UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)





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





For the
quarterly period ended September 30, 2009





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





For the
transition period
for          ,
2009





Commission
File No. 000-31751





LONGWEI
PETROLEUM


INVESTMENT
HOLDING LIMITED





(Name
of small business issuer in its charter)





Colorado
            
            84-1536518(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (IRS
      Employer Identification No.)No.
      30 Guanghau Avenue, Wan Bailin District, Taiyuan City, Shanxi
      Province,
              China
            
            030024(Address
      of principal executive offices)
            
            (Zip
      Code)





(617) 699-6325


(Registrant’s
telephone number, including area code)





Securities
      registered under Section 12(b) of the Exchange Act:Title
      of each class registered:
            
            Name
      of each exchange on which registered:None
            
            NoneSecurities
      registered under Section 12(g) of the Exchange Act:





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.


Yes x   No
o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes oNo o





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





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





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).


Yes oNo x




Applicable
only to issuers involved in bankruptcy proceedings during the preceding five
years:
 
 Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes o  
No o
 
 
 Applicable
only to corporate issuers:
 
 Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date
 
 As of
November 20, 2009, the registrant had 84,797,020 shares of its common stock
issued and outstanding.













TABLE
OF CONTENTS





PAGEPART
      IITEM
      1.
            Condensed
      Consolidated Financial StatementsCondensed
      Consolidated Balance Sheets as of September 30, 2009 (Unaudited) and June
      30, 2009
            F-1Unaudited
      Condensed Consolidated Statements of Operations and Other Comprehensive
      Income for the Three Months Ended September 30, 2009 and September 30,
      2008
            F-2Unaudited
      Condensed Consolidated Statements of Cash Flows for the Three Months Ended
      September 30, 2009 and September 30, 2008
            F-3Notes
      to the Unaudited Condensed Consolidated Financial
      Statements
            F-4ITEM
      2.
            Management’s
      Discussion and Analysis or Plan of Operation
            3ITEM
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            6ITEM
      4T.
            Controls
      and Procedures
            6PART
      IIITEM
      1.
            Legal
      Proceedings
            7ITEM
      1A.
            Risk
      Factors
            7ITEM
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            7ITEM
      3.
            Defaults
      Upon Senior Securities
            7ITEM
      4.
            Submission
      of Matters to a Vote of Security Holders
            7ITEM
      5.
            Other
      Information
            7ITEM
      6
            Exhibits
            7SIGNATURES
            8





2







ITEM
1.    CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS





Longwei
Petroleum Investment Holding Limited and Subsidiaries


Condensed
Consolidated Balance Sheets





September
      30,
              2009
            
            June
      30,
              2009Assets
            (In Thousands)Current
      Assets:(Unaudited)Cash
            
            $
            9,432
            
            
            $
            7,308Accounts
      Receivable, Net of Allowance for Doubtful Accounts of $0 as of September
      30, 2009 and $0 as of June 30, 2008
            
            
            27,407
            
            
            
            26,796Inventories
            
            
            14,178
            
            
            
            13,976Advances
      to Suppliers
            
            
            34,227
            
            
            
            35,317Total
      Current Assets
            
            
            85,244
            
            
            
            83,397Property,
      Plant and Equipment, Net
            
            
            44,312
            
            
            
            36,745Total
      Assets
            
            $
            129,556
            
            
            $
            120,142Liabilities
      and Shareholders' EquityCurrent
      Liabilities:Accounts
      Payable
            
            $
            1,626
            
            
            $
            2,275Convertible
      Notes Payable
            
            
            282
            
            
            
            800Warrant
      Derivative Liability
            
            
            2,310
            
            
            
            —Taxes
      Payable
            
            
            3,691
            
            
            
            2,144Total
      Current Liabilities
            
            
            7,909
            
            
            
            5,219Total
      Liabilities
            
            
            7,909
            
            
            
            5,219Commitments
      and ContingenciesShareholders'
      Equity:Preferred
      Stock, No Par Value, 100,000,000 Shares Authorized, 0 Issued and
      Outstanding as of June 30, 2009 and 2008
            
            
            -
            
            
            
            -Common
      Stock, No Par Value; 500,000,000 Shares Authorized; 83,011,527 and
      81,852,831 Issued and Outstanding as of September 30, 2009 and June 30,
      2009
            
            
            11,371
            
            
            
            11,949Shares
      to be Issued
            
            
            25
            
            
            
            126Stock
      Subscription Receivable
            
            
            —
            
            
            
            (76
            )Deferred
      Stock Based Compensation
            
            
            —
            
            
            
            (25
            )Additional
      Paid-in Capital
            
            
            —
            
            
            
            2,540Retained
      Earnings
            
            
            100,234
            
            
            
            90,519Other
      Comprehensive Income
            
            
            10,017
            
            
            
            9,890Total
      Shareholders' Equity
            
            
            121,647
            
            
            
            114,923Total
      Liabilities and Shareholders' Equity
            
            $
            129,556
            
            
            $
            120,142





The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.


F -
1





Longwei Petroleum
Investment Holding Limited and Subsidiaries


Unaudited
Condensed Consolidated Statements of Operations and Other Comprehensive
Income





For the Three
      Months Ended September 30,2009
            
            
            2008(In Thousands, Except
              Per Share Data)Net
      Sales
            
            $
            59,361
            
            
            $
            44,475Cost
      of Sales
            
            
            47,752
            
            
            
            34,835Gross
      Profit
            
            
            11,609
            
            
            
            9,640Operating
      ExpensesGeneral
      and Administrative Expenses
            
            
            545
            
            
            
            2,167Total
      Operating Expenses
            
            
            545
            
            
            
            2,167Operating
      Income
            
            
            11,064
            
            
            
            7,473Change
      in Fair Value of Derivatives
            
            
            (1,056
            )
            
            
            -Interest
      Income
            
            
            5
            
            
            
            4Interest
      Expense
            
            
            (31
            )
            
            
            (22
            )Income
      Before Income Tax Expense
            
            
            9,982
            
            
            
            7,455Income
      Tax Expense
            
            
            (2,777
            )
            
            
            (1,965
            )Net
      Income
            
            
            7,205
            
            
            
            5,490Foreign
      Currency Translation Adjustment
            
            
            127
            
            
            
            1,071Comprehensive
      Income
            
            $
            7,332
            
            
            $
            6,561Earnings
      per Common Share:Basic
            
            $
            0.09
            
            
            $
            0.07Diluted
            
            $
            0.08
            
            
            $
            0.07Weighted
      Average Common Shares Outstanding:Basic
            
            
            82,321,110
            
            
            
            76,205,000Diluted
            
            
            85,465,029
            
            
            
            80,705,000





The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.




F -
2








Longwei
Petroleum Investment Holding Limited and Subsidiaries


Unaudited
Condensed Consolidated Statements of Cash Flows





For
      the Three Months Ended September 30,2009
              
              
              2008(In Thousands)Cash
      Flows From Operating Activities:Net
      Income
              
              $
              7,205
              
              
              $
              5,490Adjustments
      to Reconcile Net Income to Net Cash Provided by (Used in) Operating
      Activities—Depreciation
      and Amortization
              
              
              77
              
              
              
              96Stock
      Based Compensation
              
              
              25
              
              
              
              -Change
      in Fair Value of Derivatives
              
              
              1,056
              
              
              
              -Accretion
      of Debt Discount
              
              
              -
              
              
              
              382(Increase)
      Decrease in Assets—Accounts
      Receivable
              
              
              (611
              )
              
              
              (7,453
              )Inventories
              
              
              (202
              )
              
              
              5,420Advances
      to Suppliers
              
              
              1,090
              
              
              
              (6,176
              )Increase
      (Decrease) in Liabilities—Accounts
      Payable
              
              
              (622
              )
              
              
              (83
              )Taxes
      Payable
              
              
              1,547
              
              
              
              1,560Other
      Current Liabilities
              
              
              -
              
              
              
              13Net
      Cash Provided By (Used in) Operating activities
              
              
              9,565
              
              
              
              (751
              )Cash
      Flows From Investing Activities:Land
      Improvements
              
              
              (7,644
              )
              
              
              -Net
      Cash Used in Investing Activities
              
              
              (7,644
              )
              
              
              -Cash
      Flows From Financing Activities:Proceeds
      From Issuance of Common Stock
              
              
              76
              
              
              
              -Net
      Cash Provided By Financing activities
              
              
              76
              
              
              
              -Effect
      of Exchange Rate Changes in Cash
              
              
              127
              
              
              
              129Increase
      (Decrease) in Cash
              
              
              2,124
              
              
              
              (622
              )Cash,
      Beginning of Period
              
              
              7,308
              
              
              
              8,633Cash,
      End of Period
              
              $
              9,432
              
              
              $
              8,011Supplemental
      Cash Flow Information:Cash
      Paid During the Year forInterest
              
              $
              76
              
              
              $
              —Income
      taxes
              
              $
              1,230
              
              
              $
              1,723Supplemental
      Schedule of Noncash Investing and Financing activities:None
              
              $
              -
              
              
              $
              -


The
accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.




F -
3







Longwei
Petroleum Investment Holding Limited and Subsidiaries


Footnotes
to the Unaudited Condensed Consolidated Financial Statements


For
the Three Months Ended September 30, 2009 and 2008





NOTE
1 - NATURE OF BUSINESS





Longwei
Petroleum Investment Holding, Limited (the “Company”) is an energy company that,
through its subsidiaries, engages in oil and gas operations in the People’s
Republic of China (“PRC”).  Oil and gas operations consist of
transporting, marketing and selling finished petroleum products.  The
Company’s headquarters and primary facilities are located in Taiyuan City,
Shanxi Province (“Shanxi”). The Company’s second facility is located in Gujiao,
Shanxi. The Company purchases diesel, gasoline, fuel oil and kerosene (the
“Products”) from various petroleum refineries in the PRC. The Company is 1 of 3
licensed intermediaries in Taiyuan City and the sole licensed intermediary in
Gujiao that operates its own large scale storage tanks. The Company has the
necessary licenses to operate and sell Products not only in Shanxi but
throughout the entire PRC. The Company’s storage tanks have the largest storage
capacity of any privately operated entity in Shanxi.  The Company
seeks to earn profits by selling its Products at competitive prices to large
scale gas stations, coal plants, other power supply customers and small,
independent gas stations. The Company also earns revenue by acting as a
purchasing agent for other intermediaries in Shanxi and through the sale of
diesel and gasoline at gas stations located at each of the Company’s facilities.
The sales price and the cost basis of the Company’s products are 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 the Company’s
control.





Control
by Principal Shareholders




The
Company’s directors, executive officers and their affiliates or related parties,
own beneficially and in the aggregate, the majority of the voting power of the
outstanding shares of the common stock of the Company. Accordingly, the
directors, executive officers and their affiliates, if they voted their shares
uniformly, would have the ability to control the approval of most corporate
actions, including increasing the authorized capital stock of the Company and
the dissolution, merger or sale of the Company's assets or
business.





The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America (“GAAP”) for interim financial information and with the
instructions to Form 10-Q.  They do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for a complete financial presentation. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
considered necessary for a fair presentation, have been included in the
accompanying unaudited condensed consolidated financial statements.
 Operating results for the periods presented are not necessarily indicative
of the results that may be expected for the full year.  The Company’s
accounting policies and certain other disclosures are set forth in the notes to
the unaudited condensed consolidated financial statements contained in the
Company’s Annual Report on Form 10-K for the year ended June 30, 2009 as filed
with the United States Securities and Exchange Commission on October 13, 2009.
These unaudited condensed consolidated financial statements should be read in
conjunction with the Company’s audited consolidated financial statements and
notes thereto. The preparation of unaudited condensed consolidated financial
statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the unaudited
condensed consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from those
estimates.





NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Principles
of Consolidation





The
unaudited condensed consolidated financial statements, prepared in accordance
with generally accepted accounting principles (“GAAP”) in the United States of
America, include the assets, liabilities, revenues, expenses and cash flows of
the Company and all its subsidiaries. The accompanying unaudited condensed
consolidated financial statements reflect necessary adjustments not recorded in
the books and records of the Company’s subsidiaries to present them in
conformity with GAAP.





Subsidiaries
            State
      and Countries Registered In
            Percentage of
                OwnershipLongwei
      Petroleum Investment Holding Limited
            British
      Virgin Islands
            
            100.00
            %Taiyuan
      Yahua Energy Conversion Ltd.
            People’s
      Republic of China
            
            100.00
            %Taiyuan
      Longwei Economy & Trading Ltd.
            People’s
      Republic of China
            
            100.00
            %Shanxi
      Heitan Zhingyou Petrochemical Co., Ltd
            People’s
      Republic of China
            
            100.00
            %
      (a)





(a)
            A
      total of 95% of the ownership units are held by the Company. The remaining
      5% of the ownership units are held in trust by an individual who is also
      an employee of the Company. This ownership structure is organized as such
      due to PRC business ownership laws.







F -
4





Accounting
for Derivatives
 
 The
Company evaluates conversion options, stock warrants or other contracts to
determine if those contracts or embedded components of those contracts qualify
as derivatives to be separately accounted for under the relevant sections of the
Financial Accounting Standards Board’s (the “FASB”) Accounting Standards
Codification (the “ASC”), namely ASC Topic 815-40 “Derivatives and Hedging: Contracts
in Entity’s Own Equity.” The result of this accounting treatment is that
the fair value of the derivative is marked-to-market at each balance sheet date
and recorded as a liability.  In the event that the fair value is recorded
as a liability, the change in fair value is recorded in the statement of
operations as other income or expense.  Upon conversion or exercise of a
derivative instrument, the instrument is marked to fair value at the conversion
date and then that fair value is reclassified to equity.  Equity
instruments that are initially classified as equity that become subject to
reclassification under ASC Topic 815-40 are reclassified to a liability account
at the fair value of the instrument on the reclassification date.
 
 Cumulative
Effect of Change in Accounting Principle
 
 On July
1, 2009, the Company adopted certain sections of ASC Topic 815-40 (formerly
known as “EITF 07-5”) and, as a result, determined that certain of its stock
warrants previously issued contain round-down protection (price protection) and
such instruments are not considered indexed to a company’s own stock because
neither the occurrence of a sale of common stock by the Company at market nor
the issuance of another equity-linked instrument with a lower strike price is an
input to the fair value of a fixed-for-fixed option on equity shares. 
Accordingly, the stock warrants with price protection qualify as derivatives and
need to be separately accounted for as a liability under ASC Topic
815-40.  In accordance with ASC Topic 815-40, the cumulative effect of
the change in accounting principle has been applied retrospectively and has been
recognized as an adjustment to the opening balance of equity.  The
cumulative-effect adjustment amounts recognized in the statement of financial
position as a result of the initial adoption of this policy were determined
based on the amounts that would have been recognized if the policy had been
applied from the issuance date of the instrument. As a result of the
accounting change, retained earnings as of July 1, 2009 increased from $90,519
thousand, as originally reported, to $93,029 thousand and additional paid-in
capital decreased from $2,540 thousand as originally reported, to
$0.  Common stock, par value, as of July 1, 2009 decreased from
$11,948 thousand, as originally reported, to $10,420 thousand.


Reclassifications





Certain
reclassifications have been made to the condensed consolidated financial
statements as of June 30, 2009 and for the three months ended September 30, 2008
in order to be comparable with the condensed consolidated financial statements
as of and for the three months ended September 30, 2009,
respectively.





NOTE
3 – ACCOUNTS RECEIVABLE





The
Company’s business operations are conducted in the PRC. During the normal course
of business, the Company extends unsecured credit to its customers. Management
reviews its accounts receivable on a regular basis to determine if an allowance
for doubtful accounts is necessary and adequate. An estimate for doubtful
accounts is made when collection of the full amount is no longer probable.
Through the date of these financial statements, the Company has never
experienced a significant bad debt.  As a result, an allowance for
doubtful accounts has not been recorded. Trade accounts receivable at September
30, 2009 and June 30, 2009 consisted of the following:





September
      30,
              2009
              (000’s)
            
            June
      30,
              2009
              (000’s)Trade
      Accounts Receivable
            
            $
            27,407
            
            
            $
            26,796Less:
      Allowance for Doubtful Accounts
            
            _-
            
            
            _-Totals
            
            $
            27,407
            
            
            $
            26,796





NOTE
4 – INVENTORIES





As of
September 30, 2009 and June 30, 2009, inventory consisted of significant
quantities of diesel oil and gasoline, among others, as outlined
herein:





September
      30,
              2009
              (000’s)
            
            
            June
      30,
              2009
              (000’s)Diesel
      Oil
            
            $
            7,771
            
            
            $
            7,951Gasoline
            
            
            6,407
            
            
            
            6,025Fuel
      Oil
            
            
            -
            
            
            
            -White
      Spirit
            
            
            -
            
            
            
            -Total
            
            $
            14,178
            
            
            $
            13,976




F -
5





NOTE
5 – ADVANCES TO SUPPLIERS





As of
September 30, 2009 and June 30, 2009, advances to suppliers consisted of
significant deposits on account with the Company’s refinery
partners.  The deposits are held by the Company’s refinery partners to
ensure that the delivery of inventory to the Company is made in a timely
manner.  The Company attempts to maintain a significant balance on
account with refinery partners with the expectation of receiving preferential
pricing from the refinery partners.





September
      30,
              2009
              (000’s)
            
            
            June
      30,
              2009
              (000’s)Advances
      to Suppliers
            
            $
            34,227
            
            
            $
            35,317Other
            
            
            -
            
            
            
            -Total
            
            $
            34,227
            
            
            $
            35,317





NOTE
6 – PROPERTY, PLANT AND EQUIPMENT





Property,
plant and equipment consisted of the following:





September
      30,
              2009
              (000’s)
            
            
            June
      30,
              2009
              (000’s)Land
      and Buildings
            
            $
            44,209
            
            
            $
            36,561Machinery
      and Production Equipment
            
            
            2,799
            
            
            
            2,799Railway
            
            
            1,440
            
            
            
            1,440Motor
      Vehicles
            
            
            215
            
            
            
            215Total
      Property, Plant and Equipment
            
            
            48,663
            
            
            
            41,015Accumulated
      Depreciation
            
            
            (4,351
            )
            
            
            (4,270
            )Total
            
            $
            44,312
            
            
            $
            36,745





Depreciation
expense for the three months ended September 30, 2009 and 2008 was $77 thousand
and $96 thousand, respectively.





NOTE
7 – ACQUISITION OF GUJIAO





On August
7, 2007, the Company entered into an agreement to purchase the assets of Shanxi
Heitan Zhingyou Petrochemical Co., Ltd (“Shanxi Heitan”) for approximately
$17,000 thousand.  On August 7, 2007, a payment was made towards the
acquisition price for approximately $11,888 thousand.  On February 5,
2008, the purchase agreement was amended to change the terms of the purchase
agreement such that the total purchase price would be approximately $29,966
thousand rather than $17,000 thousand and the Company would not only acquire the
assets of Shanxi Heitan but the Company would also acquire a 95% ownership of
Shanxi Heitan.  The remaining 5% of the Shanxi Heitan was not eligible
to be acquired under PRC law and was therefore allocated by Shanxi Heitan to an
unaffiliated individual from Taiyuan City to be held in trust on behalf of the
Company. On January 22, 2009, the Company therefore held majority control of the
assets and ownership units of Shanxi Heitan. Additional payments towards the
acquisition price were made during the year ended June 30, 2009 of approximately
$18,078 thousand.  The Company hired an external professional
valuation firm to conduct a valuation of the assets acquired from Shanxi
Heitan.  The external professional valuation firm determined that the
value of the assets was in excess of the total purchase price paid by the
Company of approximately $30,000 thousand.  In accordance with the
purchase method of accounting, the results of Shanxi Heitan and the estimated
fair market value of the assets and liabilities of Shanxi Heitan assumed have
been included in the unaudited condensed consolidated financial statements from
the date of acquisition, January 22, 2009 through September 30,
2009.





The
purchase price of Shanxi Heitan was allocated to the assets acquired and
liabilities assumed by the Company. The Company recorded the full value of the
purchase price to land and buildings within the Company’s property, plant and
equipment classification on the balance sheets.





(000’s)Land
      and Buildings
            
            $
            29,966Net
      Assets Acquired
            
            $
            29,966Purchase
      Consideration
            
            $
            29,966





F -
6





Goodwill
is comprised of the residual amount of the purchase price over the fair value of
the acquired tangible and intangible assets. Shanxi Heitan was a dormant
operating entity upon the date of acquisition and is expected to begin
operations in January, 2010.  As a result, the inclusion of Shanxi
Heitan’s operating results from January 22, 2009 through September 30, 2009 had
no impact on the Company’s statement of operations.  If the operating
results had been included since the beginning of the prior fiscal year, July 1,
2008, the Company’s pro-forma consolidated revenue and the Company’s pro-forma
net income for the three months ended September 30, 2008 was $44,475 thousand
(unchanged) and $5,490 thousand (unchanged), respectively.





NOTE
8 – TAXES





Taxes
payable consisted of the following:





September
      30,
              2009
              (000’s)
            
            
            June
      30,
              2009
              (000’s)Income
      Tax Payable
            
            $
            2,102
            
            
            $
            960Value
      Added Tax Payable
            
            
            916
            
            
            
            733Business
      Taxes and Other Payables
            
            
            673
            
            
            
            451Total
            
            $
            3,691
            
            
            $
            2,144





NOTE
9 – CONVERTIBLE DEBT




On December 18, 2007, the Company
issued convertible debt totaling $2,100 thousand (the “Convertible Debt”) to
four entities (the “Holders”).  The Convertible Debt bore interest at
an annualized rate of 4%, was convertible to shares of the Company’s common
stock at a fixed exercise price of $0.70 per share, contained piggyback
registration rights and a cashless conversion provision if the Company was
unable to register the shares of the Company’s common stock underlying the
Convertible Debt by December 18, 2008.  In connection with the
Convertible Debt issuance, the Company issued a total of 1,500,000 warrants (the
“Class A Common Stock Purchase Warrants”) to purchase 1,500,000 shares of the
Company’s common stock.  The Class A Common Stock Purchase Warrants
had an exercise price of $0.80 and could be exercised at any time until December
18, 2010.





On December 18, 2008, the Company
defaulted on the Convertible Debt when it failed to make repayment of the
Convertible Debt in accordance with the terms entered into with the Holders on
December 18, 2007.





On February 2, 2009, the Company
entered into a settlement agreement with the Holders of the Convertible
Debt.  The significant terms of the settlement agreement are provided
below:





1.
            The
      maturity date of the Convertible Debt was extended to September 18,
      2009


2.
            The
      interest rate on the Convertible Debt was retroactively adjusted to
      approximately 8% for the period from December 18, 2007 through December
      18, 2008 and $168 thousand in interest was payable to the Holders
      immediately


3.
            The
      exercise price of the Class A Common Stock Purchase Warrants was lowered
      from $0.80 to $0.70


4.
            The
      exercise period of the Class A Common Stock Purchase Warrants was extended
      from December 10, 2010 to December 10,
2012


5.
            The
      Company agreed to issue an additional 1,200,000 warrants (the “Class B
      Common Stock Purchase Warrants”) to the Holders.  The Class B
      Common Stock Purchase Warrants had an exercise price of $0.70 and could be
      exercised at any time until February 2,
2014.


6.
            If
      the Convertible Debt is not repaid upon the maturity date, September 18,
      2009, the interest rate on the Convertible Debt would increase to a 10%
      annualized rate








As of
September 30, 2009, a balance of $282 thousand remained outstanding on the
Convertible Debt.  A total of $545 of prin ciple and
interest accrued on the Convertible Debt was converted to common stock in the
three months ended September 30, 2009. Accrued interest as of September 30, 2009
totaled $17 thousand.





Principal
payments are due on the convertible notes as follows:





Fiscal
      Year Ending September 30,
            
            Amount
              (000’s)2010
            
            $
            282Subsequent
            
            
            -$
            282




F -
7





NOTE
10 – DETACHABLE STOCK PURCHASE WARRANTS





On July
1, 2009 we adopted ASC 815-40 due to the reset provision in the Class A and
Class B stock warrants. ASC 815-40 requires us to re-evaluate the warrants
issued with the convertible notes and to determine if the previous accounting
for these items would change. Upon this re-evaluation, we determined we are
required to reclassify the stock warrants from equity to a liability account and
we will have to mark to market the value of the stock warrants each reporting
period. We used the Black-Scholes valuation model to determine the value of the
stock warrants associated with the convertible notes as of June 30, 2009. In
accordance with the guidance of ASC 815-40, a cumulative adjustment increasing
July 1, 2009 retained earnings by $2,510 thousand and was recorded as of July 1,
2009 to reflect this new accounting policy. We will be required to re-value
these amounts in each reporting period based on a revised valuation of the
warrant derivative liability.





The
Company valued the stock warrants as of the issuance dates, December 17, 2007
and February 2, 2009, and as of the most recent fiscal year end, June 30, 2009,
in order to determine the cumulative adjustment to retained earnings. We then
valued the stock warrants as of September 30, 2009 in order to mark the stock
warrants to market. The valuation attributes utilized in Black Scholes valuation
calculations to determine the valuation of the stock warrants on each particular
date is provided below.





Class
      A Warrant - Valuation InputsProduct
            September
      30,
              2009
            June
      30,
              2009
            February
      9,
              2009
            December
      17,
              2007Stock
      Price
            $1.47
            $0.99
            $0.45
            $1.50Risk
      Free Interest Rate
            1.43%
            1.72%
            1.38%
            3.49%Volatility
            63.93%
            63.93%
            149.18%
            70.37%Exercise
      Price
            $0.70
            $0.70
            $0.70
            $0.70Dividend
      Yield
            0%
            0%
            0%
            0%Contractual
      Life (Years)
            3.22
            3.47
            3.86
            5.00








Class
      B Warrant - Valuation InputsProduct
            September
      30,
              2009
            June
      30,
              2009
            
            February
      9,
              2009Stock
      Price
            $1.47
            $0.99
            
            $0.45Risk
      Free Interest Rate
            2.41%
            2.66%
            
            1.88%Volatility
            63.93%
            63.93%
            
            123.37%Exercise
      Price
            $0.70
            $0.70
            
            $0.70Dividend
      Yield
            0%
            0%
            
            0%Contractual
      Life (Years)
            4.36
            4.62
            
            5.86





The
following is a summary of the Company’s warrant activity, adjusted for changes
in the exercise price of the warrants:





Warrants
            
            
            Weighted
      Average Exercise PriceExercisable
      – June 30, 2008
            
            
            1,500,000
            
            
            $
            -Granted
            
            
            1,200,000
            
            
            $
            0.70Exercised
            
            
            -
            
            
            $
            -Forfeited/Cancelled
            
            
            -
            
            
            $
            -Outstanding
      – June 30, 2009
            
            
            2,700,000
            
            
            $
            0.70Exercisable
      – June 30, 2009
            
            
            -
            
            
            $
            0.70Granted
            
            
            -
            
            
            $
            0.70Exercised
            
            
            (357,143
            )
            
            $
            -Forfeited/Cancelled
            
            
            -
            
            
            $
            0.70Outstanding
      – September 30, 2009
            
            
            2,342,857
            
            
            $
            0.70Exercisable
      – September 30, 2009
            
            
            2,342,857
            
            
            $
            0.70





F -
8




Warrants
      Outstanding
            
            
            Warrants
      ExercisableRange
      of
              exercise
      price
            
            
            Number
      Outstanding
            
            Weighted
      Average Remaining Contractual Life (in years)
            
            Weighted
      Average Exercise Price
            
            
            Number
      Exercisable
            
            
            Weighted
      Average Exercise Price$
            0.70
            
            
            
            2,342,857
            
            4.06
      years
            
            $
            0.70
            
            
            
            2,342,857
            
            
            $
            0.70





NOTE
11 – STOCKHOLDERS’ EQUITY





The
Company is authorized to issue 600,000,000 shares, in aggregate, consisting
of 500,000,000 shares of common stock, no par value, and 100,000,000 shares of
preferred stock, no par value. The Company's current Certificate of
Incorporation authorizes the Board of Directors (the “Board”) to determine the
preferences, limitations and relative rights of any class or series of preferred
stock prior to issuance.  Each such class or series must be given
distinguishable designated rights prior to issuance. As of September 30, 2009, 0
shares of the Company’s Preferred Stock and 83,011,527 shares of the Company’s
common stock were issued and outstanding.





Stock
Issuance





On July 16, 2009, the Company completed
a private placement with 4 investors and issued 234,484 shares of common stock
for $76,000.





Debt
Conversions





During
July 2009, the holders of the Convertible Debt issued on December 18, 2007
agreed to convert a total of $18 thousand of convertible debt to 25,000 shares
of common stock.





During
August 2009, the holders of the Convertible Debt issued on December 18, 2007
agreed to convert a total of $527 thousand of convertible debt to 753,340 shares
of common stock.





Stock
Warrant Exercise





On August 18, 2009, a holder of certain
stock warrants elected to exercise 357,143 stock warrants valued at $304
thousand on a cashless basis. The Company issued 184,729 shares of common stock
in accordance with the exercise notice.





Stock
Based Compensation





On June
30, 2009, the Company entered into a consulting agreement whereby the Company
agreed to issue 25,000 shares of common stock valued at $25 thousand to its
Chief Financial Officer as partial compensation pursuant to the terms of the
consulting agreement.  The consulting agreement is effective on July
1, 2009 for a three month term. The stock award was amortized over the three
month term ending September 30, 2009.





NOTE
12 – COMMITMENTS & CONTINGENCIES





Litigation





We may be
involved from time to time in ordinary litigation that will not have a material
effect on the Company’s operations or finances. The Company is not aware of any
pending or threatened litigation against the Company or the Company’s officers
and directors in their capacity as such that could have a material impact on the
Company’s operations or finances.





Contingent
Fees - Consultant





On April
9, 2009, the Company entered into an agreement with an entity to provide
advisory services with regard to a potential capital raise to be completed by
the Company.  The agreement provides for negotiable cash fees for
advisory services provided in connection with the capital raise of between $400
thousand and $1,200 thousand.  Fees to be paid in accordance with the
agreement have not yet been finalized.




NOTE
13 – EARNINGS PER SHARE
  The following table shows the
information used in the calculation of basic and diluted earnings per
common share (in
thousands, except number of shares and per share amounts):
 
 For
      the Three Months Ended
                September 30,2009
              
              
              2008Numerator
      — Basic and diluted:Net
      Income
              
              $
              7,205
              
              
              $
              5,490Denominator:
              
              
              
              
              
              
              76,205Weighted
      Average Common Shares Outstanding — Basic
              
              
              82,321,110
              
              
              
              76,205,000Add:     Stock
      Warrants
              
              
              2,536,956
              
              
              
              1,875,000Add:     Convertible
      Debt
              
              
              606,963
              
              
              
              2,625,000Weighted
      Average Common Shares Outstanding — Diluted
              
              
              85,465,029
              
              
              
              80,705,000Basic
      Earnings Per Common Share:Net
      Income — Basic
              
              $
              0.09
              
              
              $
              0.07Diluted
      Earnings Per Common Share:Net
      Income — Diluted
              
              $
              0.08
              
              
              $
              0.07
 
 The
calculation of earnings per common share is based on the weighted-average number
of our common shares outstanding during the applicable period. The calculation
for diluted earnings per common share recognizes the effect of all dilutive
potential common shares that were outstanding during the respective periods,
unless their impact would be anti-dilutive. We use the treasury stock
method to calculate the dilutive effect of stock options and other common stock
equivalents (potentially dilutive shares). These potentially dilutive shares
include stock options and stock grants.  For both periods presented above,
we have not excluded any potentially dilutive shares from the calculation of
diluted earnings per share.


NOTE
14 – SEGMENT INFORMATION





The Company operates under the following business
segments:





1.
            Product
      Sales - The Company purchases and sells diesel, gasoline, fuel oil and
      kerosene in the PRC.





2.
            Agency
      Sales - The Company acts as an agent in the purchase and sale of products
      by other gas and oil distributors in the PRC
..





F -
9




Three
      Months Ended
              September
      30, 2009
            
            Product
      Sales
            
            
            Agency
      Sales
            
            
            Consolidated
              TotalNet
      Sales
            
            $
            56,006
            
            
            $
            3,355
            
            
            $
            59,361Cost
      of Sales
            
            
            47,340
            
            
            
            412
            
            
            
            47,752Segment
      Income
            
            
            4,262
            
            
            
            2,943
            
            
            
            7,205Segment
      Assets
            
            
            129,556
            
            
            
            -
            
            
            
            129,556Expenditures
      for Segment Assets
            
            
            7,644
            
            
            
            -
            
            
            
            7,644





Three
      Months Ended
              September 30,
      2008
            
            Product
      Sales
            
            
            Agency
      Sales
            
            
            Consolidated
              TotalNet
      Sales
            
            $
            42,526
            
            
            $
            1,949
            
            
            $
            44,475Cost
      of Sales
            
            
            34,835
            
            
            
            -
            
            
            
            34,835Segment
      Income
            
            
            3,541
            
            
            
            1,949
            
            
            
            5,490Segment
      Assets
            
            
            101,825
            
            
            
            -
            
            
            
            101,825Expenditures
      for Segment Assets
            
            
            721
            
            
            
            -
            
            
            
            721





NOTE
15 – SUBSEQUENT EVENTS





The
Company has evaluated for subsequent events between the balance sheet date of
September 30, 2009 and November 20, 2009, the date the condensed
unaudited consolidated financial statements were issued.





Private
Placement





On
October 29, 2009, the Company entered in a Securities Purchase Agreement with
certain accredited investors (the “Investors”) (the “Purchase Agreement”)
pursuant to which the Company issued and sold 13,499,274 of its newly designated
Series A Convertible Preferred Stock (the “Series A Preferred Stock”) and
warrants (the “Warrants”) to purchase an aggregate of 13,499,274 shares of the
Company’s common stock for an aggregate purchase price of $14,849,201.50 (the
Warrants and, together with the Series A Preferred Stock, the “Private Placement
Securities”).  National Securities Corporation acted as the
lead placement agent on the private placement and was awarded 1,349,927
Warrants to purchase common stock under the same terms as the
Investors.





In
connection with the transaction, the Company also entered into a registration
rights agreement (the “Registration Rights Agreement”) with the
Investors.  The Registration Rights Agreement provides that the
Company will file a “resale” registration statement (the “Initial Registration
Statement”) with the Securities and Exchange Commission (the “SEC”) covering all
of the Private Placement Securities within 60 days from the date of the closing
of the transaction.  If any of the Private Placement Securities are
unable to be included on the Initial Registration Statement, the Company has
agreed to file subsequent registration statements until all of the Private
Placement Securities have been registered.





The
Series A Preferred Stock is convertible into shares of the Company’s common
stock based on a one to one conversion ratio, at an initial conversion
price of $1.10 per share, subject to adjustment.  The holders of the
Company’s Series A Preferred Stock do not have voting rights except as required
by Colorado law.  In addition, so long as any shares of Series A
Preferred Stock are outstanding, the Company cannot, without the written consent
of the holders of 75% of the then outstanding Series A Preferred Stock: (i)
alter or change adversely the powers, preferences or rights given to the Series
A Preferred Stock or alter or amend this Certificate, (ii) authorize or create
any class of stock ranking as to dividends or distribution of assets upon a
Liquidation (as defined in the certificate of designation) senior to or
otherwise pari passu with the Series A Preferred Stock, or any series of
preferred stock possessing greater voting rights or the right to convert at a
more favorable price than the Series A Preferred Stock, (iii) amend its
certificate of incorporation or other charter documents in breach of any of the
provisions hereof, (iv) increase the authorized number of shares of Series A
Preferred Stock or the number of authorized shares of Preferred Stock, or (v)
enter into any agreement with respect to the foregoing.  In the event
of the liquidation, dissolution or winding up of the Company, the holders of the
Company’s Series A Preferred Stock shall be entitled to be paid out of the
assets of the Company available therefore, an amount in cash equal to $1.10 per
share of Series A Preferred Stock plus accrued and unpaid
dividends.  No distribution shall be made on any junior securities by
reason of any liquidation of the Company unless each holder of Series A
Preferred Stock shall have received all amounts in full to which such holder
shall be entitled. The Series A Preferred Stock holders shall be entitled to
receive dividends payable at the rate of 6% of the Liquidation Price (which is
defined as $1.10) payable quarterly.  The Series A Preferred Stock
also contains limitations on exercise, including the limitation that the holders
may not convert their shares to the extent that upon exercise the holder,
together with its affiliates, would own in excess of 4.9% of the Company’s
outstanding shares of common stock.





The
Warrants are exercisable for a term of three years at an exercise price of
$2.255 per share.  The Warrants also contain anti-dilution provisions,
including but not limited to, if the Company issues shares of its common stock
at less than the then existing conversion price, the conversion price of the
Warrants will automatically be reduced to such lower price and the number of
shares to be issued upon exercise will be proportionately
increased.  The Warrants contain limitations on exercise, including
the limitation that the holders may not convert their Series A Warrants to the
extent that upon exercise the holder, together with its affiliates, would own in
excess of 4.9% of the Company’s outstanding shares of common stock.




F -
10





Additionally,
as further consideration for the transaction, the Company, along with the
Investors, entered into a make good escrow agreement (the “Make Good Escrow
Agreement”) with certain insiders of the Company who placed an aggregate of
13,499,274shares
of the Company’s common stock into escrow (the “Escrow Shares”), to be
distributed if certain financial milestones of the Company are not
met.  Pursuant to the terms of the Make Good Escrow Agreement, if the
After Tax Net Income reported in the Company’s 2010 Annual Report is less than
$23,900,000 (subject to certain exclusions) (the “2010 Guaranteed ATNI),
then the Investors shall be entitled to receive on a “pro rata”
basis (determined by dividing each Investor’s investment amount by the
aggregate of all investment amounts delivered to the Company by the Investors
under the Agreement) for no additional consideration.




Conversion
of December 2007 Convertible Debt





In October and November 2009, the
holders of the December 2007 convertible notes elected to convert approximately
$187,000 in principle and interest on the convertible notes.  A total
of approximately 267,000 shares of common stock were issued upon
conversion.









Exercise
of Class A Common Stock Purchase Warrants





On
October 26, 2009, the holders of 785,714 Class A Common Stock Purchase Warrants
elected to exercise the warrants to purchase the Company’s common stock on a
cashless basis.  A total of 477,122 shares of common stock were issued
to the holders upon exercise.





Exercise
of Class B Common Stock Purchase Warrants





In
October, 2009, the holders of 914,286 Class B Common Stock Purchase Warrants
elected to convert the warrants to purchase the Company’s common stock on a
cashless basis.  A total of 602,837 shares of common stock were issued
to the holders upon exercise.





Execution
of Consulting Agreement with Chief Financial Officer





On
October 26, 2009, the Company agreed to a new agreement with its Chief Financial
Officer. The agreement is for a term of twelve months.  The Chief
Financial Officer will be compensated approximately $10,000 per month. He also
received a share award of 100,000 shares of common stock, 25,000 of which are
immediately vested and 75,000 of which are subject to a vesting schedule over
twelve months.





NOTE
16 – RECENTLY ISSUED ACCOUNTING STANDARDS




In
September 2009, the FASB issued Accounting Standards Update (“ASU”)
2009-06, “Implementation Guidance on Accounting for Uncertainty in Income Taxes
and Disclosure Amendments for Nonpublic Entities”. ASU 2009-06 provides
additional implementation guidance on accounting for uncertainty in income taxes
and eliminates the disclosures required by paragraph ASC Topic 740-10-50-15(a)
through (b) for nonpublic entities. The Company believes the adoption of
ASU 2009-09 will not have a material impact on its unaudited condensed
consolidated financial statements.
 
 In
October 2009, the FASB issued ASU 2009-13, which amends ASC Topic 605,
“Revenue Recognition”, to require companies to allocate the overall
consideration in multiple-element arrangements to each deliverable by using a
best estimate of the selling price of individual deliverables in the arrangement
in the absence of vendor-specific objective evidence or other third-party
evidence of the selling price. ASU 2009-13 will be effective prospectively for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010 and early adoption will be permitted.
The Company believes the adoption of ASU 2009-13 will not have a material impact
on its unaudited condensed consolidated financial statements.




F -
11





ITEM
2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OR RESULTS OF
OPERATIONS.





This
report contains forward-looking statements that involve risks and uncertainties.
We generally use words such as “believe,” “may,” “could,” “will,” “intend,”
“expect,” “anticipate,” “plan,” and similar expressions to identify
forward-looking statements, including statements regarding our ability to
continue to generate new business based on our sales and marketing efforts,
referrals and existing relationships, our financing strategy and ability to
access the capital markets and other risks discussed in our Risk Factor section
included in our Form 10-K for the year ended June 30, 2009, as filed with the
Securities and Exchange Commission on October 13, 2009. Although we believe the
expectations expressed in the forward-looking statements included in this Form
10-Q are based on reasonable assumptions within the bounds of our knowledge of
our business, a number of factors could cause our actual results to differ
materially from those expressed in any forward-looking statements. We cannot
assure you that the results or developments expected or anticipated by us will
be realized or, even if substantially realized, that those results or
developments will result in the expected consequences for us or affect us, our
business or our operations in the way we expect. We caution readers not to place
undue reliance on these forward-looking statements, which speak only as of their
dates. We do not intend to update any of the forward-looking statements after
the date of this document to conform these statements to actual results or to
changes in our expectations, except as required by law.





Highlights
and Executive Summary





Longwei
Petroleum Investment Holding, Limited (the “Company”) is an energy company that,
through its subsidiaries, engages in oil and gas operations in the People’s
Republic of China (“PRC”).  Oil and gas operations consist of
transporting, marketing and selling finished petroleum products.  The
Company’s headquarters and primary facilities are located in Taiyuan City,
Shanxi Province (“Shanxi”). The Company’s second facility is located in Gujiao,
Shanxi. The Company purchases diesel, gasoline, fuel oil and kerosene (the
“Products”) from various petroleum refineries in the PRC. The Company is 1 of 3
licensed intermediaries in Taiyuan City and the sole licensed intermediary in
Gujiao that operates its own large scale storage tanks and has the necessary
licenses to operate and sell Products not only in Shanxi but throughout the
entire PRC. The Company’s storage tanks have the largest storage capacity of any
privately operated entity in Shanxi.  The Company seeks to earn
profits by selling its Products at competitive prices to large scale gas
stations, coal plants, other power supply customers and small, independent gas
stations. The Company also earns revenue by acting as a purchasing agent for
other intermediaries in Shanxi and through the sale of diesel and gasoline at
gas stations located at each of the Company’s facilities. The sales price and
the cost basis of the Company’s products are 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 the Company’s control.





For the
three months ended September 30, 2009, the Company reported revenues of
approximately $59 million, an increase of 33% from revenues of approximately
$44 million reported for the three months ended September 30,
2008.  The Company continued to expand its customer base and the
pricing of the Company’s Products continued to follow a trend towards higher,
more profitable pricing.





Results
of Operations





The
following tables set forth key components of the Company’s results of operations
for the three months ended September 30, 2009 and 2008, respectively.  All
numbers referenced herein are “in thousands”.





For
the Three Months Ended September 30, 2009 Compared to the Three Months Ended
September 30, 2008








(In
      Thousands)2009
            
            
            2008Revenues
            
            $
            59,361
            
            
            $
            44,475Costs
      of Sales
            
            
            47,752
            
            
            
            34,835Gross
      Profit
            
            
            11,609
            
            
            
            9,640Total
      Operating Expenses
            
            
            545
            
            
            
            2,167Income
      From Operations
            
            
            11,064
            
            
            
            7,473Other
      Income and Expenses
            
            
            (1,082
            )
            
            
            (18
            )Provision
      for Income Taxes
            
            
            (2,777
            )
            
            
            (1,965
            )Net
      Income
            
            
            7,205
            
            
            
            5,490Foreign
      Currency Translation Adjustment
            
            
            127
            
            
            
            1,071Comprehensive
      Income
            
            $
            7,332
            
            
            $
            6,561Basic
      Earnings Per Share
            
            $
            0.09
            
            
            $
            0.07Diluted
      Earnings Per Share
            
            $
            0.08
            
            
            $
            0.07





3




Revenues





Revenues
for the three months ended September 30, 2009 were $59,361 as compared to
$44,475 for the three months ended September 30, 2008. The increase of $14,886
or 33.47% was primarily due to certain new customer
contracts.  Additionally, the average sales price per metric ton of
product the Company sold was $1.1 and $1.0 during the three months ended
September 30, 2009 and 2008, respectively.





Costs
of Sales





Costs of
sales for the three months ended September 30, 2009 were $47,752 as compared to
$34,835 for the three months ended September 30, 2008.  The increase
of $12,917 or 37.08% was primarily due to the revenue growth resulting from
certain new customer contracts .  The Company’s gross profit was 20%
and 22%, respectively, for the three months ended September 30, 2009 and
2008.  The average cost basis per metric ton of product the Company
sold was $0.9 and $0.8 during the three months ended September 30, 2009 and
2008, respectively.





Operating
Expenses





Operating
expenses for the three months ended September 30, 2009 amounted to $545 as
compared to $2,167 for the three months ended September 30, 2008.  The
decrease of $1,622 or 74.85% was primarily due to the curtailing of
administrative costs in order to focus resources on the new Gujiao facility’s
buildout.  Operating expenses for the remaining three quarters of the
year ended June 30, 2010 should be more substantial. Management expects salaries
of all employees in the PRC will be paid in cash.  However,
consultants and others located outside of the PRC have been willing to accept
stock based compensation in lieu of cash.  The Company has no plans to
make stock based compensation a normal attribute of its employees and
consultants’ contracts but it is likely some stock issuances for compensation
will be awarded during the fiscal year ending September 30, 2010 and forward.
Repairs and maintenance expense is likely to increase as a result of the initial
operations of the Gujiao facility.





Net
Income





Net
income for the three months ended September 30, 2009 was $7,205 as compared to
$5,490 for the three months ended September 30, 2008, due to the reasons set
forth above.





Basic
and Diluted Earnings per Share





The Company’s basic net
income per share was $0.09 and $0.07, respectively for the three months ended
September 30, 2009 and 2008, respectively.





The
Company’s diluted net income per share was $0.08 and $0.07, respectively for the
three months ended September 30, 2009 and 2008, respectively.





Liquidity
and Capital Resources





As of
September 30, 2009, the Company’s current assets were $85,244 and current
liabilities were $7,909. Cash and cash equivalents totaled $9,432 as of
September 30, 2009. The Company’s shareholders’ equity at September 30, 2009 was
$121,647. The Company had cash provided by (used in) operating activities for
the three months ended September 30, 2009 and 2008 of $9,565 and $(751),
respectively. The Company had net cash used in investing activities of $(7,664)
and $0 for the three months ended September 30, 2009 and 2008, respectively. The
Company had net cash provided by financing activities of $76 and $0 for the
three months ended September 30, 2009 and 2008, respectively.





Off-Balance
Sheet Arrangements





The
Company does not have off-balance sheet arrangements, financings, or other
relationships with unconsolidated entities or other persons, also known as
“special purpose entities” (SPEs).




Critical
Accounting Policies and Estimates





The
discussion and analysis of the Company’s results of operations and liquidity and
capital resources are based on the Company’s consolidated financial statements,
which have been prepared in accordance with GAAP. In connection with the
preparation of consolidated financial statements, the Company is required to
make assumptions and estimates about future events, and apply judgments that
affect the reported amounts of assets, liabilities, revenue, expenses, and the
related disclosures. The assumptions, estimates and judgments included within
these estimates are based on historical experience, current trends and other
factors the Company believes to be relevant at the time the consolidated
financial statements were prepared. On a regular basis, the accounting policies,
assumptions, estimates and judgments are reviewed to ensure that the
consolidated financial statements are presented fairly and in accordance with
GAAP. However, because future events and their effects cannot be determined with
certainty, actual results could differ from the assumptions and estimates, and
such differences could be material.




4




The
preparation of consolidated financial statements in conformity with GAAP
requires the Company to make estimates and assumptions. These estimates and
assumptions affect the reported amounts of assets and liabilities and the
disclosures of contingent assets and liabilities as of the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting periods. Significant estimates and assumptions are used for, but are
not limited to: (1) inventory costs and reserves; (2) asset
impairments (3) and depreciable lives of assets. Future events and their
effects cannot be predicted with certainty, and accordingly, accounting
estimates require the exercise of judgment. The accounting estimates used in the
preparation of the consolidated financial statements will change as new events
occur, as more experience is acquired, as additional information is obtained and
as the Company’s operating environment changes. The Company evaluates and
updates these assumptions and estimates on an ongoing basis and may employ
outside experts to assist with these evaluations. Actual results could differ
from the estimates that have been used.




Significant
accounting policies are discussed in Note 1, Summary of Significant Accounting
Policies,to the accompanying consolidated financial statements. The
Company believes the following accounting policies are the most critical to aid
in fully understanding and evaluating the Company’s reported financial results,
as they require management to make difficult, subjective or complex judgments,
and to make estimates about the effect of matters that are inherently uncertain.




Description
            
            Judgments
      and Uncertainties
            
            Effect
      if Actual Results
              Differ
      from AssumptionsInventoriesThe
      Company states its inventories at the lower of cost or market value and
      net of the cost of excess and obsolete items.
            
            The
      determination of inventory valuation reserves requires management to make
      estimates and judgments on the future salability of inventories. Valuation
      reserves for excess, obsolete, and slow-moving inventory are estimated by
      comparing the inventory levels  in order to identify inventory
      for which the resale value or replacement value is less than the
      inventoriable cost.
            
            Estimates
      of future product demand may prove to be inaccurate, in which case
      inventory may be understated or overstated the provision required for
      excess and obsolete inventories. In the future, if inventories are
      determined to be overvalued, the Company would be required to recognize
      such costs in cost of sales at the time of such determination. Likewise,
      if inventories are determined to be undervalued, costs of sales may have
      been over-reported in previous periods and the Company would be required
      to recognize such additional operating income at the time of
      sale.





Impairment
      of Long Lived AssetsThe
      carrying amounts of long-lived assets are reviewed periodically in order
      to assess whether the recoverable amounts have declined below the carrying
      amounts.
            
            These
      assets are tested for impairment whenever events or changes in
      circumstances indicate that their recorded carrying amounts may not be
      recoverable. When such a decline has occurred, the carrying amount is
      reduced to recoverable amount. The recoverable amount is the greater of
      the net selling price and the value in use.  It is difficult to
      precisely estimate selling price because quoted market prices for the
      Company’s assets or cash-generating units are not readily available. In
      determining the value in use, expected cash flows generated by the asset
      or the cash-generating unit are discounted to their present value, which
      requires significant judgment relating to level of sales volume, selling
      price and amount of operating costs. The Company uses all readily
      available information in determining an amount that is a reasonable
      approximation of recoverable amount, including estimates based on
      reasonable and supportable assumptions and projections of sales volume,
      selling price and amount of operating costs.
            
            Estimates
      contemplated by the Company with regard to the recoverability of carrying
      amounts for its long lived assets may prove to be inaccurate, in which
      case property, plant and equipment may be understated or overstated. In
      the future, if property, plant and equipment are determined to be
      overvalued, the Company would be required to recognize such costs in
      operating expenses at the time of such determination. Likewise, if
      property, plant and equipment are determined to be undervalued, operating
      expenses may have been over-reported in previous periods and the Company
      would be required to recognize such additional operating income at the
      time of sale.





Depreciable
      LivesThe
      estimated depreciable life of long lived assets is estimated upon the
      acquisition of assets .
            
            These
      assets are reviewed by management and assigned a specific depreciable
      life.  The depreciable life is used to estimate the term for
      which the assets cost basis should be depreciated or expensed
      over.  The Company uses all readily available information in
      determining a depreciable life that is a reasonable approximation of the
      actual depreciable life of an asset.
            
            Estimates
      for depreciable life contemplated by the Company may prove to be
      inaccurate, in which case property, plant and equipment may be understated
      or overstated. In the future, if property, plant and equipment are
      determined to be overvalued, the Company would be required to recognize
      such costs in operating expenses at the time of such determination.
      Likewise, if property, plant and equipment are determined to be
      undervalued, operating expenses may have been over-reported in previous
      periods and the Company would be required to recognize such additional
      operating income at the time of
sale.





5





ITEM
3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
required for smaller reporting companies.





ITEM
4T.  CONTROLS AND PROCEDURES








Evaluation of Disclosure
Controls and Procedures





Our
management is responsible for establishing and maintaining a system of
disclosure controls and procedures (as defined in Rule 13a-15(e)) under the
Exchange Act) that is designed to ensure that information required to be
disclosed by the Company in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
specified in the 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 Exchange Act is accumulated and communicated
to the issuer's management, including its principal executive officer or
officers and principal financial officer or officers, or persons performing
similar functions, as appropriate to allow timely decisions regarding required
disclosure.





Pursuant
to Rule 13a-15(b) under the Exchange Act, the Company carried out an evaluation
with the participation of the Company’s management, the Company’s Chief
Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the
effectiveness of the Company’s disclosure controls and procedures (as defined
under Rule 13a-15(e) under the Exchange Act) as of the nine months ended
September 30, 2009. Based on that evaluation, our Chief Executive Officer and
Chief Financial Officer have concluded that as of September 30, 2009, our
disclosure controls and procedures were not effective due to the material
weaknesses described below.





In light
of the material weaknesses described below, we performed additional analysis and
other post-closing procedures to ensure our financial statements were prepared
in accordance with generally accepted accounting principles. Accordingly, we
believe that the financial statements included in this report fairly present, in
all material respects, our financial condition, results of operations and cash
flows for the periods presented.





A
material weakness is a control deficiency (within the meaning of the Public
Company Accounting Oversight Board (PCAOB) Auditing Standard No. 5) or
combination of control deficiencies, such that there is a reasonable possibility
that a material misstatement of the annual or interim financial statements will
not be prevented or detected. Management has identified the following three
material weaknesses which have caused management to conclude that, as of
September 30, 2009, our disclosure controls and procedures were not
effective:





1.
            Management's
      conclusion is based on, among other things, the audit adjustments recorded
      for fiscal years 2009 and 2008, and for the lack of segregation of duties
      and responsibilities within the
Organization.





It should
be noted that any system of controls, however well designed and operated, can
provide only reasonable, and not absolute, assurance that the objectives of the
system are met. In addition, the design of any control system is based in part
upon certain assumptions about the likelihood of future events. Because of these
and other inherent limitations of control systems, there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions.





Remediation of Material
Weaknesses





To
remediate the material weaknesses in our disclosure controls and procedures
identified above, we are developing a plan to ensure that all information will
be recorded, processed, summarized and reported accurately, and as of the date
of this report, we have taken the following steps to address the
above-referenced material weaknesses in our internal control over financial
reporting:





1.
            We
      will continue to educate our management personnel to comply with the
      disclosure requirements of Securities Exchange Act of 1934 and Regulation
      S-K; and2.
            We
      will increase management oversight of accounting and reporting functions
      in the future.




6





CHANGES
IN INTERNAL CONTROL OVER FINANCIAL





No
changes in the Company's internal control over financial reporting have come to
management's attention during the Company's last fiscal quarter that have
materially affected, or are likely to materially affect, the Company's internal
control over financial reporting.





ITEM
1.   LEGAL PROCEEDINGS.





We may be
involved in litigation, negotiation and settlement matters that may occur in our
day-to-day operations. Management does not believe the implication of this type
of litigation will have a material impact on our consolidated financial
statements.





ITEM
1A.  RISK FACTORS





Not
required for smaller reporting companies.




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





On
October 26, 2009, the Company entered into a consulting agreement whereby the
Company agreed to issue 100,000 shares of common stock to its Chief Financial
Officer as partial compensation pursuant to the terms of the consulting
agreement.  Such securities have not been registered under the
Securities Act of 1933. The issuance of these shares was exempted from
registration pursuant to Section 4(2) of the Securities Act of
1933.





On
October 29, 2009, the Company entered in a Securities Purchase Agreement with
certain accredited investors (the “Investors”)  pursuant to which the
Company issued and sold 13,499,274 of its newly designated Series A Convertible
Preferred Stock  and warrants to purchase an aggregate of 13,499,274
shares of the Company’s common stock for an aggregate purchase price of
$14,849,201.50. National Securities Corporation acted as the lead placement
agent on the private placement and was awarded 1,349,927 Warrants to purchase
common stock under the same terms as the Investors.





ITEM
3. DEFAULTS UPON SENIOR SECURITIES.





As of
September 30, 2009 the Company was in default on approximately $282,000 in
debts issued in December 2007.  These debts were converted to common
stock in full, subsequent to September 30, 2009.





ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.





None.





ITEM
5. OTHER INFORMATION.





None.





ITEM
6.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES.





Exhibit
      No.
            
            Description10.1
            
            Consulting
      Agreement dated June 30, 2009 (Incorporated by reference to the Company’s
      Current Report on Form 8-K filed with the SEC on July 10,
      2009)10.2
            
            Form
      of Securities Purchase Agreement (Incorporated by reference to the
      Company’s Current Report on Form 8-K
      filed with the SEC on November 2, 2009)10.3
            
            Form
      of Registration Rights Agreement (Incorporated by reference to the
      Company’s Current Report on Form 8-K filed with the SEC on November 2,
      2009)10.4
            
            Form
      of Series A Convertible Preferred Stock Certificate of Designation
      (Incorporated by reference to the Company’s Current Report on Form 8-K
      filed with the SEC on November 2, 2009)10.5
            
            Form
      of Common Stock Purchase Warrant (Incorporated by reference to the
      Company’s Current Report on Form 8-K
      filed with the SEC on November 2, 2009)10.6
            
            Form
      of Make Good Escrow Agreement (Incorporated by reference to the Company’s
      Current Report on Form 8-K
      filed with the SEC on November 2, 2009)10.7
            
            Consulting
      Agreement dated October 26, 2009 (Incorporated by reference to the
      Company’s Current Report on Form
      8-K, filed with the SEC on November 11, 2009)31.1
            
            Certification
      of Chief Executive Officer, Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
            
            Certification
      of Chief Financial Officer, Pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1
            
            Certification
      of Chief Executive Officer, Pursuant to Section 906 of the
      Sarbanes-Oxley Act of 200232.2
            
            Certification
      of Chief Financial Officer, Pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002





7





SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.





Principal
      Executive Officers of
                Longwei
      Petroleum Investment Holding LimitedDate:
      November 20, 2009
              By:
              /s/ Cai YongjunName: Cai
      YongjunTitle: Chief
      Executive Officer





By:
              /s/ James CraneName: James
      CraneTitle: Chief
      Financial Officer and Principal Accounting Officer