----

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**þ**

** ̈**

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**NEW      ORIENTAL ENERGY & CHEMICAL CORP.**

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|  **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 Sheet as of December 31, 2006                  (Unaudited)**** **                   | **2**  |
|                                                                                                                                       |   |
| **Condensed                  Consolidated Statements of Income (Loss) and Comprehensive Income                  for the**                  |   |
| **Three                  and Nine Months Ended December 31, 2006 and 2005                  (Unaudited)**** **                         | **3**  |
|                                                                                                                                       |   |
| **Condensed                  Consolidated Statements of Changes in Shareholders’ Equity for the Nine                  Months Ended** |   |
| **December                  31, 2006 (Unaudited)**** **                                                                               | **4**  |
|                                                                                                                                       |   |
| **Condensed                  Consolidated Statements of Cash Flows for the Nine Months Ended**                                             |   |
| **December                  31, 2006 and 2005 (Unaudited)**** **                                                                 | **5**  |
|                                                                                                                                       |   |
| **Notes                  to Condensed Consolidated Financial Statements for the Nine Months                  Ended**                       |   |
| **December                  31, 2006 and 2005 (Unaudited)**** **                                                                      | **6**  |
|                                                                                                                                       |   |
| **Item                  2. Management's Discussion and Analysis or Plan of Operation.**                                                    | **15** |
|                                                                                                                                       |   |
| **Item                  3. Controls and Procedures.**                                                                                      | **23** |
|                                                                                                                                       |   |
| **PART                  II. OTHER INFORMATION**                                                                                            | **24** |
|                                                                                                                                       |   |
| **Item                  1. Legal Proceedings.**                                                                                            | **24** |
|                                                                                                                                       |   |
| **Item                  2. Unregistered Sales of Equity Securities and Use of                  Proceeds.**                                 | **24** |
|                                                                                                                                       |   |
| **Item                  3. Defaults Upon Senior Securities.**                                                                              | **24** |
|                                                                                                                                       |   |
| **Item                  4. Submission of Matters to a Vote of Security                  Holders.**                                         | **24** |
|                                                                                                                                       |   |
| **Item                  5. Other Information.**                                                                                            | **24** |
|                                                                                                                                       |   |
| **Item                  6. Exhibits.**                                                                                                     | **24** |

----

**NEW      ORIENTAL ENERGY & CHEMICAL CORP.**

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

**CONDENSED      CONSOLIDATED BALANCE SHEET**

|                                                                                                                                                                                                                                                                                                             |   | **December                31, 2006****(Unaudited)** |       |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------|------------|
| **ASSETS**                                                                                                                                                                                                                                                                                                       |   |                                                |       |   |
| **CURRENT                ASSETS**                                                                                                                                                                                                                                                                                |   |                                                |       |   |
| Cash                and cash equivalents                                                                                                                                                                                                                                                                         |   | $                                                   | 4,943,014  |   |
| Restricted                cash                                                                                                                                                                                                                                                                                   |   |                                                | 4,866,367  |   |
| Notes                receivable                                                                                                                                                                                                                                                                                  |   |                                                | 1,316,608  |   |
| Accounts                receivable                                                                                                                                                                                                                                                                               |   |                                                | 87,467     |   |
| Inventories                                                                                                                                                                                                                                                                                                      |   |                                                | 3,541,583  |   |
| Prepayments                for goods                                                                                                                                                                                                                                                                             |   |                                                | 4,676,234  |   |
| Due                from employees                                                                                                                                                                                                                                                                                |   |                                                | 53,786     |   |
| Other                receivables, prepaid expenses, and other assets                                                                                                                                                                                                                                             |   |                                                | 954,698    |   |
| Total                current assets                                                                                                                                                                                                                                                                              |   |                                                | 20,439,757 |   |
|                                                                                                                                                                                                                                                                                                             |   |                                                |       |   |
| Plant                and equipment, net                                                                                                                                                                                                                                                                          |   |                                                | 11,083,478 |   |
| Land                use rights, net                                                                                                                                                                                                                                                                              |   |                                                | 1,562,989  |   |
| Construction                in progress                                                                                                                                                                                                                                                                          |   |                                                | 3,069,054  |   |
| Deposits                                                                                                                                                                                                                                                                                                         |   |                                                | 1,196,131  |   |
| Long-term                investment                                                                                                                                                                                                                                                                              |   |                                                | 26,893     |   |
| Deferred                taxes                                                                                                                                                                                                                                                                                    |   |                                                | 235,141    |   |
|  **TOTAL                ASSETS**                                                                                                                                                                                                                                                                            |   | $                                                   | 37,613,443 |   |
|                                                                                                                                                                                                                                                                                                             |   |                                                |       |   |
| **LIABILITIES                AND SHAREHOLDERS’ EQUITY**                                                                                                                                                                                                                                                    |   |                                                |       |   |
| **CURRENT                LIABILITIES**                                                                                                                                                                                                                                                                           |   |                                                |       |   |
| Accounts                payable                                                                                                                                                                                                                                                                                  |   | $                                                   | 4,177,130  |   |
| Other                payables and accrued liabilities                                                                                                                                                                                                                                                            |   |                                                | 672,329    |   |
| Short-term                debt                                                                                                                                                                                                                                                                                   |   |                                                | 3,060,689  |   |
| Notes                payable                                                                                                                                                                                                                                                                                     |   |                                                | 6,778,337  |   |
| Customer                deposits                                                                                                                                                                                                                                                                                 |   |                                                | 9,679,018  |   |
| Due                to related parties                                                                                                                                                                                                                                                                            |   |                                                | 820,756    |   |
| Due                to employees                                                                                                                                                                                                                                                                                  |   |                                                | 116,894    |   |
| Taxes                payable                                                                                                                                                                                                                                                                                     |   |                                                | 626,443    |   |
| Total                current liabilities                                                                                                                                                                                                                                                                         |   |                                                | 25,931,596 |   |
|                                                                                                                                                                                                                                                                                                             |   |                                                |       |   |
| **LONG-TERM                LIABILITIES**                                                                                                                                                                                                                                                                         |   |                                                |       |   |
| Deferred                taxes                                                                                                                                                                                                                                                                                    |   |                                                | 1,218,094  |   |
| Total                long-term liabilities                                                                                                                                                                                                                                                                       |   |                                                | 1,218,094  |   |
|                                                                                                                                                                                                                                                                                                             |   |                                                |       |   |
| **TOTAL                LIABILITIES**                                                                                                                                                                                                                                                                             |   |                                                | 27,149,690 |   |
|                                                                                                                                                                                                                                                                                                             |   |                                                |       |   |
| **COMMITMENTS**                                                                                                                                                                                                                                                                                                  |   |                                                |       |   |
|                                                                                                                                                                                                                                                                                                             |   |                                                |       |   |
| **SHAREHOLDERS’                EQUITY**                                                                                                                                                                                                                                                                    |   |                                                |       |   |
| Preferred                stock, par value $0.001 per share; 10,000,000 shares authorized,                none                issued and outstanding Common                stock, par value $0.001 per share; 30,000,000 shares authorized,                12,640,000                share issued and outstanding |   |                                                | 12,640     |   |
| Additional                paid-in capital                                                                                                                                                                                                                                                                        |   |                                                | 4,573,205  |   |
| Retained                earnings (the restricted portion is $510,283)                                                                                                                                                                                                                                            |   |                                                | 5,387,773  |   |
| Accumulated                other comprehensive income                                                                                                                                                                                                                                                            |   |                                                | 490,135    |   |
| Total                shareholders’ equity                                                                                                                                                                                                                                                                  |   |                                                | 10,463,753 |   |
|                                                                                                                                                                                                                                                                                                             |   |                                                |       |   |
| **TOTAL                LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                                                                                                                                              |   | $                                                   | 37,613,443 |   |

----

**NEW      ORIENTAL ENERGY & CHEMICAL CORP. **

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

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

**COMPREHNENSIVE      INCOME **

**(UNAUDITED)**

|                                                                      |   | **Three                Months Ended****December                31,** |       | **Nine                Months Ended****December                31,** |   |
|---------------------------------------------------------------------------|--------|----------------------------------------------------------------------|------------|---------------------------------------------------------------------|--------|
|                                                                      |   | **2006**                                                             |       | **2005**                                                            |   | **2006** |   | **2005** |   |
| **REVENUES,                NET**                                          |   | $                                                                    | 10,884,452 |                                                                | $      | 9,389,238 |   | $ | 28,365,616 |   | $ | 20,908,345 |   |
|                                                                      |   |                                                                 |       |                                                                |   |   |   |   |   |   |   |   |   |
| **COST                OF GOODS SOLD**                                     |   |                                                                 | 8,679,748  |                                                                |   | 8,982,406 |   |   | 23,767,912 |   |   | 19,290,691 |   |
|                                                                      |   |                                                                 |       |                                                                |   |   |   |   |   |   |   |   |   |
| **GROSS                PROFIT**                                           |   |                                                                 | 2,204,704  |                                                                |   | 406,832 |   |   | 4,597,704 |   |   | 1,617,654 |   |
|                                                                      |   |                                                                 |       |                                                                |   |   |   |   |   |   |   |   |   |
| Selling                and distribution                                   |   |                                                                 | 135,956    |                                                                |   | 84,672 |   |   | 496,095 |   |   | 167,469 |   |
|                                                                      |   |                                                                 |       |                                                                |   |  |   |   |   |   |   |   |   |
| General                and administrative                                 |   |                                                                 | 542,769    |                                                                |   | 232,162 |   |   | 944,233 |   |   | 625,957 |   |
|                                                                      |   |                                                                 |       |                                                                |   |  |   |   |   |   |   |   |   |
| **INCOME                FROM OPERATIONS**                                 |   |                                                                 | 1,525,979  |                                                                |   | 89,998 |   |   | 3,157,376 |   |   | 824,228 |   |
|                                                                      |   |                                                                 |       |                                                                |   |  |   |   |   |   |   |   |   |
| **OTHER                INCOME (EXPENSES)**                                |   |                                                                 |       |                                                                |   |  |   |   |   |   |   |   |   |
|                                                                      |   |                                                                 |       |                                                                |   |  |   |   |   |   |   |   |   |
| Interest                expense, net                                      |   |                                                                 | (92,933    | )                                                                   |   | (72,912 | ) |   | (212,803 | ) |   | (160,848 | ) |
|                                                                      |   |                                                                 |       |                                                                |   |   |   |   |   |   |   |   |   |
| Investment                income, net                                     |   |                                                                 | 7,390      |                                                                |   | - |   |   | 7,339 |   |   | - |   |
|                                                                      |   |                                                                 |       |                                                                |   |  |   |   |   |   |   |   |   |
| Other,                net                                                 |   |                                                                 | (12,949    | )                                                                   |   | (26,309 | ) |   | (74,964 | ) |   | 63,711 |   |
|                                                                      |   |                                                                 |       |                                                                |   |  |   |   |   |   |   |   |   |
| **INCOME****(LOSS)****BEFORE                INCOME TAXES**                |   |                                                                 | 1,427,487  |                                                                |   | (9,223 | ) |   | 2,876,948 |   |   | 727,091 |   |
|                                                                      |   |                                                                 |       |                                                                |   |  |   |   |   |   |   |   |   |
| **INCOME                TAX EXPENSE**                                     |   |                                                                 | (475,683   | )                                                                   |   | - |   |   | (1,035,062 | ) |   | (279,970 | ) |
|                                                                      |   |                                                                 |       |                                                                |   |  |   |   |   |   |   |   |   |
| **NET                INCOME (LOSS)**                                      |   |                                                                 | 951,804    |                                                                |   | (9,223 | ) |   | 1,841,886 |   |   | 447,121 |   |
|                                                                      |   |                                                                 |       |                                                                |   |  |   |   |   |   |   |   |   |
| **OTHER                COMPREHENSIVE INCOME**                             |   |                                                                 |       |                                                                |   |  |   |   |   |   |   |   |   |
| Foreign                currency translation gain                          |   |                                                                 | 109,950    |                                                                |   | 46,286 |   |   | 329,855 |   |   | 175,096 |   |
|                                                                      |   |                                                                 |       |                                                                |   |   |   |   |   |   |   |   |   |
| **OTHER                COMPREHENSIVE INCOME BEFORE INCOME TAXES**         |   |                                                                 | 109,950    |                                                                |   | 46,286 |   |   | 329,855 |   |   | 175,096 |   |
|                                                                      |   |                                                                 |       |                                                                |   |   |   |   |   |   |   |   |   |
| **INCOME                TAXES RELATED TO OTHER COMPREHENSIVE INCOME**     |   |                                                                 | (36,284    | )                                                                   |   | (15,274 | ) |   | (108,852 | ) |   | (57,782 | ) |
|                                                                      |   |                                                                 |       |                                                                |   |   |   |   |   |   |   |   |   |
| **OTHER                COMPREHENSIVE INCOME, NET OF INCOME TAXES**        |   |                                                                 | 73,666     |                                                                |   | 31,012 |   |   | 221,003 |   |   | 117,314 |   |
|                                                                      |   |                                                                 |       |                                                                |   |   |   |   |   |   |   |   |   |
| **COMPREHENSIVE                INCOME**                                   |   | $                                                                    | 1,025,470  |                                                                | $      | 21,789 |   | $ | 2,062,889 |   | $ | 564,435 |   |
|                                                                      |   |                                                                 |       |                                                                |   |   |   |   |   |   |   |   |   |
| **WEIGHTED                AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED** |   |                                                                 | 10,908,043 |                                                                |   | 7,500,000 |   |   | 8,640,145 |   |   | 7,500,000 |   |
|                                                                      |   |                                                                 |       |                                                                |   |   |   |   |   |   |   |   |   |
| **NET                INCOME (LOSS) PER SHARE, BASIC AND DILUTED**         |   | $                                                                    | 0.09       |                                                                | $      | (0.00 | ) | $ | 0.21 |   | $ | 0.06 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

**CONDENSED        CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY**

**(UNAUDITED)**

|                                             |   | **Common                Stock** |       | **Additional                Paid-in **  |   | **Retained**  |   | **Accumulated                Other                Comprehensive **  |      |             |   |
|--------------------------------------------------|--------|---------------------------------|------------|---------------------------------------------------|--------|--------------------|--------|-------------------------------------------------------------------------------|-----------|------------------|--------|
|                                             |   | **Shares**                 |       | **Par                Value**                 |   | **Capital**   |   | ** Earnings**                                                       |      | **Income**  |   | **Total**  |   |
| **BALANCE,                APRIL 1, 2006**        |   |                            | 7,500,000  |                                              | $      | 7,500              |   | $                                                                             | 4,583,591 |             | $      | 3,545,887 |   | $ | 160,280 |   | $ | 8,297,258 |   |
|                                             |   |                            |       |                                              |   |               |   |                                                                          |      |             |   |   |   |   |   |   |   |   |   |
| Net                income                        |   |                            | -          |                                              |   | -                  |   |                                                                          | -         |             |   | 1,841,886 |   |   | - |   |   | 1,841,886 |   |
|                                             |   |                            |       |                                              |   |               |   |                                                                          |      |             |   |   |   |   |   |   |   |   |   |
| Recapitalization                                 |   |                            | 5,140,000  |                                              |   | 5,140              |   |                                                                          | (10,386   | )                |   | - |   |   | - |   |   | (5,246 | ) |
|                                             |   |                            |       |                                              |   |               |   |                                                                          |      |             |   |   |   |   |   |   |   |   |   |
| Foreign                currency translation gain |   |                            | -          |                                              |   | -                  |   |                                                                          | -         |             |   | - |   |   | 329,855 |   |   | 329,855 |   |
|                                             |   |                            |       |                                              |   |               |   |                                                                          |      |             |   |   |   |   |   |   |   |   |   |
| **BALANCE,                DECEMBER 31, 2006**    |   |                            | 12,640,000 |                                              | $      | 12,640             |   | $                                                                             | 4,573,205 |             | $      | 5,387,773 |   | $ | 490,135 |   | $ | 10,463,753 |   |

----

**NEW      ORIENTAL ENERGY & CHEMICAL CORP. **

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

**CONDENSED      CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

|                                                                                                               |   | **Nine                  Months Ended****December                  31, 2006** |       | **Nine                  Months Ended****December                  31, 2005** |   |
|--------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------|--------|
| **CASH                  FLOWS FROM OPERATING ACTIVITIES:**                                                         |   |                                                                         |       |                                                                         |   |   |   |
| Net                  income                                                                                        |   | $                                                                            | 1,841,886  |                                                                         | $      | 447,121 |   |
| Adjustments                  to reconcile net income to net cash provided byoperating                  activities: |   |                                                                         |       |                                                                         |   |   |   |
| Depreciation                  and amortization                                                                     |   |                                                                         | 1,184,820  |                                                                         |   | 519,476 |   |
| Deferred                  taxes                                                                                    |   |                                                                         | 108,652    |                                                                         |   | 36,659 |   |
|                                                                                                               |   |                                                                         |       |                                                                         |   |   |   |
| **Changes                  in operating assets and liabilities:**                                                  |   |                                                                         |       |                                                                         |   |   |   |
|                                                                                                               |   |                                                                         |       |                                                                         |   |   |   |
| **(Increase)                  Decrease In:**                                                                       |   |                                                                         |       |                                                                         |   |   |   |
| Accounts                  receivable                                                                               |   |                                                                         | (87,467    | )                                                                            |   | - |   |
| Inventories                                                                                                        |   |                                                                         | (2,462,991 | )                                                                            |   | 1,024,898 |   |
| Prepayments                  for goods                                                                             |   |                                                                         | (3,840,523 | )                                                                            |   | 422,171 |   |
| Other                  receivables, prepaid expenses, and other assets                                             |   |                                                                         | (932,692   | )                                                                            |   | (68,950 | ) |
|                                                                                                               |   |                                                                         |       |                                                                         |   |   |   |
| **Increase                  (Decrease) In:**                                                                       |   |                                                                         |       |                                                                         |   |   |   |
| Accounts                  payable                                                                                  |   |                                                                         | 1,549,906  |                                                                         |   | 1,357,833 |   |
| Other                  payables and accrued liabilities                                                            |   |                                                                         | 226,147    |                                                                         |   | (125,823 | ) |
| Taxes                  payable                                                                                     |   |                                                                         | 567,333    |                                                                         |   | (46,696 | ) |
| Customer                  deposits                                                                                 |   |                                                                         | 7,818,559  |                                                                         |   | (1,670,867 | ) |
| Net                  cash provided by operating activities                                                         |   |                                                                         | 5,973,630  |                                                                         |   | 1,895,822 |   |
|                                                                                                               |   |                                                                         |       |                                                                         |   |   |   |
| **CASH                  FLOWS FROM INVESTING ACTIVITIES:**                                                         |   |                                                                         |       |                                                                         |   |   |   |
| Restricted                  cash                                                                                   |   |                                                                         | (2,745,873 | )                                                                            |   | (154,763 | ) |
| Notes                  receivable                                                                                  |   |                                                                         | (59,160    | )                                                                            |   | 148,092 |   |
| Long-term                  investment                                                                              |   |                                                                         | (26,893    | )                                                                            |   | - |   |
| Marketable                  securities                                                                             |   |                                                                         | 12,580     |                                                                         |   | (12,393 | ) |
| Purchases                  of plant and equipment                                                                  |   |                                                                         | (1,166,829 | )                                                                            |   | (3,829,526 | ) |
| Purchases                  of construction in progress                                                             |   |                                                                         | (1,467,971 | )                                                                            |   | (333,449 | ) |
| Deposit                  for equipment                                                                             |   |                                                                         | (985,953   | )                                                                            |   | - |   |
| Deposit                  for land use right                                                                        |   |                                                                         | -          |                                                                         |   | (436,450 | ) |
|                                                                                                               |   |                                                                         |       |                                                                         |   |   |   |
| Net                  cash used in investing activities                                                             |   |                                                                         | (6,440,099 | )                                                                            |   | (4,618,489 | ) |
|                                                                                                               |   |                                                                         |       |                                                                         |   |   |   |
| **CASH                  FLOWS FROM FINANCING ACTIVITIES:**                                                         |   |                                                                         |       |                                                                         |   |   |   |
| Proceeds                  of short-term debt                                                                       |   |                                                                         | 589,281    |                                                                         |   | - |   |
| Repayments                  of short-term debt                                                                     |   |                                                                         | (896,436   | )                                                                            |   | (1,264,202 | ) |
| Due                  to employees                                                                                  |   |                                                                         | 4,758      |                                                                         |   | 7,690 |   |
| Due                  to shareholders                                                                               |   |                                                                         | (301,858   | )                                                                            |   | 441,688 |   |
| Proceeds                  of notes payable                                                                         |   |                                                                         | 2,442,402  |                                                                         |   | 1,891,330 |   |
| Net                  cash provided by financing activities                                                         |   |                                                                         | 1,838,147  |                                                                         |   | 1,076,506 |   |
|                                                                                                               |   |                                                                         |       |                                                                         |   |   |   |
| **INCREASE                  (DECREASE) IN CASH AND CASH EQUIVALENTS**                                              |   |                                                                         | 1,371,678  |                                                                         |   | (1,646,161 | ) |
|                                                                                                               |   |                                                                         |       |                                                                         |   |   |   |
| Effect                  of exchange rate changes on cash                                                           |   |                                                                         | 289,575    |                                                                         |   | 161,519 |   |
| Cash                  and cash equivalents at beginning of period                                                  |   |                                                                         | 3,281,761  |                                                                         |   | 2,069,003 |   |
|                                                                                                               |   |                                                                         |       |                                                                         |   |   |   |
| **CASH                  AND CASH EQUIVALENTS AT END OF PERIOD**                                                    |   | $                                                                            | 4,943,014  |                                                                         | $      | 584,361 |   |
|                                                                                                               |   |                                                                         |       |                                                                         |   |   |   |
| **SUPPLEMENTARY                  CASH FLOW INFORMATION:**                                                          |   |                                                                         |       |                                                                         |   |   |   |
| Interest                  paid                                                                                     |   | $                                                                            | 250,692    |                                                                         | $      | 185,660 |   |
| Income                  taxes paid                                                                                 |   | $                                                                            | 317,106    |                                                                         | $      | 305,978 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE NINE MONTHS ENDED DECEMBER 31, 1006 AND 2005**

**(UNAUDITED)**

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

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

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

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

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

| (iii)   | Henan                Luoshan Jinding LPG Co., Ltd., (“Luoshan”) (100% subsidiary of                Jinding) |
|-------------------|-------------------------------------------------------------------------------------------------------------------------|

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE NINE MONTHS ENDED DECEMBER 31, 1006 AND 2005**

**(UNAUDITED)**

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE NINE MONTHS ENDED DECEMBER 31, 1006 AND 2005**

**(UNAUDITED)**

|                                                 |   | **December                31, 2006** |   | **December                31, 2005** |   |
|------------------------------------------------------|--------|--------------------------------------|--------|--------------------------------------|--------|
| Period                end RMB: US$ exchange rate     |   |                                 | 7.8087 |                                 |   | 8.0702 |   |
| Average                period RMB: US$ exchange rate |   |                                 | 7.9128 |                                 |   | 8.1734 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE NINE MONTHS ENDED DECEMBER 31, 1006 AND 2005**

**(UNAUDITED)**

**4.**
**NOTES      RECEIVABLE**

|                                                                    |   |  **December                31, 2006** |      |
|-------------------------------------------------------------------------|--------|--------------------------------------------|-----------|
|                                                                    |   | **(Unaudited)**                            |      |
| Fuyang                Weida Chemical Co., Ltd. (Due March 25, 2007      |   | $                                          | 7,812     |   |
| Zhonghua                Fertilizer Co., Ltd. (Due February 25, 2007)    |   |                                       | 15,367    |   |
| Dancheng                Xian Chemical Co., Ltd. (Due June 6, 2007)      |   |                                       | 12,807    |   |
| Luoshan                County People Government (Due December 29, 2007) |   |                                       | 640,311   |   |
| Xi                County People Government (Due December 29, 2007)      |   |                                       | 640,311   |   |
|                                                                    |   |                                       | 1,316,608 |   |

**5.**
**INVENTORIES**

|                             |   |  **December                31, 2006** |      |
|----------------------------------|--------|--------------------------------------------|-----------|
|                             |   | **(Unaudited)**                            |      |
| Raw                materials     |   | $                                          | 1,830,820 |   |
| Packing                materials |   |                                       | 16,396    |   |
| Finished                goods    |   |                                       | 1,694,367 |   |
| Total                            |   | $                                          | 3,541,583 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE NINE MONTHS ENDED DECEMBER 31, 1006 AND 2005**

**(UNAUDITED)**

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

|                                          |   | **December                31, 2006** |       |
|-----------------------------------------------|--------|--------------------------------------|------------|
|                                          |   | **(Unaudited)**                      |       |
| At              cost:                         |   |                                 |       |   |
| Buildings                                     |   | $                                    | 1,489,890  |   |
| Machinery                                     |   |                                 | 12,788,492 |   |
| Motor                vehicles                 |   |                                 | 171,081    |   |
| Office                equipment               |   |                                 | 100,807    |   |
|                                          |   |                                 | 14,550,270 |   |
| Less:                Accumulated depreciation |   |                                 |       |   |
| Buildings                                     |   |                                 | 201,553    |   |
| Machinery                                     |   |                                 | 3,149,919  |   |
| Motor                vehicles                 |   |                                 | 84,811     |   |
| Office                equipment               |   |                                 | 30,509     |   |
|                                          |   |                                 | 3,466,792  |   |
| Plant                and equipment, net       |   | $                                    | 11,083,478 |   |

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

|                                          |   |  **December 31, 2006** |      |
|-----------------------------------------------|--------|-----------------------------|-----------|
|                                          |   | **(Unaudited)**             |      |
| Cost                                          |   | $                           | 1,613,139 |   |
| Less:                Accumulated amortization |   |                        | 50,150    |   |
| Land                use rights, net           |   | $                           | 1,562,989 |   |

| 2006       |   | $      | 32,263    |   |
|------------|--------|--------|-----------|--------|
| 2007       |   |   | 32,263    |   |
| 2008       |   |   | 32,263    |   |
| 2009       |   |   | 32,263    |   |
| 2010       |   |   | 32,263    |   |
| Thereafter |   |   | 1,401,674 |   |
| Total      |   | $      | 1,562,989 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE NINE MONTHS ENDED DECEMBER 31, 1006 AND 2005**

**(UNAUDITED)**

**8.**
**CONSTRUCTION      IN PROGRESS**

|                     |   |  **December                31, 2006** |      |
|--------------------------|--------|--------------------------------------------|-----------|
|                     |   | **(Unaudited)**                            |      |
| Machinery                |   | $                                          | 1,106,458 |   |
| Plant                    |   |                                       | 1,056,952 |   |
| Work                shop |   |                                       | 905,644   |   |
| Total                    |   | $                                          | 3,069,054 |   |

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

|                                                                                                                                                                                                                                                                                                                                                                                                                         |   | **December                31,****2006** |      |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------|-----------|
|                                                                                                                                                                                                                                                                                                                                                                                                                         |   | **(Unaudited)**                         |      |
| Loans                from China Construction Bank Luoshan Branch, due January 5, 2007.                (Subsequently paid on its due date) Monthly interest only payments                at                6.12% per annum, guaranteed by Xinyang Hong Chang Pipeline Gas Co.,                Ltd.,                a former shareholder of the Company, and collateralized by a land                use                right. |   | $                                       | 768,373   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                    |      |   |
| Loans                from China Construction Bank Luoshan Branch, due March 1, 2007. Monthly                interest only payments at 6.12% per annum, guaranteed by Xinyang                Hong                Chang Pipeline Gas Co., Ltd., a former shareholder of the Company,                and                collateralized by a land use right.                                                                     |   |                                    | 512,249   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                    |      |   |
| Loans                from Rural Credit Cooperatives, due July 24, 2007. Monthly interest                only                payments at 11.16% per annum.                                                                                                                                                                                                                                                                    |   |                                    | 499,444   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                         |   |                                    |      |   |
| Loan                from Bank of China Luoshan Branch, due March 31, 2007. Monthly                interest only payments at 5.64% per annum, guaranteed by Zhou Dianchang                and Wang Guiquan and collateralized by a land use right.                                                                                                                                                                       |   |                                    | 1,280,623 |   |
| Total                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $                                       | 3,060,689 |   |

**10.**
**NOTES      PAYABLE**

|                                                                      |   | **December                31,****2006** |      |
|---------------------------------------------------------------------------|--------|-----------------------------------------|-----------|
|                                                                      |   | **(Unaudited)**                         |      |
| Due                January 10, 2007 (subsequently repaid on its due date) |   | $                                       | 256,126   |   |
| Due                January 26, 2007 (subsequently repaid on its due date) |   |                                    | 256,126   |   |
| Due                February 14, 2007                                      |   |                                    | 896,437   |   |
| Due                February 23, 2007                                      |   |                                    | 384,186   |   |
| Due                February 25, 2007                                      |   |                                    | 128,062   |   |
| Due                March 15, 2007                                         |   |                                    | 320,155   |   |
| Due                March 28, 2007                                         |   |                                    | 576,279   |   |
| Due                April 11, 2007                                         |   |                                    | 371,381   |   |
| Due                April 24, 2007                                         |   |                                    | 332,962   |   |
| Due                May 1, 2007                                            |   |                                    | 256,126   |   |
| Due                May 7, 2007                                            |   |                                    | 384,186   |   |
| Due                May 17, 2007                                           |   |                                    | 192,093   |   |
| Due                May 20, 2007                                           |   |                                    | 384,186   |   |
| Due                May 23, 2007                                           |   |                                    | 384,186   |   |
| Due                June 6, 2007                                           |   |                                    | 384,186   |   |
| Due                June 19, 2007                                          |   |                                    | 384,186   |   |
| Due                June 27, 2007                                          |   |                                    | 256,126   |   |
| Due                June 30, 2007                                          |   |                                    | 631,348   |   |
| Total                                                                     |   | $                                       | 6,778,337 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE NINE MONTHS ENDED DECEMBER 31, 1006 AND 2005**

**(UNAUDITED)**

**11.      **
**TAXES**

|                                                      |   | **December                31, 2006** |       | **December                31, 2005** |   |
|-----------------------------------------------------------|--------|--------------------------------------|------------|--------------------------------------|--------|
|                                                      |   | **(Unaudited)**                      |       | **(Unaudited)**                      |   |
| Current:                                                  |   |                                 |       |                                 |   |   |   |
| Provision                for State Corporation Income Tax |   | $                                    | (59,128    | )                                    | $      | 176,651 |   |
| Provision                for Local Corporation Income Tax |   |                                 | (5,913     | )                                    |   | 17,665 |   |
|                                                      |   |                                 | (65,041    | )                                    |   | 194,316 |   |
| Deferred:                                                 |   |                                 |       |                                 |   |   |   |
| Provision                for State Corporation Income Tax |   |                                 | (881,837   | )                                    |   | (431,169 | ) |
| Provision                for Local Corporation Income Tax |   |                                 | (88,184    | )                                    |   | (43,117 | ) |
|                                                      |   |                                 | (970,021   | )                                    |   | (474,286 | ) |
| Income                tax expense                         |   | $                                    | (1,035,062 | )                                    | $      | (279,970 | ) |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE NINE MONTHS ENDED DECEMBER 31, 1006 AND 2005**

**(UNAUDITED)**

|                                                   |   | **December                31, 2006** |       | **December                31, 2005** |   |
|--------------------------------------------------------|--------|--------------------------------------|------------|--------------------------------------|--------|
|                                                   |   | **(Unaudited)**                      |       | **(Unaudited)**                      |   |
| Computed                “expected” expense |   | $                                    | (949,393   | )                                    | $      | (239,940 | ) |
| Valuation                allowance                     |   |                                 | (73,615    | )                                    |   | - |   |
| Permanent                differences                   |   |                                 | (12,054    | )                                    |   | (40,030 | ) |
| Income                tax expense                      |   | $                                    | (1,035,062 | )                                    | $      | (279,970 | ) |

|                                               |   | **December                31,****2006** |       |
|----------------------------------------------------|--------|-----------------------------------------|------------|
|                                               |   | **(Unaudited)**                         |       |
| Deferred                tax assets:                |   |                                    |       |   |
|                                               |   |                                    |       |   |
| Cost                of sales                       |   |                                    | 225,658    |   |
| Net                operating loss carrying forward |   |                                    | 73,615     |   |
| Other                                              |   |                                    | 9,483      |   |
| Total                deferred tax assets           |   |                                    | 308,756    |   |
| Valuation                allowance                 |   |                                    | (73,615    | ) |
| Net                deferred tax assets             |   |                                    | 235,141    |   |
|                                               |   |                                    |       |   |
| Deferred                tax liabilities:           |   |                                    |       |   |
|                                               |   |                                    |       |   |
| Amortization                of land use rights     |   |                                    | (21,471    | ) |
| Depreciation                                       |   |                                    | (493,867   | ) |
| Financial                expenses                  |   |                                    | (28,509    | ) |
| Other                income and expenses           |   |                                    | (49,739    | ) |
| Cost                of sales                       |   |                                    | (489,253   | ) |
| Sales                cut-off                       |   |                                    | (135,255   | ) |
| Total                deferred tax liabilities      |   |                                    | (1,218,094 | ) |
|                                               |   |                                    |       |   |
| Net                deferred tax liabilities        |   | $                                       | (982,953   | ) |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE NINE MONTHS ENDED DECEMBER 31, 1006 AND 2005**

**(UNAUDITED)**

**12.**
**COMMITMENTS      **

| Year                ended March 31, |   | Amount |    |
|-------------------------------------|--------|--------|---------|
| 2007                                |   | $      | 261,900 |   |

----

**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)*

**Overview**

----

**Result      of Operations - Three Months Ended December 31, 2006 as compared to the Three      Months Ended December 31, 2005**

|                                                            |   | 2006                                |   | 2005                                        |   | Comparisons                    |   |
|-----------------------------------------------------------------|--------|-------------------------------------|--------|---------------------------------------------|--------|-------------------------------------|--------|
|                                                                 |   | Amount                              |   | Percentage                of Revenues  |   | Amount                         |   | Percentage                of Revenues  |   | Growth                inAmount  |   | Increase                (Decrease)                in Percentage |   |
| Item                                                            |   | US                $’000  |   | (%)                                    |   | US                $’000  |   | (%)  |   | US                $’000  |   |  (%)  |   |
| Revenues                                                        |   |                                | 10,884 |                                        |   | 100.00                              | %      |   | 9,389 |   |   | 100.00 | % |   | 1,495 |   |   | 15.92 | % |
| Cost                of Goods Sold                               |   |                                | 8,680  |                                        |   | 79.75                               | %      |   | 8,982 |   |   | 95.67 | % |   | (302 | ) |   | (3.36 | %) |
| Gross                Profit                                     |   |                                | 2,205  |                                        |   | 20.26                               | %      |   | 407 |   |   | 4.33 | % |   | 1,798 |   |   | 441.77 | % |
| Selling                and distribution                         |   |                                | 136    |                                        |   | 1.25                                | %      |   | 85 |   |   | 0.91 | % |   | 51 |   |   | 60.00 | % |
| General                & administrative                     |   |                                | 543    |                                        |   | 4.99                                | %      |   | 232 |   |   | 2.47 | % |   | 311 |   |   | 134.05 | % |
| Income                from operations                           |   |                                | 1,526  |                                        |   | 14.02                               | %      |   | 90 |   |   | 0.96 | % |   | 1,436 |   |   | 1595.56 | % |
| Interest                expense, net                            |   |                                | 93     |                                        |   | 0.85                                | %      |   | 73 |   |   | 0.78 | % |   | 20 |   |   | 27.40 | % |
| Investment                income, net                           |   |                                | 7      |                                        |   | 0.06                                | %      |   | 0 |   |   | 0.00 | % |   | 7 |   |   | N/A |   |
| Other,                net                                       |   |                                | (13    | )                                           |   | (0.12                               | )%     |   | (26 | ) |   | (0.28 | )% |   | 13 |   |   | (50.00 | %) |
| Income                before tax                                |   |                                | 1,427  |                                        |   | 13.11                               | %      |   | (9 | ) |   | (0.10 | )% |   | 1,436 |   |   | (15,955.56 | %) |
| Income                tax                                       |   |                                | 476    |                                        |   | 4.37                                |   |   | 0 |   |   | 0.00 | % |   | 476 |   |   | N/A |   |
| Net                income (loss)                                |   |                                | 952    |                                        |   | 8.75                                |   |   | (9 | ) |   | (0.10 | )% |   | 961 |   |   | (10,677.78 | %) |
| Foreign                currency translation gain                |   |                                | 110    |                                        |   | 1.01                                |   |   | 46 |   |   | 0.49 | % |   | 64 |   |   | 139.13 | % |
| Income                tax related to other comprehensive income |   |                                | 36     |                                        |   | 0.33                                |   |   | 15 |   |   | 0.16 | % |   | 21 |   |   | 140.00 | % |
| Comprehensive                income                             |   |                                | 1,025  |                                        |   | 9.42                                |   |   | 22 |   |   | 0.23 | % |   | 1,003 |   |   | 4,559.09 | % |

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

|                                      |   | 3                Months Ended December 31,                2006   |   | 3                Months Ended December                31, 2005 |   | Comparisons                         |   |
|-------------------------------------------|--------|----------------------------------------------------------------------------|--------|---------------------------------------------------------------------|--------|-------------------------------------|--------|
| Products                                  |   | AmountUS                $’000                                        |   | Percentage                of Revenues(%)                            |   | AmountUS                $’000 |   | Percentage                of Revenues(%) |   | Growth                in AmountUS                $’000 |   | Increase                (Decrease) in Percentage (%) |   |
| Urea                                      |   |                                                                       | 5,524  |                                                                |   | 50.75                               | %      |   | 7,302 |   |   | 77.77 | % |   | (1,778 | ) |   | (24.35 | %) |
| Carbonate                Hydrogen Ammonia |   |                                                                       | 242    |                                                                |   | 2.22                                | %      |   | 2 |   |   | 0.02 | % |   | 240 |   |   | 12000.00 | % |
| Methanol                (CH3OH)           |   |                                                                       | 2,566  |                                                                |   | 23.58                               | %      |   | 1,950 |   |   | 20.77 | % |   | 616 |   |   | 31.59 | % |
| Liquified                Ammonia          |   |                                                                       | 1,060  |                                                                |   | 9.74                                | %      |   | 135 |   |   | 1.44 | % |   | 925 |   |   | 685.19 | % |
| DME                (CH3OCH3)              |   |                                                                       | 928    |                                                                |   | 8.53                                | %      |   |   |   |   |   |   |   | 928 |   |   |   |   |
| Dry                Gas                    |   |                                                                       | 564    |                                                                |   | 5.18                                | %      |   |    |   |   |   |   |   | 564 |   |   |   |   |
| Total                                     |   |                                                                       | 10,884 |                                                                |   | 100.00                              | %      |   | 9,389 |   |   | 100.00 | % |   | 1,495 |   |   | 15.92 | % |

----

|                              |   | 2006                                 |   | 2005                                      |   | Comparisons                          |   |
|-----------------------------------|--------|-------------------------------------------|--------|------------------------------------------------|--------|-------------------------------------------|--------|
|                Provinces     |   | AmountUS                $’000  |   | Percentage                of Revenues(%)  |   | AmountUS                $’000  |   | Percentage                of Revenues(%)  |   | Growth                in AmountUS                $’000  |   | Increase                (Decrease) in Percentage (%)  |   |
| Hunan                Province     |   |                                      | 383    |                                           |   | 3.52                                      | %      |   | 741 |   |   | 7.89 | % |   | (358 | ) |   | (48.31 | %) |
| Guangdong                Province |   |                                      | 1,430  |                                           |   | 13.14                                     | %      |   | 2,268 |   |   | 24.16 | % |   | (838 | ) |   | (36.95 | %) |
| Hubei                Province     |   |                                      | 1,317  |                                           |   | 12.10                                     | %      |   | 835 |   |   | 8.89 | % |   | 482 |   |   | 57.72 | % |
| Anhui                Province     |   |                                      | 3,078  |                                           |   | 28.28                                     | %      |   | 1,351 |   |   | 14.39 | % |   | 1,727 |   |   | 127.83 | % |
| Jiangxi                Province   |   |                                      | 211    |                                           |   | 1.94                                      | %      |   | 107 |   |   | 1.14 | % |   | 104 |   |   | 97.20 | % |
| Shandong                Province  |   |                                      | 185    |                                           |   | 1.70                                      | %      |   | 107 |   |   | 1.14 | % |   | 78 |   |   | 72.90 | % |
| Henan                Province     |   |                                      | 4,280  |                                           |   | 39.32                                     | %      |   | 3,980 |   |   | 42.39 | % |   | 300 |   |   | 7.54 | % |
| Total                             |   |                                      | 10,884 |                                           |   | 100.00                                    | %      |   | 9,389 |   |   | 100.00 | % |   | 1,495 |   |   | 15.92 | % |

|                              |   | 2006                                                 |   | 2005                                      |   | Comparisons                          |   |
|-----------------------------------|--------|-----------------------------------------------------------|--------|------------------------------------------------|--------|-------------------------------------------|--------|
|                Item          |   | Amount                US                $’000  |   | Percentage                of Revenues(%)  |   | AmountUS                $’000  |   | Percentage                of Revenues(%)  |   | Growth                in AmountUS                $’000  |   | Increase                (Decrease) in Percentage (%)  |   |
| Revenues                          |   |                                                      | 10,884 |                                           |   |                                      |   |   | 9,389 |   |   |   |   |   | 1,495 |   |   | 15.92 | % |
| Cost                of Goods Sold |   |                                                      | 8,680  |                                           |   | 79.75                                     | %      |   | 8,982 |   |   | 95.67 | % |   | (302 | ) |   | (3.36 | %) |
| Gross                Profit       |   |                                                      | 2,204  |                                           |   | 20.25                                     | %      |   | 407 |   |   | 4.33 | % |   | 1,797 |   |   | 441.52 | % |

----

**Operating      Expenses**

**Income      From Operations**

**Investment      Income**

**Income      Tax**

**Net      Income (Loss)**

----

**Results      of Operations - Nine Months Ended December 31, 2006 as compared to the Nine      Months Ended December 31, 2005**

|                                                            |   | 2006                                |   | 2005                                    |   | Comparisons                         |   |
|-----------------------------------------------------------------|--------|-------------------------------------|--------|-----------------------------------------|--------|-------------------------------------|--------|
|                                                            |   | Amount                              |   | Percentage                  of Revenues |   | Amount                              |   | Percentage                  of Revenues |   | Growth                  in Amount |   | Increase                (Decrease) in Percentage |   |
| Item                                                            |        | US                $’000  |        | (%)                                |        | US                $’000  |   | (%)  |  | US                $’000  |  |  (%)  |  |
| Revenues                                                        |   |                                | 28,366 |                                    |   | 100.00                              | %      |   | 20,908 |   |   | 100.00 | % |   | 7,458 |   |   | 35.67 | % |
| Cost                of Goods Sold                               |   |                                | 23,768 |                                    |   | 83.79                               | %      |   | 19,291 |   |   | 92.27 | % |   | 4,477 |   |   | 23.21 | % |
| Gross                Profit                                     |   |                                | 4,598  |                                    |   | 16.21                               | %      |   | 1,618 |   |   | 7.74 | % |   | 2,908 |   |   | 184.18 | % |
| Selling                and distribution                         |   |                                | 496    |                                    |   | 1.75                                | %      |   | 167 |   |   | 0.80 | % |   | 329 |   |   | 197.01 | % |
| General                & administrative                     |   |                                | 944    |                                    |   | 3.33                                | %      |   | 626 |   |   | 2.99 | % |   | 318 |   |   | 50.80 | % |
| Income                from operations                           |   |                                | 3,157  |                                    |   | 11.13                               | %      |   | 824 |   |   | 3.94 | % |   | 2,333 |   |   | 283.13 | % |
| Interest                expense, net                            |   |                                | 213    |                                    |   | 0.75                                | %      |   | 161 |   |   | 0.77 | % |   | 52 |   |   | 32.30 | % |
| Investment                income, net                           |   |                                | 7      |                                    |   | 0.02                                | %      |   | 0 |   |   | 0.00 | % |   | 7 |   |   | N/A |   |
| Other,                net                                       |   |                                | (75    | )                                       |   | (0.26                               | )%     |   | (64 | ) |   | 0.31 | % |   | (139 | ) |   | (217.19 | %) |
| Income                before tax                                |   |                                | 2,877  |                                    |   | 10.14                               | %      |   | 727 |   |   | 3.48 | % |   | 2,150 |   |   | 295.74 | % |
| Income                tax                                       |   |                                | 1,035  |                                    |   | 3.65                                | %      |   | 280 |   |   | 1.34 | % |   | 755 |   |   | 269.64 | % |
| Net                income (loss)                                |   |                                | 1,842  |                                    |   | 6.49                                | %      |   | 447 |   |   | 2.14 | % |   | 1,395 |   |   | 312.08 | % |
| Foreign                currency translation gain                |   |                                | 330    |                                    |   | 1.16                                | %      |   | 175 |   |   | 0.84 | % |   | 155 |   |   | 88.57 | % |
| Income                tax related to other comprehensive income |   |                                | 109    |                                    |   | 0.38                                | %      |   | 58 |   |   | 0.28 | % |   | 51 |   |   | 87.93 | % |
| Comprehensive                income                             |   |                                | 2,063  |                                    |   | 7.27                                | %      |   | 564 |   |   | 2.70 | % |   | 1,499 |   |   | 265.78 |   |

| Products                                  |   | AmountUS                $’000 |   | Percentage                of Revenues(%) |   | AmountUS                $’000 |   | Percentage                of Revenues(%) |               | Growth                in AmountUS                $’000 |   | Increase                (Decrease) in Percentage (%) |   |
|-------------------------------------------|--------|-------------------------------------|--------|------------------------------------------|--------|-------------------------------------|--------|------------------------------------------|--------------------|--------------------------------------------------------------|--------|------------------------------------------------------|--------|
| Urea                                      |   |                                | 16,549 |                                     |   | 58.34                               | %      |                                     | 16,269             |                                                         |   | 77.81                                                | %      |   | 280 |   |   | 1.72 | % |
| Carbonate                Hydrogen Ammonia |   |                                | 1,970  |                                     |   | 6.94                                | %      |                                     | 652                |                                                         |   | 3.12                                                 | %      |   | 1,318 |   |   | 202.15 | % |
| Methanol                (CH3OH)           |   |                                | 4,440  |                                     |   | 15.65                               | %      |                                     | 3,864              |                                                         |   | 18.48                                                | %      |   | 576 |   |   | 14.91 | % |
| Liquefied                Ammonia          |   |                                | 1,356  |                                     |   | 4.78                                | %      |                                     | 123                |                                                         |   | 0.59                                                 | %      |   | 1,233 |   |   | 1,002.44 | % |
| DME                (CH3OCH3)              |   |                                | 3,578  |                                     |   | 12.61                               | %      |                                     |               |                                                         |   |                                                 |   |   | 3,578 |   |   |   |   |
| Dry                Gas                    |   |                                | 473    |                                     |   | 1.67                                | %      |                                     |     |                                                         |   |                                                 |   |   | 473 |   |   |   |   |
| Total                                     |   |                                | 28,366 |                                     |   | 100.00                              | %      |                                     | 20,908             |                                                         |   | 100.00                                               | %      |   | 7,458 |   |   | 35.67 | % |

----

| Provinces                         |   | AmountUS                $’000 |   | Percentage                of Revenues(%) |   | AmountUS                $’000 |   | Percentage                of Revenues(%) |   | Growth                in AmountUS                $’000 |   | Increase                (Decrease) in Percentage (%) |   |
|-----------------------------------|--------|-------------------------------------|--------|------------------------------------------|--------|-------------------------------------|--------|------------------------------------------|--------|--------------------------------------------------------------|--------|------------------------------------------------------|--------|
| Hunan                Province     |   |                                | 562    |                                     |   | 1.98                                | %      |                                     | 951    |                                                         |   | 4.55                                                 | %      |   | (389 | ) |   | (40.90 | %) |
| Guangdong                Province |   |                                | 6,521  |                                     |   | 22.99                               | %      |                                     | 5,138  |                                                         |   | 24.57                                                | %      |   | 1,383 |   |   | 26.92 | % |
| Hubei                Province     |   |                                | 2,969  |                                     |   | 10.47                               | %      |                                     | 1,984  |                                                         |   | 9.49                                                 | %      |   | 985 |   |   | 49.65 | % |
| Anhui                Province     |   |                                | 5,451  |                                     |   | 19.22                               | %      |                                     | 2,926  |                                                         |   | 13.99                                                | %      |   | 2,525 |   |   | 86.30 | % |
| Guagnxi                Province   |   |                                | 72     |                                     |   | 0.25                                | %      |                                     | 730    |                                                         |   | 3.49                                                 | %      |   | (658 | ) |   | (90.14 | %) |
| Jiangxi                Province   |   |                                | 895    |                                     |   | 3.16                                | %      |                                     | 631    |                                                         |   | 3.02                                                 | %      |   | 264 |   |   | 41.84 | % |
| Shandong                Province  |   |                                | 714    |                                     |   | 2.52                                | %      |                                     | 11     |                                                         |   | 0.05                                                 | %      |   | 703 |   |   | 6,390.91 | % |
| Henan                Province     |   |                                | 11,101 |                                     |   | 39.13                               | %      |                                     | 8,348  |                                                         |   | 39.93                                                | %      |   | 2,753 |   |   | 32.98 | % |
| Zhejiang                Province  |   |                                | 81     |                                     |   | 0.29                                | %      |                                     | -      |                                                         |   | 0.00                                                 | %      |   | 81 |   |   | N/A |   |
| Inner                Mongolia     |   |                                | 0      |                                     |   | 0.00                                | %      |                                     | 189    |                                                         |   | 0.90                                                 | %      |   | (189 | ) |   | (100.00 | %) |
| Total                             |   |                                | 28,366 |                                     |   | 100.00                              | %      |                                     | 20,908 |                                                         |   | 100.00                                               | %      |   | 7,458 |   |   | 35.67 | % |

*Cost      of Goods Sold*

*Gross      Profit*

|                              |   | 2006                                |   | 2005                                     |   | Comparisons                         |   |
|-----------------------------------|--------|-------------------------------------|--------|------------------------------------------|--------|-------------------------------------|--------|
| Item                              |   | AmountUS                $’000 |   | Percentage                of Revenues(%) |   | AmountUS                $’000 |   | Percentage                of Revenues(%) |   | Growth                in AmountUS                $’000 |   | Increase                (Decrease) in Percentage (%) |   |
| Revenues                          |   |                                | 28,366 |                                     |   |                                |   |   | 20,908 |   |   |   |   |   | 7,458 |   |   | 35.67 | % |
| Cost                of Goods Sold |   |                                | 23,768 |                                     |   | 83.79                               | %      |   | 19,291 |   |   | 92.27 | % |   | 4,477 |   |   | 23.21 | % |
| Gross                Profit       |   |                                | 4,598  |                                     |   | 16.21                               | %      |   | 1,617 |   |   | 7.73 | % |   | 2,981 |   |   | 184.35 | % |

*Operating      Expenses*

----

*Income      from Operations*

*Investment      Income*

*Income      Tax*

*Net      Income*

**LIQUIDITY      AND CAPITAL RESOURCES**

*Cash      Flows*

|                                                                        |   | Nine                months ended December 31 |   |
|-----------------------------------------------------------------------------|--------|----------------------------------------------|--------|
|                                                                        |   | (US$’000)                              |   |
|                                                                        |   | **2006**                                     |   | **2005** |   |
| Net                cash provided by (used by)                               |   |                                         |   |   |   |   |   |
| Operating                activities                                         |   |                                         | 5,974  |   |   | 1,896 |   |
| Investing                activities                                         |   |                                         | (6,440 | ) |   | (4,618 | ) |
| Financing                activities                                         |   |                                         | 1,838  |   |   | 1,076 |   |
| Effect                of exchange rate changes on cash and cash equivalents |   |                                         | 290    |   |   | 162 |   |
| Net                change in cash and cash equivalents                      |   |                                         | 1,662  |   |   | (1,484 | ) |
| Cash                and cash equivalents at beginning of period             |   |                                         | 3,282  |   |   | 2,069 |   |
| Cash                and cash equivalents at end of period                   |   |                                         | 4,944  |   |   | 585 |   |

*Liquidity*

----

*Capital      Resource*

**Item      3. Controls and Procedures.**

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

**B.      Changes in 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.**

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**SIGNATURES**

|                                            |                                                         |                                                   |
|-------------------------------------------------|--------------------------------------------------------------|--------------------------------------------------------|
|                                            | **NEW              ORIENTAL ENERGY & CHEMICAL****CORP.** |
|                                       |                                                    |                                              |
| Date: February              14, 2007  | By:                                                | /s/ Wang              Gui              Quan  |
|                                            | Name: Wang                Gui QuanTitle: President |

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