UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549


_____________________


FORM
10-Q


_____________________





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




For the
quarterly period ended September 30, 2009




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





For
the transition period from ______to______.





Commission
File Number: 000-52496





CHINA
JIANYE FUEL, INC.


(Exact
name of registrant as specified in its charter)





Delaware
            20-8296010(State
      or other jurisdiction of
              incorporation
      or organization)
            (I.R.S.
      Employer Identification Number)136-20
      38th Ave. Unit 3G, Flushing, NY 11354(Address
      of principal executive office and zip code)718-395-8706(Registrant’s
      telephone number, including area
code)




Indicate
by check mark whether the issuer (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 Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (229.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes o    No
o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See 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
              
              Smaller
      reporting company x




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




As of
October 20, 2009 29,976,923 shares of the Registrant’s common stock, $0.001 par
value, were outstanding.













CHINA
JIANYE FUEL, INC.





FORM
10-Q





For
the quarter ended September 30, 2009





TABLE
OF CONTENTS





PART
      I— FINANCIAL INFORMATIONItem
      1.
            Financial
      Statements
            1Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
            7Item
      3.
            Quantitative
      and Qualitative Disclosures About Market Risk
            11Item
      4T.
            Controls
      and Procedures
            11PART
      II— OTHER INFORMATIONItem
      1.
            Legal
      Proceedings
            11Item
      1A.
            Risk
      Factors
            11Item
      2.
            Unregistered
      Sales of Equity Securities and Use of Proceeds
            11Item
      3.
            Defaults
      Upon Senior Securities
            11Item
      4.
            Submission
      of Matters to a Vote of Security Holders
            11Item
      5.
            Other
      Information
            11Item
      6.
            Exhibits
            12SIGNATURES
            13

















PART
1 - FINANCIAL INFORMATION





Item
1.  Financial Statements





CHINA
JIANYE FUEL, INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS




September
      30,
              
              
              June
      30,2009
              
              
              2009Assets
              
              (Unaudited)Current
      AssetsCash
      and cash equivalents
              
              $
              51,903
              
              
              $
              55,202Accounts
      receivable, net of allowance for doubtfulaccounts
      of $53,896 and $31,227 at September 30,2009
      and June 30, 2009, respectively
              
              
              5,394,397
              
              
              
              6,214,181Inventory,
      net
              
              
              1,534,071
              
              
              
              1,023,372Advance
      to supplies
              
              
              1,943,546
              
              
              
              1,011,926Prepaid
      and other current assets
              
              
              246,315
              
              
              
              287,373Due
      from related parties
              
              
              89,398
              
              
              
              -Total
      current assets
              
              
              9,259,630
              
              
              
              8,592,054Property
      and Equipment, net
              
              
              2,468,990
              
              
              
              2,548,503Intangible
      assets, net
              
              
              70,042
              
              
              
              47,783Total
      Assets
              
              $
              11,798,662
              
              
              $
              11,188,340


The
Accompanying Notes Are an Integral Part of the Financial Statements




1




CHINA
JIANYE FUEL, INC.


CONDENSED
CONSOLIDATED BALANCE SHEETS


September
      302009
                
                
                2009Liabilities
      and Shareholders' Equity
                
                (Unaudited)Current
      LiabilitiesAccounts
      payable and accrued expenses
                
                $
                979,435
                
                
                $
                1,659,783VAT
      tax payable
                
                
                427,618
                
                
                
                443,356Income
      tax payable
                
                
                562,307
                
                
                
                528,957Due
      to related parties
                
                
                1,083,390
                
                
                
                1,068,112Customer
      deposits
                
                
                1,092,361
                
                
                
                -Other
      current liabilities
                
                
                92,619
                
                
                
                36,602Total
      current liabilities
                
                
                4,237,730
                
                
                
                3,736,810Shareholders'
      EquityCommon
      stock, $0.001 par value, 200,000,000 sharesauthorized,
      29,976,923 shares issued and outstandingas
      of June 30, 2009 and September 30, 2009
                
                
                29,977
                
                
                
                29,977Additional
      paid-in capital
                
                
                5,695,058
                
                
                
                5,695,058Other
      comprehensive income
                
                
                785,383
                
                
                
                773,805Retained
      earnings
                
                
                1,050,514
                
                
                
                952,690Total
      shareholders' equity
                
                
                7,560,932
                
                
                
                7,451,530Total
      Liabilities and Shareholders' Equity
                
                $
                11,798,662
                
                
                $
                11,188,340


The
Accompanying Notes Are an Integral Part of the Financial Statements




2




CHINA
JIANYE FUEL, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS


For the
Three Months Ended September, 2009 and 2008








For
      the Three Months EndedSeptember
      30, 2009
                
                
                September
      30, 2008Sales
                
                $
                2,541,000
                
                
                $
                122,841Cost
      of Sales
                
                
                2,386,690
                
                
                
                110,808Gross
      profit
                
                
                154,310
                
                
                
                12,033Operating
      costs and expenses:Selling,
      general and administrative expenses
                
                
                23,592
                
                
                
                193,865Income
      (loss) from operations
                
                
                130,718
                
                
                
                (181,832
                )Other
      income (expenses)Interest
      expense
                
                
                (286
                )
                
                
                -Other
      expense
                
                
                -
                
                
                
                (234
                )Total
      other income (expense)
                
                
                (286
                )
                
                
                (234
                )Income
      (loss) before provision for income taxes
                
                
                130,432
                
                
                
                (182,066
                )Provision
      for income taxes
                
                
                32,608
                
                
                
                -Net
      income (loss)
                
                
                97,824
                
                
                
                (182,066
                )Other
      comprehensive income (loss)Foreign
      currency translation adjustment
                
                
                11,578
                
                
                
                24,185Comprehensive
      income (loss)
                
                $
                109,402
                
                
                $
                (157,881
                )Weighted
      average number of common shares:Basic
      and diluted
                
                
                29,976,923
                
                
                
                29,976,923Not
      income (loss) per share:Basic
      and diluted
                
                $
                0.00
                
                
                $
                (0.01
                )


The
Accompanying Notes Are an Integral Part of the Financial Statements




3





CHINA
JIANYE FUEL, INC.


CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


For the
Three Months Ended September 30, 2009 and 2008


(Unaudited)


Cash
      flows from operating activitiesNet
      income (loss)
                
                $
                97,824
                
                
                $
                (182,066
                )Adjustments
      to reconcile net income to net cash provided by (used in)operating
      activities:Amortization
      and depreciation
                
                
                62,089
                
                
                
                86,430Changes
      in assets and liabilities:Decrease
      in accounts receivable
                
                
                827,759
                
                
                
                407,664Decrease
      (Increase) in inventory
                
                
                (508,990
                )
                
                
                4,407Decrease
      (Increase) in advance to supplies
                
                
                (929,668
                )
                
                
                7,127Decrease
      in prepaid and other assets
                
                
                41,425
                
                
                
                28,428(Decrease)
      in accounts payable and accured expenses
                
                
                (693,768
                )
                
                
                (454,848
                )Increase
      in customer deposits
                
                
                1,083,247
                
                
                
                -Increase
      (Decrease) in VAT tax payable
                
                
                (16,333
                )
                
                
                7,617Increase
      in income tax payable
                
                
                32,608
                
                
                
                -Increase
      in other current liabilities
                
                
                68,848
                
                
                
                54,372Net
      cash provided by (used in) operating activities
                
                
                65,041
                
                
                
                (40,869
                )Cash
      flows from investing activitiesAcquisition
      of property and equipment
                
                
                -
                
                
                
                (4,347
                )Net
      cash used in investing activities
                
                
                -
                
                
                
                (4,347
                )Cash
      flows from financing activitiesDue
      to (from) related parties
                
                
                (68,414
                )
                
                
                -Net
      cash used in financing activities
                
                
                (68,414
                )
                
                
                -Effect
      of exchange rate changes on cash and cash equivalents
                
                
                74
                
                
                
                382Net
      decrease in cash and cash equivalents
                
                
                (3,299
                )
                
                
                (44,834
                )Cash
      and cash equivalentsBeginning
                
                
                55,202
                
                
                
                129,635Ending
                
                $
                51,903
                
                
                $
                84,801Supplemental
      disclosure of cash flowsCash
      paid during the year for:Interest
      expense
                
                $
                286
                
                
                $
                -Income
      tax
                
                $
                -
                
                
                $
                -


The
Accompanying Notes Are an Integral Part of the Financial
Statements




4





CHINA
JIANYE FUEL, INC.


NOTES TO
THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


September
30, 2009






NOTE
1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Basis of
Presentation— The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles in the United States (“GAAP”) for interim financial reporting and in
accordance with instructions for Form 10-Q and Article 10 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, the unaudited condensed consolidated financial
statements contained in this report reflect all adjustments that are normal and
recurring in nature and considered necessary for a fair presentation of the
financial position and the results of operations for the interim periods
presented. The year-end condensed balance sheet data was derived from audited
financial statements, but does not include all disclosures required by GAAP. The
results of operations for the interim period are not necessarily indicative of
the results expected for the full year. These unaudited, condensed consolidated
financial statements, footnote disclosures and other information should be read
in conjunction with the financial statements and the notes thereto included in
the Company’s Annual Report on Form 10-K for the year ended June 30,
2009.





Organization— China Jianye Fuel Inc. was incorporated as Standard Commerce, Inc.
(“Standard Commerce”) in December 1994 in Nevada. On November 13, 2007, Standard
Commerce acquired the outstanding capital stock of American Jianye Ethanol
Company, Inc., a Delaware corporation (“American Jianye”) and changed its name
to China Jianye Fuel Inc. For accounting purposes, the acquisition was treated
as a recapitalization of American Jianye. American Jianye is a holding company
that owns 100% of Zhao Dong Jianye Fuel Co., Ltd. (“Zhao Dong”), a corporation
organized under the laws of the People’s Republic of China. The accompanying
consolidated financial statements include the financial statements of China
Jianye Fuel Inc. and its subsidiaries (the “Company”). The Company’s primary
business is to manufacture and distribute ethanol and methanol as alternative
fuel for automobile use.





Basis of
Consolidation— The consolidated financial statements include the
accounts of China Jianye Fuel, Inc. and its wholly owned
subsidiaries.  All significant intercompany accounts and transactions
are eliminated.





Financial
Statement Presentation— Certain changes to the 2008 financial statements
have been made to conform to the 2009 financial statement format.





Use of Estimates— The preparation of financial statements in conformity with accounting
principles generally accepted 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 period. Actual results could differ from those
estimates.




Cash and Cash
Equivalents— Cash and cash equivalents include cash and all highly liquid
instruments with original maturities of three months or less.





Inventory— Inventory is stated at the lower of cost or market. Cost is determined
by using the weighted-average method. The Company periodically reviews the age
and turnover of its inventory to determine whether any inventory has become
obsolete or has declined in value, and charges to operations for known and
anticipated inventory obsolescence. The Company did not record any provision for
slow-moving and obsolete inventory as of September 30, 2009 and June 30,
2009.





Intangible
Assets — Intangible assets consist of “Rights to use land” for 32 years
in China and therefore amortized over 32 years based on straight-line
method.





Recently Issued
Accounting Pronouncements — In August 2009, the FASB issued
Accounting Standards Update 2009-05, “Measuring Liabilities at Fair Value” to
provide guidance on measuring the fair value of liabilities under ASC 820, “Fair
Value Measurements and Disclosures.” It establishes that a Level 1 fair value
measurement should be used to measure the fair value of a liability and
alternative valuation techniques that should be used in the absence of a Level 1
measurement. ASU 2009-05 is effective for the first reporting period beginning
after issuance; thus, it became effective for the Company on October 1,
2009. The Company is evaluating the impact of ASU 2009-05 on its consolidated
financial statements.





In
October 2009, the FASB issued Accounting Standards Update 2009-13,
“Multiple-Deliverable Revenue Arrangements — a consensus of the FASB
Emerging Issues Task Force,” to provide amendments to the criteria in Subtopic
609-24 of the Codification for separating consideration into
multiple-deliverable revenue arrangements. ASU 2009-13 establishes a selling
price hierarchy for determining the selling price of each specific deliverable
which includes vendor-specific objective evidence (“VSOE”) if available, third
party evidence if VSOE is not available or estimated selling price if neither
VSOE nor third party evidence is available. ASU 2009-13 also eliminates the
residual method for allocating revenue between the elements of an arrangement
and requires that arrangement consideration be allocated at the inception of the
arrangement to all deliverables using the relative selling price method, which
allocates any discount in the arrangement proportionally to each deliverable on
the basis of each deliverable’s selling price. This Update expands the
disclosure requirements regarding a vendor’s multiple-deliverable revenue
arrangements. ASU 2009-13 is effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on or after
June 15, 2010, with early adoption permitted. The Company is currently
evaluating the impact of ASU 2009-13 on its consolidated financial
statements.





5





NOTE
2 - INVENTORY





Inventory
at September 30, 2009 and June 30, 2009 consists of the following:





September
      30, 2009
            
            
            June
      30, 2009Raw
      material
            
            $
            407,927
            
            
            $
            723,231Supplies
            
            
            38,478
            
            
            
            28,975Finished
      goods
            
            
            1,087,666
            
            
            
            271,166Total
            
            $
            1,534,071
            
            
            $
            1,023,372







NOTE
3 - RELATED-PARTY TRANSACTIONS




The
advances to or from its affiliated entities are unsecured, non-interest bearing
and without fixed terms of repayment.





6





Item
2.  Management’s Discussion and Analysis of Financial Condition and Results
of Operation





This
Quarterly Report on Form 10-Q contains “forward-looking” statements, as such
term is defined in the Private Securities Litigation Reform Act of
1995.  These forward-looking statements consist of information
relating to the Company that is based on the beliefs of the Company’s management
as well as assumptions made by and information currently available to the
Company’s management. When used in this report, the words “anticipate,”
“believe,” “estimate,” “expect” and “intend” and words or phrases of similar
import, as they relate to the Company or Company management, are intended to
identify forward-looking statements. Such statements reflect the current risks,
uncertainties and assumptions related to certain factors including, without
limitations, competitive factors, general economic conditions, customer
relations, relationships with vendors, the interest rate environment,
governmental regulation and supervision, seasonality, distribution networks,
product introductions and acceptance, technological change, changes in industry
practices, onetime events and other factors described herein and in other
filings made by the Company with the Securities and Exchange Commission. Based
upon changing conditions, should any one or more of these risks or uncertainties
materialize, or should any underlying assumptions prove incorrect, actual
results may vary materially from those described herein as anticipated,
believed, estimated, expected or intended. The Company does not intend to update
these forward-looking statements.





BUSINESS OVERVIEW





China
Jianye Fuel, Inc., through its wholly-owned subsidiary, American Jianye Ethanol
Company, Inc. (“American Jianye”), owns 100% of the registered capital of Zhao
Dong Jianye Fuel Co., Ltd. (“Zhao Dong Jianye Fuel”), a corporation organized in
2004 under the laws of The People’s Republic of China.  Zhao Dong
Jianye Fuel is engaged in the business of developing, manufacturing and
distributing alcohol-based automobile fuel products in the Peoples Republic of
China.




American
Jianye Ethanol Company, Inc. was organized under the laws of the State of
Delaware in March 2007.  It never initiated any business
activity.  In November 2007 American Jianye acquired 100% of the net
assets of Zhao Dong Jianye Fuel in exchange for debt and equity in American
Jianye..  Those shares represent the only asset of American
Jianye.




Zhao Dong
Jianye Fuel Co., Ltd. was founded in April 2004 under the laws of the People’s
Republic of China with registered capital of RMB 9 million Yuan (US$1.3
million). The offices and manufacturing facility operated by Zhao Dong Jianye
Fuel are located at 47 Huagong Road, Zhaodong City, Heilongjiang Province, in
northeastern China. Zhao Dong Jianye Fuel engages in the development,
manufacture, and distribution of alcohol based automobile fuel.  The
Company’s products are designed to function as a lower-cost, more
environmentally friendly alternative to conventional gasoline-based auto
fuel





Zhao Dong
Jianye Fuel was among the first China-based fuel manufacturers to bring to
market alcohol-based automobile fuel. Alcohol fuel is an attractive alternative
to gasoline for several reasons, including its environmental
benefits.  Alcohol-based fuel burns with higher efficiency and
significantly lower toxic waste emissions than any lead-free gasoline that meets
China’s national GB17930-1999 fuel quality standards. With its average total
toxic waste emission level being only 1% of the maximum toxic emission level
mandated by the Chinese industry regulators, the quality of alcohol fuel is on
par with or exceeds the international fuel quality standards for Type IV
lead-free gasoline. In addition, due to the lower costs of the raw materials
used in the manufacture process, the average integrated cost of such fuels is
only about 4,000-4,150 Renminbi (“RMB”) ($590-610) per ton, lower than the
prevailing wholesale price of #93 lead-free gasoline in China by as much as
1,000 RMB ($147) per ton.





Zhao Dong
Jianye Fuel has, since its formation, been engaged in developing its products
and its refinery.  The Company now has a facility capable of producing
300,000 tons of fuel annually, and has developed the core staff needed for full
production operations.  In the Spring of 2008, the Company began to
ship commercial quantities of fuel to customers, although it continues to
operate at only a small fraction of its capacity due to a need for working
capital to fund the launch of full-scale operations.





The
Company is currently capable of producing alcohol-based fuels comparable to
lead-free gasoline with octane ratings ranging from #90 to #98. The Company’s
products include both ethanol-based fuels (E10, E30, E50, E60, E70, E80 and
E85), and methanol-based fuels (M10, M30, M50, M60, M70, M80 and M85), although
the primary focus of its business plan is on methanol-based fuels due to their
environmental and economic advantages. Recently the Company has also been
engaged in research and development of methanol/ethanol blended fuels, including
ME80 and ME85.





Zhao Dong
Jianye Fuel commenced operations in 2004.  Until the Spring of 2008,
however, its activities were essentially developmental.  Its research
and development efforts have led to the development of a series of fuel products
and the award of several patents.  With funds provided by its
Chairman, Jianye Wang, it has developed a state-of-the-art refinery for the
production of methanol-based and ethanol-based fuels.  And it has
organized a staff of engineers, managers and sales professionals that will be
able to support its full-scale entry into the fuel market.




7




Until the
year ended June 30, 2008, the Company’s revenue-producing activities had been
incidental to the company’s research and development
activities.  Prior to September 30, 2007, Zhao Dong Jianye Fuel sold
modest amounts of fuel to a variety of customers, primarily to (a) develop the
channels through which it will market when it commences full scale production
and (b) introduce new products to those markets for testing and
publicity.  In the fiscal year ended June 30, 2006 this incidental
marketing effort generated $541,103 in revenue.  In the year ended on
June 30, 2007, however, Zhao Dong Jianye Fuel suspended most of its
revenue-producing activities in order to focus on internal organization
activities.  As a result, only 61,555 in revenue was generated during
the 2007 fiscal year.




During
the quarter ended December 31, 2007, however, Zhao Dong Jianye Fuel recorded its
first significant revenue - $3,449,434.  This occurred because Zhao
Dong Jianye Fuel completed a sale and delivery of fuel additives to Zhanjiang
Runtong Trading Corp.  In the quarter ended March 31, 2008 we realized
our first significant revenue from the sale of fuel, as we sold 4,200 tons of
methanol-based fuel to CIPC Heilongjiang HuBei, a fuel distributor, for
$3,249,795.  These two sales represented approximately 97% of our
revenues for the year ended June 30, 2008.  Zhanjiang Runtong Trading
Corp. and CIPC Heilongjiang HuBei are unrelated third parties, and the
transactions were the result of arms length negotiation.  In the 4th
quarter of the year ended June 30, 2008, however, our sales totaled only
$212,335, primarily consisting of incidental sales of sample
batches.




We expect
to develop more consistent revenue streams in the current fiscal
year.  In July, 2008, Zhao Dong Jianye Fuel entered into a contract
with Zhuhai Zhonghuan Oil Ltd., which contemplates that the customer will
purchase 15,000 tons of ethanol-based automobile fuel per month. Then, in
September, 2008, Zhao Dong Jianye Fuel entered into contract with Shanxi
Province Hanzhong Xilan Liquefied Petroleum Limited to provide the company 200
to 300 tons of M30 fuel each month.  Neither of these contracts
represents a binding purchase commitment – the customer’s commit to one month of
purchases at a time.  But they suggest that we are beginning to
achieve a consistent stream of revenue.




Our
business operates primarily in Chinese Renminbi (“RMB”), but we report our
results in our SEC filings in U.S. Dollars.  The conversion of our
accounts from RMB to Dollars results in translation
adjustments.  While our net income is added to the retained earnings
on our balance sheet; the translation adjustments are added to a line item on
our balance sheet labeled “accumulated other comprehensive income,” since it is
more reflective of changes in the relative values of U.S. and Chinese currencies
than of the success of our business.  During the year ended June 30,
2009, the effect of converting our financial results to Dollars was to add
$36,114 to our accumulated other comprehensive income.





RESULTS
OF OPERATIONS





Results
of Operations for the Three Months Ended September 30, 2009 and September 30,
2008:








For
      the Three Months Ended
              September
            
            
            Increase
      /
              (Decrease)2009
            
            
            2008Revenues
            
            $
            2,541,000
            
            
            $
            122,841
            
            
            $
            2,418,159Cost
      of Sales
            
            
            2,386,690
            
            
            
            110,808
            
            
            
            2,275,882Gross
      Profit
            
            
            154,310
            
            
            
            12,033
            
            
            
            142,277Selling,
      General and Administrative Expenses
            
            
            23,592
            
            
            
            193,865
            
            
            
            (170,273
            )Income
      (loss)  from operations
            
            
            130,718
            
            
            
            (181,832
            )
            
            
            312,550Other
      Income (expenses)
            
            
            (286
            )
            
            
            (234
            )
            
            
            (52
            )Income
      (loss) before provision for income taxes
            
            
            130,432
            
            
            
            (182,066
            )
            
            
            312,498Income
      taxes
            
            
            32,608
            
            
            
            -
            
            
            
            32,608Net
      Income (loss)
            
            
            97,824
            
            
            
            (182,066
            )
            
            
            84,242Total
      other income (expense)
            
            
            11,578
            
            
            
            24,185
            
            
            
            (12,607
            )Comprehensive
      Income (Loss)
            
            $
            109,402
            
            
            $
            (157,881
            )
            
            $
            267,283





Revenues.  Revenues
increased approximately $2,418,159, or 1969 %, to $2,541,000 for the three
months ended September 30, 2009 from $122,841 for the same period in
2008.  This increase was mainly due to the increase in sales to two
customers for the period ended September 30, 2009, while the sales for the same
period in 2008 represents the sales of sample batches to potential
customers.




8




Cost of
Sales.  Our cost of sales increased approximately $2,275,882,
or 2054%, to $2,386,690 for the three months ended September 30, 2009 from
$110,808 for the same period in 2008.  This increase was mainly due to
sales increase.




Gross
Profit.  Our gross profit increased approximately $142,277, or
1182%, to $154,310 for the three months ended September 30, 2009 from $12,033
for the same period in 2008.  This increase was mainly due to an
increase in sale revenue. As a percentage of revenues, the gross profit
decreased to 6 % during the three months ended September 30, 2009 from 10 % for
the same period of 2008.  Such decrease of percentage was due to the
reason that the sales for the same period in 2008 consists mainly the
distribution of sample batches to potential customers and we charge a higher
margin for the sample sales. These gross profit percentages for the periods
ended September 30, 2009 and 2008 are not meaningful, however, since we have not
commenced full scale production.





Other Selling,
General and Administrative Expenses.  Other selling, general
and administrative expenses decreased approximately $170,273, or 88%, to $23,592
for the three months ended September 30, 2009 from 193,865 for the same period
in 2008.  This decrease was mainly due to a decrease in professional
fee, rent, and depreciation expenses, which is partially offset by an increase
in bad debt and traveling expenses.  As a percentage of revenues,
other selling, general and administrative expenses decreased to 1% during the
three months ended September 30, 2009 from 158% for the same period of
2008.  Such decrease of percentage was due to an increase in sales
revenue.





Income (loss)
from operations.  Income (loss) from operations increased
approximately $312,550 or 172 %, to $130,718 for the three months ended
September 30, 2009 from $(181,832) for the same period in 2008.  This
increase was mainly due to an increase in revenue and a decrease in operating
expenses.  As a percentage of revenues, income (loss) from operations
increased to 5 % during the three months ended September 30, 2009 from (148 )%
for the same period of 2008.  Such increase of percentage was due to
an increase in revenue and a decrease in operating expenses.





Other Income
(expenses).  Other expenses decreased approximately $52, or
22%, to $286 for the three months ended September 30, 2009 from approximately
$234 for the same period in 2008.  The change was not
significant.





Income(loss)
Before Provision of Income Taxes.  Income before income taxes
increased approximately $312,498, or 172 %, to $130,432 for the three months
ended September 30, 2009 from $182,066 for the same period in
2008.  This decrease was mainly due to an increase in revenues, an
increase in operating profits, and a decrease in operating
expenses.  As a percentage of revenues, income (loss) before income
taxes and minority interest increased to 5 % during the three months ended
September 30, 2009 from (148)% for the same period of 2008.  Such
increase of percentage was due to the same reason above.




Income
Taxes.  Income taxes increased approximately $32,608, or 100 %,
to $32,608 for the three months ended September 30, 2009 from approximately $-0-
for the same period in 2008.  This increase was mainly due to an
increase in net income.  As a percentage of revenues, income taxes
increased to 1% during the three months ended September 30, 2009 from -0- % for
the same period of 2008.  Such increase of percentage was due to an
increase in net income.





Net Income
(loss).  Net income increased approximately $84,242, or 46 %,
to $97,824 for the three months ended September 30, 2009 from $(182,066) for the
same period in 2008.  This increase in profitability for the period
ended September 30, 2009 was due to the reasons described above.





LIQUIDITY
AND CAPITAL RESOURCES





Our
operations to date have been funded primarily by capital contributions and
short-term loans from our Chairman, Jianye Wang, which have been adequate to
bring us to the point where we are prepared to commence full scale
production.




Our
working capital at September 30, 2009 totaled $5,021,900. Included in our
working capital, however, was $5,394,397 in accounts receivable, almost all of
which are owed by the two customers who were the source of 100% of our 2008
revenue. We are not certain when those receivables will be paid. Also included
in working capital was an advance payment to the raw material suppliers in the
amount of $1,943,546.The recipient of this advance payment will be our primary
source of petroleum distillate, and we made this payment in accord with Chinese
custom, to enable the refinery to expand its production capacity in anticipation
of doing a large amount of business with us. We have, therefore, only a small
amount of liquid assets.




For the
three months ended September 30, 2009, our operations in that period increased
our cash position by $65,041. This occurred primarily because the amount that we
applied to reduce our accounts payable and accrued expenses, $693,768, and
increase inventory of $508,990, which was partially offset by the amount that we
collected on our accounts receivable, $827,759. This offset enabled us to
preserve the goodwill of our vendors. During the same period we realized
$1,083,247 in value from customer prepayments, which partially offset by an
increase in our advance to suppliers in the amount $929,668, allowing us to
preserve our cash.





9





CRITICAL
ACCOUNTING POLICIES





In
preparing our financial statements we are required to formulate working policies
regarding valuation of our assets and liabilities and to develop estimates of
those values.  In our preparation of the financial statements there
were two estimates made which were (a) subject to a high degree of uncertainty
and (b) material to our results.  These estimates were:




·
            Our
      decision, indicated in the Consolidated Financial Statements, to record a
      provision of only $53,896 for uncollectible accounts, against total
      related accounts receivable of $5,448,293.  This decision was
      based on our relationship with the debtors and our knowledge of their
      capacity to repay the debts.





·
            Our
      decision, described in Note 2 to the Consolidated Financial Statements, to
      record no provision for obsolete inventories.  This decision was
      based on fact that our inventory at September 30, 2009 amounted to less
      than two months’ sales and was primarily usable raw
    materials.




We have
made no material changes to our critical accounting policies in connection with
the preparation of financial statements included in this Quarterly Report on
Form 10-Q.





Impact
of Accounting Pronouncements




There
were no recent accounting pronouncements that have had a material effect on the
Company’s financial position or results of operations.





Recently
Issued Accounting Policies





In
August 2009, the FASB issued Accounting Standards Update 2009-05,
“Measuring Liabilities at Fair Value” to provide guidance on measuring the fair
value of liabilities under ASC 820, “Fair Value Measurements and Disclosures.”
It establishes that a Level 1 fair value measurement should be used to measure
the fair value of a liability and alternative valuation techniques that should
be used in the absence of a Level 1 measurement. ASU 2009-05 is effective for
the first reporting period beginning after issuance; thus, it became effective
for the Company on October 1, 2009. The Company is evaluating the impact of
ASU 2009-05 on its consolidated financial statements.





In
October 2009, the FASB issued Accounting Standards Update 2009-13,
“Multiple-Deliverable Revenue Arrangements — a consensus of the FASB
Emerging Issues Task Force,” to provide amendments to the criteria in Subtopic
609-24 of the Codification for separating consideration into
multiple-deliverable revenue arrangements. ASU 2009-13 establishes a selling
price hierarchy for determining the selling price of each specific deliverable
which includes vendor-specific objective evidence (“VSOE”) if available, third
party evidence if VSOE is not available or estimated selling price if neither
VSOE nor third party evidence is available. ASU 2009-13 also eliminates the
residual method for allocating revenue between the elements of an arrangement
and requires that arrangement consideration be allocated at the inception of the
arrangement to all deliverables using the relative selling price method, which
allocates any discount in the arrangement proportionally to each deliverable on
the basis of each deliverable’s selling price. This Update expands the
disclosure requirements regarding a vendor’s multiple-deliverable revenue
arrangements. ASU 2009-13 is effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on or after
June 15, 2010, with early adoption permitted. The Company is currently
evaluating the impact of ASU 2009-13 on its consolidated financial
statements.





Earnings
(Loss) Per Share





In
accordance with SFAS No. 128, “Computation of Earnings Per Share” (“SFAS No.
128”) and EITF No. 03-6, “Participating Securities and the Two-Class Method
under FASB Statement No. 128” (“EITF No. 03-6”), basic earnings per share is
computed by dividing net income attributable to ordinary shareholders by the
weighted average number of ordinary shares outstanding during the year. Diluted
earnings per share is calculated by dividing net income attributable to ordinary
shareholders as adjusted for the effect of dilutive ordinary equivalent shares,
if any, by the weighted average number of ordinary and dilutive ordinary
equivalent shares outstanding during the year. Ordinary equivalent shares
consist of the ordinary shares issuable upon the conversion of the convertible
preferred shares (using the if-converted method) and ordinary shares issuable
upon the exercise of outstanding share options (using the treasury stock
method).





OFF-BALANCE
SHEET ARRANGEMENTS





We do not
have any off-balance sheet arrangements that have or are reasonably likely to
have a current or future effect on our financial condition or results of
operations.





10




Item
3.  Quantitative and Qualitative Disclosures about Market
Risks





Not
applicable due to smaller reporting company status.





Item
4T. Controls and Procedures





Evaluation
of disclosure controls and procedures.




The term
“disclosure controls and procedures” (defined in SEC Rule 13a-15(e)) refers to
the controls and other procedures of a company that are designed to ensure that
information required to be disclosed by a company in the reports that it files
under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded,
processed, summarized and reported within required time periods. The Company’s
management, with the participation of the Chief Executive Officer and Chief
Financial Officer, has evaluated the effectiveness of the Company’s disclosure
controls and procedures as of the end of the period covered by this annual
report (the “Evaluation Date”). Based on that evaluation, the Company’s Chief
Executive Officer and Chief Financial Officer concluded that, as of the
Evaluation Date, such controls and procedures were effective.




Changes
in internal controls.




The term
“internal control over financial reporting” (defined in SEC Rule 13a-15(f))
refers to the process of a company that is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles. The Company’s management, with the participation
of the Chief Executive Officer and Chief Financial Officer, has evaluated any
changes in the Company’s internal control over financial reporting that occurred
during the first quarter of the fiscal year covered by this annual report, and
they have concluded that there was no change to the Company’s internal control
over financial reporting that has materially affected, or is reasonably likely
to materially affect, the Company’s internal control over financial
reporting.







PART
II - OTHER INFORMATION





Item
1. Legal Proceedings.





From time
to time, we may become involved in various lawsuits and legal proceedings, which
arise, in the ordinary course of business. However, litigation is subject to
inherent uncertainties, and an adverse result in these or other matters may
arise from time to time that may harm our business. We are currently not aware
of any such legal proceedings or claims that we believe will have a material
adverse affect on our business, financial condition or operating
results.




Item 1A. Risk
Factors





Not
applicable.




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.





11





Item
6. Exhibits.





Exhibit
      No.
            Description31.1
            Certification
      of the Chief Executive Officer and Chief Financial Officer pursuant to
      Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
      amended.32.1
            Certification
      of the Chief Executive Officer and Chief Financial Officer pursuant to
      Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934,
      as amended, and 18 U.S.C. Section 1350, as adopted pursuant to Section 906
      of the Sarbanes-Oxley Act of 2002.

















12




SIGNATURES





Pursuant
to the  requirements  of the Securities  Exchange
Act of 1934, the Registrant  has
duly  caused  this  Report  to
be  signed  on its  behalf by the undersigned
thereunto duly authorized.





CHINA
      JIANYE FUEL INC.By:
            /s/
      Jianye WangJianye
      WangChief
      Executive Officer and Chief Financial OfficerDate:
      November 20, 2009















13