**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10−Q**


(Mark
      One)




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




For
      the
      quarterly period ended: September 30, 2008




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




For
      the
      transition period from ____________ to _____________




Commission
      File Number: 333-83375





**CHINA
      NEW ENERGY GROUP COMPANY**


(Exact
      Name of Registrant as Specified in Its Charter)





**Delaware**
            **65-0972647**(State
                or other jurisdictionof
              incorporation
                or organization)
            (I.R.S.
                Employer Identification No.)





**17th
      Floor, HongJi Building, JinWei Road**


**HeBei
      District, Tianjin, China**





(Address
      of principal executive offices, Zip Code)




**(86
      22) 2626 9216**


(Registrant’s
      telephone number, including area code)





(Former
      name, former address and former fiscal year, if changed since last
      report)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
      (or
      for such shorter period that the registrant was required to file such reports),
      and (2) has been subject to such filing requirements for the past 90 days.
      Yes x No o





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





Large
      Accelerated Filer o   Accelerated
      Filer o


Non-Accelerated
      Filer  o (Do
      not
      check if a smaller reporting company) Smaller reporting company x





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





The
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of November 14, 2008 is as follows:




Class
                of Securities
            
            Shares
                OutstandingCommon
                Stock, $0.001 par value
            
            100,000,041Series
                A Convertible Preferred Stock, $0.001 par value
            
            1,857,372





**TABLE
      OF CONTENTS**





**PART
                I****FINANCIAL
                INFORMATION****ITEM
                1.**
            **FINANCIAL
                STATEMENTS.**
            1**ITEM
                2.**
            **MANAGEMENT’S
                DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                OPERATIONS.**
            14**ITEM
                3.**
            **QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.**
            22**ITEM
                4.**
            **CONTROLS
                AND PROCEDURES.**
            23**PART
                II****OTHER
                INFORMATION****ITEM
                1.**
            **LEGAL
                PROCEEDINGS.**
            24**ITEM
                2.**
            **UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.**
            24**ITEM
                3.**
            **DEFAULTS
                UPON SENIOR SECURITIES.**
            24**ITEM
                4.**
            **SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY HOLDERS.**
            24**ITEM
                5.**
            **OTHER
                INFORMATION.**
            24**ITEM
                6.**
            **EXHIBITS.**
            25


i


**PART
      I**


**FINANCIAL
      INFORMATION**




**ITEM
      1.**  **FINANCIAL
      STATEMENTS.**





**China
      New Energy Group Company**


Condensed
      Consolidated Financial Statements


For
      the
      three and nine months ended


September
      30, 2008


(Stated
      in US dollars)








China
      New
      Energy Group Company


**Condensed
      Consolidated Financial Statements**


**Three
      and nine months ended September 30, 2008**








Index
      to
      Condensed Consolidated Financial Statements





**Page**Condensed
                Consolidated Balance Sheets
            
            2Condensed
                Consolidated Statements of Operations and Comprehensive
                Loss
            
            3Condensed
                Consolidated Statements of Cash Flows
            
            4Condensed
                Consolidated Statement of Changes in Stockholders’ Equity
            
            5Notes
                to Consolidated Financial Statements
            
            6-13


1


**China
      New Energy Group Company**


**Condensed
      Consolidated Balance Sheets**





(Unaudited)September
              30,
            
            December
                31,2008
            
            2007**Assets**Plant
                and equipmentPlant
                in service
            
            $
            9,257,932
            
            $
            8,970,843Construction
                work in progress
            
            
            960,275
            
            
            3,057,90310,218,207
            
            
            12,028,746Less
                - Allowance for depreciation
            
            
            454,979
            
            
            322,1679,763,228
            
            
            11,706,579**Current
                assets**Cash
                and Bank Deposits
            
            
            7,208,602
            
            
            2,311,028Escrow
                Account
            
            
            250,000
            
            
            -Accounts
                Receivable
            
            
            1,248,058
            
            
            869,459Inventories
            
            
            137,171
            
            
            373,490Deposit
                & Other receivable - Related
            
            
            92,157
            
            
            448,186Deposit
                & Other receivable - Third Party
            
            
            1,099,052
            
            
            -**Total
                current assets**
            
            
            10,035,040
            
            
            4,002,163Investment
                in an associated company
            
            
            4,800,523
            
            
            -Intangible
                assets, net
            
            
            413,512
            
            
            2,033,152**Total
                assets**
            
            
            25,012,303
            
            
            17,741,894**Liabilities
                and stockholders' equity****Current
                liabilities**Accounts
                Payable
            
            
            512,333
            
            
            1,266,968Accruals
                & Other payable-Related
            
            
            29,456
            
            
            148,010Accruals
                & Other payable - Third Party
            
            
            1,598,958
            
            
            2,389,047Dividends
                payable
            
            
            59,000
            
            
            -Business
                tax payable
            
            
            769,322
            
            
            1,242,024**Total
                current liabilities**
            
            
            2,969,069
            
            
            5,046,049**Commitments
                and Contingencies****Minority
                Interest**
            
            
            125,245
            
            
            97,875**Stockholders'
                equity**Convertible
                Preferred stock, 10,000,000 shares authorized and 1,857,373 shares
                issued,par
                value $0.001
            
            
            1,857
            
            
            -Common
                stock, 500,000,000 shares authorized and 100,000,041 shares issued,par
                value $0.001
            
            
            100,000
            
            
            100,000Additional
                paid in capital
            
            
            20,165,567
            
            
            5,619,219Earned
                Sunplus
            
            
            2,319,061
            
            
            1,903,034Retained
                earnings
            
            
            (1,234,909
            )
            
            4,786,707Other
                Comprehensive Income
            
            
            566,413
            
            
            189,010**Total
                stockholders' equity**
            
            
            21917,989
            
            
            12,597,970**Total
                liabilities and stockholders' equity**
            
            $
            25,012,303
            
            $
            17,741,894


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


2


**China
      New Energy Group Company**


**Condensed
      Consolidated Statements of Operations and Comprehensive Loss**





(Unaudited)
                
                (Unaudited)For
                    the three months periods ended
                
                For
                    the nine months periods endedSeptember
                    30,
                
                September
                    30,2008
                
                2007
                
                2008
                
                2007Revenue
                
                $
                2,253,858
                
                $
                1,786,174
                
                
                4,236,987
                
                $
                3,041,306Cost
                    of revenue
                
                
                (575,626
                )
                
                (478,812
                )
                
                (1,128,901
                )
                
                (785,387
                )Operating
                    margin
                
                
                1,678,232
                
                
                1,307,362
                
                
                3,108,086
                
                
                2,255,919ExpensesSelling,
                    general and administrative
                
                
                (346,094
                )
                
                (85,094
                )
                
                (813,975
                )
                
                (321,110
                )Income
                    from operations
                
                
                1,332,138
                
                
                1,222,268
                
                
                2,294,111
                
                
                1,934,809Other
                    income/(loss), net
                
                
                3,702
                
                
                (8,489
                )
                
                9,974
                
                
                (7,095
                )Total
                    other expenses
                
                
                3,702
                
                
                (8,489
                )
                
                9,974
                
                
                (7,095
                )Income
                    from continuing operations before income tax
                
                
                1,335,840
                
                
                1,213,779
                
                
                2,304,085
                
                
                1,927,714Income
                    tax
                
                
                (391,358
                )
                
                (353,326
                )
                
                (705,244
                )
                
                (598,193
                )Net
                    income before minority interest
                
                
                944,482
                
                
                860,453
                
                
                1,598,841
                
                
                1,329,521Minority
                    interest
                
                
                (37,009
                )
                
                (8,147
                )
                
                (46,277
                )
                
                (13,672
                )Income
                    from continuing operations
                
                
                907,473
                
                
                852,306
                
                
                1,552,564
                
                
                1,315,849Income/(loss)
                    from discontinued operations, net of tax
                
                
                (7,116
                )
                
                174,473
                
                
                223,410
                
                
                333,020Net
                    income
                
                $
                900,357
                
                $
                1,026,779
                
                
                1,775,974
                
                $
                1,648,869Deemed
                    dividend on preferred shares issued
                
                
                (7,031,818
                )
                
                -
                
                
                (7,031,818
                )
                
                -Dividend
                    on preferred shares
                
                
                (59,000
                )
                
                -
                
                
                (59,000
                )
                
                -Net
                    loss attributed to common stockholders
                
                
                (6,190,461
                )
                
                1,026,779
                
                
                (5,314,844
                )
                
                1,648,869Other
                    comprehensive incomeForeign
                    currency translation gain
                
                
                37,114
                
                
                45,918
                
                
                377,403
                
                
                91,836Comprehensive
                    income
                
                
                (6,153,347
                )
                
                1,072,697
                
                
                (4,937,441
                )
                
                1,740,705Income
                    (loss) per average share outstanding
                
                $
                (0.00900
                )
                $
                0.01027
                
                
                (0.01776
                )
                $
                0.01649Weighted
                    average common equivalent shares outstanding -Basic
                    and diluted
                
                
                100,000,041
                
                
                100,000,041
                
                
                100,000,041
                
                
                100,000,041





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


3





**China
      New Energy Group Company**


**Condensed
      Consolidated Statements of Cash Flows**





(Unaudited)For the six months periods endedSeptember
                30,2008
            
            2007**Cash
                flows from operating activities**Net
                income
            
            $
            1,775,974
            
            $
            1,648,869Adjustments
                to reconcile net income/(loss) to net cash used inoperating
                activities:Depreciation
            
            
            125,592
            
            
            90,476Amortization
            
            
            6,429
            
            
            5,815`

              Minority
                interest
            
            
            27,371
            
            
            13,672Changes
                in assets and liabilities:Accounts
                receivables
            
            
            (374,181
            )
            
            (60,003
            )Inventory
            
            
            174,757
            
            
            14,347Deposits
                and other receivables - Third Party
            
            
            (650,954
            )
            
            (220,899
            )Accounts
                payables
            
            
            (398,948
            )
            
            708,066Accrued
                liabilities and other payables-Third Party
            
            
            (790,089
            )
            
            (751,196
            )Business
                taxes & government suncharge
            
            
            (397,601
            )
            
            (165,347
            )**Net
                cash (used in)/provided by operating activities**
            
            
            (501,650
            )
            
            1,283,800**Cash
                flow from investing activities**Acquisition
                of assets
            
            
            (97,692
            )
            
            (23,845
            )Acquisition
                of work in progress
            
            
            (960,375
            )
            
            (35,605
            )Acquisition
                of an associated company
            
            
            483,512
            
            
            -**Net
                cash (used in) investing activities**
            
            
            (574,555
            )
            
            (59,450
            )**Cash
                flow from financing activities**Cash
                advanced from directors/shareholders
            
            
            (210,711
            )
            
            64,204Proceeds
                from sale of preferred stock
            
            
            9,000,000
            
            
            -Payment
                of offering costs associated with preferred
                stock
            
            
            (1,507,144
            )**Net
                cash provided by financing activities**
            
            
            7,282,145
            
            
            64,204Cummulative
                Translation Adjustment
            
            
            (1,308,366
            )
            
            172**Cash
                and cash equivalents:****Net
                (decrease) increase**
            
            
            4,897,574
            
            
            1,288,726**Balance
                at beginning of period**
            
            
            2,311,028
            
            
            327,918**Balance
                at end of period**
            
            
            7,208,602
            
            
            1,616,644**Supplemental
                cash flow information:**Cash
                paid for income taxes
            
            
            -
            
            
            400Cash
                paid for interest
            
            $
            -
            
            
            -





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


4


**China
      New Energy Group Company**


**Condensed
      Consolidated Statements of Changes in Stockholders’ Equity**


**For
      Three Months Ended September 30, 2008 (Unaudited) and Year Ended December 31,
      2007**





STATUTORYADDITIONAL
            
            SURPLUS
            
            
            
            CUMULATIVE
            
            TOTALPAID-IN
            
            RESERVE
            
            RETAINED
            
            TRANSLATON
            
            STOCKHOLDERS'NUMBER
                OF SHARES
            
            PAID-IN
                REGISERED CAPITAL
            
            CAPITAL
            
            FUND
            
            EARNINGS
            
            ADJUSTMENT
            
            EQUITYCommon
            
            Preferred
            
            Warrants
            
            Common
            
            Preferred
            
            WarrantsUS$
            
            US$
            
            US$
            
            US$
            
            US$
            
            US$
            
            US$
            
            US$Balance,
                December 31,2005
            
            
            100
            
            
            -
            
            
            -
            
            $
            100
            
            $
            -
            
            $
            -
            
            $
            5,355,882
            
            $
            233,524
            
            $
            1,569,100
            
            $
            -
            
            $
            7,158,606Recapitalization
                upon reverse merger
            
            
            99,999,941
            
            
            -
            
            
            -
            
            
            99,900
            
            
            -
            
            
            -
            
            
            (99,900
            )Transfer
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            659,869
            
            
            (659,869
            )
            
            -
            
            
            -Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,934,450
            
            
            -
            
            
            1,934,450Cumulative
                translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            16,035
            
            
            (36,366
            )
            
            -
            
            
            5,339
            
            
            (14,992
            )Balance,
                December 31,2006
            
            
            100,000,041
            
            
            -
            
            
            -
            
            
            100,000
            
            
            -
            
            
            -
            
            
            5,272,017
            
            
            857,027
            
            
            2,843,681
            
            
            5,339
            
            
            9,078,064Transfer
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            889,863
            
            
            (889,863
            )
            
            -
            
            
            -Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2,832,889
            
            
            -
            
            
            2,832,889Cumulative
                translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            347,202
            
            
            156,144
            
            
            -
            
            
            183,671
            
            
            687,017Balance,
                December 31,2007
            
            
            100,000,041
            
            
            -
            
            
            -
            
            
            100,000
            
            
            -
            
            
            -
            
            
            5,619,219
            
            
            1,903,034
            
            
            4,786,707
            
            
            189,010
            
            
            12,597,970Issuance
                of shares for private placement
            
            
            -
            
            
            1,857,373
            
            
            
            
            
            -
            
            
            1,857
            
            
            
            
            
            7,740,999
            
            
            -
            
            
            -
            
            
            -
            
            
            7,742,851Net income
                for the nine months ended September 30, 2008
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,775,974
            
            
            -
            
            
            1,775,974Deemed
              dividend on
              preferred shares issued
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            7,031,818
            
            
            
            
            
            (7,031,818
            )Preferred
              stock
              dividends
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (59,000
            )
            
            
            
            
            (59,000
            )Transfer
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            706,772
            
            
            (706,772
            )
            
            -
            
            
            -Cumulative
                translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (226,469
            )
            
            (290,745
            )
            
            -
            
            
            377,403
            
            
            (139,811
            )Balance,
                September 30, 2008
            
            
            100,000,041
            
            
            1,857,373
            
            
            0
            
            $
            100,000
            
            $
            1,857
            
            $
            0
            
            $
            20,165,567
            
            $
            2,319,061
            
            $
            (1,234,909
            )
            $
            566,413
            
            $
            21,917,989


5




CHINA
      NEW
      ENERGY GROUP COMPANY


NOTES
      TO
      CONSOLIDATED FINANCIAL STATEMENTS





**1.
      The Company**




Travel
      Hunt Holdings, Inc. (t he
      "Company") was incorporated under the laws of the State of Florida on December
      17, 1999. On July 15, 2003, Travel Hunt Holdings, Inc. acquired all the
      outstanding shares of Travel Hunt, Inc., an inactive Florida corporation with
      no
      assets or liabilities for 700,000 common shares of Travel Hunt Holdings, Inc.
      The transaction was accounted for as a combination of entities under common
      control and accordingly we recorded the merger at historical cost. Accordingly,
      all shares and per share amounts have been retroactively restated. From and
      after April 26, 2007, the Company ceased its prior business operations and
      began
      exploring potential targets for a business combination through a purchase of
      assets, share purchase or exchange, merger or similar type of transaction.




On
      August
      29, 2007, the Board of Directors approved a 1 for 10 reverse stock split in
      connection with the reincorporation of the Company from Florida to Delaware.
      This reincorporation and reverse stock split was effected on October 11, 2007.




The
      reincorporation merger agreement provided for the merger of the Company with
      and
      into Travel Hunt Holdings, Inc., a Delaware corporation (referred to for
      purposes of this section as TVLH-Delaware), and resulted in:




·
a
      change of domicile of the Company from the State of Florida to the State of
      Delaware;




·
the
      right of the Company's shareholders to receive one (1) share of common stock,
      par value $0.001 per share, of TVLH-Delaware for each ten (10) shares of the
      Company's common stock, par value $0.001 per share, owned as of the effective
      time of the reincorporation merger;




·
the
      persons presently serving as the Company's executive officers and directors
      serving in their same respective positions with TVLH-Delaware;




·
the
      adoption of a new Certificate of Incorporation under the laws of Delaware
      pursuant to which the Company's authorized capital stock remained 110,000,000
      shares of authorized capital stock, consisting of 100,000,000 shares of common
      stock, par value $0.001 per share, and 10,000,000 shares of "blank check"
      preferred stock, par value $0.001 per share, with the right conferred upon
      the
      Board of Directors to set the dividend, voting, conversion, liquidation and
      other rights, as well as the qualifications, limitations and restrictions,
      with
      respect to the preferred stock as the Board of Directors may determine from
      time
      to time; and the adoption of new Bylaws under the laws of the State of Delaware.




The
      Company owns all of the issued and outstanding capital stock of Willsky
      Development Limited, a British Virgin Islands company ("Willsky Development"),
      which in turn owns 99% of the outstanding capital stock of SingOcean. The
      remaining 1% of SingOcean is owned by Tianjin Nanyang Mechanical and Electrical
      Equipments Installment Project Co. SingOcean owns 100% of each of Acheng
      SingOcean and Dashiqiao SingOcean, and 99% of Hunchun SingOcean. The remaining
      1% of Hunchun SingOcean is owned by an individual. Aching SingOcean and
      Dashiqiao SingOcean are divisions of SingOcean and not separate entities. These
      divisions are principally responsible for the construction and operation of
      the
      natural gas distribution networks in the cities of Acheng and Dashiqiao,
      respectively.





On
      May
      27, 2008, the Company changed its name to China New Energy Group
      Company.





On
      September 16, 2008, the Company, through its wholly-owned subsidiary
      Tianjin SingOcean Public Utility Development Co., Ltd., entered into an Equity
      Swap Agreement with Mr. Xiu Hai Tian, whereby the Company
      acquired from Mr. Xiu a 49% ownership interest in Qinhuangdao
      Chensheng Gas Ltd., or Chensheng Gas, in exchange for the Company's 99%
      ownership in Hunchun SingOcean Energy Ltd. , or Hunchun SingOcean. The parties
      to the Equity Swap Agreement determined that the value of the 49% interest
      in
      Chensheng Gas and the 99% interest in Hunchun SingOcean were approximately
      equal
      and therefore there was no cash consideration involved in the transaction from
      either party.




6




The
      following chart reflects the Company’s organizational structure as of the date
      of this report.











The
      Company is a vertically integrated natural gas company engaged in the
      development of natural gas distribution networks, the distribution of natural
      gas to residential and industrial customers in small and medium sized cities
      in
      China and the exploration and recovery of natural gas reserves.





**2.
      Summary of Significant Accounting Policies**





**(a)
      Basis of Presentation**


The
      financial statements are prepared in accordance with the accounting principles
      generally accepted in the United States of America (“US GAAP”).





**(b)
      Use of Estimates**


In
      preparing consolidated financial statements in conformity with US GAAP,
      management is required to make estimates and assumptions that affect the
      reported amounts of assets and liabilities and the disclosure of contingent
      assets and liabilities at the date of the financial statements and revenues
      and
      expenses during the reported periods. Significant estimates include
      depreciation. Actual results could differ from those estimates.





**(c)**  **Principles
      of consolidation**


The
      consolidated financial statements include the accounts of the Company and all
      of
      its subsidiaries. All significant intercompany transactions and accounts have
      been eliminated in consolidation. Certain prior year amounts have been
      reclassified to conform with current year classifications.





**(d)
      Cash and Cash Equivalents**


The
      Company considers all highly liquid investments with original maturities of
      three months or less at the time of purchase to be cash equivalents. As of
      September 30, 2008 and 2007, the Group did not have any cash
      equivalents.





**(e)
      Plant and Equipment**


Plant
      and
      equipment is stated at cost. Depreciation is provided principally by use of
      the
      straight-line method over the useful lives of the related assets, except for
      leasehold properties, which are depreciated over the terms of their related
      leases or their estimated useful lives, whichever is less. Expenditures for
      maintenance and repairs, which do not improve or extend the expected useful
      life
      of the assets, are expensed to operations while major repairs are
      capitalized.




7




The
      estimated useful lives are as follows:





Leasehold
                improvements
            
            3
                yearsComputer
                equipment
            
            3
                yearsFurniture
                & fixture
            
            5
                yearsOffice
                equipment
            
            5
                yearsExploration
                equipment
            
            5
                yearsMotor
                vehicle
            
            5
                yearsGas
                transportation vehicle
            
            5
                yearsGas
                station
            
            40
                years and 50 yearsUnderground
                gas pipeline
            
            40
                years and 50 years





The
      gain
      or loss on disposal of property, plant and equipment is the difference between
      the net sales proceeds and the carrying amount of the relevant assets, and,
      if
      any, is recognized in the statement of operations.





**(f)**  **Intangible
      Assets**


Intangible
      asset consist of land use right in both Daishiquiao City and Acheng City.





According
      to Chinese regulations, land belongs to the nation. Land use right refers to
      the
      purchase of the legal right to use land from the government. The term of the
      land use right is 50 years. The land use right is amortized using the
      straight-line method over their estimated useful life 50 years.





**(g)**  **Inventories**


Inventories
      consist of IC card, gas meter, PE valves and natural gas and are valued at
      the
      lower of cost or market value using weighted average cost method of accounting.





**(h)**  **Goodwill**


Goodwill
      represents the excess of the purchase price over the fair value of the net
      tangible and identifiable intangible assets acquired in a business combination,
      In accordance with Statement of Financial Accounting Standards No. 142 or SFAS
      No. 142, “Goodwill” and Other Intangible Assets”, goodwill is no longer subject
      to amortization. Rather, goodwill is subject to at least an annual assessment
      for impairment, applying a fair-value based test fair value is generally
      determined using a discounted cash flow analysis.





**(i)
      Impairment of Assets**


In
      accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144,
      "Accounting for Impairment or Disposal of Long-Lived Assets", the Company
      evaluates its long-lived assets to determine whether later events and
      circumstances warrant revised estimates of useful lives or a reduction in
      carrying value due to impairment. If indicators of impairment exist and if
      the
      value of the assets is impaired, an impairment loss would be recognized. As
      of
      September 30, 2008 and 2007, no impairment loss has been
      recognized.





**(j)
      Income Taxes**


The
      Group
      accounts for income taxes under SFAS No. 109, "Accounting for Income Taxes".
      Under SFAS No. 109, deferred tax assets and liabilities are recognized for
      the
      future tax consequences attributable to differences between the financial
      statement carrying amounts of existing assets and liabilities and their
      respective tax bases. Deferred tax assets and liabilities are measured using
      enacted tax rates expected to apply to taxable income in the years in which
      those temporary differences are expected to be recovered or settled. Under
      SFAS
      No. 109, the effect on deferred tax assets and liabilities of a change in tax
      rates is recognized in income in the period that includes the enactment
      date.





**(k)
      Revenue Recognition**


Natural
      gas revenues are recorded based on the amount of product delivered to customers
      through its pipeline and checked by its gas meter.





Connection
      fees which relate to the hookup from the street pipeline to the customer are
      charged to both residential and commercial customers. This revenue segment
      accounts for a majority of the Company’s revenue. The connection fees are
      recognized as revenue upon the completion of the jobs by the contractor, the
      installation is checked and accepted by the Company’s technical staff and
      acceptance by the customer.




8




**(l)
      Foreign Currency Transactions**


The Company
      functional currency is Renminbi (“RMB”) and its reporting currency is U.S.
      dollars. The Company’s consolidated balance sheet accounts are translated into
      U.S. dollars at the year-end exchange rates and all revenue and expenses are
      translated into U.S. dollars at the average exchange rates prevailing during
      the
      periods in which these items arise. Translation gains and losses are deferred
      and accumulated as a component of other comprehensive income in stockholders’
equity. Transaction gains and losses that arise from exchange rate fluctuations
      from transactions denominated in a currency other than the functional currency
      are included in the statement of operations as incurred. The translation and
      transaction gains and losses were immaterial for the period ended September
      30,
      2008 and 2007.





The
      PRC
      government imposes significant exchange restrictions on fund transfers out
      of
      the PRC that are not related to business operations. These restrictions have
      not
      had a material impact on the Company because it has not engaged in any
      significant transactions that are subject to the restrictions.





**(m)
      Fair Value of Financial Instruments**


SFAS
      No.
      107, “Disclosures about Fair Values of Financial Instruments”, requires
      disclosing fair value to the extent practicable for financial instruments that
      are recognized or unrecognized in the balance sheet. The fair value of the
      financial instruments disclosed herein is not necessarily representative of
      the
      amount that could be realized or settled, nor does the fair value amount
      consider the tax consequences of realization or settlement.





For
      certain financial instruments, including cash, accounts and other receivables,
      accounts payable, accruals and other payables, it was assumed that the carrying
      amounts approximate fair value because of the near term maturities of such
      obligations. The carrying amounts of long-term loans approximate fair value
      as
      the interest on these loans is minimal.





**(n)
      Earnings Per Share**


Basic
      earnings per share is computed by dividing the earnings for the year by the
      weighted average number of common shares outstanding for the period. Diluted
      earnings per share reflects the potential dilution of securities by including
      other potential common stock, including stock options and warrants, in the
      weighted average number of common shares outstanding for a period, if
      dilutive.





**(o)
      Accumulated Other Comprehensive Income**


Accumulated
      other comprehensive income represents the change in equity of the Group during
      the periods presented from foreign currency translation
      adjustments.




**(p)**  **Profit
      Appropriation**


In
      accordance with PRC regulations, the Company is required to make appropriations
      to the statutory surplus reserve, based on after-tax net income determined
      in
      accordance with PRC GAAP. Appropriation to the statutory surplus reserve should
      be at least 10% of the after-tax net income determined in accordance with the
      PRC GAAP until the reserve is equal to 50% of the entity’s registered capital.
      Statutory surplus reserve is non-distributable other than in liquidation.





**(q)
      Stock-Based Compensation**


In
      March
      2004, the FASB issued a proposed statement, Share-Based Payment, which addresses
      the accounting for share-based payment transactions in which an enterprise
      receives employee services in exchange for equity instruments of the enterprise
      or liabilities that are based on the grant-date fair value of the enterprise's
      equity instruments or that may be settled by the issuance of such equity
      instruments. The proposed statement would eliminate the ability to account
      for
      share-based compensation transactions using Accounting Principles Board ("APB")
      Opinion No. 25, Accounting for Stock Issued to Employees, and generally would
      require instead that such transactions be accounted for using a fair-value-based
      method. In December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment,
      which is a revision of SFAS No. 123. Generally, the approach in SFAS No. 123(R)
      is similar to the approach described in SFAS No. 123. However, SFAS No. 123(R)
      requires all share-based payments to employees, including grants of employee
      stock options, to be recognized in the income statement based on their
      grant-date fair values. Pro forma disclosure is no longer an alternative.




9




As
      permitted by SFAS No. 123, for 2005, the Company accounted for share-based
      payments to employees using APB Opinion No. 25's intrinsic value method and,
      as
      such, generally recognized no compensation cost for employee stock options.





Effective
      January 1, 2006, we have adopted SFAS No. 123(R)'s fair value method of
      accounting for share based payments. Accordingly, the adoption of SFAS No.
      123(R)'s fair value method may have a significant impact on the Company's
      results of operations as we are required to recognize the cost of employee
      services received in exchange for awards of equity instruments based on the
      grant-date fair value of those awards. SFAS No. 123(R) permits public companies
      to adopt its requirements using either the "modified prospective" method or
      the
      "modified retrospective" method.





The
      Company adopted SFAS No. 123(R) using the modified prospective method. In April
      2005, the SEC delayed the effective date of SFAS No. 123(R), which is now
      effective for public companies for annual, rather than interim periods that
      begin after June 15, 2005. The impact of the adoption of SFAS No. 123(R) cannot
      be predicted at this time because it will depend on levels of share-based
      payments granted in the future.





**(r)
      Seasonality**




Our
      pipeline distribution networks are primarily located in northeastern China,
      which is extremely cold during the winter months. During such time, we are
      unable to construct primary gas pipelines. However, if a primary pipeline is
      already in place, we are able to connect new customers to our distribution
      network during the winter months.





Additionally,
      gas consumption by residential customers is higher in the winter months for
      heating purposes, and we see a corresponding increase in usage fees during
      that
      time.





**(s)
      New Accounting Pronouncements**





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” and is effective for fiscal years
      beginning after November 15, 2007. This Statement permits entities to choose
      to
      measure many financial instruments and certain other items at fair value. The
      objective is to improve financial reporting by providing entities with the
      opportunity to mitigate volatility in reported earnings caused by measuring
      related assets and liabilities differently without having to apply complex
      hedge
      accounting provisions. The Company is currently assessing the impact the
      adoption of this pronouncement will have on the financial
      statements.





In
      December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in
      Consolidated Financial Statements-an amendment of ARB No. 51” and is effective
      for fiscal years beginning after December 5, 2008. This Statement establishes
      accounting and reporting standards for the noncontrolling interest in a
      subsidiary and for the deconsolidation of a subsidiary. The Company is currently
      assessing the impact the adoption of this pronouncement will have on the
      Company’s financial statements.





In
      December 2007, the FASB issued SFAS No. 141 (Revised) “Business Combinations”.
      SFAS 141 (Revised) is effective for fiscal years beginning after December 13,
      2008. This Statement establishes principles and requirements for how the
      acquirer of a business recognizes and measures in its financial statements
      the
      identifiable assets acquired, the liabilities assumed, and any noncontrolling
      interest in the acquiree. The Statement also provides guidance for recognizing
      and measuring the goodwill acquired in the business combination and determines
      what information to disclose to enable users of the financial statements to
      evaluate the nature and financial effects of the business combination. The
      Company is currently assessing the impact the adoption of this pronouncement
      will have on the Company’s financial statements.





In
      February 2008, the Financial Accounting Standards Board (“FASB”) issued FASB
      Staff Position (“FSP”) No. FAS 157-2, “Effective Date of FASB Statement No. 157”
(“FSP FAS 157-2”), which delays the effective date of Statement of Financial
      Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”)
      for all non-financial assets and non-financial liabilities, except those that
      are recognized or disclosed at fair value in the financial statements on a
      recurring basis (at least annually) for fiscal years beginning after November
      15, 2008, and interim periods within those fiscal years for items within the
      scope of this FSP. We are currently evaluating the impact of adopting FSP FAS
      157-2 for non-financial assets and non-financial liabilities on our financial
      position, cash flows, and results of operations. We have considered all other
      recently issued accounting pronouncements and do not believe the adoption of
      such pronouncements will have a material impact on our consolidated financial
      statements.




10




**3.
      Reverse Merger**




On
      March
      28, 2008, we completed a reverse acquisition transaction with Willsky
      Development whereby we issued to the shareholders of Willsky Development
      94,908,650 shares of our common stock in exchange for all of the issued and
      outstanding capital stock of Willsky Development. Willsky Development thereby
      became our wholly owned subsidiary and the former shareholders of Willsky
      Development became our controlling stockholders.




For
      accounting purposes, the share exchange transaction was treated as a reverse
      acquisition with Willsky Development as the acquirer and Travel Hunt Holdings,
      Inc. as the acquired party. When we refer in this report to business and
      financial information for periods prior to the consummation of the reverse
      acquisition, we are referring to the business and financial information of
      Willsky Development on a consolidated basis unless the context suggests
      otherwise.




In
      connection with consummation of the transactions contemplated by the Share
      Exchange Agreement, we issued Warrants for the purchase of a number of
      shares of our common stock equal to an aggregate of two percent (2%) of our
      issued and outstanding common stock as of immediately after the closing of
      our
      next private placement transaction in which we receive gross proceeds of at
      least $8,000,000 million. The term of the Warrants is 5 years and each has
      an
      exercise price equal to 150% of the price attributable to a share of common
      stock at the valuation attributable to us in the transaction on “post-money”
basis.




The
      fair
      value of the share purchase warrants issued on March 28, 2008, was in the amount
      of $910,000, which was determined using the Black-Scholes option value model
      with the following assumptions:




Expected
                Dividend Yield
            
            
            0.00
            %Risk
                Free Interest Rate
            
            
            4.00
            %Expected
                Volatility
            
            
            00.00
            %Expected
                Option Life (in years average)
            
            
            5.00





The
      fair
      value amount is included on the balance sheet as accrued derivative liability
      in
      the amount of $910,000 with a like amount included as other expense on the
      statement of operations.





The
      Company also issued Promissory Notes in the aggregate principal amount of
      $660,000 bearing interest at the rate of 2.5% per annum. The principal and
      accrued interest is payable on September 30, 2008, except that the Notes will
      accelerate and become payable upon the consummation of a private placement
      transaction in which the Company sells or issues shares of common stock in
      which
      gross proceeds are $1,000,000 or more. If the principal and accrued interest
      is
      not paid in full at maturity or upon the acceleration described above, or upon
      an event of default, the notes will become convertible into shares totaling
      15%
      of then outstanding common stock. Management has not recorded the beneficial
      conversion feature of this convertible note since it intends to pay the Notes
      in
      cash as they become due.




11





**4.
      Retirement and Welfare Benefits**





The
      Group
      has no retirement plans or post-employment benefit for its
      employees.





**5.
      Capital stock transactions**




**Series
      A Convertible Preferred Stock**




In
      connection with the August 20, 2008 private placement, the Company filed a
      Certificate of Designations of Preferences, Rights and Limitations of Series
      A
      Convertible Preferred Stock with the Secretary of State of the State of Delaware
      (the "Certificate").  Pursuant to the Certificate, there are 5,550,000
      shares of Series A Convertible Preferred Stock  ("Preferred Stock")
      authorized.  On August 20, 2008, the Company issued 1,857,373 shares of
      Preferred Stock to China Hand Fund I, LLC.  Pursuant to the terms of
      the Certificate, the holders of the Preferred Stock will be entitled to
      cumulative dividends at a rate of 6% of the price paid per share, as may be
      adjusted in accordance with the Certificate, per annum compounded daily and
      payable semi-annually. In addition to the right to vote as a separate class
      of securities, the holders of the Preferred Stock are entitled to vote together
      with the holders of the Company’s common stock, with each such holder of
      Preferred Stock entitled to the number of votes equal to the number of shares
      of
      the Company’s common stock in to which such Preferred Stock would be converted
      if converted on the record date for the taking of a vote.





Each
      share of Preferred Stock is initially convertible, at any time at the sole
      option of the holder of such Preferred Stock, into 35 shares of the Company’s
      common stock, subject to future adjustments as provided for in the Certificate.
      The Preferred Stock shall automatically convert into shares of the Company’s
      common stock immediately prior to any transaction resulting in a change in
      control of the Company. Further, the Company shall have the right to convert
      the
      preferred stock at any time following the achievement of certain
      performance milestones as prescribed by the Certificate. The Company has
      determined that there is no derivative liability attached to the preferred
      stock
      conversion rights as of September 30, 2008.




**Warrants**




On
      August
      20, 2008, the Company consummated a private placement transaction in which
      it
      issued and sold to China Hand Fund I, LLC 1,857,373 shares of the Company's
      Series A Preferred Stock and warrants to purchase 13,001,608 shares of the
      Company's common stock at an initial exercise price of $0.187 per share (subject
      to adjustments) for a period of 5 years following the date of issuance, for
      a
      purchase price of $9 million.  Currently, none of the warrants have been
      exercised. The Company has determined that the requirements of EITF 00-19 do
      not
      apply to this transaction.




The
        fair
        value of the 13,001,608 warrants issued with the Series A Convertible Preferred
        Stock was $1,968,182. The fair value was computed using the Black-Scholes
        model
        under the following assumptions: (1) expected life of 5 years, (2) volatility
        of
        66%, (3) risk free interest rate of 3% and dividend rate of 0%. In addition,
        since this convertible preferred stock is convertible into shares of common
        stock at a one to thirty-five ratio an embedded beneficial conversion feature
        was recorded as a discount to additional paid-in capital in accordance with
        Emerging Issues Task Force No. 00-27, “Application of Issue No. 98-5 to Certain
        Convertible Instruments.” The intrinsic value of the beneficial conversion
        feature has been recorded as a preferred stock dividend at the date of issuance.
        The Company recognized $7,031,818 of preferred dividends related to the
        beneficial conversion feature.




**6.
      Concentrations and Credit Risk**





The
      Group
      operates principally in the PRC and grants credit to its customers in this
      geographic region. Although the PRC is economically stable, it is always
      possible that unanticipated events in foreign countries could disrupt the
      Company’s operations.





Financial
      instruments that potentially subject the Group to a concentration of credit
      risk
      consist of cash and accounts receivable.




The
      Company does not require collateral to support financial instruments that are
      subject to credit risk.




**7.
      Discontinued Operations**





As
      discussed in Note 1 to the financial statements effective September 26, 2008,
      the Company entered into an asset swap in which it disposed of subsidiary
      Hunchun SingOcean including substantially all of the assets.





In
      accordance with SFAS No. 144, “Accounting for the Impairment of
      Long-Lived Assets”, Hunchun SingOcean operation is being accounted for as
      discontinued operations and, accordingly, its operating results is segregated
      and reported as discontinued operations in the accompanying consolidated
      statement of operations in 2008 and 2007. The results of operations of Hunchun
      SingOcean operation for the period ended September 30, 2008 and 2007 are as
      follows:




12





Period
                ended
              September
                30, 2008
            
            Period
                ended
              September
                30, 2007Revenue
            
            
            459,506
            
            
            761,956Operating
                Income/(loss)
            
            
            295,701
            
            
            494,505





**8.
      Commitments and Contingencies**





The
      Company is obligated to provide uninterrupted piped gas to connected users
      and
      to ensure the safety in the process of piped gas operation. The volume of gas
      to
      be supplied by the Company will grow with the increase of gas users. The Company
      has selected three qualified gas resource suppliers to ensure the stable
      operation to meet its’ obligation.





From
      time
      to time, the Company may become involved in various lawsuits and legal
      proceedings which arise in the ordinary course of business. The Company is
      currently not aware of any such legal proceedings or claims that we expect
      will
      have a material adverse affect on our business, financial condition or operating
      results.





However,
      litigation is subject to inherent uncertainities, and an adverse result in
      these
      or other matters may arise from time to time that may harm our
      business.




**9.
      Operational Rights and Right to Supply and Operate Gas
      Pipeline**





The
      Company has signed the “Investment Agreement of Piped Gas Project Construction
      in Daishiquiao” which states that the Company is in charge of operations and
      management of the piped gas project in Daishiquiao. On June 16, 2005, the
      Daishiquiao City Construction Bureau gave the Company a certificate which
      confirmed that the Company has exclusive operational rights for thirty years
      in
      Daishiquiao.





The
      Company has signed an “Investment Agreement of Pipes Gas Project Construction in
      Acheng” which states that the Company has the exclusive right to invest in and
      operate gas pipeline system in Acheng for thirty years.





**10.
      Environmental Matters**





The
      Company does not anticipate any material future cash requirements relating
      to
      environmental issues. If circumstances change the Company will record the
      estimated charges to return sites to their original condition.




13




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





***Special
      Note Regarding Forward Looking Statements***





This
      Quarterly Report on Form 10-Q, including the following “Management’s Discussion
      and Analysis of Financial Condition and Results of Operations,” contains
      forward-looking statements that are based on the beliefs of our management,
      and
      involve risks and uncertainties, as well as assumptions, that, if they ever
      materialize or prove incorrect, could cause actual results to differ materially
      from those expressed or implied by such forward-looking statements. The words
      “believe,” “expect,” “anticipate,” “project,” “targets,” “optimistic,” “intend,”
“aim,” “will” or similar expressions are intended to identify forward-looking
      statements. All statements, other than statements of historical fact, are
      statements that could be deemed forward-looking statements, including statements
      regarding new and existing products and services, technologies and
      opportunities; statements regarding market and industry segment growth and
      demand and acceptance of new and existing products; any projections of sales,
      earnings, revenue, margins or other financial items; any statements of the
      plans, strategies and objectives of management for future operations; any
      statements regarding future economic conditions or performance; uncertainties
      related to conducting business in China; any statements of belief or intention;
      any of the factors and risks mentioned in the “Risk Factors” sections of our
      Current Report on Form 8-K filed with the Securities and Exchange Commission
      on
      March 31, 2008, as amended on April 11, 2008 and June 26, 2008, and any
      statements of assumptions underlying any of the foregoing. All forward-looking
      statements included in this report are based on information available to us
      on
      the date of this report. We assume no obligation and do not intend to update
      these forward-looking statements, except as required by law.





***Certain
      Terms***





In
      this
      report, unless indicated otherwise, references to:




“China
      New Energy,” the “Company,” “we,” “us,” or “our” refer to China New Energy Group
      Company and all of its subsidiaries and divisions;




“Willsky
      Development” refer to Willsky Development, Ltd.




“SingOcean”
      refer to Tianjin SingOcean Public Utility Development Co., Ltd.;




“Hunchun
      SingOcean” refer to Hunchun SingOcean Ocean Energy Co., Ltd.;




“Acheng
      SingOcean” refer to Tianjin Sing Ocean Public Utility Development Co., Ltd. -
      Acheng Division;




“Dashiquio
      SingOcean” refer to Tianjin Sing Ocean Public Utility Development Co., Ltd. -
      Dashiquio Division;





“Chensheng
      Gas” refer to Qiuhuangdao Chensheng Gas Co., Ltd.




“China,”
      “Chinese” and “PRC” refer to the People’s Republic of China;




“BVI”
      refer to the British Virgin Islands;




“SEC”
      refer to the United States Securities and Exchange Commission;




“Securities
      Act” refer to the Securities Act of 1933, as amended;




“Exchange
      Act” refer to the Securities Exchange Act of 1934, as amended;




“RMB”
      refer to Renminbi, the legal currency of China; and




“U.S.
      dollar,” “$” and “US$” refer to the legal currency of the United
      States.




14




***Overview
      of Our Business***





We
      are a
      vertically integrated natural gas company engaged in the development of natural
      gas distribution networks, the distribution of natural gas to residential and
      industrial customers in small and medium sized cities in China and the
      exploration and recovery of natural gas reserves.





We
      currently own the exclusive rights to develop distribution networks to provide
      natural gas to industrial, commercial and domestic consumers in the cities
      of
      Dashiqiao, Acheng and Nandaihe. Currently, these distribution networks provide
      natural gas to an aggregate of approximately 45,000 consumers in these cities,
      and we anticipate that we will be able to extend these distribution networks
      to
      connect in excess of 53,000 consumers in these cities.





We
      presently have the capability to provide both natural gas and liquefied
      petroleum gas, or LPG, and to deliver natural gas or LPG in a variety of ways.
      Pure LPG and air-mixed LPG are transmitted through pipelines and natural gas
      in
      the form of compressed natural gas, or CNG, or liquefied natural gas, or LNG,
      are transported in trucks and then transmitted through pipelines after
      depressurization or vaporization, respectively.





We
      are
      able to procure our natural gas in two ways. We can either mine the natural
      gas
      ourselves from deposits for which we have exclusive exploitation rights, or
      we
      can purchase natural gas from third-party suppliers. Historically, we have
      purchased the majority of our gas from natural gas suppliers, though as we
      begin
      more extensive exploration and exploitation activities on our deposits, we
      may
      rely more heavily on self-procurement.





Once
      natural gas is extracted, all water content and impurities are removed. Natural
      gas is then delivered by truck to either (1) our natural gas supply stations,
      where the gas is either depressurized and then delivered to households through
      pipelines or delivered directly to customers in pressurized tanks, or (2) to
      gas
      stations where the gas is sold for use in motor vehicles.





Our
      major
      business activities include development and construction of local gas
      distribution networks, transportation of natural gas from suppliers to our
      storage facilities in a given operational location, and operating and
      maintaining the gas distribution networks. However, our primary strategic focus
      is the exploration and recovery of natural gas resources, which will allow
      us to
      control every aspect of our supply chain from the mining of the natural gas
      to
      the transportation of the gas to our holding facilities, such as supply stations
      and gas stations, to the delivery of our gas to our customers.




15




In
      connection with this private placement, we agreed to certain make good
      provisions that will require us to issue to China Hand up to an aggregate of
      1,114,442 (557,221 shares for each of 2008 and 2009) additional shares of our
      Series A Preferred Stock if we do not achieve the targeted after-tax net income
      and earnings per share targets for 2008 and 2009. The 2008 after tax net income
      target is $4.3 million and the 2008 earnings per share target is 0.0261 on
      a
      fully-diluted basis. The 2009 after tax net income target, or the 2009 ATNI
      Target, is $6.0 million and the 2009 earnings per share target, or 2009 EPS
      Target, is $0.0294 on a fully diluted basis; provided that if a subsequent
      closing under this private placement does not occur within 30 days of the filing
      of our 2008 annual report on Form 10-K, then the 2009 ATNI Target is reduced
      to
      $4.5 million and the 2008 EPS Target is reduced to $0.0273.





**Private
        Placement**
 
 On
        August
        20, 2008, we completed a private placement in which we sold to China Hand
        and
        its designees 1,857,373 shares of our Series A Preferred Stock and warrants
        to
        purchase 13,001,608 shares of our common stock at an initial exercise price
        of
        $0.187 per share (subject to adjustments) for a period of 5 years following
        the
        date of issuance, for a purchase price of $9,000,000.
 
 As
        a
        result of this private placement, we raised approximately $9 million in gross
        proceeds, which left us with approximately $6.8 million in net proceeds after
        the deduction of offering expenses in the amount of approximately $2.2 million.
        Kuhns Brothers Securities Corporation, or Kuhns Brothers, acted as placement
        agent in connection with this private placement. As compensation for its
        services, Kuhns Brothers received a cash fee equal to $900,000, representing
        10%
        of the gross proceeds received from the private placement, as well as warrants
        to purchase 6,500,804 shares of our common stock, representing 10% the aggregate
        number of shares of common stock issuable to China Hand in the private placement
        upon conversion of the Series A Preferred Stock. We are under contractual
        obligation to register the shares of our common stock within a pre-defined
        period.




***Our
      Current Organizational Structure***




On
      March 28, 2008, we completed a reverse acquisition
      transaction with Willsky Development whereby we issued to the shareholders
      of
      Willsky Development 94,908,650 shares of our common stock in exchange for all
      of
      the issued and outstanding capital stock of Willsky Development. Willsky
      Development thereby became our wholly owned subsidiary and the former
      shareholders of Willsky Development became our controlling stockholders. For
      accounting purposes, the share exchange transaction was treated as a reverse
      acquisition with Willsky Development as the acquirer and Travel Hunt Holdings,
      Inc. as the acquired party. On May 27, 2008, we changed our name from Travel
      Hunt Holdings, Inc. to China New Energy Group Company.




We
      own
      all of the issued and outstanding capital stock of Willsky Development, which
      in
      turn owns 99% of the outstanding capital stock of SingOcean. The remaining
      1% of
      SingOcean is owned by Tianjin Nanyang Mechanical and Electrical Equipments
      Installment Project Co. SingOcean owns 100% of each of Acheng SingOcean and
      Dashiqiao SingOcean, and 49% of Chensheng Gas. The remaining 51% of Chensheng
      Gas is owned by 16 individuals, though we expect to acquire this remaining
      51%
      by the end of 2008. Aching SingOcean and Dashiqiao SingOcean are divisions
      of
      SingOcean and not separate entities. These divisions are principally responsible
      for the construction and operation of the natural gas distribution networks
      in
      the cities of Acheng and Dashiqiao, respectively. Chensheng Gas is a natural
      gas
      distribution company operating in the Nandaihe area in Northern China, which
      could potential provide natural gas to 50,000 individuals, and we anticipate
      that it will connect to an excess of 20,000 customers over the next three to
      five years.




On
      September 16, 2008, we, through our
      wholly-owned subsidiary Tianjin SingOcean Public Utility Development Co., Ltd.,
      entered into an Equity Swap Agreement with Mr. Xiu Hai Tian, whereby we
      acquired from Mr. Xiu a 49% ownership interest in Chensheng Gas, in
      exchange for our 99% ownership in Hunchun SingOcean. The parties to the
      Equity Swap Agreement determined that the value of the 49% interest in Chensheng
      Gas and the 99% interest in Hunchun SingOcean were approximately equal and
      therefore there was no cash or other consideration involved in the transaction
      from either party. The foregoing description of the Agreement is qualified
      in
      its entirety by reference to the full text of the Equity Swap Agreement filed
      as
      Exhibit 10.1 hereto.





The
      following chart reflects our organizational structure as of the date of this
      report.










16




***Third
      Quarter Financial Performance Highlights***





We
      continued to experience strong demand for our products and services during
      the
      third fiscal quarter of 2008 and growth in our revenues and net
      income.





The
      following are some financial highlights for the third quarter of 2008:





·
            Revenues:
                Our revenues were $2,253,858 for the third fiscal quarter of 2008,
                and
                increase of 26.18% from the same period of 2007.





·
            Gross
                Margin: Gross margin was $1,678,232 for the third fiscal quarter
                of 2008,
                an increase of 26.06% from the same period of 2007.





·
            Operating
                Income: Operating Income was $1,332,138 for the third fiscal quarter
                of 2008,as
                compared to a profit from operations of $1,222,268 during the same
                period
                of 2007.





·
            Net
                Income: Net Income was $900,357 for the third fiscal quarter of 2008,
                as compared to net income of $1,026,779 during the same period of
                2007.





·
            Fully
                diluted loss per share was $0.009 for the third fiscal quarter of
                2008.





***Results
      of Operations***





***Nine
      Months Ended September 30, 2008 Compared to Nine Months Ended September 30,
      2007***





The
      following table summarizes the results of our operations during the nine-month
      periods ended September 30, 2008 and ended September 30, 2007, and provides
      information regarding the dollar and percentage increase or (decrease) from
      the
      nine-month period ended September 30, 2007 to the nine-month period ended
      September 30, 2008.





All
      amounts in thousands of U.S. dollars, except percentages


**Nine Months**
              **Ended**
              **September 30,**
              **2008**
            
            **Nine Months**
              **Ended**
              **September 30,**
              **2007**
            
            **Percentage**
              **Change**
              **(Decrease)**Revenues
            
            $
            4,236,987
            
            $
            3,041,306
            
            
            39.3
            %Cost
                of revenue
            
            $
            (1,128,901
            )
            $
            785,387
            
            
            43.7
            %Gross
                Profit
            
            $
            3,108,086
            
            $
            2,255,919
            
            
            37.8
            %Selling,
                general and administrative expenses
            
            $
            (813,975
            )
            $
            321,110
            
            
            545
            %Operating
                Income (Expenses)
            
            $
            2,294,111
            
            $
            1,934,809
            
            
            (18.6
            )%Other
                Income and (Expenses)Minority
                interest
            
            $
            (46,277
            )
            $
            13,672
            
            
            238.1
            %Other
                income (expense)
            
            $
            9,974
            
            $
            (7,095
            )
            
            240.6
            %Income
                (loss) before income taxes
            
            $
            2,304,085
            
            $
            1,927,714
            
            
            (19.5
            )%Income
                taxes
            
            $
            (705,244
            )
            $
            598,193
            
            
            17.9
            %Net
                income (loss)
            
            $
            1,775,974
            
            $
            1,648,869
            
            
            (7.7
            )%




17




*Revenues* .
      Revenues are derived primarily from connection fees and sales of natural gas.
      Revenues increased $1,195,681, or 39.3% to $4,236,987 for the nine months ended
      September 30, 2008 from $3,041,306 for the same period in 2007. This increase
      was mainly attributable to the increase in our customer base.





*Cost
      of Sales.* Cost of
      sales consist primarily of the purchase of natural gas from our suppliers. ** Our cost
      of sales increased $343,514, or 43.7%, to $1,128,901 for the nine months ended
      September 30, 2008 from $785,387 during the same period in 2007. As a percentage
      of revenues, the cost of sales increased to 26.6% during the nine months ended
      September 30, 2008 from 25.8% in the same period in 2007, which was mainly
      attributable to an increase in our customer base as well as an increase in
      our
      purchasing price of natural gas.





*Gross
      Profit.* Our
      gross profit increased $852,167, or 37.8%, to $3,108,086 for the nine months
      ended September 30, 2008 from $2,255,919 during the same period in 2007. Gross
      profit as a percentage of revenues was 73.4% for the nine months ended September
      30, 2008, a decrease of 0.8% from 74.2% during the same period in 2007. Such
      percentage decrease was mainly due to an increase in our purchasing price of
      natural gas.





*Selling,
      General and Administrative Expenses.* Selling,
      general and administrative expenses, including sales representative commissions,
      promotion fees, salesperson salaries and expenses, depreciation charges and
      other fees increased $492,865, or 153%, to $813,975 for the nine months ended
      September 30, 2008 from $321,110 during the same period in 2007. As a percentage
      of revenues, selling expenses increased to 19.2% for the nine months ended
      September 30, 2008 from 10.6% for the same period in 2007. Such dollar increase
      of selling, general and administrative expenses was mainly attributable to
      an
      increase in our operations since September 30, 2007.





*Income
      Taxes* . Our
      subsidiaries SingOcean, Acheng SingOcean Dashiqiao SingOcean are subject to
      enterprise income tax, or EIT, at a rate of 25% and 33.0% of assessable profits
      for the nine months ended September 30, 2008 amd 2007, respectively, sales
      tax
      at a rate of 3% on connection revenue and sales tax at a rate of 4% on gas
      sales
      revenue.





*Net
      Income.* Net
      income increased $127,105 to $1,775,974 for the nine months ended September
      30,
      2008 from net income of $1,648,869 for the same period of 2007, as a result
      of
      the factors described above.




***Three
      months ended September 30, 2008 Compared to Three months ended September 30,
      2007***





The
      following table summarizes the results of our operations during the three-month
      periods ended September 30, 2008 and ended September 30, 2007, and provides
      information regarding the dollar and percentage increase or (decrease) from
      the
      three-month period ended September 30, 2007 to the three-month period ended
      September 30, 2008.




18




All
      amounts in thousands of U.S. dollars, except percentages


**Three Months**
                **Ended**
                **September 30,**
                **2008**
              
              **Three Months**
                **Ended**
                **September 30,**
                **2007**
              
              **Percentage**
                **Change**
                **(Decrease)**Revenues
              
              $
              2,253,858
              
              $
              1,786,174
              
              
              26.2
              %Cost
                  of sales
              
              $
              (575,626
              )
              $
              478,812
              
              
              20.2
              %Gross
                  Profit
              
              $
              1,678,232
              
              $
              1,307,362
              
              
              28.4
              %Selling,
                  general and administrative expenses
              
              $
              (346,094
              )
              $
              85,094
              
              
              306.7
              %Operating
                  Income (Expenses)
              
              $
              1,332,138
              
              $
              1,222,268
              
              
              .0
              %Other
                  Income and (Expenses)Minority
                  interest (expense)
              
              $
              (37,009
              )
              $
              (8,147
              )
              
              354.3
              %Other
                  income (expense)
              
              $
              3,702
              
              $
              (8,489
              )
              
              143.6
              %Income
                  (loss) before income taxes
              
              $
              1,335,840
              
              $
              1,213,779
              
              
              (10.1)
              %Income
                  taxes
              
              $
              391,358
              
              $
              353,326
              
              
              10.8
              %Net
                  income (loss)
              
              $
              900,357
              
              $
              1,026,779
              
              
              (12.3
              )%





*Revenues* .
      Revenues are derived primarily from connection fees and sales of natural gas.
      Revenues increased $467,684, or 26.2% to $2,253,858 for the three months ended
      September 30, 2008 from $1,786,174 million for the same period in 2007. This
      increase was mainly attributable to an increase in our customer
      base.





*Cost
      of Sales.* Cost of
      sales consists primarily of the purchase of natural gas from our suppliers. ** Our cost
      of sales increased $96,814, or 20.2%, to $575,626 for the three months ended
      September 30, 2008 from $478,812 during the same period in 2007, which was
      mainly attributable to an increase in our customer base as well as an increase
      in our purchasing price of natural gas. As a percentage of revenues, the cost
      of
      sales decreased to 25.5% during the three months ended September 30, 2008 from
      26.8% in the same period in 2007.




*Gross
      Profit.* Our
      gross
      profit increased $370,870, or 28.4%, to $1,678,232 for the three months ended
      September 30, 2008 from $1,307,362 during the same period in 2007. Gross profit
      as a percentage of revenues was 74.5% for the three months ended September
      30,
      2008, a increase of 1.3% from 73.2% during the same period in 2007. Such
      percentage increase was mainly due to continued sales of natural gas do to
      existing customers, which does not have the same one-time connection cost as
      new
      customers.





*Selling,
      General and Administrative Expenses.* Selling,
      general and administrative expenses, including sales representative commissions,
      promotion fees, salesperson salaries and expenses, depreciation charges and
      other fees increased $261,000, or 306.7%, to $346,094 for the three months
      ended
      September 30, 2008 from $85,094 during the same period in 2007. As a percentage
      of revenues, selling expenses increased to 71.1% for the three months ended
      September 30, 2008 from 4.8% for the same period in 2007. Such increase of
      selling, general and administrative expenses was mainly attributable to a
      significant increase in our operations since June 30, 2007.





*Income
      Taxes* . Our
      subsidiaries SingOcean, Acheng SingOcean, Chensheng Gas and Dashiqiao SingOcean
      are subject to enterprise income tax, or EIT, at a rate of 25% and 33.0% of
      assessable profits for the three months ended September 30, 2008 and 2007,
      respectively, sales tax at a rate of 3% on connection revenue and sales tax
      at a
      rate of 4% on gas sales revenue.





*Net
      Income.* Net
      income decreased $126,422, or 12.3% to $900,357 for the three months ended
      September 30, 2008 from net income of $1,026,779 for the same period of 2007,
      as
      a result of the factors described above.




***Liquidity
      and Capital Resources***  ****





General





As
      of
      September 30, 2008, we had cash and cash equivalents (excluding restricted
      cash)
      of approximately $7,208,602. The following table provides detailed information
      about our net cash flow for all financial statement periods presented in this
      report.




19




**Cash
      Flow**


(all
      amounts in thousands of U.S. dollars)





**Nine months ended September 30,****2008**
            
            **2007**Net
                cash provided by (used in) operating activities
            
            $
            (501,650
            )
            $
            1,283,800Net
                cash provided by (used in) investing activities
            
            $
            (574,555
            )
            $
            (59,450
            )Net
                cash provided by (used in) financing activities
            
            $
            7,282,145
            
            $
            64,204Cumulative
                translation adjustment
            
            $
            (1,308,366
            )
            $
            172Net
                cash flow
            
            $
            7,208,602
            
            $
            1,616,644





Operating
      Activities





Net
      cash
      used in operating activities was approximately $501,650 for the nine-month
      period ended September 30, 2008, which is a difference of approximately
      $1,785,450 from approximately $1,283,800 net cash provided by operating
      activities for the same period of 2007. The increase of the cash used in
      operating activities was mainly attributable to an increase in accrued
      liabilities as well as a decrease in our accounts receivable, an increase in
      derivative liability of $910,000 as the fair value of warrants issued in
      connection with our reverse acquisition transaction with Willsky Development
      described above.





Investing
      Activities





Our
      main
      uses of cash for investing activities are for constructing gas pipelines and
      distribution stations.





Net
      cash
      used in investing activities for the nine-month period ended September 30,
      2008
      was approximately $574,555, which is an increase of approximately $515,105
      from
      net cash used in investing activities of approximately $59,450 for the same
      period of 2007 due to cash used in pipeline investment activities in
      2008.





Financing
      Activities





Net
      cash
      provided by financing activities for the nine-month period ended September
      30,
      2008 was approximately $7,282,145, which is an increase of approximately
      $7,346,349 from approximately $64,204 net cash provided by financing activities
      during the same period of 2007. The increase of the cash provided by financing
      activities was mainly attributable to the private placement we consummated
      on
      August 20, 2006, as described above, as well as an increase in cash advanced
      from directors and shareholders in 2008.





As
      of
      September 30, 2008, there were no bank loans outstanding.




**Private
          Placement**
 
 On
          August
          20, 2008, we completed a private placement in which we sold to China Hand
          and
          its designees 1,857,373 shares of our Series A Preferred Stock and warrants
          to
          purchase 13,001,608 shares of our common stock at an initial exercise price
          of
          $0.187 per share (subject to adjustments) for a period of 5 years following
          the
          date of issuance, for a purchase price of $9,000,000.
 
 As
          a
          result of this private placement, we raised approximately $9 million in
          gross
          proceeds, which left us with approximately $6.8 million in net proceeds
          after
          the deduction of offering expenses in the amount of approximately $2.2
          million.
          Kuhns Brothers Securities Corporation, or Kuhns Brothers, acted as placement
          agent in connection with this private placement. As compensation for its
          services, Kuhns Brothers received a cash fee equal to $900,000, representing
          10%
          of the gross proceeds received from the private placement, as well as warrants
          to purchase 6,500,804 shares of our common stock, representing 10% the
          aggregate
          number of shares of common stock issuable to China Hand in the private
          placement
          upon conversion of the Series A Preferred Stock. We are under contractual
          obligation to register the shares of our common stock within a pre-defined
          period.




***Inflation***  ****





Our
      results of operations have not been affected by inflation and management does
      not expect that inflation risk would cause material impact on its operations
      in
      the future.


20





***Seasonality***





Our
      pipeline distribution networks are primarily located in northeastern China,
      which is extremely cold during the winter months. During such time, we are
      unable to construct primary gas pipelines. However, if a primary pipeline is
      already in place, we are able to connect new customers to our distribution
      network during the winter months.





Additionally,
      gas consumption by residential customers is higher in the winter months for
      heating purposes, and we see a corresponding increase in usage fees during
      that
      time.





***Critical
      Accounting Policies***





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires our management to make
      assumptions, estimates and judgments that affect the amounts reported in the
      financial statements, including the notes thereto, and related disclosures
      of
      commitments and contingencies, if any. We consider our critical accounting
      policies to be those that require the more significant judgments and estimates
      in the preparation of financial statements, including the
      following:





Plant
      and Equipment





Plant
      and
      equipment is stated at cost. Depreciation is provided principally by use of
      the
      straight-line method over the useful lives of the related assets, except for
      leasehold properties, which are depreciated over the terms of their related
      leases or their estimated useful lives, whichever is less. Expenditures for
      maintenance and repairs, which do not improve or extend the expected useful
      life
      of the assets, are expensed to operations while major repairs are
      capitalized.





The
      estimated useful lives are as follows:





Leasehold
                improvements
            3
                yearsComputer
                equipment
            3 yearsFurniture
                & fixture
            5 yearsOffice
                equipment
            5 yearsExploration
                equipment
            5 yearsMotor
                vehicle
            5 yearsGas
                transportation vehicle
            5 yearsGas
                station
            40 years and 50 yearsUnderground
                gas pipeline
            40 years and 50 years





The
      gain
      or loss on disposal of property, plant and equipment is the difference between
      the net sales proceeds and the carrying amount of the relevant assets, and,
      if
      any, is recognized in the statement of operations.





Intangible
      Assets





Intangible
      asset consist of land use right in both Daishiquiao City and Acheng City.





According
      to Chinese rules, land belongs to the nation. Land use right refers to the
      purchase of the legal right to use land from the government. The term of the
      land use right is 50 years. The land use right is amortized using the
      straight-line method over their estimated useful life 50 years.





Inventories





Inventories
      consist of IC card, gas meter, PE valves and natural gas and are valued at
      the
      lower of cost or market value using weighted average cost method of accounting.





Impairment
      of Assets





In
      accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144,
      "Accounting for Impairment or Disposal of Long-Lived Assets", the Company
      evaluates its long-lived assets to determine whether later events and
      circumstances warrant revised estimates of useful lives or a reduction in
      carrying value due to impairment. If indicators of impairment exist and if
      the
      value of the assets is impaired, an impairment loss would be recognized. As
      of
      September 30, 2008 and 2007, no impairment loss has been
      recognized.


21





Revenue
      Recognition





Natural
      gas revenues are recorded based on the amount of product delivered to customers
      through its pipeline and checked by its gas meter.





***Recently
      issued accounting pronouncements***





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities” and is effective for fiscal years
      beginning after November 15, 2007. This Statement permits entities to choose
      to
      measure many financial instruments and certain other items at fair value. The
      objective is to improve financial reporting by providing entities with the
      opportunity to mitigate volatility in reported earnings caused by measuring
      related assets and liabilities differently without having to apply complex
      hedge
      accounting provisions. The Company is currently assessing the impact the
      adoption of this pronouncement will have on the financial
      statements.





In
      December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in
      Consolidated Financial Statements-an amendment of ARB No. 51” and is effective
      for fiscal years beginning after December 5, 2008. This Statement establishes
      accounting and reporting standards for the noncontrolling interest in a
      subsidiary and for the deconsolidation of a subsidiary. The Company is currently
      assessing the impact the adoption of this pronouncement will have on the
      Company’s financial statements.





In
      December 2007, the FASB issued SFAS No. 141 (Revised) “Business Combinations”.
      SFAS 141 (Revised) is effective for fiscal years beginning after December 13,
      2008. This Statement establishes principles and requirements for how the
      acquirer of a business recognizes and measures in its financial statements
      the
      identifiable assets acquired, the liabilities assumed, and any noncontrolling
      interest in the acquiree. The Statement also provides guidance for recognizing
      and measuring the goodwill acquired in the business combination and determines
      what information to disclose to enable users of the financial statements to
      evaluate the nature and financial effects of the business combination. The
      Company is currently assessing the impact the adoption of this pronouncement
      will have on the Company’s financial statements.





In
      February 2008, the Financial Accounting Standards Board (“FASB”) issued FASB
      Staff Position (“FSP”) No. FAS 157-2, “Effective Date of FASB Statement No. 157”
(“FSP FAS 157-2”), which delays the effective date of Statement of Financial
      Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”)
      for all non-financial assets and non-financial liabilities, except those that
      are recognized or disclosed at fair value in the financial statements on a
      recurring basis (at least annually) for fiscal years beginning after November
      15, 2008, and interim periods within those fiscal years for items within the
      scope of this FSP. We are currently evaluating the impact of adopting FSP FAS
      157-2 for non-financial assets and non-financial liabilities on our financial
      position, cash flows, and results of operations. We have considered all other
      recently issued accounting pronouncements and do not believe the adoption of
      such pronouncements will have a material impact on our consolidated financial
      statements.





***Off-Balance
      Sheet Arrangements***





We
      do not
      have any off-balance sheet arrangements that have or are reasonably likely
      to
      have a current or future effect on our financial condition, changes in financial
      condition, revenues or expenses, results of operations, liquidity, capital
      expenditures, or capital resources that is material to investors.





**ITEM
              3.**
            **QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET
                RISK.**





Not
      Applicable.


22





**ITEM
              4.**
            **CONTROLS
                AND PROCEDURES.**





***Evaluation
      of Disclosure Controls and Procedures.***  ****





We
      maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under
      the Exchange Act) that are designed to ensure that information that would be
      required to be disclosed in Exchange Act reports is recorded, processed,
      summarized and reported within the time period specified in the SEC’s rules and
      forms, and that such information is accumulated and communicated to our
      management, including to our Chief Executive Officer and Chief Financial
      Officer, as appropriate, to allow timely decisions regarding required
      disclosure.





As
      required by Rule 13a-15 under the Exchange Act, our management, including Mr.
      Jiaji Shang, our Chief Executive Officer and Ms. Xiaoling Li, our Chief
      Financial Officer, evaluated the effectiveness of the design and operation
      of
      our disclosure controls and procedures as of September 30, 2008. Based on that
      evaluation, Mr. Shang and Ms. Li concluded that as of September 30, 2008, and
      as
      of the date that the evaluation of the effectiveness of our disclosure controls
      and procedures was completed, our disclosure controls and procedures were
      effective to satisfy the objectives for which they are intended.





***Changes
      in Internal Control Over Financial Reporting.***  ****





During
      the fiscal quarter ended September 30, 2008, there were no changes in our
      internal control over financial reporting identified in connection with the
      evaluation performed during the fiscal year covered by this report that has
      materially affected, or is reasonably likely to materially affect, our internal
      control over financial reporting.


23





**PART
      II**





**OTHER
      INFORMATION**





**ITEM
              1.**
            **LEGAL
                PROCEEDINGS.**********





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





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





None.





**ITEM
              3.**
            **DEFAULTS
                UPON SENIOR SECURITIES.**





None.




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





None.





**ITEM
              5.**
            **OTHER
                INFORMATION.**





On
      September 16, 2008, the Company, through its wholly-owned subsidiary
      Tianjin SingOcean Public Utility Development Co., Ltd., entered into an Equity
      Swap Agreement with Mr. Xiu Hai Tian, whereby the Company
      acquired from Mr. Xiu a 49% ownership interest in Chensheng Gas in
      exchange for the Company's 99% ownership in Hunchun SingOcean Energy Ltd. ,
      or Hunchun SingOcean. The parties to the Equity Swap Agreement determined that
      the value of the 49% interest in Chensheng Gas and the 99% interest in Hunchun
      SingOcean were approximately equal and therefore there was no cash consideration
      involved in the transaction from either party. The foregoing description of
      the
      Agreement is qualified in its entirety by reference to the full text of the
      Equity Swap Agreement filed as Exhibit 10.1 hereto.





Chensheng
      Gas is a natural gas distribution company operating in the Nandaihe area in
      Northern China, which could potential provide natural gas to 50,000 individuals.
      At present, Chensheng Gas has laid in excess of 12km of medium pressure pipe
      in
      Nandaihe and has installed distribution pipes for approximately twenty
      residential areaas with an aggregate of approximately 10,000 customers.
      Chensheng Gas has signed a distribution contract to provide natural gas services
      to a high-rise building with approximately 4,000 potential customers.





Hunchun
      SingOcean is a natural gas distribution company operating in Hunchun in Northern
      China. Hunchun SingOcean provides natural gas services to
      approximately 12,898 customers. Hunchun SingOcean also owns the exclusive
      rights to develop a coal bed methane, or CBM, reserve near Hunchun, which
      contains approximately 3.3 billion cubic meters of CBM.


24





**ITEM
      6.**  **EXHIBITS.** ****





The
      following exhibits are filed as part of this report or incorporated by
      reference:





**Exhibit
                No.**
            
            **Description**10.1
            
            Equity
                Swap Agreement, dated September 16, 2008, between Tianjin SingOcean
                Public
                Utility Development Co., Ltd. and Xiu Hai Tian. (English
                Translation)31.1
            
            Certification
                of Principal Executive Officer filed pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                of Principal Financial Officer filed pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.32.1
            
            Certifications
                of Principal Executive Officer furnished pursuant to 18 U.S.C. Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002.32.2
            
            Certifications
                of Principal Financial Officer furnished pursuant to 18 U.S.C. Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002.


25





**SIGNATURES**





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





Dated:
      November 19, 2008





**CHINA
                NEW ENERGY GROUP COMPANY**By:
            /s/
                Jiaji ShangJiaji
                ShangChief
                Executive Officer(Principal
                Executive Officer)By:
            /s/
                Xiaoling LiXiaoling
                LiChief
                Financial Officer(Principal
                Financial Officer)





**EXHIBIT
      INDEX**





**Exhibit
                No.**
            
            **Description**10.1
            
            Equity
                Swap Agreement, dated September 16, 2008, between Tianjin SingOcean
                Public
                Utility Development Co., Ltd. and Xiu Hai Tian. (English
                Translation)31.1
            
            Certification
                of Principal Executive Officer filed pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.31.2
            
            Certification
                of Principal Financial Officer filed pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.32.1
            
            Certifications
                of Principal Executive Officer furnished pursuant to 18 U.S.C. Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002.32.2
            
            Certifications
                of Principal Financial Officer furnished pursuant to 18 U.S.C. Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002.