----

|  [X] | Quarterly      Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of      1934 |
|-----------|---------------------------------------------------------------------------------------------------|

| [__] | Transition      Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange Act Of      1934 |
|------|----------------------------------------------------------------------------------------------------|

| Nevada                                                             |   | 75-2882833                                   |
|--------------------------------------------------------------------|--------|----------------------------------------------|
| (State      or other jurisdiction of incorporation of origination) |   | (I.R.S.      Employer Identification Number) |

| Room      2205, Suite A, Zhengxin BuildingNo. 5 Gaoxin 1st Road, Gao Xin      DistrictXi’an,      Shaanxi ProvincePeople’s Republic of      China |   | N/A             |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------|
| (Address      of principal executive offices)                                                                                                                      |   | (Zip      code) |
|                                                                                                                                                               |
| (029)      8209-1099                                                                                                                                               |
| (Registrant’s      telephone number, including areacode)                                                                                                     |

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

----

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TABLE OF CONTENTS

| PART      I  | FINANCIAL      INFORMATION                                                                      | Page(s)                   |
|--------------|-------------------------------------------------------------------------------------------------|---------------------------|
| Item      1. | Financial      Statements (unaudited)                                                           |    3  |
|         | Consolidated      Balance Sheets                                                                |   4-5           |
|         | Consolidated      Statements of Income (Operations) and Other Comprehensive      Income         |        6-7           |
|         | Consolidated      Statements of Shareholders’ Equity                                      |        8             |
|         | Consolidated      Statements of Cash Flows                                                      |        9             |
|         | Notes      to the Consolidated Financial Statements                                             |        10-21         |
| Item      2. | Management's      Discussion and Analysis of Financial Condition and Results of      Operations |        22-25         |
| Item      3. | Quantitative      and Qualitative Disclosures about Market Risk                                 |        26            |
| Item      4. | Controls      and Procedures                                                                    |        26            |

| PART      II  | OTHER      INFORMATION                                           |        26    |
|---------------|------------------------------------------------------------------|-------------------|
| Item      1.  | Legal      Proceedings                                           |        26    |
| Item      1A. | Risk      Factors                                                |        26    |
| Item      2.  | Unregistered      Sales of Equity Securities and Use of Proceeds |        26    |
| Item      3.  | Defaults      Upon Senior Securities                             |        27    |
| Item      4.  | Submission      of Matters to a Vote of Security Holders         |        27    |
| Item      5.  | Other      Information                                           |        27    |
| Item      6.  | Exhibits                                                         |        27-28 |
| Signatures    |                                                             |        29    |

----

----

|                                              |   |   |   |   |   |   |   |   |   |
|---------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|
| SINO      CLEAN ENERGY INC. AND SUBSIDIARIES      |
|                                              |   |   |   |   |   |   |   |   |   |
| Consolidated      Financial Statements            |
| For      the Periods Ended June 30, 2008 and 2007 |
|                                              |   |   |   |   |   |   |   |   |   |
|                                              |   |   |   |   |   |   |   |   |   |

----

| Sino      Clean Energy Inc. and Subsidiaries                               |   |
|----------------------------------------------------------------------------|--------|
| Consolidated      Balance Sheets                                           |   |
| (Amounts      expressed in U.S. Dollars)                                   |   |
|                                                                       |   |   |   |   |   |   |
| ASSETS                                                                     |   |
|                                                                       |   | June      30, |   |   | December      31, |   |
|                                                                       |   | 2008 |   |   | 2007 |   |
|                                                                       |   | (Unaudited) |   |   | (Audited) |   |
|                                                                       |   |   |   |   |   |   |
| Current      assets                                                        |   |   |   |   |   |   |
|          Cash and cash equivalent                           |   | $ | 4,709,388 |   |   | $ | 2,832,132 |   |
|          Accounts receivable, net (Note 2(d))               |   |   | 3,459,196 |   |   |   | 1,068,303 |   |
|          Deposits and prepayments (Note 6)                  |   |   | 2,457,771 |   |   |   | 2,542,929 |   |
|          Other receivables                                  |   |   | 13,803 |   |   |   | 138,523 |   |
|          Prepaid land use right - current portion (Note 10) |   |   | 38,614 |   |   |   | 36,285 |   |
|          Government grant receivable (Note 7)               |   |   | - |   |   |   | 411,000 |   |
|          Assets on discontinued operation                   |   |   |   |   |   |   |   |   |
|              Other receivable - related |   |   | - |   |   |   | 141,795 |   |
|          Inventories (Note 8)                               |   |   | 76,443 |   |   |   | 40,959 |   |
|                                                                       |   |   |   |   |   |   |   |   |
|                                                                       |   |   |   |   |   |   |   |   |
| Total      current assets                                                  |   |   | 10,755,215 |   |   |   | 7,211,926 |   |
|                                                                       |   |   |   |   |   |   |   |   |
| Property,      plant and equipment, net (Note 9)                           |   |   | 3,109,726 |   |   |   | 5,435,804 |   |
| Prepaid      land use right - non current portion (Note 10)                |   |   | 1,809,802 |   |   |   | 1,718,744 |   |
| Goodwill      (Notes 3 and 11)                                             |   |   | 410,869 |   |   |   | - |   |
| Intangible      assets, net (Note 12)                                      |   |   | 1,365 |   |   |   | 1,478 |   |
|                                                                       |   |   |   |   |   |   |   |   |
| Total      assets                                                          |   | $ | 16,086,977 |   |   | $ | 14,367,952 |   |
|                                                                       |   |   |   |   |   |   |   |   |
|                                                                       |   |   |   |   |   |   |   |   |

----

| Sino      Clean Energy Inc. and Subsidiaries                                                                                         |   |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|
| Consolidated      Balance Sheets                                                                                                     |   |
| (Amounts      expressed in U.S. Dollars)                                                                                             |   |
|                                                                                                                                 |   | June      30, |   |   | December      31, |   |
|                                                                                                                                 |   | 2008 |   |   | 2007 |   |
|                                                                                                                                 |   | (Unaudited) |   |   | (Audited) |   |
|                                                                                                                                 |   |   |   |   |   |   |
| LIABILITIES      AND SHAREHOLDERS' EQUITY                                                                                            |   |
|                                                                                                                                 |   |   |   |   |   |   |
| Current      liabilities                                                                                                             |   |   |   |   |   |   |
|          Accounts payable                                                                                             |   | $ | 89,144 |   |   | $ | 41,827 |   |
|          Accrued expenses and other payables (Note 13)                                                                |   |   | 949,081 |   |   |   | 893,732 |   |
|          Amount due to a director (Note 18(a))                                                                        |   |   | - |   |   |   | 8,527 |   |
|          Taxes payable                                                                                                |   |   | 320,090 |   |   |   | 130,332 |   |
|          Deposit on sales of property (Note 18 (c))                                                                   |   |   | - |   |   |   | 1,507,000 |   |
|                                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                                 |   |   |   |   |   |   |   |   |
| Total      current liabilities                                                                                                       |   |   | 1,358,315 |   |   |   | 2,581,418 |   |
|                                                                                                                                 |   |   |   |   |   |   |   |   |
| Minority      interest                                                                                                               |   |   | - |   |   |   | 352,789 |   |
|                                                                                                                                 |   |   |   |   |   |   |   |   |
|                                                                                                                                 |   |   |   |   |   |   |   |   |
| Commitments      and Contingencies (Note 19)                                                                                         |   |   |   |   |   |   |   |   |
|                                                                                                                                 |   |   |   |   |   |   |   |   |
| Shareholders'      Equity                                                                                                            |   |   |   |   |   |   |   |   |
|          Preferred stock, $0.001 par value,                                                                           |   |   |   |   |   |   |   |   |
|            50,000,000 shares authorized,                                                                    |   |   |   |   |   |   |   |   |
|            nil issued and outstanding                                                                       |   |   | - |   |   |   | - |   |
|          Common stock, $0.001 par value,                                                                              |   |   |   |   |   |   |   |   |
|          200,000,000 shares authorized,                                                                               |   |   |   |   |   |   |   |   |
|          92,181,750 and 84,681,750 issued and outstanding as of June 30, 2008 and      December 31, 2007 respectively |   |
|                                                                                                                                 |   |   | 92,182 |   |   |   | 84,682 |   |
|          Additional paid-in capital                                                                                   |   |   | 10,294,525 |   |   |   | 9,153,174 |   |
|          Retained earnings                                                                                            |   |   | 2,021,871 |   |   |   | 686,482 |   |
|          Statutory reserves (Note 15)                                                                                 |   |   | 348,309 |   |   |   | 348,309 |   |
|          Accumulated other comprehensive income                                                                       |   |   | 1,971,775 |   |   |   | 1,161,098 |   |
|                                                                                                                                 |   |   |   |   |   |   |   |   |
| Total      shareholders' equity                                                                                                      |   |   | 14,728,662 |   |   |   | 11,433,745 |   |
|                                                                                                                                 |   |   |   |   |   |   |   |   |
| Total      liabilities and shareholders' equity                                                                                      |   | $ | 16,086,977 |   |   | $ | 14,367,952 |   |
|                                                                                                                                 |   |   |   |   |   |   |   |   |

----

| Sino      Clean Energy Inc. and Subsidiaries                                            |   |
|-----------------------------------------------------------------------------------------|--------|
| Consolidated      Statements of Income (Operations) and Other Comprehensive      Income |   |
| For      the three months and six months ended June 30, 2008 and    2007                |   |
| (Amounts      expressed in U.S. Dollars)                                                |   |
| (Unaudited)                                                                             |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   | Three      months ended June 30, |   |   | Six      months ended June 30, |   |
|                                                                                    |   | 2008 |   |   | 2007 |   |   | 2008 |   |   | 2007 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Revenue                                                                                 |   | $ | 3,251,224 |   |   | $ | - |   |   | $ | 5,736,352 |   |   | $ | - |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost      of goods sold                                                                 |   |   | (2,245,700 | ) |   |   | - |   |   |   | (3,930,379 | ) |   |   | - |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross      profit                                                                       |   |   | 1,005,524 |   |   |   | - |   |   |   | 1,805,973 |   |   |   | - |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling      expenses                                                                   |   |   | 2,360 |   |   |   | 494 |   |   |   | 4,765 |   |   |   | 1,780 |   |
| General      and administrative expenses                                                |   |   | 222,306 |   |   |   | 81,249 |   |   |   | 385,804 |   |   |   | 132,911 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      (loss) from operations                                                      |   |   | 780,858 |   |   |   | (81,743 | ) |   |   | 1,415,404 |   |   |   | (134,691 | ) |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      income (expenses)                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Rental      income, net of outgoings                                        |   |   | 25,894 |   |   |   | - |   |   |   | 79,613 |   |   |   | - |   |
|   Interest      income                                                        |   |   | 11,511 |   |   |   | 3,613 |   |   |   | 11,511 |   |   |   | 9,923 |   |
|   Commission      income                                                      |   |   | 144,875 |   |   |   | - |   |   |   | 144,875 |   |   |   | - |   |
|   Sundry      income(expenses)                                                |   |   | (10,217 | ) |   |   | 34,717 |   |   |   | 26,843 |   |   |   | (6,602 | ) |
|   Other      income                                                           |   |   | - |   |   |   | 23,097 |   |   |   | - |   |   |   | 144,940 |   |
|   Gain      on disposal of property (Note 18(c))                              |   |   | 33,000 |   |   |   | - |   |   |   | 33,000 |   |   |   | - |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total      other income (expenses)                                                      |   |   | 205,063 |   |   |   | 61,427 |   |   |   | 295,842 |   |   |   | 148,261 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      before provision for income taxes                                           |   |   | 985,921 |   |   |   | (20,316 | ) |   |   | 1,711,246 |   |   |   | 13,570 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Provision      for income taxes (Note 16)                                               |   |   | (21,375 | ) |   |   | - |   |   |   | 24,708 |   |   |   | - |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income before minority interest                                                |   | $ | 1,007,296 |   |   | $ | (20,316 | ) |   | $ | 1,686,538 |   |   | $ | 13,570 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| Sino      Clean Energy Inc. and Subsidiaries                                            |   |
|-----------------------------------------------------------------------------------------|--------|
| Consolidated      Statements of Income (Operations) and Other Comprehensive      Income |   |
| For      the three months and six months ended June 30, 2008 and    2007                |   |
| (Amounts      expressed in U.S. Dollars)                                                |   |
| (Unaudited)                                                                             |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   | Three      months ended June 30, |   |   | Six      months ended June 30, |   |
|                                                                                    |   | 2008 |   |   | 2007 |   |   | 2008 |   |   | 2007 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |
| Less:      Minority interest                                                            |   |   | (195,406 | ) |   |   | 5,735 |   |   |   | (351,149 | ) |   |   | 10,091 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net      income (loss)                                                                  |   |   | 811,890 |   |   |   | (14,581 | ) |   |   | 1,335,389 |   |   |   | 23,661 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other      comprehensive income                                                         |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   Foreign      currency translation adjustment                                |   |   | 322,619 |   |   |   | 192,260 |   |   |   | 810,677 |   |   |   | 269,747 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive      income                                                               |   | $ | 1,134,509 |   |   | $ | 177,679 |   |   | $ | 2,146,066 |   |   | $ | 293,408 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Weight      average number of shares                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   -      Basic and diluted                                                    |   |   | 84,764,168 |   |   |   | 84,681,750 |   |   |   | 84,723,186 |   |   |   | 84,681,750 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income      (loss) per common share (Note 17)                                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|   -      Basic and diluted                                                    |   | $ | 0.0096 |   |   | $ | (0.0002 | ) |   | $ | 0.0158 |   |   | $ | 0.0003 |   |
|                                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

| Sino      Clean Energy Inc. and Subsidiaries                    |   |
|-----------------------------------------------------------------|--------|
| Consolidated      Statements of Shareholders' Equity            |   |
| (Amount      expressed in U.S. Dollars except number of shares) |   |
|                                                            |   |
|                                                            |   | Common      stock (par value $0.1208) |   |   | Additional |   |   | Statutory |   |   | Statutory |   |   | (Accumulated |   |   | Accumulated   |   |         |   |
|                                                            |   |   |   |   | paid-in |   |   | capital |   |   | welfare |   |   | deficits)      / Retained |   |   |  other comprehensive |   |   |   |
|                                                            |   | Shares |   |   | Amount |   |   | capital |   |   | reserves |   |   | reserves |   |   | earnings |   |   |        income |   | Total |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,      January 1, 2007 (audited)                         |   |   | 84,681,750 |   |   | $ | 84,682 |   |   | $ | 9,153,174 |   |   | $ | 232,206 |   |   | $ | 116,103 |   |   | $ | (330,456 | ) |   | $ | 432,312 |   |   | $ | 9,688,021 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           Net income                        |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 23,661 |   |   |   | - |   |   |   | 23,661 |   |
|           Foreign currency translation gain |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 269,747 |   |   |   | 269,747 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,      June 30, 2007 (Unaudited)                         |   |   | 84,681,750 |   |   | $ | 84,682 |   |   | $ | 9,153,174 |   |   | $ | 232,206 |   |   | $ | 116,103 |   |   | $ | (306,795 | ) |   | $ | 702,059 |   |   | $ | 9,981,429 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           Net income                        |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 993,277 |   |   |   | - |   |   |   | 993,277 |   |
|           Foreign currency translation gain |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 459,039 |   |   |   | 459,039 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,      December 31, 2007  (audited)            |   |   | 84,681,750 |   |   | $ | 84,682 |   |   | $ | 9,153,174 |   |   | $ | 232,206 |   |   | $ | 116,103 |   |   | $ | 686,482 |   |   | $ | 1,161,098 |   |   | $ | 11,433,745 |   |
|           Issuance of share                 |   |   | 7,500,000 |   |   |   | 7,500 |   |   |   | 1,141,351 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,148,851 |   |
|           Net income                        |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 1,335,389 |   |   |   | - |   |   |   | 1,335,389 |   |
|           Foreign currency translation gain |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 810,677 |   |   |   | 810,677 |   |
|                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Balance,      June 30, 2008 (Unaudited)                         |   |   | 92,181,750 |   |   | $ | 92,182 |   |   | $ | 10,294,525 |   |   | $ | 232,206 |   |   | $ | 116,103 |   |   | $ | 2,021,871 |   |   | $ | 1,971,775 |   |   | $ | 14,728,662 |   |

----

| Sino      Clean Energy Inc. and Subsidiaries                                                               |   |
|------------------------------------------------------------------------------------------------------------|--------|
| Consolidated      Statements of Cash Flows                                                                 |   |
| (Amounts      expressed in U.S. Dollars)                                                                   |   |
| (Unaudited)                                                                                                |   |
|                                                                                                       |   | Period      ended June 30, |   |
|                                                                                                       |   | 2008 |   |   | 2007 |   |
| Cash      flows from operating activities:                                                                 |   |   |   |   |   |   |
|          Net income                                                                         |   | $ | 1,335,389 |   |   | $ | 23,661 |   |
|          Adjustments to reconcile net income to cash provided by operating      activities: |   |   |   |   |   |   |   |   |
|     Minority      interest                                                             |   |   | 351,149 |   |   |   | (10,091 | ) |
|          Depreciation and amortization                                                      |   |   | 116,610 |   |   |   | 53,017 |   |
|          Gain on disposal of property                                                       |   |   | (33,000 | ) |   |   | - |   |
|          (Increase) decrease in assets:                                                     |   |   |   |   |   |   |   |   |
|             Accounts receivable                                              |   |   | (2,249,291 | ) |   |   | - |   |
|             Deposits and prepayments                                         |   |   | 240,535 |   |   |   | (2,597,161 | ) |
|             Other receivables                                                |   |   | 145,922 |   |   |   | (2,300 | ) |
|             Assets on discontinued operation                                 |   |   |   |   |   |   |   |   |
|                 Accounts receivables                     |   |   | - |   |   |   | 765,329 |   |
|                 Other receivables                        |   |   | 141,795 |   |   |   | 254,452 |   |
|                  Inventories                        |   |   | - |   |   |   | 13,826 |   |
|             Inventories                                                      |   |   | (31,822 | ) |   |   | - |   |
|     Increase      (decrease) in liabilities:                                           |   |   |   |   |   |   |   |   |
|             Accounts payable                                                 |   |   | 43,229 |   |   |   | - |   |
|             Accounts payable - discontinued operations                       |   |   | - |   |   |   | (877,307 | ) |
|             Advance from customers                                           |   |   | - |   |   |   | 590,318 |   |
|             Accrued expenses and other payable                               |   |   | 24,750 |   |   |   | (34,540 | ) |
|             Taxes payables                                                   |   |   | 175,690 |   |   |   | - |   |
|             Taxes payables - discontinued operations                         |   |   | - |   |   |   | (70,226 | ) |
|          Net cash provided from (used in) operating activities                              |   |   | 260,956 |   |   |   | (1,891,022 | ) |
|                                                                                                       |   |   |   |   |   |   |   |   |
| Cash      flows from investing activities:                                                                 |   |   |   |   |   |   |   |   |
|          Amount due from a director                                                         |   |   | - |   |   |   | 93,954 |   |
|          Purchase of property, plant and equipment                                          |   |   | (41,389 | ) |   |   | (1,057,481 | ) |
|          Net cash used in investing activities                                              |   |   | (41,389 | ) |   |   | (963,527 | ) |
|                                                                                                       |   |   |   |   |   |   |   |   |
| Cash      flows from financing activities:                                                                 |   |   |   |   |   |   |   |   |
|          (Payment to ) advance from a director                                              |   |   | (8,527 | ) |   |   | 80,277 |   |
|     Receipt      from government grant                                                 |   |   | 411,000 |   |   |   | - |   |
|          Proceeds from disposal of property                                                 |   |   | 1,055,532 |   |   |   | - |   |
|          Net cash provided by financing activities                                          |   |   | 1,458,005 |   |   |   | 80,277 |   |
|                                                                                                       |   |   |   |   |   |   |   |   |
| Effect      of foreign currency translation                                                                |   |   | 199,684 |   |   |   | 86,684 |   |
|                                                                                                       |   |   |   |   |   |   |   |   |
| Net      increase (decrease) in cash and cash equivalents                                                  |   |   | 1,877,256 |   |   |   | (2,687,588 | ) |
|                                                                                                       |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents, beginning of year                                                          |   |   | 2,832,132 |   |   |   | 4,450,557 |   |
|                                                                                                       |   |   |   |   |   |   |   |   |
| Cash      and cash equivalents, end of period                                                              |   | $ | 4,709,388 |   |   | $ | 1,762,969 |   |
|                                                                                                       |   |   |   |   |   |   |   |   |
| Supplemental      Disclosure Information                                                                   |   |   |   |   |   |   |   |   |
| Interest      paid                                                                                         |   | $ | - |   |   | $ | - |   |
| Income      taxes paid                                                                                     |   | $ | - |   |   | $ | - |   |
|                                                                                                       |   |   |   |   |   |   |   |   |
| Major      non-cash transaction                                                                            |   |   |   |   |   |   |   |   |
| Issuance      of share in exchange of equity interest (Note 3)                                             |   |   |   |   |   |
|                                                                                                       |   | $ | 1,148,851 |   |   | $ | - |   |

----

        

| 1.    | CORPORATION REORGANZATION AND BUSINESS      ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|                 | Sino      Clean Energy Inc. (the “Company”) was originally incorporated in Texas as      “Discount Mortgage Services, Inc.” on July 11, 2000. In November 2001, the      Company changed its name to Endo Networks, Inc. and was redomiciled to the      State of Nevada in December 2002. On January 4, 2007, the Company changed      its name to “China West Coal Energy Inc.”. Further on August 15, 2007, the      Company changed its name to “Sino Clean Energy  Inc”. |

| 2.    | SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES |
|----------------------|-------------------------------------------------|
|                 |                                            |
| a.                   | Basis of presentation      and consolidation    |

|   | The      accompanying consolidated financial statements are prepared in accordance      with accounting principles generally accepted in the United States of      America. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      consolidated financial statements include the financial statements of the      Company, its wholly owned subsidiary Hangson Ltd. (“Hangson”), its      variable interest entity (VIE) Shaanxi Suo’ang Biological Science      & Technology Co., Ltd. (“Suo’ang Biological”) and Suo’ang Biological’s      subsidiary, Shaanxi Suo’ang New Energy Enterprise Co., Ltd. (“Suo’ang New      Energy”). All significant inter-company transactions and balances among      the Company, Hangson, Suo’ang Biological and Suo’ang New Energy are      eliminated upon consolidation. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| b. | Use of      estimates |
|----|-----------------------|

|   | The      preparation of consolidated financial statements in conformity with      generally accepted accounting principles requires management to make      estimates and assumptions that affect the reported amounts of assets and      liabilities, disclosure of contingent assets and liabilities at the date      of the financial statements, and the reported amounts of revenues and      expenses during the reporting period. Because of the use of estimates      inherent in the financial reporting process, actual results could differ      from those estimates. Significant estimates include estimates of accruals      and determination of fair values for assets  disposed. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| c. | Cash and cashequivalents |
|----|--------------------------|

|   | Cash and cash equivalents consist of cash on hand and bank      deposits. |
|--------|---------------------------------------------------------------------------|

| d. | Accounts      receivable |
|----|--------------------------|

|   | Accounts      receivables are recognized and carried at original invoiced amount less an      allowance for any uncollectibleaccounts. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | The      Company uses the aging method to estimate the valuation allowance for      anticipated uncollectible receivable balances. Under the aging method, bad      debts determined by management are based on historical experience as well      as the current economic climate and are applied to customers' balances      categorized by the number of months the underlying invoices have remained      outstanding. The valuation allowance balance is adjusted to the amount      computed as a result of the aging method. When facts subsequently become      available to indicate that an adjustment to the allowance should be made,      this is recorded as a change in estimate in the current period. As of June      30, 2008 and December 31, 2007, accounts receivable were net of allowances      of $5,713 and $5,368 respectively. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| e. | Inventories |
|----|-------------|

|           | Inventories      are stated at the lower of cost, as determined on a weighted average      basis, or net realizable value. Costs of inventories include purchase and      related costs incurred in bringing the products to their present location      and condition.                                                                                                                                                                                                           |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| f.   | Property,      plant and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|           | Property,      plant and equipment are recorded at cost less accumulated depreciation and      amortization. Gains or losses on disposals are reflected as gain or loss      in the year of disposal. The cost of improvements that extend the life of      plant, property and equipment are capitalized. These capitalized costs may      include structural improvements, equipment and fixtures. All ordinary      repair and maintenance costs are expensed as    incurred.  |

|   | Depreciation      or amortization for financial reporting purposes is provided using the      straight-line method over the estimated useful lives of the assets as      follows: |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                              |

|           | Buildings                    | the      shorter of the useful life or the lease term  |
|----------------|-----------------------------------|-------------------------------------------------------------|
|           | Leasehold      improvements  | the      shorter of the useful life or the lease term  |
|           | Plant and      machinery     | 10      years                                          |
|           | Office      equipment        | 5      years                                           |
|           | Motor      vehicles          | 3    years                                             |
|           |                              |                                                        |
| g.   | Construction      in progress     |                                                        |

|     | Construction      in progress includes direct costs of factory buildings. Construction in      progress is not depreciated until such time as the assets are completed      and put into operational use. |
|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |                                                                                                                                                                                                      |
| h.  | Prepaid      land use rights                                                                                                                                                                              |

|   | Prepaid      land use right is expensed over the term of 50  years. |
|--------|---------------------------------------------------------------------|

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

| j.       | Impairment |
|----------------------------------------|------------|

----

| k.   | Comprehensive      income                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|           | SFAS      No. 130, Reporting Comprehensive Income, requires disclosure of all      components of comprehensive income and loss on an annual and interim      basis. Comprehensive income and loss is defined as the change in equity of      a business enterprise during a period from transactions and other events      and circumstances from non-owner sources. The Company had other      comprehensive income of $810,677 and $267,747 for the periods ended June      30, 2008 and 2007, respectively. The other comprehensive income arose from      the changes in foreign currency exchangerate. |

| l.   | Fair value of financial      instruments                                                                                                                                                                                                                                                                                 |
|----------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |                                                                                                                                                                                                                                                                                                                          |
|           | The      Company believes that the carrying values of its cash and cash      equivalents, accounts receivable, accounts payable, other receivables and      other payables as of June 30, 2008 and December 31, 2007 approximate to      their respective fair values due to the short-term nature of those      instruments. |

| m.   | Revenue      recognition                                                                                                                                                                                                                                                                                                                                                                                                              |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|           | Revenues      of the Company arising from sales of coal watermixture.                                                                                                                                                                                                                                                                                                                                                                 |
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|           | Sales      are recognized when the following four revenue criteria are met:      persuasive evidence of an arrangement exists, delivery has occurred, the      selling price is fixed or determinable, and collectibility is reasonably      assured. Revenues are presented net of value added tax (VAT). No      return allowance is made as products are normally not returnable upon      acceptance by the customers.  |

| n.  | Income (loss) per common      share                                                                                                                                                   |
|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |                                                                                                                                                                                       |
|     | Income      (loss) per common share is computed by dividing income available to common      shareholders by the weighted average number of common shares outstanding      for the periods. |

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

----

| p.  | Foreign      currency translation                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|     | The      reporting currency of the Company is the United States Dollars. All assets      and liabilities accounts have been translated into United States Dollars      using the current exchange rate at the balance sheet date. Capital stock      is recorded at historical rates. Revenue and expenses are translated using      the average exchange rate in the period. The resulting gain and      loss has been reported as other comprehensive income within the      shareholder's equity. |

| q.   | Related  parties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|           | Parties      are considered to be related to the Company if the parties, directly or      indirectly, through one or more intermediaries, control, are controlled      by, or are under common control with the Company. Related parties also      include principal owners of the Company, its management, members of the      immediate families of principal owners of the Company and its management      and other parties with which the Company may deal if one party      controls or can significantly influence the management or operating      policies of the other to an extent that one of the transacting parties      might be prevented from fully pursuing its own separate interests. A party      which can significantly influence the management or operating      policies of the transacting parties or if it has an ownership interest in      one of the transacting parties and can significantly influence the other      to an extent that one or more of the transacting parties might be      prevented from fully pursuing its own separate interests is also a related      party. |

| r.  | Recently issued accounting      pronouncements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|----------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|     | In      September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements"      (“SFAS 157”), to define fair value, establish a framework for measuring      fair value in accordance with generally accepted accounting principles and      expand disclosures about fair value measurements. SFAS 157 requires      quantitative disclosures using a tabular format in all periods (interim      and annual) and qualitative disclosures about the valuation techniques      used to measure fair value in all annual periods. The provisions of this      Statement shall be effective for financial statements issued for fiscal      years beginning after November 15, 2007 and interim periods within those      fiscal years. The Company is required to adopt the provisions of this      statement as of January 1, 2008. The Company determined that      the adoption of this standard had no material effect on its      financial statements. |

|   | In      September 2006, the FASB issued Statement No. 158, “Employers' Accounting      for Defined Benefit Pension and Other Postretirement Plans - An amendment      of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS 158”). This      Statement enhances disclosure regarding the funded status of an employer's      defined benefit postretirement plan by (a) requiring companies to include      the funding status in comprehensive income, (b) recognize transactions and      events that affect the funded status in the financial statements in the      year in which they occur, and (c) at a measurement date of the employer's      fiscal year-end. Statement No. 158 effective for fiscal year ending after      December 15, 2008, and is not expected to apply to the      Company. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In      February 2007, FASB issued SFAS No. 159, "The Fair Value Option for      Financial Assets and Financial Liabilities Including an Amendment of FASB      Statement No. 115" (“SFAS 159”). SFAS 159 permits entities to choose to      measure many financial instruments and certain other items at fair values.      SFAS 159 is effective for fiscal years after November 15, 2007. The      Company determined that the adoption of this standard had      no material effect on its financialstatements. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In      December 2007, the FASB issued Statement of Financial Accounting Standards      No. 141 (revised 2007), “Business Combinations” (“FAS 141R”).      FAS 141R replaces Statement of Financial Accounting Standards      No. 141, “Business Combinations” (“FAS 141”). Although it      retains the fundamental requirement in FAS 141 that the acquisition      method of accounting be used for all business combinations, FAS 141R      establishes principles and requirements for how the acquirer in a business      combination (a) recognizes and measures the assets acquired,      liabilities assumed and any noncontrolling (“minority”) interest in the      acquiree, (b) recognizes and measures the goodwill acquired in a      business combination or a gain from a bargain purchase and      (c) determines what information to disclose regarding the business      combination. FAS 141R applies prospectively to business combinations      for which the acquisition date is on or after the beginning      of the Company’s 2009 fiscal year. The Company is currently assessing the      potential effect of FAS 141R on its financial      statements. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | In      December 2007, the FASB issued Statement of Financial Accounting Standards      No. 160, “Noncontrolling (“minority”) Interests in Consolidated      Financial Statements” (“FAS 160”). FAS 160 establishes      accounting and reporting standards for the noncontrolling (“minority”)      interest in a subsidiary, commonly referred to as minority interest. Among      other matters, FAS 160 requires (a) the noncontrolling      (“minority”) interest be reported within equity in the balance sheet and      (b) the amount of consolidated net income attributable to the parent      and to the noncontrolling (“minority”) interest to be clearly presented in      the statement of income. FAS 160 is effective for the Company’s 2009      fiscal year. FAS 160 is to be applied prospectively, except for the      presentation and disclosure requirements, which shall be applied      retrospectively for all periods presented. The Company is currently      assessing the potential effect of FAS 160 on its financial      statements. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In      March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative      Instruments and Hedging Activities – An Amendment of FASB Statement No.      133” (“SFAS No. 161”), which changes the disclosure requirements for      derivative instruments and hedging activities. Entities are required to      provide enhanced disclosures about (a) how and why an entity uses      derivative instruments, (b) how derivative instruments and related hedged      items are accounted for under Statement 133 and its related      interpretations, and (c) how derivative instruments and related hedged      items affect an entity’s financial position, financial performance, and      cash flows. This statement will be effective for financial statements      issued for fiscal years and interim periods beginning after November 15,      2008 (that is, fiscal 2009 for the Company). The Company does not expect      that this Statement will have an effect on the Company’s consolidated      financial statements. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In      May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally      Accepted Accounting Principles”. This Statement identifies the sources of      accounting principles and the framework for selecting the principles to be      used in the preparation of financial statements of nongovernmental      entities that are presented in conformity with generally accepted      accounting principles (GAAP) in the United States (the GAAP hierarchy).      This Statement is effective 60 days following the SEC’s approval of the      Public Company Accounting Oversight Board amendments to AU Section 411,      The Meaning of Present Fairly in Conformity With Generally Accepted      Accounting Principles. The Company does not expect that this Statement      will have an effect on the Company’s consolidated financial      statements. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In      May 2008, the FASB issued SFAS No. 163, “Accounting for Financial      Guarantee Insurance Contracts—an interpretation of FASB Statement No. 60”.      This Statement interprets Statement 60, “Accounting and Reporting by      Insurance Enterprises” and amends existing accounting pronouncements to      clarify their application to the financial guarantee insurance contracts      included within the scope of this Statement. This Statement requires that      an insurance enterprise recognize a claim liability prior to an event of      default (insured event) when there is evidence that credit deterioration      has occurred in an insured financial obligation. This Statement also      clarifies how Statement 60 applies to financial guarantee insurance      contracts, including the recognition and measurement to be used to account      for premium revenue and claim liabilities.  This Statement is      effective for financial statements issued for fiscal years beginning after      December 15, 2008 (that is, fiscal 2009 for the Company), and all interim      periods within those fiscal years. The Company does not expect that this      Statement will have an effect on the Company’s consolidated financial      statements. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 3.   | ACQUISITION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|           | On      June 30, 2008, the Company and its wholly owned subsidiary, Hangson,      entered into a Securities Purchase Agreement (the “Agreement”) with the      minority shareholder of Suo’ang New Energy. Pursuant to the Agreement, the      minority shareholder transferred his 20% ownership of Suo’ang New Energy      to Hangson in exchange for 7,500,000 shares (the “Shares”) of the      Company’s restricted common stock. Suo’ang Biological, the Company’s VIE,      owns 80% of Suo’ang New Energy. Pursuant to the terms of the Agreement,      the minority shareholder agreed to waive any and all rights that he may      have to any distributions and or payments from Suo’ang New Energy      beginning January 1, 2008. On June 30, 2008, the transaction      contemplated under the Agreement was completed upon approval by the      Chinese local government authorities. As a result, Suo’ang New Energy is      now 100% controlled by theCompany. |

----

|   | The      total purchase price was $1,148,851, by issuance of the Company’s      restricted common stock based on the per share value on the      acquisition date. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      acquisition was accounted for using the purchase method of accounting. The      allocation of the purchase price for this acquisition, as of the date of      acquisition, is as follows: |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|         | Cash      acquired                                            |   | $      | 3,712,020   |   |
|--------------|--------------------------------------------------------------------|--------|--------|-------------|--------|
|         | Accounts      receivable, net of allowance                         |   |   | 3,459,196   |   |
|         | Property,      plant and equipment                                 |   |   | 3,100,935   |   |
|         | Inventory                                                          |   |   | 76,443      |   |
|         | Prepaid      land use right                                        |   |   | 1,848,416   |   |
|         | Goodwill                                                           |   |   | 410,869     |   |
|         | Other      assets acquired                                         |   |   | 2,422,836   |   |
|         | Total      assets acquired                                         |   |   | 15,030,715  |   |
|         | Liabilities      assumed                                           |   |   | (10,929,937 | )      |
|         |                                                               |   |   | 4,100,778   |   |
|    | Less:      Interest held by Suo'ang by way of initial contribution |   |   | (2,951,927  | )      |
|         |                                                               |   | $      | 1,148,851   |   |

|   | At      the date of acquisition of the minority interest of Suo’ang New Energy,      management made its best estimate of the allocations of the fair value      assigned to assets and has categorized the value of $410,869 attributed to      goodwill for the acquisition. A final analysis and determination will be      made during year ending December 31,2008. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      following table sets forth the unaudited pro forma results of operations      of the Company as if the additional acquisition of the 20% interest in      Suo’ang New Energy had occurred at the beginning of the year. These pro      forma amounts do not purport to be indicative of the results that would      have actually been obtained if the acquisition occurred as of the      beginning of the periods presented or that not be obtained in      the future. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |   |
|--------|--------|

| Unaudited      Pro Forma Results             |   |
|----------------------------------------------|--------|
|                                         |   |   |   |
| Net      income attributable to shareholders |   | $ | 1,686,538 |   |

| 4.    | CONCENTRATION OF CREDIT      RISK |
|----------------------|----------------------------------------|

|   | a. | Financial      instruments that potentially expose the Company to concentrations of      credit risk, consist of cash and cash equivalents and accounts receivable.      The Company performs ongoing evaluations of their cash position and credit      evaluations to ensure collections and minimize  losses. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | b. | As      of June 30, 2008 and 2007, the Company's bank deposits were all placed      with banks in the PRC where there is currently no rule or regulation in      place for obligatory insurance of bankaccounts. |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | c. | For      the periods ended June 30, 2008 and 2007, all of the Company's sales arose      in the PRC. All accounts receivable as of June 30, 2008 and 2007 also      arose in the PRC. |
|--------|----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | d. | Details      of the customers accounting for 10% or more of the Company’s total sales      for the periods ended June 30, 2008 and 2007 are as    follows: |
|--------|----|------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|           |   | Periods ended June      30, |      |
|----------------|--------|-----------------------------|-----------|
|           |   | 2008                        |      |   | 2007 |   |
| Company      A |   | $                           | 1,175,657 |   |   | $ | - |   |
| Company      B |   |                        | 999,194   |   |   |   | - |   |
| Company      C |   |                        | 858,224   |   |   |   | - |   |
| Company      D |   |                        | 577,828   |   |   |   | - |   |

| 5.     | CURRENT      VULNERABILITY DUE TO CERTAIN CONCENTRATIONS                                                                                                                                                                                                                                      |
|----------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |                                                                                                                                                                                                                                                                                          |
|                       | The      Company's operations are all carried out in the PRC. Accordingly, the      Company's business, financial condition and results of operations may be      influenced by the political, economic and legal environments in the PRC,      and by the general state of the PRC'seconomy. |

|   | The      Company's operations in the PRC are subject to specific considerations and      significant risks not typically associated with companies in the North      America and Western Europe. These include risks associated with, among      others, the political, economic and legal environments and foreign      currency exchange. The Company's results may be adversely affected by      changes in governmental policies with respect to laws and regulations,      anti-inflationary measures, currency conversion and remittance abroad, and      rates and methods of taxation, among other  things. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 6.   | DEPOSITS AND      PREPAYMENTS                     |
|----------------|--------------------------------------------------------|
|           |                                                   |
|           | Deposits      and prepayments consist of thefollowing, |

|                                                                 |   | June      30, |      |   | December      31, |   |
|----------------------------------------------------------------------|--------|---------------|-----------|--------|-------------------|--------|
|                                                                 |   | 2008          |      |   | 2007              |   |
| Prepayment      for construction in progress and machinery purchases |   | $             | 1,109,583 |   |              | $      | 908,561 |   |
| Purchase security      deposit                                  |   |          | 1,304,107 |   |              |   | 1,609,750 |   |
| Prepaid      expenses                                           |   |          | 41,935    |   |              |   | 22,600 |   |
| Other                                                                |   |          | 2,146     |   |              |   | 2,018 |   |
|                                                                 |   |          |      |   |              |   |   |   |
|                                                                 |   | $             | 2,457,771 |   |              | $      | 2,542,929 |   |

| 7.     | GOVERNMENT      GRANT RECEIVABLE                                                                                                                                        |
|----------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                       |                                                                                                                                                                    |
|                       | The      amount represents a subsidy from the Shaanxi Provincial Government. The      subsidy is unconditional and was received in the first quarter of      2008. |
|                       |                                                                                                                                                                    |
| 8.                    | INVENTORIES                                                                                                                                                        |

|   | Inventories      consist of the following, |
|--------|--------------------------------------------|

|                         |   | June      30, |        |   | December      31, |   |
|------------------------------|--------|---------------|-------------|--------|-------------------|--------|
|                         |   | 2008          |        |   | 2007              |   |
| Raw      materials           |   | $             | 58,640      |   |              | $      | 22,615 |   |
| Packing materials  |   |          | 1,074  |   |              |   | 1,751  |   |
| Finished      goods          |   |          | 16,729      |   |              |   | 16,593 |   |
|                         |   |          |        |   |              |   |   |   |
|                         |   | $             | 76,443      |   |              | $      | 40,959 |   |

----

| 9.  | PROPERTY, PLANT AND      EQUIPMENT                      |
|----------|--------------------------------------------------------------|
|     |                                                         |
|     | Property,      plant and equipment consists of thefollowing, |

|                                                       |   |   | June      30, |      |   | December      31, |   |
|------------------------------------------------------------|--------|--------|---------------|-----------|--------|-------------------|--------|
|                                                       |   |   | 2008          |      |   | 2007              |   |
| Construction      in progress                         |   |   | $             | 126,817   |   |              | $      | 119,169 |   |
| Buildings                                             |   |   |          | 1,403,310 |   |              |   | 3,806,628 |   |
| Leasehold      improvements                           |   |   |          | -         |   |              |   | 232,900 |   |
| Plant and      machinery                         |   |   |          | 1,698,592 |   |              |   | 1,596,161 |   |
| Office equipment                                 |   |   |          | 69,612    |   |              |   | 65,414 |   |
| Motor      vehicles                                        |   |   |          | 178,878   |   |              |   | 127,935 |   |
|                                                       |   |   |          | 3,477,209 |   |              |   | 5,948,207 |   |
|                                                       |   |   |          |      |   |              |   |   |   |
| Less:      Accumulated depreciation and amortization  |   |   |          | 367,483   |   |              |   | 512,403 |   |
|                                                       |   |   |          |      |   |              |   |   |   |
|                                                       |   |   | $             | 3,109,726 |   |              | $      | 5,435,804 |   |

|   | Construction      in progress included above was the construction of buildings, production      lines and machinery for the “Coal-water mixture”  business. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      depreciation expenses on property, plant and equipment for the six months      ended June 30, 2008 and 2007 were $116,317 and $52,834,      respectively. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 10.   | PREPAID      LAND USE RIGHT                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|            | The      Company has recorded as prepaid land use rights the costs paid to acquire      a long-term interest to utilize the land underlying the building and      production facility for its “coal-water mixture” business. This type of      arrangement is common for the use of land in the PRC. The prepaid land use      rights are expenses on the straight-line method over the term of the land      use rights of 50 years.  |

|            | The      amount expensed on prepaid land use right for the periods ended June 30,      2008 and 2007 was $19,239 and $525, respectively. The amount to be      expensed on prepaid land use rights over each of the next five years and      thereafter is $193,070 per annum. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |                                                                                                                                                                                                                                                                           |
| 11.   | GOODWILL                                                                                                                                                                                                                                                                       |

| Balance      as of December 31, 2007                                                                |   | $      | -       |   |
|-----------------------------------------------------------------------------------------------------|--------|--------|---------|--------|
| Arising      from additional acquisition of Suo’ang New Energy on June 30, 2008 (Note      3) |   |   | 410,869 |   |
|                                                                                                |   |   |    |   |
| Balance      as of June 30, 2008                                                                    |   | $      | 410,869 |   |

| 12.   | INTANGIBLE  ASSETS                          |
|-----------------|--------------------------------------------------|
|            |                                             |
|            | Intangible      assets consist of the following: |

|                                |   | June      30, |   |   | December      31, |   |
|-------------------------------------|--------|---------------|--------|--------|-------------------|--------|
|                                |   | 2008          |   |   | 2007              |   |
| Accounting      software            |   | $             | 2,085  |   |              | $      | 1,959 |   |
| Less:      Accumulated amortization |   |          | (720   | )      |              |   | (481 | ) |
|                                |   |          |   |   |              |   |   |   |
|                                |   | $             | 1,365  |   |              | $      | 1,478 |   |

|   | The      amortization expenses on intangible assets for the periods ended June 30,      2008 and 2007 were $239 and $183,respectively. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------|

----

| 13.  | ACCRUED EXPENSES      AND OTHER PAYABLES                             |
|-----------|---------------------------------------------------------------------------|
|      |                                                                      |
|      | Accrued      expenses and other payables consist of the following as  of: |

|                                        |   |   | June      30, |    |  December      31, |
|---------------------------------------------|--------|--------|---------------|---------|-------------------------|
|                                        |   |   | 2008          |    | 2007                    |
| Accrued      operating expenses        |   |   | $             | 590,861 |                    | $ | 471,988 |
| Prepaid      land use right payable    |   |   |          | 142,313 |                    |   | 133,731 |
| Accrued      staff welfare             |   |   |          | 122,271 |                    |   | 71,706 |
| Construction      in progress payable  |   |   |          | 12,755  |                    |   | 90,140 |
| Non-interest      bearing loan         |   |   |          | -       |                    |   | 68,627 |
| Advance      from customer             |   |   |          | 58,317  |                    |   | 54,800 |
| Other      payables                    |   |   |          | 22,564  |                    |   | 2,740 |
|                                        |   |   |          |    |                    |   |   |
|                                        |   |   | $             | 949,081 |                    | $ | 893,732 |

| 14.    | CAPITAL    TRANSACTION                                                                                                                                                                                                                                           |
|-----------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                  |                                                                                                                                                                                                                                                                  |
|                  | On      June 30, 2008 the Company acquired 20% ownership interest of Suo’ang New      Energy with the agreed value of $1,148,851 in exchange for the Company’s      issuance of 7,500,000 shares of common stock, as fully described in      Note 3. |

| 15.  | STATUTORY    RESERVES                                                                                                                                                 |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|      |                                                                                                                                                                       |
|      | As      stipulated by the PRC's Company Law, net income after taxation can only be      distributed as dividends after appropriation has been made for the      following: |

|   | a.    | Making      up cumulative prior years' losses, if any;                                                                                                                                                                                                                                                                                                                      |
|--------|----------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                 |                                                                                                                                                                                                                                                                                                                                                                             |
|   | b.                   | Allocations      to the “Statutory capital reserve” of at least 10% of income after tax, as      determined under PRC accounting rules and regulations, until the fund      amounts to 50% of the Company's registered capital. This is restricted to      set off against losses, expansion of production and operation or increase      in registered capital; and |

|   | c.             | Allocations      of 5-10% of income after tax, as determined under PRC accounting rules and      regulations, to the Company's “Statutory common welfare fund”. This is      restricted to capital expenditure for the collective benefits of the      Company's employees; and |
|--------|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |           |                                                                                                                                                                                                                                                                                        |
|   | d.   | Allocations      to the discretionary surplus reserve, if approved in the shareholders'      general meeting.                                                                                                                                                                          |

|   | Statutory      reserves consist of the following asof: |
|--------|--------------------------------------------------------|

|                                  |   | June      30, |    | December      31, |   |
|---------------------------------------|--------|---------------|---------|-------------------|--------|
|                                  |   | 2008          |    | 2007              |   |
| Statuatory      capital reserve  |   | $             | 232,206 |              | $      | 232,206 |   |
|                                  |   |          | 116,103 |              |   | 116,103 |   |
| Statuatory      common welfare fund   |   |          |    |              |   |   |   |
|                                  |   | $             | 348,309 |              | $      | 348,309 |   |

| 16.    | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|-----------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|                  | Companies      in the PRC are generally subject to PRC Enterprise Income Taxes at a      statutory rate of 33% (30% of national income tax plus 3% local income      tax) on the net income. However, the Company’s VIE, Shaanxi Suo’ang, has      been approved as a “high and new technology enterprise” and under PRC      Income Tax Laws, it is entitled to a preferential tax rate of 15% upon      expiry of a two years' tax holiday for 2004 and 2005, within which no      income taxes were charged. Shaanxi Suoang is subject to income tax from      2006. |

----

|   | The      Company and its wholly owned subsidiary Hangson are not subject to any      income taxes as these companies had no income for the periods ended June      30, 2008 and 2007. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      income tax expense consisted of the following as  of: |
|--------|----------------------------------------------------------------|

|                                           |   | June    30, |   |
|------------------------------------------------|--------|-------------|--------|
|                                           |   | 2008        |   |   | 2007 |   |
| Current –      PRC Enterprise Income Tax |   | $           | 24,708 |   |   | $ | - |   |
| Deferred                                       |   |        | -      |   |   |   | - |   |
|                                           |   |        |   |   |   |   |   |   |
| Total      income tax expenses                 |   | $           | 24,708 |   |   | $ | - |   |

|   | The      following table reconciles the U.S. statutory rates to the Company's      effective tax rate: |
|--------|--------------------------------------------------------------------------------------------------------|

|                                       |   | June    30, |   |
|--------------------------------------------|--------|-------------|--------|
|                                       |   | 2008        |   |   | 2007 |   |
| U.S.      statutory rate                   |   |        | 34     | % |   |   | 34 | % |
| Foreign      income not recognized in U.S. |   |        | (34    | %) |   |   | (34 | %) |
| Non-deductible      expenses and other     |   |        | -      |   |   |   | - |   |
| Tax      holiday                           |   |        | (14    | %) |   |   | - |   |
| PRC      preferential income tax rate      |   |        | 15     | % |   |   | 15 | % |
|                                       |   |        |   |   |   |   |   |   |
| Effective      tax rate                    |   |        | 1      | % |   |   | 15 | % |

|   | No      significant deferred tax liabilities or assets existed as of either June      30, 2008 or 2007. |
|--------|---------------------------------------------------------------------------------------------------------|

| 17.     | INCOME (LOSS) PER COMMON      SHARE                                                                                                                                                                              |
|-----------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                        |                                                                                                                                                                                                                  |
|                        | Basic      income (loss) per common share for the periods ended June 30, 2008 and      2007 were determined by dividing net income for the periods by the      weighted average number of common shares  outstanding. |

|   | The      Company has retroactively adjusted the weighted average number of common      shares outstanding by deeming that the three-for-one (3:1) forward stock      split on August 20, 2007 had occurred as of the beginning of the earliest      period presented. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      Company did not have dilutive securities outstanding as of and during the      periods ended June 30, 2008 and2007. |
|--------|------------------------------------------------------------------------------------------------------------------------------|

| 18.                   | RELATED      PARTY TRANSACTIONS                                                                       |
|-----------------------|------------------------------------------------------------------------------------------------------------|
|                  |                                                                                                       |
| (a)    | Related      party payables                                                                           |
|                  |                                                                                                       |
|                  | Amount      payable to a director as of June 30, 2008 and December 31 2007, is      summarized as follows: |

|                           |   | June      30, |   |   | December      31, |   |
|--------------------------------|--------|---------------|--------|--------|-------------------|--------|
|                           |   | 2008          |   |   | 2007              |   |
| Amount      due to a director: |   |          |   |   |              |   |
| Mr.      Peng Zhou             |   | $             | -      |   |              | $      | 8,527 |   |

|   | This      balance is interest free and unsecured and has no fixed repayment      date. |
|--------|----------------------------------------------------------------------------------------|

----

| (b)        | Disposal      of patent                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|-----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|            | In      2006, the Company disposed of the patent related to the discontinued COPO      resin product operations to a related company for a consideration of      $256,200. A loss on disposal of $291,266 was recorded. The balance remains      outstanding as of December 31, 2007 was $141,795 and was repaid during the      first quarter of 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                |
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (c)   | Transfer      of property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|            |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|            | On      June 13, 2006, the Company signed a property transfer agreement with a      related company, HanZhong SiXiong KeChuang Commercial Company Ltd., which      is controlled by a shareholder of the Company, to dispose of the Company’s      leasehold properties together with the leasehold improvements for an      aggregate cash consideration of approximately $2,450,000. The agreed price      is $120,000 lower then the evaluated value according to an appraisal      report issued by an independent professional appraiser because the      property title did not transfer from the property developer to the      Company. As of December 31, 2007, $1,567,500 was received and      recorded as deposit on sale of property in the balance    sheet.  |

|   | On      March 25, 2007 and June 21, 2007, the Company and the buyer entered into      extension agreements whereby the Company extended the date for payment of      the remaining balance and transfer of the title of properties to the buyer      to on or before May 31, 2007 and October 31, 2007 respectively. On March      6, 2008, the Company entered a supplementary agreement whereby the Company      agreed to transfer the title of the properties before May 31, 2008 and the      buyer will pay the Company on or one month after the transfer of property      title. The transfer of property was completed accordingly. Gain on      transfer of property of $33,000 wasrecorded. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (d)  | Forfeiture      of minority interest                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|      | On      June 30, 2008, the Company entered into a Securities Purchase Agreement      (the “Agreement”) to acquire from a minority shareholder his 20% equity      ownership interest in Suo’ang New Energy as more fully described in Note      3. Pursuant to the terms of the Agreement, the minority shareholder agreed      to waive any and all right he may have to any distributions and/or      payments from Suo’ang New Energy beginning January 1,  2008. |
|      |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| 19.  | COMMITMENTS      AND CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

|   | During      the fiscal year 2007, the Company entered into various contracts for the      construction of a new plant for its coal water mixture business, as well      as several contracts to purchasemachinery. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | The      Company's commitments for capital expenditure as of June 30, 2008 are as      follows:                                                                                                                                                                                                                                  |   |   |    |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|
|   |                                                                                                                                                                                                                                                                                                                             |   |   |    |
|   | Contracted      but not accrued for:                                                                                                                                                                                                                                                                                        |   |   |    |
|   |                                                                                                                                                                                                                                                                                                                             |   |   |    |
|   | Purchase      of machinery                                                  |   | $      | 320,605 |   |

----

|   | As      of June 30, 2008, the Company’s total future minimum lease payments under      non-cancelable operating leases to be paid in each of the five succeeding      years are as follows: |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| Periods ending June      30,            |   |   |   |
|----------------------------------------------|--------|--------|--------|
|    2009                       |   |   | 20,994 |   |
|    2010                       |   |   | 20,994 |   |
|    2011      and thereafter   |   |   | -      |   |
|                                         |   |   |   |   |
| Total operating      lease commitments  |   | $      | 41,988 |   |

|   | According      to the prevailing laws and regulations of the PRC, the Company is required      to cover its employees with medical, retirement and unemployment insurance      programs. Management believes that due to the transient nature of its      employees, the Company does not need to provide all employees with such      social insurance. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | In      the event that any current or former employee files a complaint with the      PRC government, the Company may be subject to making up the social      insurance as well as administrative fines. As the Company believes that      these fines would not be material, no provision has been made in this      regard. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

----

| (i) | Long-lived      Assets |
|-----|------------------------|

| (ii) | Goodwill |
|------|----------|

----

----

----

|                                                                                                                                                                | June      30, 2008 | December      31, 2007 | June      30, 2007 |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|------------------------|--------------------|
|                                                                                                                                                                |               |                   |               |
| Balance      sheet items, except for the registered and paid-up capital, as of end of      period/year                                                              |               | USD0.1458:RMB1         |               | USD0.1370:RMB1 |   | USD0.1316:RMB1 |
|                                                                                                                                                                |               |                   |               |   |   |   |
| Amounts      included in the statement of operations, statement of changes in      stockholders' equity and statement of cash flows for the period/ year      ended |               | USD0.1412:RMB1         |               | USD0.1320:RMB1 |   | USD0.1300:RMB1 |

Item3.                      Quantitativeand Qualitative Disclosures About Market Risk

| (a)    | Evaluation of disclosure      controls and procedures. As of the end of the period covered by      this report, we carried out an evaluation, under the supervision and with      the participation of our management, including our Chief Executive Officer      and Chief Financial Officer, of the effectiveness of the design and      operation of our disclosure controls and procedures, as defined in Rules      13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as      amended.  Based upon that evaluation, our Chief Executive      Officer and Chief Financial Officer concluded that our disclosure controls      and procedures were effective as of the end of the applicable period to      ensure that the information required to be disclosed by the Company in      reports that it files or submits under the Exchange Act (i) is recorded,      processed, summarized and reported within the time periods specified in      Securities and Exchange Commission rules and forms, and (ii) is      accumulated and communicated to our management, including our Chief      Executive Officer and Chief Financial Officer, as appropriate to allow      timely decisions regarding required disclosures. |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| (b)    | Changes in internal controls      over financial reporting. There was no change in our internal      control over financial reporting during our most recent fiscal quarter      that has materially affected, or is reasonably likely to materially      affect, our internal control over financial  reporting.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

Item1.                      LegalProceedings.

Item 1A. Risk Factors.

Item2.                      UnregisteredSales of Equity Securities and Use of Proceeds.

Item3.                      Defaultsupon Senior Securities.

----

Item4.                      Submission of Matters to a Vote of Securities Holders.

Item5.                      Other Information.

Item6.                       Exhibits.

|                      |                                                                                                                                                                  |
|---------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Exhibit       Number | Description                                                                                                                                                      |
|                      |                                                                                                                                                                  |
| 2.1                       | Share      Exchange Agreement between Endo Networks, Inc., Endo Majority      Shareholders, Hangson Ltd. and the Hangson Shareholders dated October 18,      2006 (1) |

| 3.1 | Articles      of Incorporation of Endo Networks, Inc., a Nevada corporation, as      amended. (3) |
|-----|--------------------------------------------------------------------------------------------------------|
| 3.2 | Bylaws      of Endo Networks, Inc. (3)                                                                 |

| 3.3 | Text      of Amendment to our Bylaws (4)                                                                               |
|-----|------------------------------------------------------------------------------------------------------------------------|
| 3.4 | Articles      of Merger filed with the Secretary of State of Nevada with an effective      date of August 15, 2007 (6) |

| 10.1 | Asset      and Share Purchase Agreement between Registrant and Peter B. Day (for Endo      Canada) (2)                                                                                               |
|------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.2 | Contract      for Technology Transfer between Shaanxi Suo’ang Biological Science &      Technology Co., Ltd. and HanZhongWeiDa Commercial Company Limited dated      December 25, 2006 (5) |

| 10.3 10.4 | Machineries      Transfer Agreement between Shaanxi      Suo’ang Biological Science & Technology Co., Ltd. and HanZhongWeiDa      Commercial Company Limited dated January 10, 2007 (5)Securities      Purchase Agreement dated as of June 30, 2008, by and among Mr. Peng Zhou,      Sino Clean Energy Inc., Hangson Limited and Shaanxi Suo’ang New Energy      Enterprise Co., Ltd. (8) |
|----------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 31.1           | Section      302 Certification by the Corporation’s Chief Executive Officer      *                                                                                                                                                                                                                                                                                                                             |

| 31.2 | Section      302 Certification by the Corporation’s Chief Financial Officer      * |
|------|------------------------------------------------------------------------------------------|
| 32.1 | Section      906 Certification by the Corporation’s Chief Executive Officer      * |

| 32.2 | Section      906 Certification by the Corporation’s Chief Financial Officer      *                                                                                      |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 99.1 | Consulting      Services Agreement by and between Hangson Limited and Shaanxi Suo’ang      Biological Science & Technology Co., Ltd. dated August 18, 2006      (3) |

| 99.2 | Equity      Pledge Agreement by and between Hangson Limited and Shaanxi Suo’ang      Biological Science & Technology Co., Ltd. (“Shaanxi Suoang”) and      Shaanxi Suoang’s Majority Shareholders dated August 18, 2006      (3) |
|------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 99.3 | Operating      Agreement by and between Hangson Limited and Shaanxi Suo’ang Biological      Science & Technology Co., Ltd. (“Shaanxi Suoang”) and Shaanxi Suoang’s      Majority Shareholders dated August 18, 2006(3)           |

| 99.4   | Proxy Agreement by and between      Hangson Limited and Shaanxi Suo’ang Biological Science & Technology      Co., Ltd. (“Shaanxi Suoang”) and Shaanxi Suoang’s Majority Shareholders      dated August 18, 2006 (3)    |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 99.5   | Option      Agreement between Hangson Limited and Shaanxi Suo’ang Biological Science      & Technology Co., Ltd. (“Shaanxi Suoang”) and Shaanxi Suoang’s      Majority Shareholders dated August 18, 2006 (3)          |
| 99.6   | Agreement      by and between Shaanxi Suo’ang Biological      Science and Technology Co. Ltd. and Hanzhong Si Xiong Ke Chuang Business      Co. Ltd. (3)                                                                                |
| 99.7   | Supplementary      Agreement by and between Shaanxi Suo'ang Biological      Science and Technology Co. Ltd. and Hanzhong Si Xiong Ke Chuang Business      Co. Ltd. dated March 25, 2007 (5)                                                        |
| 99.8   | Agreement      to Defer Payment for Property Transfer by and between Shaanxi Suo'ang      Biological Science and Technology Co. Ltd. and Hanzhong Si Xiong Ke Chuang      Business Co. Ltd. dated June 21, 2007 (7)                           |
| 99.9   | Supplementary      Agreement to the Property Transfer Agreement  by      and between Shaanxi Suo'ang Biological Science and Technology Co.      Ltd. and Hanzhong Si Xiong Ke Chuang Business Co. Ltd. dated March 6,      2008 (7) |
|   | Biological      Science and Technology Co. Ltd. and Hanzhong Si Xiong Ke Chuang Business      Co. Ltd. dated March 6, 2008 (7)                                                                                                                          |

|   |   |
|--------|--------|

----

| (1) | Filed      as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with      the SEC on October 18, 2006 and incorporated herein by      reference. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Filed      as Exhibit A of Registrant’s Schedule 14A filed with the SEC on August 8,      2006 and incorporated herein byreference.                              |

| (3)       | Filed      as Exhibits to the Registrant’s Current Report on Form 8-K filed with the      SEC on October 26, 2006 and incorporated herein by    reference.      |
|-----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (4)       | Filed      as an Exhibit to the Registrant’s Current Report on Form 8-K filed with      the SEC on November 17, 2006 and incorporated herein by      reference. |
| (5)       | Filed as Exhibits to the      Registrant’s Annual Report on Form 10-KSB filed with the SEC on May 3,      2007 and incorporated herein by reference.       |
| (6)  | Filed      as an Exhibit to the Registrant’s Current Report on Form 8-K filed with      the SEC on August 17, 2007 and incorporated herein by      reference.   |
| (7)       | Filed      as an Exhibit to the Registrant’s Quarterly Report on Form 10-Q filed with      the SEC on May 19, 2008 and incorporated herein by    reference.     |
| (8)       | Filed      as an Exhibit to the Registrant’s Current Report on Form 8-K filed with      the SEC on July 7, 2008 and incorporated herein by reference.      |

----

SIGNATURES

|                       | SINO      CLEAN ENERGY INC.(Registrant)     |
|----------------------------|---------------------------------------------|
|                       |                                        |   |
| Date:      August 12, 2008 | By:                                         | /s/      Baowen Ren |   |
|                       | Baowen      RenChief      Executive Officer |   |