----

----

**þ      **

** ̈      **

----

**NEW      ORIENTAL ENERGY & CHEMICAL CORP.**

----

| **Delaware**                                   |   | **20-1917956**                     |
|------------------------------------------------|--------|------------------------------------|
| (State                or Other Jurisdiction of |   | (I.R.S.                Employer    |
| Incorporation                or Organization)  |   | Identification                No.) |

----

**NEW      ORIENTAL ENERGY CORP., INC.**

**INDEX**

| **PART              I. FINANCIAL INFORMATION** |                                                                                                                                                                                                            |   |
|------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                           |                                                                                                                                                                                                            |   |   |
| **Item                1.**                     | **Financial                Statements**                                                                                                                                                                         |   |   |
|                                           |                                                                                                                                                                                                            |   |   |
|                                           | **Condensed                Consolidated Balance Sheets as of September 30, 2007 (Unaudited)                and March                31, 2007**                                                                  |   | **2** |
|                                           |                                                                                                                                                                                                            |   |   |
|                                           | **Condensed                Consolidated Statements of Income and Comprehensive Income for the                Three                and Six Months Ended September 30, 2007 and 2006                (Unaudited)** |   | **3** |
|                                           |                                                                                                                                                                                                            |   |   |
|                                           | **Condensed                Consolidated Statements of Cash Flows for the Six Months Ended September                30, 2007 and 2006 (Unaudited)**                                                              |   | **5** |
|                                           |                                                                                                                                                                                                            |   |   |
|                                           | **Notes                to Condensed Consolidated Financial Statements for the Three and                Six                Months Ended September 30, 2007 and 2006                (Unaudited)**                 |   | **7** |
|                                           |                                                                                                                                                                                                            |   |   |
| **Item                2.**                     | **Management's                Discussion and Analysis or Plan of Operation**                                                                                                                                    |   | **20** |
|                                           |                                                                                                                                                                                                            |   |   |
| **Item                3.**                     | **Controls                and Procedures**                                                                                                                                                                      |   | **34** |
|                                           |                                                                                                                                                                                                            |   |   |
| **PART                II. OTHER INFORMATION**  |                                                                                                                                                                                                            |   |
|                                           |                                                                                                                                                                                                            |   |   |
| **Item                1.**                     | **Legal                Proceedings**                                                                                                                                                                            |   | **34** |
|                                           |                                                                                                                                                                                                            |   |   |
| **Item                2.**                     | **Unregistered                Sales of Equity Securities and Use of Proceeds**                                                                                                                                  |   | **34** |
|                                           |                                                                                                                                                                                                            |   |   |
| **Item                3.**                     | **Defaults                Upon Senior Securities**                                                                                                                                                              |   | **34** |
|                                           |                                                                                                                                                                                                            |   |   |
| **Item                4.**                     | **Submission                of Matters to a Vote of Security Holders**                                                                                                                                          |   | **34** |
|                                           |                                                                                                                                                                                                            |   |   |
| **Item                5.**                     | **Other                Information**                                                                                                                                                                            |   | **34** |
|                                           |                                                                                                                                                                                                            |   |   |
| **Item                6.**                     | **Exhibits**                                                                                                                                                                                                    |   | **34** |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP.**

**(FORMERLY        SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED BALANCE SHEETS**

**(UNAUDITED)**

|                                                                                                                                                                                                                                   |   | **September                30,** |       | **March                31,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|------------|------------------------------|--------|
|                                                                                                                                                                                                                                   |   | **2007**                         |       | **2007**                     |   |
|                                                                                                                                                                                                                                   |   | **(Unaudited)**                  |       |                         |   |
| **ASSETS**                                                                                                                                                                                                                             |   |
| **CURRENT                ASSETS**                                                                                                                                                                                                      |   |                             |       |                         |   |
| Cash                and cash equivalents                                                                                                                                                                                               |   | $                                | 7,456,591  |                         | $      | 2,616,149 |   |
| Restricted                cash                                                                                                                                                                                                         |   |                             | 8,220,629  |                         |   | 5,430,426 |   |
| Notes                receivable                                                                                                                                                                                                        |   |                             | 1,344,730  |                         |   | 1,395,858 |   |
| Inventories                                                                                                                                                                                                                            |   |                             | 2,474,159  |                         |   | 3,786,130 |   |
| Prepayments                for goods                                                                                                                                                                                                   |   |                             | 2,095,836  |                         |   | 383,639 |   |
| Taxes                receivable                                                                                                                                                                                                        |   |                             | -          |                         |   | 155,863 |   |
| Due                from employees                                                                                                                                                                                                      |   |                             | 32,644     |                         |   | 113,275 |   |
| Other                assets                                                                                                                                                                                                            |   |                             | 537,577    |                         |   | 204,508 |   |
| Current                assets of the discontinued operation                                                                                                                                                                            |   |                             | -          |                         |   | 47,084 |   |
|  Total                current assets                                                                                                                                                                                              |   |                             | 22,162,166 |                         |   | 14,132,932 |   |
|                                                                                                                                                                                                                                   |   |                             |       |                         |   |   |   |
| **LONG-TERM                ASSETS**                                                                                                                                                                                                    |   |                             |       |                         |   |   |   |
| Plant                and equipment, net                                                                                                                                                                                                |   |                             | 15,433,734 |                         |   | 11,571,652 |   |
| Land                use rights, net                                                                                                                                                                                                    |   |                             | 1,534,329  |                         |   | 1,510,695 |   |
| Construction                in progress                                                                                                                                                                                                |   |                             | 3,326,257  |                         |   | 5,208,277 |   |
| Deposits                                                                                                                                                                                                                               |   |                             | 1,091,234  |                         |   | 267,757 |   |
| Deferred                taxes                                                                                                                                                                                                          |   |                             | 244,619    |                         |   | 646,331 |   |
| Other                long-term assets                                                                                                                                                                                                  |   |                             | 30,787     |                         |   | 39,745 |   |
| Other                assets of the discontinued operation                                                                                                                                                                              |   |                             | -          |                         |   | 125,875 |   |
|                                                                                                                                                                                                                                   |   |                             |       |                         |   |   |   |
|   **TOTAL                ASSETS**                                                                                                                                                                                            |   | $                                | 43,823,126 |                         | $      | 33,503,264 |   |
|                                                                                                                                                                                                                                   |   |                             |       |                         |   |   |   |
| **LIABILITIES                AND SHAREHOLDERS’ EQUITY**                                                                                                                                                                          |
|                                                                                                                                                                                                                                   |   |                             |       |                         |   |   |   |
| **CURRENT                LIABILITIES**                                                                                                                                                                                                 |   |                             |       |                         |   |   |   |
| Accounts                payable                                                                                                                                                                                                        |   | $                                | 3,972,457  |                         | $      | 2,259,834 |   |
| Other                payables and accrued liabilities                                                                                                                                                                                  |   |                             | 409,402    |                         |   | 409,025 |   |
| Short                term debt                                                                                                                                                                                                         |   |                             | 17,693,654 |                         |   | 7,356,933 |   |
| Notes                payable                                                                                                                                                                                                           |   |                             | 549,875    |                         |   | 572,781 |   |
| Customer                deposits                                                                                                                                                                                                       |   |                             | 3,509,118  |                         |   | 5,385,425 |   |
| Payable                to contractors                                                                                                                                                                                                  |   |                             | 62,717     |                         |   | 96,861 |   |
| Due                to related parties                                                                                                                                                                                                  |   |                             | 1,756,147  |                         |   | 4,041,583 |   |
| Taxes                payable                                                                                                                                                                                                           |   |                             | 781,637    |                         |   | 25,063 |   |
| Current                liabilities of the discontinued operation                                                                                                                                                                       |   |                             | **-**      |                         |   | 12,711 |   |
|  Total                current liabilities                                                                                                                                                                                         |   |                             | 28,735,007 |                         |   | 20,160,216 |   |
|                                                                                                                                                                                                                                   |   |                             |       |                         |   |   |   |
| **LONG-TERM                LIABILITIES**                                                                                                                                                                                               |   |                             |       |                         |   |   |   |
| Deferred                taxes                                                                                                                                                                                                          |   |                             | 1,113,571  |                         |   | 1,619,110 |   |
| Due                to employees                                                                                                                                                                                                        |   |                             | 120,033    |                         |   | 115,816 |   |
|  Total                long-term liabilities                                                                                                                                                                                       |   |                             | 1,233,604  |                         |   | 1,734,926 |   |
|                                                                                                                                                                                                                                   |   |                             |       |                         |   |   |   |
| **TOTAL                LIABILITIES**                                                                                                                                                                                                   |   |                             | 29,968,611 |                         |   | 21,895,142 |   |
|                                                                                                                                                                                                                                   |   |                             |       |                         |   |   |   |
| **SHAREHOLDERS’                EQUITY**                                                                                                                                                                                          |   |                             |       |                         |   |   |   |
| Common                stock, par value $0.001 per share; 30,000,000 shares authorized,                12,640,000 shares issued and outstanding as of September 30, 2007                and                March 31, 2007, respectively |   |                             | 12,640     |                         |   | 12,640 |   |
| Additional                paid-in capital                                                                                                                                                                                              |   |                             | 4,573,205  |                         |   | 4,573,205 |   |
| Retained                earnings (restricted portion was $439,248 and $440,182 as of September                30,                2007 and March 31, 2007, respectively)                                                                |   |                             | 8,449,928  |                         |   | 6,563,558 |   |
| Accumulated                other comprehensive income                                                                                                                                                                                  |   |                             | 818,742    |                         |   | 458,719 |   |
|                                                                                                                                                                                                                                   |   |                             |       |                         |   |   |   |
| Total                Shareholders’ Equity                                                                                                                                                                                        |   |                             | 13,854,515 |                         |   | 11,608,122 |   |
|                                                                                                                                                                                                                                   |   |                             |       |                         |   |   |   |
| **TOTAL                LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                                                                    |   | $                                | 43,823,126 |                         | $      | 33,503,264 |   |

----

**NEW          ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY          SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**CONDENSED          CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND**

**COMPREHNENSIVE          INCOME **

**(UNAUDITED)**

|                                                           |   | **Three                Months Ended** |        | **Six                Months Ended** |   |
|----------------------------------------------------------------|--------|---------------------------------------|-------------|-------------------------------------|--------|
|                                                           |   | **September                30,**      |        | **September                30,**    |   |
|                                                           |   | **2007**                              |        | **2006**                            |   | **2007** |   | **2006** |   |
| **REVENUES**                                                   |   | $                                     | 18,215,622  |                                | $      | 7,942,195 |   | $ | 32,902,228 |   | $ | 17,189,339 |   |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| **COST                OF GOODS SOLD**                          |   |                                  | (16,376,557 | )                                   |   | (6,735,973 | ) |   | (28,450,295 | ) |   | (14,306,635 | ) |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| **GROSS                PROFIT**                                |   |                                  | 1,839,065   |                                |   | 1,206,222 |   |   | 4,451,933 |   |   | 2,882,704 |   |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| Selling                and distribution                        |   |                                  | 208,584     |                                |   | 135,497 |   |   | 644,997 |   |   | 373,087 |   |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| General                and administrative                      |   |                                  | 541,512     |                                |   | 216,615 |   |   | 1,020,280 |   |   | 438,639 |   |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| **INCOME                FROM OPERATIONS**                      |   |                                  | 1,088,969   |                                |   | 854,110 |   |   | 2,786,656 |   |   | 2,070,978 |   |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| **OTHER                INCOME (EXPENSES)**                     |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| Interest                expense, net                           |   |                                  | (161,789    | )                                   |   | (50,830 | ) |   | (261,049 | ) |   | (118,532 | ) |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| Governments                grants                              |   |                                  | 79,332      |                                |   | - |   |   | 78,714 |   |   | - |   |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| Other                income (expenses), net                    |   |                                  | (2,644      | )                                   |   | (41,603 | ) |   | 7,905 |   |   | (61,713 | ) |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| **INCOME                FROM OPERATIONS BEFORE INCOME TAXES**  |   |                                  | 1,003,868   |                                |   | 761,677 |   |   | 2,612,226 |   |   | 1,890,733 |   |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| **INCOME                TAXES**                                |   |                                  | (160,976    | )                                   |   | (16,842 | ) |   | (747,548 | ) |   | (399,468 | ) |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| **INCOME                FROM CONTINUING OPERATIONS**           |   |                                  | 842,892     |                                |   | 744,835 |   |   | 1,864,678 |   |   | 1,491,265 |   |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| **DISCONTINUED                OPERATION**                      |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| Income                from discontinued operation              |   |                                  | 1,761       |                                |   | 8,356 |   |   | 1,761 |   |   | 3,591 |   |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| Income                from disposition of long term investment |   |                                  | 19,359      |                                |   | - |   |   | 19,931 |   |   | - |   |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| **NET                INCOME**                                  |   |                                  | 864,012     |                                |   | 753,191 |   |   | 1,886,370 |   |   | 1,494,856 |   |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| **OTHER                COMPREHENSIVE INCOME**                  |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
|                                                           |   |                                  |        |                                |   |   |   |   |   |   |   |   |   |
| Foreign                currency translation gain               |   |                                  | 145,816     |                                |   | 30,059 |   |   | 537,348 |   |   | 50,452 |   |
| Unrealized                gain on marketable securities        |   |                                  | -           |                                |   | 2,561 |   |   | - |   |   | 5,043 |   |
| **OTHER                COMPREHENSIVE INCOME BEFORE TAX**       |   | $                                     | 145,816     |                                | $      | 32,620 |   | $ | 537,348 |   | $ | 55,495 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY        SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND**

**COMPREHNENSIVE        INCOME **

**(UNAUDITED)**

|                                                                                                                                       |   | **Three                Months Ended** |       | **Six                Months Ended** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|------------|-------------------------------------|--------|
|                                                                                                                                       |   | **September                30,**      |       | **September                30,**    |   |
|                                                                                                                                       |   | **2007**                              |       | **2006**                            |   | **2007** |   | **2006** |   |
| **INCOME                TAX EXPENSE RELATED TO OTHER COMPREHENSIVE INCOME**                                                                |   | $                                     | 64,603     |                                | $      | 10,765 |   | $ | 177,325 |   | $ | 18,313 |   |
|                                                                                                                                       |   |                                  |       |                                |   |   |   |   |   |   |   |   |   |
| **OTHER                COMPREHENSIVE INCOME, NET**                                                                                         |   |                                  | 81,213     |                                |   | 21,855 |   |   | 360,023 |   |   | 37,182 |   |
|                                                                                                                                       |   |                                  |       |                                |   |  |   |   |   |   |   |   |   |
| **COMPREHENSIVE                INCOME**                                                                                                    |   | $                                     | 945,225    |                                |   | 775,046 |   |   | 2,246,393 |   | $ | 1,532,038 |   |
|                                                                                                                                       |   |                                  |       |                                |   |   |   |   |   |   |   |   |   |
| **WEIGHTED                AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED**                                                                  |   |                                  | 12,640,000 |                                |   | 7,500,000 |   |   | 12,640,000 |   |   | 7,500,000 |   |
|                                                                                                                                       |   |                                  |       |                                |   |   |   |   |   |   |   |   |   |
| **INCOME                PER SHARE FROM CONTINUING OPERATIONS, BASIC AND                DILUTED**                                           |   | $                                     | 0.07       |                                | $      | 0.10 |   | $ | 0.15 |   | $ | 0.20 |   |
|                                                                                                                                       |   |                                  |       |                                |   |   |   |   |   |   |   |   |   |
| **INCOME                (LOSS) PER SHARE FROM INCOME (LOSS) FROM DISCONTINUED OPERATION,                BASIC AND                DILUTED** |   | $                                     | -          |                                | $      | 0.00 |   | $ | - |   | $ | 0.00 |   |
|                                                                                                                                       |   |                                  |       |                                |   |   |   |   |   |   |   |   |   |
| **NET                INCOME PER SHARE, BASIC AND DILUTED**                                                                                 |   | $                                     | 0.07       |                                | $      | 0.10 |   | $ | 0.15 |   | $ | 0.20 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY        SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**CONDENSED        CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

|                                                                                                           |   | **Six                Months Ended** |       |
|----------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|------------|
|                                                                                                           |   | **September                30,**    |       |
|                                                                                                           |   | **2007**                            |       | **2006** |   |
| **CASH                FLOWS FROM OPERATING ACTIVITIES:**                                                       |   |                                |       |   |   |
| Net                income                                                                                      |   | $                                   | 1,886,370  |   | $ | 1,494,856 |   |
| Adjustments                to reconcile net income to net cash provided byoperating                activities: |   |                                |       |   |   |   |   |
| Depreciation                and amortization                                                                   |   |                                | 939,254    |   |   | 721,561 |   |
| Deferred                taxes                                                                                  |   |                                | (281,153   | ) |   | 79,937 |   |
|                                                                                                           |   |                                |       |   |   |   |   |
| **Changes                in operating assets and liabilities:**                                                |   |                                |       |   |   |   |   |
|                                                                                                           |   |                                |       |   |   |   |   |
| **(Increase)                Decrease In:**                                                                     |   |                                |       |   |   |   |   |
| Inventories                                                                                                    |   |                                | 1,311,970  |   |   | (2,685,154 | ) |
| Prepayment                for goods                                                                            |   |                                | (1,712,197 | ) |   | (2,160,001 | ) |
| Other                assets                                                                                    |   |                                | (263,169   | ) |   | (9,282 | ) |
| Discontinued                operation                                                                          |   |                                | -          |   |   | (155,814 | ) |
|                                                                                                           |   |                                |       |   |   |   |   |
| **Increase                (Decrease) In:**                                                                     |   |                                |       |   |   |   |   |
| Accounts                payable                                                                                |   |                                | 1,712,623  |   |   | 2,508,782 |   |
| Other                payables and accrued liabilities                                                          |   |                                | 377        |   |   | 49,902 |   |
| Customer                deposits                                                                               |   |                                | (1,876,307 | ) |   | 127,281 |   |
| Taxes                payable                                                                                   |   |                                | 912,436    |   |   | 256,893 |   |
| Discontinued                operation                                                                          |   |                                | -          |   |   | 149,845 |   |
| Net                cash provided by operating activities                                                       |   |                                | 2,630,204  |   |   | 378,806 |   |
|                                                                                                           |   |                                |       |   |   |   |   |
| **CASH                FLOWS FROM INVESTING ACTIVITIES:**                                                       |   |                                |       |   |   |   |   |
| Restricted                cash                                                                                 |   |                                | (2,790,204 | ) |   | (914,139 | ) |
| Purchases                of plant and equipment                                                                |   |                                | (1,083,672 | ) |   | (310,816 | ) |
| Purchases                of land use right                                                                     |   |                                | -          |   |   | (26,553 | ) |
| Purchases                of marketable securities                                                              |   |                                | -          |   |   | (67,031 |   |
| Deposit                for land use rights                                                                     |   |                                | (847,373   | ) |   | - |   |
| Deposit                for equipment                                                                           |   |                                | -          |   |   | (613,084 | ) |
| Proceeds                from disposition of long term investment                                               |   |                                | 73,515     |   |   | - |   |
| Issuance                of notes receivable                                                                    |   |                                | 51,128     |   |   | - |   |
| Purchases                of construction in progress                                                           |   |                                | (1,331,150 | ) |   | (1,203,148 | ) |
| Due                from employees                                                                              |   |                                | 80,631     |   |   | (671 | ) |
|     Net                cash used in investing activities                                   |   |                                | (5,847,125 | ) |   | (3,135,442 | ) |
|                                                                                                           |   |                                |       |   |   |  |   |
| **CASH                FLOWS FROM FINANCING ACTIVITIES**                                                        |   |                                |       |   |   |   |   |
| Proceeds                from short-term debt                                                                   |   |                                | 19,025,071 |   |   | 4,695,589 |   |
| Repayments                of short-term debt                                                                   |   |                                | (8,947,116 | ) |   | (4,235,842 | ) |
| Advances                from related parties                                                                   |   |                                | (2,291,534 | ) |   | - |   |
| Due                to employees                                                                                |   |                                | 3,024      |   |   | 3,071 |   |
| Net                cash provided by financing activities                                                       |   |                                | 7,789,445  |   |   | 462,818 |   |
|                                                                                                           |   |                                |       |   |   |  |   |
| **NET                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**                                        |   |                                | 4,572,524  |   |   | (2,293,817 | ) |

----

**NEW      ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY      SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

|                                                            |   | **Six                Months Ended** |      |
|-----------------------------------------------------------------|--------|-------------------------------------|-----------|
|                                                            |   | **September                30,**    |      |
|                                                            |   | **2007**                            |      | **2006** |   |
| Effect                of exchange rate changes on cash          |   |                                | 267,918   |   |   | (163,871 | ) |
| Cash                and cash equivalents at beginning of period |   |                                | 2,616,149 |   |   | 3,244,341 |   |
|                                                            |   |                                |      |   |   |   |   |
| **CASH                AND CASH EQUIVALENTS AT END OF PERIOD**   |   | $                                   | 7,456,591 |   | $ | 786,652 |   |
|                                                            |   |                                |      |   |   |   |   |
| **SUPPLEMENTARY                CASH FLOW INFORMATION**          |   |                                |      |   |   |   |   |
| Income                taxes paid                                |   | $                                   | -         |   | $ | - |   |
| Interest                paid                                    |   | $                                   | 261,049   |   | $ | 118,532 |   |

**SUPPLEMENTAL      NON-CASH DISCLOSURES:**

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY        SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE SIX MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**

**(UNAUDITED)**

**1.**
**ORGANIZATION      AND PRINCIPAL ACTIVITIES**

**2.      **
**BASIS      OF PRESENTATION**

**3.      **
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES**

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY        SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE SIX MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**

**(UNAUDITED)**

**3.      **
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**

|   | (i) | Kinfair                Holding Limited (“KHL”) (An inactive holding company, 100% subsidiary of                NOEC). |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------|

|   | (ii) | Henan                Jinding Chemicals Co., Ltd. (“Jinding”) ( 100% subsidiary of                KHL) |
|--------|------|-------------------------------------------------------------------------------------------------------------------|

|                                    |   | **Sales**                                                           |   | **Customer                Deposits**                     |   |
|------------------------------------|--------|---------------------------------------------------------------------|--------|----------------------------------------------------------|--------|
|                               |   | **Six                Months Ended****September                30,** |   | **As                of****September                30,** |   | **As                of****March                31,** |   |
| **Major                Customers** |   | **2007**                                                            |   | **2006**                                                 |   | **2007** |   | **2007** |   |
| Company                A           |   |                                                                | 24.1   | %                                                        |   | 26.8 | % |   | 4.4 | % |   | 62.1 | % |
| Company                B           |   |                                                                | 9.0    | %                                                        |   | - |   |   | 16.3 | % |   | - |   |
| Company                C           |   |                                                                | 7.0    | %                                                        |   | - |   |   | 14.3 | % |   | - |   |
| Company                D           |   |                                                                | -      |                                                     |   | 9.2 | % |   | - |   |   | 7.5 | % |
| Company                E           |   |                                                                | -      |                                                     |   | 6.5 | % |   | - |   |   | 3.3 | % |

|                                    |   | **Purchases**                                                       |   | **Accounts                Payable/Deposits ***           |   |
|------------------------------------|--------|---------------------------------------------------------------------|--------|----------------------------------------------------------|--------|
|                               |   | **Six                Months Ended****September                30,** |   | **As                of****September                30,** |   | **As                of****March                31,** |   |
| **Major                Suppliers** |   | **2007**                                                            |   | **2006**                                                 |   | **2007** |   | **2007** |   |
| Company                E           |   |                                                                | 19.5   | %                                                        |   | - |   |   | - |   |   | - |   |
| Company                F           |   |                                                                | 18.9   | %                                                        |   | - |   |   | 14.6 | % |   | - |   |
| Company                G           |   |                                                                | 10.5   | %                                                        |   | - |   |   | 29.7 | % |   | - |   |
| Company                H           |   |                                                                | -      |                                                     |   | 21.4 | % |   | - |   |   | 0.0 | % |
| Company                I           |   |                                                                | -      |                                                     |   | 14.3 | % |   | - |   |   | 0.0 | % |
| Company                J           |   |                                                                | -      |                                                     |   | 14.4 | % |   | - |   |   | 8.5 | % |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY        SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE SIX MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**

**(UNAUDITED)**

**3.      **
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**

----

**NEW      ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY      SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR      THE SIX MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**

**(UNAUDITED)**

**3.      **
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**

|  | · | Persuasive                evidence of an arrangement exists, |
|--|--------|--------------------------------------------------------------|

|  | · | Delivery                has occurred or services have been                rendered, |
|--|--------|-------------------------------------------------------------------------------------|

|  | · | The                seller’s price to the buyer is fixed or determinable,                and |
|--|--------|---------------------------------------------------------------------------------------------------|

|  | · | Collectibility                is reasonably assured. |
|--|--------|------------------------------------------------------|

|                                                 |   | September                30, 2007 |   | March                31, 2007 |   | September                30, 2006 |   |
|------------------------------------------------------|--------|-----------------------------------|--------|-------------------------------|--------|-----------------------------------|--------|
| Year                end RMB: US$ exchange rate       |   |                              | 7.5108 |                          |   | 7.7342                            |   |   | 7.9087 |   |
| Average                yearly RMB: US$ exchange rate |   |                              | 7.6225 |                          |   | 7.8756                            |   |   | 7.9629 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY        SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE SIX MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**

**(UNAUDITED)**

**3.      **
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**

**Fuel      Segment:**

|                        |   | For                The Six Months Ended September 30, 2007 |       |
|-----------------------------|--------|------------------------------------------------------------|------------|
|                        |   | DME                                                        |       | Methanol |   | Segment                Total |   |
| Revenues                    |   | $                                                          | 16,564,488 |   | $ | 58,858 |   | $ | 16,623,346 |   |
| COGS                        |   |                                                       | 14,367,334 |   |   | 55,647 |   |   | 14,422,981 |   |
| Gross                Profit |   | $                                                          | 2,197,154  |   | $ | 3,211 |   | $ | 2,200,365 |   |

|                        |   | For                The Six Months Ended September 30, 2006 |      |
|-----------------------------|--------|------------------------------------------------------------|-----------|
|                        |   | DME                                                        |      | Methanol |   | Segment                Total |   |
| Revenues                    |   | $                                                          | 2,881,826 |   | $ | 2,150,274 |   | $ | 5,032,100 |   |
| COGS                        |   |                                                       | 2,116,165 |   |   | 1,885,683 |   |   | 4,001,848 |   |
| Gross                Profit |   | $                                                          | 765,661   |   | $ | 264,591 |   | $ | 1,030,252 |   |

**Fertilizer      Segment:**

|                        |   | For                The Six Months Ended September 30, 2007 |       |
|-----------------------------|--------|------------------------------------------------------------|------------|
|                        |   | Urea                                                       |       | Ammonium                Bicarbonate |   | Liquefied                Ammonia |   | Ammonia                Water |   | Segment                Total |   |
| Revenues                    |   | $                                                          | 14,693,406 |   | $ | 1,140,950 |   | $ | 347,741 |   | $ | 96,785 |   | $ | 16,278,882 |   |
| COGS                        |   |                                                       | 12,463,358 |   |   | 1,128,108 |   |   | 347,462 |   |   | 88,386 |   |   | 14,027,314 |   |
| Gross                Profit |   | $                                                          | 2,230,048  |   | $ | 12,842 |   | $ | 279 |   | $ | 8,399 |   | $ | 2,251,568 |   |

|                        |   | For                The Six Months Ended September 30, 2006 |       |
|-----------------------------|--------|------------------------------------------------------------|------------|
|                        |   | Urea                                                       |       | Ammonium                Bicarbonate |   | Liquefied                Ammonia |   | Ammonia                Water |   | Segment                Total |   |
| Revenues                    |   | $                                                          | 10,519,625 |   | $ | 1,278,812 |   | $ | 308,367 |   | $ | 50,435 |   | $ | 12,157,239 |   |
| COGS                        |   |                                                       | 8,948,739  |   |   | 1,015,314 |   |   | 293,758 |   |   | 46,976 |   |   | 10,304,787 |   |
| Gross                Profit |   | $                                                          | 1,570,886  |   | $ | 263,498 |   | $ | 14,609 |   | $ | 3,459 |   | $ | 1,852,452 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY        SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE SIX MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**

**(UNAUDITED)**

**3.      **
**SUMMARY      OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)**

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY        SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE SIX MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**

**(UNAUDITED)**

**4.**
**INVENTORIES**

|                             |   | **September                30, 2007** |      | **March                31, 2007** |   |
|----------------------------------|--------|---------------------------------------|-----------|-----------------------------------|--------|
|                             |   | **Unaudited**                         |      |                              |   |
| Finished                goods    |   | $                                     | 337,459   |                              | $      | 2,626,187 |   |
| Raw                materials     |   |                                  | 1,838,092 |                              |   | 561,995 |   |
| Packing                materials |   |                                  | 298,608   |                              |   | 597,948 |   |
| Total                inventories |   | $                                     | 2,474,159 |                              | $      | 3,786,130 |   |

**5.**
**RELATED      PARTY TRANSACTIONS**

|                                                     |   | **September                30, 2007** |      | **March                31, 2007** |   |
|----------------------------------------------------------|--------|---------------------------------------|-----------|-----------------------------------|--------|
|                                                     |   | **Unaudited**                         |      |                              |   |
| Xinyang                Hong Chang Pipeline Gas Co,. Ltd. |   | $                                     | 1,198,390 |                              | $      | 3,749,580 |   |
| Long                Triumph Investments Limited          |   |                                  | 422,109   |                              |   | 162,209 |   |
| Chen                Siqiang                              |   |                                  | 133,141   |                              |   | 129,296 |   |
| Due                to employees                          |   |                                  | 2,507     |                              |   | 498 |   |
|                                                     |   | $                                     | 1,756,147 |                              | $      | 4,041,583 |   |

|  | (a) | Xinyang                Hong Chang Pipeline Gas Co., Ltd. is a company controlled by the                Chairman                of the board and Chief executive officer of the Company. The amount                represents advances from Xinyang Hong Chang Pipeline Gas Co., Ltd..                The                amount is unsecured, interest free and has no fixed repayment                terms. |
|--|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (b) | Long                Triumph Investment Limited is a shareholder of the Company. The amount                represents advances from Long Triumph Investment Limited. The amount                is                unsecured, interest free, and has no fixed repayment                terms. |
|--|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | (c) | Chen                Siqiang is the Chairman of the board and Chief executive officer                of the                Company. The amount is unsecured, has an interest rate of 7.2% per                annum                and is due on August 3, 2008. |
|--|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY        SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE SIX MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**

**(UNAUDITED)**

**6.      **
**PLANT      AND EQUIPMENT**

|                                          |   | **September                30, 2007** |       | **March                31, 2007** |   |
|-----------------------------------------------|--------|---------------------------------------|------------|-----------------------------------|--------|
|                                               |   | **Unaudited**                         |       |                              |   |
| At                cost:                       |   |                                  |       |                              |   |
| Buildings                                     |   | $                                     | 1,503,437  |                              | $      | 1,362,587 |   |
| Machinery                                     |   |                                  | 18,373,976 |                              |   | 13,737,425 |   |
| Motor                vehicles                 |   |                                  | 338,349    |                              |   | 295,231 |   |
| Office                equipment               |   |                                  | 200,036    |                              |   | 109,900 |   |
|                                          |   |                                  | 20,415,798 |                              |   | 15,505,143 |   |
| Less:                Accumulated depreciation |   |                                  |       |                              |   |   |   |
| Buildings                                     |   |                                  | 257,013    |                              |   | 215,272 |   |
| Machinery                                     |   |                                  | 4,543,682  |                              |   | 3,584,558 |   |
| Motor                vehicles                 |   |                                  | 130,700    |                              |   | 97,162 |   |
| Office                equipment               |   |                                  | 50,669     |                              |   | 36,499 |   |
|                                          |   |                                  | 4,982,064  |                              |   | 3,933,491 |   |
| Plant                and equipment, net       |   | $                                     | 15,433,734 |                              | $      | 11,571,652 |   |

**7.      **
**LAND      USE RIGHTS**

|                                          |   | **September                30, 2007** |      | **March                31, 2007** |   |
|-----------------------------------------------|--------|---------------------------------------|-----------|-----------------------------------|--------|
|                                          |   | **Unaudited**                         |      |                              |   |
| Cost                                          |   | $                                     | 1,635,110 |                              | $      | 1,587,880 |   |
| Less:                Accumulated amortization |   |                                  | 100,781   |                              |   | 77,185 |   |
| Land                use rights, net           |   | $                                     | 1,534,329 |                              | $      | 1,510,695 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY        SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE SIX MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**

**(UNAUDITED)**

**8.      CONSTRUCTION IN PROGRESS**

|      |   | **September                30, 2007** |      | **March                31, 2007** |   |
|-----------|--------|---------------------------------------|-----------|-----------------------------------|--------|
|      |   | **Unaudited**                         |      |                              |   |
| Machinery |   | $                                     | 2,257,704 |                              | $      | 1,823,426 |   |
| Plant     |   |                                  | 1,068,553 |                              |   | 3,383,946 |   |
| Other     |   |                                  | -         |                              |   | 905 |   |
|      |   | $                                     | 3,326,257 |                              | $      | 5,208,277 |   |

**9**
**.      **
**SHORT-TERM      DEBT**

|                                                                                                                                                                                                                                                 |   | **September                30, 2007** |      | **March                31, 2007** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|-----------|-----------------------------------|--------|
|                                                                                                                                                                                                                                                 |   | **Unaudited**                         |      |                              |   |
| Rural                Credit Cooperatives, Due July 24, 2007, interest rate at 11.16% per                annum,                guaranteed by Xinyang Hong Chang Pipeline Gas Co.Ltd. (Subsequently                repaid                in July 2007) |   | $                                     | -         |                              | $      | 504,254 |   |
|                                                                                                                                                                                                                                                 |   |                                  |      |                              |   |   |   |
| Bank                of China Luoshan Branch, Due August 13, 2008, interest rate at 6.84%                per                annum, collateralized by land use rights.                                                                                 |   |                                  | 2,662,833 |                              |   | - |   |
|                                                                                                                                                                                                                                                 |   |                                  |      |                              |   |   |   |
| China                Construction Bank Luoshan Branch, Due June 30, 2008, interest rate                at                7.29% per annum, collateralized by land use rights.                                                                         |   |                                  | 2,662,833 |                              |   |   |   |
|                                                                                                                                                                                                                                                 |   |                                  |      |                              |   |   |   |
| Xinyang                Chengxing Credit Cooperatives, Due April 16, 2008, interest rate                at 9.6%                per annum, collateralized by finished goods inventory.                                                                 |   |                                  | 2,662,833 |                              |   | - |   |
|                                                                                                                                                                                                                                                 |   |                                  |      |                              |   |   |   |
| Bank                of China Luoshan Branch, Due March 31, 2007, interest rate at 5.58%                per                annum, collateralized by a land use right. (Subsequently repaid in                April                2007)               |   |                                  | -         |                              |   | 1,292,958 |   |

| Notes                payable to unrelated companies:                      |   |   |    |   |   |   |   |
|---------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|--------|
|                                                                      |   |   |    |   |   |   |   |
| Due                October 12, 2007 (subsequently repaid on its due date) |   |   | 199,712 |   |   | -      |   |
| Due                October 17, 2007 (subsequently repaid on its due date) |   |   | 399,425 |   |   | -      |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY        SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE SIX MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**

**(UNAUDITED)**

**9**
**.      **
**SHORT-TERM      DEBT (CONTINUED)**

|                                                                      |   | **September                30, 2007** |    | **March                31, 2007** |   |
|---------------------------------------------------------------------------|--------|---------------------------------------|---------|-----------------------------------|--------|
|                                                                      |   | **Unaudited**                         |    |                              |   |
| Due                October 18, 2007 (subsequently repaid on its due date) |   |                                  | 133,142 |                              |   | - |   |
| Due                October 23, 2007 (subsequently repaid on its due date) |   |                                  | 66,571  |                              |   | - |   |
| Due                October 25, 2007 (subsequently repaid on its due date) |   |                                  | 532,566 |                              |   | - |   |
| Due                October 28, 2007 (subsequently repaid on its due date) |   |                                  | 199,712 |                              |   | - |   |
| Due                November 15, 2007                                      |   |                                  | 532,566 |                              |   | - |   |
| Due                November 24, 2007                                      |   |                                  | 106,513 |                              |   | - |   |
| Due                November 30, 2007                                      |   |                                  | 412,739 |                              |   | - |   |
| Due                December 6, 2007                                       |   |                                  | 266,283 |                              |   | - |   |
| Due                December 18, 2007                                      |   |                                  | 532,566 |                              |   | - |   |
| Due                December 21, 2007                                      |   |                                  | 93,199  |                              |   | - |   |
| Due                December 27, 2007                                      |   |                                  | 931,991 |                              |   | - |   |
| Due                January 5, 2008                                        |   |                                  | 239,655 |                              |   | - |   |
| Due                January 6, 2008                                        |   |                                  | 332,854 |                              |   | - |   |
| Due                January 9, 2008                                        |   |                                  | 532,566 |                              |   | - |   |
| Due                January 12, 2008                                       |   |                                  | 239,655 |                              |   | - |   |
| Due                January 13, 2008                                       |   |                                  | 93,199  |                              |   | - |   |
| Due                January 17, 2008                                       |   |                                  | 186,398 |                              |   | - |   |
| Due                January 25, 2008                                       |   |                                  | 439,367 |                              |   | - |   |
| Due                January 30, 2008                                       |   |                                  | 565,852 |                              |   | - |   |
| Due                February 7, 2008                                       |   |                                  | 119,827 |                              |   | - |   |
| Due                February 9, 2008                                       |   |                                  | 179,741 |                              |   | - |   |
| Due                February 15, 2008                                      |   |                                  | 199,979 |                              |   | - |   |
| Due                February 16, 2008                                      |   |                                  | 332,854 |                              |   | - |   |
| Due                February 20, 2008                                      |   |                                  | 106,513 |                              |   | - |   |
| Due                February 23, 2008                                      |   |                                  | 139,799 |                              |   | - |   |
| Due                February 24, 2008                                      |   |                                  | 399,425 |                              |   | - |   |
| Due                February 29, 2008                                      |   |                                  | 591,348 |                              |   | - |   |
| Due                March 6, 2008                                          |   |                                  | 159,770 |                              |   | - |   |
| Due                March 12, 2008                                         |   |                                  | 372,797 |                              |   | - |   |
| Due                March 28, 2008                                         |   |                                  | 66,571  |                              |   | - |   |
| Due                July 5, 2007 (subsequently repaid on its due date)     |   |                                  | -       |                              |   | 129,295 |   |
| Due                July 23, 2007 (subsequently repaid on its due date)    |   |                                  | -       |                              |   | 646,478 |   |
| Due                August 5, 2007 (subsequently repaid on its due date)   |   |                                  | -       |                              |   | 387,888 |   |

----

**NEW      ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY      SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**NOTES      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR      THE SIX MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**

**(UNAUDITED)**

**9**
**.      **
**SHORT-TERM      DEBT (CONTINUED)**

|                                                                        |   | **September                30, 2007** |       | **March                31, 2007** |   |
|-----------------------------------------------------------------------------|--------|---------------------------------------|------------|-----------------------------------|--------|
|                                                                        |   | **Unaudited**                         |       |                              |   |
| Due                August 13, 2007 (subsequently repaid on its due date)    |   |                                  | -          |                              |   | 387,888 |   |
| Due                September 13, 2007 (subsequently repaid on its due date) |   |                                  | -          |                              |   | 387,888 |   |
| Due                September 26, 2007 (subsequently repaid on its due date) |   |                                  | -          |                              |   | 258,591 |   |
| Due                April 11, 2007 (subsequently repaid on its due date)     |   |                                  | -          |                              |   | 374,958 |   |
| Due                April 24, 2007 (subsequently repaid on its due date)     |   |                                  | -          |                              |   | 336,169 |   |
| Due                May 1, 2007 (subsequently repaid on its due date)        |   |                                  | -          |                              |   | 258,592 |   |
| Due                May 7, 2007 (subsequently repaid on its due date)        |   |                                  | -          |                              |   | 387,888 |   |
| Due                May 17, 2007 (subsequently repaid on its due date)       |   |                                  | -          |                              |   | 193,943 |   |
| Due                May 20 2007 (subsequently repaid on its due date)        |   |                                  | -          |                              |   | 387,888 |   |
| Due                May 23, 2007 (subsequently repaid on its due date)       |   |                                  | -          |                              |   | 387,888 |   |
| Due                June 6, 2007 (subsequently repaid on its due date)       |   |                                  | -          |                              |   | 387,888 |   |
| Due                June 19, 2007 (subsequently repaid on its due date)      |   |                                  | -          |                              |   | 387,888 |   |
| Due                June 27, 2007 (subsequently repaid on its due date)      |   |                                  | -          |                              |   | 258,591 |   |
|                                                                        |   | $                                     | 17,693,654 |                              | $      | 7,356,933 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY        SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE SIX MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**

**(UNAUDITED)**

**10.**
**INCOME      TAXES**

|                              |   | **Six                Months Ended****September                30,** |     |
|-----------------------------------|--------|---------------------------------------------------------------------|----------|
|                              |   | **2007**                                                            |     |  **2006** |   |
| Current:                          |   |                                                                |     |   |   |
| ** **CIT                     |   | $                                                                   | 903,779  |   | $ | 428,492 |   |
| Deferred:                         |   |                                                                |     |   |   |   |   |
| CIT                               |   |                                                                | (156,231 | ) |   | (29,024 | ) |
|                              |   |                                                                |     |   |   |   |   |
| Income                tax expense |   | $                                                                   | 747,548  |   | $ | 399,468 |   |

|                                                   |   | **Six                Months Ended****September                30,** |     |
|--------------------------------------------------------|--------|---------------------------------------------------------------------|----------|
|                                                   |   | **2007**                                                            |     |  **2006** |   |
| Computed                “expected” expense |   | $                                                                   | 872,788  |   | $ | 623,942 |   |
| Permanent                differences                   |   |                                                                | (125,240 | ) |   | (224,474 | ) |
| Income                tax expense                      |   | $                                                                   | 747,548  |   | $ | 399,468 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

**(FORMERLY        SPORTS SOURCES, INC.) AND SUBSIDIARIES**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE SIX MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**

**(UNAUDITED)**

**10.**
**INCOME      TAXES (CONTINUED)**

|                                          |   | **September                30, 2007** |      | **March                31, 2007** |   |
|-----------------------------------------------|--------|---------------------------------------|-----------|-----------------------------------|--------|
|                                               |   | **Unaudited**                         |      |                              |   |
| **Deferred                tax assets:**       |   |                                  |      |                              |   |
| Non-current                portion:           |   |                                  |      |                              |   |
| Cost                of sales                  |   | $                                     | 210,761   |                              | $      | 603,158 |   |
| Payroll                                       |   |                                  | 5,536     |                              |   | 7,096 |   |
| Other                expense                  |   |                                  | 28,322    |                              |   | 36,077 |   |
| Total                deferred tax assets      |   |                                  | 244,619   |                              |   | 646,331 |   |
|                                          |   |                                  |      |                              |   |   |   |
| **Deferred                tax liabilities:**  |   |                                  |      |                              |   |   |   |
| Non-current                portion:           |   |                                  |      |                              |   |   |   |
| Depreciation                                  |   |                                  | 378,881   |                              |   | 495,756 |   |
| Amortization                                  |   |                                  | 26,760    |                              |   | 30,910 |   |
| Welfare                                       |   |                                  | 17,995    |                              |   | 54,758 |   |
| Cost                of sales                  |   |                                  | 385,284   |                              |   | 776,372 |   |
| Government                grant               |   |                                  | 53,257    |                              |   | 42,668 |   |
| Other                income                   |   |                                  | 251,394   |                              |   | 218,646 |   |
| Total                deferred tax liabilities |   |                                  | 1,113,571 |                              |   | 1,619,110 |   |
|                                          |   |                                  |      |                              |   |   |   |
| Net                deferred tax liabilities   |   | $                                     | (868,952  | )                                 | $      | (972,779 | ) |

----

**Item        2. Management's Discussion and Analysis or Plan of        Operation**

**Forward      Looking Statements **

|   | · | The                loss of primary customers; |
|--------|--------|-----------------------------------------------|

|   | · | Our                ability to implement productivity improvements, cost reduction initiatives                or facilities expansions; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Market                developments affecting, and other changes in, the demand for our                products                and the introduction of new competing products; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Availability                or increases in the price of our primary raw materials or active                ingredients; |
|--------|--------|--------------------------------------------------------------------------------------------------------------------------|

|   | · | The                timing of planned capital expenditures; |
|--------|--------|------------------------------------------------------------|

|   | · | Our                ability to identify, develop or acquire, and market additional product                lines and businesses necessary to implement our business strategy                and our                ability to finance such acquisitions and development; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                condition of the capital markets generally, which will be affected                by                interest rates, foreign currency fluctuations and general economic                conditions; |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | · | The                ability to obtain registration and re-registration of our products                under                applicable law; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | The                political and economic climate in the foreign or domestic jurisdictions                in                which we conduct business; and |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | Other                People’s Republic of China (the “PRC”) or foreign regulatory or                legislative developments which affect the demand for our products                generally or increase the environmental compliance cost for our products                or impose liabilities on the manufacturers and distributors of such                products. |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Critical      Accounting Policies and Estimates**

*Use      of estimates *

*Accounts      receivable *

*Inventories      *

*Property      and equipment*

*Revenue      recognition *

----

*Income      taxes *

*Foreign      currency transactions and comprehensive income (loss)*

**Recent      Accounting Pronouncement**

**Overview**

----

**RESULT      OF OPERATIONS**

**Three      Months Ended September 30, 2007 as compared to Three Months Ended September      30,      2006**

|                                                                 |   | **Three                Months Ended****September                30, 2007** |        | **Three                Months Ended****September                30, 2006** |   | **Comparisons**         |   |
|----------------------------------------------------------------------|--------|----------------------------------------------------------------------------|-------------|----------------------------------------------------------------------------|--------|-------------------------|--------|
| **Item**                                                             |   | **Amount**                                                                 |        | **Percentage                of****Revenues**                               |   | **Amount**              |   | **Percentage                of****Revenues** |   | **Growth                in****Amount** |   | **Increase                (Decrease) in Percentage** |   |
|                                                                 |   | **US                $**                                                    |        | **(%)**                                                                    |   | **US                $** |   | **(%)** |   | **US                $** |   | **(%)** |   |
| Revenues                                                             |   |                                                                       | 18,215,622  |                                                                       |   | 100.00                  | %      |   | 7,942,195 |   |   | 100.00 | % |   | 10,273,427 |   |   | 129.35 | % |
| Cost                of Goods Sold                                    |   |                                                                       | (16,376,557 | )                                                                          |   | (89.90                  | %)     |   | (6,735,973 | ) |   | (84.81 | %) |   | 9,640,584 |   |   | 143.12 | % |
| Gross                Profit                                          |   |                                                                       | 1,839,065   |                                                                       |   | 10.10                   | %      |   | 1,206,222 |   |   | 15.19 | % |   | 632,843 |   |   | 52.46 | % |
| Selling                and distribution                              |   |                                                                       | (208,584    | )                                                                          |   | (1.15                   | %)     |   | (135,497 | ) |   | (1.71 | %) |   | 73,087 |   |   | 53.94 | % |
| General                & administrative                          |   |                                                                       | (541,512    | )                                                                          |   | (2.97                   | %)     |   | (216,615 | ) |   | (2.73 | %) |   | 324,897 |   |   | 149.99 | % |
| Income                from operations                                |   |                                                                       | 1,088,969   |                                                                       |   | 5.98                    | %      |   | 854,110 |   |   | 10.75 | % |   | 234,859 |   |   | 27.50 | % |
| Interest                expense, net                                 |   |                                                                       | (161,789    | )                                                                          |   | (0.89                   | %)     |   | (50,830 | ) |   | (0.64 | %) |   | 110,959 |   |   | 218.29 | % |
| Government                grants                                     |   |                                                                       | 79,332      |                                                                       |   | 0.43                    | %      |   | 0 |   |   | 0.00 | % |   | 79,332 |   |   | 100.00 | % |
| Other,                net                                            |   |                                                                       | (2,644      | )                                                                          |   | (0.01                   | %)     |   | (41,603 | ) |   | (0.52 | %) |   | 38,959 |   |   | 93.64 | % |
| Income                before tax                                     |   |                                                                       | 1,003,868   |                                                                       |   | 5.51                    | %      |   | 761,677 |   |   | 9.59 | % |   | 242,191 |   |   | 31.80 | % |
| Income                tax                                            |   |                                                                       | (160,976    | )                                                                          |   | (0.88                   | %)     |   | (16,842 | ) |   | (0.21 | %) |   | (144,134 | ) |   | (855.80 | %) |
| Income                from continuing operation                      |   |                                                                       | 842,892     |                                                                       |   | 4.63                    | %      |   | 744,835 |   |   | 9.38 | % |   | 98,057 |   |   | 13.16 | % |
| Income                from discontinued operation                    |   |                                                                       | 1,761       |                                                                       |   | 0.01                    | %      |   | 8,356 |   |   | 0.10 | % |   | (6,595 | ) |   | (78.93 | %) |
| Income                from disposition of long term investment       |   |                                                                       | 19,359      |                                                                       |   | 0.11                    | %      |   | 0 |   |   | 0.00 | % |   | 19,359 |   |   | 100.00 | % |
| Net                income (loss)                                     |   |                                                                       | 864,012     |                                                                       |   | 4.75                    | %      |   | 753,191 |   |   | 9.48 | % |   | 110,821 |   |   | 14.71 | % |
| Foreign                currency translation gain                     |   |                                                                       | 145,816     |                                                                       |   | 0.81                    | %      |   | 30,059 |   |   | 0.38 | % |   | 115,757 |   |   | 385.10 | % |
| Unrealized                gain on marketable securities              |   |                                                                       | 0           |                                                                       |   | 0.00                    | %      |   | 2,561 |   |   | 0.03 | % |   | (2,561 | ) |   | (100.00 | %) |
| Other                comprehensive income                            |   |                                                                       | 81,213      |                                                                       |   | 0.44                    | %      |   | 21,855 |   |   | 0.28 | % |   | 59,358 |   |   | 271.60 | % |
| Comprehensive                income                                  |   |                                                                       | 945,225     |                                                                       |   | 5.19                    | %      |   | 775,046 |   |   | 9.76 | % |   | 170,179 |   |   | 21.96 | % |
| Weighted                average shares outstanding basic and diluted |   |                                                                       | 12,640,000  |                                                                       |   |                    |   |   | 7,500,000 |   |   |   |   |   | 5,140,000 |   |   | 68.53 | % |
| Net                income per share, basic and diluted               |   |                                                                       | 0.07        |                                                                       |   |                    |   |   | 0.10 |   |   |   |   |   | (0.03 | ) |   | (30 | %) |

----

**Revenues,      Cost of Goods Sold and Gross Profit**

|  | a) | The                second quarter, which includes the hottest and, in a chemical processing                business, the most inefficient months of July and August, is typically                when the Company closes its production for a period of approximately                two                weeks for an annual overhaul and servicing of gas transporting pipelines                and columns. |
|--|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | b) | This                year, with the exception of the new, independent DME production line,                all                facilities were closed for a period of ten (10) days in August at                a total                cost of $415,467. Further, following the practice begun in fiscal                2006,                the company fully expensed this cost in the period, following US                accounting protocol, although accounting rules in China would typically                permit these to be treated as deferred                expenses. |
|--|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | c) | The                normal, substantial decreases in August production of urea, ammonium                bicarbonate, methanol, liquefied ammonia and ammonia water as a result                of                the required annual maintenance shutdown also increased fixed unit                costs                for these products. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | d) | Additionally,                in the off peak season (July, August and September) fertilizer demand                and                prices typically decline fairly dramatically, as was the case in                the most                recent second quarter. As an example, urea, which sold for $233 in                April,                dropped to approximately $200 per ton on average in the July to September                period. |
|--|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                |   | **3                Months Ended****September                30, 2007** |       | **3                Months Ended****September                30, 2006** |   | **Comparisons**         |   |
|-------------------------------------|--------|------------------------------------------------------------------------|------------|------------------------------------------------------------------------|--------|-------------------------|--------|
| **Products**                        |   | **Amount**                                                             |       | **Percentage                of Revenues**                              |   | **Amount**              |   | **Percentage                of Revenues** |   | **Growth                in Amount** |   | **Increase                (Decrease) in Percentage** |   |
|                                |   | **US                $**                                                |       | **(%)**                                                                |   | **US                $** |   | **(%)** |   | **US                $** |   | **(%)** |   |
| Urea                                |   |                                                                   | 5,455,413  |                                                                   |   | 29.95                   | %      |   | 4,891,382 |   |   | 61.59 | % |   | 564,031 |   |   | 11.53 | % |
| Ammonium                bicarbonate |   |                                                                   | 339,430    |                                                                   |   | 1.86                    | %      |   | 482,450 |   |   | 6.07 | % |   | (143,020 | ) |   | (29.64 | %) |
| Methanol                            |   |                                                                   | 0          |                                                                   |   | 0.00                    | %      |   | 884,724 |   |   | 11.14 | % |   | (884,724 | ) |   | (100.00 | %) |
| Liquefied                Ammonia    |   |                                                                   | 171,889    |                                                                   |   | 0.94                    | %      |   | 285,889 |   |   | 3.60 | % |   | (114,000 | ) |   | (39.88 | %) |
| DME                                 |   |                                                                   | 12,206,012 |                                                                   |   | 67.01                   | %      |   | 1,371,697 |   |   | 17.27 | % |   | 10,834,315 |   |   | 789.85 | % |
| Ammonia                Water        |   |                                                                   | 42,878     |                                                                   |   | 0.24                    | %      |   | 26,053 |   |   | 0.33 | % |   | 16,825 |   |   | 64.58 | % |
| Total                               |   |                                                                   | 18,215,622 |                                                                   |   | 100.00                  | %      |   | 7,942,195 |   |   | 100.00 | % |   | 10,273,427 |   |   | 129.35 | % |

|                              |   | **3                Months Ended****September                30, 2007** |       | **3                Months Ended****September                30, 2006** |   | **Comparisons**           |   |
|-----------------------------------|--------|------------------------------------------------------------------------|------------|------------------------------------------------------------------------|--------|---------------------------|--------|
| **Provinces**                     |   | **Amount**                                                             |       | **Percentage                of Revenues**                              |   | **Amount**                |   | **Percentage                of Revenues** |   | **Growth                in                Amount** |   | **Increase                (Decrease) in Percentage** |   |
|                              |   | **US                $**                                                |       | **(%)**                                                                |   | **US                  $** |   | **(%)** |   | **US                $** |   | **(%)** |   |
| Henan                Province     |   |                                                                   | 5,900,446  |                                                                   |   | 32.39                     | %      |   | 3,980,373 |   |   | 50.12 | % |   | 1,920,073 |   |   | 48.24 | % |
| Guangdong                Province |   |                                                                   | 2,911,816  |                                                                   |   | 15.99                     | %      |   | 1,819,264 |   |   | 22.90 | % |   | 1,092,552 |   |   | 60.05 | % |
| Hubei                Province     |   |                                                                   | 4,696,754  |                                                                   |   | 25.79                     | %      |   | 762,422 |   |   | 9.60 | % |   | 3,934,332 |   |   | 516.03 | % |
| Anhui                Province     |   |                                                                   | 695,899    |                                                                   |   | 3.82                      | %      |   | 1,127,630 |   |   | 14.20 | % |   | (431,731 | ) |   | (38.29 | %) |
| Hunan                Province     |   |                                                                   | 11,615     |                                                                   |   | 0.06                      | %      |   | 0 |   |   | 0.00 | % |   | 11,615 |   |   | 100.00 | % |
| Hebei                Province     |   |                                                                   | 2,840,692  |                                                                   |   | 15.59                     | %      |   | 0 |   |   | 0.00 | % |   | 2,840,692 |   |   | 100.00 | % |
| Jiangxi                Province   |   |                                                                   | 1,074,966  |                                                                   |   | 5.90                      | %      |   | 119,318 |   |   | 1.50 | % |   | 955,648 |   |   | 800.93 | % |
| Shandong                Province  |   |                                                                   | 0          |                                                                   |   | 0.00                      | %      |   | 131,832 |   |   | 1.66 | % |   | (131,832 | ) |   | (100.00 | %) |
| Zhejiang                Province  |   |                                                                   | 83,434     |                                                                   |   | 0.46                      | %      |   | 1,356 |   |   | 0.02 | % |   | 82,078 |   |   | 6,053.46 | % |
| Total                             |   |                                                                   | 18,215,622 |                                                                   |   | 100.00                    | %      |   | 7,942,195 |   |   | 100.00 | % |   | 10,273,427 |   |   | 129.35 | % |

----

|                              |   | **3                Months Ended****September                30, 2007** |       | **3                Months Ended****September                30, 2006** |   | **Comparisons**         |   |
|-----------------------------------|--------|------------------------------------------------------------------------|------------|------------------------------------------------------------------------|--------|-------------------------|--------|
| **Item**                          |   | **Amount**                                                             |       | **Percentage                of Revenues**                              |   | **Amount**              |   | **Percentage                of Revenues** |   | **Growth                in Amount** |   | **Increase                (Decrease) in Percentage** |   |
|                              |   | **US                $**                                                |       | **(%)**                                                                |   | **US                $** |   | **(%)** |   | **US                $** |   | **(%)** |   |
| Revenues                          |   |                                                                   | 18,215,622 |                                                                   |   | 100                     | %      |   | 7,942,195 |   |   | 100 | % |   | 10,273,427 |   |   | 129.35 | % |
| Cost                of Goods Sold |   |                                                                   | 16,376,557 |                                                                   |   | 89.90                   | %      |   | 6,735,973 |   |   | 84.81 | % |   | 9,640,584 |   |   | 143.12 | % |
| Gross                Profit       |   |                                                                   | 1,839,065  |                                                                   |   | 10.10                   | %      |   | 1,206,222 |   |   | 15.19 | % |   | 632,843 |   |   | 52.46 | % |

|    |   |   |                               | **DME** |   | **Methanol** |   | **Urea** |     | **Ammonium                Bicarbonate** |   | **Liquefied                Ammonia** |   | **Ammonia                Water** |     |
|---------|--------|--------|------------------------------------|---------|--------|--------------|--------|----------|----------|-----------------------------------------|--------|--------------------------------------|--------|----------------------------------|----------|
| 2008Q2  |   |   | Revenues                           |    |   | 12,206,012   |   |     | 0        |                                    |   | 5,455,413                            |   |                             | 339,430  |   |   | 171,889 |   |   | 42,878 |   |
|         |   |   | COGS                               |    |   | 10,620,664   |   |     | 0        |                                    |   | 5,190,129                            |   |                             | 341,492  |   |   | 181,766 |   |   | 42,506 |   |
|         |   |   | Gross                Profit        |    |   | 1,585,348    |   |     | 0        |                                    |   | 265,284                              |   |                             | (2,062   | ) |   | (9,877 | ) |   | 372 |   |
|         |   |   | Gross                Profit %      |    |   | 12.99        | %      |     | 0.00     | %                                       |   | 4.86                                 | %      |                             | (0.61    | %) |   | (5.75 | %) |   | 0.87 | % |
| 2007Q2  |   |   | Revenues                           |    |   | 1,371,697    |   |     | 884,724  |                                    |   | 4,891,382                            |   |                             | 482,450  |   |   | 285,889 |   |   | 26,053 |   |
|         |   |   | COGS                               |    |   | 993,700      |   |     | 769,814  |                                    |   | 4,239,408                            |   |                             | 435,247  |   |   | 275,076 |   |   | 22,728 |   |
|         |   |   | Gross                Profit        |    |   | 377,997      |   |     | 114,910  |                                    |   | 651,974                              |   |                             | 47,203   |   |   | 10,813 |   |   | 3,325 |   |
|         |   |   | Gross                Profit %      |    |   | 27.56        | %      |     | 12.99    | %                                       |   | 13.33                                | %      |                             | 9.78     | % |   | 3.78 | % |   | 12.76 | % |
| Changes |   |   | Revenues                           |    |   | 10,834,315   |   |     | (884,724 | )                                       |   | 564,031                              |   |                             | (143,020 | ) |   | (114,000 | ) |   | 16,825 |   |
|         |   |   | Revenue                Growth      |    |   | 789.85       | %      |     | (100.00  | %)                                      |   | 11.53                                | %      |                             | (29.64   | %) |   | (39.88 | %) |   | 64.58 | % |
|         |   |   | Gross                Margin Growth |    |   | (14.57%      | )      |     | (100.00  | %)                                      |   | (8.47                                | %)     |                             | (10.39   | %) |   | (9.53 | %) |   | (11.89 | %) |

----

----

**Operating      Expenses**

**Income      From Operations**

**Income      Tax**

**Net      Income (Loss)**

----

**Six      Months Ended September 30, 2007 as compared to Six Months Ended September 30,      2006**

|                                                                 |   | **Six                Months Ended****September                30, 2007** |        | **Six                Months Ended****September                30, 2006** |   | **Comparisons**         |   |
|----------------------------------------------------------------------|--------|--------------------------------------------------------------------------|-------------|--------------------------------------------------------------------------|--------|-------------------------|--------|
| **Item**                                                             |   | **Amount**                                                               |        | **Percentage                of Revenues**                                |   | **Amount**              |   | **Percentage                of Revenues** |   | **Growth                in Amount** |   | **Increase                (Decrease) in Percentage** |   |
|                                                                 |   | **US                $**                                                  |        | **(%)**                                                                  |   | **US                $** |   | **(%)** |   | **US                $** |   | **(%)** |   |
| Revenues                                                             |   |                                                                     | 32,902,228  |                                                                     |   | 100.00                  | %      |   | 17,189,339 |   |   | 100.00 | % |   | 15,712,889 |   |   | 91.41 | % |
| Cost                of Goods Sold                                    |   |                                                                     | (28,450,295 | )                                                                        |   | (86.47                  | %)     |   | (14,306,635 | ) |   | (83.23 | %) |   | (14,143,660 | ) |   | 98.86 | % |
| Gross                Profit                                          |   |                                                                     | 4,451,933   |                                                                     |   | 13.53                   | %      |   | 2,882,704 |   |   | 16.77 | % |   | 1,569,229 |   |   | 54.44 | % |
| Selling                and distribution                              |   |                                                                     | (644,997    | )                                                                        |   | (1.96                   | %)     |   | (373,087 | ) |   | (2.17 | %) |   | 271,910 |   |   | 72.88 | % |
| General                & administrative                          |   |                                                                     | (1,020,280  | )                                                                        |   | (3.10                   | %)     |   | (438,639 | ) |   | (2.55 | %) |   | 581,641 |   |   | 132.60 | % |
| Income                from operations                                |   |                                                                     | 2,786,656   |                                                                     |   | 8.47                    | %      |   | 2,070,978 |   |   | 12.05 | % |   | 715,678 |   |   | 34.56 | % |
| Interest                expense, net                                 |   |                                                                     | (261,049    | )                                                                        |   | (0.79                   | %)     |   | (118,532 | ) |   | (0.69 | %) |   | 142,517 |   |   | 120.24 | % |
| Government                grants                                     |   |                                                                     | 78,714      |                                                                     |   | 0.24                    | %      |   | 0 |   |   | 0.00 | % |   | 78,714 |   |   | 100.00 | % |
| Other,                net                                            |   |                                                                     | 7,905       |                                                                     |   | 0.02                    | %      |   | (61,713 | ) |   | (0.36 | %) |   | 69,618 |   |   | 112.81 | % |
| Income                before tax                                     |   |                                                                     | 2,612,226   |                                                                     |   | 7.94                    | %      |   | 1,890,733 |   |   | 11.00 | % |   | 721,493 |   |   | 38.16 | % |
| Income                tax                                            |   |                                                                     | (747,548    | )                                                                        |   | (2.27                   | %)     |   | (399,468 | ) |   | (2.32 | %) |   | 348,080 |   |   | 87.14 | % |
| Income                from continuing operation                      |   |                                                                     | 1,864,678   |                                                                     |   | 5.67                    | %      |   | 1,491,265 |   |   | 8.68 | % |   | 373,413 |   |   | 25.14 | % |
| Income                from discontinued operation                    |   |                                                                     | 1,761       |                                                                     |   | 0.01                    | %      |   | 3,591 |   |   | 0.02 | % |   | (1,830 | ) |   | (50.96 | %) |
| Income                from disposition of long term investment       |   |                                                                     | 19,931      |                                                                     |   | 0.06                    | %      |   | 0 |   |   | 0.00 | % |   | 19,931 |   |   | 100.00 | % |
| Net                income (loss)                                     |   |                                                                     | 1,886,370   |                                                                     |   | 5.73                    | %      |   | 1,494,856 |   |   | 8.70 | % |   | 391,514 |   |   | 26.19 | % |
| Foreign                currency translation gain                     |   |                                                                     | 537,348     |                                                                     |   | 1.63                    | %      |   | 50,452 |   |   | 0.29 | % |   | 486,896 |   |   | 965.07 | % |
| Unrealized                gain on marketable securities              |   |                                                                     | 0           |                                                                     |   | 0.00                    | %      |   | 5,043 |   |   | 0.03 | % |   | (5,043 | ) |   | (100.00 | %) |
| Other                comprehensive income                            |   |                                                                     | 360,023     |                                                                     |   | 1.09                    | %      |   | 37,182 |   |   | 0.21 | % |   | 322,841 |   |   | 868.27 | % |
| Comprehensive                income                                  |   |                                                                     | 2,246,393   |                                                                     |   | 6.83                    | %      |   | 1,532,038 |   |   | 8.91 | % |   | 714,355 |   |   | 46.63 | % |
| Weighted                average shares outstanding basic and diluted |   |                                                                     | 12,640,000  |                                                                     |   |                    |   |   | 7,500,000 |   |   |   |   |   | 5,140,000 |   |   | 68.53 | % |
| Net                income per share, basic and diluted               |   |                                                                     | 0.15        |                                                                     |   |                    |   |   | 0.20 |   |   |   |   |   | (0.05 | ) |   | (25 | %) |

----

**Revenues**

|                                |   | **6                Months Ended****September                30, 2007** |       | **6                Months Ended****September                30, 2006** |   | **Comparisons**         |   |
|-------------------------------------|--------|------------------------------------------------------------------------|------------|------------------------------------------------------------------------|--------|-------------------------|--------|
| **Products**                        |   | **Amount**                                                             |       | **Percentage                of Revenues**                              |   | **Amount**              |   | **Percentage                of Revenues** |   | **Growth                in Amount** |   | **Increase                (Decrease) in Percentage** |   |
|                                |   | **US                $**                                                |       | **(%)**                                                                |   | **US                $** |   | **(%)** |   | **US                $** |   | **(%)** |   |
| Urea                                |   |                                                                   | 14,693,406 |                                                                   |   | 44.66                   | %      |   | 10,519,625 |   |   | 61.20 | % |   | 4,173,781 |   |   | 39.68 | % |
| Ammonium                bicarbonate |   |                                                                   | 1,140,950  |                                                                   |   | 3.47                    | %      |   | 1,278,812 |   |   | 7.44 | % |   | (137,862 | ) |   | (10.78 | %) |
| Methanol                            |   |                                                                   | 58,858     |                                                                   |   | 0.18                    | %      |   | 2,150,274 |   |   | 12.51 | % |   | (2,091,416 | ) |   | (97.26 | %) |
| Liquefied                Ammonia    |   |                                                                   | 347,741    |                                                                   |   | 1.06                    | %      |   | 308,367 |   |   | 1.79 | % |   | 39,374 |   |   | 12.77 | % |
| DME                                 |   |                                                                   | 16,564,488 |                                                                   |   | 50.34                   | %      |   | 2,881,826 |   |   | 16.77 | % |   | 13,682,662 |   |   | 474.79 | % |
| Ammonia                Water        |   |                                                                   | 96,785     |                                                                   |   | 0.29                    | %      |   | 50,435 |   |   | 0.29 | % |   | 46,350 |   |   | 91.90 | % |
| Total                               |   |                                                                   | 32,902,228 |                                                                   |   | 100.00                  | %      |   | 17,189,339 |   |   | 100.00 | % |   | 15,712,889 |   |   | 91.41 | % |

**Divided      by regions**

|                              |   | **6                Months Ended****September                30, 2007** |       | **6                Months Ended****September                30, 2006** |   | **Comparisons**         |   |
|-----------------------------------|--------|------------------------------------------------------------------------|------------|------------------------------------------------------------------------|--------|-------------------------|--------|
| **Provinces**                     |   | **Amount**                                                             |       | **Percentage                of Revenues**                              |   | **Amount**              |   | **Percentage                of Revenues** |   | **Growth                in Amount** |   | **Increase                (Decrease) in Percentage** |   |
|                              |   | **US                $**                                                |       | **(%)**                                                                |   | **US                $** |   | **(%)** |   | **US                $** |   | **(%)** |   |
| Henan                Province     |   |                                                                   | 10,793,087 |                                                                   |   | 32.80                   | %      |   | 6,908,340 |   |   | 40.19 | % |   | 3,884,747 |   |   | 56.23 | % |
| Guangdong                Province |   |                                                                   | 9,572,885  |                                                                   |   | 29.10                   | %      |   | 4,902,841 |   |   | 28.52 | % |   | 4,670,044 |   |   | 95.25 | % |
| Hubei                Province     |   |                                                                   | 6,239,313  |                                                                   |   | 18.96                   | %      |   | 1,657,420 |   |   | 9.64 | % |   | 4,581,893 |   |   | 276.45 | % |
| Anhui                Province     |   |                                                                   | 1,403,103  |                                                                   |   | 4.27                    | %      |   | 2,281,334 |   |   | 13.27 | % |   | (878,231 | ) |   | (38.50 | %) |
| Hunan                Province     |   |                                                                   | 260,592    |                                                                   |   | 0.79                    | %      |   | 178,712 |   |   | 1.04 | % |   | 81,880 |   |   | 45.82 | % |
| Hebei                Province     |   |                                                                   | 2,837,184  |                                                                   |   | 8.62                    | %      |   | 0 |   |   | 0.00 | % |   | 2,837,184 |   |   | 100.00 | % |
| Jiangxi                Province   |   |                                                                   | 1,669,696  |                                                                   |   | 5.08                    | %      |   | 637,812 |   |   | 3.71 | % |   | 1,031,884 |   |   | 161.78 | % |
| Shandong                Province  |   |                                                                   | 24,031     |                                                                   |   | 0.07                    | %      |   | 485,511 |   |   | 2.83 | % |   | (461,480 | ) |   | (95.05 | %) |
| Zhejiang                Province  |   |                                                                   | 102,337    |                                                                   |   | 0.31                    | %      |   | 72,531 |   |   | 0.42 | % |   | 29,806 |   |   | 41.09 | % |
| Guangxi                Province   |   |                                                                   | 0          |                                                                   |   | 0.00                    | %      |   | 64,838 |   |   | 0.38 | % |   | (64,838 | ) |   | (100.00 | %) |
| Total                             |   |                                                                   | 32,902,228 |                                                                   |   | 100.00                  | %      |   | 17,189,339 |   |   | 100.00 | % |   | 15,712,889 |   |   | 91.41 | % |

----

**Cost      of Goods Sold**

**Gross      Profit**

|                              |   | **6                Months Ended****September                30, 2007** |       | **6                Months Ended****September                30, 2006** |   | **Comparisons**         |   |
|-----------------------------------|--------|------------------------------------------------------------------------|------------|------------------------------------------------------------------------|--------|-------------------------|--------|
| **Item**                          |   | **Amount**                                                             |       | **Percentage                of Revenues**                              |   | **Amount**              |   | **Percentage                of Revenues** |   | **Growth                in Amount** |   | **Increase                (Decrease) in Percentage** |   |
|                              |   | **US                $**                                                |       | **(%)**                                                                |   | **US                $** |   | **(%)** |   | **US                $** |   | **(%)** |   |
| Revenues                          |   |                                                                   | 32,902,228 |                                                                   |   | 100                     | %      |   | 17,189,339 |   |   | 100 | % |   | 15,712,889 |   |   | 91.41 | % |
| Cost                of Goods Sold |   |                                                                   | 28,450,295 |                                                                   |   | 86.47                   | %      |   | 14,306,635 |   |   | 83.23 | % |   | 14,143,660 |   |   | 98.86 | % |
| Gross                Profit       |   |                                                                   | 4,451,933  |                                                                   |   | 13.53                   | %      |   | 2,882,704 |   |   | 16.77 | % |   | 1,569,229 |   |   | 54.44 | % |

----

**Operating      Expenses**

**Income      From Operations**

**Income      Tax**

**Net      Income (Loss)**

**LIQUIDITY      AND CAPITAL RESOURCES**

*Cash      Flows*

|                                                                        |   |  **Six                months ended****September                30,** |       |
|-----------------------------------------------------------------------------|--------|---------------------------------------------------------------------------|------------|
|                                                                        |   | **2007**                                                                  |       | **2006** |   |
| Net                cash provided by (used in)                               |   |                                                                      |       |   |   |
| Operating                activities                                         |   | $                                                                         | 2,630,204  |   | $ | 378,807 |   |
| Investing                activities                                         |   |                                                                      | (5,847,125 | ) |   | (3,135,442 | ) |
| Financing                activities                                         |   |                                                                      | 7,789,445  |   |   | 462,818 |   |
| Net                change in cash and cash equivalents                      |   |                                                                      | 4,572,524  |   |   | (2,293,817 | ) |
|                                                                        |   |                                                                      |       |   |   |   |   |
| Effect                of exchange rate changes on cash and cash equivalents |   |                                                                      | 267,918    |   |   | (163,872 | ) |
|                                                                        |   |                                                                      |       |   |   |   |   |
| Cash                and cash equivalents at beginning of period             |   |                                                                      | 2,616,149  |   |   | 3,244,341 |   |
|                                                                        |   |                                                                      |       |   |   |   |   |
| Cash                and cash equivalents at end of period                   |   | $                                                                         | 7,456,591  |   | $ | 786,652 |   |

----

*Liquidity*

*Capital      Resources*

----

**Item      3. Controls and Procedures.**

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

**B.      Changes in Internal Control over Financial Reporting:**

There      was      no change in the Company's internal control over financial reporting that was      identified in connection with such evaluation that occurred during the period      covered by this Quarterly Report on Form 10-QSB that has materially affected,      or      is reasonably likely to materially affect, the Company's internal control over      financial reporting.

**PART      II**

**OTHER      INFORMATION**

**Item      1. Legal Proceedings.**

**Item      2. Unregistered Sales of Equity Securities and Use of      Proceeds.**

**Item      3. Defaults Upon Senior Securities.**

**Item      4. Submission of Matters to a Vote of Security Holders.**

**Item      5. Other Information.**

**Item      6. Exhibits.**

| **Exhibit****Number** |   | **Description**                                                                                   |
|-----------------------|--------|---------------------------------------------------------------------------------------------------|
| 31.1                  |   | Certification                pursuant to Section 302 of Sarbanes Oxley Act of 2002                |
|                  |   |                                                                                              |
| 31.2                  |   | Certification                pursuant to Section 302 of Sarbanes Oxley Act of 2002                |
|                  |   |                                                                                              |
| 32.1                  |   | Certification                pursuant to Section 906 of Sarbanes Oxley Act of 2002                |
|                  |   |                                                                                              |
| 32.2                  |   | Certification                pursuant to Section 906 of Sarbanes Oxley Act of                2002 |

----

**SIGNATURES**

|                                 |                                                        |                                             |
|--------------------------------------|-------------------------------------------------------------|--------------------------------------------------|
|                                 | **NEW                ORIENTAL ENERGY & CHEMICAL CORP.** |
|                            |                                                   |                                        |
| Date:              November 13, 2007 | By:                                               | /s/ Wang              Gui              Quan |
|                                 | Name: Wang              Gui Quan                       |
|                                 | Title: President                                       |

----