----

----

| x | Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|---|-----------------------------------------------------------------------------------|

|  ̈ | Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
|--------|------------------------------------------------------------------------------------|

| Utah                                                          | 90-0438712                          |
|---------------------------------------------------------------|-------------------------------------|
| (State or other jurisdictionof incorporation or organization) | (I.R.S. EmployerIdentification No.) |

| No. 18 Zhong Guan Cun Dong St.Haidian DistrictBeijing, P. R. China | 100083     |
|--------------------------------------------------------------------|------------|
| (Address of principal executive offices)                           | (Zip Code) |

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

----

|      |                                                                                       | Page   |
|-----------|--------------------------------------------------------------------------------------------|--------|
| PART I -  | FINANCIAL INFORMATION                                                                      | 3      |
|      |                                                                                       |   |
| Item 1.   | Financial Statements (Unaudited)                                                           | 3      |
|      |                                                                                       |   |
|      | Notes to Financial Statements (Unaudited)                                                  | 11     |
|      |                                                                                       |   |
| Item 2.   | Management’s Discussion and Analysis of Financial Condition and Results of Operation | 41     |
|      |                                                                                       |   |
| Item 3.   | Quantitative and Qualitative Disclosures About Market Risk                                 | 47     |
|      |                                                                                       |   |
| Item 4.   | Controls and Procedures                                                                    | 47     |
|      |                                                                                       |   |
| PART II - | OTHER INFORMATION                                                                          | 48     |
|      |                                                                                       |   |
| Item 1.   | Legal Proceedings                                                                          | 48     |
|      |                                                                                       |   |
| Item 1A.  | Risk Factors                                                                               | 48     |
|      |                                                                                       |   |
| Item 2.   | Unregistered Sales of Equity Securities and Use of Proceeds                                | 48     |
|      |                                                                                       |   |
| Item 3.   | Defaults Upon Senior Securities                                                            | 48     |
|      |                                                                                       |   |
| Item 4.   | (Removed and Reserved)                                                                     | 48     |
|      |                                                                                       |   |
| Item 5.   | Other Information                                                                          | 48     |
|      |                                                                                       |   |
| Item 6.   | Exhibits                                                                                   | 48     |

----

| Content                                                 |   | Page   |
|---------------------------------------------------------|--------|--------|
|                                                    |   |   |
| Report of Independent Registered Public Accounting Firm |   | 4      |
|                                                    |   |   |
| Consolidated Balance Sheets                             |   | 5      |
|                                                    |   |   |
| Consolidated Statements of Income                       |   | 7      |
|                                                    |   |   |
| Consolidated Statements of Stockholders’ Equity   |   | 8      |
|                                                    |   |   |
| Consolidated Statements of Cash Flows                   |   | 10     |
|                                                    |   |   |
| Notes to Consolidated Financial Statements              |   | 11     |

----

| To:    | The Board of Directors and Stockholders of |
|--------|--------------------------------------------|
|   | Sino Gas International Holdings, Inc.      |

| San Mateo, California | Samuel H. Wong & Co., LLP |
|-----------------------|-------------------------------|
| May 12, 2011          | Certified Public Accountants  |

----

|                                   |   |   |   |         | 3/31/2011 |   |        | 12/31/2010 |   |
|----------------------------------------|--------|--------|--------|--------------|-----------|--------|-------------|------------|--------|
|                                   |   | Notes  |   |         |      |   |        |       |   |
| ASSETS                                 |   |   |   |         |      |   |        |       |   |
| Current Assets                         |   |   |   |         |      |   |        |       |   |
| Cash & cash equivalents            |   |   | 2(e)   |         |      | $      | 2,383,087   |       |   | $ | 3,582,330 |   |
| Notes receivable                       |   |   |   |         |      |   | 805,619     |       |   |   | 226,867 |   |
| Accounts receivable                    |   |   | 2(f),3 |    |      |   | 10,400,932  |       |   |   | 9,504,229 |   |
| Other receivables                      |   |   |   |         |      |   | 1,451,328   |       |   |   | 1,127,981 |   |
| Related party receivable               |   |   |   |         |      |   | 410,953     |       |   |   | 408,361 |   |
| Inventory                              |   |   |   |         |      |   | 691,148     |       |   |   | 482,594 |   |
| Advance to suppliers                   |   |   | 2(g)   |    |      |   | 2,523,788   |       |   |   | 3,621,147 |   |
| Prepaid expenses and taxes             |   |   |   |         |      |   | 520,083     |       |   |   | 264,481 |   |
| Total Current Assets                   |   |   |   |         |      |   | 19,186,938  |       |   |   | 19,217,990 |   |
|                                   |   |   |   |         |      |   |        |       |   |   |   |   |
| Non-Current Assets                     |   |   |   |         |      |   |        |       |   |   |   |   |
| Investment                             |   |   | 2(h),4 |         |      |   | 13,081,741  |       |   |   | 12,794,384 |   |
| Property, plant & equipment, net   |   |   | 2(j),6 |         |      |   | 51,496,930  |       |   |   | 49,928,482 |   |
| Construction in progress               |   |   | 2(m)   |         |      |   | 19,341,387  |       |   |   | 19,336,428 |   |
| Intangible assets, net                 |   |   | 2(k),8 |         |      |   | 508,553     |       |   |   | 533,730 |   |
| Goodwill                               |   |   | 2(l),7 |         |      |   | 1,677,975   |       |   |   | 1,677,975 |   |
| Deposit                                |   |   |   |         |      |   | 1,092,384   |       |   |   | 1,239,548 |   |
| Total Non-current Assets               |   |   |   |         |      |   | 87,198,970  |       |   |   | 85,510,547 |   |
|                                   |   |   |   |         |      |   |        |       |   |   |   |   |
| Total Assets                           |   |   |   |         |      | $      | 106,385,908 |       |   | $ | 104,728,537 |   |
|                                   |   |   |   |         |      |   |        |       |   |   |   |   |
| LIABILITIES & STOCKHOLDERS' EQUITY |   |   |   |         |      |   |        |       |   |   |   |   |
|                                   |   |   |   |         |      |   |        |       |   |   |   |   |
| LIABILITIES                            |   |   |   |         |      |   |        |       |   |   |   |   |
| Current Liabilities                    |   |   |   |         |      |   |        |       |   |   |   |   |
| Bank loans                             |   |   | 9      |         |      | $      | 9,436,690   |       |   | $ | 7,864,727 |   |
| Accounts payable                       |   |   |   |         |      |   | 10,974,755  |       |   |   | 11,105,790 |   |
| Other payables - current portion       |   |   | 10(a)  |         |      |   | 3,921,652   |       |   |   | 3,691,923 |   |
| Accrued liabilities                    |   |   |   |         |      |   | 114,858     |       |   |   | 1,635,217 |   |
| Unearned revenue                       |   |   | 2(n)   |         |      |   | 1,358,105   |       |   |   | 106,868 |   |
| Total Current Liabilities              |   |   |   |         |      |   | 25,806,060  |       |   |   | 24,404,525 |   |
|                                   |   |   |   |         |      |   |        |       |   |   |   |   |
| Non-current Liabilities                |   |   |   |         |      |   |        |       |   |   |   |   |
| Long-term bank loans                   |   |   | 9      |    |      |   | 3,044,094   |       |   |   | 3,024,895 |   |
| Non-current Convertible Bonds          |   |   | 11     |    |      |   | 5,803,254   |       |   |   | 5,641,117 |   |
| Other payables - non-current portion   |   |   | 10(b)  |         |      |   | 1,854,558   |       |   |   | 1,859,499 |   |
| Total Non-current Liabilities          |   |   |   |         |      |   | 10,701,906  |       |   |   | 10,525,511 |   |
|                                   |   |   |   |         |      |   |        |       |   |   |   |   |
| Total Liabilities                      |   |   |   |         |      | $      | 36,507,966  |       |   | $ | 34,930,036 |   |

----

|                                                                                                                                                  |   |   |   |   | 3/31/2011 |   |        | 12/31/2010 |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|-----------|--------|-------------|------------|--------|
|                                                                                                                                                  |   | Notes  |   |   |      |   |        |       |   |
| STOCKHOLDERS' EQUITY                                                                                                                                  |   |   |   |   |      |   |        |       |   |
|                                                                                                                                                  |   |   |   |   |      |   |        |       |   |   |   |   |
| Preferred Stock B US$0.001 par value; 5,000,000 shares authorized; 4,590,094 shares issued and outstanding as of March 31, 2011 and December 31, 2010 |   |   | 10     |   |      | $      | 4,590       |       |   | $ | 4,590 |   |
|                                                                                                                                                  |   |   |   |   |      |   |        |       |   |   |   |   |
| Additional paid in capital - Preferred Stock B                                                                                                        |   |   |   |   |      |   | 5,335,894   |       |   |   | 5,335,894 |   |
|                                                                                                                                                  |   |   |   |   |      |   |        |       |   |   |   |   |
| Preferred Stock B-1 US$0.001 par value; 3,000,000 shares authorized; 95,418 shares issued and outstanding as of March 31, 2011 and December 31, 2010  |   |   | 10     |   |      |   | 95          |       |   |   | 95 |   |
|                                                                                                                                                  |   |   |   |   |      |   |        |       |   |   |   |   |
| Additional paid in capital - Preferred Stock B-1                                                                                                      |   |   |   |   |      |   | 132,662     |       |   |   | 132,662 |   |
|                                                                                                                                                  |   |   |   |   |      |   |        |       |   |   |   |   |
| Common Stock US$0.001 par value; 250,000,000 shares authorized; 27,156,617 shares issued and outstanding as of March 31, 2011 and December 31, 2010   |   |   | 10     |   |      |   | 27,156      |       |   |   | 27,156 |   |
|                                                                                                                                                  |   |   |   |   |      |   |        |       |   |   |   |   |
| Additional paid in capital - Common Stock                                                                                                             |   |   |   |   |      |   | 23,933,033  |       |   |   | 23,933,033 |   |
|                                                                                                                                                  |   |   |   |   |      |   |        |       |   |   |   |   |
| Additional paid in capital - Warrants Series: A, B, J, C, D                                                                                           |   |   |   |   |      |   | 311,110     |       |   |   | 311,110 |   |
| Additional paid in capital - Warrants Series: E, G                                                                                                    |   |   |   |   |      |   | 47,946      |       |   |   | 47,946 |   |
| Additional paid in capital - Warrants Series: F, R                                                                                                    |   |   |   |   |      |   |        |       |   |   | - |   |
| Additional paid in capital - Convertible Bonds Detachable Warrants                                                                                    |   |   |   |   |      |   | 223,367     |       |   |   | 223,367 |   |
| Additional paid in capital - Beneficial Conversion Feature                                                                                            |   |   |   |   |      |   | 8,094,814   |       |   |   | 8,094,814 |   |
|                                                                                                                                                  |   |   |   |   |      |   |        |       |   |   |   |   |
| Statutory reserve                                                                                                                                     |   |   | 2(w)   |   |      |   | 5,428,310   |       |   |   | 4,819,762 |   |
| Retained earnings                                                                                                                                     |   |   |   |   |      |   | 17,489,154  |       |   |   | 17,977,181 |   |
| Minority Interest                                                                                                                                     |   |   |   |   |      |   | 990,534     |       |   |   | 1,004,500 |   |
| Accumulated other comprehensive income                                                                                                                |   |   | 2(x)   |   |      |   | 7,859,277   |       |   |   | 7,886,391 |   |
| Total Stockholders' Equity                                                                                                                            |   |   |   |   |      |   | 69,877,942  |       |   |   | 69,798,501 |   |
|                                                                                                                                                  |   |   |   |   |      |   |        |       |   |   |   |   |
| Total Liabilities & Stockholders' Equity                                                                                                          |   |   |   |   |      | $      | 106,385,908 |       |   | $ | 104,728,537 |   |

----

|                                                    |   |   |    |   |      |   |       |      |   |
|---------------------------------------------------------|--------|--------|---------|--------|-----------|--------|------------|-----------|--------|
|                                                    |   | Notes  |    |   | 3/31/2011 |   |       | 3/31/2010 |   |
| Sales                                                   |   |   | 2(r)    |   |      | $      | 7,986,270  |      |   | $ | 6,957,661 |   |
| Cost of revenue                                         |   |   | 2(s)    |   |      |   | 5,565,844  |      |   |   | 4,833,148 |   |
| Gross Profit                                            |   |   |    |   |      |   | 2,420,426  |      |   |   | 2,124,513 |   |
|                                                    |   |   |    |   |      |   |       |      |   |   |   |   |
| Operating Expenses                                      |   |   |    |   |      |   |       |      |   |   |   |   |
| Selling expenses                                        |   |   |    |   |      |   | 576,861    |      |   |   | 271,243 |   |
| General and administrative expenses                     |   |   |    |   |      |   | 1,235,888  |      |   |   | 906,531 |   |
| Total operating expenses                                |   |   |    |   |      |   | 1,812,749  |      |   |   | 1,177,774 |   |
|                                                    |   |   |    |   |      |   |       |      |   |   |   |   |
| Operating Income                                        |   |   |    |   |      |   | 607,677    |      |   |   | 946,739 |   |
|                                                    |   |   |    |   |      |   |       |      |   |   |   |   |
| Other Income/(Expense)                                  |   |   |    |   |      |   |       |      |   |   |   |   |
| Other income                                            |   |   |    |   |      |   | 335        |      |   |   | 5,382 |   |
| Other expense                                           |   |   |    |   |      |   | (3,963     | )         |   |   | (1,300 | ) |
| Interest income                                         |   |   |    |   |      |   | 2,066      |      |   |   | 4,770 |   |
| Interest expense                                        |   |   |    |   |      |   | (461,723   | )         |   |   | (924,841 | ) |
| Total other income/(expense)                            |   |   |    |   |      |   | (463,285   | )         |   |   | (915,989 | ) |
|                                                    |   |   |    |   |      |   |       |      |   |   |   |   |
| Earnings from continued operation                       |   |   |    |   |      |   | 144,392    |      |   |   | 30,750 |   |
|                                                    |   |   |    |   |      |   |       |      |   |   |   |   |
| Income tax                                              |   |   | 2(t),13 |   |      |   | (37,837    | )         |   |   | (239,334 | ) |
|                                                    |   |   |    |   |      |   |       |      |   |   |   |   |
| Net income                                              |   |   |    |   |      | $      | 106,555    |      |   | $ | (208,586 | ) |
|                                                    |   |   |    |   |      |   |       |      |   |   |   |   |
| Net income (loss) attributable to:                      |   |   |    |   |      |   |       |      |   |   |   |   |
| - Common stockholders                                   |   |   |    |   |      | $      | 120,521    |      |   | $ | (208,586 | ) |
| - Non-controlling interest                              |   |   |    |   |      | $      | (13,966    | )         |   |   | - |   |
|                                                    |   |   |    |   |      |   |       |      |   |   |   |   |
| Income available to common stockholders for basic EPS   |   |   |    |   |      | $      | 120,521    |      |   | $ | (208,586 | ) |
| Interest expense for convertible bonds, net of tax      |   |   |    |   |      |   | 282,996    |      |   |   | 801,216 |   |
| Income available to common stockholders for diluted EPS |   |   |    |   |      | $      | 403,517    |      |   | $ | 592,630 |   |
|                                                    |   |   |    |   |      |   |       |      |   |   |   |   |
| Earnings Per Share                                      |   |   | 2(z),15 |   |      |   |       |      |   |   |   |   |
| -   Basic                                     |   |   |    |   |      | $      | 0.004      |      |   | $ | (0.01 | ) |
| -   Diluted                                   |   |   |    |   |      | $      | 0.004      |      |   | $ | (0.01 | ) |
|                                                    |   |   |    |   |      |   |       |      |   |   |   |   |
| Weighted Average Shares Outstanding                     |   |   |    |   |      |   |       |      |   |   |   |   |
| -   Basic                                     |   |   |    |   |      |   | 27,156,617 |      |   |   | 26,769,313 |   |
| -   Diluted                                   |   |   |    |   |      |   | 27,156,617 |      |   |   | 26,769,313 |   |

----

|                                       |   | Preferred Stock B |      |   | Preferred Stock B-1 |   |   | Common Stock                |   |
|--------------------------------------------|--------|-----------------------------|-----------|--------|-------------------------------|--------|--------|----------------------------------|--------|
|                                       |   | SharesOutstanding           |      |   | Amount                        |   |   | APIC -PreferredStock B |   |   | SharesOutstanding |   |   | Amount |   |   | APIC -PreferredStock B-1 |   |   | SharesOutstanding |   |   | Amount |   |   | APIC -CommonStock |   |
| Balance at January 1, 2010                 |   |                        | 4,579,839 |   |                          |   | 4,580  |                             |   |   | 5,323,972 |   |   |   | 95,418 |   |   |   | 95 |   |   |   | 132,662 |   |   |   | 26,769,313 |   |   |   | 26,769 |   |   |   | 22,513,732 |   |
| Net Income                                 |   |                        | -         |   |                          |   | -      |                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Conversion of Preferred Stock B            |   |                        | (170,742  | )      |                          |   | (171   | )                                |   |   | (198,484 | ) |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 170,742 |   |   |   | 171 |   |   |   | 198,484 |   |
| Reversal of conversion                     |   |                        | 180,997   |   |                          |   | 181    |                             |   |   | 210,406 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (180,997 | ) |   |   | (181 | ) |   |   | (210,406 | ) |
| Conversion of Convertible Bonds            |   |                        | -         |   |                          |   | -      |                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 322,581 |   |   |   | 322 |   |   |   | 199,678 |   |
| Shares Based Compensation                  |   |                        | -         |   |                          |   | -      |                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 75,000 |   |   |   | 75 |   |   |   | 35,925 |   |
| Cancellation of Common Stock               |   |                        | -         |   |                          |   | -      |                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (22 | ) |   |   | - |   |   |   | - |   |
| Expiration of IR Firm’s Warrants     |   |                        | -         |   |                          |   | -      |                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 92,468 |   |
| Expiration of Warrants F&R             |   |                        | -         |   |                          |   | -      |                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 107,652 |   |
| Issuance of Subsidiary’s 49% Equity  |   |                        | -         |   |                          |   | -      |                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 995,500 |   |
| Appropriation of Retained Earnings         |   |                        | -         |   |                          |   | -      |                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Foreign Currency Translation Adjustment    |   |                        | -         |   |                          |   | -      |                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Balance at December 31, 2010               |   |                        | 4,590,094 |   |                          |   | 4,590  |                             |   |   | 5,335,894 |   |   |   | 95,418 |   |   |   | 95 |   |   |   | 132,662 |   |   |   | 27,156,617 |   |   |   | 27,156 |   |   |   | 23,933,033 |   |
|                                       |   |                        |      |   |                          |   |   |                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at January 1, 2011                 |   |                        | 4,590,094 |   |                          |   | 4,590  |                             |   |   | 5,335,894 |   |   |   | 95,418 |   |   |   | 95 |   |   |   | 132,662 |   |   |   | 27,156,617 |   |   |   | 27,156 |   |   |   | 23,933,033 |   |
| Net Income                                 |   |                        | -         |   |                          |   | -      |                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Appropriation of loss to minority interest |   |                        | -         |   |                          |   | -      |                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Appropriation of Retained Earnings         |   |                        | -         |   |                          |   | -      |                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Foreign Currency Translation Adjustment    |   |                        | -         |   |                          |   | -      |                             |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Balance at March 31, 2011                  |   |                        | 4,590,094 |   |                          |   | 4,590  |                             |   |   | 5,335,894 |   |   |   | 95,418 |   |   |   | 95 |   |   |   | 132,662 |   |   |   | 27,156,617 |   |   |   | 27,156 |   |   |   | 23,933,033 |   |

----

|                                       |   | Common Stock                   |    |   |                                |   |               |                                |   |   |                                  |   |   |                                   |    |   |             |   |
|--------------------------------------------|--------|-------------------------------------|---------|--------|-------------------------------------|--------|--------------------|-------------------------------------|--------|--------|---------------------------------------|--------|--------|----------------------------------------|---------|--------|------------------|--------|
|                                       |   | APIC -WarrantsSeries:A,B,J,C,D |    |   | APIC -WarrantsSeries: E,G |   |               | APIC -WarrantsSeries: F,R |   |   | APIC -ConvertibleBondsDetachable |   |   | APIC -BeneficialConversionFeature |    |   | StatutoryReserve |   |   | RetainedEarnings |   |   | MinorityInterest |   |   | AccumulatedOtherComprehensiveIncome |   |   | Total |   |
| Balance at January 1, 2010                 |   |                                | 311,110 |   |                                |   | 47,946 47,946 |                                |   |   | 107,652                               |   |   |                                   | 223,367 |   |             |   | 8,094,814 |   |   |   | 4,612,191 |   |   |   | 14,143,089 |   |   |   | - |   |   |   | 7,725,883 |   |   |   | 63,267,862 |   |
| Net Income                                 |   |                                | -       |   |                                |   | -                  |                                |   |   | -                                     |   |   |                                   | -       |   |             |   | - |   |   |   | - |   |   |   | 4,041,663 |   |   |   | - |   |   |   | - |   |   |   | 4,041,663 |   |
| Conversion of Preferred Stock B            |   |                                | -       |   |                                |   | -                  |                                |   |   | -                                     |   |   |                                   | -       |   |             |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Reversal of Common Stock                   |   |                                | -       |   |                                |   | -                  |                                |   |   | -                                     |   |   |                                   | -       |   |             |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Conversion of Convertible Bonds            |   |                                | -       |   |                                |   | -                  |                                |   |   | -                                     |   |   |                                   | -       |   |             |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 200,000 |   |
| Shares Based Compensation                  |   |                                | -       |   |                                |   | -                  |                                |   |   | -                                     |   |   |                                   | -       |   |             |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 36,000 |   |
| Cancellation of Common Stock               |   |                                | -       |   |                                |   | -                  |                                |   |   | -                                     |   |   |                                   | -       |   |             |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Expiration of IR Firm’s Warrants     |   |                                | -       |   |                                |   | -                  |                                |   |   | -                                     |   |   |                                   | -       |   |             |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 92,468 |   |
| Expiration of Warrants F&R             |   |                                | -       |   |                                |   | -                  |                                |   |   | (107,652                              | )      |   |                                   | -       |   |             |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Issuance of Subsidiary’s 49% Equity  |   |                                | -       |   |                                |   | -                  |                                |   |   | -                                     |   |   |                                   | -       |   |             |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,004,500 |   |   |   | - |   |   |   | 2,000,000 |   |
| Appropriation of Retained Earnings         |   |                                | -       |   |                                |   | -                  |                                |   |   | -                                     |   |   |                                   | -       |   |             |   | - |   |   |   | 207,571 |   |   |   | (207,571 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Foreign Currency Translation Adjustment    |   |                                | -       |   |                                |   | -                  |                                |   |   | -                                     |   |   |                                   | -       |   |             |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 160,508 |   |   |   | 160,508 |   |
| Balance at December 31, 2010               |   |                                | 311,110 |   |                                |   | 47,946             |                                |   |   | -                                     |   |   |                                   | 223,367 |   |             |   | 8,094,814 |   |   |   | 4,819,762 |   |   |   | 17,977,181 |   |   |   | 1,004,500 |   |   |   | 7,886,391 |   |   |   | 69,798,501 |   |
|                                       |   |                                |    |   |                                |   |               |                                |   |   |                                  |   |   |                                   |    |   |             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance at January 1, 2011                 |   |                                | 311,110 |   |                                |   | 47,946             |                                |   |   | -                                     |   |   |                                   | 223,367 |   |             |   | 8,094,814 |   |   |   | 4,819,762 |   |   |   | 17,977,181 |   |   |   | 1,004,500 |   |   |   | 7,886,391 |   |   |   | 69,798,501 |   |
| Net Income                                 |   |                                | -       |   |                                |   | -                  |                                |   |   | -                                     |   |   |                                   | -       |   |             |   | - |   |   |   | - |   |   |   | 106,555 |   |   |   | - |   |   |   | - |   |   |   | 106,555 |   |
| Appropriation of loss to minority interest |   |                                | -       |   |                                |   | -                  |                                |   |   | -                                     |   |   |                                   | -       |   |             |   | - |   |   |   | - |   |   |   | 13,966 |   |   |   | (13,966 | ) |   |   | - |   |   |   | - |   |
| Appropriation of Retained Earnings         |   |                                | -       |   |                                |   | -                  |                                |   |   | -                                     |   |   |                                   | -       |   |             |   | - |   |   |   | 608,548 |   |   |   | (608,548 | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Foreign Currency Translation Adjustment    |   |                                | -       |   |                                |   | -                  |                                |   |   | -                                     |   |   |                                   | -       |   |             |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (27,114 | ) |   |   | (27,114 | ) |
| Balance at March 31, 2011                  |   |                                | 311,110 |   |                                |   | 47,946             |                                |   |   | -                                     |   |   |                                   | 223,367 |   |             |   | 8,094,814 |   |   |   | 5,428,310 |   |   |   | 17,489,154 |   |   |   | 990,534 |   |   |   | 7,859,277 |   |   |   | 69,877,942 |   |

|                                    |   | 12/31/2010 |      |   | 3/31/2011 |   |    | Total  |   |
|-----------------------------------------|--------|------------|-----------|--------|-----------|--------|---------|--------|--------|
| Comprehensive Income               |   |       |      |   |      |   |    |   |   |   |   |   |
| Net Income                              |   | $          | 4,041,663 |   |      | $      | 106,555 |   |   | $ | 4,148,218 |   |
| Other Comprehensive Income              |   |       |      |   |      |   |    |   |   |   |   |   |
| Foreign Currency Translation Adjustment |   |       | 160,508   |   |      |   | (27,114 | )      |   |   | 133,394 |   |
| Total                                   |   | $          | 4,202,171 |   |      | $      | 79,441  |   |   | $ | 4,281,612 |   |

----

|                                                             |   | 3/31/2011 |       |   | 3/31/2010 |   |
|------------------------------------------------------------------|--------|-----------|------------|--------|-----------|--------|
| Cash Flows from Operating Activities                             |   |      |       |   |      |   |
| Net Income                                                       |   | $         | 106,555    |   |      | $      | (208,586 | ) |
| Adjustments to reconcile net income to net cash from operations: |   |      |       |   |      |   |   |   |
| Bad debt provision                                               |   |      | 9,058      |   |      |   | - |   |
| Depreciation expense                                             |   |      | 357,210    |   |      |   | 338,917 |   |
| Amortization expense of intangible assets                        |   |      | 26,627     |   |      |   | 7,427 |   |
| Amortization expense of convertible bonds                        |   |      | 162,137    |   |      |   | 680,356 |   |
| Changes in operating assets and liabilities:                     |   |      |       |   |      |   |   |   |
| Withdraw/(deposit) in restricted time deposits                   |   |      | -          |   |      |   | 30,975 |   |
| Decrease/(increase) in accounts and other receivables            |   |      | (1,807,859 | )      |      |   | (1,351,982 | ) |
| Decrease/(increase) in inventory                                 |   |      | (208,554   | )      |      |   | (159,177 | ) |
| Decrease/(increase) in prepayments                               |   |      | 841,757    |   |      |   | 742,620 |   |
| Decrease/(increase) in related party receivable                  |   |      | (2,592     | )      |      |   | - |   |
| Increase/(decrease) in accounts and other payables               |   |      | (175,372   | )      |      |   | (3,005,004 | ) |
| Cash Sourced/(Used) in Operating Activities                      |   |      | (691,033   | )      |      |   | (2,924,453 | ) |
|                                                             |   |      |       |   |      |   |   |   |
| Cash Flows from Investing Activities                             |   |      |       |   |      |   |   |   |
| Decrease in deposit                                              |   |      | 147,165    |   |      |   | - |   |
| Increase of investment in equity                                 |   |      | (287,357   | )      |      |   | (1,131 | ) |
| Purchase of property, plant & equipment                      |   |      | (1,925,658 | )      |      |   | (1,590,308 | ) |
| Purchase of intangible assets                                    |   |      | (1,450     | )      |      |   | (158 | ) |
| Decrease/(increase) in construction in progress                  |   |      | (4,959     | )      |      |   | (14,924 | ) |
| Cash Sourced/(Used) in Investing Activities                      |   |      | (2,072,259 | )      |      |   | (1,606,521 | ) |
|                                                             |   |      |       |   |      |   |   |   |
| Cash Flows from Financing Activities                             |   |      |       |   |      |   |   |   |
| Proceeds/(settlement) of bank loans                              |   |      | 1,591,163  |   |      |   | 2,195,293 |   |
| Cash Sourced/(Used) in Financing Activities                      |   |      | 1,591,163  |   |      |   | 2,195,293 |   |
|                                                             |   |      |       |   |      |   |   |   |
| Net increase in cash & cash equivalents for the periods      |   |      | (1,172,129 | )      |      |   | (2,335,681 | ) |
|                                                             |   |      |       |   |      |   |   |   |
| Effect of currency translation                                   |   |      | (27,114    | )      |      |   | 20,404 |   |
|                                                             |   |      |       |   |      |   |   |   |
| Cash & cash equivalents at the beginning of periods          |   |      | 3,582,330  |   |      |   | 9,820,890 |   |
|                                                             |   |      |       |   |      |   |   |   |
| Cash & cash equivalents at the end of periods                |   | $         | 2,383,087  |   |      | $      | 7,505,613 |   |
|                                                             |   |      |       |   |      |   |   |   |
| Supplementary cash flows information                             |   |      |       |   |      |   |   |   |
| Interest received                                                |   | $         | 2,066      |   |      | $      | 4,770 |   |
| Interest paid                                                    |   | $         | 299,081    |   |      | $      | 245,814 |   |
| Income tax paid                                                  |   | $         | 492,832    |   |      | $      | 239,335 |   |

----

| 1. | ORGANIZATION AND PRINCIPAL ACTIVITIES |
|----|---------------------------------------|

----

| 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|----|--------------------------------------------|

----

| Name of Company             |   | Place ofIncorporation |   | Date ofIncorporation |   | BeneficiaryInterest % |   |   | EquityInterest % |   |  RegisteredCapital |
|---------------------------------------|--------|----------------------------|--------|---------------------------|--------|----------------------------|--------|--------|-----------------------|--------|-------------------------|
| GAS Investment China Co., Ltd.        |   | The British Virgin Islands |   | 6/19/2003                 |   |                       | 100    |   |                  |   | 100                     |   | USD 10,000,000 |
|                                  |   |                       |   |                      |   |                       |   |   |                  |   |                    |   |   |
| Sino Gas Construction, Ltd.           |   | The British Virgin Islands |   | 1/9/2007                  |   |                       | 51     |   |                  |   | 51                      |   | USD  98,039 |
|                                  |   |                       |   |                      |   |                       |   |   |                  |   |                    |   |   |
| Sino Gas Investment Development, Ltd. |   | The British Virgin Islands |   | 1/9/2007                  |   |                       | 100    |   |                  |   | 100                     |   |  USD 50,000 |
|                                  |   |                       |   |                      |   |                       |   |   |                  |   |                    |   |   |
| Beijing Zhong Ran Weiye Gas Co., Ltd. |   | PRC                        |   | 8/29/2001                 |   |                       | 100    |   |                  |   | 100                     |   |  RMB 206,000,000 |
|                                  |   |                       |   |                      |   |                       |   |   |                  |   |                    |   |   |
| Beijing Chenguang Gas Co., Ltd.       |   | PRC                        |   | 10/30/2002                |   |                       | 100    |   |                  |   | 100                     |   |  RMB 35,239,600 |
|                                  |   |                       |   |                      |   |                       |   |   |                  |   |                    |   |   |
| Guannan Weiye Gas Co., Ltd.           |   | PRC                        |   | 6/19/2003                 |   |                       | 100    |   |                  |   | 100                     |   | RMB 9,510,000 |
|                                  |   |                       |   |                      |   |                       |   |   |                  |   |                    |   |   |
| Ningjin Weiye Gas Co., Ltd            |   | PRC                        |   | 12/3/2003                 |   |                       | 100    |   |                  |   | 95                      |   |   RMB 3,000,000 |
|                                  |   |                       |   |                      |   |                       |   |   |                  |   |                    |   |   |
| Yutian Zhongran Weiye Gas Co., Ltd.   |   | PRC                        |   | 12/19/2003                |   |                       | 100    |   |                  |   | 90                      |   |   RMB 3,000,000 |
|                                  |   |                       |   |                      |   |                       |   |   |                  |   |                    |   |   |
| Xingtang Weiye Gas Co., Ltd.          |   | PRC                        |   | 2/18/2004                 |   |                       | 100    |   |                  |   | 95                      |   |  RMB 3,000,000 |
|                                  |   |                       |   |                      |   |                       |   |   |                  |   |                    |   |   |
| Wuqiao Gas Co., Ltd.                  |   | PRC                        |   | 6/30/2004                 |   |                       | 100    |   |                  |   | 95                      |   |  RMB 2,000,000 |
|                                  |   |                       |   |                      |   |                       |   |   |                  |   |                    |   |   |
| Jinzhou Weiye Gas Co., Ltd.           |   | PRC                        |   | 7/19/2004                 |   |                       | 100    |   |                  |   | 95                      |   |  RMB 13,659,877 |

----

| Sihong Weiye Gas Co., Ltd.                              |   | PRC    |   | 12/3/2004  |   |   | 100    |   |   |   | 95     |   | RMB 10,000,000 |
|---------------------------------------------------------|--------|--------|--------|------------|--------|--------|--------|--------|--------|--------|--------|--------|---------------------|
|                                                    |   |   |   |       |   |   |   |   |   |   |   |   |                |
| Sishui Weiye Gas Co., Ltd.                              |   | PRC    |   | 12/22/2004 |   |   | 100    |   |   |   | 95     |   | RMB 3,000,000  |
|                                                    |   |   |   |       |   |   |   |   |   |   |   |   |                |
| Langfang Weiye Dangerous Goods Transportation Co., Ltd. |   | PRC    |   | 3/22/2005  |   |   | 100    |   |   |   | 95     |   | RMB 1,000,000  |
|                                                    |   |   |   |       |   |   |   |   |   |   |   |   |                |
| Linzhang Weiye Gas Co., Ltd.                            |   | PRC    |   | 7/6/2005   |   |   | 100    |   |   |   | 85     |   | RMB 1,000,000  |
|                                                    |   |   |   |       |   |   |   |   |   |   |   |   |                |
| Peixian Weiye Gas Co., Ltd.                             |   | PRC    |   | 8/22/2005  |   |   | 100    |   |   |   | 90     |   | RMB 45,694,900 |
|                                                    |   |   |   |       |   |   |   |   |   |   |   |   |                |
| Zhangjiakou City Xiahuayuan Jinli Gas Co., Ltd.         |   | PRC    |   | 9/30/2005  |   |   | 100    |   |   |   | 100    |   | RMB 2,000,000  |
|                                                    |   |   |   |       |   |   |   |   |   |   |   |   |                |
| Longyao Zhongran Weiye Gas Co., Ltd.                    |   | PRC    |   | 10/13/2005 |   |   | 100    |   |   |   | 95     |   | RMB 3,000,000  |
|                                                    |   |   |   |       |   |   |   |   |   |   |   |   |                |
| Yuxian Jinli Gas Co., Ltd.                              |   | PRC    |   | 11/8/2005  |   |   | 100    |   |   |   | 100    |   | RMB 9,500,000  |
|                                                    |   |   |   |       |   |   |   |   |   |   |   |   |                |
| Hengshui Weiye Gas Co., Ltd.                            |   | PRC    |   | 12/20/2005 |   |   | 100    |   |   |   | 100    |   | RMB 3,000,000  |
|                                                    |   |   |   |       |   |   |   |   |   |   |   |   |                |
| Shenzhou Weiye Gas Co., Ltd.                            |   | PRC    |   | 12/23/2005 |   |   | 100    |   |   |   | 95     |   | RMB 6,638,035  |
|                                                    |   |   |   |       |   |   |   |   |   |   |   |   |                |
| Changli Weiye Gas Co., Ltd.                             |   | PRC    |   | 12/8/2006  |   |   | 100    |   |   |   | 100    |   | RMB 3,000,000  |
|                                                    |   |   |   |       |   |   |   |   |   |   |   |   |                |
| Chenan Chenguang Gas Co., Ltd                           |   | PRC    |   | 1/23/2007  |   |   | 100    |   |   |   | 100    |   | RMB 1,500,000  |
|                                                    |   |   |   |       |   |   |   |   |   |   |   |   |                |
| Wuhe Weiye Gas Co., Ltd.                                |   | PRC    |   | 1/30/2007  |   |   | 100    |   |   |   | 100    |   | RMB 3,000,000  |
|                                                    |   |   |   |       |   |   |   |   |   |   |   |   |                |
| Xinji Zhongchen Gas Co., Ltd                            |   | PRC    |   | 2/7/2007   |   |   | 100    |   |   |   | 100    |   | RMB 3,000,000  |
|                                                    |   |   |   |       |   |   |   |   |   |   |   |   |                |
| Gucheng Weiye Gas Co., Ltd.                             |   | PRC    |   | 3/21/2007  |   |   | 100    |   |   |   | 100    |   | RMB 3,000,000  |

----

| Luquan Chenguang Gas Co., Ltd.       |   | PRC    |   | 4/27/2007  |   |   | 100    |   |   |   | 100    |   | RMB 2,000,000        |
|--------------------------------------|--------|--------|--------|------------|--------|--------|--------|--------|--------|--------|--------|--------|---------------------------|
|                                 |   |   |   |       |   |   |   |   |   |   |   |   |                      |
| Shijiazhuang Chenguang Gas Co., Ltd. |   | PRC    |   | 6/14/2007  |   |   | 100    |   |   |   | 100    |   | RMB 2,000,000        |
|                                 |   |   |   |       |   |   |   |   |   |   |   |   |                      |
| Nangong Weiye Gas Co., Ltd.          |   | PRC    |   | 6/25/2007  |   |   | 100    |   |   |   | 100    |   |  RMB 3,000,000       |
|                                 |   |   |   |       |   |   |   |   |   |   |   |   |                      |
| Sixian Weiye Gas Co., Ltd.           |   | PRC    |   | 9/3/2007   |   |   | 100    |   |   |   | 100    |   |  RMB 3,000,000       |
|                                 |   |   |   |       |   |   |   |   |   |   |   |   |                      |
| Baishan Weiye Gas Co., Ltd.          |   | PRC    |   | 7/13/2007  |   |   | 100    |   |   |   | 100    |   |  RMB 15,000,000 |
|                                 |   |   |   |       |   |   |   |   |   |   |   |   |                      |
| Xinhe Weiye Gas Co., Ltd.            |   | PRC    |   | 7/2/2009   |   |   | 100    |   |   |   | 100    |   |  RMB 300,000         |
|                                 |   |   |   |       |   |   |   |   |   |   |   |   |                      |
| Hebei Weiye Gas (Group) Co., Ltd.    |   | PRC    |   | 12/18/2009 |   |   | 100    |   |   |   | 100    |   |  RMB 75,439,270      |
|                                 |   |   |   |       |   |   |   |   |   |   |   |   |                      |
| Gaocheng Weiye Gas Co., Ltd.         |   | PRC    |   | 1/27/2010  |   |   | 100    |   |   |   | 100    |   |  RMB 200,000         |

----

----

| Assets Class                                  |   | Estimated Useful Life |
|-----------------------------------------------|--------|-----------------------|
| Gas Pipelines (Up to December 31, 2007)       |   | 25 years              |
| Gas Pipelines (Starting from January 1, 2008) |   | 50 years              |
| Buildings                                     |   | 25 years              |
| Leasehold Improvements                        |   | 25 years              |
| Machinery & Equipment                     |   | 20 years              |
| Motor Vehicles                                |   | 10 years              |
| Office Equipment                              |   | 8 years               |

| Asset Class         |   | Estimated Useful Life |
|---------------------|--------|-----------------------|
| Land use rights     |   | 20 - 50 years         |
| Franchises          |   | 30 years              |
| Accounting software |   | 3 years               |

----

|                                   |   | 3/31/2011 |   |   | 12/31/2010 |   |
|----------------------------------------|--------|-----------|--------|--------|------------|--------|
|                                   |
| Years end RMB : US$ exchange rate      |   |      | 6.5701 |   |       |   | 6.6118 |   |
| Average yearly RMB : US$ exchange rate |   |      | 6.5894 |   |       |   | 6.7788 |   |

----

----

|   | · | All of the operating companies are located in the PRC; and GAS Investment China Co., Ltd., Sino Gas Construction, Ltd., and Sino Gas Investment Development, Ltd. are located in the British Virgin Islands. All of these entities are subject to the relevant tax laws and regulations of the PRC, and the British Virgin Islands in which the related entity domiciled. The maximum tax rates of the subsidiaries pursuant to the countries in which they domicile are: |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Subsidiary                                                            |   | Country of Domicile |   | Income Tax Rate |   |
|-----------------------------------------------------------------------|--------|---------------------|--------|-----------------|--------|
| PRC Operating Companies (per Note 2. (d) Principals of Consolidation) |   | PRC                 |   |            | 25.0   | % |
|                                                                  |   |                |   |            |   |   |
| i.    GAS Investment China Co., Ltd.                   |   | BVI                 |   |            | 0.00   | % |
| ii.   Sino Gas Construction, Ltd.                           |   | BVI                 |   |            | 0.00   | % |
| iii.  Sino Gas Investment Development, Ltd.                 |   | BVI                 |   |            | 0.00   | % |

|   | · | Effective January 1, 2008, PRC government implements a new 25% tax rate for all enterprises regardless of whether domestic or foreign enterprise without any tax holiday, which is defined as "two-year exemption followed by three-year half exemption" hitherto enjoyed by tax payers. As a result of the new tax law, standard 15% tax rate preference terminated as of December 31, 2007. However, PRC government has established a set of transition rules to allow enterprises already started tax holidays before January 1, 2008, to continue enjoying the tax holidays until being fully utilized. |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Since Sino Gas International Holdings, Inc. is primarily a holding company without any business activities in the United States, the Company shall not be subject to United States income tax for the three months ended March 31, 2011. |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Concentration of Credit Risk |
|--------|--------|------------------------------|

|   | · | Environmental risks |
|--------|--------|---------------------|

----

|   | · | Inflation Risk |
|--------|--------|----------------|

|   | i. | Making up cumulative prior years' losses, if any; |
|--------|----|---------------------------------------------------|

|   | ii. | Allocations to the "Statutory reserve" of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital; |
|--------|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | iii. | Allocations to the discretionary surplus reserve, if approved in the shareholders' general meeting. |
|--------|------|-----------------------------------------------------------------------------------------------------|

----

| 3. | ACCOUNTS RECEIVABLE |
|----|---------------------|

|                      |   | 3/31/2011 |       |   | 12/31/2010 |   |
|---------------------------|--------|-----------|------------|--------|------------|--------|
| Gross accounts receivable |   | $         | 10,505,992 |   |       | $      | 9,600,231 |   |
| Allowance for bad debt    |   |      | (105,060   | )      |       |   | (96,002 | ) |
| Net accounts receivable   |   | $         | 10,400,932 |   |       | $      | 9,504,229 |   |

|                          |   | 3/31/2011 |     |   | 12/31/2010 |   |
|-------------------------------|--------|-----------|----------|--------|------------|--------|
| Beginning balance             |   | $         | (96,002  | )      |       | $      | (50,875 | ) |
| Addition                      |   |      | (9,058   | )      |       |   | (45,127 | ) |
| Written-off against allowance |   |      | -        |   |       |   | - |   |
| Reversal                      |   |      | -        |   |       |   | - |   |
| Ending balance                |   | $         | (105,060 | )      |       | $      | (96,002 | ) |

----

|         |   | 3/31/2011 |       |   | 12/31/2010 |   |
|--------------|--------|-----------|------------|--------|------------|--------|
| <30 Days  |   | $         | 2,988,383  |   |       | $      | 4,894,088 |   |
| 30-60 Days   |   |      | 1,977,513  |   |       |   | 1,050,245 |   |
| 60-90 Days   |   |      | 1,740,247  |   |       |   | 111,355 |   |
| 90-180 Days  |   |      | 1,227,601  |   |       |   | 2,265,088 |   |
| 180-360 Days |   |      | 1,578,371  |   |       |   | 230,684 |   |
| >360 Days |   |      | 993,877    |   |       |   | 1,048,771 |   |
| Total        |   | $         | 10,505,992 |   |       | $      | 9,600,231 |   |

| Hebei Zhonggang Steel Co., Ltd.                         |   | $      | 863,056   |   |
|---------------------------------------------------------|--------|--------|-----------|--------|
| Jiangsu Zhonghuang Real Estate Co., Ltd                 |   |   | 693,759   |   |
| Baishan Huixin Real Estate Co., Ltd                     |   |   | 652,685   |   |
| Lianyun Port Zhaolong Home Development Co., Ltd.        |   |   | 617,215   |   |
| Baishan Xingda Real Estate Co., Ltd.                    |   |   | 454,155   |   |
| Hebei Dihua Longzhou New Town Development Co., Ltd.     |   |   | 449,116   |   |
| Qinwan Island Yongsheng Qiangwang Real Estate Co., Ltd. |   |   | 405,735   |   |
| Changli Golden Coast Real Estate Co., Ltd.              |   |   | 384,045   |   |
| Baishan Yongsheng Real Estate Co., Ltd.                 |   |   | 380,744   |   |
| Jiangshu Zhengzhong Zhiye Co., Ltd.                     |   |   | 282,930   |   |
|                                                    |   | $      | 5,183,440 |   |

| 4. | RELATED PARTY RECEIVABLE |
|----|--------------------------|

----

| 5. | INVESTMENT |
|----|------------|

| Ref.   |                                                  |   | 3/31/2011 |       |   | 12/31/2010 |   |
|--------|-------------------------------------------------------|--------|-----------|------------|--------|------------|--------|
| (1)    | Beijing Zhongran Xiangke Oil Gas Technology Co., Ltd. |   | $         | 6,092,654  |   |       | $      | 6,054,228 |   |
| (2)    | Qujing City Fuel Gas Co., Ltd.                        |   |      | 3,490,726  |   |       |   | 3,490,726 |   |
| (3)    | Tongshan Hengxin Jiaye Gas Co., Ltd.                  |   |      | 3,467,920  |   |       |   | 3,219,181 |   |
| (4)    | China Construction Bank                               |   |      | 30,441     |   |       |   | 30,249 |   |
|   | Total                                                 |   | $         | 13,081,741 |   |       | $      | 12,794,384 |   |

|   | (1). | The Company through its wholly owned subsidiary Beijing Gas invested $1,642,152 (RMB 13,465,648) on Xiangke Oil Gas in the acquisition of 40% equity position. The $6,092,654 investment as of March 31, 2011 consisted of principal and accumulated post-acquisition investment income attributed to Xiangke Oil Gas’ operation results. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Beijing Zhongran Xiangke Oil Gas Technology Co., Ltd. |   |
|------------------------------------------------------------------------------------------|--------|
| Condensed Balance Sheets                                                       |   | Condensed Statements of Income |   |
|                                                                                     |   | 12/31/2010 |   |   |   | 12/31/2010 |   |
| Assets                                                                                   |   |   |   |   |   |   |   |   |   |
| Current assets                                                                           |   | $ | 11,185,589 |   | Revenue |   | $ | 15,534,241 |   |
| Non-current assets                                                                       |   |   | 20,708,416 |   | Cost of revenue |   |   | 10,946,208 |   |
|   Total assets                                                                 |   |   | 31,894,004 |   |    Gross profit |   |   | 4,588,033 |   |
|                                                                                     |   |   |   |   |   |   |   |   |   |
| Liabilities                                                                              |   |   |   |   | Operating expenses |   |   | 2,404,563 |   |
| Current liabilities                                                                      |   |   | 12,667,599 |   |    Operating income |   |   | 2,183,470 |   |
| Non-current liabilities                                                                  |   |   | 4,537,342 |   | Other income/(expenses) |   |   | (357,745 | ) |
|   Total liabilities                                                            |   |   | 17,204,941 |   |    Earnings before tax |   |   | 1,825,725 |   |
|                                                                                     |   |   |   |   |   |   |   |   |   |
| Net Assets                                                                               |   |   | 14,689,063 |   | Income tax |   |   | (404,846 | ) |
|                                                                                     |   |   |   |   |   |   |   |   |   |
| Total Liabilities & Net Assets                                                       |   | $ | 31,894,004 |   | Net income |   | $ | 1,420,879 |   |

|   | (2). | Along with two local partners in Qujing city, the second largest city in Yunnan province of P.R.C, Beijing Gas established Qujing City Fuel Gas Co., Ltd. with registered capital of $4,387,761 (RMB 30,000,000). Beijing Gas’ original investment of $1,746,764 (RMB 11,700,000) presented 39% equity ownership of Qujing Gas. |
|--------|------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| Qujing City Fuel Gas Co., Ltd. |   |
|---------------------------------------------------------|--------|
| Condensed Balance Sheets                      |   | Condensed Statements of Income |   |
|                                                    |   | 12/31/2010 |   |   |   | 12/31/2010 |   |
| Assets                                                  |   |   |   |   |   |   |   |   |   |
| Current assets                                          |   | $ | 17,792,452 |   | Revenue |   | $ | 4,529,481 |   |
| Non-current assets                                      |   |   | 9,846,526 |   | Cost of revenue |   |   | 3,548,119 |   |
|   Total assets                                |   |   | 27,638,978 |   |    Gross profit |   |   | 981,362 |   |
|                                                    |   |   |   |   |   |   |   |   |   |
| Liabilities                                             |   |   |   |   | Operating expenses |   |   | 149,119 |   |
| Current liabilities                                     |   |   | 10,617,997 |   |    Operating income |   |   | 832,243 |   |
| Non-current liabilities                                 |   |   | 11,343,356 |   | Other income/(expenses) |   |   | 5 |   |
|   Total liabilities                           |   |   | 21,961,353 |   |    Earnings before tax |   |   | 832,248 |   |
|                                                    |   |   |   |   |   |   |   |   |   |
| Net Assets                                              |   |   | 5,677,625 |   | Income tax |   |   | 236,369 |   |
|                                                    |   |   |   |   |   |   |   |   |   |
| Total Liabilities & Net Assets                      |   | $ | 27,638,978 |   | Net income |   | $ | 595,880 |   |

|   | (3). | On April 23, 2008, Beijing Gas entered into an agreement to acquire 100% equity interest in Tongshan Hengxin Jiaye Natural Gas Co., Ltd. (“Tongshan Gas”), for a purchase price of $4,660,000 (RMB 32,600,000). Tongshan is a regional natural gas distributor and developer of natural gas distribution networks in Jiangsu province of PRC. As of March 31, 2011, the Company has not finished the registration of equity transfer with Tongshan City Industrial and Commercial Administration. Therefore, acquisition payments of $3,467,920 for Tongshan Gas was classified as investment as of date. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4). | The investment of $30,441 (RMB 200,000) with China Construction Bank was a long-term investment fund. |
|--------|------|-------------------------------------------------------------------------------------------------------|

----

| 6. | PROPERTY,PLANT AND EQUIPMENT |
|----|------------------------------|

| 3/31/2011                 |   | At Cost |       |   | AccumulatedDepreciation |   |      | Net    |   |
|---------------------------|--------|--------------|------------|--------|-------------------------|--------|-----------|--------|--------|
| Gas Pipelines             |   | $            | 45,797,055 |   |                    | $      | 2,709,858 |   |   | $ | 43,087,197 |   |
| Motor Vehicles            |   |         | 6,271,808  |   |                    |   | 1,974,331 |   |   |   | 4,297,477 |   |
| Machinery & Equipment |   |         | 1,658,907  |   |                    |   | 368,091   |   |   |   | 1,290,816 |   |
| Buildings                 |   |         | 2,718,269  |   |                    |   | 351,861   |   |   |   | 2,366,408 |   |
| Leasehold Improvements    |   |         | 388,386    |   |                    |   | 70,405    |   |   |   | 317,981 |   |
| Office Equipment          |   |         | 261,362    |   |                    |   | 124,311   |   |   |   | 137,051 |   |
| Total                     |   | $            | 57,059,787 |   |                    | $      | 5,598,857 |   |   | $ | 51,496,930 |   |

| 12/31/2010                |   | At Cost |       |   | AccumulatedDepreciation |   |      | Net    |   |
|---------------------------|--------|--------------|------------|--------|-------------------------|--------|-----------|--------|--------|
| Gas Pipelines             |   | $            | 44,512,342 |   |                    | $      | 2,563,156 |   |   | $ | 41,949,186 |   |
| Motor Vehicles            |   |         | 6,067,524  |   |                    |   | 1,873,107 |   |   |   | 4,194,417 |   |
| Machinery & Equipment |   |         | 1,542,016  |   |                    |   | 347,088   |   |   |   | 1,194,928 |   |
| Buildings                 |   |         | 2,316,729  |   |                    |   | 271,630   |   |   |   | 2,045,099 |   |
| Leasehold Improvements    |   |         | 475,099    |   |                    |   | 69,242    |   |   |   | 405,857 |   |
| Office Equipment          |   |         | 256,419    |   |                    |   | 117,424   |   |   |   | 138,995 |   |
| Total                     |   | $            | 55,170,129 |   |                    | $      | 5,241,647 |   |   | $ | 49,928,482 |   |

| 7. | GOODWILL |
|----|----------|

|           |   | 3/31/2011 |      |   | 12/31/2010 |   |
|----------------|--------|-----------|-----------|--------|------------|--------|
| Yuxian Gas     |   | $         | 10,954    |   |       | $      | 10,954 |   |
| Guannan Gas    |   |      | 409,963   |   |       |   | 409,963 |   |
| Chengguang Gas |   |      | 1,257,058 |   |       |   | 1,257,058 |   |
|           |   | $         | 1,677,975 |   |       | $      | 1,677,975 |   |

----

| 8. | INTANGIBLE ASSETS |
|----|-------------------|

| 3/31/2011           |   | At Cost |      |   | AccumulatedAmortization |   |    | Net    |   |
|---------------------|--------|--------------|-----------|--------|-------------------------|--------|---------|--------|--------|
| Land Use rights     |   | $            | 564,505   |   |                    | $      | 122,809 |   |   | $ | 441,696 |   |
| Franchises          |   |         | 418,563   |   |                    |   | 388,439 |   |   |   | 30,124 |   |
| Accounting Software |   |         | 91,888    |   |                    |   | 55,155  |   |   |   | 36,733 |   |
|                |   | $            | 1,074,956 |   |                    | $      | 566,403 |   |   | $ | 508,553 |   |

| 12/31/2010          |   | At Cost |      |   | AccumulatedAmortization |   |    | Net    |   |
|---------------------|--------|--------------|-----------|--------|-------------------------|--------|---------|--------|--------|
| Land Use Rights     |   | $            | 559,082   |   |                    | $      | 69,649  |   |   | $ | 489,433 |   |
| Franchises          |   |         | 405,214   |   |                    |   | 372,035 |   |   |   | 33,179 |   |
| Accounting Software |   |         | 39,334    |   |                    |   | 28,216  |   |   |   | 11,118 |   |
|                |   | $            | 1,003,630 |   |                    | $      | 469,900 |   |   | $ | 533,730 |   |

| 9. | LOANS |
|----|-------|

| Name of Bank                               |   | Due Date |   | InterestRate |   |   | 3/31/2011 |   |      | 12/31/2010 |   |
|------------------------------------------------------|--------|---------------|--------|--------------|--------|--------|-----------|--------|-----------|------------|--------|
| China Minsheng Banking Corp., Ltd. - Pinganli Branch |   | 11/15/2011    |   |         | 6.67   | %      |      | $      | 1,065,433 |       |   | $ | 1,058,713 |   |
| Bank of Dalian - Beijing Branch                      |   | 12/14/2011    |   |         | 4.63   | %      |      |   | 4,566,141 |       |   |   | 4,537,343 |   |
| Bank of Communications - Zhongguancun Branch         |   | 12/14/2011    |   |         | 5.94   | %      |      |   | 2,283,070 |       |   |   | 2,268,671 |   |
| Bank of China – Huanghe Boulevard Branch       |   | 01/31/2012    |   |         | 6.391  | %      |      |   | 1,522,046 |       |   |   | - |   |
| Total                                                |   |          |   |         |   |   |      | $      | 9,436,690 |       |   | $ | 7,864,727 |   |

----

| Name of Bank                  |   | Due Date |   | Interest Rate |   |   | 3/31/2011 |   |      | 12/31/2010 |   |
|-----------------------------------------|--------|---------------|--------|--------------------|--------|--------|-----------|--------|-----------|------------|--------|
| China Development Bank - Beijing Branch |   | 12/24/2012    |   |               | 5.40   | %      |      | $      | 3,044,094 |       |   | $ | 3,024,895 |   |
| Total                                   |   |          |   |               |   |   |      | $      | 3,044,094 |       |   | $ | 3,024,895 |   |

| 10. | OTHER PAYABLES |
|-----|----------------|

| Ref.   |                       |   | 3/31/2011 |      |   | 12/31/2010 |   |
|--------|----------------------------|--------|-----------|-----------|--------|------------|--------|
| (1)    | Amount due to Employees    |   | $         | 502,734   |   |       | $      | 954,455 |   |
| (2)    | Tax Payable                |   |      | 167,315   |   |       |   | 692,861 |   |
| (3)    | Payables to Subcontractors |   |      | 3,251,603 |   |       |   | 2,044,607 |   |
|   | Total                      |   | $         | 3,921,652 |   |       | $      | 3,691,923 |   |

|   | (1). | Amounts due to employees included accrual payroll, welfare payable, continued education training program cost and individual travel advance. They were all unsecured, interest free, and have no fixed repayment terms. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2).  | The tax payable consisted of value added tax, sales tax, income tax and local tax payables. |
|--------|------------|---------------------------------------------------------------------------------------------|

|   | (3).  | Payables to subcontractors were unbilled liabilities. |
|--------|------------|-------------------------------------------------------|

| Ref.   |                                                 |   | 3/31/2011 |      |   | 12/31/2010 |   |
|--------|------------------------------------------------------|--------|-----------|-----------|--------|------------|--------|
| (1)    | Payable for the acquisition of Baishan Gas Co., Ltd. |   | $         | 1,854,558 |   |       | $      | 1,859,499 |   |
|   | Total                                                |   | $         | 1,854,558 |   |       | $      | 1,859,499 |   |

----

| 11. | CONVERTIBLE BONDS AND BOND WARRANTS |
|-----|-------------------------------------|

----

|   |                                                           |   | 3/31/2011       |      |
|--------|----------------------------------------------------------------|--------|-----------------|-----------|
| Ref.   |                                                           |   | 5.3M Bonds |      |   | 692K Bonds |   |   | Total |   |
| (1)    | Convertible Bonds Payable - principal                          |   | $               | 5,349,982 |   |   | $ | 692,984 |   |   | $ | 6,042,966 |   |
| (2)    | Less: Interest Discount - Warrants                             |   |            | (178,950  | ) |   |   | (44,417 | ) |   |   | (223,367 | ) |
| (3)    | Less: Interest Discount - Beneficial Conversion Feature        |   |            | (869,270  | ) |   |   | (223,252 | ) |   |   | (1,092,522 | ) |
| (4)    | Less: Bond Discount - Issuance Cost                            |   |            | (503,766  | ) |   |   | (91,382 | ) |   |   | (595,148 | ) |
| (5)    | Accretion of Interest Discount - Warrants                      |   |            | 67,493    |   |   |   | 15,404 |   |   |   | 82,898 |   |
| (6)    | Accretion of Interest Discount - Beneficial Conversion Feature |   |            | 869,270   |   |   |   | 223,252 |   |   |   | 1,092,522 |   |
| (7)    | Accretion of Bond Discount - Issuance Cost                     |   |            | 190,002   |   |   |   | 31,692 |   |   |   | 221,694 |   |
| (8)    | Accretion of Interest Discount - Redemption                    |   |            | 423,742   |   |   |   | 50,470 |   |   |   | 474,212 |   |
| (9)    | Conversion of Convertible Bonds into Common Stock              |   |            | (200,000  | ) |   |   | - |   |   |   | (200,000 | ) |
|   | Convertible Bonds Payable, net                                 |   | $               | 5,148,503 |   |   | $ | 654,751 |   |   | $ | 5,803,254 |   |

|   |                                                           |   | 12/31/2010      |      |
|--------|----------------------------------------------------------------|--------|-----------------|-----------|
| Ref.   |                                                           |   | 5.3M Bonds |      |   | 692K Bonds |   |   | Total |   |
| (1)    | Convertible Bonds Payable - principal                          |   | $               | 5,349,982 |   |   | $ | 692,984 |   |   | $ | 6,042,966 |   |
| (2)    | Less: Interest Discount - Warrants                             |   |            | (178,950  | ) |   |   | (44,417 | ) |   |   | (223,367 | ) |
| (3)    | Less: Interest Discount - Beneficial Conversion Feature        |   |            | (869,270  | ) |   |   | (223,252 | ) |   |   | (1,092,522 | ) |
| (4)    | Less: Bond Discount - Issuance Cost                            |   |            | (503,766  | ) |   |   | (91,382 | ) |   |   | (595,148 | ) |
| (5)    | Accretion of Interest Discount - Warrants                      |   |            | 53,545    |   |   |   | 12,034 |   |   |   | 65,579 |   |
| (6)    | Accretion of Interest Discount - Beneficial Conversion Feature |   |            | 869,270   |   |   |   | 223,252 |   |   |   | 1,092,522 |   |
| (7)    | Accretion of Bond Discount - Issuance Cost                     |   |            | 150,735   |   |   |   | 24,758 |   |   |   | 175,493 |   |
| (8)    | Accretion of Interest Discount - Redemption                    |   |            | 336,168   |   |   |   | 39,426 |   |   |   | 375,594 |   |
| (9)    | Conversion of Convertible Bonds into Common Stock              |   |            | (200,000  | ) |   |   | - |   |   |   | (200,000 | ) |
|   | Convertible Bonds Payable, net                                 |   | $               | 5,007,714 |   |   | $ | 633,403 |   |   | $ | 5,641,117 |   |

|   | (1).  | The principal amounts listed above represent the face amount of the convertible notes. |
|--------|------------|----------------------------------------------------------------------------------------|

|   | (2). | The proceeds were allocated between the convertible bonds and warrants based on their relative fair value. See Note 13 Capital Stock for the calculation of fair value of convertible bonds detachable warrants. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3). | Because the conversion price of bonds is $0.62, which was lower than the fair market value of common stock at issuance day, beneficial conversion feature was applied. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4). | The issuance cost consisted of commission to placement agent and legal expense. |
|--------|------|---------------------------------------------------------------------------------|

|   | (5). | The interest discount of warrants was amortized over the whole period applying effective annual interest rate. |
|--------|------|----------------------------------------------------------------------------------------------------------------|

|   | (6). | The bonds were convertible at the option of the holders into shares of common stock. However, Rule 144 minimum of six months holding period requirement for a resale of securities was required, therefore, the beneficial conversion feature was amortized over six months period. |
|--------|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (7). | The debt issuance cost was amortized over 36 months period applying effective annual interest rate. |
|--------|------|-----------------------------------------------------------------------------------------------------|

|   | (8). | Based on 15% per annum redemption rate, the redemption values were determined to be $1,123,496 and $145,527 for the $5,349,982 and $692,984 convertible bonds respectively. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (9). | Principal of $200,000 was converted into 322,581 shares common stock on August 24, 2010 |
|--------|------|-----------------------------------------------------------------------------------------|

| 12. | CAPITAL STOCK |
|-----|---------------|

----

|                                     |   | Financial Transactions |      |
|------------------------------------------|--------|-----------------------------|-----------|
|                                     |   | 9/7/2006                    |      |   | 10/20/2006 |   |   | 5/15/2007 |   |   | 9/7/2007 |   |
| Gross proceeds                           |   | $                           | 6,876,800 |   |   | $ | 2,404,800 |   |   | $ | 3,000,000 |   |   | $ | 18,766,700 |   |
| Used to Purchase Shell                   |   |                        | (675,000  | ) |   |   | - |   |   |   | - |   |   |   | - |   |
| Commissions to Placement Agent           |   |                        | (673,786  | ) |   |   | (235,000 | ) |   |   | (265,867 | ) |   |   | (1,241,805 | ) |
| Legal & Related Expenses             |   |                        | (426,978  | ) |   |   | (10,000 | ) |   |   | (146,374 | ) |   |   | (232,028 | ) |
| Used to Purchase Back Warrants A & B |   |                        | -         |   |   |   | - |   |   |   | - |   |   |   | (3,500,000 | ) |
| Net proceeds                             |   | $                           | 5,101,036 |   |   | $ | 2,159,800 |   |   | $ | 2,587,759 |   |   | $ | 13,792,867 |   |

|                            |   | Authorized Shares |        |   | Shares issued andoutstanding |   |
|---------------------------------|--------|------------------------|-------------|--------|----------------------------------------|--------|
| Common Stock                    |   |                   | 250,000,000 |   |                                   |   | 27,156,617 |   |
| Convertible Preferred Stock A   |   |                   | 20,000,000  |   |                                   |   | - |   |
| Convertible Preferred Stock B   |   |                   | 5,000,000   |   |                                   |   | 4,590,094 |   |
| Convertible Preferred Stock B-1 |   |                   | 3,000,000   |   |                                   |   | 95,418 |   |

|                                        |   | Strike Price |   | ContractualLife |      |  ExpirationDate |       | Shares issuedand outstanding |   |      | WeightedAverageFair Value |   |
|---------------------------------------------|--------|-------------------|--------|-----------------|-----------|----------------------|------------|----------------------------------------|--------|-----------|--------------------------------|--------|
| Series A Warrants                           |   | $                 | 3.84   |            | 60 Months |                 | 9/6/2011   |                                   |   | 241,708   |                           |   | $ | 0.70 |   |
| Series C Warrants                           |   | $                 | 3.38   |            | 60 Months |                 | 9/6/2011   |                                   |   | 3,083,589 |                           |   | $ | 0.81 |   |
| Series G Warrants                           |   | $                 | 3.84   |            | 48 Months |                 | 9/6/2011   |                                   |   | 109,489   |                           |   | $ | 0.44 |   |
| 5.3 M Convertible Bonds Detachable Warrants |   | $                 | 0.744  |            | 36 Months |                 | 11/30/2012 |                                   |   | 3,451,601 |                           |   | $ | 0.05 |   |
| 692K Convertible Bonds Detachable Warrants  |   | $                 | 0.744  |            | 36 Months |                 | 12/23/2012 |                                   |   | 447,086   |                           |   | $ | 0.11 |   |

----

|                        |   | Warrants A |   |   | Warrants C |   |   | Warrants G |   |   | 5.3M CBWarrants |   |   | 692K CBWarrants |   |
|-----------------------------|--------|-----------------|--------|--------|-----------------|--------|--------|-----------------|--------|--------|----------------------|--------|--------|----------------------|--------|
| Weighted average fair value |   | $               | 0.70   |   |            | $      | 0.81   |            |   | $      | 0.44                 |   |   | $                    | 0.05   |   |   | $ | 0.11 |   |
| Strike price                |   | $               | 3.84   |   |            | $      | 3.38   |            |   | $      | 3.84                 |   |   | $                    | 0.744  |   |   | $ | 0.744 |   |
| Risk-free interest rate     |   |            | 4.18   | %      |            |   | 4.18   | %               |   |   | 4.18                 | %      |   |                 | 1.12   | % |   |   | 1.51 | % |
| Expected volatility         |   |            | 40.00  | %      |            |   | 40.00  | %               |   |   | 40.00                | %      |   |                 | 12.84  | % |   |   | 12.84 | % |
| Years to maturity           |   |            | 5.00   |   |            |   | 5.00   |            |   |   | 4.00                 |   |   |                 | 3.00   |   |   |   | 3.00 |   |

----

|                           |   | Preferred Stock B           |      |   | Preferred Stock B-1 |   |   | Common Stock                     |   |   |    |   |   |                                  |   |
|--------------------------------|--------|---------------------------------------|-----------|--------|-------------------------------|--------|--------|---------------------------------------|--------|--------|---------|--------|--------|---------------------------------------|--------|
| Name of Shareholders |   | Number of Sharesoutstanding |      |   | Capital                       |   |   | Number of Sharesoutstanding |   |   | Capital |   |   | Number of Sharesoutstanding |   |   | Capital |   |   | AdditionalPaid inCapital |   |   | % of EquityHoldings |   |
| Manager / Insider              |   |                                  | -         |   |                          | $      | -      |                                  |   |   | -       |   |   | $                                     | -      |   |   |   | 12,653,661 |   |   | $ | 12,653 |   |   | $ | 4,064,862 |   |   |   | 47 | % |
| Investors                      |   |                                  | 4,590,094 |   |                          |   | 4,590  |                                  |   |   | 95,418  |   |   |                                  | 95     |   |   |   | 14,502,956 |   |   |   | 14,503 |   |   |   | 25,919,150 |   |   |   | 53 | % |
| Beneficial Conversion Feature  |   |                                  | -         |   |                          |   | -      |                                  |   |   | -       |   |   |                                  | -      |   |   |   | - |   |   |   | - |   |   |   | 8,094,814 |   |   |   | - |   |
|                           |   |                                  | 4,590,094 |   |                          | $      | 4,590  |                                  |   |   | 95,418  |   |   | $                                     | 95     |   |   |   | 27,156,617 |   |   | $ | 27,156 |   |   | $ | 38,078,826 |   |   |   | 100 | % |

----

| 13. | INCOME TAX |
|-----|------------|

| Description                  |   | March 31,2011 |     |   | March 31,2010 |   |
|------------------------------|--------|--------------------|----------|--------|--------------------|--------|
| Income (loss) before taxes:- |   |               |     |   |               |   |
| US Federal                   |   | $                  | (462,165 | )      |               | $      | (954,050 | ) |
| State                        |   |               | -        |   |               |   | - |   |
| BVI                          |   |               | (28,551  | )      |               |   | (118,054 | ) |
| PRC                          |   |               | 591,271  |   |               |   | 1,102,854 |   |
| Total income before taxes    |   | $                  | 144,392  |   |               | $      | 30,750 |   |
|                         |   |               |     |   |               |   |   |   |
| Provision for taxes:-        |   |               |     |   |               |   |   |   |
| Current:                     |   |               |     |   |               |   |   |   |
| U.S. Federal                 |   | $                  | -        |   |               | $      | - |   |
| State                        |   |               | -        |   |               |   | - |   |
| HK                           |   |               | -        |   |               |   | - |   |
| PRC                          |   |               | (37,837  | )      |               |   | (239,334 | ) |
|                         |   |               | (37,837  | )      |               |   | (239,334 | ) |
| Deferred:                    |   |               |     |   |               |   |   |   |
| U.S. Federal                 |   |               | -        |   |               |   | - |   |
| State                        |   |               | -        |   |               |   | - |   |
| HK                           |   |               | -        |   |               |   | - |   |
| PRC                          |   |               | -        |   |               |   | - |   |
| Valuation allowance          |   |               | -        |   |               |   | - |   |
|                         |   |               | -        |   |               |   | - |   |
|                         |   |               |     |   |               |   |   |   |
| Total provision for taxes    |   | $                  | (37,837  | )      |               | $      | (239,334 | ) |
|                         |   |               |     |   |               |   |   |   |
| Effective tax rate           |   |               | 26.20    | %      |               |   | 21.70 | % |

|                                   |   | March 31,2011 |   |   | March 31,2010 |   |
|----------------------------------------|--------|--------------------|--------|--------|--------------------|--------|
| U.S. federal statutory income tax rate |   |               | 34.00  | %      |               |   | 34.00 | % |
| Lower rates in PRC, net                |   |               | (9.00  | )%     |               |   | (9.00 | )% |
| Tax holiday                            |   |               | -      |   |               |   | (10.00 | )% |
| Accruals in foreign jurisdictions      |   |               | 1.20   | %      |               |   | 6.70 | % |
| Effective tax rate                     |   |               | 26.20  | %      |               |   | 21.70 | % |

----

| 14. | SEGMENT INFORMATION |
|-----|---------------------|

| Financial Position Segment Report |   |
|--------------------------------------------------|--------|
| As of March 31, 2011         |   |
|                                             |   | Gas Distribution |   |   | Gas PipelineInstallation |   |   | Shell, BVIs, &Eliminations |   |   | Total |   |
| Assets                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Current Assets                                   |   | $ | 13,193,025 |   |   | $ | 5,233,753 |   |   | $ | 760,160 |   |   | $ | 19,186,938 |   |
| Non-Current Assets                               |   |   | 23,775,632 |   |   |   | 59,932,611 |   |   |   | 3,490,727 |   |   |   | 87,198,970 |   |
| Total Assets                                     |   |   | 36,968,657 |   |   |   | 65,166,364 |   |   |   | 4,250,887 |   |   |   | 106,385,908 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current Liabilities                              |   |   | 2,614,122 |   |   |   | 23,191,938 |   |   |   | - |   |   |   | 25,806,060 |   |
| Non-current Liabilities                          |   |   | 1,084,090 |   |   |   | 9,617,816 |   |   |   | - |   |   |   | 10,701,906 |   |
| Total Liabilities                                |   |   | 3,698,211 |   |   |   | 32,809,754 |   |   |   | - |   |   |   | 36,507,965 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Assets                                       |   |   | 33,270,445 |   |   |   | 32,356,610 |   |   |   | 4,250,887 |   |   |   | 69,877,942 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities & Equities                       |   | $ | 36,968,657 |   |   | $ | 65,166,364 |   |   | $ | 4,250,887 |   |   | $ | 106,385,908 |   |

----

| Operation Result Segment Report                               |   |
|------------------------------------------------------------------------------|--------|
| For the three months ended March 31, 2011 |   |
|                                                                         |   | GasDistribution |   |   | Gas PipelineInstallation |   |   | Shell, BVIs, &Eliminations |   |   | Total |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales Revenue                                                                |   | $ | 9,246,221 |   |   | $ | 3,668,032 |   |   | $ | (4,927,983 | ) |   | $ | 7,986,270 |   |
| Cost of Revenue                                                              |   |   | (9,001,034 | ) |   |   | (1,492,792 | ) |   |   | 4,927,983 |   |   |   | (5,565,844 | ) |
| Gross Profit                                                                 |   |   | 245,186 |   |   |   | 2,175,240 |   |   |   | - |   |   |   | 2,420,426 |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating Expense                                                            |   |   | (162,563 | ) |   |   | (1,442,227 | ) |   |   | (207,959 | ) |   |   | (1,812,749 | ) |
| Operating Income/(Loss)                                                      |   |   | 82,623 |   |   |   | 733,013 |   |   |   | (207,959 | ) |   |   | 607,677 |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Income/(Loss)                                                          |   |   | (46,930 | ) |   |   | (133,598 | ) |   |   | (282,757 | ) |   |   | (463,285 | ) |
| Earnings before tax                                                          |   |   | 35,693 |   |   |   | 599,415 |   |   |   | (490,716 | ) |   |   | 144,392 |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax                                                                   |   |   | (2,126 | ) |   |   | (35,711 | ) |   |   | - |   |   |   | (37,837 | ) |
| Gain/(loss) from discontinued operation, net of tax                          |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Income                                                                   |   | $ | 33,567 |   |   | $ | 563,704 |   |   | $ | (490,716 | ) |   | $ | 106,555 |   |

| Financial Position Segment Report |   |
|--------------------------------------------------|--------|
| As of December 31, 2010      |   |
|                                             |   | Gas Distribution |   |   | Gas PipelineInstallation |   |   | Shell, BVIs, &Eliminations |   |   | Total |   |
| Assets                                           |   |   |   |   |   |   |   |   |   |   |   |   |
| Current Assets                                   |   | $ | 10,911,426 |   |   | $ | 6,825,815 |   |   | $ | 1,480,749 |   |   | $ | 19,217,990 |   |
| Non-Current Assets                               |   |   | 31,563,653 |   |   |   | 50,456,168 |   |   |   | 3,490,726 |   |   |   | 85,510,547 |   |
| Total Assets                                     |   |   | 42,475,079 |   |   |   | 57,281,983 |   |   |   | 4,971,475 |   |   |   | 104,728,537 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Current Liabilities                              |   |   | 3,202,219 |   |   |   | 21,202,306 |   |   |   | - |   |   |   | 24,404,525 |   |
| Non-current Liabilities                          |   |   | 1,381,096 |   |   |   | 9,144,415 |   |   |   | - |   |   |   | 10,525,511 |   |
| Total Liabilities                                |   |   | 4,583,315 |   |   |   | 30,346,721 |   |   |   | - |   |   |   | 34,930,036 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Assets                                       |   |   | 37,891,764 |   |   |   | 26,935,262 |   |   |   | 4,971,475 |   |   |   | 69,798,501 |   |
|                                             |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Liabilities & Equities                       |   | $ | 42,475,079 |   |   | $ | 57,281,983 |   |   | $ | 4,971,475 |   |   | $ | 104,728,537 |   |

----

| Operation Result Segment Report                               |   |
|------------------------------------------------------------------------------|--------|
| For the three months ended March 31, 2010 |   |
|                                                                         |   | GasDistribution |   |   | Gas PipelineInstallation |   |   | Shell, BVIs, &Eliminations |   |   | Total |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales Revenue                                                                |   | $ | 6,157,019 |   |   | $ | 3,076,832 |   |   | $ | (2,276,190 | ) |   | $ | 6,957,661 |   |
| Cost of Revenue                                                              |   |   | (6,007,746 | ) |   |   | (1,101,592 | ) |   |   | 2,276,190 |   |   |   | (4,833,148 | ) |
| Gross Profit                                                                 |   |   | 149,273 |   |   |   | 1,975,240 |   |   |   | - |   |   |   | 2,124,513 |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating Expense                                                            |   |   | (63,706 | ) |   |   | (842,989 | ) |   |   | (271,079 | ) |   |   | (1,177,774 | ) |
| Operating Income/(Loss)                                                      |   |   | 85,567 |   |   |   | 1,132,251 |   |   |   | (271,079 | ) |   |   | 946,739 |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Income/(Loss)                                                          |   |   | (64,359 | ) |   |   | (50,605 | ) |   |   | (801,025 | ) |   |   | (915,989 | ) |
| Earnings before tax                                                          |   |   | 21,207 |   |   |   | 1,081,647 |   |   |   | (1,072,104 | ) |   |   | 30,750 |   |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income tax                                                                   |   |   | (4,602 | ) |   |   | (234,732 | ) |   |   | - |   |   |   | (239,334 | ) |
|                                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net Income                                                                   |   | $ | 16,605 |   |   | $ | 846,915 |   |   | $ | (1,072,104 | ) |   | $ | (208,586 | ) |

----

| 15. | EARNINGS PER SHARE |
|-----|--------------------|

|                                                            |   | Ref    |   |   | 3/31/2011 |       |       | 3/31/2010 |   |
|-----------------------------------------------------------------|--------|--------|--------|--------|-----------|------------|------------|-----------|--------|
| Net Income                                                      |   |   |   |   | $         | 106,555    |       |      | $      | (208,586 | ) |
| Preferred Dividends                                             |   |   |   |   |      | -          |       |      |   | - |   |
| Constructive Preferred Dividends                                |   |   |   |   |      | -          |       |      |   | - |   |
| Net loss attributed to non-controlling interest                 |   |   |   |   |      | (13,966    | )          |      |   | - |   |
| Income Available to Common Stockholders for Basic EPS           |   |   |   |   | $         | 120,521    |       |      | $      | (208,586 | ) |
|                                                            |   |   |   |   |      |       |       |      |   |   |   |
| Interest Expense for Convertible Bonds, net of tax              |   |   |   |   |      | 282,996    |       |      |   | 801,216 |   |
| Income Available to Common Stockholders for Diluted EPS         |   |   |   |   | $         | 403,517    |       |      | $      | 592,630 |   |
|                                                            |   |   |   |   |      |       |       |      |   |   |   |
| Original Shares                                                 |   |   |   |   |      | 27,156,617 |       |      |   | 26,769,313 |   |
| Addition to Common Stock                                        |   |   |   |   |      | -          |       |      |   | - |   |
| Basic Weighted Average Shares Outstanding                       |   |   |   |   |      | 27,156,617 |       |      |   | 26,769,313 |   |
|                                                            |   |   |   |   |      |       |       |      |   |   |   |
| Potentially Dilutive Securities:                                |   |   |   |   |      |       |       |      |   |   |   |
| Addition to Common Stock from Conversion of Preferred Stock B   |   |   | (1)    |   |      |       | -          |      |   |   | - |   |
| Addition to Common Stock from Conversion of Preferred Stock B-1 |   |   | (2)    |   |      |       | -          |      |   |   | - |   |
| Addition to Common Stock from Conversion of Convertible Bonds   |   |   | (3)    |   |      |       | -          |      |   |   | - |   |
| Addition to Common Stock from Exercise of Warrants              |   |   | (4)    |   |      |       | -          |      |   |   | - |   |
| Diluted Weighted Average Shares Outstanding                     |   |   |   |   |      |       | 27,156,617 |      |   |   | 26,769,313 |   |
|                                                            |   |   |   |   |      |       |       |      |   |   |   |   |
| Earnings Per Share                                              |   |   |   |   |      |       |       |      |   |   |   |   |
| -   Basic                                             |   |   |   |   |      | $          | 0.004      |      |   | $ | (0.01 | ) |
| -   Diluted                                           |   |   |   |   |      | $          | 0.004      |      |   | $ | (0.01 | ) |
|                                                            |   |   |   |   |      |       |       |      |   |   |   |   |
| Weighted Average Shares Outstanding                             |   |   |   |   |      |       |       |      |   |   |   |   |
| -   Basic                                             |   |   |   |   |      |       | 27,156,617 |      |   |   | 26,769,313 |   |
| -   Diluted                                           |   |   |   |   |      |       | 27,156,617 |      |   |   | 26,769,313 |   |

|   | (1). | The application of conversions’ of preferred stock B to common stock was anti-dilutive for the three months ended March 31, 2011. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------|

|   | (2). | The application of conversions of preferred stock B-1 to common stock was anti-dilutive for the three months ended March 31, 2011. |
|--------|------|------------------------------------------------------------------------------------------------------------------------------------|

|   | (3). | The average price of the Company’s common stock was $0.45 for the three-month periods ended March 31, 2011, which was lower than the conversion price $0.62 of the convertible bonds. Therefore, the conversion of convertible bonds have been excluded from diluted weighted average shares. |
|--------|------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (4). | The exercise of warrants to common stock was anti-dilutive for the three-month periods ended March 31, 2011. |
|--------|------|--------------------------------------------------------------------------------------------------------------|

----

----

----

----

|               |    | For the 3 months endedMarch 31, |     |    |   |    |
|-------------------------|--------------|----------------------------------------------------------|---------------|--------------|--------|--------------|
|               |    | 2011                                                     |     |    | 2010   |    |    | Change |    |
|                    |         | US$                                                      |          |         | US$    |         |   |   |   |
| Net Revenues            |         |                                                     | 7,986,270     |         |   |         | 6,957,661 |   |   |   | 14.78 | % |
| Gross Profit            |         |                                                     | 2,420,426     |         |   |         | 2,124,513 |   |   |   | 13.93 | % |
| Operating Income   |         |                                                     |  607,677 |         |   |         | 946,739 |   |   |   | -35.81 | % |
| Net Income              |         |                                                     | 106,555       |         |   |         | -208,586 |   |   |   | 151.08 | % |
| Gross Margin       |         |                                                     | 30.31         | %            |   |         | 30.53 | % |   |   | -0.75 | % |
| Net Margin         |         |                                                     | 1.33          | %            |   |         | -3.00 | %  |   |   |   |   |

|                |    | For the 3 months ended March 31, |    |    |   |    |
|--------------------------|--------------|----------------------------------------------------------------|--------------|--------------|--------|--------------|
|                |    | 2011                                                           |    |    | 2010   |    |    | Change |    |
| (In $ million) |         | US$                                                            |         |         | %      |         |   | US$ |   |   | % |   |   | % |   |
| Net Revenues             |         |                                                           | 7.99         |         |   |         | 100 | % |   |   | 6.96 |   |   |   | 100 | % |   |   | 14.78 | % |
| Connection Fees          |         |                                                           | 2.80         |         |   |         | 3 | 5% |   |   | 2.75 |   |   |   | 40 | % |   |   | 1.91 | % |
| Gas Sales                |         |                                                           | 5.19         |         |   |         | 65 | % |   |   | 4.21 |   |   |   | 60 | % |   |   | 23.18 | % |

|                   |    | For the 3 months ended March 31, |    |    |   |    |
|-----------------------------|--------------|----------------------------------------------------------------|--------------|--------------|--------|--------------|
| (in US$ millions) |    | 2011                                                           |    |    | 2010   |    |    | Change |    |
|                        |         | US$                                                            |         |         | %      |         |   | US$ |   |   | % |   |   | % |   |
| Connection Fees             |         |                                                           | 2.80         |         |   |         | 100 | % |   |   | 2.75 |   |   |   | 100 | % |   |   | 1.91 | % |
| Residential Users           |         |                                                           | 2.80         |         |   |         | 100 | % |   |   | 2.75 |   |   |   | 100 | % |   |   |   |   |
| Industrial Users            |         |                                                           | 0.00         |         |   |         | 0 | % |   |   | 0.00 |   |   |   | 0 | % |   |   |   |   |

----

|                            |    | For the 3 months ended March 31, |    |    |   |    |
|--------------------------------------|--------------|----------------------------------------------------------------|--------------|--------------|--------|--------------|
|                            |    | 2011                                                           |    |    | 2010   |    |    | Change |    |
| ($ million)                     |         | US$                                                            |         |         | %      |         |   | US$ |   |   | % |   |   | % |   |
| Gas Sales                            |         |                                                           | 5.19         |         |   |         | 100 | % |   |   | 4.21 |   |   |   | 100 | % |   |   | 23.18 | % |
| Residential Users                    |         |                                                           | 2.63         |         |   |         | 51 | % |   |   | 2.15 |   |   |   | 51 | % |   |   | 22.41 | % |
| Industrial and Commercial Users |         |                                                           | 2.56         |         |   |         | 49 | % |   |   | 2.06 |   |   |   | 49 | % |   |   | 24.27 | % |

|           |    | For the 3 months ended March 31, |    |    |   |    |
|---------------------|--------------|----------------------------------------------------------------|--------------|--------------|--------|--------------|
|           |    | 2011                                                           |    |    | 2010   |    |    | Change |    |
| ($ million)    |         | US$                                                            |         |         | %      |         |   | US$ |   |   | % |   |   | % |   |
| Cost of Revenues    |         |                                                           | 5.57         |         |   |         | 100 | % |   |   | 4.83 |   |   |   | 100 | % |   |   | 15.16 | % |
| Connection Fee Cost |         |                                                           | 0.63         |         |   |         | 11 | % |   |   | 0.77 |   |   |   | 16 | % |   |   | -19.16 | % |
| Gas Cost            |         |                                                           | 4.94         |         |   |         | 89 | % |   |   | 4.06 |   |   |   | 84 | % |   |   | 21.67 | % |

----

|        |    | For the 3 months ended March 31, |    |    |   |    |
|------------------|--------------|----------------------------------------------------------------|--------------|--------------|--------|--------------|
|        |    | 2011                                                           |    |    | 2010   |    |    | Change |    |
| ($ million) |         | US$                                                            |         |         | %      |         |   | US$ |   |   | % |   |   | % |   |
| Gross Profit     |         |                                                           | 2.42         |         |   |         | 100 | % |   |   | 2.12 |   |   |   | 100 | % |   |   | 13.93 | % |
| Connection       |         |                                                           | 2.17         |         |   |         | 90 | % |   |   | 1.97 |   |   |   | 93 | % |   |   | 10.13 | % |
| Gas              |         |                                                           | 0.25         |         |   |         | 10 | % |   |   | 0.15 |   |   |   | 7 | % |   |   | 64.25 | % |

----

|                                |   | 2011   |       |   | 2010   |   |
|-------------------------------------|--------|--------|------------|--------|--------|--------|
| At Cost                             |   |   |       |   |   |   |
| Gas Pipelines                       |   | $      | 45,797,055 |   |   | $      | 44,512,342 |   |
| Motor Vehicles                      |   |   | 6,271,808  |   |   |   | 6,067,524 |   |
| Machinery & Equipment           |   |   | 1,658,907  |   |   |   | 1,542,016 |   |
| Buildings                           |   |   | 2,718,269  |   |   |   | 2,316,729 |   |
| Leasehold Improvements              |   |   | 388,386    |   |   |   | 475,099 |   |
| Office Equipment                    |   |   | 261,362    |   |   |   | 256,419 |   |
|  Less Accumulated depreciation |   |   | (5,598,857 | )      |   |   | (5,241,647 | ) |
|                                |   | $      | 51,496,930 |   |   | $      | 49,928,482 |   |

----

----

| Exhibit Number:  |    | Description                                                                                        |
|----------------------------|--------------|----------------------------------------------------------------------------------------------------|
| 23.1                       |         | Consent of Samuel H. Wong & Co., LLP                                                           |
|                       |         |                                                                                               |
| 31.1                       |         | Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002.      |
|                       |         |                                                                                               |
| 31.2                       |         | Certification of Principal Accounting Officer under Section 302 of the Sarbanes-Oxley Act of 2002. |
|                       |         |                                                                                               |
| 32                         |         | Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350   |

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|               | SINO GAS INTERNATIONAL HOLDINGS, INC. |
|--------------------|---------------------------------------|
|               |                                  |   |
| Date: May 16, 2011 | By:                                   | /s/  Yuchuan Liu |
|               |                                  | Yuchuan Liu |
|               |                                  | Chairman and Chief Executive Officer |
|               |                                  | (Principal Executive Officer) |
|               |                                  |   |
|               | SINO GAS INTERNATIONAL HOLDINGS, INC. |
|               |                                  |   |
| Date: May 16, 2011 | By:                                   | /s/  Yugang Zhang |
|               |                                  | Yugang Zhang |
|               |                                  | Chief Financial Officer |
|               |                                  | (Principal Financial Officer) |

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