10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
x	QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
	ACT OF 1934
	FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2011
OR
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
	EXCHANGE ACT OF 1934
Commission file number 000-53224

CHINA PROSPEROUS CLEAN ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

Nevada

(State or other jurisdiction of incorporation or organization)

West Side, Public Transportation Gas Filling Center,

Angang Avenue-Middle Part, Yindu District,

Anyang, Henan Province,

Postal code: 455000

The People’s Republic of China

(Address of principal executive offices, including zip code.)

 86-372-3166864

(telephone number, including area code)

Copy of Communication to:

Bernard & Yam, LLP

Attention: Bin Zhou, Esq.

401 Broadway Suite 1708

New York, NY 10013

Phone: 212-219-7783

Facsimile: 212-219-3604

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 last 90 days.  YES x NO ¨

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,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	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 ¨  NO x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: 125,000 shares of common stock  as of September 30, 2011 and November 11, 2011.

On this Form 10Q quarterly report, the registrant, China Prosperous Clean Energy Corporation, is hereinafter referred as "we", or "Company", or "CHPC".

1

CHINA PROSPEROUS CLEAN ENERGY CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2011 AND 2010

(UNAUDITED)

2

Table of Contents

Page

Consolidated Financial Statements

Consolidated Balance Sheets	4
Consolidated Statements of Operations	5
Consolidated Statements of Comprehensive Income	6
Consolidated Statements of Cash Flows	7
Notes to Consolidated Financial Statements	8

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CHINA PROSPEROUS CLEAN ENERGY CORPORATION

Consolidated Balance Sheets

	September 30,		December 31,
	2011		2010
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	1,346,494	$	3,806,939
Restricted cash		3,601,315		304,540
Accounts receivable		693,205		541,809
Inventories		907,264		1,020,912
Advance payments		9,678,406		9,363,683
Loans to third parties		3,962,594		3,224,210
Dividends receivable		271,861		524,400
Other current assets		1,386,531		986,519
Total current assets		21,847,670		19,773,012
Property and equipment, net		6,220,660		4,731,838
Other assets:
Advance payments-non current		3,575,196		3,465,541
Deferred income taxes		53,764		52,114
Goodwill		64,360		62,386
Investment in non-consolidated entity		9,680,870		9,383,948
Other non-current assets		33,796		34,371
Total other assets		13,407,986		12,998,360
Total assets	$	41,476,316	$	37,503,210
Liabilities
Current liabilities:
Accounts payable and accrued expenses	$	434,481	$	1,523,027
Short-term bank loans		1,565,000		1,517,000
Trade notes payable		5,947,000		606,800
Customer advances		133,601		1,222,234
Current maturities of capital lease obligations		124,786		-
Due to former shareholders		1,686,228		1,634,509
Income taxes payable		122,536		178,643
Loans from third parties		17,909,204		18,873,908
Other current liabilities		1,007,467		611,054
Total current liabilities		28,930,303		26,167,175
Long- term capital lease obligations		202,576		-
Total liabilities		29,132,879		26,167,175
Commitments and contingencies
Equity
Stockholders’ equity:
Common stock, $0.001 par value, 75,000,000 shares authorized,		125		125
125,000 shares issued and outstanding at
September 30, 2011 and December 31, 2010.
Additional paid-in capital		8,105,257		8,105,257
Retained earnings		2,704,690		2,162,039
Statutory reserve		343,432		283,119
Accumulated other comprehensive income		1,177,830		773,166
Total stockholders’ equity		12,331,334		11,323,706
Noncontrolling interest		12,103		12,329
Total equity		12,343,437		11,336,035
Total liabilities and equity	$	41,476,316	$	37,503,210

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

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CHINA PROSPEROUS CLEAN ENERGY CORPORATION

Consolidated Statements of Operations

(Unaudited)

	For the Three Months						For the Nine Months
	Ended September 30,						Ended September 30,
	2011			2010			2011			2010
Sales	$	8,213,554		$	6,739,042		$	24,613,106		$	16,723,481
Cost of sales		6,964,280			5,746,539			21,002,418			14,401,031
Gross profit		1,249,274			992,503			3,610,688			2,322,450
Operating expenses:
Selling expenses		629,545			432,372			1,998,091			1,244,261
General and administrative expenses:		374,213			211,178			935,993			563,131
Total operating expenses		1,003,758			643,550			2,934,084			1,807,392
Income from operations		245,516			348,953			676,604			515,058
Other income (expenses):
Investment income		83,529			79,100			249,391			235,985
Interest expense		(8,299	)		(4,827	)		(101,894	)		(37,058	)
Other expenses		(1,845	)		(1,616	)		(4,090	)		(105,402	)
Total other income		73,385			72,657			143,407			93,525
Income before provision for income taxes		318,901			421,611			820,011			608,583
Provision for income taxes		100,488			60,834			220,882			119,244
Net income		218,413			360,777			599,129			489,339
Less: Net loss attributable to noncontrolling interest		(190	)		(2,599	)		(3,836	)		(2,661	)
Net income attributable to CHPC	$	218,603		$	363,376		$	602,965		$	492,000
Weighted average number of shares
Basic and diluted		125,000			120,000			125,000			120,000
Earnings per share
Basic and diluted	$	1.75		$	3.02		$	4.82		$	4.10

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

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CHINA PROSPEROUS CLEAN ENERGY CORPORATION

Consolidated Statements of Comprehensive Income

(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Net income	$	218,413		$	360,777		$	599,129		$	489,339
Other comprehensive income
Foreign currency translation adjustment		140,267			151,205			408,273			185,935
Total other comprehensive income		140,267			151,205			408,273			185,935
Comprehensive income		358,680			511,982			1,007,402			675,274
Less: Comprehensive income attributable to the
noncontrolling interest		(26	)		(1,061	)		(226	)		(2,402	)
Comprehensive income attributable to CHPC	$	358,706		$	508,239		$	1,007,628		$	672,872

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

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CHINA PROSPEROUS CLEAN ENERGY CORPORATION

Consolidated Statements of Cash Flows

(Unaudited)

	For the Nine Months Ended September 30,
	2011			2010
Cash flows from operating activities:
Net income	$	599,129		$	489,339
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation		299,265			213,829
Share-based payments		37,500			-
Changes in assets and liabilities:
Accounts receivable		(132,228	)		193,676
Inventories		143,751			(449,534	)
Advance payments		(18,165	)		5,656,121
Dividends receivable		265,072			78,773
Other current assets		(422,118	)		(2,154,503	)
Other non-current assets		1,637			956
Accounts payable and accrued expenses		(1,119,595	)		(832,908	)
Trade notes payable		5,240,760			(588,400	)
Customer advances		(1,110,307	)		509,609
Other current liabilities		310,562			616,042
Total adjustments		3,496,134			3,243,661
Net cash provided by operating activities:		4,095,263			3,733,000
Cash flows from investing activities:
Acquisition of property and equipment		(1,618,171	)		(192,496	)
Advance payments for purchase of fixed assets		-			(2,357,088	)
Loans to third parties		(626,768	)		-
Investment in non-consolidated entities		-			208,070
Net cash used in investing activities:		(2,244,939	)		(2,341,514	)
Cash flows from financing activities:
Restricted cash		(3,237,569	)		293,947
Repayment of short-term bank loans		-			(882,600	)
Proceeds from (repayment of) loans from third parties		(1,538,348	)		3,179,240
Capital lease obligations		322,426
Repayment of long-term bank loan		-			(147,100	)
Net cash provided by (used in) financing activities:		(4,453,491	)		2,443,487
Effect of foreign currency translation on cash		142,722			39,999
Net increase (decrease) in cash and cash equivalents		(2,460,445	)		3,874,972
Cash and cash equivalents – beginning		3,806,939			694,620
Cash and cash equivalents – ending	$	1,346,494		$	4,569,592
Supplemental schedule of non cash activities
Advance payments for investment in non-consolidated entity	$	-		$	5,478,442

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

7

CHINA PROSPEROUS CLEAN ENERGY CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 – Organization and Description of Business

China Prosperous Clean Energy Corporation (the "Company" or “CHPC”) was incorporated in the State of Nevada on March 24, 2006.  On September 30, 2008, the Company entered a share exchange agreement ("Share Exchange Agreement”) under which the Company issued 5,865,000 shares of its common stock, par value $ 0.00001, to Oracular Dragon Capital Company, Ltd (“Oracular Dragon”), the sole shareholder of Origin Orbit Green Resource Company, Ltd (“Origin Orbit”) in exchange for all the issued and outstanding shares of Origin Orbit (the “Share Exchange”).  The Share Exchange is the final part of a series of consecutive transactions including the stock purchase transactions consummated on September 19, 2008 in which the sole shareholder of Origin Orbit purchased 4,524,231 shares of common stock of CHPC from the affiliate and non-affiliate shareholders of CHPC at a total consideration of $ 346,586 (the “Stock Purchase”). Immediately following the Share Exchange and Stock Purchase, Oracular Dragon owned 10,389,231 shares of the common stock of CHPC, representing approximately 86.6% of CHPC’s total issued and outstanding share capital. As a result, the Share Exchange has been accounted for as a reverse acquisition using the purchase method of accounting, whereby Origin Orbit is deemed to be the accounting acquirer and CHPC to be the accounting acquiree. The financial statements before the date of Share Exchange are those of Origin Orbit with the results of CHPC being condensed consolidated from the date of Share Exchange. No goodwill has been recorded.

Origin Orbit is a holding company that, on April 4, 2007, acquired 100% of the capital stock of Anyang Prosperous Energy Technology Developing Co., Ltd. (“Anyang Prosperous”) and Anyang Top Energy Green Resources Co., Ltd. (“Anyang Top”), both of which were organized under the laws of the People’s Republic of China (“PRC”).  Anyang Top does not have any subsidiary.  Anyang Prosperous has various ownership interests in a number of companies in PRC.

As a result of these share exchange transaction and acquisitions, CHPC has become the holding company of the group comprising Origin Orbit, Anyang Prosperous and Anyang Top and their subsidiaries. The Company is principally engaged in the wholesale and retail sales of compressed natural gas and liquefied petroleum gas through its subsidiaries in the People’s Republic of China (“PRC” or “China”).

As of September 30, 2011, details of the subsidiaries of the Company are as follows:

	Place of	Registered and	Percentage of
Subsidiaries’ names	operation	paid-up capital	effective ownership	Principal activities
Origin Orbit Green Resource Company, Ltd (Origin Orbit”)	British Virgin Islands	US$7,950,000	100% (a)	Holding company of the other subsidiaries
Anyang Prosperous Energy Technology Developing Co., Ltd. (Anyang Prosperous”)	PRC	US$5,000,000	100% (b)	Wholesale and retail sales of compressed natural gas and liquefied petroleum gas(LPG”)
Anyang Top Energy Green Resources Co., Ltd. (Anyang Top”)	PRC	US$2,500,000	100% (b)	Wholesale of compressed natural gas, liquefied petroleum gas and Dimethyl Ether
Jinan Zhenyuan Green Resource Co. Ltd. (Jinan Green Resource”)	PRC	RMB10,000,000	99% (c)	Sales of LPG for domestic and vehicles usage and related vehicles components

8

CHINA PROSPEROUS CLEAN ENERGY CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 – Organization and Description of Business (continued)

	Place of	Registered and	Percentage of
Subsidiaries’ names	operation	paid-up capital	effective ownership	Principal activities
Henan Prosperous Clean Energy Corporation	PRC	RMB30,000,000	100%(c)	Investing in and constructing gas filling stations and selling compressed natural gas ("CNG"), liquefied petroleum gas ("LPG"), coal-bed methane, dimethyl ether ("DME") and methane.
Handan City Prosperous Car-used Green Resource Co. Ltd. (Handan Green Resource”)	PRC	RMB750,000	98% (c)	Sales of LPG, vehicles components, and new energy research and development
Weifang Prosperous Energy Technology Development Co. Ltd. (Weifang Prosperous”)	PRC	RMB10,000,000	100% (c)	Energy technology research and development, and sales vehicles components and gas equipment
Hengshui Prosperous Energy Technology Development Co. Ltd. (Hengshui Prosperous”)	PRC	RMB2,000,000	100% (c)	Gas energy technology research and development
Heze Prosperous Energy Technology Development Co. Ltd. (Heze Prosperous”)	PRC	RMB5,000,000	100% (c)	Construction of LPG and CNG station, and sales of vehicle components LPG and CNG
Shijiazhuang Prosperous Energy Technology Development Co. Ltd. (Shijiazhuang Prosperous”)	PRC	RMB10,000,000	100% (c)	Gas energy technology research, development and advisory services, and  sales of gas energy product
Xuchang Zhenyuan Green Resource Technology Development Co. Ltd. (Xuchang Zhenyuan”)	PRC	RMB10,000,000	100% (c)	Investment in natural gas business
Yantai Prosperous Energy Technology Development Co. Ltd. (Yantai Prosperous”)	PRC	RMB500,000	100% (c)	Gas energy technology research and development, and sales vehicle components and gas energy equipment

9

CHINA PROSPEROUS CLEAN ENERGY CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Note 1 – Organization and Description of Business (continued)

	Place of	Registered and	Percentage of
Subsidiaries’ names	operation	paid-up capital	effective ownership	Principal activities
Changzhi City Zhenyuan Energy Technology Development Co. Ltd (Changzhi City”)	PRC	RMB4,400,000	100% (c)	Sales of crude oil, natural gas, LPG and related vehicle components, and construction of gas stations
Jiaozuo City Prosperous Energy Technology Development Co. Ltd. (Jiaozuo City”)	PRC	RMB5,000,000	100% (c)	Sales of natural gas, liquefied petroleum gas and vehicle components, construction and operation of gas stations
Pingdingshan City Zhenyuan Energy Technology Developing Co. Ltd. (Pingdingshan City”)	PRC	RMB5,000,000	100% (c)	Energy technology development, sales of natural gas, LPG and vehicle components, and construction and operation of gas stations
Linying Prosperous Energy Technology Development Co. Ltd. (Linyi Prosperous”)	PRC	RMB10,000,000	100% (c)	Sales of natural gas and vehicle components.
Jiangsu Hengrun Clean Energy Co., Ltd. ("Jiangsu Hengrun ")	PRC	RMB20,000,000	100% (c)	Research and development of clean energy technology, promotion and application of clean energy technology.

Notes:

(a)   Held directly by CHPC.

(b)   Held indirectly by CHPC through Origin Orbit.

(c)   Held indirectly by CHPC through Origin Orbit and Anyang Prosperous.

(d)   According to the Companies Law of the PRC, at the incorporation of the investee, shareholders are only required to pay up 20% of the capital contribution requirement as a minimum and can make up the remaining payment in two years’ time.

10

CHINA PROSPEROUS CLEAN ENERGY CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Note 2– Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The Company’s consolidated financial statements include the accounts of its controlled subsidiaries. All intercompany balances and transactions are eliminated in consolidation. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applicable to interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included.

In preparing the accompanying unaudited consolidated financial statements, the company evaluated the period from September 30, 2011 through the date the financial statements were issued, for material subsequent events requiring recognition or disclosure. No such events were identified for this period.

Interim Financial Statements

These interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the years ended December 31, 2010 and 2009, as not all disclosures required by GAAP for annual consolidated financial statements are presented. The interim consolidated financial statements follow the same accounting policies and methods of computations as the audited consolidated financial statements for the years ended December 31, 2010 and 2009.

Reclassification

Certain amounts as of December 31, 2010 and September 30, 2010 were reclassified for presentation purposes.

Note 3– Restricted Cash

As of September 30, 2011 and December 31, 2010, the Company had restricted cash of $ 3,601,315 and $304,540, respectively. These restricted cash balances are reserved for settlement of trade notes payable in connection with inventory purchases. The cash held in custody by bank issuing the trade notes payable is restricted as to withdrawal or use, and is currently earning interest.

Note 4 – Inventories

Inventories by major categories are summarized as follows:

	September 30, 2011		December 31, 2010
Compressed natural gas	$	212,761	$	199,569
Liquefied petroleum gas		219,271		578,264
Dimethyl ether		107,175		97,452
Vehicle modification components and other		368,057		145,627
Total	$	907,264	$	1,020,912

Note 5 – Advance Payments

Advance payments as of September 30, 2011 and December 31, 2010 consist of the following:

	September 30, 2011		December 31, 2010
Inventories	$	9,678,406	$	9,363,683
Property and equipment		3,575,196		3,465,541
Total	$	13,253,602	$	12,829,224

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CHINA PROSPEROUS CLEAN ENERGY CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Note 6 – Loans to Third Parties

Loans to third parties primarily consist of goodfaith non-interest bearing advances given to third parties and payable on demand. Loan to third parties outstanding as of September 30, 2011 and December 31, 2010 were $3,962,594 and $3,224,210, respectively.

Note 7 – Dividends Receivable

Dividends receivable as of September 30, 2011 and December 31, 2010 were $271,863 and $524,400, respectively, representing income receivable from Anyang Petro China and Ancai exhibited in Note 11.

Note 8 – Property and Equipment

Propertyand equipment consist of the following:

	September 30, 2011			December 31, 2010
Buildings	$	2,484,156		$	1,144,422
Machinery		4,169,522			3,129,046
Machinery – capital lease		324,390			-
Office equipment		351,233			75,363
Gas storage vehicles and motor vehicles		125,604			127,350
Construction in progress		916,572			1,731,539
		8,047,087			6,207,720
Less: Accumulated depreciation		(1,826,427	)		(1,475,882	)
Total	$	6,220,660		$	4,731,838

Depreciation expense for three months ended September 30, 2011 and 2010 was $130,871 and $103,889 respectively. Depreciation expense for the nine months ended September 30, 2011 and 2010 was $299,265 and $213,829 respectively. For the nine months ended September 30, 2011 and 2010, amortization of equipment under capital lease included in depreciation expense was $10,468 and $-0-, respectively.

Note 9 – Capital Leases – Future Minimum Lease Payments

The Company leases certain machineries under agreements that are classified as capital leases. The cost of equipment under capital leases is included in the property and equipment and was $324,390 and $-0- as of September 30, 2011 and December 31, 2010, respectively. Accumulated amortization of the leased machinery as of September 30, 2011 and 2010 was $10,468 and $-0-, respectively. Amortization of assets under capital leases is included in depreciation expense.

The future minimum lease payments required under the capital leases and the present values of the net minimum lease payments as of September 30, 2011 are as follows:

Year Ending December 31,	Amount
2011	$	73,134
2012		127,114
2013		127,114
Total minimum lease payments	$	327,362
Less: Current maturities of capital
lease obligations		(124,786	)
Long-term capital lease obligations	$	202,576

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CHINA PROSPEROUS CLEAN ENERGY CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Note 10 – Deferred Income Taxes

Deferred income tax asset of $53,764 and $52,114 as of September 30, 2011 and December 31, 2010 arose from unused tax loss carry-forwards that management considers more likely than not that it will be realized through future operations. The tax loss carry-forwards are available for offset against future taxable income over the next five years.

Note 11 – Investments in Non-consolidated Entities

As of September 30, 2011, available-for-sale securities consist of the following:

Name of investee	Place of operation	Percentage of ownership	Principal activities
Anyang Dingran Gas Co., Ltd	PRC	38%	Natural gas pipeline, investment and management in CNG filling station
Anyang PetroChina Marketing Company Limited (“Anyang PetroChina”)	PRC	34%	Sales of crude oil and refined oil and LPG
Ancai Energy Corporation	PRC	15%	Long distance pipe network, LPG pipeline, operation of CNG filling station

As the above company is a private company whose shares are not quoted or traded in an active market, management has determined that it is not practicable to estimate their fair value reliably. Therefore, the investment in the above company is stated at cost less any impairment losses. No events or changes in circumstances have been identified that potentially would have a significant adverse effect on the fair value of investment in the above company. As of September 30, 2011, there was no allowance for impairment loss.

Anyang Dingran Gas Co., Ltd was incorporated on July 12, 2010, with a registered capital of $8 million, which was invested by Ancai Hi-tec Corporation, Antai Investment Co., Ltd., and Anyang Prosperous. Anyang Prosperous invested $3.04 million for its 38% equity interest in Anyang Dingran. It mainly engaged in the investment and operation in CNG and LNG stations. Through the CNG pipeline of branch of Henan, which can support 0.21billion M3 CNG per year, it will construct mother stations and standard stations, and now it was operated by the above three parties. Therefore, Anyang Dingran has been accounted for using the cost method instead of the equity method. For the nine months ended September 30, 2011 and 2010, no dividend income was distributed from Anyang Dingran.

Although the Company held 34% ownership interest in Anyang PetroChina, the Company did not have significant influence over Anyang PetroChina. According to an agreement between the Company and the other shareholder of Anyang PetroChina, namely China National Petroleum Corporation (“China National Petroleum”), the Company has assigned the full power and right of management of Anyang PetroChina to China National Petroleum for the period until December 31, 2009. In return, the Company has been entitled to 10% of the cost of its investment in Anyang PetroChina in the form of a fixed “dividend” each year regardless of the actual performance of Anyang PetroChina for the period until December 31, 2009. Therefore, Anyang PetroChina has been accounted for using the cost method instead of the equity method. For the nine months ended September 30, 2011 and 2010, dividend income of $247,279 and $235,343, respectively, from Anyang Petro China was included in other income.

The Company acquired 15% of the shares of Ancai Energy Co., Ltd (“Ancai”), which was established on April 18, 2008 and was registered with capital of approximate $1.17million. Ancai is mainly engaged in the investment in the construction of long-distance pipeline and delivery networks for natural gas, and pipeline LPG and CNG filling stations. The Jiaozuo-Anyang branch of the West-East natural gas transmission project had been built and put into operation in December 2003, which supplies natural gas to users in the cities of Jiaozuo, Xinxiang, Hebi, Anyang as well as industrial users. The project is not just an industrial project, but also a state key infrastructural project for clean energy. Almost 15 million people in Northern Henan can benefit from the project, which plays an important role in local industry and ecological environment. The

13

CHINA PROSPEROUS CLEAN ENERGY CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Note 11 – Investments in Non-consolidated Entities (continued)

investment made on Ancai will provide steady and qualified natural gas for the network of CNG filling stations that belong to the company and Henan Transport Authority, developing a stable market of filling stations which takes Ancai mother station as its center. Ancai has been accounted for using the cost method instead of the equity method. For the nine months ended September 30, 2011 and 2010, dividend of $2,112 and $-0- respectively, from Ancai was included in other income.

As of September 30, 2011, Ancai Group Inc, the 70% shareholder of Ancai, is responsible for the management of Ancai.

Note 12 – Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses as of September 30, 2011 and December 31, 2010 consist of the following:

	September 30, 2011		December 31, 2010
Accounts payable	$	406,166	$	1,509,024
Accrued expenses		28,315		14,003
Total	$	434,481	$	1,523,027

The carrying values of accounts payable and accrued expenses approximate their fair values due to the short-term nature of these obligations.

Note 13– Short Term Bank Loans

Short-term bank loans consist of the following:

	September 30,		December 31,
	2011		2010
6.372% one-year term loan from Bank of China, signed on October 8, 2010, which is to be repaid in full by October 8, 2011. The loan is guaranteed by real estate of Anyang Century Plaza Century Real Estate Development Co., Ltd. Interest was paid quarterly.	$	469,500	$	455,100
6.672% one-year term loan from Bank of China, signed on November 9, 2010, which is to be repaid in full by November 9, 2011. The loan is guaranteed by real estate of Anyang Century Plaza Century Real Estate Development Co., Ltd. Interest was paid quarterly.		313,000		303,400
6.1160% one-year term loan from Zhengzhou Branch of Shanghai Pudong Development Bank, signed on November 18, 2010, which is to be repaid in full by November 18, 2011. The loan is guaranteed by 70% of the paid-up capital of $500 and rights to use land of Henan Small & Medium Enterprises Investment Guaranty Co., Ltd. Interest was paid monthly.		782,500		758,500
Total	$	1,565,000	$	1,517,000

14

CHINA PROSPEROUS CLEAN ENERGY CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Note 14 – Due to Former Shareholders

Balances of due to the former shareholders are mainly a result of a series of mergers and acquisitions of the Company in 2008. As of September 30, 2011 and December 31, 2010, the outstanding balance due to the former shareholders was $1,686,228 and $1,634,509, respectively.

Note 15 – Loans From Third Parties

Loans from third parties as of September 30, 2011 and December 31, 2010 consist of the following:

	September 30, 2011		September 30, 2010
Anyang Zhenyuan Group	$	16,406,804	$	17,417,588
Beijing Prosperous Energy Technology Developing Co., Ltd		1,502,400		1,456,320
Total	$	17,909,204	$	18,873,908

The proceeds of these loans were utilized as working capital. These loans are good-faith, unsecured, and non-interest bearing.

Note 16 – Income Taxes

The Company being incorporated in the State of Nevada is not subject to any income tax according to the rules and regulations of the State of Nevada. Before January 1, 2008, the Company’s subsidiaries in the PRC were generally subject to PRC enterprise income tax at 33%. On March 16, 2007, the PRC government promulgated a new tax law, China’s Unified Corporate Income Tax Law (“New CIT Law”), which took effect from January 1, 2008. Under the New CIT Law, foreign-owned enterprises as well as domestic companies are subject to a unified tax rate of 25%. Accordingly, the Company’s subsidiaries in the PRC have been subject to the PRC corporate income tax at a rate of 25% on their taxable income arising in the PRC commencing from January 1, 2008. Meanwhile, according to Rule 28 of New CIT Law, income tax of small low-profit enterprises is subject to the reduced rate of 20%. Changzhi Company as one of the Company’s subsidiaries meets the conditions of small low-profit enterprises, so Changzhi Company’s income tax rate of 20% in 2009.The effect of this change in tax rate has been reflected in the calculation of deferred income tax assets as of December 31, 2007 and thereafter.

The Company’s provision for income taxes consists of:

	For the Nine Months Ended September 30,
	2011		2010
Current	$	220,882	$	119,244
Deferred		-		-
Total provision for income taxes	$	220,882	$	119,244

Note 17 – Share – Based Payments

On December 3, 2010, the board of directors approved to issue 500,000 shares of the Company’s common stock to Mr. Zhijun Liu, the consultant of the Company for one year consultant service fee. The fair value on December 3, 2010 was $50,000 based on the quoted price of the Company’s common stock on that day. Total share-based payments recognized in income statement for the nine months ended September 30, 2011 and 2010 were $37,500 and $-0-, respectively.

15

CHINA PROSPEROUS CLEAN ENERGY CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Note 18 – Earnings Per Share

The Company presents earnings per share on a basic and diluted basis. Basic earnings per share have been computed by dividing net earnings by the weighted average number of common shares outstanding. Diluted earnings per share have been computed by dividing net earnings plus convertible preferred dividends and interest expense (after-tax) on convertible debt by the weighted average number of common shares outstanding including the dilutive effect of equity securities. The weighted average number of common shares calculated for diluted EPS excludes the potential common stock that would be exercised under the options and warrants granted to officers because the inclusion of the potential shares from these options and warrants would cause an anti-dilutive effect by increasing the net earnings per share.

On February 22, 2011, the Company effectuated a 1 for 100 reverse stock split of its common stocks. All references to number of shares, except shares authorized, and to per share information in the consolidated financial statements have been adjusted to reflect the reverse stock split on a retroactive basis.

	Three Months Ended September 30,
	2011		2010
Net income attributable to CHPC	$	218,603	$	363,376
Weighted average common shares		125,000		120,000
(denominator for basic income per share)
Effect of dilutive securities		-		-
Weighted average common shares		125,000		120,000
(denominator for diluted income per share)
Basic earnings per share	$	1.75	$	3.02
Diluted earnings per share	$	1.75	$	3.02

	Nine Months Ended September 30,
	2011		2010
Net income attributable to CHPC	$	602,965	$	492,000
Weighted average common shares		125,000		120,000
(denominator for basic income per share)
Effect of dilutive securities		-		-
Weighted average common shares		125,000		120,000
(denominator for diluted income per share)
Basic earnings per share	$	4.82	$	4.10
Diluted earnings per share	$	4.82	$	4.10

Note 19 – Risk Factors

The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of the PRC’s economy. The Company’s business may be influenced bychanges in governmental policies with respect tolaws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

16

CHINA PROSPEROUS CLEAN ENERGY CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Note 20 – Concentration of Credit Risk

As of September 30, 2011 and December 31, 2010, 100% of the Company’s cash included cash on hand and deposits in accounts maintained within the PRC where there is currently no rule or regulation in place for obligatory insurance to cover bank deposits in the event of bank failure. However, the Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.

For the nine months ended September 30, 2011 and Dec 31, 2010, all of the Company’s sales arose in the PRC. In addition, all accounts receivable as of September 30, 2011 and December 31, 2010 were due from customers located in the PRC.

As of September 30, 2011 and December 31, 2010, no single customer accounted for more than 10% of the company’s accounts receivable.

Note 21 – Supplemental Cash Flow Disclosures

The following is supplemental information relating to the consolidated statements of cash flows:

	For the nine months ended September 30,
	2011		2010
Cash paid for interest	$	101,894	$	37,058
Cash paid for income taxes	$	164,775	$	68,688

Note 22 – Commitments and Contingencies

Lease commitments

The Company has entered into several tenancy agreements for the lease of land and equipment for the purpose of its gas stations. The Company’s commitments for minimum lease payments under these operating leases for the next five years and thereafter as of September 30, 2011 are as follows:

Period ended December 31,
2011	$	201,070
2012		246,206
2013		153,482
2014		145,334
2015		112,149
Thereafter		487,739
Total	$	1,345,980

Guaranty contingency

On May 18th, 2011, Anyang Top Energy Green Resources Co., Ltd (“Anyang Top”) signed a Guaranty Agreement (the “Guaranty”) with Zhengzhou Hengrun Energy Co, Ltd (“Zhengzhou Hengrun”), an unrelated party, to become the guarantor with respect to a RMB 25.9 million (approximately $3.98 million) capital lease. The lessor is Zhongji Vehicle leasing Co., Ltd. (“Zhongji”). According to the Guaranty, Zhengzhou Hengrun will start to lease the equipment from August 24th 2011, if Zhengzhou Hengrun fails to pay the monthly rent RMB 719,847.2 (approximately $111,360) by the 25th of each month from September 2011 to August 2014, Anyang Top is obligated under the Guaranty to make the required monthly payments. The maximum potential amount of future payments that Anyang Top would be required to make under the Guaranty is RMB 21.6 million (approximately $3.34 million). There are no recourse provisions that would enable the Company to recover from third parties and no assets held as collateral by the Company or by third parties that, upon the occurrence of a triggering event or condition under the Guaranty, the Company can obtain and liquidate to recover all or a portion of any amounts paid by Anyang Top under the Guaranty.

17

CHINA PROSPEROUS CLEAN ENERGY CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Note 23 – Segment Information

ASC 280-10 (formerly SFAS 131), “Disclosure about Segments of an Enterprise and Related Information” requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance.

The Company has re-evaluated the structure of its organization and has determined, based on the requirements of SFAS 131, that the Company has the following three reportable segments, identified based on the nature of products, the type or class of customers, and the methods used to distribute the Company’s products:

▪   Retail sales of Compressed Natural Gas (“CNG”) through operation of CNG filling stations;

▪   Retail sales of Liquefied Petroleum Gas (“LPG”) through operation of LPG filling stations; and

▪   Wholesale of CNG and LPG

During the ended September 30, 2011, all of the Company’s operations were carried out in one geographical segment – China.

The following table sets out the Company’s segment information. The “Unallocated” column in the following table contains the reconciliation between the amounts for reportable segments and the consolidated amounts, which consists primarily of corporate items not allocated to the operating segments, intersegment eliminations. Intersegment sales are accounted for at fair value as if sales were to third parties.

	For the Nine Months Ended September 30,
Sales from external customers	2011			2010
CNG retail	$	4,933,218		$	5,383,731
LPG retail		218,015			512,438
CNG and LPG wholesale		14,693,777			8,872,819
Unallocated		4,768,096			1,954,493
Consolidated	$	24,613,106		$	16,723,481
	For the Nine Months Ended September 30,
Net income attributable to CHPC		2011			2010
CNG retail	$	788,789		$	603,418
LPG retail		(21,568	)		(60,391	)
CNG and LPG wholesale		(51,972	)		(328,462	)
Unallocated		(112,284	)		277,435
Consolidated	$	602,965		$	492,000

	For the Nine Months Ended September 30,
Investment income from non-consolidated entities	2011			2010
Consolidated	$	249,391		$	235,985
	For the Nine Months Ended September 30,
Interest expenses		2011			2010
Consolidated	$	(101,984	)	$	(37,058	)

18

CHINA PROSPEROUS CLEAN ENERGY CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

Note 23 – Segment Information(Continued)

	For the Nine Months Ended September 30,
Income before noncontrolling interest and income taxes	2011			2010
Consolidated		$	820,011		$	608,583
	For the Nine Months Ended September 30,
Segment assets			2011			2010
CNG retail		$	4,598,464		$	2,073,046
LPG retail			81,856			67,582
CNG and LPG wholesale			2,869,027			1,390,697
Unallocated			33,926,969			27,697,728
Consolidated		$	41,476,316		$	31,229,053

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

The following discussion contains forward-looking statements. Forward looking statements are identified by words and phrases such as “anticipate”, “intend”, “expect” and words and phrases of similar import. We caution investors that forward-looking statements are only predictions based on our current expectations about future events and are not guarantees of future performance. Our actual results, performance or achievements could differ materially from those expressed or implied by the forward-looking statements due to risks, uncertainties and assumptions that are difficult to predict, including those set forth in Item 1A above. We encourage you to read those risk factors carefully along with the other information provided in this Report and in our other filings with the SEC before deciding to invest in our stock or to maintain or change your investment. We undertake no obligation to revise or update any forward-looking statement for any reason, except as required by law.

You should read this MD&A in conjunction with the Consolidated Financial Statements and Related Notes in Item 1.

Unless otherwise noted, all currency figures in this filing are in U.S. dollars. References to "Yuan" or "RMB" are to the Chinese Yuan (also known as the Renminbi). According to Bank of China, as of September 30, 2011, RMB1: US$0.1565.

OVERVIEW

Our new primary business operations include: retail sales of CNG and operation of CNG filling stations; retail sales of LPG and operation of LPG filling stations; and wholesale of LPG and CNG. Our primary business is carried out by Origin Orbit through Anyang Prosperous and Anyang Top. Along with the reform and opening up and  China's sustained economic growth and rising consumption level, the gas industry as the basis of the energy industry, has been in a sustained and rapid development process, including LPG and CNG, and  other clean gas consumption. With China's sustained and rapid economic growth, and increasing social environmental awareness, clean, renewable energy has been encouraging by industrial policy. "The People's Republic of China National Economic and Social Development of the 12 th Five-Year Plan" clearly declaim that accelerating the development of new energy used vehicles and other strategic emerging industries, adjusting and optimizing the energy structure, promoting diversified clean energy development, increasing oil and gas exploration and development, and promoting rapid growth in natural gas production.

LPG, CNG and other clean energy will play an important role in future, there will be immense room for development and a very good development prospects. We plan to add 7 stations in 2011, 15 new stations in 2012, which will be the highlights of the Company.

In the remainder of this filing and its exhibits, “we, us or our” refers to China Prosperous Clean Energy Corporation, Origin Orbit, Anyang Prosperous and Anyang Top, collectively. The results of operations discussed below are the consolidated results of reflect the results of China Prosperous Clean Energy Corporation, Origin Orbit, Anyang Prosperous and Anyang Top.

19

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our management's discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported net sales and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management’s discussion and analysis.

  Basis of Consolidation

These consolidated financial statements include the financial statements of CHPC and its subsidiaries. All significant inter-company balances and transactions have been eliminated on consolidation.

Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the failure of customers to make required payments.  The Company reviews the accounts receivable on a periodic basis and makes allowances where there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, the customer’s payment history, its current credit-worthiness and current economic trends. Up to September 30, 2011, there was no accounts receivable reserve.

Available-for-sale Investments

Available-for-sale investments are equity securities which the Company does not intend to sell in the near term. The investees are private companies and do not have a quoted market price in an active market, so the fair value of available-for-sale investment cannot be practicably estimated are stated in the balance sheet using the cost method. Temporary impairments of costs of such available-for-sale investments are reported in other comprehensive income, where as other than temporary impairments are reflected in earnings.

Goodwill

The Company accounts for acquisitions of business in accordance with SFAS No. 141 “Business Combinations”, which may result in the recognition of goodwill. Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations accounted for under the purchase method. Goodwill is not subject to amortization but will be subject to periodic evaluation for impairment. Goodwill is stated in the condensed consolidated balance sheet at cost less accumulated impairment loss, if any.

Asset Impairment

(a)  Long-lived Assets

The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. An impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets, including goodwill, if any. An impairment loss is measured and recorded based on discounted estimated future cash flows. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable cash flows that are largely independent of future cash flows from other asset groups.

20

 (b)  Goodwill

The Company evaluates, on at least an annual basis, the carrying amount of goodwill to determine whether current events and circumstances indicate that such carrying amount may no longer be recoverable. To accomplish this, the Company compares the estimated fair value of its reporting units to their carrying amounts. If the carrying value of a reporting unit exceeds its estimated fair value, the Company compares the implied fair value of the reporting unit’s goodwill to its carrying amount, and any excess of the carrying value over the fair value is charged to earnings. The Company’s fair value estimates are based on numerous assumptions and it is possible that actual fair value will be significantly different than the estimates.

 Revenue Recognition

Revenue is recognized when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectability is reasonably assured.

Sales revenue is recognized net of sales discounts and returns at the time when the merchandise is sold to the customer. Based on historical experience, management estimates that sales returns are immaterial and has not made allowance for estimated sales returns.

Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes".  SFAS No. 109 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years.  Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

On January 1, 2007, the Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This Interpretation also provides guidance on recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures. The adoption of FIN 48 has not resulted in any material impact on the Company’s financial position or results.

Foreign Currency

The Company uses the United States dollars (“US Dollar” or “US$” or “$”) for financial reporting purposes. The Company maintains the books and records in its functional currency, Chinese Renminbi (“RMB”), being the primary currency of the economic environment in which its operations are conducted. In general, the Company translates its assets and liabilities into U.S. dollars using the applicable exchange rates prevailing at the balance sheet date, and the statement of income is translated at average exchange rates during the reporting period. Adjustments resulting from the translation of the Company’s financial statements are recorded as accumulated other comprehensive income.

The exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the condensed consolidated financial statements were as follows:

21

	September 30, 2011	December 31, 2010
Balance sheet items, except for paid-in capital and retained earnings as of the end of period	RMB1: US$0.15650	RMB1: US$0.14970
	Three months ended September 30, 2011	Three months ended September 30, 2010
Amounts included in the statements of income, statements of stockholders’ equity and statements of cash flows for the period	RMB1: US$0.15618	RMB1: US$0.14790
	Nine months ended September 30, 2011	Nine months ended September 30, 2010
Amounts included in the statements of income, statements of stockholders’ equity and statements of cash flows for the period	RMB1: US$0.15414	RMB1: US$0.14710

 Segment Information

ASC 280-10 (formerly SFAS 131), “Disclosure about Segments of an Enterprise and Related Information” requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance.

The Company has re-evaluated the structure of its organization and has determined, based on the requirements of ASC 280-10, that the Company has the following three reportable segments, identified based on the nature of products, the type or class of customers, and the methods used to distribute the Company’s products:

1)Retail sales of Compressed Natural Gas (“CNG”) through operation of CNG filling stations;

2)Retail sales of Liquefied Petroleum Gas (“LPG”) through operation of LPG filling stations; and

3)Wholesale of CNG and LPG

Recent Accounting Pronouncements

 In April 2010, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2010-17, Revenue Recognition—Milestone Method (Topic 605) – Revenue Recognition (ASU 2010-17). ASU 2010-17 provides guidance on defining the milestone and determining when the use of the milestone method of revenue recognition for research or development transactions is appropriate. It provides criteria for evaluating if the milestone is substantive and clarifies that a vendor can recognize consideration that is contingent upon achievement of a milestone as revenue in the period in which the milestone is achieved, if the milestone meets all the criteria to be considered substantive. ASU 2010-17 is effective for us in fiscal 2012 and should be applied prospectively. The adoption of this ASU will not have a material impact on the Company’s consolidated financial statements.

 In January 2010, the FASB issued the following ASC Updates:

ASU No. 2010-01— Equity (Topic 505): Accounting for Distributions to Shareholders with Components of Stock and Cash. This Update clarifies that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in EPS prospectively and is not a stock dividend for purposes of applying Topics 505 and 260 (Equity and Earnings Per Share). The amendments in this Update are effective for interim and annual periods ending on or after December 15, 2009 with retrospective application.

ASU No. 2010-02— Consolidation (Topic 810): Accounting and Reporting for Decreases in Ownership of a Subsidiary. This Update amends Subtopic 810-10 and related guidance to clarify that the scope of the decrease in ownership provisions of the Subtopic and related guidance applies to (i) a subsidiary or group of assets that is a business or nonprofit activity; (ii) a subsidiary that is a business or nonprofit activity that is transferred to an equity method investee or joint venture; and (iii) an exchange of a group of assets that constitutes a business or nonprofit activity for a noncontrolling interest in an entity, but does not apply to: (i) sales of in substance real estate; and (ii) conveyances of oil and gas mineral rights. The amendments in this Update are effective beginning in the period that an entity adopts FAS 160 (now included in Subtopic 810-10).

22

ASU No. 2010-06— Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements.  This Update amends Subtopic 820-10 that requires new disclosures about transfers in and out of Levels 1 and 2 and activity in Level 3 fair value measurements. This Update also amends Subtopic 820-10 to clarify certain existing disclosures. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements, which are effective for fiscal years beginning after December 15, 2010.

The Company expects that the adoption of the above Updates issued in January 2010 did not and will not have any significant impact on its financial position and results of operations.

In January 2010, the FASB expanded the disclosure requirements for fair value measurements relating to the transfers in and out of Level 2 measurements and amended the disclosure for the Level 3 activity reconciliation to be presented on a gross basis. In addition, valuation techniques and inputs should be disclosed for both Levels 2 and 3 recurring and nonrecurring measurements. The new requirements are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about the Level 3 activity reconciliation which are effective for fiscal years beginning after December 15, 2010. The Company adopted the new disclosure requirements on January 1, 2010 except for the disclosure related to the Level 3 reconciliation, which will be adopted on January 1, 2011. The adoption will not have an impact on its consolidated financial condition, results of operations or cash flows.

In October 2009, the FASB issued an amendment to the accounting and disclosure for revenue recognition. The amendment modifies the criteria for recognizing revenue in multiple element arrangements. Under the guidance, in the absence of vendor-specific objective evidence (“VSOE”) or other third party evidence (“TPE”) of the selling price for the deliverables in a multiple-element arrangement, this amendment requires companies to use an estimated selling price (“ESP”) for the individual deliverables. Companies shall apply the relative-selling price model for allocating an arrangement’s total consideration to its individual deliverables. Under this model, the ESP is used for both the delivered and undelivered elements that do not have VSOE or TPE of the selling price. The guidance is effective for the fiscal year beginning on or after June 15, 2010, and will be applied prospectively to revenue arrangements entered into or materially modified after the effective date. The Company intends to adopt the new guidance prospectively beginning January 1, 2011 and is currently evaluating the impact the adoption will have on its consolidated financial statements.

 On July 1, 2009, the Financial Accounting Standards Board (“FASB”) officially launched the FASB Accounting Standards Codification (“ASC”), which has become the single official source of authoritative nongovernmental US GAAP, in addition to guidance issued by the Securities and Exchange Commission. The ASC is designed to simplify US GAAP into a single, topically ordered structure. All guidance contained in the ASC carries an equal level of authority. The ASC is effective for all interim and annual periods ending after September 15, 2009.

On July 1, 2009, the Company adopted the accounting and disclosure requirements of Statement of Financial Accounting Standard (“SFAS”) No. 160, Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51, which is now included with ASC Topic 810 Consolidation.  This standard establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary that do not result in deconsolidation.  On a prospective basis, any changes in ownership will be accounted for as equity transactions with no gain or loss recognized on the transactions unless there is a change in control. 

23

RESULTS OF OPERATIONS

The following table sets forth the amounts and the percentage relationship to revenues of certain items in our consolidated statements of income for the three months ended September 30, 2011 and 2010.

Profit & Loss for the quarter ended September 30, 2011 and 2010

	For the quarter ended September 30, 2011				For the quarter ended September 30, 2010				Changes
	Amount		Percentage of Revenue		Amount		Percentage of Revenue		Amount		Percentage
	$		(%)		$		(%)		$		$(%)
Sales	$	8,213,554	100.00	%		6,739,042	100.00	%		1,474,512	21.88	%
Cost of Sales		6,964,280	84.79	%		5,746,539	85.27	%		1,217,741	21.19	%
Gross Profit		1,249,274	15.21	%		992,503	14.73	%		256,771	25.87	%
Operating Expenses：		1,003,758	12.22	%		643,550	9.55	%		360,209	55.97	%
Selling Expenses		629,545	7.66	%		432,372	6.42	%		197,173	45.60	%
General & Administrative Expenses		374,213	4.56	%		211,178	3.13	%		163,035	77.20	%
Income from Operations		245,516	2.99	%		348,953	5.18	%		(103,438)	(29.64	%)

24

Other Income (Expenses)：	73,385	0.89	%	72,657	1.08	%	728	1.00	%
Investment Income	83,529	1.02	%	79,100	1.17	%	4,429	5.60	%
Interest Expense	(8,299)	(0.10	%)	(4,827)	(0.07	%)	3,472	71.93	%
Other Income (Expenses)	(1,845)	(0.02	%)	(1,616)	(0.02	%)	229	14.17	%
Income before Provision for Income Taxes	318,901	3.88	%	421,611	6.26	%	(102,710)	(24.36	%)
Provision for Income Taxes	100,488	1.22	%	60,834	0.90	%	39,654	65.18	%
Income before Noncontrolling Interest	218,413	2.66	%	360,777	5.35	%	(142,364)	(39.46	%)
Noncontrolling Interest	(190)		%	(2,599)	(0.04	%)	2,409	92.69	%

Net Income	218,603	2.66	%	363,376	5.39	%	(144,773)	(39.84	%)
Foreign Currency Translation Adjustment	140,267	1.70	%	151,205	2.17	%	(6,482)	(4.43	%)
Total Comprehensive Income	358,706	4.36	%	508,239	7.56	%	(151,255)	(29.68	%)

25

Profit & Loss for the Nine months ended September 30, 2011 and 2010

	For the nine months ended September 30, 2011				For the nine months ended September 30, 2010				Changes
	Amount		Percentage of Revenue		Amount		Percentage of Revenue		Amount	Percentage
	$		(%)		$		(%)		$	(%)
Sales		24,613,106	100.00	%		16,723,481	100.00	%	7,889,625	47.18	%
Cost of Sales		21,002,418	85.33	%		14,401,031	86.11	%	6,601,387	45.84	%
Gross Profit		3,610,688	14.67	%		2,322,450	13.89	%	1,288,238	55.47	%
Operating Expenses：		2,934,084	11.92	%		1,807,392	10.81	%	1,126,692	62.34	%
Selling Expenses		1,998,091	8.12	%		1,244,261	7.44	%	753,830	60.58	%
General & Administrative Expenses		935,993	3.80	%		563,131	3.37	%	372,862	66.21	%
Income from Operations		676,604	2.75	%		515,058	3.08	%	161,546	31.36	%
Other Income (Expenses)：		143,407	0.58	%		93,525	0.56	%	49,882	53.34	%
Investment Income		249,391	1.01	%		235,985	1.41	%	13,406	5.68	%
Interest Expense		(101,894)	(0.41	%)		(37,058)	(0.22	%)	64,836	174.96	%
Other Income (Expenses)		(4,090)	(0.02	%)		(105,402)	(0.63	%)	(101,312)	(96.12	%)

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Income before Provision for Income Taxes	820,011	3.33	%	608,583	3.64	%	211,428	34.74	%
Provision for Income Taxes	220,882	0.90	%	119,244	0.71	%	101,637	85.23	%
Income before Noncontrolling interest	599,129	2.43	%	489,339	2.93	%	109,790	22.44	%
Noncontrolling Interest	(3,836)	(0.02	%)	(2,661)	(0.02	%)	(1,175)	(44.16	%)
Net Income	602,965	2.45	%	492,000	2.94	%	110,965	22.55	%
Foreign Currency Translation Adjustment	407,721	1.66	%	180,872	1.08	%	226,849	125.42	%
Total Comprehensive Income	1,010,686	4.11	%	672,872	4.02	%	337,814	50.20	%

  The “Results of Operations” discussed in this section merely reflect the information and results of Origin Orbit for the three months and nine months ended September 30, 2011 and 2010.

SALES

Historical Financial Information for the quarter ended September 30, 2011 and for the quarter ended September 30, 2010:

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	For the quarter  ended September 30, 2011		For the quarter ended September 30,2010		Change in Percentage (%)
Sales	$	8,213,554	$	6,739,042	21.88%
Net income	$	218,603	$	363,376	（39.84）%
Net Income as a percentage of sales	$	2.66%	$	5.39%	(50.28%)

The Company’s consolidated sales increased to $ 8,213,554 for the quarter ended September 30, 2011, a 21.88% increase from $6,739,042 reported for the quarter ended September 30, 2011. The increase in revenue resulted primarily from the following factors:

1)   The three new natural gas filling stations of the Company located in Anyang, Linyng, Weifang have been put into operation in this quarter, along with the increase of filling stations, sales volume increased by 17.03% compared with the same quarter of last year.

2)   The retail prices of natural gas filling stations of the Company have been adjusted upwards along with China's domestic retail prices of crude oil. The average retail prices increased by 21.58% compared with the same quarter of last year.

Our consolidated net income decreased by 39.84% to $ 218,603for the quarter ended September 30, 2011, as compared to $363,376 for the quarter ended September 30, 2011. This decrease was attributable to:

Though we adopt the centralized purchasing policy and choose the provider from different channel, because of the effect of increasing CNG price to us, and finally increase of cost of sales was more than sales, and caused the falling of gross profit..

Revenues breakdown by segments for the quarter ended September 30, 2011 and for the quarter ended September 30, 2010(in US Dollar)

Items	For the quarter ended September 30, 2011 ($)		Percentage (%)			For the quarter ended September 30, 2010 ($)		Percentage (%)			Change in Amount ($)			Change In Percentage  (%)
CNG retail		4,933,218		20.04	%		5,383,731		32.19	%		(450,513	)		(0.84	)%
LPG retail		218,015		0.89	%		512,438		3.06	%		(294,423	)		(57.46	)%
CNG and LPG wholesale		14,693,777		59.70	%		8,872,819		53.06	%		5,820,958			65.60	%
Others		4,768,096		19.37	%		1,954,493		11.69	%		2,813,603			144	%
TOTAL		24,613,106		100.00	%		16,723,481		100.00	%		7,889,625			47.18	%

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The CNG retail for the quarter ended September 30, 2011 was decreased by 0.84% as compared to the quarter ended September 30, 2010. This was mainly due to:

1)   Pursuant to the "The Guideline Catalog of Industrial Structure Adjustment (2007)"  issued by National Development and Reform Commission (NDRC) new and clean energy vehicles were officially listed among the “encouraged products” and CNG/petroleum dual-fuel automobiles, a major type of clean energy vehicles,  are staged for full promotion by NDRC, which lead to the significant increase in our CNG retail sales;

2)   In July 2010, one new CNG filling station in Anyang, in 2011 one in Weifang, and the other one in Linying  were put into operation, which contributed to the increase in CNG retail sales;

3)   The retail prices of natural gas have been adjusted upwards along with China's domestic retail prices of crude oil.

LPG retail sales fell by 57.46% compared to the same quarter of 2010. This was mainly due to the shift of favorable policy preference from LPG/gas dual-fueled vehicles to CNG/gas dual-fueled vehicles by central and local governments. As a result, our main LPG retail customers, taxis and city buses, have been converted to CNG dual-fuel vehicles, at the same time, because of the city planning of Handan, one of our LPG stations was ceased to work, which caused the decrease in our existing LPG retail sales.

CNG and LPG wholesales increased 65.6% compared to the same quarter of 2010. Along with China's rapid economic growth, CNG and LPG wholesale market gradually resumed and our sales market was basically steady.

“Others” increased by 144%, it is mainly because of the recovery of LPG market, and the sales of DME ,which can be blended with LPG, was increased too.

COST OF SALES (COS)

COS for the quarter ended September 30, 2011 was $6,964,280 which is 84.79% of total revenues and represents a 21.29% increase as compared to$5,746,539 and 85.27% of total revenues for the quarter ended September 30, 2010. The increase in COS as a percentage of total revenue was primarily because:

1) Along with the increase in sales, COS increased too.

2) we has taken centralized purchasing to obtain lower prices of raw materials and multiple channels to choose providers, which increased our profitability.

COS as a percentage of sales may fluctuate in the future. This fluctuation may primarily be due to changes in the price of our procurement price and selling price, which can have a significant impact on the COS. The Company will adopt proper measures to reduce fluctuations in the COS. These measures includes: centralized purchasing to obtain lower prices of raw materials, maintaining long-term stable cooperative relations with the existing gas source suppliers, increasing the development of new gas suppliers, and solving gas supply problems and reducing the cost of sales by way of joint venture and self-built CNG mother stations.

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GROSS PROFIT MARGIN

Gross Profit Margin of major products in 2011and 2010 (for the quarter ended September 30):

Gross Margin	2011		2010		Comparisons
TOTAL		15.21%		14.73%	0.48%
CNG Retail		39.29%		36.65%	2.64%
CNG Wholesale
LPG Retail		8.61%		16.07%	(7.46)
LPG Wholesale		3.43%		1.08%	2.35%

Raw Material Procurement

We were able to maintain relatively low purchase price even given the strong fluctuation of LPG price.

Average Price of Raw Material in the quarter ended September 30, 2011and 2010 (net of tax)

Quarter Ended September 30	Retail LPG (per ton)		Wholesale LPG (per ton)		CNG (per cube)
2010	$	742.04	$	685.69	$	0.32
2011	$	889.73	$	744.13	$	0.42

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SELLING EXPENSES

Selling expenses for the quarter ended September 30, 2011 mainly included the salary of sales personnel and transportation cost. In the second quarter of 2011, selling expenses amounted to $ 629,545, representing7.66% of total sales. The retail business sells its product through its own retail outlets whereas the wholesale business sells its product in the domestic market through direct distribution. The major component of selling expenses is transportation cost. The company mainly uses tank trucks to transport its products. In the third quarter of 2011, the transportation cost increased 93.55% to approximately $336,375 compared with approximately $173,789 in the same quarter 2010.

The selling expenses for the quarter ended September 30, 2011 increased by 45.60% as compared to $432,372 for the quarter ended September 30, 2010. The main reason is that along with the increase in LPG wholesale, the related transportation cost increased by 93.55%. 

GENERAL AND ADMINISTRATIVE EXPENSES

The general and administrative expenses for the quarter ended September 30, 2011, mainly included the salary and welfare of the management personnel and office related expenses $374,213, which accounted for 4.56% of total sales. For the quarter ended September 30, 2010, the general and administrative expense was $211,178, accounted for 3.13% of total sales, which represents a 77.20% increase. The reason of the increase was that:

1) In December, 2010, a technical services agreement was entered between Liu Zhijun and the Company,according to the agreement, service charge of $12,501 was accounted in this quarter.

2) Linying was put into operation in July 2011, general and administrative expenses and depreciation allowances increased, so the related office expenses increased.

FINANCING COSTS

The financial expenses mainly consisted of interest expenses and bank charges. For the quarter ended September 30, 2011, interest expenses was $8,299, representing 0.10% of total sales. For quarter ended September 30, 2010, it was $4,827 representing0.07% of total sales.

The main reason for the increase of the $3,472 in interest expenses, which represents a 6.40% in crease as compared to $4,827 for the quarter ended September 30, 2010, this was mainly due to: 1) Bank of China increased the interest rate. 2) In November 2010, Anyang Prosperous acquired a one-year loan from Zhengzhou Guoji Road Branch of Shanghai Pudong Development Bank.

INCOME FROM OPERATIONS

The Company's consolidated operating income for the quarter ended September 30, 2011 decreased by 29.64% to $245,516, from $348,954 reported for the quarter ended September 30, 2010. This was mainly due to:

(a)  Along with the increase of sales volume, and the related. increased too, meanwhile, since Linying Company was put into trail operation, which resulted the increase of operating expense.

We believe income from operations will show further improvements as we will continue building new CNG filling stations with further revenue source, aided by prudent cost controls on both the production and operating components of our business. We anticipate further improvements in cost of sales, increased sales and market share. Thus, while management expects this factor to favorably benefit gross and operating income, we also anticipate that with the addition of quality members to management, efficiency will be enhanced, which will also improve margins.

We are positive about the future increase in the net income as it will benefit from the following factors:

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a)   We will continue building new CNG filling stations as to expand our market share, such as Linying mother station that was completed in June 2010, and put into operation in July, 2011. The second gas station in Changzhi will be completed by the end of 2011; One LPG station in Anyang was changed into CNG station and was put into operation in June 2011.

b)   The Company will take proper measures to reduce fluctuations in the COS. These measures includes: centralized purchasing to obtain lower prices of raw materials, maintaining long-term stable cooperative relations with the existing gas source suppliers, increasing the development of new gas suppliers, and solving gas supply problems and reducing the cost of sales by way of joint venture and self-built CNG mother stations.

c)   We are also looking forward to reorganization and optimization of existing management processes, improvement of internal management, increase management efficiency and reduction of administrative costs, which will lead to the increase of our profits.

NET INCOME

The net income for the quarter ended September 30, 2011 was $218,413 and 2.66% of sales, comparing to $363,376 and 5.39% in the same quarter in 2010. The main reason of the decrease was that the CNG retail price increased less than purchasing cost of CNG, and gross margin increased.

ACCOUNT RECEIVABLE

Account receivable balance as of September 30, 2011 and December 31, 2010 was $693,205 and $541,809, respectively The average turnover rate of account receivable is 40 times, or 9 days.

LIQUIDITY AND CAPITAL RESOURCES

The primary source of liquidity had been cash generated from operations. Historically, the primary liquidity requirements were for capital expenditures and working capital and investments. Our contractual obligations, commitments and debt service requirements over the next several years are insignificant.

Our primary source of liquidity will continue to be cash generated from operations as well as existing cash on hand. If our current cash and cash equivalents and cash generated from operations will not satisfy our expected working and other capital requirements for the foreseeable future based on current business strategy and expansion plan, we will have available resources to meet both our short-term and long-term liquidity requirements, including debt service. If our cash flow from operations is insufficient to fund our debt service and other obligations, we may choose to use other means available to us such as to increase our borrowings under our lines of credit, reduce or delay capital expenditures, seek additional capital or seek to restructure or refinance our indebtedness.

As of September 30, 2011 and December 31, 2010, the Company had cash and cash equivalents of approximately $1,346,494 and $ 3,806,939 respectively.

The following is a summary of cash provided by or used in each of the indicated types of activities during the nine months ended September 30, 2011 and 2010:

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Cash provided by (used in):	Nine months  ended September 30, 2011			Nine months  ended September 30, 2010			Change
							Amount			Percentage
	($)			($)			($)			(%)
Operating Activities		4,095,263			3,733,000			362,263			9.70	%
Investing Activities		(2,244,939	)		(2,341,514	)	（96,575）				(4.12	%)
Financing Activities		(4,453,491	)		2,443,487			(6,896,978	)		(282.26	)%

Net cash flow provided by operating activities was $4,095,263 in the nine months ended September 30, 2011, as compared to net cash flow provided by operating activities of $3,733,000 in the nine months ended September 30, 2010, representing a increase of $362,263 or 9.70%. Along with the recovery of Chinese economy, we will maintain long-term stable cooperative relations with our existing gas source suppliers, increase the development of new gas suppliers, solve gas supply problems and reduce cost of sales by way of joint venture and self-built CNG mother stations, so as to reduce fluctuations in the COS and by doing so, cash flow used in operating activities will meet our liquidity requirements.

The increase in net cash flow from operating activities was mainly due to: increase in net income, and in January 2011 Anyang Prosperous acquired a bank acceptance from Zhengzhou Guoji Road Branch of Shanghai Pudong Development Bank, which caused the increase of trade bills payable.

Net cash flow used in investing activities was ($2,244,939) for the nine months ended September 30, 2011, as compared to net cash used in investing activities of ($2,341,514) for the nine months ended September 30, 2010, representing a decrease of ($96,575) or (4.12%). The increase of net cash flow used in investing activities was mainly because of decrease in purchasing fixed assets.

 Net cash flow provided by financing activities was ($4,453,491) for the nine months ended September 30, 2011 as compared to net cash provided by financing activities of $2,443,487 for the nine months ended September 30, 2010, representing a decrease of ($6,896,978) or (282.26%). This is mainly because we keep cash deposit in bank to get the Bank Bill.

We do not believe that inflation had a significant negative impact on our results of operations during 2011.

As of September 30, 2011, our total assets were $41,476,316and our total liabilities were $29,132,879. Our debt to total assets ratio, calculated as total liabilities (including short-term debt and payables) over total assets, was 0.70:1.

As of December 31, 2010, our total assets were $37,503,210 and our total liabilities were $26,167,175. Our debt to asset ratio, calculated as total liabilities (including short-term debt and payables) over total assets, was 0.70:1.

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Based on past performance and current expectations, we believe our cash and cash equivalents, cash generated from operations, as well as future possible cash investments, will satisfy our working capital needs, capital expenditures and other liquidity requirements associated with our operations for at least the next 12 months.

INCOME TAXES

The Company being incorporated in the State of Nevada is not subject to any income tax according to the rules and regulations of the State of Nevada. Before January 1, 2008, the Company’s subsidiaries in the PRC were generally subject to PRC enterprise income tax at 33%. On March 16, 2007, the PRC government promulgated a new tax law, China’s Unified Corporate Income Tax Law (“New CIT Law”), which took effect from January 1, 2008. Under the New CIT Law, foreign-owned enterprises as well as domestic companies are subject to a unified tax rate of 25%. Accordingly, the Company’s subsidiaries in the PRC have been subject to the PRC corporate income tax at a rate of 25% on their taxable income arising in the PRC commencing from January 1, 2008. Meanwhile, according to Rule 28 of New CIT Law, income tax of small low-profit enterprises is subject to the reduced rate of 20%. Changzhi Company as one of the Company’s subsidiaries meets the conditions of small low-profit enterprises. So Changzhi Company’s income tax rate was 20% in 2009.The effect of this change in tax rate has been reflected in the calculation of deferred income tax assets as of December 31, 2007 and thereafter.

The Company’s provision for income taxes consisted of:

	For the nine Months
	Ended September 30,
	2011		2010
Current – PRC	$	220,882	$	119,244
Deferred	$	220,882	$	119,244

OFF-BALANCE SHEET ARRANGEMENTS

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. 

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

                We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report pursuant to Rule 13a-15 of the Exchange Act. Based on this Evaluation, our Principal Executive Officer and Principal Financial Officer concluded that our Disclosure Controls were effective as of the end of the period covered by this report.

Changes in Internal Controls

                We have also evaluated our internal controls for financial reporting, and there have been no change in our internal control over financial reporting or in other factors that has materially affected, or is reasonably likely to materially affect our internal control over financial reporting subsequent to the date of last evaluation.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Currently we are not involved in any pending litigation or legal proceeding.

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item. 

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

On September 19, 2008, Walter Brenner and Horst Balthes (the "Affiliate Sellers"), two major shareholders and affiliates of the Company consummated two Affiliate Stock Purchase Agreements (the "Affiliate Agreements") with Oracular Dragon. Pursuant to the terms and conditions of the Affiliate Agreements, Oracular Dragon acquired from the Affiliate Sellers a total 3,100,000 shares of common stock of the Company for a total price of $ 75,000.  Also on September 19, 2008, a group of non-Affiliate Stockholders ("Non-Affiliate Sellers") of the Company consummated a Non-Affiliate Stock Purchase Agreement ("Non-Affiliate Agreement") with Oracular Dragon. Pursuant to the terms and conditions of the Non-Affiliate Agreement, Oracular Dragon acquired from the Non-Affiliate Sellers a total 1,424,231 shares of common stock of the Company for a total price of $ 271,586. As the result, Oracular Dragon acquired from Affiliate and Non-Affiliate Sellers a total 4,524,231 shares of common stock of the Company, representing approximately 73.7% of the total issued and outstanding shares of the Company.

Oracular Dragon is a company organized under the laws of British Virgin Islands and has its principal place of business in the People’s Republic of China. Oracular Dragon is neither a U.S Person, as such term is defined in Rule 902(k) of Regulation S, nor is it located within the United States.

35

On September 30, 2008, the Company entered a share exchange agreement ("Share Exchange Agreement”) under which the Company issued 5,865,000 shares of its common stock, par value $ 0.00001, to Oracular Dragon in exchange for all the issued and outstanding shares that Oracular Dragon owned in Origin Orbit Green Resource Company, Ltd. (“Origin Orbit”), the wholly-owned subsidiary of Oracular Dragon (“Share Exchange Transaction”).

The Share Exchange Transaction is the final part of a series of consecutive transactions including the Affiliate and Non-Affiliate Stock Purchase Transactions consummated on September 19, 2008 (“Stock Purchase Transactions”). The Share Exchange Transaction and Stock Purchase Transactions, combined together, were to ensure that the Company was able to acquire 100% of the beneficial ownership interest in Origin Orbit.

Origin Orbit is a holding company that, on April 4, 2007, acquired 100% of the capital stock of Anyang Prosperous Energy Technology Developing Co., Ltd. (“Anyang Prosperous”) and Anyang Top Energy Green Resources Co., Ltd. (“Anyang Top”), both of which were organized under the laws of the People’s Republic of China (“PRC”). Upon the acquisition of Origin Orbit, Anyang Prosperous and Anyang Top became our subsidiaries that we own through Origin Orbit.

Following the acquisition of Origin Orbit, we ceased all the metal exploring business. Our new primary business operations include: retail sales of CNG and operation of CNG filling stations; retail sales of LPG and operation of LPG filling stations; and wholesale of LPG and CNG. Our primary business is carried out by Origin Orbit through Anyang Prosperous and Anyang Top.

On October 14, 2008, we changed our legal name from “Acropolis Precious Metals, Inc.” to “China Prosperous Clean Energy Corporation”.

On December 03, 2010, we entered a Consulting Agreement with Mr. Zhijun Liu, who is a citizen and resident of the People’s Republic of China. Under the Consulting Agreement, Mr. Zhijun Liu will advise and assist us to identify potential merger and acquisition targets, expand business operations in North China (Beijing, Tianjin, Hebei Province,  Shanxi Province and Inner Mongolia Autonomous Region, select and hire managerial talents, select and develop new clean energy products and develop market plans to improve the sales in company’s existing markets. The term of the Consulting Agreement is one year and the compensation for Mr. Zhijun Liu’s services is 500,000 shares of common stock of the Company.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following documents are filed as a part of this report or are incorporated by reference to previous filings, if so indicated:

Exhibit No.	Description
3.1	Articles of Incorporation (1)
3.2	Bylaws (1)
10.1	Affiliate Stock Purchase Agreement between Walter Brenner and Oracular Dragon Capital Company, Ltd. (2)
10.2	Affiliate Stock Purchase Agreement between Horst Balthes and Oracular Dragon Capital Company, Ltd.(2)

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10.3	Non-Affiliate Stock Purchase Agreement (2)
10.4	Share Exchange Agreement, dated September 30, 2008, between Company and Oracular Dragon Capital Company, Ltd.(3)
10.5	Consulting Agreement between Company and Zhijun Liu (4)
31.1	Section 302 Certificate of Chief Executive Officer *
31.2	Section 302 Certificate of Chief Financial Officer *
32.1	Section 906 Certificate of Chief Executive Officer *
32.2	Section 906 Certificate of Chief Financial Officer *

101	The following materials from our Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) Notes to Consolidated Financial Statements.
	101.INS**                      XBRL Instance 101.SCH**                      XBRL Taxonomy Extension Schema 101.CAL**                      XBRL Taxonomy Extension Calculation 101.DEF**                       XBRL Taxonomy Extension Definition 101.LAB**                      XBRL Taxonomy Extension Labels 101.PRE**                      XBRL Taxonomy Extension Presentation

* filed herewith

** XBRL information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

(1) Incorporated by reference to the Form SB-2 registration statement filed on June 29, 2007.

(2) Incorporated by reference to the Report on Form 8-K as filed on June 20, 2008

(3) Incorporated by reference to the Report on Form 8-K as filed on September 30, 2008.

(4) Incorporated by reference to the Report on Form 8-K as filed on December 07, 2010

37

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 hereunto duly authorized.

Date: November 14, 2011	CHINA PROSPEROUS CLEAN ENERGY CORPORATION
	/s/Hongjie Zhou
	Hongjie Zhou
	Acting Chief Financial Officer

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EX-31.1

Exhibit 31.1

CERTIFICATION

I, Wei Wang, certify that:

1. I have reviewed this quarterly report on Form 10-Q of China Prosperous Clean Energy Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2011

/s/ Wei Wang

     Wei Wang

Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Hongjie Zhou, certify that:

1. I have reviewed this quarterly report on Form 10-Q of China Prosperous Clean Energy Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 14, 2011

/s/ Hongjie Zhou

     Hongjie Zhou

Acting Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of China Prosperous Clean Energy Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2011 as filed with the Securities and Exchange Commission (the “Report”), I, Wei Wang, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2011	/s/ Wei Wang
	Wei Wang Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of China Prosperous Clean Energy Corporation (the “Company”) on Form 10-Q for the period ended September 30, 2011 as filed with the Securities and Exchange Commission (the “Report”), I, Hongjie Zhou, Acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 14, 2011	/s/ Hongjie Zhou
	Hongjie Zhou Acting Chief Financial Officer

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Consolidated Balance Sheets Parentheticals (USD $)	Sep. 30, 2011	Dec. 31, 2010
Common Stock, par or stated value	$ 0.001	$ 0.001
Common Stock, shares authorized	75,000,000	75,000,000
Common Stock, shares issued	125,000	125,000
Common Stock, shares outstanding	125,000	125,000

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CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Sales	$ 8,213,554	$ 6,739,042	$ 24,613,106	$ 16,723,481
Cost of sales	6,964,280	5,746,539	21,002,418	14,401,031
Gross profit	1,249,274	992,503	3,610,688	2,322,450
Selling expenses	629,545	432,372	1,998,091	1,244,261
General and administrative expenses:	374,213	211,178	935,993	563,131
Total operating expenses	1,003,758	643,550	2,934,084	1,807,392
Income from operations	245,516	348,953	676,604	515,058
Investment income	83,529	79,100	249,391	235,985
Interest expense	(8,299)	(4,827)	(101,894)	(37,058)
Other expenses	(1,845)	(1,616)	(4,090)	(105,402)
Total other income	73,385	72,657	143,407	93,525
Income before provision for income taxes	318,901	421,611	820,011	608,583
Provision for income taxes	100,488	60,834	220,882	119,244
Net income	218,413	360,777	599,129	489,339
Less: Net loss attributable to noncontrolling interest	(190)	(2,599)	(3,836)	(2,661)
Net income attributable to CHPC	$ 218,603	$ 636,376	$ 602,965	$ 492,000
Weighted average number of shares - Basic and diluted	125,000	120,000	125,000	120,000
Earnings per share - Basic and diluted	$ 1.75	$ 3.02	$ 4.82	$ 4.10

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SHARE - BASED PAYMENTS

9 Months Ended

Sep. 30, 2010

SHARE - BASED PAYMENTS

SHARE - BASED PAYMENTS

Note 17 - Share - Based Payments

On December 3, 2010, the board of directors approved to issue 500,000 shares of the Company's common stock to Mr. Zhijun Liu, the consultant of the Company for one year consultant service fee. The fair value on December 3, 2010 was $50,000 based on the quoted price of the Company's common stock on that day. Total share-based payments recognized in income statement for the nine months ended September 30, 2011 and 2010 were $37,500 and $-0-, respectively.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2011	Nov. 10, 2011
Document and Entity Information
Entity Registrant Name	CHINA PROSPEROUS CLEAN ENERGY Corp
Document Type	10-Q
Document Period End Date	Sep. 30, 2011
Amendment Flag	false
Entity Central Index Key	0001402159
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		125,000
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3

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CONCENTRATION OF CREDIT RISK

9 Months Ended

Sep. 30, 2010

CONCENTRATION OF CREDIT RISK

CONCENTRATION OF CREDIT RISK

Note 20 - Concentration of Credit Risk

As of September 30, 2011 and December 31, 2010, 100% of the Company's cash included cash on hand and deposits in accounts maintained within the PRC where there is currently no rule or regulation in place for obligatory insurance to cover bank deposits in the event of bank failure. However, the Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.

For the nine months ended September 30, 2011 and Dec 31, 2010, all of the Company's sales arose in the PRC. In addition, all accounts receivable as of September 30, 2011 and December 31, 2010 were due from customers located in the PRC.

As of September 30, 2011 and December 31, 2010, no single customer accounted for more than 10% of the company's accounts receivable.

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LOANS TO THIRD PARTIES

9 Months Ended

Sep. 30, 2010

LOANS TO THIRD PARTIES

LOANS TO THIRD PARTIES

Note 6 - Loans to Third Parties

Loans to third parties primarily consist of goodfaith non-interest bearing advances given to third parties and payable on demand. Loan to third parties outstanding as of September 30, 2011 and December 31, 2010 were $3,962,594 and $3,224,210, respectively.

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SUPPLEMENTAL CASH FLOW DISCLOSURES

9 Months Ended

Sep. 30, 2010

SUPPLEMENTAL CASH FLOW DISCLOSURES

SUPPLEMENTAL CASH FLOW DISCLOSURES

Note 21 - Supplemental Cash Flow Disclosures

The following is supplemental information relating to the consolidated statements of cash flows:

	For the nine months ended September 30,
	2011		2010
Cash paid for interest	$	101,894	$	37,058
Cash paid for income taxes	$	164,775	$	68,688

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RISK FACTORS

9 Months Ended

Sep. 30, 2010

RISK FACTORS

RISK FACTORS

Note 19 - Risk Factors

The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of the PRC's economy. The Company's business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

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INVESTMENTS IN NON-CONSOLIDATED ENTITIES

9 Months Ended

Sep. 30, 2010

INVESTMENTS IN NON-CONSOLIDATED ENTITIES

INVESTMENTS IN NON-CONSOLIDATED ENTITIES

Note 11 - Investments in Non-consolidated Entities

As of September 30, 2011, available-for-sale securities consist of the following:

Name of investee	Place of operation	Percentage of ownership	Principal activities
Anyang Dingran Gas Co., Ltd	PRC	38%	Natural gas pipeline, investment and management in CNG filling station
Anyang PetroChina Marketing Company Limited ("Anyang PetroChina")	PRC	34%	Sales of crude oil and refined oil and LPG
Ancai Energy Corporation	PRC	15%	Long distance pipe network, LPG pipeline, operation of CNG filling station

As the above company is a private company whose shares are not quoted or traded in an active market, management has determined that it is not practicable to estimate their fair value reliably. Therefore, the investment in the above company is stated at cost less any impairment losses. No events or changes in circumstances have been identified that potentially would have a significant adverse effect on the fair value of investment in the above company. As of September 30, 2011, there was no allowance for impairment loss.

Anyang Dingran Gas Co., Ltd was incorporated on July 12, 2010, with a registered capital of $8 million, which was invested by Ancai Hi-tec Corporation, Antai Investment Co., Ltd., and Anyang Prosperous. Anyang Prosperous invested $3.04 million for its 38% equity interest in Anyang Dingran. It mainly engaged in the investment and operation in CNG and LNG stations. Through the CNG pipeline of branch of Henan, which can support 0.21billion M3 CNG per year, it will construct mother stations and standard stations, and now it was operated by the above three parties. Therefore, Anyang Dingran has been accounted for using the cost method instead of the equity method. For the nine months ended September 30, 2011 and 2010, no dividend income was distributed from Anyang Dingran.

Although the Company held 34% ownership interest in Anyang PetroChina, the Company did not have significant influence over Anyang PetroChina. According to an agreement between the Company and the other shareholder of Anyang PetroChina, namely China National Petroleum Corporation ("China National Petroleum"), the Company has assigned the full power and right of management of Anyang PetroChina to China National Petroleum for the period until December 31, 2009. In return, the Company has been entitled to 10% of the cost of its investment in Anyang PetroChina in the form of a fixed "dividend" each year regardless of the actual performance of Anyang PetroChina for the period until December 31, 2009. Therefore, Anyang PetroChina has been accounted for using the cost method instead of the equity method. For the nine months ended September 30, 2011 and 2010, dividend income of $247,279 and $235,343, respectively, from Anyang Petro China was included in other income.

The Company acquired 15% of the shares of Ancai Energy Co., Ltd ("Ancai"), which was established on April 18, 2008 and was registered with capital of approximate $1.17million. Ancai is mainly engaged in the investment in the construction of long-distance pipeline and delivery networks for natural gas, and pipeline LPG and CNG filling stations. The Jiaozuo-Anyang branch of the West-East natural gas transmission project had been built and put into operation in December 2003, which supplies natural gas to users in the cities of Jiaozuo, Xinxiang, Hebi, Anyang as well as industrial users. The project is not just an industrial project, but also a state key infrastructural project for clean energy. Almost 15 million people in Northern Henan can benefit from the project, which plays an important role in local industry and ecological environment. Theinvestment made on Ancai will provide steady and qualified natural gas for the network of CNG filling stations that belong to the company and Henan Transport Authority, developing a stable market of filling stations which takes Ancai mother station as its center. Ancai has been accounted for using the cost method instead of the equity method. For the nine months ended September 30, 2011 and 2010, dividend of $2,112 and $-0- respectively, from Ancai was included in other income.

As of September 30, 2011, Ancai Group Inc, the 70% shareholder of Ancai, is responsible for the management of Ancai.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2010

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Note 2- Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The Company's consolidated financial statements include the accounts of its controlled subsidiaries. All intercompany balances and transactions are eliminated in consolidation. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles ("GAAP") applicable to interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included.

In preparing the accompanying unaudited consolidated financial statements, the company evaluated the period from September 30, 2011 through the date the financial statements were issued, for material subsequent events requiring recognition or disclosure. No such events were identified for this period.

Interim Financial Statements

These interim consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements for the years ended December 31, 2010 and 2009, as not all disclosures required by GAAP for annual consolidated financial statements are presented. The interim consolidated financial statements follow the same accounting policies and methods of computations as the audited consolidated financial statements for the years ended December 31, 2010 and 2009.

Reclassification

Certain amounts as of December 31, 2010 and September 30, 2010 were reclassified for presentation purposes.

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PROPERTY AND EQUIPMENT

9 Months Ended

Sep. 30, 2010

PROPERTY AND EQUIPMENT

PROPERTY AND EQUIPMENT

Note 8 - Property and Equipment

Property and equipment consist of the following:

	September 30, 2011			December 31, 2010
Buildings	$	2,484,156		$	1,144,422
Machinery		4,169,522			3,129,046
Machinery - capital lease		324,390			-
Office equipment		351,233			75,363
Gas storage vehicles and motor vehicles		125,604			127,350
Construction in progress		916,572			1,731,539
		8,047,087			6,207,720
Less: Accumulated depreciation		(1,826,427	)		(1,475,882	)
Total	$	6,220,660		$	4,731,838

Depreciation expense for three months ended September 30, 2011 and 2010 was $130,871 and $103,889 respectively. Depreciation expense for the nine months ended September 30, 2011 and 2010 was $299,265 and $213,829 respectively. For the nine months ended September 30, 2011 and 2010, amortization of equipment under capital lease included in depreciation expense was $10,468 and $-0-, respectively.

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SHORT TERM BANK LOANS

9 Months Ended

Sep. 30, 2010

SHORT TERM BANK LOANS

SHORT TERM BANK LOANS

Note 13- Short Term Bank Loans

Short-term bank loans consist of the following:

	September 30,		December 31,
	2011		2010
6.372% one-year term loan from Bank of China, signed on October 8, 2010, which is to be repaid in full by October 8, 2011. The loan is guaranteed by real estate of Anyang Century Plaza Century Real Estate Development Co., Ltd. Interest was paid quarterly.	$	469,500	$	455,100
6.672% one-year term loan from Bank of China, signed on November 9, 2010, which is to be repaid in full by November 9, 2011. The loan is guaranteed by real estate of Anyang Century Plaza Century Real Estate Development Co., Ltd. Interest was paid quarterly.		313,000		303,400
6.1160% one-year term loan from Zhengzhou Branch of Shanghai Pudong Development Bank, signed on November 18, 2010, which is to be repaid in full by November 18, 2011. The loan is guaranteed by 70% of the paid-up capital of $500 and rights to use land of Henan Small & Medium Enterprises Investment Guaranty Co., Ltd. Interest was paid monthly.		782,500		758,500
Total	$	1,565,000	$	1,517,000

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CAPITAL LEASES - FUTURE MINIMUM LEASE PAYMENTS

9 Months Ended

Sep. 30, 2010

CAPITAL LEASES - FUTURE MINIMUM LEASE PAYMENTS

CAPITAL LEASES - FUTURE MINIMUM LEASE PAYMENTS

Note 9 - Capital Leases - Future Minimum Lease Payments

The Company leases certain machineries under agreements that are classified as capital leases. The cost of equipment under capital leases is included in the property and equipment and was $324,390 and $-0- as of September 30, 2011 and December 31, 2010, respectively. Accumulated amortization of the leased machinery as of September 30, 2011 and 2010 was $10,468 and $-0-, respectively. Amortization of assets under capital leases is included in depreciation expense.

The future minimum lease payments required under the capital leases and the present values of the net minimum lease payments as of September 30, 2011 are as follows:

Year Ending December 31,	Amount
2011	$	73,134
2012		127,114
2013		127,114
Total minimum lease payments	$	327,362
Less: Current maturities of capital
lease obligations		(124,786	)
Long-term capital lease obligations	$	202,576

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DIVIDEND RECEIVABLE

9 Months Ended

Sep. 30, 2010

DIVIDEND RECEIVABLE

DIVIDEND RECEIVABLE

Note 7 - Dividends Receivable

Dividends receivable as of September 30, 2011 and December 31, 2010 were $271,863 and $524,400, respectively, representing income receivable from Anyang Petro China and Ancai exhibited in Note 11.

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CONSOLIDATED STATEMENT OF CASH FLOWS (USD $)	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Net income	$ 599,129	$ 489,339
Depreciation	299,265	213,829
Share-based payments	37,500
Accounts receivable	(132,228)	193,676
Inventories	143,751	(449,534)
Advance payments	(18,165)	5,656,121
Dividends receivable	265,072	78,773
Other current assets	(422,118)	(2,154,503)
Other non-current assets	1,637	956
Accounts payable and accrued expenses	(1,119,595)	(832,908)
Trade notes payable	5,240,760	(588,400)
Customer advances	(1,110,307)	509,609
Other current liabilities	310,562	616,042
Total adjustments	3,496,134	3,243,661
Net cash provided by operating activities:	4,095,263	3,733,000
Acquisition of property and equipment	(1,618,171)	(192,496)
Advance payments for purchase of fixed assets		(2,357,088)
Loans to third parties	(626,768)
Investment in non-consolidated entities		208,070
Net cash used in investing activities:	(2,244,939)	(2,341,514)
Restricted cash	(3,237,569)	293,947
Repayment of short-term bank loans		(882,600)
Proceeds from (repayment of) loans from third parties	(1,538,348)	3,179,240
Capital lease obligations	322,426
Repayment of long-term bank loan		(147,100)
Net cash provided by (used in) financing activities:	(4,453,491)	2,443,487
Effect of foreign currency translation on cash	142,722	39,999
Net increase (decrease) in cash and cash equivalents	(2,460,445)	3,874,972
Cash and cash equivalents – beginning	3,806,939	694,620
Cash and cash equivalents – ending	1,346,494	4,569,592
Advance payments for investment in non-consolidated entity		$ 5,478,442

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RESTRICTED CASH

9 Months Ended

Sep. 30, 2010

RESTRICTED CASH

RESTRICTED CASH

Note 3- Restricted Cash

As of September 30, 2011 and December 31, 2010, the Company had restricted cash of $ 3,601,315 and $304,540, respectively. These restricted cash balances are reserved for settlement of trade notes payable in connection with inventory purchases. The cash held in custody by bank issuing the trade notes payable is restricted as to withdrawal or use, and is currently earning interest.

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INVENTORIES

9 Months Ended

Sep. 30, 2010

INVENTORIES

INVENTORIES

Note 4 - Inventories

Inventories by major categories are summarized as follows:

	September 30, 2011		December 31, 2010
Compressed natural gas	$	212,761	$	199,569
Liquefied petroleum gas		219,271		578,264
Dimethyl ether		107,175		97,452
Vehicle modification components and other		368,057		145,627
Total	$	907,264	$	1,020,912

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COMMITMENTS AND CONTINGENCIES

9 Months Ended

Sep. 30, 2010

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Note 22 - Commitments and Contingencies

Lease commitments

The Company has entered into several tenancy agreements for the lease of land and equipment for the purpose of its gas stations. The Company's commitments for minimum lease payments under these operating leases for the next five years and thereafter as of September 30, 2011 are as follows:

Period ended December 31,
2011	$	201,070
2012		246,206
2013		153,482
2014		145,334
2015		112,149
Thereafter		487,739
Total	$	1,345,980

Guaranty contingency

On May 18th, 2011, Anyang Top Energy Green Resources Co., Ltd ("Anyang Top") signed a Guaranty Agreement (the "Guaranty") with Zhengzhou Hengrun Energy Co, Ltd ("Zhengzhou Hengrun"), an unrelated party, to become the guarantor with respect to a RMB 25.9 million (approximately $3.98 million) capital lease. The lessor is Zhongji Vehicle leasing Co., Ltd. ("Zhongji"). According to the Guaranty, Zhengzhou Hengrun will start to lease the equipment from August 24th 2011, if Zhengzhou Hengrun fails to pay the monthly rent RMB 719,847.2 (approximately $111,360) by the 25th of each month from September 2011 to August 2014, Anyang Top is obligated under the Guaranty to make the required monthly payments. The maximum potential amount of future payments that Anyang Top would be required to make under the Guaranty is RMB 21.6 million (approximately $3.34 million). There are no recourse provisions that would enable the Company to recover from third parties and no assets held as collateral by the Company or by third parties that, upon the occurrence of a triggering event or condition under the Guaranty, the Company can obtain and liquidate to recover all or a portion of any amounts paid by Anyang Top under the Guaranty.

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ACCOUNTS PAYABLE AND ACCRUED EXPENSES

9 Months Ended

Sep. 30, 2010

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Note 12 - Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses as of September 30, 2011 and December 31, 2010 consist of the following:

	September 30, 2011		December 31, 2010
Accounts payable	$	406,166	$	1,509,024
Accrued expenses		28,315		14,003
Total	$	434,481	$	1,523,027

The carrying values of accounts payable and accrued expenses approximate their fair values due to the short-term nature of these obligations.

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ADVANCE PAYMENTS

9 Months Ended

Sep. 30, 2010

ADVANCE PAYMENTS

ADVANCE PAYMENTS

Note 5 - Advance Payments

Advance payments as of September 30, 2011 and December 31, 2010 consist of the following:

	September 30, 2011		December 31, 2010
Inventories	$	9,678,406	$	9,363,683
Property and equipment		3,575,196		3,465,541
Total	$	13,253,602	$	12,829,224

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LOANS FROM THIRD PARTIES

9 Months Ended

Sep. 30, 2010

LOANS FROM THIRD PARTIES

LOANS FROM THIRD PARTIES

Note 15 - Loans From Third Parties

Loans from third parties as of September 30, 2011 and December 31, 2010 consist of the following:

	September 30, 2011		September 30, 2010
Anyang Zhenyuan Group	$	16,406,804	$	17,417,588
Beijing Prosperous Energy Technology Developing Co., Ltd		1,502,400		1,456,320
Total	$	17,909,204	$	18,873,908

The proceeds of these loans were utilized as working capital. These loans are good-faith, unsecured, and non-interest bearing.

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SEGMENT INFORMATION

9 Months Ended

Sep. 30, 2010

SEGMENT INFORMATION

SEGMENT INFORMATION

Note 23 - Segment Information

ASC 280-10 (formerly SFAS 131), "Disclosure about Segments of an Enterprise and Related Information" requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance.

The Company has re-evaluated the structure of its organization and has determined, based on the requirements of SFAS 131, that the Company has the following three reportable segments, identified based on the nature of products, the type or class of customers, and the methods used to distribute the Company's products:

▪   Retail sales of Compressed Natural Gas ("CNG") through operation of CNG filling stations;

▪   Retail sales of Liquefied Petroleum Gas ("LPG") through operation of LPG filling stations; and

▪   Wholesale of CNG and LPG

During the ended September 30, 2011, all of the Company's operations were carried out in one geographical segment - China.

The following table sets out the Company's segment information. The "Unallocated" column in the following table contains the reconciliation between the amounts for reportable segments and the consolidated amounts, which consists primarily of corporate items not allocated to the operating segments, intersegment eliminations. Intersegment sales are accounted for at fair value as if sales were to third parties.

	For the Nine Months Ended September 30,
Sales from external customers	2011			2010
CNG retail	$	4,933,218		$	5,383,731
LPG retail		218,015			512,438
CNG and LPG wholesale		14,693,777			8,872,819
Unallocated		4,768,096			1,954,493
Consolidated	$	24,613,106		$	16,723,481
	For the Nine Months Ended September 30,
Net income attributable to CHPC		2011			2010
CNG retail	$	788,789		$	603,418
LPG retail		(21,568	)		(60,391	)
CNG and LPG wholesale		(51,972	)		(328,462	)
Unallocated		(112,284	)		277,435
Consolidated	$	602,965		$	492,000

	For the Nine Months Ended September 30,
Investment income from non-consolidated entities	2011			2010
Consolidated	$	249,391		$	235,985
	For the Nine Months Ended September 30,
Interest expenses		2011			2010
Consolidated	$	(101,984	)	$	(37,058	)

	For the Nine Months Ended September 30,
Income before noncontrolling interest and income taxes	2011			2010
Consolidated		$	820,011		$	608,583
	For the Nine Months Ended September 30,
Segment assets			2011			2010
CNG retail		$	4,598,464		$	2,073,046
LPG retail			81,856			67,582
CNG and LPG wholesale			2,869,027			1,390,697
Unallocated			33,926,969			27,697,728
Consolidated		$	41,476,316		$	31,229,053

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Consolidated Statements of Comprehensive Income (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Net income	$ 218,413	$ 360,777	$ 599,129	$ 489,339
Foreign currency translation adjustment	140,267	151,205	408,273	185,935
Total other comprehensive income	140,267	151,205	408,273	185,935
Comprehensive income	358,680	511,982	1,007,402	675,274
Less: Comprehensive income attributable to the noncontrolling interest	(26)	(1,061)	(226)	(2,402)
Comprehensive income attributable to CHPC	$ 358,706	$ 508,239	$ 1,007,628	$ 672,872

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INCOME TAXES

9 Months Ended

Sep. 30, 2010

INCOME TAXES

INCOME TAXES

Note 16 - Income Taxes

The Company being incorporated in the State of Nevada is not subject to any income tax according to the rules and regulations of the State of Nevada. Before January 1, 2008, the Company's subsidiaries in the PRC were generally subject to PRC enterprise income tax at 33%. On March 16, 2007, the PRC government promulgated a new tax law, China's Unified Corporate Income Tax Law ("New CIT Law"), which took effect from January 1, 2008. Under the New CIT Law, foreign-owned enterprises as well as domestic companies are subject to a unified tax rate of 25%. Accordingly, the Company's subsidiaries in the PRC have been subject to the PRC corporate income tax at a rate of 25% on their taxable income arising in the PRC commencing from January 1, 2008. Meanwhile, according to Rule 28 of New CIT Law, income tax of small low-profit enterprises is subject to the reduced rate of 20%. Changzhi Company as one of the Company's subsidiaries meets the conditions of small low-profit enterprises, so Changzhi Company's income tax rate of 20% in 2009.The effect of this change in tax rate has been reflected in the calculation of deferred income tax assets as of December 31, 2007 and thereafter.

The Company's provision for income taxes consists of:

	For the Nine Months Ended September 30,
	2011		2010
Current	$	220,882	$	119,244
Deferred		-		-
Total provision for income taxes	$	220,882	$	119,244

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EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2010

EARNINGS PER SHARE

EARNINGS PER SHARE

Note 18 - Earnings Per Share

The Company presents earnings per share on a basic and diluted basis. Basic earnings per share have been computed by dividing net earnings by the weighted average number of common shares outstanding. Diluted earnings per share have been computed by dividing net earnings plus convertible preferred dividends and interest expense (after-tax) on convertible debt by the weighted average number of common shares outstanding including the dilutive effect of equity securities. The weighted average number of common shares calculated for diluted EPS excludes the potential common stock that would be exercised under the options and warrants granted to officers because the inclusion of the potential shares from these options and warrants would cause an anti-dilutive effect by increasing the net earnings per share.

On February 22, 2011, the Company effectuated a 1 for 100 reverse stock split of its common stocks. All references to number of shares, except shares authorized, and to per share information in the consolidated financial statements have been adjusted to reflect the reverse stock split on a retroactive basis.

	Three Months Ended September 30,
	2011		2010
Net income attributable to CHPC	$	218,603	$	363,376
Weighted average common shares		125,000		120,000
(denominator for basic income per share)
Effect of dilutive securities		-		-
Weighted average common shares		125,000		120,000
(denominator for diluted income per share)
Basic earnings per share	$	1.75	$	3.02
Diluted earnings per share	$	1.75	$	3.02

	Nine Months Ended September 30,
	2011		2010
Net income attributable to CHPC	$	602,965	$	492,000
Weighted average common shares		125,000		120,000
(denominator for basic income per share)
Effect of dilutive securities		-		-
Weighted average common shares		125,000		120,000
(denominator for diluted income per share)
Basic earnings per share	$	4.82	$	4.10
Diluted earnings per share	$	4.82	$	4.10

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ORGANIZATION AND DESCRIPTION OF BUSINESS

9 Months Ended

Sep. 30, 2010

ORGANIZATION AND DESCRIPTION OF BUSINESS

ORGANIZATION AND DESCRIPTION OF BUSINESS

Note 1 - Organization and Description of Business

China Prosperous Clean Energy Corporation (the "Company" or "CHPC") was incorporated in the State of Nevada on March 24, 2006.  On September 30, 2008, the Company entered a share exchange agreement ("Share Exchange Agreement") under which the Company issued 5,865,000 shares of its common stock, par value $ 0.00001, to Oracular Dragon Capital Company, Ltd ("Oracular Dragon"), the sole shareholder of Origin Orbit Green Resource Company, Ltd ("Origin Orbit") in exchange for all the issued and outstanding shares of Origin Orbit (the "Share Exchange").  The Share Exchange is the final part of a series of consecutive transactions including the stock purchase transactions consummated on September 19, 2008 in which the sole shareholder of Origin Orbit purchased 4,524,231 shares of common stock of CHPC from the affiliate and non-affiliate shareholders of CHPC at a total consideration of $ 346,586 (the "Stock Purchase"). Immediately following the Share Exchange and Stock Purchase, Oracular Dragon owned 10,389,231 shares of the common stock of CHPC, representing approximately 86.6% of CHPC's total issued and outstanding share capital. As a result, the Share Exchange has been accounted for as a reverse acquisition using the purchase method of accounting, whereby Origin Orbit is deemed to be the accounting acquirer and CHPC to be the accounting acquiree. The financial statements before the date of Share Exchange are those of Origin Orbit with the results of CHPC being condensed consolidated from the date of Share Exchange. No goodwill has been recorded.

Origin Orbit is a holding company that, on April 4, 2007, acquired 100% of the capital stock of Anyang Prosperous Energy Technology Developing Co., Ltd. ("Anyang Prosperous") and Anyang Top Energy Green Resources Co., Ltd. ("Anyang Top"), both of which were organized under the laws of the People's Republic of China ("PRC").  Anyang Top does not have any subsidiary.  Anyang Prosperous has various ownership interests in a number of companies in PRC.

As a result of these share exchange transaction and acquisitions, CHPC has become the holding company of the group comprising Origin Orbit, Anyang Prosperous and Anyang Top and their subsidiaries. The Company is principally engaged in the wholesale and retail sales of compressed natural gas and liquefied petroleum gas through its subsidiaries in the People's Republic of China ("PRC" or "China").

As of September 30, 2011, details of the subsidiaries of the Company are as follows:

	Place of	Registered and	Percentage of
Subsidiaries' names	operation	paid-up capital	effective ownership	Principal activities
Origin Orbit Green Resource Company, Ltd (Origin Orbit")	British Virgin Islands	US$7,950,000	100% (a)	Holding company of the other subsidiaries
Anyang Prosperous Energy Technology Developing Co., Ltd. (Anyang Prosperous")	PRC	US$5,000,000	100% (b)	Wholesale and retail sales of compressed natural gas and liquefied petroleum gas(LPG")
Anyang Top Energy Green Resources Co., Ltd. (Anyang Top")	PRC	US$2,500,000	100% (b)	Wholesale of compressed natural gas, liquefied petroleum gas and Dimethyl Ether
Jinan Zhenyuan Green Resource Co. Ltd. (Jinan Green Resource")	PRC	RMB10,000,000	99% (c)	Sales of LPG for domestic and vehicles usage and related vehicles components

	Place of	Registered and	Percentage of
Subsidiaries' names	operation	paid-up capital	effective ownership	Principal activities
Henan Prosperous Clean Energy Corporation	PRC	RMB30,000,000	100%(c)	Investing in and constructing gas filling stations and selling compressed natural gas ("CNG"), liquefied petroleum gas ("LPG"), coal-bed methane, dimethyl ether ("DME") and methane.
Handan City Prosperous Car-used Green Resource Co. Ltd. (Handan Green Resource")	PRC	RMB750,000	98% (c)	Sales of LPG, vehicles components, and new energy research and development
Weifang Prosperous Energy Technology Development Co. Ltd. (Weifang Prosperous")	PRC	RMB10,000,000	100% (c)	Energy technology research and development, and sales vehicles components and gas equipment
Hengshui Prosperous Energy Technology Development Co. Ltd. (Hengshui Prosperous")	PRC	RMB2,000,000	100% (c)	Gas energy technology research and development
Heze Prosperous Energy Technology Development Co. Ltd. (Heze Prosperous")	PRC	RMB5,000,000	100% (c)	Construction of LPG and CNG station, and sales of vehicle components LPG and CNG
Shijiazhuang Prosperous Energy Technology Development Co. Ltd. (Shijiazhuang Prosperous")	PRC	RMB10,000,000	100% (c)	Gas energy technology research, development and advisory services, and  sales of gas energy product
Xuchang Zhenyuan Green Resource Technology Development Co. Ltd. (Xuchang Zhenyuan")	PRC	RMB10,000,000	100% (c)	Investment in natural gas business
Yantai Prosperous Energy Technology Development Co. Ltd. (Yantai Prosperous")	PRC	RMB500,000	100% (c)	Gas energy technology research and development, and sales vehicle components and gas energy equipment

	Place of	Registered and	Percentage of
Subsidiaries' names	operation	paid-up capital	effective ownership	Principal activities
Changzhi City Zhenyuan Energy Technology Development Co. Ltd (Changzhi City")	PRC	RMB4,400,000	100% (c)	Sales of crude oil, natural gas, LPG and related vehicle components, and construction of gas stations
Jiaozuo City Prosperous Energy Technology Development Co. Ltd. (Jiaozuo City")	PRC	RMB5,000,000	100% (c)	Sales of natural gas, liquefied petroleum gas and vehicle components, construction and operation of gas stations
Pingdingshan City Zhenyuan Energy Technology Developing Co. Ltd. (Pingdingshan City")	PRC	RMB5,000,000	100% (c)	Energy technology development, sales of natural gas, LPG and vehicle components, and construction and operation of gas stations
Linying Prosperous Energy Technology Development Co. Ltd. (Linyi Prosperous")	PRC	RMB10,000,000	100% (c)	Sales of natural gas and vehicle components.
Jiangsu Hengrun Clean Energy Co., Ltd. ("Jiangsu Hengrun ")	PRC	RMB20,000,000	100% (c)	Research and development of clean energy technology, promotion and application of clean energy technology.

Notes:

(a)   Held directly by CHPC.

(b)   Held indirectly by CHPC through Origin Orbit.

(c)   Held indirectly by CHPC through Origin Orbit and Anyang Prosperous.

(d)   According to the Companies Law of the PRC, at the incorporation of the investee, shareholders are only required to pay up 20% of the capital contribution requirement as a minimum and can make up the remaining payment in two years' time.

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DEFERRED INCOME TAXES

9 Months Ended

Sep. 30, 2010

DEFERRED INCOME TAXES

DEFERRED INCOME TAXES

Note 10 - Deferred Income Taxes

Deferred income tax asset of $53,764 and $52,114 as of September 30, 2011 and December 31, 2010 arose from unused tax loss carry-forwards that management considers more likely than not that it will be realized through future operations. The tax loss carry-forwards are available for offset against future taxable income over the next five years.

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DUE TO FORMER SHAREHOLDERS

9 Months Ended

Sep. 30, 2010

DUE TO FORMER SHAREHOLDERS

DUE TO FORMER SHAREHOLDERS

Note 14 - Due to Former Shareholders

Balances of due to the former shareholders are mainly a result of a series of mergers and acquisitions of the Company in 2008. As of September 30, 2011 and December 31, 2010, the outstanding balance due to the former shareholders was $1,686,228 and $1,634,509, respectively.

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Consolidated Balance Sheets (USD $)	Sep. 30, 2011	Dec. 31, 2010
Cash and cash equivalents	$ 1,346,494	$ 3,806,939
Restricted cash	3,601,315	304,540
Accounts receivable	693,205	541,809
Inventories	907,264	1,020,912
Advance payments	9,678,406	9,363,683
Loans to third parties	3,962,594	3,224,210
Dividends receivable	271,861	524,400
Other current assets	1,386,531	986,519
Total current assets	21,847,670	19,773,012
Property and equipment, net	6,220,660	4,731,838
Advance payments-non current	3,575,196	3,465,541
Deferred income taxes	53,764	52,114
Goodwill	64,360	62,386
Investment in non-consolidated entity	9,680,870	9,383,948
Other non-current assets	33,796	34,371
Total other assets	13,407,986	12,998,360
Total assets	41,476,316	37,503,210
Accounts payable and accrued expenses	434,481	1,523,027
Short-term bank loans	1,565,000	1,517,000
Trade notes payable	5,947,000	606,800
Customer advances	133,601	1,222,234
Current maturities of capital lease obligations	124,786
Due to former shareholders	1,686,228	1,634,509
Income taxes payable	122,536	178,643
Loans from third parties	17,909,204	18,873,908
Other current liabilities	1,007,467	611,054
Total current liabilities	28,930,303	26,167,175
Long- term capital lease obligations	202,576
Total liabilities	29,132,879	26,167,175
Commitments and contingencies
Common stock, $0.001 par value, 75,000,000 shares authorized,125,000 shares issued and outstanding at September 30, 2011 and December 31, 2010.	125	125
Additional paid-in capital	8,105,257	8,105,257
Retained earnings	2,704,690	2,162,039
Statutory reserve	343,432	283,119
Accumulated other comprehensive income	1,177,830	773,166
Total stockholders' equity	12,331,334	11,323,706
Noncontrolling interest	12,103	12,329
Total equity	12,343,437	11,336,035
Total liabilities and equity	$ 41,476,316	$ 37,503,210