>&nbsp;</P>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED</B></P><A
name=_Toc195698090></A>
<P
style="MARGIN-TOP: 10px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 0px; LINE-HEIGHT: 13pt"
align=center><B>NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007</B></P><A name=eolPage79></A>
<P style="MARGIN: 0px" align=center>&nbsp;&nbsp;&nbsp;</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -20px; LINE-HEIGHT: 15pt"><B>1.
</B></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"><B>MANAGEMENT'S
REPRESENTATION OF INTERIM FINANCIAL INFORMATION</B></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">The
accompanying financial statements have been prepared by Longwei Petroleum
Investment Holding Limited, Inc. without audit pursuant to the rules and
regulations of the Securities and Exchange Commission. &nbsp;Certain information
and disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted as
allowed by such rules and regulations, and management believes that the
disclosures are adequate to make the information presented not misleading.
&nbsp;These financial statements include all of the adjustments, which in the
opinion of management are necessary to a fair presentation of financial position
and results of operations. &nbsp;All such adjustments are of a normal and
recurring nature. Interim results are not necessarily indicative of results for
a full year.&nbsp;</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="PADDING-RIGHT: 96px; MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -21px; LINE-HEIGHT: 16pt"><B>2.
</B></P>
<P
style="PADDING-RIGHT: 96px; FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 14pt"><B>SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES </B></P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>This summary of significant accounting policies of the Company is
presented to assist in understanding the Company&#146;s financial statements.
&nbsp;The financial statements and notes are representations of the Company&#146;s
management, which is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements. </P>
<P style="MARGIN: 0px"><BR></P>
<P
style="PADDING-RIGHT: 96px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 14pt"><B>Description
of Business </B></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>Longwei Petroleum Investment Holding Limited (&#147;we,&#148; &#147;us,&#148; &#147;our,&#148;
&#147;Longwei&#148;) was incorporated under the laws of the State of Colorado on March 17,
2000, under the name of Tabatha II, Inc. We changed our name to Longwei
Petroleum Investment Holding Limited on October 12, 2007. We were formed as a
&#147;blind pool&#148; or &#147;blank check&#148; company whose business plan was to seek to acquire
a business opportunity through completion of a merger, exchange of stock, or
other similar type of transaction. In furtherance of our business plan, we
voluntarily elected to become subject to the periodic reporting obligations of
the Securities Exchange Act of 1934 by filing a registration statement on Form
10-SB.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>Prior to October 16, 2007, our only business activities were the
organizational activities described above, including registration under the
Securities Exchange Act of 1934, and efforts to locate a suitable business
opportunity for acquisition. On October 16, 2007, the date of the closing of the
Share Exchange, we acquired all of the issued and outstanding common stock of
Longwei Petroleum Investment Holding Limited (&#147;Longwei BVI&#148;), a British Virgin
Islands corporation incorporated on April 3, 2006. &nbsp;Longwei BVI owns all of
the issued and outstanding stock of Taiyuan Yahua Energy Conversion Co., Ltd.
(&#147;Taiyuan Yahua&#148;), a Chinese limited liability company, which in turn is the
sole shareholder of <A name=_DV_M165></A>Taiyuan Longwei Economy &amp; Trading
Co., Ltd. (&#147;Taiyuan Longwei&#148;), a Chinese limited liability company.
&nbsp;&nbsp;We issued 69,000,000 shares of common stock in the share exchange
transaction for 100% of the ownership of Longwei BVI. As a result of the share
exchange transaction, Longwei BVI and its subsidiaries became our wholly owned
subsidiaries.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=justify><BR></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><BR></P>
<P style="MARGIN: 0px" align=center>- 8 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B></B>&nbsp;</P>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"><B>2.&nbsp;&nbsp;&nbsp;&nbsp;SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</B></P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"><B>Description of
Business - continued</B></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>The former stockholders of Longwei BVI acquired 92% of our issued
and outstanding common stock as a result of closing the share exchange
transaction. &nbsp;Therefore, although Longwei BVI became our wholly-owned
subsidiary, the transaction was accounted for as a recapitalization of Longwei
BVI, whereby Longwei BVI is deemed to be the accounting acquirer and is deemed
to have adopted our capital structure.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>All operating activities are carried out through our wholly-owned
Chinese subsidiary, Taiyuan Longwei Economy &amp; Trading Co., Ltd. (&#147;Taiyuan
Longwei&#148;), which was incorporated in 1995. &nbsp;The operating company is
located in Taiyuan City, China. &nbsp;We purchase diesel, gasoline, fuel oil and
kerosene from various suppliers. As an intermediary, we seek to earn profits by
buying diesel, gasoline, fuel oil and kerosene at competitive prices and selling
them to other wholesalers. In addition, we also earn revenues by acting as a
purchase agent where we charge an agency fee, a fee which is charged to
wholesalers who do not have a license to purchase directly from refineries.
Further, the company owns a gas station located on its property where it
generates additional profit and revenue. The cost of our products is largely
dependent on the price of crude oil. The price of crude oil is subject to
fluctuation due to a variety of factors, all of which are beyond our control.
When sudden and significant increases occur in the cost of fuel and lubricant
products, we may not be able to pass on these increases through timely price
increases to our customers. The timing of passing these costs to our customers
can significantly affect our margins. The affect of lower crude oil prices,
after the sale for a short time of higher priced inventory on hand at the time
of the price decrease, reduces the cost of the products which, in turn, improves
profit margins. Fuel oil is a liquid petroleum product that is burned in a
furnace or boiler for the generation of heat or used in an engine for the
generation of power. Solvents are unrefined petroleum products used in paint,
dry-cleaning solvents, solvents for cutback asphalts and solvents for the rubber
industry. We transport and market these products to other wholesale buyers. Our
primary customers are large-scale gas stations, which represent 60% of our
sales. These gas stations, which purchase diesel and gasoline from us, are
located in Taiyuan City in the Shanxi Province of China. Our second largest
group of customers is the coal plants and power supply companies that use our
fuel oil for heat and power, along with our solvents, which comprise 30% of our
business. Our third largest customers are the small independent gas stations.
These represent 10% of our total sales, and purchase gasoline and diesel. Our
operating company is located at No. 30 Guanghua Avenue, Xiaojingyu Xiang, Wan
Bailin District, Taiyuan City, P.C. 030024, Shanxi Province, China, and our
phone number is (86) 351-6527-366.</P><A name=FIS_THE_OFFERING></A>
<P style="PADDING-LEFT: 6px; FONT-SIZE: 11pt; MARGIN: 0px"
align=justify>&nbsp;</P>
<P
style="PADDING-RIGHT: 1px; PADDING-LEFT: 60px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp;Basis
of Preparation</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">The
financial statements of the Company are prepared in accordance with accounting
principles generally accepted in the United States of America and include the
accounts of the Company. This basis of accounting differs in certain material
respects from that used for the preparation of the books and records of the
Company, which are prepared in accordance with the accounting principles and the
relevant financial regulations applicable to enterprises with limited
liabilities, established in the PRC (&#147;PRC GAAP&#148;) the accounting standards used
in the place of their domicile.</P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px" align=center><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 9 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007</B></P>
<P style="MARGIN: 0px"><BR></P>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"><B>2.&nbsp;&nbsp;&nbsp;&nbsp;SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</B></P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">(b)&nbsp;&nbsp;&nbsp;&nbsp;Economic
and Political Risks</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">The
Company's operations are conducted in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environment in the PRC, and by the general state
of the PRC economy.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">The
Company's operations in the PRC are subject to special considerations and
significant risks not typically associated with companies in North America and
Western Europe. These include risks associated with, among others, the
political, economic and legal environment and foreign currency exchange. The
Company's results may be adversely affected by changes in the political and
social conditions in the PRC, and by changes in governmental policies with
respect to laws and regulations, anti-inflationary measures, currency
conversion, remittances abroad, and rates and methods of taxation.</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">(c)&nbsp;&nbsp;&nbsp;&nbsp;Principles
of Consolidation</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -17px; LINE-HEIGHT: 13pt">&nbsp;</P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">The
accompanying financial statements include Longwei Petroleum Investment Holding
Limited, its wholly owned subsidiary, Longwei Petroleum Investment Holding
Limited, a British Virgin Island corporation, its wholly owned subsidiary,
Taiyuan Yahua Energy Conversion Co., Ltd., a Chinese limited liability company,
which owns 100% of the operating subsidiary, Taiyuan Longwei Economy &amp;
Trading Company, Ltd., a Chinese limited liability company. &nbsp;Intercompany
transactions have been eliminated in consolidation. </P>
<P style="MARGIN: 0px"><BR></P>
<P
style="PADDING-RIGHT: 1px; PADDING-LEFT: 60px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp;Property,
Plant and Equipment</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">Property,
plant and equipment are carried at cost less accumulated depreciation.
Depreciation is provided over the assets' estimated useful lives, using the
straight-line method. Estimated useful lives of the property, plant and
equipment are as follows:</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=324></TD>
<TD width=17></TD>
<TD width=14></TD>
<TD width=90></TD></TR>
<TR>
<TD vAlign=bottom width=324>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Buildings</P></TD>
<TD width=17>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P></TD>
<TD vAlign=bottom width=14>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P></TD>
<TD vAlign=bottom width=90>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">20
years</P></TD></TR>
<TR>
<TD vAlign=bottom width=324>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Heavy machinery
and production equipment</P></TD>
<TD width=17>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P></TD>
<TD vAlign=bottom width=14>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P></TD>
<TD vAlign=bottom width=90>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">8- 20
years</P></TD></TR>
<TR>
<TD vAlign=bottom width=324>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Railway</P></TD>
<TD width=17>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P></TD>
<TD vAlign=bottom width=14>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P></TD>
<TD vAlign=bottom width=90>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">20
years</P></TD></TR>
<TR>
<TD vAlign=bottom width=324>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Motor
vehicles</P></TD>
<TD width=17>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P></TD>
<TD vAlign=bottom width=14>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P></TD>
<TD vAlign=bottom width=90>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">5
years</P></TD></TR></TABLE>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">The
cost and related accumulated depreciation of assets sold or otherwise retired
are eliminated from the accounts and any gain or loss is included in the
statement of income. The cost of maintenance and repairs is charged to the
statement of income as incurred, whereas significant renewals and betterments
are capitalized.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><BR></P>
<P style="MARGIN: 0px" align=center>- 10 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"><B>2.&nbsp;&nbsp;&nbsp;&nbsp;SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</B></P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">(e)&nbsp;&nbsp;&nbsp;&nbsp;Accounting
for the Impairment of Long-Lived Assets</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">The
long-lived assets held and used by the Company are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
assets may not be recoverable. It is reasonably possible that these assets could
become impaired as a result of technology or other industry changes.
Determination of recoverability of assets to be held and used is by comparing
the carrying amount of an asset to future net undiscounted cash flows to be
generated by the assets. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">There
was no impairment of long-lived assets as of September 30, 2008.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">(f)&nbsp;&nbsp;&nbsp;&nbsp;Inventories</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">Inventories
are stated at the lower of cost, determined on a weighted average basis, or net
realizable value. Net realizable value is the estimated selling price in the
ordinary course of business less the estimated cost of completion and the
estimated costs necessary to make the sale.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">When
inventories are sold, their carrying amount is charged to expense in the year in
which the revenue is recognized. Write-downs for declines in net realizable
value or for losses of inventories are recognized as an expense in the year the
impairment or loss occurs. There were no declines in net realizable value of
inventory for three months ended September 30, 2008.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;(g)
&nbsp;&nbsp;&nbsp;Accounts Receivable</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">Trade
receivables are recognized and carried at the original invoice amount less
allowance for any uncollectible amounts. An estimate for doubtful accounts is
made when collection of the full amount is no longer probable. Bad debts are
written off as incurred.<B> </B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">(h)&nbsp;&nbsp;&nbsp;&nbsp;Cash
and Cash Equivalents</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">The
Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. Cash deposit in PRC
banks are not insured by any government agency or entity.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">(i)&nbsp;&nbsp;&nbsp;&nbsp;Advances
to Suppliers</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">Advances
to suppliers represent the cash paid in advance for purchasing of inventory
items from suppliers.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">(j)&nbsp;&nbsp;&nbsp;&nbsp;Fair
Value of Financial Instruments</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">The
Company's financial instruments include cash and cash equivalents, accounts
receivable, prepaid taxes, advances to suppliers, other current assets, taxes
payable, accounts payable and advances from customers. Management estimates that
the carrying amounts of the non related party financial instruments approximate
their fair values due to their short-term nature.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><BR></P>
<P style="MARGIN: 0px" align=center>- 11 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px" align=center>&nbsp;</P>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"><B>2.&nbsp;&nbsp;&nbsp;&nbsp;SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</B></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;(k)&nbsp;&nbsp;&nbsp;&nbsp;Revenue
Recognition</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">The
Company derives the bulk of its revenue from sales of gasoline, diesel, solvent
oil and fuel oil. These product sales revenues are recognized when customers
take possession of goods in accordance with the terms of purchase order
agreements that evidence agreed upon pricing and when collectibility is
reasonably assured. Cost of revenues for product sales include costs to purchase
and transport the product to the Company, costs to deliver the goods to the
customer and depreciation on product storage and delivery equipment.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">Agency
service revenue consists of fees charged to small fuel distributors who lack the
required licenses to purchase directly from large refineries. The Company
allocates a portion of its purchasing quota to these customers for a fee similar
to a sales commission. Agency service revenue is recognized when there is
evidence of an arrangement that specifies pricing and irrevocable allocation of
a portion of the Company&#146;s purchase quota and collection has occurred. Cost of
agency service revenues consists primarily of selling commissions.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;(l)&nbsp;&nbsp;&nbsp;&nbsp;Foreign
Currency Translation</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>&nbsp;The functional currency of the Company is RMB and RMB is
freely convertible into foreign currencies. The Company maintains its financial
statements in the functional currency. Monetary assets and liabilities
denominated in currencies other than the functional currency are translated into
the functional currency at rates of exchange prevailing at the balance sheet
date. Transactions denominated in currencies other than the functional currency
are translated into the functional currency at the exchange rates prevailing at
the dates of the transactions. Exchange gains or losses arising from foreign
currency transactions are included in the determination of net income for the
respective periods.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>For financial reporting purposes, the financial statements of the
Company which are prepared using the functional currency have been translated
into United States dollars. Assets and liabilities are translated at exchange
rates at the balance sheet dates and revenue and expenses are translated at the
average exchange rates and stockholders&#146; equity is translated at historical
exchange rates. Any translation adjustments resulting are not included in
determining net income but are included in foreign exchange adjustment to other
comprehensive income, a component of stockholders&#146; equity. &nbsp;If the RMB
appreciates against the U.S. dollar, revenue and expenses would be higher than
they would have been if there were no fluctuations in the currencies.
&nbsp;Conversely, if the RMB appreciates against the U.S. dollar, revenue and
expenses would be lower than they would have been if there were no fluctuations
in the currencies. The exchange rates adopted are as follows:</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=235></TD>
<TD width=77></TD>
<TD width=11></TD>
<TD width=76></TD></TR>
<TR>
<TD vAlign=bottom width=235>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P></TD>
<TD width=77>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>2008</B></P></TD>
<TD vAlign=bottom colSpan=2>
<P
style="PADDING-RIGHT: 7px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>2007</B></P></TD></TR>
<TR>
<TD vAlign=bottom width=235>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Period
end&nbsp;RMB exchange rate</P></TD>
<TD width=77>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>6.7899</P></TD>
<TD vAlign=bottom width=11>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>6.859</P></TD></TR>
<TR>
<TD vAlign=bottom width=235>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Average
period&nbsp;RMB exchange rate</P></TD>
<TD width=77>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>6.8377</P></TD>
<TD vAlign=bottom width=11>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P></TD>
<TD vAlign=bottom width=76>
<P
style="PADDING-RIGHT: 7px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>7.276</P></TD></TR></TABLE>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">No
representation is made that the RMB amounts could have been, or could be,
converted into U.S. dollars at the rates used in translation.</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><BR></P>
<P style="MARGIN: 0px" align=center>- 12 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007</B></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"><B>2.&nbsp;&nbsp;&nbsp;&nbsp;SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">(m)&nbsp;&nbsp;&nbsp;&nbsp;Use
of Estimates</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">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; however actual results
could differ materially from those estimates.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;(n)&nbsp;&nbsp;&nbsp;&nbsp;Income
Taxes</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">The
company has implemented SFAS No. 109, "Accounting for Income Taxes," which
provides for a liability approach to accounting for income taxes. Deferred
income taxes result from the effect of transactions that are recognized in
different periods for financial and tax reporting purposes. The company has
recorded no deferred tax assets or liabilities as of September 30, 2008, since
nearly all differences in tax bases and financial statement carrying values are
permanent differences.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;(o)&nbsp;&nbsp;&nbsp;&nbsp;Recent
Accounting Pronouncements</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="MARGIN-TOP: 6px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 6px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">In
December&nbsp;2007, the<A name=keyword></A> FASB issued SFAS No.&nbsp;141R,
"Business Combinations" ("SFAS No.&nbsp;141R"). SFAS No.&nbsp;141R amends
SFAS&nbsp;141 and provides revised guidance for recognizing and measuring
identifiable assets and goodwill acquired, liabilities assumed, and any
noncontrolling interest in the acquiree. It also provides disclosure
requirements to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. It is effective for fiscal
years beginning on or after December&nbsp;15, 2008 and will be applied
prospectively. We are currently evaluating the impact of adopting SFAS
No.&nbsp;141R on our consolidated financial statements. </P>
<P
style="MARGIN-TOP: 6px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 6px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">In
December&nbsp;2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements&nbsp;&#151; an amendment of ARB No.&nbsp;51" ("SFAS
No. 160&#148;). SFAS No. 160 requires that ownership interests in subsidiaries held
by parties other than the parent, and the amount of consolidated net income, be
clearly identified, labeled, and presented in the consolidated financial
statements. It also requires once a subsidiary is deconsolidated, any retained
noncontrolling equity investment in the former subsidiary be initially measured
at fair value. Sufficient disclosures are required to clearly identify and
distinguish between the interests of the parent and the interests of the
noncontrolling owners. It is effective for fiscal years beginning on or after
December&nbsp;15, 2008 and requires retroactive adoption of the presentation and
disclosure requirements for existing minority interests. All other requirements
shall be applied prospectively. We are currently evaluating the impact of
adopting SFAS No. 160 on our consolidated financial statements. </P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">In
March 2008, FASB issued Financial Accounting Standards No. 161, &#147;<I>Disclosure
about Derivative Instruments and Hedging Activities - an amendment to FASB
Statement No. 133.&#148;</I> The use and complexity of derivative instruments and
hedging activities have increased significantly over the past several years.
Constituents have expressed concerns that the existing disclosure requirements
in FASB Statement No. 133, &#147;<I>Accounting for Derivative Instruments and Hedging
Activities,&#148;</I> do not provide adequate information about how derivative and
hedging activities affect an entity&#146;s financial position, financial performance,
and cash flows. Accordingly, this Statement requires enhanced disclosures about
an entity&#146;s derivative and</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><BR></P>
<P style="MARGIN: 0px" align=center>- 13 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"><B>2.&nbsp;&nbsp;&nbsp;&nbsp;SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)</B></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">(o)&nbsp;&nbsp;&nbsp;&nbsp;Recent
Accounting Pronouncements (Continued)</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">hedging activities
and thereby improves the transparency of financial reporting. This Statement is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008.</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 7px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">In
May 2008, the FASB issued Statement No. 162, &#147;<I>The Hierarchy of Generally
Accepted Accounting Principles</I>.&#148; &nbsp;This statement identifies the sources
of accounting principles and the framework for selecting the principles to be
used in the preparation of financial statements of nongovernmental entities that
are presented in conformity with generally accepted accounting principles (GAAP)
in the United States (the GAAP hierarchy). &nbsp;This statement is effective 60
days following the SEC&#146;s approval of the Public Company Accounting Oversight
Board amendments to AU Section 411, &#147;<I>the Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles</I>.&#148;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>In May 2008, the FASB issued Statement No. 163<I> &#147;Accounting for
Financial Guarantee Insurance Contracts&#151;an interpretation of FASB Statement No.
60.&#148; &nbsp;</I>The premium revenue recognition approach for a financial
guarantee insurance contract links premium revenue recognition to the amount of
insurance protection and the period in which it is provided. For purposes of
this statement, the amount of insurance protection provided is assumed to be a
function of the insured principal amount outstanding, since the premium received
requires the insurance enterprise to stand ready to protect holders of an
insured financial obligation from loss due to default over the period of the
insured financial obligation. &nbsp;This Statement is effective for financial
statements issued for fiscal years beginning after December 15, 2008.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">3.&nbsp;&nbsp;&nbsp;&nbsp;ACCOUNTS
RECEIVABLE</P>
<P style="MARGIN: 0px"><BR></P>
<P style="PADDING-LEFT: 72px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>The receivables and allowance balances at September 30, 2008 and
June 30, 2008 are as follows:</P>
<P style="MARGIN: 0px"><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=247></TD>
<TD width=18></TD>
<TD width=1></TD>
<TD width=15></TD>
<TD width=120></TD>
<TD width=1></TD>
<TD width=16></TD>
<TD width=2></TD>
<TD width=2></TD>
<TD width=118></TD>
<TD width=3></TD></TR>
<TR>
<TD vAlign=bottom width=247>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD>
<TD width=18>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>September 30, 2008</B></P></TD>
<TD vAlign=bottom colSpan=2>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px"
align=right><B></B>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=4>
<P
style="PADDING-RIGHT: 2px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>&nbsp;June 30, &nbsp;2008</B></P></TD></TR>
<TR>
<TD vAlign=bottom width=247>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Accounts
receivable</P></TD>
<TD colSpan=2>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=bottom colSpan=2>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>19,785,012</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>12,134,507</P></TD></TR>
<TR>
<TD vAlign=bottom width=247>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Less:
allowance for doubtful accounts</P></TD>
<TD colSpan=2>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=15>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px"
align=right>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=2>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>-</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=2>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>-</P></TD></TR>
<TR>
<TD vAlign=bottom width=247>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Accounts
receivable, net</P></TD>
<TD colSpan=2>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=15>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom colSpan=2>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>19,785,012</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>12,134,507</P></TD></TR></TABLE>
<P style="FONT-SIZE: 11pt; MARGIN: 0px" align=center>&nbsp;&nbsp;</P>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">4.&nbsp;&nbsp;&nbsp;&nbsp;INVENTORIES</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="PADDING-LEFT: 72px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Inventories
are the unsold petroleum products purchased from various suppliers, and consist
of the following as of September 30, 2008 and June 30, 2008:</P>
<P style="MARGIN: 0px"><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=276></TD>
<TD width=13></TD>
<TD width=106></TD>
<TD width=12></TD>
<TD width=112></TD></TR>
<TR>
<TD vAlign=top width=276>
<P>&nbsp;</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=106>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>September 30,</B></P></TD>
<TD vAlign=top width=12>
<P>&nbsp;</P></TD>
<TD vAlign=top width=112>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>June 30,</B></P></TD></TR>
<TR>
<TD vAlign=top width=276>
<P>&nbsp;</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=106>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>2008</B></P></TD>
<TD vAlign=top width=12>
<P>&nbsp;</P></TD>
<TD vAlign=top width=112>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>2008</B></P></TD></TR>
<TR>
<TD vAlign=top width=276>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Diesel
Oil</P></TD>
<TD vAlign=top width=13>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=bottom width=106>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>11,689,430</P></TD>
<TD vAlign=top width=12>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=top width=112>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16,433,154
</P></TD></TR>
<TR>
<TD vAlign=top width=276>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Gasoline</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=106>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>12,239,390</P></TD>
<TD vAlign=top width=12>
<P>&nbsp;</P></TD>
<TD vAlign=top width=112>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12,619,687
</P></TD></TR>
<TR>
<TD vAlign=top width=276>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Less:
allowances for slowing moving items</P></TD>
<TD vAlign=top width=13>
<P>&nbsp;</P></TD>
<TD vAlign=top width=106>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>-</P></TD>
<TD vAlign=top width=12>
<P>&nbsp;</P></TD>
<TD vAlign=top width=112>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>-</P></TD></TR>
<TR>
<TD vAlign=top width=276>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Total</P></TD>
<TD vAlign=top width=13>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 3px double"
vAlign=top width=106>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>23,928,820</P></TD>
<TD vAlign=top width=12>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 3px double"
vAlign=top width=112>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;29,052,841
</P></TD></TR></TABLE>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><BR></P>
<P style="MARGIN: 0px" align=center>- 14 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007</B></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">5.&nbsp;&nbsp;&nbsp;&nbsp;ADVANCE
TO SUPPLIERS</P>
<P style="MARGIN: 0px"><BR></P>
<P style="PADDING-LEFT: 72px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>The Company has made payments to unrelated suppliers in advance of
receiving products and services. The advance payments are meant to ensure
preferential pricing and delivery. The amounts advanced under such arrangements
totaled $34,792,293 as of September 30, 2008.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">6.&nbsp;&nbsp;&nbsp;&nbsp;PROPERTY,
PLANT AND EQUIPMENT</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="PADDING-LEFT: 72px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">At
September 30 and June 30, 2008, property, plant and equipment, at cost, consist
of</P>
<P style="MARGIN: 0px"><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=215></TD>
<TD width=18></TD>
<TD width=104></TD>
<TD width=18></TD>
<TD width=122></TD>
<TD width=18></TD>
<TD width=75></TD>
<TD width=18></TD>
<TD width=92></TD></TR>
<TR>
<TD vAlign=top width=215>
<P>&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD>
<TD vAlign=top width=104>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>June 30, 2008</B></P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD>
<TD vAlign=top width=122>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>Impact of foreign currency exchange rate</B></P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD>
<TD vAlign=top width=75>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>Additions</B></P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD>
<TD vAlign=top width=92>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>September 30, 2008</B></P></TD></TR>
<TR>
<TD vAlign=bottom width=215>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Land and buildings</P></TD>
<TD vAlign=bottom width=18>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=bottom width=104>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;2,052,874 </P></TD>
<TD vAlign=bottom width=18>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=bottom width=122>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20,892
</P></TD>
<TD vAlign=bottom width=18>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=bottom width=75>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>-</P></TD>
<TD vAlign=bottom width=18>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=bottom width=92>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;2,073,766 </P></TD></TR>
<TR>
<TD vAlign=bottom width=215>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Machinery and
production equipment</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=104>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;4,454,536 </P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=122>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;45,373
</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=75>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;721
</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=92>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;4,500,630 </P></TD></TR>
<TR>
<TD vAlign=bottom width=215>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Total property,
plant and equipment</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=104>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;6,507,410 </P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=122>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;66,265
</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=75>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;721
</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=92>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;6,574,396 </P></TD></TR>
<TR>
<TD vAlign=bottom width=215>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Less: accumulated depreciation</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=104>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;(3,870,084)</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=122>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(39,386)
</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=75>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(96,466)</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=92>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;(4,005,936)</P></TD></TR>
<TR>
<TD vAlign=bottom width=215>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Property, plant and equipment, net</P></TD>
<TD vAlign=bottom width=18>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=104>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;2,637,326 </P></TD>
<TD vAlign=bottom width=18>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=122>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;26,879
</P></TD>
<TD vAlign=bottom width=18>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=75>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(95,745)</P></TD>
<TD vAlign=bottom width=18>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=92>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;2,568,460 </P></TD></TR></TABLE>
<P style="MARGIN: 0px"><BR></P>
<P
style="PADDING-LEFT: 60px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Depreciation
expense for the three months ended September 30, 2008 was $96,466.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=justify>7.
&nbsp;TAXES PAYABLE</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 73px; LINE-HEIGHT: 13pt"
align=justify>Taxes payable consist of the following:</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=275></TD>
<TD width=14></TD>
<TD width=125></TD>
<TD width=32></TD>
<TD width=132></TD></TR>
<TR>
<TD vAlign=bottom width=275>
<P>&nbsp;</P></TD>
<TD vAlign=top width=14>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=125>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>September 30, 2008</B></P></TD>
<TD vAlign=top width=32>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=132>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>June 30, 2008</B></P></TD></TR>
<TR>
<TD vAlign=top width=275>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Income tax payable</P></TD>
<TD vAlign=top width=14>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">$</P></TD>
<TD vAlign=top width=125>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>1,450,660</P></TD>
<TD vAlign=top width=32>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=top width=132>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>1,190,002 &nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=275>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Value Added Tax payable</P></TD>
<TD vAlign=top width=14>
<P>&nbsp;</P></TD>
<TD vAlign=top width=125>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>2,138,607</P></TD>
<TD vAlign=bottom width=32>
<P>&nbsp;</P></TD>
<TD vAlign=top width=132>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>963,178</P></TD></TR>
<TR>
<TD vAlign=top width=275>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Business taxes payable and others</P></TD>
<TD vAlign=top width=14>
<P>&nbsp;</P></TD>
<TD vAlign=top width=125>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>451,108 </P></TD>
<TD vAlign=bottom width=32>
<P>&nbsp;</P></TD>
<TD vAlign=top width=132>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>302,043</P></TD></TR>
<TR>
<TD vAlign=bottom width=275>
<P>&nbsp;</P></TD>
<TD vAlign=top width=14>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=125>
<P>&nbsp;</P></TD>
<TD vAlign=top width=32>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=132>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=275>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Total</P></TD>
<TD vAlign=top width=14>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=125>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>4,040,375</P></TD>
<TD vAlign=top width=32>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=bottom width=132>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>2,455,223</P></TD></TR></TABLE>
<P style="FONT-SIZE: 11pt; MARGIN: 0px" align=center>&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=justify>8.
&nbsp;ACCRUED PAYABLES</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 60px; LINE-HEIGHT: 13pt"
align=justify>Accrued payables consist of the following:</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=283></TD>
<TD width=18></TD>
<TD width=131></TD>
<TD width=11></TD>
<TD width=92></TD></TR>
<TR>
<TD vAlign=bottom width=283>
<P>&nbsp;</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=131>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>September 30, 2008</B></P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=92>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>June 30, 2008</B></P></TD></TR>
<TR>
<TD width=283>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Accrued
salaries</P></TD>
<TD vAlign=top width=18>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">$</P></TD>
<TD width=131>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;15,376</P></TD>
<TD vAlign=top width=11>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD width=92>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>15,221</P></TD></TR>
<TR>
<TD width=283>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Accrued staff
welfare</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD>
<TD width=131>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;246,521</P></TD>
<TD vAlign=top width=11>
<P>&nbsp;</P></TD>
<TD width=92>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>230,518</P></TD></TR>
<TR>
<TD vAlign=top width=283>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Accrued expenses and miscellaneous</P></TD>
<TD vAlign=top width=18>
<P>&nbsp;</P></TD>
<TD vAlign=top width=131>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>508,599</P></TD>
<TD vAlign=bottom width=11>
<P>&nbsp;</P></TD>
<TD vAlign=top width=92>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>552,697</P></TD></TR>
<TR>
<TD vAlign=bottom width=283>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Total</P></TD>
<TD vAlign=top width=18>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">$</P></TD>
<TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 3px double"
vAlign=bottom width=131>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>770,496</P></TD>
<TD vAlign=top width=11>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">$</P></TD>
<TD style="BORDER-TOP: #000000 1px solid; BORDER-BOTTOM: #000000 3px double"
vAlign=bottom width=92>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>798,436</P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px" align=justify><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 15 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">9.&nbsp;&nbsp;&nbsp;&nbsp;INCOME
TAXES</P>
<P style="MARGIN: 0px"><BR></P>
<P style="PADDING-LEFT: 60px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>(a)&nbsp;&nbsp;&nbsp;&nbsp; <U>Corporation Income Tax
(&#147;CIT&#148;)</U></P>
<P style="MARGIN: 0px"><BR></P>
<P
style="PADDING-LEFT: 96px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">The
Company is governed by the Income Tax Laws of the PRC. The PRC federal statutory
tax rate is 25% since January 1, 2008.</P>
<P style="MARGIN: 0px"><BR></P>
<P style="PADDING-LEFT: 96px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>The provision for income taxes for three months ended September
30, 2008 is summarized as follows:</P>
<P style="MARGIN: 0px"><BR></P>
<DIV align=right>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=190></TD>
<TD width=15></TD>
<TD width=12></TD>
<TD width=74></TD>
<TD width=15></TD>
<TD width=12></TD>
<TD width=75></TD>
<TD width=15></TD>
<TD width=12></TD>
<TD width=73></TD>
<TD width=2></TD></TR>
<TR>
<TD vAlign=bottom width=190>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD>
<TD width=15>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px"
align=right><B></B>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P
style="PADDING-RIGHT: 2px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>&nbsp;&nbsp;2008</B></P></TD>
<TD vAlign=bottom width=2>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=190>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Current</P></TD>
<TD width=15>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD>
<TD vAlign=bottom width=12>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=74>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=12>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=75>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD>
<TD vAlign=bottom width=12>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">$</P></TD>
<TD vAlign=top width=73>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>1,964,629 &nbsp;</P></TD>
<TD vAlign=bottom width=2>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=190>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Deferred</P></TD>
<TD width=15>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD>
<TD vAlign=bottom width=12>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=74>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=12>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=75>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=12>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=73>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>-</P></TD>
<TD vAlign=bottom width=2>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=190>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD>
<TD width=15>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD>
<TD vAlign=bottom width=12>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=74>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=12>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=75>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=12>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">$</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=73>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>1,964,629 &nbsp;</P></TD>
<TD vAlign=bottom width=2>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P></TD></TR></TABLE></DIV>
<P style="MARGIN: 0px"><BR></P>
<P style="PADDING-LEFT: 84px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>(b)&nbsp;&nbsp;&nbsp;&nbsp; <U>Value Added Tax (&#147;VAT&#148;)</U></P>
<P style="MARGIN: 0px"><BR></P>
<P
style="PADDING-LEFT: 84px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">In
accordance with the relevant taxation laws in the PRC, the normal VAT rate for
domestic sales is 5% to 17%, which is levied on the invoiced value of sales and
is payable by the purchaser. The Company is required to remit the VAT it
collects to the tax authority.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="PADDING-LEFT: 85px; FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: -1px; LINE-HEIGHT: 13pt">The
value added tax refundable presents the VAT that the Company paid for the
purchasing products and can be used to deduct the VAT related to the sale of
products.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">10.
&nbsp;&nbsp;&nbsp;SEGMENT INFORMATION</P>
<P style="MARGIN: 0px"><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=47></TD>
<TD width=27></TD>
<TD width=15></TD>
<TD width=106></TD>
<TD width=75></TD>
<TD width=106></TD>
<TD width=15></TD>
<TD width=108></TD>
<TD width=17></TD>
<TD width=18></TD>
<TD width=31></TD>
<TD width=75></TD></TR>
<TR>
<TD vAlign=bottom colSpan=4>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=8>
<P style="MARGIN: 0px" align=center>For the three months ended September
30, 2008</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P style="MARGIN: 0px" align=center>Agency</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=106>
<P style="MARGIN: 0px" align=center>Product sales</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=108>
<P style="MARGIN: 0px" align=center>Service</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=2>
<P style="MARGIN: 0px" align=center>Total</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px">Revenues</P></TD>
<TD vAlign=bottom width=106>
<P style="MARGIN: 0px" align=right>$ &nbsp;&nbsp;&nbsp;42,526,196</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P style="MARGIN: 0px" align=right>$ &nbsp;&nbsp;1,949,290</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px" align=right>$
&nbsp;&nbsp;&nbsp;44,475,486</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px">Cost of revenues</P></TD>
<TD vAlign=bottom width=106>
<P style="MARGIN: 0px" align=right>34,835,475</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P style="MARGIN: 0px" align=right>-</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px" align=right>34,835,475</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px">Gross profit</P></TD>
<TD vAlign=bottom width=106>
<P style="MARGIN: 0px" align=right>7,690,721</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P style="MARGIN: 0px" align=right>1,949,290</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px" align=right>9,640,011</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px">Income from operations</P></TD>
<TD vAlign=bottom width=106>
<P style="MARGIN: 0px" align=right>5,505,816</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P style="MARGIN: 0px" align=right>1,949,290</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px" align=right>7,455,106</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px">Total assets</P></TD>
<TD vAlign=bottom width=106>
<P style="MARGIN: 0px" align=right>101,824,826</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P style="MARGIN: 0px" align=right>-</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px" align=right>101,824,826</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px">Depreciation </P></TD>
<TD vAlign=bottom width=106>
<P style="MARGIN: 0px" align=right>96,466</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P style="MARGIN: 0px" align=right>-</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px" align=right>96,466</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=8>
<P style="MARGIN: 0px" align=center>For the three months ended September
30, 2007</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P style="MARGIN: 0px" align=center>Agency</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=106>
<P style="MARGIN: 0px" align=center>Product sales</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=108>
<P style="MARGIN: 0px" align=center>Service</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom colSpan=2>
<P style="MARGIN: 0px" align=center>Total</P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px">Revenues</P></TD>
<TD vAlign=bottom width=106>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32,110,699 </P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P style="MARGIN: 0px" align=right>&nbsp;$
&nbsp;&nbsp;&nbsp;&nbsp;4,377,973</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px" align=right>$ &nbsp;&nbsp;&nbsp;36,488,672
</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px">Cost of revenues</P></TD>
<TD vAlign=bottom width=106>
<P style="MARGIN: 0px" align=right>25,434,493
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U></P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;259,397</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px" align=right>&nbsp;&nbsp;&nbsp;&nbsp;25,693,890
</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px">Gross profit</P></TD>
<TD vAlign=top width=106>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,676,206
</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=top width=108>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;4,118,576</P></TD>
<TD vAlign=bottom width=17>
<P style="MARGIN: 0px" align=center>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;10,794,782</P></TD></TR>
<TR>
<TD vAlign=top width=47>
<P>&nbsp;</P></TD>
<TD vAlign=top width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px">Income from operations</P></TD>
<TD vAlign=bottom width=106>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6,318,772
</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;4,118,576</P></TD>
<TD vAlign=bottom width=17>
<P style="MARGIN: 0px" align=center>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10,437,348</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px">Total assets</P></TD>
<TD vAlign=bottom width=106>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;70,458,277 </P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;70,458,277
&nbsp;&nbsp;&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px">Depreciation </P></TD>
<TD vAlign=bottom width=106>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;89,634
</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="MARGIN: 0px"
align=right>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;89,634
&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=47>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=27>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=106>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=15>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=108>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=17>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=18>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR></TABLE>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><BR></P>
<P style="MARGIN: 0px" align=center>- 16 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=center><B>FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007</B></P>
<P style="MARGIN: 0px" align=center><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">11.
&nbsp;&nbsp;&nbsp;GEOGRAPHICAL INFORMATION</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="PADDING-LEFT: 56px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>&nbsp;The Company's revenues by geographic destination are
analyzed as follows:</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=270></TD>
<TD width=12></TD>
<TD width=118></TD>
<TD width=19></TD>
<TD width=123></TD></TR>
<TR>
<TD vAlign=top width=270>
<P>&nbsp;</P></TD>
<TD vAlign=top width=12>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P
style="PADDING-RIGHT: 13px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>For the Three Months Ended September 30,</B></P></TD></TR>
<TR>
<TD vAlign=top width=270>
<P>&nbsp;</P></TD>
<TD vAlign=top width=12>
<P>&nbsp;</P></TD>
<TD vAlign=top width=118>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>2008</B></P></TD>
<TD vAlign=top width=19>
<P>&nbsp;</P></TD>
<TD vAlign=top width=123>
<P
style="PADDING-RIGHT: 13px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>2007</B></P></TD></TR>
<TR>
<TD vAlign=top width=270>
<P>&nbsp;</P></TD>
<TD vAlign=top width=12>
<P>&nbsp;</P></TD>
<TD vAlign=top width=118>
<P>&nbsp;</P></TD>
<TD vAlign=top width=19>
<P>&nbsp;</P></TD>
<TD vAlign=top width=123>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=270>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>PRC</P></TD>
<TD vAlign=top width=12>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">$</P></TD>
<TD vAlign=top width=118>
<P style="MARGIN: 0px" align=right>44,475,486</P></TD>
<TD vAlign=top width=19>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=top width=123>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>36,488,672</P></TD></TR>
<TR>
<TD vAlign=top width=270>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Outside PRC</P></TD>
<TD vAlign=top width=12>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=118>
<P
style="PADDING-RIGHT: 10px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>-</P></TD>
<TD vAlign=top width=19>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=123>
<P
style="PADDING-RIGHT: 3px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>-</P></TD></TR>
<TR>
<TD vAlign=top width=270>
<P>&nbsp;</P></TD>
<TD vAlign=top width=12>
<P>&nbsp;</P></TD>
<TD vAlign=top width=118>
<P>&nbsp;</P></TD>
<TD vAlign=top width=19>
<P>&nbsp;</P></TD>
<TD vAlign=top width=123>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=270>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Total net
revenues</P></TD>
<TD vAlign=top width=12>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=118>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>44,475,486</P></TD>
<TD vAlign=top width=19>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=123>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>36,488,672</P></TD></TR>
<TR>
<TD vAlign=top width=270>
<P>&nbsp;</P></TD>
<TD vAlign=top width=12>
<P>&nbsp;</P></TD>
<TD vAlign=top width=118>
<P>&nbsp;</P></TD>
<TD vAlign=top width=19>
<P>&nbsp;</P></TD>
<TD vAlign=top width=123>
<P>&nbsp;</P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=justify><BR></P>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">12.
&nbsp;&nbsp;&nbsp;WARRANTS</P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=justify>We
completed a convertible note on December 18, 2007, in the amount of $2,100,000
at an interest rate of 4% per annum, with a conversion feature of $0.70 per
share (the conversion price) at the option of the investor. &nbsp;Additionally,
warrants were granted at an exercise price of $0.80. The convertible note will
give the Company $2,100,000. After disbursement of fees and expenses, the
Company netted $1,800,000. &nbsp;Additionally, if all of the warrants are
exercised, the Company will receive $1,200,000. &nbsp;In using the Black-
Scholes Calculation the company will have a total expense of $1,528,180 for the
life of the warrants. &nbsp;The note was for a period of 12 months expiring
December 17, 2008. Each month expense would be $127,348. &nbsp;</P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px">&nbsp;</P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P><A name=_Toc183245755></A>
<P style="MARGIN: 0px"><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 17 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="PADDING-RIGHT: 1px; MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -17px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 13pt"><B>ITEM
&nbsp;2.</B></P>
<P
style="PADDING-RIGHT: 1px; FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 96px; LINE-HEIGHT: 13pt"><B>MANAGEMENT&#146;S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS</B></P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">DISCLAIMER REGARDING
FORWARD LOOKING STATEMENTS</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">Certain
statements in this Form 10-Q, which are not statements of historical fact, are
what are known as "forward-looking statements," which are basically statements
about the future. For that reason, these statements involve risk and uncertainty
since no one can accurately predict the future. Words such as "plans,"
"intends," "hopes," "seeks," "anticipates," "expects," and the like, often
identify such forward looking statements, but are not the only indication that a
statement is a forward-looking statement. Such forward-looking statements
include statements concerning our plans and objectives with respect to our
present and future operations, and statements which express or imply that such
present and future operations will or may produce revenues, income or profits.
These and other factors may cause our actual results to differ materially from
any forward-looking statement. &nbsp;We caution you not to place undue reliance
on these forward-looking statements. &nbsp;Although we base these
forward-looking statements on our expectations, assumptions, and projections
about future events, actual events and results may differ materially, and our
expectations, assumptions, and projections may prove to be inaccurate. The
forward-looking statements speak only as of the date hereof, and we expressly
disclaim any obligation to publicly release the results of any revisions to
these forward-looking statements to reflect events or circumstances after the
date of this filing. </P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"><B>Overview</B></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>Longwei Petroleum Investment Holding Limited (&#147;we,&#148; &#147;us,&#148; &#147;our,&#148;
&#147;Longwei&#148;) was incorporated under the laws of the State of Colorado on March 17,
2000, under the name of Tabatha II, Inc. We changed our name to Longwei
Petroleum Investment Holding Limited on October 12, 2007. We were formed as a
&#147;blind pool&#148; or &#147;blank check&#148; company whose business plan was to seek to acquire
a business opportunity through completion of a merger, exchange of stock, or
other similar type of transaction. In furtherance of our business plan, we
voluntarily elected to become subject to the periodic reporting obligations of
the Securities Exchange Act of 1934 by filing a registration statement on Form
10-SB.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>Prior to October 16, 2007, our only business activities were the
organizational activities described above, including registration under the
Securities Exchange Act of 1934, and efforts to locate a suitable business
opportunity for acquisition. On October 16, 2007, the date of the closing of the
Share Exchange, we acquired all of the issued and outstanding common stock of
Longwei Petroleum Investment Holding Limited (&#147;Longwei BVI&#148;), a British Virgin
Islands corporation incorporated on April 3, 2006. &nbsp;Longwei BVI owns all of
the issued and outstanding stock of Taiyuan Yahua Energy Conversion Co., Ltd.
(&#147;Taiyuan Yahua&#148;), a Chinese limited liability company, which is in turn the
sole shareholder of Taiyuan Longwei Economy &amp; Trading Co., Ltd. (&#147;Taiyuan
Longwei&#148;), a Chinese limited liability company. &nbsp;&nbsp;We issued 69,000,000
shares in the share exchange transaction for 100% of the ownership of Longwei
BVI. As a result of the share exchange transaction, Longwei BVI and its
subsidiaries became our wholly owned subsidiaries.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>&nbsp;Taiyuan Yahua was incorporated on August 11, 2006. &nbsp;The
operating subsidiary, Taiyuan Longwei, is located in Taiyuan City, China, and
was established in 1995 as a Chinese limited liability company. &nbsp;We
purchase diesel, gasoline, fuel oil and kerosene from various suppliers. As a
licensed intermediary, we seek to earn profits by buying diesel gasoline fuel
oil and kerosene at competitive prices and selling them to other wholesalers. In
addition, we also earn revenue by acting as a purchase agent where we charge an
agency fee, a fee which is charged to other wholesalers who do not have a
license to purchase directly from refineries. &nbsp;&nbsp;The cost of our
products is largely dependent on the price of crude oil. The price of crude oil
is subject to fluctuation due to a variety of factors, all of which are beyond
our control. When sudden and significant increases occur in the cost of fuel and
lubricant products, we may not be able to pass on these increases through timely
price increases to our customers. The timing of passing these costs through to
our customers can significantly affect our margins. The affect of lower crude
oil prices, after the sale for a short time of higher priced inventory on hand
at the time of the price decrease, reduces the cost of </P>
<P style="MARGIN: 0px" align=justify><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 18 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>the products which in turn improves profit margins. Fuel oil is a
liquid petroleum product that is burned in a furnace or boiler for the
generation of heat or used in an engine for the generation of power.
&nbsp;Solvents are unrefined petroleum products used in paint, dry-cleaning
solvents, solvents for cutback asphalts and solvents for the rubber industry. We
transport and market these products to other wholesale buyers. &nbsp;Our primary
customers are large-scale gas stations, which represent 60% of our sales and
which are located in Taiyuan City in the Shanxi Province of China. &nbsp;They
primarily buy diesel and gasoline. &nbsp;Our second largest group of customers
is coal plants and power supply companies which use our fuel oil for heat and
power along with our solvents; these comprise 30% of our business. &nbsp;Our
third largest customer is the small, independent gas station which represents
10% of our total sales. &nbsp;These stations buy gasoline and diesel from
us.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>We currently have 14 storage tanks that allow us to store 50,000
metric tons of our products. In addition, we own our own rail system to
transport our products to our customers. &nbsp;</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>We have been granted a Finish Oil Wholesale license which allows
our company to engage in the wholesale business of gasoline, fuel oil and diesel
oil. &nbsp;This license is granted by the People&#146;s Republic of China. &nbsp;In
addition, we also have a special license for Dangerous Chemical Products
Businesses that allows us to handle gasoline and diesel oil. &nbsp;The Finish
Oil Wholesale License allows us to engage in the business of these products.
There is no expiration date on this license<B>.</B> &nbsp;The Dangerous Chemical
Products Businesses license is renewed every three years. &nbsp;The People&#146;s
Republic of China&#146;s constitution states that all mineral and oil resources
belong to the State. &nbsp;Without these licenses, we would not be allowed to
sell our products. &nbsp;</P>
<P style="MARGIN: 0px" align=justify><BR></P><A name=eolPage28></A>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Results of Operations</I></B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Revenue</I></B></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>The following table shows the different components comprising our
total revenue for the three months ending September 30, 2008 and September 30,
2007.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>All amounts in thousands of U.S. dollars</I></B></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=0.4></TD>
<TD width=161></TD>
<TD width=0.4></TD>
<TD width=71></TD>
<TD width=0.4></TD>
<TD width=72></TD>
<TD width=84></TD>
<TD width=70></TD>
<TD width=0.4></TD>
<TD width=84></TD>
<TD width=90></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>Sales by Products</B></P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>2008</B></P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right><B>% of total
revenues</B></P></TD>
<TD vAlign=top width=84>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right><B>Volume of sales
in thousands</B></P></TD>
<TD vAlign=top width=70>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>2007</B></P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right><B>% of total
revenues</B></P></TD>
<TD vAlign=top width=90>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right><B>Volume of sales
in thousands</B></P></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=84>
<P style="FONT-SIZE: 9pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>(gallons)</P></TD>
<TD vAlign=top width=70>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=90>
<P style="FONT-SIZE: 9pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>(gallons)</P></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Diesel
Oil</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>25,539</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>57.4%</P></TD>
<TD vAlign=top width=84>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>8,854</P></TD>
<TD vAlign=top width=70>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>18,336</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>50.3%</P></TD>
<TD vAlign=top width=90>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>8,503</P></TD></TR>
<TR>
<TD vAlign=top width=0.4>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Gasoline</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>16,987</P></TD>
<TD vAlign=top width=72>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>38.2%</P></TD>
<TD vAlign=top width=84>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>5,993</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>12,540</P></TD>
<TD vAlign=top width=84>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>34.4%</P></TD>
<TD vAlign=top width=90>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>5,652</P></TD></TR>
<TR>
<TD vAlign=top width=0.4>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Fuel Oil</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>0</P></TD>
<TD vAlign=top width=72>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>0%</P></TD>
<TD vAlign=top width=84>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>0</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>1,235</P></TD>
<TD vAlign=top width=84>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>3.4%</P></TD>
<TD vAlign=top width=90>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>623</P></TD></TR>
<TR>
<TD vAlign=top width=0.4>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Kerosene</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>0</P></TD>
<TD vAlign=top width=72>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>0%</P></TD>
<TD vAlign=top width=84>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>0</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>0</P></TD>
<TD vAlign=top width=84>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>0%</P></TD>
<TD vAlign=top width=90>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>0</P></TD></TR>
<TR>
<TD vAlign=top width=0.4>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=72>
<P>&nbsp;</P></TD>
<TD vAlign=top width=84>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=84>
<P>&nbsp;</P></TD>
<TD vAlign=top width=90>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=0.4>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"><B>TOTALS
Petroleum Products</B></P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>42,526</P></TD>
<TD vAlign=top width=72>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>95.6%</P></TD>
<TD vAlign=top width=84>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>14,847</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>32,111</P></TD>
<TD vAlign=top width=84>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>88.0%</P></TD>
<TD vAlign=top width=90>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>14,778</P></TD></TR>
<TR>
<TD vAlign=top width=0.4>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=72>
<P>&nbsp;</P></TD>
<TD vAlign=top width=84>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=84>
<P>&nbsp;</P></TD>
<TD vAlign=top width=90>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=0.4>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Agency
Fee</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>1,949</P></TD>
<TD vAlign=top width=72>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>4.4%</P></TD>
<TD vAlign=top width=84>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>4,378</P></TD>
<TD vAlign=top width=84>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>12.0%</P></TD>
<TD vAlign=top width=90>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=0.4>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=72>
<P>&nbsp;</P></TD>
<TD vAlign=top width=84>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=84>
<P>&nbsp;</P></TD>
<TD vAlign=top width=90>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=0.4>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=72>
<P>&nbsp;</P></TD>
<TD vAlign=top width=84>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=84>
<P>&nbsp;</P></TD>
<TD vAlign=top width=90>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=0.4>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"><B>TOTAL
REVENUE</B></P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top colSpan=2>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt; FONT-FAMILY: Times New Roman Bold"
align=right><B>44,475</B></P></TD>
<TD vAlign=top width=72>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt; FONT-FAMILY: Times New Roman Bold"
align=right><B>100%</B></P></TD>
<TD vAlign=top width=84>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top colSpan=2>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt; FONT-FAMILY: Times New Roman Bold"
align=right><B>36,489</B></P></TD>
<TD vAlign=top width=84>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt; FONT-FAMILY: Times New Roman Bold"
align=right><B>100%</B></P></TD>
<TD vAlign=top width=90>
<P>&nbsp;</P></TD></TR></TABLE>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>For the three months ended September 30, 2008, revenues were
$44,475,486, an increase of $7,986,814 or approximately 21.9% as compared to
$36,488,672 for the same period in September 30, 2007. This increase was the
result of stronger overall demand for petroleum products. &nbsp;Diesel sales
were $25.539 million or approximately 8.854 million gallons, an increase of
$7.203 million or approximately .351 million gallons, and approximately 39.3%
sales increase in the three month period year ending September 30, 2008,
compared to $18.336 million or approximately 8.503 million gallons for the year
</P>
<P style="MARGIN: 0px" align=justify><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 19 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>ending September 30, 2007. Gasoline sales were $16.987 million or
approximately 5.993 million gallons, an increase of $4.447 million or
approximately .341 million gallon increase, and approximately 35.4% sales
increase, compared to gasoline sales of $12.540 million or approximately 5.652
million gallons for the three months ending September 30, 2007.
&nbsp;&nbsp;These increases were mainly the result of greater purchases by our
existing customers due to the continued growth of Shanxi Province. &nbsp;The
increase of petroleum products for the three months ending September 30, 2008
was mainly due to the following factors: the population in China in general has
become wealthier; as a result, the demand for petroleum has increased and the
economy in Shanxi Province where the Company's major customers are continued to
experience growth. Management expects growth for the fiscal year 2009 to remain
strong due to (i) continued strong growth in the China economy, (ii) a continued
improvement in the wealth of its citizens, and (iii) business strategy of
increasing storage for our products. &nbsp;For the three months ended September
30, 2008, 50% of our customers were large-scale gas stations located in Taiyuan
City in the Shanxi Province, compared to 60% for the three months ended
September 30, 2007. &nbsp;&nbsp;Our second largest group of customers is coal
plants and power supply companies which use our diesel, gasoline and fuel oil to
generate heat and power this group provided 40% of our business in 2008 compared
to 30% in 2007. This group of customers will continue to remain strong as our
local economy continues to grow and new power plants are built. We anticipate
that in the fiscal year 2009 this group will represent 55% to 60% of our sales,
as the company will focus on this particular customer segment due to larger bulk
sales. Our third largest customer is the small, independent gas station which
represents 10% of our total sales. &nbsp;These stations buy gasoline and diesel
from us. &nbsp;This group will continue to remain strong as more cars are being
used for transportation in Shanxi Province. Additionally, the impact of
favorable currency exchange rates resulted in an increase of approximately $4.2
million in revenues, or 9.5%, as the RMB continued to appreciate against the
dollar. &nbsp;Agency fees decreased by 55.5%, a decrease of approximately $2.429
million. &nbsp;Agency fee revenues were $1.949 million for the three months
ended September 30, 2008, compared to $4.378 million in the same period of 2007.
Agency fees are fees from companies not possessing the required license to buy
direct from refineries. &nbsp;&nbsp;We purchase petroleum on their behalf and
arrange delivery for them. &nbsp;The China government continues to grant
licenses to other wholesalers to buy direct. Thus, we anticipate that agency
fees will be reduced further in the future unless we are able to obtain new
customers that want to go direct but do not have the required license. </P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Cost of Goods Sold</I></B></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=justify>Cost of
goods sold for the three months ended September 30, 2008 increased by $9.395
million or 36.9 %, to $34.835 million as compared to $25.435 million for the
prior quarter of 2007. This increase was mainly attributable to the increase of
sales revenue. </P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=justify>The
following table illustrates the items constituting our cost of goods sold for
the three months ending September 30, 2008 and September 30, 2007.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=justify>(All
amounts, other than percentages, in thousands of U.S. dollars)</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=1></TD>
<TD width=185></TD>
<TD width=2></TD>
<TD width=63></TD>
<TD width=2></TD>
<TD width=81></TD>
<TD width=2></TD>
<TD width=99></TD>
<TD width=2></TD>
<TD width=57></TD>
<TD width=2></TD>
<TD width=75></TD>
<TD width=2></TD>
<TD width=93></TD>
<TD width=2></TD></TR>
<TR>
<TD vAlign=top width=1>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><B>Cost of Goods</B></P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right><B>2008</B></P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right><B>% of total cost
of goods sold</B></P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right><B>% of total cost
of goods vs its revenue</B></P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right><B>2007</B></P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right><B>% of total cost
of goods</B></P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right><B>% of total cost
of goods vs its revenue</B></P></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt">Diesel Oil</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>21,751</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>62.4%</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>85.2%</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>14,684</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>57.2%</P></TD>
<TD vAlign=top colSpan=3>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>80.1%</P></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt">Gasoline</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>13,084</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>37.6%</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>77.0%</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>9,773</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>38.1%</P></TD>
<TD vAlign=top colSpan=3>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>77.9%</P></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt">Fuel Oil</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>0</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>0%</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>0%</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>978</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>3.8%</P></TD>
<TD vAlign=top colSpan=3>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>79.1%</P></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt">Kerosene</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>0</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>0%</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>0%</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>0</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>0%</P></TD>
<TD vAlign=top colSpan=3>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>0%</P></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><B>TOTAL COST </B></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><B>Petroleum Products</B></P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>34,835</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>100%</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>78.3%</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>25,435</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>99.0%</P></TD>
<TD vAlign=top colSpan=3>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>69.7%</P></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt">Agency Fee</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>0</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>0%</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>0%</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>259</P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>1.0%</P></TD>
<TD vAlign=top colSpan=3>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right>0.7%</P></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><B>TOTAL COST OF
GOODS</B></P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top colSpan=2>
<P
style="MARGIN: 0px; LINE-HEIGHT: 13pt; FONT-FAMILY: Times New Roman Bold"
align=right><B>34,835</B></P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right><B>100%</B></P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top colSpan=2>
<P
style="MARGIN: 0px; LINE-HEIGHT: 13pt; FONT-FAMILY: Times New Roman Bold"
align=right><B>25,694</B></P></TD>
<TD vAlign=top colSpan=2>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt" align=right><B>100%</B></P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD></TR></TABLE>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P style="MARGIN: 0px" align=center>- 20 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=1></TD>
<TD width=185></TD>
<TD width=2></TD>
<TD width=63></TD>
<TD width=2></TD>
<TD width=81></TD>
<TD width=2></TD>
<TD width=99></TD>
<TD width=2></TD>
<TD width=57></TD>
<TD width=2></TD>
<TD width=75></TD>
<TD width=2></TD>
<TD width=93></TD>
<TD width=2></TD></TR></TABLE>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"><B>Gross Profit
Margin</B></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>Our gross profit margin was 21.7% for the three months ended
September 30, 2008, compared to 29.6% for the three months ended September 30,
2007. The decrease was the result of the decline in agency fees which represent
the greatest profit for the company due to the fact it is a service, and no
purchases have to be made for this revenue. Agency fee profits declined by
approximately 2.2 million or approximately 53.7%. &nbsp;Additionally, the gross
margins on diesel were approximately 14.8% for the quarter ending September 30,
2008 compared to 24.9% in quarter ending September 30, 2007. &nbsp;The gross
margins on gasoline were approximately 22.9% in the quarter ending September 30,
2008 compared to 22.1% for the same quarter in 2007, improving slightly. The
decrease of diesel margins was the result of the company locking in fuel prices.
The company made advance to suppliers of approximately $34.792 million in the
quarter ending September 30, 2008 compared to $28.327 million in September 30,
2007. The risk associated with maintaining huge quantities of inventory and
amounts of advances to suppliers has the effect of locking in prices. &nbsp;We
pay for fuel well in advance of the time we deliver commodities and establish
customer prices. &nbsp;Therefore, our gross margins will vary considerably from
period to period, based on short-term prices of petroleum products. Management
does not provide any type of hedging activity in order to reduce this risk;
however management monitors petroleum prices in an effort to maintain
profitability.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Selling General and Administrative Expenses</I></B></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>Selling, general and administrative expenses were $2.167 million
for the quarter ending September 30, 2008, a $1.810 million increase, compared
to $357,434 for the same period in 2007. &nbsp;&nbsp;The increases for &nbsp;the
three month &nbsp;period was due to the increased costs associated with the
recapitalization of the company between Longwei Petroleum Investment Holding and
Tabatha II, and the addition of 15 new sales personnel and staff to support the
company&#146;s growth. &nbsp;</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Depreciation and Amortization</I></B></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>Depreciation and amortization expenses were $96,466 for the
quarter ending September 30, 2008, an increase of $6,832 over the depreciation
expense of $89,634 for the quarter ending September 30, 2007. </P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Income Tax Expense</I></B><I>s</I></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>We incurred income tax expenses of $1,964,629 for the quarter
ending September 30, 2008, a decrease of $1,472,949 or approximately 42.8%,
decrease versus $3,437,578 for the quarter ending September 30, 2007. This
decrease in taxes was the result of a decline in profit resulting from less
agency fees. The company is governed by the income tax laws of China. The China
statutory tax rate is 30% and the local tax rate is 3%.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Net Income</I></B></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>We earned a net income of $5,490,477 for the quarter ended
September 30, 2008, a decrease of $1,528,293 or approximately 21.8% as compared
to $7,018,770 for the quarter ending September 30, 2007. This was primarily due
to the decline of agency fees profit of $2,169,286 in quarter ending September
30, 2008. Agency fees are fees from companies not possessing the required
license to buy direct from refineries. &nbsp;&nbsp;We purchase petroleum on
their behalf and arrange delivery for them. &nbsp;The China government continues
to grant licenses to other wholesalers to buy direct. Thus, we anticipate that
agency fees will be reduced further in the future unless we are able to obtain
new customers that want to go direct but do not have the required license. This
decline in agency fees will have a negative impact on net income and margins in
future periods.</P>
<P style="MARGIN: 0px" align=justify>&nbsp;</P>
<P style="MARGIN: 0px" align=center>- 21 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I></I></B>&nbsp;</P>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Net Income Margin</I></B></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>Net income margin for the quarter ending September 30, 2008 was
approximately 12.3% compared to approximately 19.2% for the quarter ending
September 30, 2007. This decrease as described above was largely the result of
agency fee profits and revenues declining in the period. Management anticipates
that net income margin will remain in the 12 to 15% profit range due to increase
of costs associated with being a public company and the decline in agency
fees.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Inflation</I></B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px" align=justify>&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>Inflationary factors such as increases in the cost of our product
and overhead costs may adversely affect our operating results. Although we do
not believe that inflation has had a material impact on our financial position
or results of operations to date, a high rate of inflation in the future may
have an adverse effect on our ability to maintain current levels of gross margin
and selling, general and administrative expenses as a percentage of net revenues
if the selling prices of our products do not increase with these increased
costs.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Foreign Currency Translation Adjustment</I></B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px" align=justify>&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>Our operating subsidiaries are located in China. &nbsp;The
operating subsidiaries purchase all products and render services in China, and
receive payment from customers in China using RMB as the functional currency.
&nbsp;We do not engage in currency hedging.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>We incurred a foreign currency translation adjustment of
$1,070,650 for the quarter ending September 30, 2008 as compared with the
foreign currency translation adjustment of $781,958 for the quarter ending
September 30, 2007. On July 21, 2005, China reformed its foreign currency
exchange policy, revalued RMB by 2.1 percent and allowed the RMB to appreciate
as much as 0.3 percent per day against the U.S. dollar. We implemented different
exchange rates in translating RMB into U.S. dollars in our financial statements
for quarter ending September 30, 2008. We used an exchange rate of 6.79 for
assets and liabilities and used the average exchange rate of 6.84 for revenues
and expenses, compared to the exchange rate of 7.51 in 2007 for assets and
liabilities and 7.56 as the average rate used in calculating revenue and
expenses. Historical exchange rates for shareholders&#146; equity were used. </P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>Assets and liabilities are translated at exchange rates at the
balance sheet dates and revenue and expenses are translated at the average
exchange rates and shareholders&#146; equity is translated at historical exchange
rates. Any translation adjustments resulting are not included in determining net
income but are included in foreign exchange adjustment to other comprehensive
income, a component of stockholders&#146; equity. &nbsp;If the RMB appreciates
against the U.S. dollar, revenue and expenses would be higher than they would
have been if there were no fluctuations in the currencies. &nbsp;Conversely, if
the RMB depreciates against the U.S. dollar, revenue and expenses would be lower
than they would have been if there were no fluctuations in the currencies. The
exchange rates adopted are as follows for quarter ending September 30, 2008 and
September 30, 2007:</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=5></TD>
<TD width=265></TD>
<TD width=9></TD>
<TD width=8></TD>
<TD width=7></TD>
<TD width=39></TD>
<TD width=55></TD>
<TD width=4></TD>
<TD width=26></TD>
<TD width=59></TD>
<TD width=4></TD>
<TD width=11></TD>
<TD width=39></TD>
<TD width=17></TD>
<TD width=7></TD></TR>
<TR>
<TD vAlign=bottom colSpan=2>
<P style="PADDING-RIGHT: 1px; MARGIN: 0px">&nbsp;</P></TD>
<TD colSpan=2>
<P style="PADDING-RIGHT: 1px; MARGIN: 0px">&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 12px; MARGIN: 0px; TEXT-INDENT: 24px"
align=right><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 12px; MARGIN: 0px; TEXT-INDENT: 24px"
align=right><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
2009&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</B></P></TD>
<TD vAlign=bottom colSpan=3>
<P
style="PADDING-RIGHT: 2px; PADDING-LEFT: 34px; MARGIN: 0px; TEXT-INDENT: -97px"
align=right><B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2008</B></P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=5>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="PADDING-RIGHT: 1px; MARGIN: 0px">Year end RMB: exchange
rate</P></TD>
<TD colSpan=2>
<P style="PADDING-RIGHT: 1px; MARGIN: 0px">&nbsp;</P></TD>
<TD vAlign=top width=39>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="PADDING-RIGHT: 1px; MARGIN: 0px; TEXT-INDENT: 36px"
align=right>6.7899</P></TD>
<TD vAlign=bottom width=26>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="PADDING-RIGHT: 1px; MARGIN: 0px" align=right>6.859</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=5>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="PADDING-RIGHT: 1px; MARGIN: 0px">Average yearly&nbsp;RMB:
exchange rate</P></TD>
<TD colSpan=2>
<P style="PADDING-RIGHT: 1px; MARGIN: 0px">&nbsp;</P></TD>
<TD vAlign=top width=39>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="PADDING-RIGHT: 1px; MARGIN: 0px" align=right>6.8377</P></TD>
<TD vAlign=bottom width=26>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="PADDING-RIGHT: 1px; MARGIN: 0px" align=right>7.276</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Liquidity and Capital Resources</I></B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px"
align=justify>&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>As of September 30, 2008, we had cash and cash equivalents of
$8,010,731 compared to cash and cash equivalents of $6,558,490 in period ending
September 30, 2007. This was the result of the convertible note the company did
with certain accredited investors in which the company netted approximately $1.8
million. &nbsp;The following table provides detailed information about our net
cash flow for the September 30 period in 2008 and 2007 respectively.</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px" align=justify>&nbsp;</P>
<P style="MARGIN: 0px" align=justify><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 22 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P style="PAGE-BREAK-BEFORE: always; MARGIN: 0px" align=justify><BR><BR></P>
<TABLE style="FONT-SIZE: 10pt" cellSpacing=0 align=center>
<TR style="FONT-SIZE: 0px" height=0>
<TD width=1></TD>
<TD width=1></TD>
<TD width=342></TD>
<TD width=2></TD>
<TD width=2></TD>
<TD width=2></TD>
<TD width=29></TD>
<TD width=86></TD>
<TD width=2></TD>
<TD width=2></TD>
<TD width=22></TD>
<TD width=88></TD>
<TD width=1></TD>
<TD width=0.467></TD>
<TD width=0.867></TD>
<TD width=2></TD>
<TD width=11></TD>
<TD width=1></TD>
<TD width=2></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #ffffff 4px solid" vAlign=bottom colSpan=3>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #ffffff 4px solid" width=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 2px solid" vAlign=bottom colSpan=15>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=center><B>For the quarter ended September 30,</B></P></TD></TR>
<TR>
<TD style="BORDER-BOTTOM: #000000 2px solid" vAlign=bottom width=1>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>&nbsp;</P></TD>
<TD width=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>2008</B></P></TD>
<TD vAlign=bottom width=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right><B>2007</B></P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=5>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=1>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=1>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Cash and cash equivalents, beginning of period</P></TD>
<TD width=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=29>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>8,632,879</P></TD>
<TD vAlign=bottom width=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=22>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>6,060,428</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=1>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=1>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Net cash provided (used in) operating activities</P></TD>
<TD width=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;</P></TD>
<TD vAlign=bottom width=29>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>(750,892)</P></TD>
<TD vAlign=bottom width=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=22>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>(269,568)</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=1>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=1>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Net cash (used in) investing activities</P></TD>
<TD width=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;</P></TD>
<TD vAlign=bottom width=29>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>(721)</P></TD>
<TD vAlign=bottom width=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=22>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>(15,622)</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=1>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=1>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Net cash provided by financing activities</P></TD>
<TD width=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;</P></TD>
<TD vAlign=bottom width=29>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>-</P></TD>
<TD vAlign=bottom width=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=22>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>-</P></TD>
<TD vAlign=bottom colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=2>
<P>&nbsp;</P></TD>
<TD vAlign=bottom colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=bottom width=1>
<P>&nbsp;</P></TD>
<TD vAlign=bottom width=1>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Effect of exchange rate, changes in cash </P></TD>
<TD vAlign=top width=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=29>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>129,465</P></TD>
<TD vAlign=top width=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top width=22>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 1px solid" vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>783,252</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD></TR>
<TR>
<TD vAlign=top width=1>
<P>&nbsp;</P></TD>
<TD vAlign=top width=1>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>Cash and cash equivalents, end of the period</P></TD>
<TD vAlign=top width=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=29>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>8,010,731</P></TD>
<TD vAlign=top width=2>
<P>&nbsp;</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top width=22>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>$</P></TD>
<TD style="BORDER-BOTTOM: #000000 3px double" vAlign=top colSpan=2>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=right>6,558,490</P></TD>
<TD vAlign=top colSpan=2>
<P>&nbsp;</P></TD>
<TD vAlign=top width=2>
<P>&nbsp;</P></TD>
<TD vAlign=top colSpan=3>
<P>&nbsp;</P></TD></TR></TABLE>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Operating Activities:</I></B></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>Net cash used in operating activities was $750,892<B>&nbsp;</B>for
the quarter ending September 30, 2008, compared in the net cash used of $269,568
for the three month period ending September 30, 2007. This was largely the
result of increases in advances to suppliers to prepare for the anticipated
stronger demand from our customers. &nbsp;This was partially offset by the
decrease in accounts receivables.</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px" align=justify>&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Investing Activities</I></B></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>Net cash used in investing activities was $721 in quarter ending
September 30, 2008 compared to $15,622 in September 30, 2007.</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px" align=justify>&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Financing Activities:</I></B></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 0.05pt" align=justify><BR></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -17px; LINE-HEIGHT: 13pt"
align=justify>&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>We have no material commitments for capital expenditures as of
September 30, 2008.&nbsp;</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Critical Accounting Policies</I></B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px" align=justify>&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>The preparation of financial statements, in conformity with
accounting principles generally accepted in the United States, requires our
management to make assumptions, estimates and judgments that affect the amounts
reported in the financial statements, including the notes thereto, and related
disclosures of commitments and contingencies, if any. We consider our critical
accounting policies to be those that require the more significant judgments and
estimates in the preparation of financial statements, including the following:<A
name=eolPage37></A></P>
<P
style="MARGIN-TOP: 10px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify><I>Basis of Consolidation</I> - The consolidated financial
statements of the Company and its subsidiaries are prepared in accordance with
accounting principles generally accepted in the United States of America and
include the accounts of the Company and its subsidiaries. All material
inter-company accounts and transactions have been eliminated in the
consolidation.&nbsp;</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify><I>Inventories</I> -<FONT style="COLOR: #0000ff">
</FONT>Inventories are stated at the lower of cost, determined on a weighted
average basis, or net realizable value. Net realizable value is the estimated
selling price in the ordinary course of business less the estimated costs
necessary to make the sale.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>When inventories are sold, their carrying amount is charged to
expense in the year in which the revenue is recognized. Write-downs for declines
in net realizable value or for losses of inventories are recognized as an
expense in the year the impairment or loss occurs. There were no declines in net
realizable value of inventory for the quarter ending September 30, 2008.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=justify>Revenue
Recognition</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>The Company derives the bulk of its revenue from the trading of
gasoline, diesel, kerosene and fuel oil, and also has revenues from agency
service and transportation service.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>In accordance with the Securities and Exchange Commission ("SEC")
Staff Accounting Bulletin No. 104, Revenue Recognition ("SAB 104"), the Company
recognizes revenue when the following </P>
<P style="MARGIN: 0px" align=justify><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 23 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="FONT-SIZE: 11pt; PAGE-BREAK-BEFORE: always; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify>fundamental criteria are met: (i) persuasive evidence of an
arrangement exists, (ii) delivery has occurred or services have been rendered,
(iii) the price to the customer is fixed or determinable and (iv) collection of
the resulting receivable is reasonably assured.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify><I>Foreign Currency Translation</I> - The functional currency of
the Company is RMB and RMB is not freely convertible into foreign currencies.
The Company maintains its financial statements in the functional currency.
Monetary assets and liabilities denominated in currencies other than the
functional currency are translated into the functional currency at rates of
exchange prevailing at the balance sheet date. Transactions denominated in
currencies other than the functional currency are translated into the functional
currency at the exchange rates prevailing at the dates of the transactions.
Exchange gains or losses arising from foreign currency transactions are included
in the determination of net income for the respective periods.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify><I>Use of Estimates- </I>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; however actual results could differ materially from
those estimates.&nbsp;</P>
<P style="MARGIN: 0px" align=justify><BR></P><A name=eolPage39></A>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt" align=justify>Recent
Accounting Pronouncements</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P
style="MARGIN-TOP: 6px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 6px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">In
December&nbsp;2007, the FASB issued SFAS No.&nbsp;141R, "Business Combinations"
("SFAS No.&nbsp;141R"). SFAS No.&nbsp;141R amends SFAS&nbsp;141 and provides
revised guidance for recognizing and measuring identifiable assets and goodwill
acquired, liabilities assumed, and any noncontrolling interest in the acquiree.
It also provides disclosure requirements to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. It is effective for fiscal years beginning on or after
December&nbsp;15, 2008 and will be applied prospectively. We are currently
evaluating the impact of adopting SFAS No.&nbsp;141R on our consolidated
financial statements. </P>
<P
style="MARGIN-TOP: 6px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 6px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">In
December&nbsp;2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements&nbsp;&#151; an amendment of ARB No.&nbsp;51" ("SFAS
No. 160&#148;). SFAS No. 160 requires that ownership interests in subsidiaries held
by parties other than the parent, and the amount of consolidated net income, be
clearly identified, labeled, and presented in the consolidated financial
statements. It also requires once a subsidiary is deconsolidated, any retained
noncontrolling equity investment in the former subsidiary be initially measured
at fair value. Sufficient disclosures are required to clearly identify and
distinguish between the interests of the parent and the interests of the
noncontrolling owners. It is effective for fiscal years beginning on or after
December&nbsp;15, 2008 and requires retroactive adoption of the presentation and
disclosure requirements for existing minority interests. All other requirements
shall be applied prospectively. We are currently evaluating the impact of
adopting SFAS No. 160 on our consolidated financial statements. </P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">In
March 2008, FASB issued Financial Accounting Standards No. 161, &#147;<I>Disclosure
about Derivative Instruments and Hedging Activities - an amendment to FASB
Statement No. 133.&#148;</I> The use and complexity of derivative instruments and
hedging activities have increased significantly over the past several years.
Constituents have expressed concerns that the existing disclosure requirements
in FASB Statement No. 133, &#147;<I>Accounting for Derivative Instruments and Hedging
Activities,&#148;</I> do not provide adequate information about how derivative and
hedging activities affect an entity&#146;s financial position, financial performance,
and cash flows. Accordingly, this Statement requires enhanced disclosures about
an entity&#146;s derivative and hedging activities and thereby improves the
transparency of financial reporting. This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008.</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px">&nbsp;</P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 7px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">In
May 2008, the FASB issued Statement No. 162, &#147;<I>The Hierarchy of Generally
Accepted Accounting Principles</I>.&#148; &nbsp;This statement identifies the sources
of accounting principles and the framework for selecting the principles to be
used in the preparation of financial statements of nongovernmental entities </P>
<P style="MARGIN-TOP: 0px; MARGIN-BOTTOM: 7px"><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 24 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 7px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 13pt">that
are presented in conformity with generally accepted accounting principles (GAAP)
in the United States (the GAAP hierarchy). &nbsp;This statement is effective 60
days following the SEC&#146;s approval of the Public Company Accounting Oversight
Board amendments to AU Section 411, &#147;<I>the Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles</I>.&#148;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>In May 2008, the FASB issued Statement No. 163<I> &#147;Accounting for
Financial Guarantee Insurance Contracts&#151;an interpretation of FASB Statement No.
60.&#148; &nbsp;</I>The premium revenue recognition approach for a financial
guarantee insurance contract links premium revenue recognition to the amount of
insurance protection and the period in which it is provided. For purposes of
this statement, the amount of insurance protection provided is assumed to be a
function of the insured principal amount outstanding, since the premium received
requires the insurance enterprise to stand ready to protect holders of an
insured financial obligation from loss due to default over the period of the
insured financial obligation. &nbsp;This Statement is effective for financial
statements issued for fiscal years beginning after December 15, 2008.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B>Seasonality</B></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>Our operating results and operating cash flows historically have
been subject to seasonal variations. Our revenues are usually higher in the
first half of the year than in the second half of the year because of the
increased demand for gasoline and diesel during and around the Chinese spring
festival.</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px" align=justify>&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B>Off-Balance Sheet Arrangements</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px" align=justify>&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>We do not have any off-balance sheet arrangements.</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px" align=justify><A
name=FIS_MARKET_RISK></A>&nbsp;</P><A name=_Toc180903898></A><A
name=_Toc183245756></A>
<P style="MARGIN-TOP: 10px; MARGIN-BOTTOM: 0px" align=center><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 25 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 10px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 0px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 13pt"
align=center><B>QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK</B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px" align=justify>&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Interest Rate Risk</I></B></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>The Company deposits surplus funds with Chinese banks earning
daily interest. The Company does not invest in any instruments for trading
purposes. The Company&#146;s operations are not sensitive to fluctuations in interest
rates.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Foreign Exchange Risk</I></B></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>While our reporting currency is the U.S. Dollar, all of our
consolidated revenues and consolidated costs and expenses are denominated in
RMB. All of our assets are denominated in RMB. As a result, we are exposed to
foreign exchange risk as our revenues and results of operations may be affected
by fluctuations in the exchange rate between U.S. Dollars and RMB. If the RMB
depreciates against the U.S. Dollar, the value of our RMB revenues, earnings and
assets as expressed in our U.S. Dollar financial statements will decline. We
have not entered into any hedging transactions in an effort to reduce our
exposure to foreign exchange risk.</P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"
align=justify><B><I>Inflation</I></B></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px" align=justify>&nbsp;</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>Inflationary factors such as increases in the cost of our product
and overhead costs may adversely affect our operating results. Although we do
not believe that inflation has had a material impact on our financial position
or results of operations to date, a high rate of inflation in the future may
have an adverse effect on our ability to maintain current levels of gross margin
and selling, general and administrative expenses as a percentage of net revenues
if the selling prices of our products do not increase with these increased
costs.</P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px" align=justify><A
name=FIS_BUSINESS></A>&nbsp;</P><A name=_Toc180903899></A><A
name=_Toc183245757></A>
<P style="MARGIN-TOP: 10px; MARGIN-BOTTOM: 0px" align=center><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 26 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 10px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 0px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 13pt"
align=center><B>CORPORATE STRUCTURE</B></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt"
align=justify>The chart below depicts our corporate structure. <A
name=_DV_M166></A>As depicted below, we own 100% of the capital stock of Longwei
BVI. &nbsp;Longwei BVI incorporated in the British Virgin Islands in April 2006,
owns 100% of the capital stock of Taiyuan Yahua, and Taiyuan Yahua owns 100% of
the capital stock of Taiyuan Longwei, the operating subsidiary<A
name=_DV_M168></A>. &nbsp;Taiyuan Yahua was established in August 2006 as a
Chinese limited liability company. &nbsp;Taiyuan Longwei was established as a
Chinese limited liability company in July 1995. &nbsp;As of October 16, 2007,
the date of the closing of the Share Exchange Agreement, all of our operations
are conducted by and through Taiyuan Longwei. &nbsp;</P>
<P style="MARGIN: 0px" align=justify><BR></P>


<P style="margin:0px" align=justify><BR></P>

<P style="margin:0px; text-indent:48px" align=center><img src="corpstructures1.gif"  alt="[corpstructures1.gif]"
<P style="margin:0px" align=justify></P>

<P style="margin:0px" align=justify></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px; TEXT-INDENT: 48px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=justify></P>
<P style="MARGIN: 0px; TEXT-INDENT: 48px" align=center>&nbsp;</P>
<P style="MARGIN: 0px" align=justify></P><A name=_Toc183245758></A>
<P style="MARGIN-TOP: 10px; MARGIN-BOTTOM: 0px"><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 27 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 10px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -17px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 13pt"><B>ITEM
3.</B></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 96px; LINE-HEIGHT: 13pt"><B>CONTROLS
AND PROCEDURES</B></P>
<P style="MARGIN: 0px"><BR></P>
<P
style="MARGIN-TOP: 6px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 6px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">The
Securities and Exchange Commission defines the term &#147;disclosure controls and
procedures&#148; to mean a company's controls and other procedures of an issuer that
are designed to ensure that information required to be disclosed in the reports
that it files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission&#146;s rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Securities Exchange Act of 1934 is
accumulated and communicated to the issuer&#146;s management, including its principal
executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure. &nbsp;The Company maintains such a system of controls and procedures
in an effort to ensure that all information which it is required to disclose in
the reports it files under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified under the
SEC's rules and forms and that information required to be disclosed is
accumulated and communicated to principal executive and principal financial
officers to allow timely decisions regarding disclosure. </P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">As
of the end of the period covered by this report, we carried out an evaluation,
under the supervision and with the participation of our chief executive officer
and principal accounting officer, of the effectiveness of the design and
operation of our disclosure controls and procedures. &nbsp;Based on this
evaluation, our chief executive officer and principal accounting officer
concluded that our disclosure controls and procedures are designed to provide
reasonable assurance of achieving the objectives of timely alerting them to
material information required to be included in our periodic SEC reports and of
ensuring that such information is recorded, processed, summarized and reported
with the time periods specified. &nbsp;Our chief executive officer and principal
accounting officer also concluded that our disclosure controls and procedures
were effective as of June 30, 2008 to provide reasonable assurance of the
achievement of these objectives.</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">There
was no change in the Company's internal control over financial reporting during
the quarter ended September 30, 2008, that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P><A name=_Toc183245759></A>
<P style="MARGIN-TOP: 10px; MARGIN-BOTTOM: 0px"><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 28 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 10px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 0px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 13pt"><B>PART
II. &nbsp;OTHER INFORMATION</B></P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -20px; LINE-HEIGHT: 15pt"><B>Item
1.</B></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 96px; LINE-HEIGHT: 13pt"><B>Legal
Proceedings</B></P>
<P
style="PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">None</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -20px; LINE-HEIGHT: 15pt"><B>Item
2.</B></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 96px; LINE-HEIGHT: 13pt"><B>Unregistered
Sales of Equity Securities and Use of Proceeds</B></P>
<P
style="PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">None
</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -20px; LINE-HEIGHT: 15pt"><B>Item
3.</B></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 96px; LINE-HEIGHT: 13pt"><B>Defaults
upon Senior Securities</B></P>
<P
style="PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">None
</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -20px; LINE-HEIGHT: 15pt"><B>Item
4.</B></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 96px; LINE-HEIGHT: 13pt"><B>Submission
of Matters to a Vote of Security Holders</B></P>
<P
style="PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">None</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -20px; LINE-HEIGHT: 15pt"><B>Item
5.</B></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 96px; LINE-HEIGHT: 13pt"><B>Other
Information</B></P>
<P
style="PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 48px; LINE-HEIGHT: 13pt">None</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="MARGIN-TOP: 0px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -17px; LINE-HEIGHT: 13pt"><B>Item
6. </B></P>
<P
style="FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: 96px; LINE-HEIGHT: 13pt"><B>Exhibits</B></P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">The following
exhibits are filed herewith:</P>
<P style="MARGIN: 0px"><BR></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -20px; TEXT-INDENT: -48px; LINE-HEIGHT: 15pt">3(i)</P>
<P
style="PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Articles
of Incorporation (incorporated by reference from Registration Statement on Form
3(i) Articles of Incorporation (incorporated by reference from Registration
Statement on Form 10-SB filed with the Securities and Exchange Commission on
October 11, 2000).</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -20px; TEXT-INDENT: -48px; LINE-HEIGHT: 15pt">3(ii)</P>
<P
style="PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Bylaws
(incorporated by reference from Registration Statement on Form 10-SB filed with
the Securities and Exchange Commission on October 11, 2000).</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -20px; TEXT-INDENT: -48px; LINE-HEIGHT: 15pt">31.1
</P>
<P
style="PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Certifications
pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of
1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -20px; TEXT-INDENT: -48px; LINE-HEIGHT: 15pt">31.2
</P>
<P
style="PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Certifications
pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of
1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -20px; TEXT-INDENT: -48px; LINE-HEIGHT: 15pt">32.1
</P>
<P
style="PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.</P>
<P
style="PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN: 0px; TEXT-INDENT: -48px; LINE-HEIGHT: 13pt">&nbsp;</P>
<P
style="MARGIN-TOP: 0px; PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN-BOTTOM: -20px; TEXT-INDENT: -48px; LINE-HEIGHT: 15pt">32.2
</P>
<P
style="PADDING-LEFT: 48px; FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.</P>
<P style="MARGIN: 0px; LINE-HEIGHT: 13pt"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">&nbsp;</P><A
name=_Toc183245760></A>
<P style="MARGIN-TOP: 10px; MARGIN-BOTTOM: 0px"><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 29 -</P>
<P style="MARGIN: 0px"><BR></P>
<HR style="MARGIN-TOP: 9px; MARGIN-BOTTOM: 9px" noShade SIZE=1>
<P
style="MARGIN-TOP: 10px; FONT-SIZE: 11pt; MARGIN-BOTTOM: 0px; PAGE-BREAK-BEFORE: always; LINE-HEIGHT: 13pt"><B>SIGNATURES</B></P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">In accordance with
the requirements of the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.</P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt"><B>LONGWEI PETROLEUM
INVESTMENT HOLDING LIMITED</B></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">By: /s/ Cai Yongjun,
Chief Executive Officer</P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: 13pt">By: /s/ Wang Junping,
Chief Financial Officer</P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 11pt; MARGIN: 0px; LINE-HEIGHT: normal">Date:
&nbsp;November 19, 2008<FONT style="FONT-SIZE: 12pt; FONT-FAMILY: CG Times">
</FONT></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px" align=justify><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR>&nbsp;</P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="MARGIN: 0px"><BR></P>
<P style="FONT-SIZE: 12pt; MARGIN: 0px; LINE-HEIGHT: 14pt">&nbsp;</P>
<P style="MARGIN: 0px"><BR><BR></P>
<P style="MARGIN: 0px" align=center>- 30 -</P>
<P style="MARGIN: 0px"><BR></P></DIV></BODY>
<!-- EDGAR Validation Code: C9737C3F -->
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{"company-data": {"conformed-name": "LONGWEI PETROLEUM INVESTMENT HOLDING LTD", "cik": "0001111817", "assigned-sic": "5171", "irs-number": "841536518", "state-of-incorporation": "CO", "fiscal-year-end": "0630"}, "filing-values": {"form-type": "10-Q", "act": "34", "file-number": "000-31751", "film-number": "081199367"}, "business-address": {"street1": "30 GUANGHAU AVENUE, WAN BAILIN DISTRICT", "street2": "TAIYUAN CITY, SHANXI PROVINCE", "city": "SHANXI", "state": "F4", "zip": "030024", "phone": "8635 1652 7366"}, "mail-address": {"street1": "30 GUANGHAU AVENUE, WAN BAILIN DISTRICT", "street2": "TAIYUAN CITY, SHANXI PROVINCE", "city": "SHANXI", "state": "F4", "zip": "030024"}, "former-company": {"former-conformed-name": "TABATHA II INC", "date-changed": "20000413"}}
longweisep08
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
10
-
Q
X
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
quarter ended September 30, 2008
_
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
transition period from ____ to _____
LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED
(Name of small business issuer in its charter)
Colorado
0-31751
84-1536518
(State or other jurisdiction of incorporation)
(Commission File Number)
(IRS Employer Identification Number)
No.30 Guanghua Street, Xiaojingyu Xiang, Wanbailin
District
Taiyuan City, Shanxi Province, China P.C. 030024
(Address of principal executive
offices)
Registrant's telephone number, including area code:  (303)
885-5501
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 the
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Large Accelerated
Filer   [  ]
                                                                Accelerated
Filer   [  ]
Non-Accelerated
Filer   [  ] (Do not check if a smaller reporting company)
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__ No
X
Indicate the number
of shares outstanding of each of the issuer's classes of stock, as of the latest
practicable date.
Class of Securities
Shares Outstanding at October 31, 2008
Common Stock, no par value
76,205,000
- 1 -
PART
1 - FINANCIAL INFORMATION
ITEM
1.
FINANCIAL
STATEMENTS
(a)
The unaudited financial statements of registrant for three months ended
September 30, 2008, follow.  The financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim period presented
.
- 2 -
INDEX
PART 1 - FINANCIAL INFORMATION
2
ITEM 1.
FINANCIAL STATEMENTS
2
BALANCE SHEETS AS OF SEPTEMBER 30,
2008 AND JUNE 30, 2008
4
UNAUDITED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
5
UNAUDITED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
6
UNAUDITED
STATEMENTS OF CASH FLOWS
7
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS
8
- 3 -
LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED
BALANCE
SHEETS
AS OF SEPTEMBER
30, 2008 AND JUNE 30, 2008
September 30, 2008
June 30, 2008
(Unaudited)
ASSETS
Current
assets:
Cash
and cash equivalents
$
8,010,731
$
8,632,879
Accounts
receivable
19,785,012
12,134,507
Inventories
23,928,820
29,052,841
Advance
to suppliers
34,792,293
28,327,067
Deposits
12,739,510
12,610,984
Other
receivables
-
72,896
Total current
assets
99,256,366
90,831,174
Property, plant
and equipment, net
2,568,460
2,637,326
Total
assets
$
101,824,826
$
93,468,500
LIABILITIES
AND STOCKHOLDERS' EQUITY
Current
liabilities:
Accounts
payable
$
-
$
165,231
Accrued
payables
770,496
798,436
Convertible
notes payable, net of discount of $254,697 and $636,742,
respectively
1,911,353
1,508,135
Taxes
payable
4,040,375
2,455,223
Total current
liabilities
6,722,224
4,927,025
Total
liabilities
6,722,224
4,927,025
STOCKHOLDERS'
EQUITY
Common
Stock; no par value, 100,000,000 shares authorized, 76,205,000 and
76,205,000 shares issued and outstanding as of 09/30/08 and 06/30/08,
respectively
7,008,712
7,008,712
Additional
paid-in capital
1,528,180
1,528,180
Retained
earnings
74,233,130
68,742,653
Accumulated
other comprehensive income
12,332,580
11,261,930
Total
stockholders' equity
95,102,602
88,541,475
Total
liabilities and stockholders' equity
$
101,824,826
$
93,468,500
See
accompanying notes to the financial statements
- 4 -
LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED
UNAUDITED
STATEMENTS
OF INCOME AND COMPREHENSIVE
INCOME
FOR THREE MONTHS
ENDED SEPTEMBER 30, 2008 AND 2007
Three months ended September
30,
2008
2007
Net revenues:
Product sales
$
42,526,196
$
32,110,699
Agency service
1,949,290
4,377,973
44,475,486
36,488,672
Cost of revenues
Product sales
34,835,475
25,434,493
Agency service
-
259,397
34,835,475
25,693,890
Gross profit
9,640,011
10,794,782
Operating Expenses
Salaries
45,798
36,009
Other
selling, general and administrative expenses
2,121,349
321,425
2,167,147
357,434
Operating profit
7,472,864
10,437,348
Other income and (expenses)
Interest income
3,836
19,000
Interest expense
(21,594)
-
Other income/(expense)
(17,758)
19,000
Income before income taxes
7,455,106
10,456,348
Income taxes
(1,964,629)
(3,437,578)
Net income
5,490,477
7,018,770
Other comprehensive income
Foreign
currency translation adjustment
1,070,650
781,958
Comprehensive income
$
6,561,127
$
7,800,728
Basic net income per share
$
0.07
$
0.10
Weighted
average number of shares outstanding
76,205,000
69,000,000
Diluted net income per share
$
0.07
$
0.10
Diluted
weighted average number of shares outstanding
80,705,000
69,000,000
See accompanying notes to the financial
statements
- 5 -
LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED
UNAUDITED
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2008
Common stock
shares
Common stock amount
Additional paid-in capital
Retained earnings
Accumulated other
comprehensive income
Total stockholders' equity
Balance at June 30, 2008
76,205,000
$
7,008,712
$
1,528,180
$
68,742,653
$
11,261,930
$
88,541,475
Net income for the period
-
-
-
5,490,477
-
5,490,477
Foreign
currency translation adjustment
-
-
-
-
1,070,650
1,070,650
Balance at September 30,2008
76,205,000
$
7,008,712
$
1,528,180
$
74,233,130
$
12,332,580
$
95,102,602
See
accompanying notes to the financial statements
- 6 -
LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED
UNAUDITED
STATEMENTS OF CASH
FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
2008 AND 2007
Three Months ended September
30,
2008
2007
Operating activities
Net income
$
5,490,477
$
7,018,770
Adjustments
to reconcile net income from operations to net cash used in operating
activities:
Depreciation
96,466
89,634
Warrant expense
382,045
-
Accrued interest
21,173
-
Changes in operating assets and
liabilities
Accounts receivable
(7,526,834)
(10,781,567)
Other receivable
73,639
-
Inventory
5,420,116
2,921,429
Advance to suppliers
(6,176,527)
(2,907,038)
Prepaid taxes
-
1,475,158
Accounts payable
-
240,596
Other payable
(105,230)
-
Advance from customers
-
(416,397)
Taxes payable
1,560,129
2,089,847
Other current
liabilities
13,654
-
Net cash used in operating activities
(750,892)
(269,568)
Investing activities
Purchase of equipment
(721)
(15,622)
Net cash used in investing activities
(721)
(15,622)
Effect of exchange rate changes in cash
129,465
783,252
Net increase (decrease) in cash and cash
equivalents
(622,148)
498,062
Cash and cash equivalents, beginning of the
period
8,632,879
6,060,428
Cash and cash equivalents, end of the period
$
8,010,731
$
6,558,490
Supplemental disclosure of cash flow
information
Cash paid during the period:
Income taxes paid
$
1,722,707
$
1,714,612
See
accompanying notes to the financial statements
- 7 -
LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
1.
MANAGEMENT'S
REPRESENTATION OF INTERIM FINANCIAL INFORMATION
The
accompanying financial statements have been prepared by Longwei Petroleum
Investment Holding Limited, Inc. without audit pursuant to the rules and
regulations of the Securities and Exchange Commission.  Certain information
and disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted as
allowed by such rules and regulations, and management believes that the
disclosures are adequate to make the information presented not misleading.
 These financial statements include all of the adjustments, which in the
opinion of management are necessary to a fair presentation of financial position
and results of operations.  All such adjustments are of a normal and
recurring nature. Interim results are not necessarily indicative of results for
a full year.
2.
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of the Company is
presented to assist in understanding the Company's financial statements.
 The financial statements and notes are representations of the Company's
management, which is responsible for their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
Description
of Business
Longwei Petroleum Investment Holding Limited ("we," "us," "our,"
"Longwei") was incorporated under the laws of the State of Colorado on March 17,
2000, under the name of Tabatha II, Inc. We changed our name to Longwei
Petroleum Investment Holding Limited on October 12, 2007. We were formed as a
"blind pool" or "blank check" company whose business plan was to seek to acquire
a business opportunity through completion of a merger, exchange of stock, or
other similar type of transaction. In furtherance of our business plan, we
voluntarily elected to become subject to the periodic reporting obligations of
the Securities Exchange Act of 1934 by filing a registration statement on Form
10-SB.
Prior to October 16, 2007, our only business activities were the
organizational activities described above, including registration under the
Securities Exchange Act of 1934, and efforts to locate a suitable business
opportunity for acquisition. On October 16, 2007, the date of the closing of the
Share Exchange, we acquired all of the issued and outstanding common stock of
Longwei Petroleum Investment Holding Limited ("Longwei BVI"), a British Virgin
Islands corporation incorporated on April 3, 2006.  Longwei BVI owns all of
the issued and outstanding stock of Taiyuan Yahua Energy Conversion Co., Ltd.
("Taiyuan Yahua"), a Chinese limited liability company, which in turn is the
sole shareholder of
Taiyuan Longwei Economy & Trading
Co., Ltd. ("Taiyuan Longwei"), a Chinese limited liability company.
  We issued 69,000,000 shares of common stock in the share exchange
transaction for 100% of the ownership of Longwei BVI. As a result of the share
exchange transaction, Longwei BVI and its subsidiaries became our wholly owned
subsidiaries.
- 8 -
LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
2.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Description of
Business - continued
The former stockholders of Longwei BVI acquired 92% of our issued
and outstanding common stock as a result of closing the share exchange
transaction.  Therefore, although Longwei BVI became our wholly-owned
subsidiary, the transaction was accounted for as a recapitalization of Longwei
BVI, whereby Longwei BVI is deemed to be the accounting acquirer and is deemed
to have adopted our capital structure.
All operating activities are carried out through our wholly-owned
Chinese subsidiary, Taiyuan Longwei Economy & Trading Co., Ltd. ("Taiyuan
Longwei"), which was incorporated in 1995.  The operating company is
located in Taiyuan City, China.  We purchase diesel, gasoline, fuel oil and
kerosene from various suppliers. As an intermediary, we seek to earn profits by
buying diesel, gasoline, fuel oil and kerosene at competitive prices and selling
them to other wholesalers. In addition, we also earn revenues by acting as a
purchase agent where we charge an agency fee, a fee which is charged to
wholesalers who do not have a license to purchase directly from refineries.
Further, the company owns a gas station located on its property where it
generates additional profit and revenue. The cost of our products is largely
dependent on the price of crude oil. The price of crude oil is subject to
fluctuation due to a variety of factors, all of which are beyond our control.
When sudden and significant increases occur in the cost of fuel and lubricant
products, we may not be able to pass on these increases through timely price
increases to our customers. The timing of passing these costs to our customers
can significantly affect our margins. The affect of lower crude oil prices,
after the sale for a short time of higher priced inventory on hand at the time
of the price decrease, reduces the cost of the products which, in turn, improves
profit margins. Fuel oil is a liquid petroleum product that is burned in a
furnace or boiler for the generation of heat or used in an engine for the
generation of power. Solvents are unrefined petroleum products used in paint,
dry-cleaning solvents, solvents for cutback asphalts and solvents for the rubber
industry. We transport and market these products to other wholesale buyers. Our
primary customers are large-scale gas stations, which represent 60% of our
sales. These gas stations, which purchase diesel and gasoline from us, are
located in Taiyuan City in the Shanxi Province of China. Our second largest
group of customers is the coal plants and power supply companies that use our
fuel oil for heat and power, along with our solvents, which comprise 30% of our
business. Our third largest customers are the small independent gas stations.
These represent 10% of our total sales, and purchase gasoline and diesel. Our
operating company is located at No. 30 Guanghua Avenue, Xiaojingyu Xiang, Wan
Bailin District, Taiyuan City, P.C. 030024, Shanxi Province, China, and our
phone number is (86) 351-6527-366.
(a)    Basis
of Preparation
The
financial statements of the Company are prepared in accordance with accounting
principles generally accepted in the United States of America and include the
accounts of the Company. This basis of accounting differs in certain material
respects from that used for the preparation of the books and records of the
Company, which are prepared in accordance with the accounting principles and the
relevant financial regulations applicable to enterprises with limited
liabilities, established in the PRC ("PRC GAAP") the accounting standards used
in the place of their domicile.
- 9 -
LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
2.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(b)    Economic
and Political Risks
The
Company's operations are conducted in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environment in the PRC, and by the general state
of the PRC economy.
The
Company's operations in the PRC are subject to special considerations and
significant risks not typically associated with companies in North America and
Western Europe. These include risks associated with, among others, the
political, economic and legal environment and foreign currency exchange. The
Company's results may be adversely affected by changes in the political and
social conditions in the PRC, and by changes in governmental policies with
respect to laws and regulations, anti-inflationary measures, currency
conversion, remittances abroad, and rates and methods of taxation.
(c)    Principles
of Consolidation
The
accompanying financial statements include Longwei Petroleum Investment Holding
Limited, its wholly owned subsidiary, Longwei Petroleum Investment Holding
Limited, a British Virgin Island corporation, its wholly owned subsidiary,
Taiyuan Yahua Energy Conversion Co., Ltd., a Chinese limited liability company,
which owns 100% of the operating subsidiary, Taiyuan Longwei Economy &
Trading Company, Ltd., a Chinese limited liability company.  Intercompany
transactions have been eliminated in consolidation.
(d)    Property,
Plant and Equipment
Property,
plant and equipment are carried at cost less accumulated depreciation.
Depreciation is provided over the assets' estimated useful lives, using the
straight-line method. Estimated useful lives of the property, plant and
equipment are as follows:
Buildings
20
years
Heavy machinery
and production equipment
8- 20
years
Railway
20
years
Motor
vehicles
5
years
The
cost and related accumulated depreciation of assets sold or otherwise retired
are eliminated from the accounts and any gain or loss is included in the
statement of income. The cost of maintenance and repairs is charged to the
statement of income as incurred, whereas significant renewals and betterments
are capitalized.
- 10 -
LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
2.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(e)    Accounting
for the Impairment of Long-Lived Assets
The
long-lived assets held and used by the Company are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
assets may not be recoverable. It is reasonably possible that these assets could
become impaired as a result of technology or other industry changes.
Determination of recoverability of assets to be held and used is by comparing
the carrying amount of an asset to future net undiscounted cash flows to be
generated by the assets. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.
There
was no impairment of long-lived assets as of September 30, 2008.
(f)    Inventories
Inventories
are stated at the lower of cost, determined on a weighted average basis, or net
realizable value. Net realizable value is the estimated selling price in the
ordinary course of business less the estimated cost of completion and the
estimated costs necessary to make the sale.
When
inventories are sold, their carrying amount is charged to expense in the year in
which the revenue is recognized. Write-downs for declines in net realizable
value or for losses of inventories are recognized as an expense in the year the
impairment or loss occurs. There were no declines in net realizable value of
inventory for three months ended September 30, 2008.
(g)
   Accounts Receivable
Trade
receivables are recognized and carried at the original invoice amount less
allowance for any uncollectible amounts. An estimate for doubtful accounts is
made when collection of the full amount is no longer probable. Bad debts are
written off as incurred.
(h)    Cash
and Cash Equivalents
The
Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. Cash deposit in PRC
banks are not insured by any government agency or entity.
(i)    Advances
to Suppliers
Advances
to suppliers represent the cash paid in advance for purchasing of inventory
items from suppliers.
(j)    Fair
Value of Financial Instruments
The
Company's financial instruments include cash and cash equivalents, accounts
receivable, prepaid taxes, advances to suppliers, other current assets, taxes
payable, accounts payable and advances from customers. Management estimates that
the carrying amounts of the non related party financial instruments approximate
their fair values due to their short-term nature.
- 11 -
LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
2.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(k)    Revenue
Recognition
The
Company derives the bulk of its revenue from sales of gasoline, diesel, solvent
oil and fuel oil. These product sales revenues are recognized when customers
take possession of goods in accordance with the terms of purchase order
agreements that evidence agreed upon pricing and when collectibility is
reasonably assured. Cost of revenues for product sales include costs to purchase
and transport the product to the Company, costs to deliver the goods to the
customer and depreciation on product storage and delivery equipment.
Agency
service revenue consists of fees charged to small fuel distributors who lack the
required licenses to purchase directly from large refineries. The Company
allocates a portion of its purchasing quota to these customers for a fee similar
to a sales commission. Agency service revenue is recognized when there is
evidence of an arrangement that specifies pricing and irrevocable allocation of
a portion of the Company's purchase quota and collection has occurred. Cost of
agency service revenues consists primarily of selling commissions.
(l)    Foreign
Currency Translation
The functional currency of the Company is RMB and RMB is
freely convertible into foreign currencies. The Company maintains its financial
statements in the functional currency. Monetary assets and liabilities
denominated in currencies other than the functional currency are translated into
the functional currency at rates of exchange prevailing at the balance sheet
date. Transactions denominated in currencies other than the functional currency
are translated into the functional currency at the exchange rates prevailing at
the dates of the transactions. Exchange gains or losses arising from foreign
currency transactions are included in the determination of net income for the
respective periods.
For financial reporting purposes, the financial statements of the
Company which are prepared using the functional currency have been translated
into United States dollars. Assets and liabilities are translated at exchange
rates at the balance sheet dates and revenue and expenses are translated at the
average exchange rates and stockholders' equity is translated at historical
exchange rates. Any translation adjustments resulting are not included in
determining net income but are included in foreign exchange adjustment to other
comprehensive income, a component of stockholders' equity.  If the RMB
appreciates against the U.S. dollar, revenue and expenses would be higher than
they would have been if there were no fluctuations in the currencies.
 Conversely, if the RMB appreciates against the U.S. dollar, revenue and
expenses would be lower than they would have been if there were no fluctuations
in the currencies. The exchange rates adopted are as follows:
2008
2007
Period
end RMB exchange rate
6.7899
6.859
Average
period RMB exchange rate
6.8377
7.276
No
representation is made that the RMB amounts could have been, or could be,
converted into U.S. dollars at the rates used in translation.
- 12 -
LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
2.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(m)    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; however actual results
could differ materially from those estimates.
(n)    Income
Taxes
The
company has implemented SFAS No. 109, "Accounting for Income Taxes," which
provides for a liability approach to accounting for income taxes. Deferred
income taxes result from the effect of transactions that are recognized in
different periods for financial and tax reporting purposes. The company has
recorded no deferred tax assets or liabilities as of September 30, 2008, since
nearly all differences in tax bases and financial statement carrying values are
permanent differences.
(o)    Recent
Accounting Pronouncements
In
December 2007, the
FASB issued SFAS No. 141R,
"Business Combinations" ("SFAS No. 141R"). SFAS No. 141R amends
SFAS 141 and provides revised guidance for recognizing and measuring
identifiable assets and goodwill acquired, liabilities assumed, and any
noncontrolling interest in the acquiree. It also provides disclosure
requirements to enable users of the financial statements to evaluate the nature
and financial effects of the business combination. It is effective for fiscal
years beginning on or after December 15, 2008 and will be applied
prospectively. We are currently evaluating the impact of adopting SFAS
No. 141R on our consolidated financial statements.
In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements — an amendment of ARB No. 51" ("SFAS
No. 160"). SFAS No. 160 requires that ownership interests in subsidiaries held
by parties other than the parent, and the amount of consolidated net income, be
clearly identified, labeled, and presented in the consolidated financial
statements. It also requires once a subsidiary is deconsolidated, any retained
noncontrolling equity investment in the former subsidiary be initially measured
at fair value. Sufficient disclosures are required to clearly identify and
distinguish between the interests of the parent and the interests of the
noncontrolling owners. It is effective for fiscal years beginning on or after
December 15, 2008 and requires retroactive adoption of the presentation and
disclosure requirements for existing minority interests. All other requirements
shall be applied prospectively. We are currently evaluating the impact of
adopting SFAS No. 160 on our consolidated financial statements.
In
March 2008, FASB issued Financial Accounting Standards No. 161, "
Disclosure
about Derivative Instruments and Hedging Activities - an amendment to FASB
Statement No. 133."
The use and complexity of derivative instruments and
hedging activities have increased significantly over the past several years.
Constituents have expressed concerns that the existing disclosure requirements
in FASB Statement No. 133, "
Accounting for Derivative Instruments and Hedging
Activities,"
do not provide adequate information about how derivative and
hedging activities affect an entity's financial position, financial performance,
and cash flows. Accordingly, this Statement requires enhanced disclosures about
an entity's derivative and
- 13 -
LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
2.    SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(o)    Recent
Accounting Pronouncements (Continued)
hedging activities
and thereby improves the transparency of financial reporting. This Statement is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008.
In
May 2008, the FASB issued Statement No. 162, "
The Hierarchy of Generally
Accepted Accounting Principles
."  This statement identifies the sources
of accounting principles and the framework for selecting the principles to be
used in the preparation of financial statements of nongovernmental entities that
are presented in conformity with generally accepted accounting principles (GAAP)
in the United States (the GAAP hierarchy).  This statement is effective 60
days following the SEC's approval of the Public Company Accounting Oversight
Board amendments to AU Section 411, "
the Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles
."
In May 2008, the FASB issued Statement No. 163
"Accounting for
Financial Guarantee Insurance Contracts—an interpretation of FASB Statement No.
60."
The premium revenue recognition approach for a financial
guarantee insurance contract links premium revenue recognition to the amount of
insurance protection and the period in which it is provided. For purposes of
this statement, the amount of insurance protection provided is assumed to be a
function of the insured principal amount outstanding, since the premium received
requires the insurance enterprise to stand ready to protect holders of an
insured financial obligation from loss due to default over the period of the
insured financial obligation.  This Statement is effective for financial
statements issued for fiscal years beginning after December 15, 2008.
3.    ACCOUNTS
RECEIVABLE
The receivables and allowance balances at September 30, 2008 and
June 30, 2008 are as follows:
September 30, 2008
June 30,  2008
Accounts
receivable
$
19,785,012
12,134,507
Less:
allowance for doubtful accounts
-
-
Accounts
receivable, net
$
19,785,012
12,134,507
4.    INVENTORIES
Inventories
are the unsold petroleum products purchased from various suppliers, and consist
of the following as of September 30, 2008 and June 30, 2008:
September 30,
June 30,
2008
2008
Diesel
Oil
$
11,689,430
$
16,433,154
Gasoline
12,239,390
12,619,687
Less:
allowances for slowing moving items
-
-
Total
$
23,928,820
$
29,052,841
- 14 -
LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
5.    ADVANCE
TO SUPPLIERS
The Company has made payments to unrelated suppliers in advance of
receiving products and services. The advance payments are meant to ensure
preferential pricing and delivery. The amounts advanced under such arrangements
totaled $34,792,293 as of September 30, 2008.
6.    PROPERTY,
PLANT AND EQUIPMENT
At
September 30 and June 30, 2008, property, plant and equipment, at cost, consist
of
June 30, 2008
Impact of foreign currency exchange rate
Additions
September 30, 2008
Land and buildings
$
2,052,874
$
20,892
$
-
$
2,073,766
Machinery and
production equipment
4,454,536
45,373
721
4,500,630
Total property,
plant and equipment
6,507,410
66,265
721
6,574,396
Less: accumulated depreciation
(3,870,084)
(39,386)
(96,466)
(4,005,936)
Property, plant and equipment, net
$
2,637,326
$
26,879
$
(95,745)
$
2,568,460
Depreciation
expense for the three months ended September 30, 2008 was $96,466.
7.
 TAXES PAYABLE
Taxes payable consist of the following:
September 30, 2008
June 30, 2008
Income tax payable
$
1,450,660
$
1,190,002
Value Added Tax payable
2,138,607
963,178
Business taxes payable and others
451,108
302,043
Total
$
4,040,375
$
2,455,223
8.
 ACCRUED PAYABLES
Accrued payables consist of the following:
September 30, 2008
June 30, 2008
Accrued
salaries
$
15,376
$
15,221
Accrued staff
welfare
246,521
230,518
Accrued expenses and miscellaneous
508,599
552,697
Total
$
770,496
$
798,436
- 15 -
LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
9.    INCOME
TAXES
(a)
Corporation Income Tax
("CIT")
The
Company is governed by the Income Tax Laws of the PRC. The PRC federal statutory
tax rate is 25% since January 1, 2008.
The provision for income taxes for three months ended September
30, 2008 is summarized as follows:
2008
Current
$
1,964,629
Deferred
-
$
1,964,629
(b)
Value Added Tax ("VAT")
In
accordance with the relevant taxation laws in the PRC, the normal VAT rate for
domestic sales is 5% to 17%, which is levied on the invoiced value of sales and
is payable by the purchaser. The Company is required to remit the VAT it
collects to the tax authority.
The
value added tax refundable presents the VAT that the Company paid for the
purchasing products and can be used to deduct the VAT related to the sale of
products.
10.
   SEGMENT INFORMATION
For the three months ended September
30, 2008
Agency
Product sales
Service
Total
Revenues
$    42,526,196
$   1,949,290
$
   44,475,486
Cost of revenues
34,835,475
-
34,835,475
Gross profit
7,690,721
1,949,290
9,640,011
Income from operations
5,505,816
1,949,290
7,455,106
Total assets
101,824,826
-
101,824,826
Depreciation
96,466
-
96,466
For the three months ended September
30, 2007
Agency
Product sales
Service
Total
Revenues
$
     32,110,699
$
    4,377,973
$    36,488,672
Cost of revenues
25,434,493
259,397
25,693,890
Gross profit
6,676,206
4,118,576
10,794,782
Income from operations
6,318,772
4,118,576
10,437,348
Total assets
70,458,277
-
70,458,277
Depreciation
89,634
-
89,634
- 16 -
LONGWEI PETROLEUM INVESTMENT HOLDING LIMITED
NOTES
TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007
11.
   GEOGRAPHICAL INFORMATION
The Company's revenues by geographic destination are
analyzed as follows:
For the Three Months Ended September 30,
2008
2007
PRC
$
44,475,486
$
36,488,672
Outside PRC
-
-
Total net
revenues
$
44,475,486
$
36,488,672
12.
   WARRANTS
We
completed a convertible note on December 18, 2007, in the amount of $2,100,000
at an interest rate of 4% per annum, with a conversion feature of $0.70 per
share (the conversion price) at the option of the investor.  Additionally,
warrants were granted at an exercise price of $0.80. The convertible note will
give the Company $2,100,000. After disbursement of fees and expenses, the
Company netted $1,800,000.  Additionally, if all of the warrants are
exercised, the Company will receive $1,200,000.  In using the Black-
Scholes Calculation the company will have a total expense of $1,528,180 for the
life of the warrants.  The note was for a period of 12 months expiring
December 17, 2008. Each month expense would be $127,348.
- 17 -
ITEM
 2.
MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DISCLAIMER REGARDING
FORWARD LOOKING STATEMENTS
Certain
statements in this Form 10-Q, which are not statements of historical fact, are
what are known as "forward-looking statements," which are basically statements
about the future. For that reason, these statements involve risk and uncertainty
since no one can accurately predict the future. Words such as "plans,"
"intends," "hopes," "seeks," "anticipates," "expects," and the like, often
identify such forward looking statements, but are not the only indication that a
statement is a forward-looking statement. Such forward-looking statements
include statements concerning our plans and objectives with respect to our
present and future operations, and statements which express or imply that such
present and future operations will or may produce revenues, income or profits.
These and other factors may cause our actual results to differ materially from
any forward-looking statement.  We caution you not to place undue reliance
on these forward-looking statements.  Although we base these
forward-looking statements on our expectations, assumptions, and projections
about future events, actual events and results may differ materially, and our
expectations, assumptions, and projections may prove to be inaccurate. The
forward-looking statements speak only as of the date hereof, and we expressly
disclaim any obligation to publicly release the results of any revisions to
these forward-looking statements to reflect events or circumstances after the
date of this filing.
Overview
Longwei Petroleum Investment Holding Limited ("we," "us," "our,"
"Longwei") was incorporated under the laws of the State of Colorado on March 17,
2000, under the name of Tabatha II, Inc. We changed our name to Longwei
Petroleum Investment Holding Limited on October 12, 2007. We were formed as a
"blind pool" or "blank check" company whose business plan was to seek to acquire
a business opportunity through completion of a merger, exchange of stock, or
other similar type of transaction. In furtherance of our business plan, we
voluntarily elected to become subject to the periodic reporting obligations of
the Securities Exchange Act of 1934 by filing a registration statement on Form
10-SB.
Prior to October 16, 2007, our only business activities were the
organizational activities described above, including registration under the
Securities Exchange Act of 1934, and efforts to locate a suitable business
opportunity for acquisition. On October 16, 2007, the date of the closing of the
Share Exchange, we acquired all of the issued and outstanding common stock of
Longwei Petroleum Investment Holding Limited ("Longwei BVI"), a British Virgin
Islands corporation incorporated on April 3, 2006.  Longwei BVI owns all of
the issued and outstanding stock of Taiyuan Yahua Energy Conversion Co., Ltd.
("Taiyuan Yahua"), a Chinese limited liability company, which is in turn the
sole shareholder of Taiyuan Longwei Economy & Trading Co., Ltd. ("Taiyuan
Longwei"), a Chinese limited liability company.   We issued 69,000,000
shares in the share exchange transaction for 100% of the ownership of Longwei
BVI. As a result of the share exchange transaction, Longwei BVI and its
subsidiaries became our wholly owned subsidiaries.
Taiyuan Yahua was incorporated on August 11, 2006.  The
operating subsidiary, Taiyuan Longwei, is located in Taiyuan City, China, and
was established in 1995 as a Chinese limited liability company.  We
purchase diesel, gasoline, fuel oil and kerosene from various suppliers. As a
licensed intermediary, we seek to earn profits by buying diesel gasoline fuel
oil and kerosene at competitive prices and selling them to other wholesalers. In
addition, we also earn revenue by acting as a purchase agent where we charge an
agency fee, a fee which is charged to other wholesalers who do not have a
license to purchase directly from refineries.   The cost of our
products is largely dependent on the price of crude oil. The price of crude oil
is subject to fluctuation due to a variety of factors, all of which are beyond
our control. When sudden and significant increases occur in the cost of fuel and
lubricant products, we may not be able to pass on these increases through timely
price increases to our customers. The timing of passing these costs through to
our customers can significantly affect our margins. The affect of lower crude
oil prices, after the sale for a short time of higher priced inventory on hand
at the time of the price decrease, reduces the cost of
- 18 -
the products which in turn improves profit margins. Fuel oil is a
liquid petroleum product that is burned in a furnace or boiler for the
generation of heat or used in an engine for the generation of power.
 Solvents are unrefined petroleum products used in paint, dry-cleaning
solvents, solvents for cutback asphalts and solvents for the rubber industry. We
transport and market these products to other wholesale buyers.  Our primary
customers are large-scale gas stations, which represent 60% of our sales and
which are located in Taiyuan City in the Shanxi Province of China.  They
primarily buy diesel and gasoline.  Our second largest group of customers
is coal plants and power supply companies which use our fuel oil for heat and
power along with our solvents; these comprise 30% of our business.  Our
third largest customer is the small, independent gas station which represents
10% of our total sales.  These stations buy gasoline and diesel from
us.
We currently have 14 storage tanks that allow us to store 50,000
metric tons of our products. In addition, we own our own rail system to
transport our products to our customers.
We have been granted a Finish Oil Wholesale license which allows
our company to engage in the wholesale business of gasoline, fuel oil and diesel
oil.  This license is granted by the People's Republic of China.  In
addition, we also have a special license for Dangerous Chemical Products
Businesses that allows us to handle gasoline and diesel oil.  The Finish
Oil Wholesale License allows us to engage in the business of these products.
There is no expiration date on this license
.
The Dangerous Chemical
Products Businesses license is renewed every three years.  The People's
Republic of China's constitution states that all mineral and oil resources
belong to the State.  Without these licenses, we would not be allowed to
sell our products.
Results of Operations
Revenue
The following table shows the different components comprising our
total revenue for the three months ending September 30, 2008 and September 30,
2007.
All amounts in thousands of U.S. dollars
Sales by Products
2008
% of total
revenues
Volume of sales
in thousands
2007
% of total
revenues
Volume of sales
in thousands
(gallons)
(gallons)
Diesel
Oil
25,539
57.4%
8,854
18,336
50.3%
8,503
Gasoline
16,987
38.2%
5,993
12,540
34.4%
5,652
Fuel Oil
0
0%
0
1,235
3.4%
623
Kerosene
0
0%
0
0
0%
0
TOTALS
Petroleum Products
42,526
95.6%
14,847
32,111
88.0%
14,778
Agency
Fee
1,949
4.4%
4,378
12.0%
TOTAL
REVENUE
44,475
100%
36,489
100%
For the three months ended September 30, 2008, revenues were
$44,475,486, an increase of $7,986,814 or approximately 21.9% as compared to
$36,488,672 for the same period in September 30, 2007. This increase was the
result of stronger overall demand for petroleum products.  Diesel sales
were $25.539 million or approximately 8.854 million gallons, an increase of
$7.203 million or approximately .351 million gallons, and approximately 39.3%
sales increase in the three month period year ending September 30, 2008,
compared to $18.336 million or approximately 8.503 million gallons for the year
- 19 -
ending September 30, 2007. Gasoline sales were $16.987 million or
approximately 5.993 million gallons, an increase of $4.447 million or
approximately .341 million gallon increase, and approximately 35.4% sales
increase, compared to gasoline sales of $12.540 million or approximately 5.652
million gallons for the three months ending September 30, 2007.
  These increases were mainly the result of greater purchases by our
existing customers due to the continued growth of Shanxi Province.  The
increase of petroleum products for the three months ending September 30, 2008
was mainly due to the following factors: the population in China in general has
become wealthier; as a result, the demand for petroleum has increased and the
economy in Shanxi Province where the Company's major customers are continued to
experience growth. Management expects growth for the fiscal year 2009 to remain
strong due to (i) continued strong growth in the China economy, (ii) a continued
improvement in the wealth of its citizens, and (iii) business strategy of
increasing storage for our products.  For the three months ended September
30, 2008, 50% of our customers were large-scale gas stations located in Taiyuan
City in the Shanxi Province, compared to 60% for the three months ended
September 30, 2007.   Our second largest group of customers is coal
plants and power supply companies which use our diesel, gasoline and fuel oil to
generate heat and power this group provided 40% of our business in 2008 compared
to 30% in 2007. This group of customers will continue to remain strong as our
local economy continues to grow and new power plants are built. We anticipate
that in the fiscal year 2009 this group will represent 55% to 60% of our sales,
as the company will focus on this particular customer segment due to larger bulk
sales. Our third largest customer is the small, independent gas station which
represents 10% of our total sales.  These stations buy gasoline and diesel
from us.  This group will continue to remain strong as more cars are being
used for transportation in Shanxi Province. Additionally, the impact of
favorable currency exchange rates resulted in an increase of approximately $4.2
million in revenues, or 9.5%, as the RMB continued to appreciate against the
dollar.  Agency fees decreased by 55.5%, a decrease of approximately $2.429
million.  Agency fee revenues were $1.949 million for the three months
ended September 30, 2008, compared to $4.378 million in the same period of 2007.
Agency fees are fees from companies not possessing the required license to buy
direct from refineries.   We purchase petroleum on their behalf and
arrange delivery for them.  The China government continues to grant
licenses to other wholesalers to buy direct. Thus, we anticipate that agency
fees will be reduced further in the future unless we are able to obtain new
customers that want to go direct but do not have the required license.
Cost of Goods Sold
Cost of
goods sold for the three months ended September 30, 2008 increased by $9.395
million or 36.9 %, to $34.835 million as compared to $25.435 million for the
prior quarter of 2007. This increase was mainly attributable to the increase of
sales revenue.
The
following table illustrates the items constituting our cost of goods sold for
the three months ending September 30, 2008 and September 30, 2007.
(All
amounts, other than percentages, in thousands of U.S. dollars)
Cost of Goods
2008
% of total cost
of goods sold
% of total cost
of goods vs its revenue
2007
% of total cost
of goods
% of total cost
of goods vs its revenue
Diesel Oil
21,751
62.4%
85.2%
14,684
57.2%
80.1%
Gasoline
13,084
37.6%
77.0%
9,773
38.1%
77.9%
Fuel Oil
0
0%
0%
978
3.8%
79.1%
Kerosene
0
0%
0%
0
0%
0%
TOTAL COST
Petroleum Products
34,835
100%
78.3%
25,435
99.0%
69.7%
Agency Fee
0
0%
0%
259
1.0%
0.7%
TOTAL COST OF
GOODS
34,835
100%
25,694
100%
- 20 -
Gross Profit
Margin
Our gross profit margin was 21.7% for the three months ended
September 30, 2008, compared to 29.6% for the three months ended September 30,
2007. The decrease was the result of the decline in agency fees which represent
the greatest profit for the company due to the fact it is a service, and no
purchases have to be made for this revenue. Agency fee profits declined by
approximately 2.2 million or approximately 53.7%.  Additionally, the gross
margins on diesel were approximately 14.8% for the quarter ending September 30,
2008 compared to 24.9% in quarter ending September 30, 2007.  The gross
margins on gasoline were approximately 22.9% in the quarter ending September 30,
2008 compared to 22.1% for the same quarter in 2007, improving slightly. The
decrease of diesel margins was the result of the company locking in fuel prices.
The company made advance to suppliers of approximately $34.792 million in the
quarter ending September 30, 2008 compared to $28.327 million in September 30,
2007. The risk associated with maintaining huge quantities of inventory and
amounts of advances to suppliers has the effect of locking in prices.  We
pay for fuel well in advance of the time we deliver commodities and establish
customer prices.  Therefore, our gross margins will vary considerably from
period to period, based on short-term prices of petroleum products. Management
does not provide any type of hedging activity in order to reduce this risk;
however management monitors petroleum prices in an effort to maintain
profitability.
Selling General and Administrative Expenses
Selling, general and administrative expenses were $2.167 million
for the quarter ending September 30, 2008, a $1.810 million increase, compared
to $357,434 for the same period in 2007.   The increases for  the
three month  period was due to the increased costs associated with the
recapitalization of the company between Longwei Petroleum Investment Holding and
Tabatha II, and the addition of 15 new sales personnel and staff to support the
company's growth.
Depreciation and Amortization
Depreciation and amortization expenses were $96,466 for the
quarter ending September 30, 2008, an increase of $6,832 over the depreciation
expense of $89,634 for the quarter ending September 30, 2007.
Income Tax Expense
s
We incurred income tax expenses of $1,964,629 for the quarter
ending September 30, 2008, a decrease of $1,472,949 or approximately 42.8%,
decrease versus $3,437,578 for the quarter ending September 30, 2007. This
decrease in taxes was the result of a decline in profit resulting from less
agency fees. The company is governed by the income tax laws of China. The China
statutory tax rate is 30% and the local tax rate is 3%.
Net Income
We earned a net income of $5,490,477 for the quarter ended
September 30, 2008, a decrease of $1,528,293 or approximately 21.8% as compared
to $7,018,770 for the quarter ending September 30, 2007. This was primarily due
to the decline of agency fees profit of $2,169,286 in quarter ending September
30, 2008. Agency fees are fees from companies not possessing the required
license to buy direct from refineries.   We purchase petroleum on
their behalf and arrange delivery for them.  The China government continues
to grant licenses to other wholesalers to buy direct. Thus, we anticipate that
agency fees will be reduced further in the future unless we are able to obtain
new customers that want to go direct but do not have the required license. This
decline in agency fees will have a negative impact on net income and margins in
future periods.
- 21 -
Net Income Margin
Net income margin for the quarter ending September 30, 2008 was
approximately 12.3% compared to approximately 19.2% for the quarter ending
September 30, 2007. This decrease as described above was largely the result of
agency fee profits and revenues declining in the period. Management anticipates
that net income margin will remain in the 12 to 15% profit range due to increase
of costs associated with being a public company and the decline in agency
fees.
Inflation
Inflationary factors such as increases in the cost of our product
and overhead costs may adversely affect our operating results. Although we do
not believe that inflation has had a material impact on our financial position
or results of operations to date, a high rate of inflation in the future may
have an adverse effect on our ability to maintain current levels of gross margin
and selling, general and administrative expenses as a percentage of net revenues
if the selling prices of our products do not increase with these increased
costs.
Foreign Currency Translation Adjustment
Our operating subsidiaries are located in China.  The
operating subsidiaries purchase all products and render services in China, and
receive payment from customers in China using RMB as the functional currency.
 We do not engage in currency hedging.
We incurred a foreign currency translation adjustment of
$1,070,650 for the quarter ending September 30, 2008 as compared with the
foreign currency translation adjustment of $781,958 for the quarter ending
September 30, 2007. On July 21, 2005, China reformed its foreign currency
exchange policy, revalued RMB by 2.1 percent and allowed the RMB to appreciate
as much as 0.3 percent per day against the U.S. dollar. We implemented different
exchange rates in translating RMB into U.S. dollars in our financial statements
for quarter ending September 30, 2008. We used an exchange rate of 6.79 for
assets and liabilities and used the average exchange rate of 6.84 for revenues
and expenses, compared to the exchange rate of 7.51 in 2007 for assets and
liabilities and 7.56 as the average rate used in calculating revenue and
expenses. Historical exchange rates for shareholders' equity were used.
Assets and liabilities are translated at exchange rates at the
balance sheet dates and revenue and expenses are translated at the average
exchange rates and shareholders' equity is translated at historical exchange
rates. Any translation adjustments resulting are not included in determining net
income but are included in foreign exchange adjustment to other comprehensive
income, a component of stockholders' equity.  If the RMB appreciates
against the U.S. dollar, revenue and expenses would be higher than they would
have been if there were no fluctuations in the currencies.  Conversely, if
the RMB depreciates against the U.S. dollar, revenue and expenses would be lower
than they would have been if there were no fluctuations in the currencies. The
exchange rates adopted are as follows for quarter ending September 30, 2008 and
September 30, 2007:
2009
2008
Year end RMB: exchange
rate
6.7899
6.859
Average yearly RMB:
exchange rate
6.8377
7.276
Liquidity and Capital Resources
As of September 30, 2008, we had cash and cash equivalents of
$8,010,731 compared to cash and cash equivalents of $6,558,490 in period ending
September 30, 2007. This was the result of the convertible note the company did
with certain accredited investors in which the company netted approximately $1.8
million.  The following table provides detailed information about our net
cash flow for the September 30 period in 2008 and 2007 respectively.
- 22 -
For the quarter ended September 30,
2008
2007
Cash and cash equivalents, beginning of period
$
8,632,879
$
6,060,428
Net cash provided (used in) operating activities
$
(750,892)
$
(269,568)
Net cash (used in) investing activities
(721)
(15,622)
Net cash provided by financing activities
-
-
Effect of exchange rate, changes in cash
129,465
783,252
Cash and cash equivalents, end of the period
$
8,010,731
$
6,558,490
Operating Activities:
Net cash used in operating activities was $750,892
for
the quarter ending September 30, 2008, compared in the net cash used of $269,568
for the three month period ending September 30, 2007. This was largely the
result of increases in advances to suppliers to prepare for the anticipated
stronger demand from our customers.  This was partially offset by the
decrease in accounts receivables.
Investing Activities
Net cash used in investing activities was $721 in quarter ending
September 30, 2008 compared to $15,622 in September 30, 2007.
Financing Activities:
We have no material commitments for capital expenditures as of
September 30, 2008.
Critical Accounting Policies
The preparation of financial statements, in conformity with
accounting principles generally accepted in the United States, requires our
management to make assumptions, estimates and judgments that affect the amounts
reported in the financial statements, including the notes thereto, and related
disclosures of commitments and contingencies, if any. We consider our critical
accounting policies to be those that require the more significant judgments and
estimates in the preparation of financial statements, including the following:
Basis of Consolidation
- The consolidated financial
statements of the Company and its subsidiaries are prepared in accordance with
accounting principles generally accepted in the United States of America and
include the accounts of the Company and its subsidiaries. All material
inter-company accounts and transactions have been eliminated in the
consolidation.
Inventories
-
Inventories are stated at the lower of cost, determined on a weighted
average basis, or net realizable value. Net realizable value is the estimated
selling price in the ordinary course of business less the estimated costs
necessary to make the sale.
When inventories are sold, their carrying amount is charged to
expense in the year in which the revenue is recognized. Write-downs for declines
in net realizable value or for losses of inventories are recognized as an
expense in the year the impairment or loss occurs. There were no declines in net
realizable value of inventory for the quarter ending September 30, 2008.
Revenue
Recognition
The Company derives the bulk of its revenue from the trading of
gasoline, diesel, kerosene and fuel oil, and also has revenues from agency
service and transportation service.
In accordance with the Securities and Exchange Commission ("SEC")
Staff Accounting Bulletin No. 104, Revenue Recognition ("SAB 104"), the Company
recognizes revenue when the following
- 23 -
fundamental criteria are met: (i) persuasive evidence of an
arrangement exists, (ii) delivery has occurred or services have been rendered,
(iii) the price to the customer is fixed or determinable and (iv) collection of
the resulting receivable is reasonably assured.
Foreign Currency Translation
- The functional currency of
the Company is RMB and RMB is not freely convertible into foreign currencies.
The Company maintains its financial statements in the functional currency.
Monetary assets and liabilities denominated in currencies other than the
functional currency are translated into the functional currency at rates of
exchange prevailing at the balance sheet date. Transactions denominated in
currencies other than the functional currency are translated into the functional
currency at the exchange rates prevailing at the dates of the transactions.
Exchange gains or losses arising from foreign currency transactions are included
in the determination of net income for the respective periods.
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; however actual results could differ materially from
those estimates.
Recent
Accounting Pronouncements
In
December 2007, the FASB issued SFAS No. 141R, "Business Combinations"
("SFAS No. 141R"). SFAS No. 141R amends SFAS 141 and provides
revised guidance for recognizing and measuring identifiable assets and goodwill
acquired, liabilities assumed, and any noncontrolling interest in the acquiree.
It also provides disclosure requirements to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. It is effective for fiscal years beginning on or after
December 15, 2008 and will be applied prospectively. We are currently
evaluating the impact of adopting SFAS No. 141R on our consolidated
financial statements.
In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements — an amendment of ARB No. 51" ("SFAS
No. 160"). SFAS No. 160 requires that ownership interests in subsidiaries held
by parties other than the parent, and the amount of consolidated net income, be
clearly identified, labeled, and presented in the consolidated financial
statements. It also requires once a subsidiary is deconsolidated, any retained
noncontrolling equity investment in the former subsidiary be initially measured
at fair value. Sufficient disclosures are required to clearly identify and
distinguish between the interests of the parent and the interests of the
noncontrolling owners. It is effective for fiscal years beginning on or after
December 15, 2008 and requires retroactive adoption of the presentation and
disclosure requirements for existing minority interests. All other requirements
shall be applied prospectively. We are currently evaluating the impact of
adopting SFAS No. 160 on our consolidated financial statements.
In
March 2008, FASB issued Financial Accounting Standards No. 161, "
Disclosure
about Derivative Instruments and Hedging Activities - an amendment to FASB
Statement No. 133."
The use and complexity of derivative instruments and
hedging activities have increased significantly over the past several years.
Constituents have expressed concerns that the existing disclosure requirements
in FASB Statement No. 133, "
Accounting for Derivative Instruments and Hedging
Activities,"
do not provide adequate information about how derivative and
hedging activities affect an entity's financial position, financial performance,
and cash flows. Accordingly, this Statement requires enhanced disclosures about
an entity's derivative and hedging activities and thereby improves the
transparency of financial reporting. This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008.
In
May 2008, the FASB issued Statement No. 162, "
The Hierarchy of Generally
Accepted Accounting Principles
."  This statement identifies the sources
of accounting principles and the framework for selecting the principles to be
used in the preparation of financial statements of nongovernmental entities
- 24 -
that
are presented in conformity with generally accepted accounting principles (GAAP)
in the United States (the GAAP hierarchy).  This statement is effective 60
days following the SEC's approval of the Public Company Accounting Oversight
Board amendments to AU Section 411, "
the Meaning of Present Fairly in
Conformity With Generally Accepted Accounting Principles
."
In May 2008, the FASB issued Statement No. 163
"Accounting for
Financial Guarantee Insurance Contracts—an interpretation of FASB Statement No.
60."
The premium revenue recognition approach for a financial
guarantee insurance contract links premium revenue recognition to the amount of
insurance protection and the period in which it is provided. For purposes of
this statement, the amount of insurance protection provided is assumed to be a
function of the insured principal amount outstanding, since the premium received
requires the insurance enterprise to stand ready to protect holders of an
insured financial obligation from loss due to default over the period of the
insured financial obligation.  This Statement is effective for financial
statements issued for fiscal years beginning after December 15, 2008.
Seasonality
Our operating results and operating cash flows historically have
been subject to seasonal variations. Our revenues are usually higher in the
first half of the year than in the second half of the year because of the
increased demand for gasoline and diesel during and around the Chinese spring
festival.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
- 25 -
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET
RISK
Interest Rate Risk
The Company deposits surplus funds with Chinese banks earning
daily interest. The Company does not invest in any instruments for trading
purposes. The Company's operations are not sensitive to fluctuations in interest
rates.
Foreign Exchange Risk
While our reporting currency is the U.S. Dollar, all of our
consolidated revenues and consolidated costs and expenses are denominated in
RMB. All of our assets are denominated in RMB. As a result, we are exposed to
foreign exchange risk as our revenues and results of operations may be affected
by fluctuations in the exchange rate between U.S. Dollars and RMB. If the RMB
depreciates against the U.S. Dollar, the value of our RMB revenues, earnings and
assets as expressed in our U.S. Dollar financial statements will decline. We
have not entered into any hedging transactions in an effort to reduce our
exposure to foreign exchange risk.
Inflation
Inflationary factors such as increases in the cost of our product
and overhead costs may adversely affect our operating results. Although we do
not believe that inflation has had a material impact on our financial position
or results of operations to date, a high rate of inflation in the future may
have an adverse effect on our ability to maintain current levels of gross margin
and selling, general and administrative expenses as a percentage of net revenues
if the selling prices of our products do not increase with these increased
costs.
- 26 -
CORPORATE STRUCTURE
The chart below depicts our corporate structure.
As depicted below, we own 100% of the capital stock of Longwei
BVI.  Longwei BVI incorporated in the British Virgin Islands in April 2006,
owns 100% of the capital stock of Taiyuan Yahua, and Taiyuan Yahua owns 100% of
the capital stock of Taiyuan Longwei, the operating subsidiary
.  Taiyuan Yahua was established in August 2006 as a
Chinese limited liability company.  Taiyuan Longwei was established as a
Chinese limited liability company in July 1995.  As of October 16, 2007,
the date of the closing of the Share Exchange Agreement, all of our operations
are conducted by and through Taiyuan Longwei.
- 27 -
ITEM
3.
CONTROLS
AND PROCEDURES
The
Securities and Exchange Commission defines the term "disclosure controls and
procedures" to mean a company's controls and other procedures of an issuer that
are designed to ensure that information required to be disclosed in the reports
that it files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by an issuer in the reports
that it files or submits under the Securities Exchange Act of 1934 is
accumulated and communicated to the issuer's management, including its principal
executive and principal financial officers, or persons performing similar
functions, as appropriate to allow timely decisions regarding required
disclosure.  The Company maintains such a system of controls and procedures
in an effort to ensure that all information which it is required to disclose in
the reports it files under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified under the
SEC's rules and forms and that information required to be disclosed is
accumulated and communicated to principal executive and principal financial
officers to allow timely decisions regarding disclosure.
As
of the end of the period covered by this report, we carried out an evaluation,
under the supervision and with the participation of our chief executive officer
and principal accounting officer, of the effectiveness of the design and
operation of our disclosure controls and procedures.  Based on this
evaluation, our chief executive officer and principal accounting officer
concluded that our disclosure controls and procedures are designed to provide
reasonable assurance of achieving the objectives of timely alerting them to
material information required to be included in our periodic SEC reports and of
ensuring that such information is recorded, processed, summarized and reported
with the time periods specified.  Our chief executive officer and principal
accounting officer also concluded that our disclosure controls and procedures
were effective as of June 30, 2008 to provide reasonable assurance of the
achievement of these objectives.
There
was no change in the Company's internal control over financial reporting during
the quarter ended September 30, 2008, that has materially affected, or is
reasonably likely to materially affect, the Company's internal control over
financial reporting.
- 28 -
PART
II.  OTHER INFORMATION
Item
1.
Legal
Proceedings
None
Item
2.
Unregistered
Sales of Equity Securities and Use of Proceeds
None
Item
3.
Defaults
upon Senior Securities
None
Item
4.
Submission
of Matters to a Vote of Security Holders
None
Item
5.
Other
Information
None
Item
6.
Exhibits
The following
exhibits are filed herewith:
3(i)
Articles
of Incorporation (incorporated by reference from Registration Statement on Form
3(i) Articles of Incorporation (incorporated by reference from Registration
Statement on Form 10-SB filed with the Securities and Exchange Commission on
October 11, 2000).
3(ii)
Bylaws
(incorporated by reference from Registration Statement on Form 10-SB filed with
the Securities and Exchange Commission on October 11, 2000).
31.1
Certifications
pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of
1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2
Certifications
pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of
1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
32.1
Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
32.2
Certifications
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
- 29 -
SIGNATURES
In accordance with
the requirements of the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
LONGWEI PETROLEUM
INVESTMENT HOLDING LIMITED
By: /s/ Cai Yongjun,
Chief Executive Officer
By: /s/ Wang Junping,
Chief Financial Officer
Date:
 November 19, 2008
- 30 -