----

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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 June 30, 2007                    (Unaudited)**                                                                                 | **2**  |
|                                              |   |                                                                                                                                                                                           |   |
|                                              |   | **Condensed                    Consolidated Statements of Income and Comprehensive Income for                    the Three                    Month Ended June 30, 2007 and 2006 (Unaudited)** | **3**  |
|                                              |   |                                                                                                                                                                                           |   |
|                                              |   | **Condensed                    Consolidated Statements of Cash Flows for the Three Months Ended                    June 30,                    2007 and 2006 (Unaudited)**                     | **5**  |
|                                              |   |                                                                                                                                                                                           |   |
|                                              |   | **Notes                    to Condensed Consolidated Financial Statements for the Three                    Months Ended                    June 30, 2007 and 2006 (Unaudited)**                | **7**  |
|                                              |   |                                                                                                                                                                                           |   |
| **Item                    2.**                    |   | **Management's                    Discussion and Analysis or Plan of Operation**                                                                                                               | **19** |
|                                              |   |                                                                                                                                                                                           |   |
| **Item                  3.**                      |   | **Controls                    and Procedures**                                                                                                                                                 | **29** |
|                                              |   |                                                                                                                                                                                           |   |
| **PART                    II. OTHER INFORMATION** |   |
|                                              |   |                                                                                                                                                                                           |   |
| **Item                    1.**                    |   | **Legal                    Proceedings**                                                                                                                                                       | **29** |
|                                              |   |                                                                                                                                                                                           |   |
| **Item                  2.**                      |   | **Unregistered                    Sales of Equity Securities and Use of Proceeds**                                                                                                             | **29** |
|                                              |   |                                                                                                                                                                                           |   |
| **Item                    3.**                    |   | **Defaults                    Upon Senior Securities**                                                                                                                                         | **30** |
|                                              |   |                                                                                                                                                                                           |   |
| **Item                    4.**                    |   | **Submission                    of Matters to a Vote of Security Holders**                                                                                                                     | **30** |
|                                              |   |                                                                                                                                                                                           |   |
| **Item                  5.**                      |   | **Other                    Information**                                                                                                                                                       | **30** |
|                                              |   |                                                                                                                                                                                           |   |
| **Item                  6.**                      |   | **Exhibits**                                                                                                                                                                                   | **30** |

----

**NEW          ORIENTAL ENERGY & CHEMICAL CORP.**

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

**CONDENSED          CONSOLIDATED BALANCE SHEET**

**(UNAUDITED)**

|                                                                                                                                                                                                                |   | **June                30,** |       | **March                31,** |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|------------|------------------------------|--------|
|                                                                                                                                                                                                                |   | **2007**                    |       | **2007**                     |   |
|                                                                                                                                                                                                                |   | **(Unaudited)**             |       |                         |   |
| **ASSETS**                                                                                                                                                                                                          |   |                        |       |                         |   |
| **CURRENT                ASSETS**                                                                                                                                                                                   |   |                        |       |                         |   |
| Cash                and cash equivalents                                                                                                                                                                            |   | $                           | 3,281,435  |                         | $      | 2,616,149 |   |
| Restricted                cash                                                                                                                                                                                      |   |                        | 6,119,099  |                         |   | 5,430,426 |   |
| Notes                receivable                                                                                                                                                                                     |   |                        | 1,339,374  |                         |   | 1,395,858 |   |
| Inventories                                                                                                                                                                                                         |   |                        | 2,418,344  |                         |   | 3,786,130 |   |
| Prepayments                for goods                                                                                                                                                                                |   |                        | 981,775    |                         |   | 383,639 |   |
| Taxes                receivable                                                                                                                                                                                     |   |                        | -          |                         |   | 155,863 |   |
|  Due                from employees                                                                                                                                                                             |   |                        | 72,800     |                         |   | 113,275 |   |
| Other                assets                                                                                                                                                                                         |   |                        | 287,176    |                         |   | 204,508 |   |
| Current                assets of discontinued operation                                                                                                                                                             |   |                        | 55,356     |                         |   | 47,084 |   |
|  Total                current assets                                                                                                                                                                           |   |                        | 14,555,359 |                         |   | 14,132,932 |   |
|                                                                                                                                                                                                                |   |                        |       |                         |   |   |   |
| Plant                and equipment, net                                                                                                                                                                             |   |                        | 13,436,640 |                         |   | 11,571,652 |   |
| Land                use rights, net                                                                                                                                                                                 |   |                        | 1,521,297  |                         |   | 1,510,695 |   |
| Construction                in progress                                                                                                                                                                             |   |                        | 4,374,297  |                         |   | 5,208,277 |   |
| Deposits                                                                                                                                                                                                            |   |                        | 1,046,049  |                         |   | 267,757 |   |
| Deferred                taxes                                                                                                                                                                                       |   |                        | 287,734    |                         |   | 646,331 |   |
| Other                long-term assets                                                                                                                                                                               |   |                        | 40,194     |                         |   | 39,745 |   |
| Other                assets of discontinued operation                                                                                                                                                               |   |                        | 125,398    |                         |   | 125,875 |   |
|                                                                                                                                                                                                                |   |                        |       |                         |   |   |   |
| **TOTAL                ASSETS**                                                                                                                                                                                     |   | $                           | 35,386,968 |                         | $      | 33,503,264 |   |
|                                                                                                                                                                                                                |   |                        |       |                         |   |   |   |
| **LIABILITIES                AND SHAREHOLDERS’ EQUITY**                                                                                                                                                       |   |                        |       |                         |   |   |   |
|                                                                                                                                                                                                                |   |                        |       |                         |   |   |   |
| **CURRENT                LIABILITIES**                                                                                                                                                                              |   |                        |       |                         |   |   |   |
| Accounts                payable                                                                                                                                                                                     |   | $                           | 2,935,905  |                         | $      | 2,259,834 |   |
| Other                payables and accrued liabilities                                                                                                                                                               |   |                        | 509,423    |                         |   | 409,025 |   |
| Short                term debt                                                                                                                                                                                      |   |                        | 11,030,136 |                         |   | 7,356,933 |   |
|  Notes                payable - current portion                                                                                                                                                                |   |                        | 581,708    |                         |   | 572,781 |   |
| Customer                deposits                                                                                                                                                                                    |   |                        | 1,297,768  |                         |   | 5,385,425 |   |
| Payable                to contractors                                                                                                                                                                               |   |                        | 86,606     |                         |   | 96,861 |   |
| Due                to related parties                                                                                                                                                                               |   |                        | 4,259,603  |                         |   | 4,041,583 |   |
| Taxes                payable                                                                                                                                                                                        |   |                        | 476,093    |                         |   | 25,063 |   |
| Current                liabilities of discontinued operation                                                                                                                                                        |   |                        | 12,759     |                         |   | 12,711 |   |
|  Total                current liabilities                                                                                                                                                                      |   |                        | 21,190,001 |                         |   | 20,160,216 |   |
|                                                                                                                                                                                                                |   |                        |       |                         |   |   |   |
| **LONG-TERM                LIABILITIES**                                                                                                                                                                            |   |                        |       |                         |   |   |   |
| Deferred                taxes                                                                                                                                                                                       |   |                        | 1,217,916  |                         |   | 1,619,110 |   |
| Due                to employees                                                                                                                                                                                     |   |                        | 119,171    |                         |   | 115,816 |   |
| Total                long-term liabilities                                                                                                                                                                          |   |                        | 1,337,087  |                         |   | 1,734,926 |   |
|                                                                                                                                                                                                                |   |                        |       |                         |   |   |   |
| **TOTAL                LIABILITIES**                                                                                                                                                                                |   |                        | 22,527,088 |                         |   | 21,895,142 |   |
|                                                                                                                                                                                                                |   |                        |       |                         |   |   |   |
| **SHAREHOLDERS’                EQUITY**                                                                                                                                                                       |   |                        |       |                         |   |   |   |
| Common                stock, par value $0.001 per share; 30,000,000 shares authorized,                12,640,000 shares issued and outstanding as of June 30, 2007 and                March 31,                2007 |   |                        | 12,640     |                         |   | 12,640 |   |
| Additional                paid-in capital                                                                                                                                                                           |   |                        | 4,573,205  |                         |   | 4,573,205 |   |
| Retained                earnings (restricted portion was $440,182 as of June 30, 2007 and                March                31, 2007)                                                                             |   |                        | 7,586,456  |                         |   | 6,563,558 |   |
| Accumulated                other comprehensive income                                                                                                                                                               |   |                        | 687,579    |                         |   | 458,719 |   |
|                                                                                                                                                                                                                |   |                        |       |                         |   |   |   |
| Total                Shareholders’ Equity                                                                                                                                                                     |   |                        | 12,859,880 |                         |   | 11,608,122 |   |
|                                                                                                                                                                                                                |   |                        |       |                         |   |   |   |
| **TOTAL                LIABILITIES AND SHAREHOLDERS’ EQUITY**                                                                                                                                                 |   | $                           | 35,386,968 |                         | $      | 33,503,264 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

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

**COMPREHNENSIVE        INCOME **

**(UNAUDITED)**

|                                                                                                                  |   | **Three                Months Ended** |        |
|-----------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|-------------|
|                                                                                                                  |   | **June                30,**           |        |
|                                                                                                                  |   | **2007**                              |        | **2006** |   |
|                                                                                                                  |   |                                  |        |   |   |
| **REVENUES**                                                                                                          |   | $                                     | 14,727,290  |   |   | 9,208,377 |   |
|                                                                                                                  |   |                                  |        |   |   |   |   |
| **COST                OF GOODS SOLD**                                                                                 |   |                                  | (12,118,023 | ) |   | (7,542,175 | ) |
|                                                                                                                  |   |                                  |        |   |   |  |   |
| **GROSS                PROFIT**                                                                                       |   |                                  | 2,609,267   |   |   | 1,666,202 |   |
|                                                                                                                  |   |                                  |        |   |   |   |   |
| Research                and development                                                                               |   |                                  | 51,662      |   |   | 198 |   |
|                                                                                                                  |   |                                  |        |   |   |   |   |
| Selling                and distribution                                                                               |   |                                  | 435,049     |   |   | 236,497 |   |
|                                                                                                                  |   |                                  |        |   |   |  |   |
| General                and administrative                                                                             |   |                                  | 428,226     |   |   | 218,118 |   |
|                                                                                                                  |   |                                  |        |   |   |  |   |
| **INCOME                FROM OPERATIONS**                                                                             |   |                                  | 1,694,330   |   |   | 1,211,389 |   |
|                                                                                                                  |   |                                  |        |   |   |   |   |
| **OTHER                INCOME (EXPENSES)**                                                                            |   |                                  |        |   |   |   |   |
|                                                                                                                  |   |                                  |        |   |   |   |   |
| Interest                expense, net                                                                                  |   |                                  | (99,834     | ) |   | (67,402 | ) |
|                                                                                                                  |   |                                  |        |   |   |  |   |
| Other                income (expenses), net                                                                           |   |                                  | 10,456      |   |   | (19,681 | ) |
|                                                                                                                  |   |                                  |        |   |   |  |   |
| **INCOME                FROM OPERATIONS BEFORE INCOME TAXES**                                                         |   |                                  | 1,604,952   |   |   | 1,124,306 |   |
|                                                                                                                  |   |                                  |        |   |   |   |   |
| **INCOME                TAXES**                                                                                       |   |                                  | 583,815     |   |   | 380,573 |   |
|                                                                                                                  |   |                                  |        |   |   |  |   |
| **INCOME                FROM CONTINUING OPERATIONS**                                                                  |   |                                  | 1,021,137   |   |   | 743,733 |   |
|                                                                                                                  |   |                                  |        |   |   |   |   |
| **DISCONTINUED                OPERATION**                                                                             |   |                                  |        |   |   |   |   |
|                                                                                                                  |   |                                  |        |   |   |   |   |
| Income                (loss) from discontinued operation (net of income tax $396 and $0,                respectively) |   |                                  | 1,761       |   |   | (5,080 | ) |
|                                                                                                                  |   |                                  |        |   |   |   |   |
| **NET                INCOME**                                                                                         |   |                                  | 1,022,898   |   |   | 738,653 |   |
|                                                                                                                  |   |                                  |        |   |   |   |   |
| **OTHER                COMPREHENSIVE INCOME**                                                                         |   |                                  |        |   |   |   |   |
|                                                                                                                  |   |                                  |        |   |   |   |   |
| Foreign                currency translation gain                                                                      |   |                                  | 341,582     |   |   | 23,407 |   |
| Unrealized                gain on marketable securities                                                               |   |                                  | -           |   |   | 2,482 |   |
| **OTHER                COMPREHENSIVE INCOME BEFORE TAX**                                                              |   |                                  | 341,582     |   |   | 25,889 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

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

**COMPREHNENSIVE        INCOME **

**(UNAUDITED)**

|                                                                                                                                       |   | **Three                Months Ended** |       |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|------------|
|                                                                                                                                       |   | **June                30,**           |       |
|                                                                                                                                       |   | **2007**                              |       | **2006** |   |
|                                                                                                                                       |   |                                  |       |   |   |
| **INCOME                TAX EXPENSE RELATED TO OTHER COMPREHENSIVE INCOME**                                                                |   |                                  | 112,722    |   |   | 8,543 |   |
|                                                                                                                                       |   |                                  |       |   |   |   |   |
| **OTHER                COMPREHENSIVE INCOME, NET**                                                                                         |   |                                  | 228,860    |   |   | 17,346 |   |
|                                                                                                                                       |   |                                  |       |   |   |  |   |
| **COMPREHENSIVE                INCOME**                                                                                                    |   | $                                     | 1,251,758  |   | $ | 755,999 |   |
|                                                                                                                                       |   |                                  |       |   |   |   |   |
| **WEIGHTED                AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED**                                                                  |   |                                  | 12,640,000 |   |   | 7,500,000 |   |
|                                                                                                                                       |   |                                  |       |   |   |   |   |
| **INCOME                PER SHARE FROM CONTINUING OPERATIONS, BASIC AND                DILUTED**                                           |   | $                                     | 0.08       |   | $ | 0.10 |   |
|                                                                                                                                       |   |                                  |       |   |   |   |   |
| **INCOME                (LOSS) PER SHARE FROM INCOME (LOSS) FROM DISCONTINUED OPERATION,                BASIC AND                DILUTED** |   | $                                     | 0.00       |   | $ | (0.00 | ) |
|                                                                                                                                       |   |                                  |       |   |   |   |   |
| **NET                INCOME PER SHARE, BASIC AND DILUTED**                                                                                 |   | $                                     | 0.08       |   |   | 0.10 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

**CONDENSED        CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

|                                                                                                            |   | **Three                Months Ended** |       |
|-----------------------------------------------------------------------------------------------------------------|--------|---------------------------------------|------------|
|                                                                                                            |   | **June                30,**           |       |
|                                                                                                            |   | **2007**                              |       | **2006** |   |
|                                                                                                            |   |                                  |       |   |   |
| **CASH                FLOWS FROM OPERATING ACTIVITIES:**                                                        |   |                                  |       |   |   |
| Net                income                                                                                       |   | $                                     | 1,022,898  |   | $ | 738,653 |   |
| Adjustments                to reconcile net income to net cash provided by operating                activities: |   |                                  |       |   |   |  |   |
| Depreciation                and amortization                                                                    |   |                                  | 455,958    |   |   | 357,550 |   |
| Deferred                taxes                                                                                   |   |                                  | (155,320   | ) |   | (26,777 | ) |
|                                                                                                            |   |                                  |       |   |   |   |   |
| **Changes                in operating assets and liabilities:**                                                 |   |                                  |       |   |   |   |   |
|                                                                                                            |   |                                  |       |   |   |   |   |
| **(Increase)                Decrease In:**                                                                      |   |                                  |       |   |   |   |   |
| Inventories                                                                                                     |   |                                  | 1,367,786  |   |   | (3,410,767 | ) |
| Prepayment                for goods                                                                             |   |                                  | (598,137   | ) |   | (981,894 | ) |
| Other                assets                                                                                     |   |                                  | (82,667    | ) |   | (12,854 | ) |
| Discontinued                operation                                                                           |   |                                  | (8,272     | ) |   | (8,632 | ) |
|                                                                                                            |   |                                  |       |   |   |   |   |
| **Increase                (Decrease) In:**                                                                      |   |                                  |       |   |   |   |   |
| Accounts                payable                                                                                 |   |                                  | 676,071    |   |   | 3,222,103 |   |
| Other                payables and accrued liabilities                                                           |   |                                  | 100,398    |   |   | 79,365 |   |
| Customer                deposits                                                                                |   |                                  | (4,087,656 | ) |   | (158,840 | ) |
| Taxes                payable                                                                                    |   |                                  | 606,892    |   |   | 348,030 |   |
| Discontinued                operation                                                                           |   |                                  | 49         |   |   | 34,385 |   |
| Net                cash provided by (used in) operating activities                                              |   |                                  | (702,000   | ) |   | 180,322 |   |
|                                                                                                            |   |                                  |       |   |   |   |   |
| **CASH                FLOWS FROM INVESTING ACTIVITIES:**                                                        |   |                                  |       |   |   |   |   |
| Restricted                cash                                                                                  |   |                                  | (688,673   | ) |   | (318,347 | ) |
| Purchases                of plant and equipment                                                                 |   |                                  | (30,311    | ) |   | (312,407 | ) |
| Deposit                for land use rights                                                                      |   |                                  | (805,541   | ) |   | (5,128 | ) |
| Repayment                (issuance) of notes receivable                                                         |   |                                  | 56,485     |   |   | (64,029 | ) |
| Purchases                of construction in progress                                                            |   |                                  | (1,164,383 | ) |   | (148,718 | ) |
| Due                from employees                                                                               |   |                                  | 40,475     |   |   | (132 | ) |
| Net                cash used in investing activities                                                            |   |                                  | (2,591,948 | ) |   | (848,761 | ) |
|                                                                                                            |   |                                  |       |   |   |  |   |
| **CASH                FLOWS FROM FINANCING ACTIVITIES**                                                         |   |                                  |       |   |   |   |   |
| Proceeds                from short-term debt                                                                    |   |                                  | 8,285,733  |   |   | 1,562,178 |   |
| Repayments                of short-term debt                                                                    |   |                                  | (4,727,201 | ) |   | (2,151,183 | ) |
| Advances                from related parties                                                                    |   |                                  | 216,258    |   |   | - |   |
| Due                to employees                                                                                 |   |                                  | 1,295      |   |   | 3,883 |   |
| Discontinued                operation                                                                           |   |                                  | -          |   |   | 65,561 |   |
| Net                cash provided by (used in) financing activities                                              |   |                                  | 3,776,085  |   |   | (519,561 | ) |
|                                                                                                            |   |                                  |       |   |   |  |   |
| **NET                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS**                                         |   |                                  | 482,137    |   |   | (1,188,000 | ) |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

**CONDENSED        CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(UNAUDITED)**

|                                                            |   | **Three                Months Ended** |      |
|-----------------------------------------------------------------|--------|---------------------------------------|-----------|
|                                                            |   | **June                30,**           |      |
|                                                            |   | **2007**                              |      | **2006** |   |
|                                                            |   |                                  |      |   |   |
| Effect                of exchange rate changes on cash          |   |                                  | 183,149   |   |   | 23,374 |   |
| Cash                and cash equivalents at beginning of period |   |                                  | 2,616,149 |   |   | 3,281,761 |   |
|                                                            |   |                                  |      |   |   |   |   |
| **CASH                AND CASH EQUIVALENTS AT END OF PERIOD**   |   | $                                     | 3,281,435 |   | $ | 2,117,135 |   |
|                                                            |   |                                  |      |   |   |   |   |
| **SUPPLEMENTARY                CASH FLOW INFORMATION**          |   |                                  |      |   |   |   |   |
| Income                taxes paid                                |   | $                                     | -         |   | $ | - |   |
| Interest                paid                                    |   | $                                     | 76,943    |   | $ | - |   |

**SUPPLEMENTAL      NON-CASH DISCLOSURES:**

----

**NEW          ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

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

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

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

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

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

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

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

|   | (iii) | Henan                Luoshan Jinding LPG Co., Ltd., (“Luoshan”) (100% subsidiary of Jinding,                subsequently sold. See Note 11 and Note                12) |
|--------|-------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                               |   | **Sales**                                      |   | **Customer                Deposits**                        |   |
|------------------------------------|--------|------------------------------------------------|--------|-------------------------------------------------------------|--------|
|                                    |   | **Three                Months Ended June 30,** |   | **As                of****June                30,****2007** |   | **As                of****March                30,****2007** |   |
| **Major                Customers** |   | **2007**                                       |   | **2006**                                                    |   |
| Company                A           |   |                                           | 39.33  | %                                                           |   | 34.98 | % |   | 72.31 | % |   | 62.06 | % |
| Company                B           |   |                                           | 10.65  | %                                                           |   | - |   |   | 0.02 | % |   | 3.32 | % |
| Company                C           |   |                                           | 10.21  | %                                                           |   | 6.03 | % |   | 8.41 | % |   | 7.52 | % |
| Company                D           |   |                                           | -      |                                                        |   | 6.23 | % |   | - |   |   | 0.02 | % |

|                               |   | **Purchases**                                  |   | **Accounts                Payable/Deposit ***  |   |
|------------------------------------|--------|------------------------------------------------|--------|------------------------------------------------|--------|
|                                    |   | **Three                Months Ended June 30,** |   | **Three                Months Ended June 30,** |   |
| **Major                Suppliers** |   | **2007**                                       |   | **2006**                                       |   | **2007** |   | **2006** |   |
| Company                E           |   |                                           | 20.39  | %                                              |   | 14.29 | % |   | 13.72 | % |   | 6.12 | % |
| Company                F           |   |                                           | 17.82  | %                                              |   | 3.73 | % |   | 1.46 | % |   | 4.80 | % |
| Company                G           |   |                                           | 15.32  | %                                              |   | 5.98 | % |   | 7.16 | % |   | 7.97 | % |

----

**NEW          ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

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

----

**NEW          ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

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

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

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

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

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

|                                                 |   | June                30, 2007 |   | March                31, 2007 |   | June                30, 2006 |   |
|------------------------------------------------------|--------|------------------------------|--------|-------------------------------|--------|------------------------------|--------|
| Year                end RMB: US$ exchange rate       |   |                         | 7.6155 |                          |   | 7.7342                       |   |   | 7.9956 |   |
| Average                yearly RMB: US$ exchange rate |   |                         | 7.6749 |                          |   | 7.8756                       |   |   | 8.0063 |   |

----

**NEW          ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

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

**Fuel      Segment:**

|                        |   |   |      | For                The Three Months Ended June                30, 2007 |   |
|-----------------------------|--------|--------|-----------|------------------------------------------------------------------------|--------|
|                        |   | DME    |      | Methanol                                                               |   | Segment                Total |   |
| Revenues                    |   |   | 4,424,938 |                                                                   |   | 58,210 |   |   | 4,483,148 |   |
| COGS                        |   |   | 3,803,204 |                                                                   |   | 55,268 |   |   | 3,858,472 |   |
| Gross                Profit |   |   | 621,734   |                                                                   |   | 2,942 |   |   | 624,676 |   |

|                        |   |   |      | For                The Three Months Ended June 30, 2006 |   |
|-----------------------------|--------|--------|-----------|---------------------------------------------------------|--------|
|                        |   | DME    |      | Methanol                                                |   | Segment                Total |   |
| Revenues                    |   |   | 1,495,847 |                                                    |   | 1,253,725 |   |   | 2,749,572 |   |
| COGS                        |   |   | 1,097,157 |                                                    |   | 1,102,438 |   |   | 2,199,595 |   |
| Gross                Profit |   |   | 398,690   |                                                    |   | 151,287 |   |   | 549,977 |   |

**Fertilizer      Segment:**

|                        |   |   |      |                                |   |  For                The Three Months Ended June                30, 2007 |   |
|-----------------------------|--------|--------|-----------|-------------------------------------|--------|------------------------------------------------------------------------------|--------|
|                        |   | Urea   |      | Ammonium                Bicarbonate |   | Liquefied                Ammonia                                             |   | Ammonia                Water |   | Segment                Total |   |
| Revenues                    |   |   | 9,217,132 |                                |   | 798,675                                                                      |   |   | 174,821 |   |   | 53,514 |   |   | 10,244,142 |   |
| COGS                        |   |   | 7,263,797 |                                |   | 783,889                                                                      |   |   | 165,971 |   |   | 45,894 |   |   | 8,259,551 |   |
| Gross                Profit |   |   | 1,953,335 |                                |   | 14,786                                                                       |   |   | 8,850 |   |   | 7,620 |   |   | 1,984,591 |   |

|                                        |   |
|----------------------------------------|--------|
|                                   |   |   |   |   |   |  For                The Three Months Ended June                30, 2006 |   |
|                                   |   | Urea |   | Ammonium                Bicarbonate |   | Liquefied                Ammonia |   | Ammonia                Water |   | Segment                Total |   |
| Revenues                               |   |   | 5,619,385 |   |   | 792,690 |   |   | 22,597 |   |   | 24,133 |   |   | 6,458,805 |   |
|                    COGS |   |   | 4,696,330 |   |   | 604,816 |   |   | 17,488 |   |   | 23,946 |   |   | 5,342,580 |   |
| Gross                Profit            |   |   | 923,055 |   |   | 187,874 |   |   | 5,109 |   |   | 187 |   |   | 1,116,225 |   |

----

**NEW          ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

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

**4.**
**INVENTORIES**

|                             |   | **June                30, 2007** |      | **March                31, 2007** |   |
|----------------------------------|--------|----------------------------------|-----------|-----------------------------------|--------|
|                             |   | **Unaudited**                    |      |                              |   |
| Finished                goods    |   | $                                | 772,452   |                              | $      | 2,626,187 |   |
| Raw                materials     |   |                             | 1,320,638 |                              |   | 561,995 |   |
| Packing                materials |   |                             | 325,254   |                              |   | 597,948 |   |
| Total                inventories |   | $                                | 2,418,344 |                              | $      | 3,786,130 |   |

----

**NEW          ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

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

|                                                                             |   | **June                30, 2007** |      | **March                31, 2007** |   |
|----------------------------------------------------------------------------------|--------|----------------------------------|-----------|-----------------------------------|--------|
|                                                                             |   | **Unaudited**                    |      |                              |   |
| Xinyang                Hong Chang Pipeline Gas Co,. Ltd.                         |   | $                                | 3,808,023 |                              | $      | 3,749,580 |   |
|    Long                Triumph                Investments Limited |   |                             | 320,025   |                              |   | 162,209 |   |
|     Chen                Siqiang                              |   |                             | 131,312   |                              |   | 129,296 |   |
|     Due                to                employees           |   |                             | 243       |                              |   | 498 |   |
|                                                                             |   | $                                | 4,259,603 |                              | $      | 4,041,583 |   |

|  | (a) | Xinyang                Hong Chang Pipeline Gas Co., Ltd. is a company controlled by the                Chairman                of the board and Chief executive officer of the Company. The amount                represents advances from Xinyang Hong Chang Pipeline Gas Co., Ltd..                The                amount is unsecured. Of the $3,808,023, $2,626,223 has an interest                rate of                7.74% per annum and is due on October 15, 2007. The balance of $1,181,800                is interest free and has no fixed repayment                terms. |
|--|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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

|                                                                                                             |   | **June                  30, 2007** |       | **March                  31, 2007** |   |
|------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|------------|-------------------------------------|--------|
|                                 At cost:   |   | **Unaudited**                      |       |                                |   |
|     Buildings                                                                                |   | $                                  | 1,399,516  |                                | $      | 1,362,587 |   |
|     Machinery                                                                                |   |                               | 16,033,010 |                                |   | 13,737,425 |   |
|                          Motor                  vehicles                      |   |                               | 333,698    |                                |   | 295,231 |   |
|     Office                  equipment                                                        |   |                               | 111,613    |                                |   | 109,900 |   |
|                                                                                                             |   |                               | 17,877,837 |                                |   | 15,505,143 |   |
|         Less:                  Accumulated                  depreciation |   |                               |       |                                |   |   |   |
|      Buildings                                                                          |   |                               | 236,020    |                                |   | 215,272 |   |
|             Machinery                                |   |                               | 4,048,787  |                                |   | 3,584,558 |   |
|    Motor                  vehicles                                                                |   |                               | 113,593    |                                |   | 97,162 |   |
|                          Office                  equipment                    |   |                               | 42,797     |                                |   | 36,499 |   |
|                                                                                                             |   |                               | 4,441,197  |                                |   | 3,933,491 |   |
|         Plant                  and equipment,                  net       |   | $                                  | 13,436,640 |                                | $      | 11,571,652 |   |

**6.      **
**PLANT      AND EQUIPMENT (CONTINUED)**

----

**NEW          ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

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

|                                                                                                         |   | **June                30, 2007** |      | **March                31, 2007** |   |
|--------------------------------------------------------------------------------------------------------------|--------|----------------------------------|-----------|-----------------------------------|--------|
|                                                                                                         |   | **Unaudited**                    |      |                              |   |
|                        Cost                                               |   | $                                | 1,612,630 |                              | $      | 1,587,880 |   |
|         Less:                Accumulated                amortization |   |                             | 91,333    |                              |   | 77,185 |   |
|                        Land                use rights, net                |   | $                                | 1,521,297 |                              | $      | 1,510,695 |   |

**8.      CONSTRUCTION IN PROGRESS**

|                                                            |   | **June                30, 2007** |      | **March                31, 2007** |   |
|-----------------------------------------------------------------|--------|----------------------------------|-----------|-----------------------------------|--------|
|                                                            |   | **Unaudited**                    |      |                              |   |
|         Machinery       |   | $                                | 1,808,468 |                              | $      | 1,823,426 |   |
|                        Plant |   |                             | 2,565,829 |                              |   | 3,383,946 |   |
|                        Other |   |                             | -         |                              |   | 905 |   |
|                                                            |   | $                                | 4,374,297 |                              | $      | 5,208,277 |   |

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

|                                                                                                                                                                                                                                                 |   | **June                30, 2007** |      | **March                31, 2007** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------|-----------|-----------------------------------|--------|
|                                                                                                                                                                                                                                                 |   | **Unaudited**                    |      |                              |   |
| Rural                Credit Cooperatives, Due July 24, 2007, interest rate at 11.16% per                annum,                guaranteed by Xinyang Hong Chang Pipeline Gas Co.Ltd. (Subsequently                repaid                in July 2007) |   | $                                | 512,113   |                              | $      | 504,254 |   |
|                                                                                                                                                                                                                                                 |   |                             |      |                              |   |   |   |
| Bank                of China Luoshan Branch, Due April 12, 2008, interest rate at 6.36%                per                annum, collateralized by a land use right.                                                                                 |   |                             | 1,313,111 |                              |   | - |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

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

|                                                                                                                                                                                                                                             |   | **June                  30, 2007** |      | **March                  31, 2007** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------|-----------|-------------------------------------|--------|
|                                                                                                                                                                                                                                             |   | **Unaudited**                      |      |                                |   |
| Xinyang                  Chengxing Credit Cooperatives, Due April 16, 2008, interest rate                  at 9.6%                  per annum, collateralized by finished goods inventory.                                                       |   |                               | 2,626,223 |                                |   | - |   |
|                                                                                                                                                                                                                                             |   |                               |      |                                |   |   |   |
| Bank                  of China Luoshan Branch, Due March 31, 2007, interest rate at 5.58%                  per                  annum, collateralized by a land use right. (Subsequently repaid                  in April                  2007) |   |                               | -         |                                |   | 1,292,958 |   |
| Notes                  payable to unrelated companies:                                                                                                                                                                                           |   |                               |      |                                |   |   |   |
| Due                  July 5, 2007 (subsequently repaid on its due date)                                                                                                                                                                          |   |                               | 131,311   |                                |   | 129,295 |   |
| Due                  July 23, 2007 (subsequently repaid on its due date)                                                                                                                                                                         |   |                               | 656,556   |                                |   | 646,478 |   |
| Due                  August 5, 2007 (subsequently repaid on its due date)                                                                                                                                                                        |   |                               | 393,933   |                                |   | 387,888 |   |
| Due                  August 13, 2007 (subsequently repaid on its due date)                                                                                                                                                                       |   |                               | 393,933   |                                |   | 387,888 |   |
| Due                  September 13, 2007                                                                                                                                                                                                          |   |                               | 393,933   |                                |   | 387,888 |   |
| Due                  September 26, 2007                                                                                                                                                                                                          |   |                               | 262,622   |                                |   | 258,591 |   |
| Due                  October 12, 2007                                                                                                                                                                                                            |   |                               | 196,967   |                                |   | - |   |
| Due                  October 17, 2007                                                                                                                                                                                                            |   |                               | 393,933   |                                |   | - |   |
| Due                  October 18, 2007                                                                                                                                                                                                            |   |                               | 131,311   |                                |   | - |   |
| Due                  October 23, 2007                                                                                                                                                                                                            |   |                               | 65,656    |                                |   | - |   |
| Due                  October 25, 2007                                                                                                                                                                                                            |   |                               | 525,245   |                                |   | - |   |
| Due                  October 28, 2007                                                                                                                                                                                                            |   |                               | 196,967   |                                |   | - |   |
| Due                  November 15, 2007                                                                                                                                                                                                           |   |                               | 525,245   |                                |   | - |   |
| Due                  November 24, 2007                                                                                                                                                                                                           |   |                               | 105,049   |                                |   | - |   |
| Due                  November 30, 2007                                                                                                                                                                                                           |   |                               | 407,065   |                                |   | - |   |
| Due                  December 6, 2007                                                                                                                                                                                                            |   |                               | 262,622   |                                |   | - |   |
| Due                  December 18, 2007                                                                                                                                                                                                           |   |                               | 525,245   |                                |   | - |   |
| Due                  December 21, 2007                                                                                                                                                                                                           |   |                               | 91,918    |                                |   | - |   |
| Due                  December 23, 2007                                                                                                                                                                                                           |   |                               | 919,178   |                                |   | - |   |
| Due                  April 11, 2007 (subsequently repaid on its due date)                                                                                                                                                                        |   |                               | -         |                                |   | 374,958 |   |
| Due                  April 24, 2007 (subsequently repaid on its due date)                                                                                                                                                                        |   |                               | -         |                                |   | 336,169 |   |
| Due                  May 1, 2007 (subsequently repaid on its due date)                                                                                                                                                                           |   |                               | -         |                                |   | 258,592 |   |
| Due                  May 7, 2007 (subsequently repaid on its due date)                                                                                                                                                                           |   |                               | -         |                                |   | 387,888 |   |

----

**NEW        ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR        THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

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

|                                                                     |   | **June                  30, 2007** |       | **March                  31, 2007** |   |
|--------------------------------------------------------------------------|--------|------------------------------------|------------|-------------------------------------|--------|
|                                                                     |   | **Unaudited**                      |       |                                |   |
| Due                  May 17, 2007 (subsequently repaid on its due date)  |   |                               | -          |                                |   | 193,943 |   |
| Due                  May 20 2007 (subsequently repaid on its due date)   |   |                               | -          |                                |   | 387,888 |   |
| Due                  May 23, 2007 (subsequently repaid on its due date)  |   |                               | -          |                                |   | 387,888 |   |
| Due                  June 6, 2007 (subsequently repaid on its due date)  |   |                               | -          |                                |   | 387,888 |   |
| Due                  June 19, 2007 (subsequently repaid on its due date) |   |                               | -          |                                |   | 387,888 |   |
| Due                  June 27, 2007 (subsequently repaid on its due date) |   |                               | -          |                                |   | 258,591 |   |
|                                                                     |   | $                                  | 11,030,136 |                                | $      | 7,356,933 |   |

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

**11.**
**INCOME      TAXES**

----

**NEW          ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

**11.**
**INCOME      TAXES (CONTINUED)**

|                                                                  |   | **Three                  Months Ended June 30,** |    |
|-----------------------------------------------------------------------|--------|--------------------------------------------------|---------|
|                                                                  |   | **2007**                                         |    |  **2006** |   |
|         Current:              |   | **Unaudited**                                    |    | **Unaudited** |   |
| **         **CIT         |   | $                                                | 604,686 |   | $ | 409,442 |   |
|                          Deferred: |   |                                             |    |   |   |   |   |
|          CIT             |   |                                             | (20,871 | ) |   | (28,869 | ) |
|                                                                  |   |                                             |    |   |   |   |   |
|     Income                  tax expense           |   | $                                                | 583,815 |   | $ | 380,573 |   |

|                                                                                                                             |   | **Three                  Months Ended June 30,** |    |
|----------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|---------|
|                                                                                                                             |   | **2007**                                         |    |  **2006** |   |
|                                                                                                                             |   | **Unaudited**                                    |    | **Unaudited** |   |
|         Computed“expected”                  expense                          |   | $                                                | 529,634 |   | $ | 371,021 |   |
|                               Permanent                  differences |   |                                             | 54,181  |   |   | 9,552 |   |
|                                                                                                                             |   |                                             |    |   |   |   |   |
|         Income                  tax                  expense                             |   | $                                                | 583,815 |   | $ | 380,573 |   |

|                                                                                                  |   | **June                30, 2007** |      | **March                31, 2007** |   |
|-------------------------------------------------------------------------------------------------------|--------|----------------------------------|-----------|-----------------------------------|--------|
| **       Deferred                tax                assets:**      |   | **Unaudited**                    |      |                              |   |
|                        Non-current portion:                             |   |                             |      |                              |   |
|                        Cost of sales                                    |   | $                                | 255,319   |                              | $      | 603,158 |   |
|                        Payroll                                     |   |                             | 7,207     |                              |   | 7,096 |   |
|     Other                expense                                                  |   |                             | 25,208    |                              |   | 36,077 |   |
|                        Total deferred tax assets                   |   |                             | 287,734   |                              |   | 646,331 |   |
|                                                                                                  |   |                             |      |                              |   |   |   |
| **       Deferred                tax                liabilities:** |   |                             |      |                              |   |   |   |
|                        Non-current portion:                        |   |                             |      |                              |   |   |   |
|                        Depreciation                                |   |                             | 501,967   |                              |   | 495,756 |   |
|         Amortization                                          |   |                             | 29,843    |                              |   | 30,910 |   |
|        Welfare                                                     |   |                             | 38,553    |                              |   | 54,758 |   |
|                        Cost of sales                               |   |                             | 435,136   |                              |   | 776,372 |   |
|                        Government grant                            |   |                             | 43,333    |                              |   | 42,668 |   |
|                        Other income                                |   |                             | 169,084   |                              |   | 218,646 |   |
|                        Total deferred tax liabilities              |   |                             | 1,217,916 |                              |   | 1,619,110 |   |
|                                                                                                  |   |                             |      |                              |   |   |   |
|                        Net deferred tax liabilities                |   | $                                | (930,182  | )                                 | $      | (972,779 | ) |

----

**NEW          ORIENTAL ENERGY & CHEMICAL CORP. **

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

**NOTES          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**FOR          THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006**

**(UNAUDITED)**

**12.** **DISCONTINUED      OPERATION**

----

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

**Forward      Looking Statements **

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

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

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

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

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

----

|   | Ÿ | 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; |
|--------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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

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

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

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

**Critical      Accounting Policies and Estimates**

*Use      of estimates *

*Accounts      receivable *

*Inventories      *

*Property      and equipment*

----

*Revenue      recognition *

*Income      taxes *

*Foreign      currency transactions and comprehensive income (loss)*

**Recent      Accounting Pronouncement**

----

**Overview**

**Result      of Operations - Three Months Ended June 30, 2007 as compared to the Three Months      Ended June 30, 2006**

**Three      Months Ended June 30,**

|                                                                   |   | **2007**                  |        | **2006**                                    |   | **Comparisons**           |   |
|-------------------------------------------------------------------|--------|---------------------------|-------------|---------------------------------------------|--------|---------------------------|--------|
| **Item**                                                          |   | **Amount**                |        | **Percentage                  of Revenues** |   | **Amount**                |   | **Percentage                  of Revenues** |   | **Growth                  in Amount** |   | **Increase                  (Decrease) in Percentage** |   |
|                                                              |   | **US                  $** |        | **(%)**                                     |   | **US                  $** |   | **(%)** |   | **US                  $** |   |  **(%)** |   |
| Revenues                                                          |   |                      | 14,727,290  |                                        |   | 100.00                    | %      |   | 9,208,377 |   |   | 100.00 | % |   | 5,518,913 |   |   | 59.93 | % |
| Cost                  of Goods Sold                               |   |                      | (12,118,023 | )                                           |   | (82.28                    | %)     |   | (7,542,175 | ) |   | (81.91 | %) |   | 4,575,848 |   |   | 60.67 | % |
| Gross                  Profit                                     |   |                      | 2,609,267   |                                        |   | 17.72                     | %      |   | 1,666,202 |   |   | 18.09 | % |   | 943,065 |   |   | 56.60 | % |
| Research                  and development                         |   |                      | (51,662     | )                                           |   | (0.35                     | %)     |   | (198 | ) |   | (0.00 | %) |   | 51,464 |   |   | 25,991.92 | % |
| Selling                  and distribution                         |   |                      | (435,049    | )                                           |   | (2.95                     | %)     |   | (236,497 | ) |   | (2.57 | %) |   | 198,552 |   |   | 83.96 | % |
| General                  & administrative                     |   |                      | (428,226    | )                                           |   | (2.91                     | %)     |   | (218,118 | ) |   | (2.37 | %) |   | 210,108 |   |   | 96.33 | % |
| Income                  from operations                           |   |                      | 1,694,330   |                                        |   | 11.51                     | %      |   | 1,211,389 |   |   | 13.15 | % |   | 482,941 |   |   | 39.87 | % |
| Interest                  expense, net                            |   |                      | (99,834     | )                                           |   | (0.68                     | %)     |   | (67,402 | ) |   | (0.73 | %) |   | 32,432 |   |   | 48.12 | % |
| Other,                  net                                       |   |                      | 10,456      |                                        |   | 0.07                      | %      |   | (19,681 | ) |   | (0.21 | %) |   | 30,137 |   |   | 153.13 | % |
| Income                  before tax                                |   |                      | 1,604,952   |                                        |   | 10.90                     | %      |   | 1,124,306 |   |   | 12.21 | % |   | 480,646 |   |   | 42.75 | % |
| Income                  tax                                       |   |                      | (583,815    | )                                           |   | (3.96                     | %)     |   | (380,573 | ) |   | (4.13 | %) |   | (203,242 | ) |   | (53.40 | %) |
| Income                  from continuing operation                 |   |                      | 1,021,137   |                                        |   | 6.93                      | %      |   | 743,733 |   |   | 8.08 | % |   | 277,404 |   |   | 37.30 | % |
| Income                  from discontinued operation               |   |                      | 1,761       |                                        |   | 0.01                      | %      |   | (5,080 | ) |   | (0.06 | %) |   | 6,841 |   |   | 134.67 | % |
| Net                  income (loss)                                |   |                      | 1,022,898   |                                        |   | 6.94                      | %      |   | 738,653 |   |   | 8.02 | % |   | 284,245 |   |   | 38.48 | % |
| Foreign                  currency translation gain                |   |                      | 341,582     |                                        |   | 2.33                      | %      |   | 23,407 |   |   | 0.25 | % |   | 318,175 |   |   | 1359.32 | % |
| Unrealized                  gain on marketable securities         |   |                      | 0           |                                        |   | 0                         |   |   | 2,482 |   |   | 0.03 | % |   | (2,482 | ) |   | 100 | % |
| Income                  tax related to other comprehensive income |   |                      | (112,722    | )                                           |   | (0.77                     | %)     |   | (8,543 | ) |   | (0.09 | %) |   | 104,179 |   |   | 1219.47 | % |
| Comprehensive                  income                             |   |                      | 1,251,758   |                                        |   | 8.50                      | %      |   | 755,999 |   |   | 8.21 | % |   | 495,759 |   |   | 65.58 | % |

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

|                                  |   | **3                  Months                  Ended**  |       | **3                  Months                  Ended**  |   |                             |   |                                            |      |
|---------------------------------------|--------|------------------------------------------------------------|------------|------------------------------------------------------------|--------|----------------------------------|--------|-------------------------------------------------|-----------|
|                                  |   |  **June                  30,                  2007**  |       |  **June                  30,                  2006**  |   |  **Comparisons**            |   |
| **Products**                          |   | **Amount                  US $**                           |       | **Percentage                  of Revenues (%)**            |   | **Amount                  US $** |   | **Percentage                  of Revenues (%)** |      | **Growth                  in Amount US $** |   | **Increase                  (Decrease) in Percentage (%)** |   |
| Urea                                  |   |                                                       | 9,217,132  |                                                       |   | 62.59                            | %      |                                            | 5,619,385 |   |   | 61.02 | % |   | 3,597,747 |   |   | 64.02 | % |
| Ammonium                  bicarbonate |   |                                                       | 798,675    |                                                       |   | 5.42                             | %      |                                            | 792,690   |   |   | 8.61 | % |   | 5,985 |   |   | 0.76 | % |
| Methanol                              |   |                                                       | 58,210     |                                                       |   | 0.40                             | %      |                                            | 1,253,725 |   |   | 13.62 | % |   | (1,195,515 | ) |   | (95.36 | %) |
| Liquefied                  Ammonia    |   |                                                       | 174,821    |                                                       |   | 1.19                             | %      |                                            | 22,597    |   |   | 0.25 | % |   | 152,224 |   |   | 673.65 | % |
| DME                                   |   |                                                       | 4,424,938  |                                                       |   | 30.05                            | %      |                                            | 1,495,847 |   |   | 16.24 | % |   | 2,929,091 |   |   | 195.81 | % |
| Ammonia                  Water        |   |                                                       | 53,514     |                                                       |   | 0.36                             | %      |                                            | 24,133    |   |   | 0.26 | % |   | 29,381 |   |   | 121.75 | % |
| Total                                 |   |                                                       | 14,727,290 |                                                       |   | 100.00                           | %      |                                            | 9,208,377 |   |   | 100.00 | % |   | 5,518,913 |   |   | 59.93 | % |

|                                  |   |  **3                    Months Ended** |       | ** 3                    Months Ended**          |   |                                  |   |
|---------------------------------------|--------|---------------------------------------------|------------|------------------------------------------------------|--------|---------------------------------------|--------|
|                                       |   | **June                    30, 2007**        |       | **June                    30, 2006**                 |   | **Comparisons**                       |   |
| **Provinces**                         |   | **Amount****US                    $**       |       | **Percentage                    of Revenues****(%)** |   | **Amount****US                    $** |   | **Percentage                    of Revenues****(%)** |   | **Growth                    in Amount****US                    $** |   | **Increase                    (Decrease) in Percentage (%)** |   |
| Henan                    Province     |   |                                        | 4,905,987  |                                                 |   | 33.31                                 | %      |   | 2,912,387 |   |   | 31.63 | % |   | 1,993,600 |   |   | 68.45 | % |
| Guangdong                    Province |   |                                        | 6,672,907  |                                                 |   | 45.31                                 | %      |   | 3,072,519 |   |   | 33.37 | % |   | 3,600,388 |   |   | 117.18 | % |
| Hubei                    Province     |   |                                        | 1,550,274  |                                                 |   | 10.53                                 | %      |   | 891,260 |   |   | 9.68 | % |   | 659,014 |   |   | 73.94 | % |
| Anhui                    Province     |   |                                        | 708,940    |                                                 |   | 4.81                                  | %      |   | 1,148,559 |   |   | 12.47 | % |   | (439,619 | ) |   | (38.28 | %) |
| Hunan                    Province     |   |                                        | 249,298    |                                                 |   | 1.69                                  | %      |   | 178,309 |   |   | 1.94 | % |   | 70,989 |   |   | 39.81 | % |
| Guangxi                    Province   |   |                                        | 0          |                                                 |   | 0.00                                  | %      |   | 64,692 |   |   | 0.70 | % |   | (64,692 | ) |   | (100.00 | %) |
| Jiangxi                    Province   |   |                                        | 596,795    |                                                 |   | 4.05                                  | %      |   | 517,056 |   |   | 5.61 | % |   | 79,739 |   |   | 15.42 | % |
| Shandong                    Province  |   |                                        | 24,061     |                                                 |   | 0.17                                  | %      |   | 352,584 |   |   | 3.83 | % |   | (328,523 | ) |   | (93.18 | %) |
| Zhejiang                    Province  |   |                                        | 19,028     |                                                 |   | 0.13                                  | %      |   | 71,011 |   |   | 0.77 | % |   | (51,983 | ) |   | (73.20 | %) |
| Total                                 |   |                                        | 14,727,290 |                                                 |   | 100.00                                | %      |   | 9,208,377 |   |   | 100.00 | % |   | 5,518,913 |   |   | 59.93 | % |

----

|                                       |   | **3                    Months Ended****June                    30, 2007** |       | **3                    Months Ended****June                    30, 2006** |   | **Comparisons**                       |   |
|---------------------------------------|--------|---------------------------------------------------------------------------|------------|---------------------------------------------------------------------------|--------|---------------------------------------|--------|
| **Item**                              |   | **Amount****US                    $**                                     |       | **Percentage                    of Revenues****(%)**                      |   | **Amount****US                    $** |   | **Percentage                    of Revenues****(%)** |   | **Growth                    in Amount****US                    $** |   | **Increase                    (Decrease) in Percentage (%)** |   |
| Revenues                              |   |                                                                      | 14,727,290 |                                                                      |   | 100                                   | %      |   | 9,208,377 |   |   | 100 | % |   | 5,518,913 |   |   | 59.93 | % |
| Cost                    of Goods Sold |   |                                                                      | 12,118,023 |                                                                      |   | 82.28                                 | %      |   | 7,542,175 |   |   | 81.91 | % |   | 4,575,848 |   |   | 60.67 | % |
| Gross                    Profit       |   |                                                                      | 2,609,267  |                                                                      |   | 17.72                                 | %      |   | 1,666,202 |   |   | 18.09 | % |   | 943,065 |   |   | 56.60 | % |

|    |   |   |                                 | **DME** |   | **Methanol** |   | **Urea** |       | **Ammonium                  Bicarbonate** |   | **Liquefied                  Ammonia** |   | **Ammonia                  Water** |    |
|---------|--------|--------|--------------------------------------|---------|--------|--------------|--------|----------|------------|-------------------------------------------|--------|----------------------------------------|--------|------------------------------------|---------|
| 2008Q1  |   |   | Revenues                             |    |   | 4,424,938    |   |     | 58,210     |                                      |   | 9,217,132                              |   |                               | 798,675 |   |   | 174,821 |   |   | 53,514 |   |
|         |   |   | COGS                                 |    |   | 3,803,204    |   |     | 55,268     |                                      |   | 7,263,797                              |   |                               | 783,889 |   |   | 165,971 |   |   | 45,894 |   |
|         |   |   | Gross                  Profit        |    |   | 621,734      |   |     | 2,942      |                                      |   | 1,953,335                              |   |                               | 14,786  |   |   | 8,850 |   |   | 7,620 |   |
|         |   |   | Gross                  Profit %      |    |   | 14.05        | %      |     | 5.05       | %                                         |   | 21.19                                  | %      |                               | 1.85    | % |   | 5.06 | % |   | 14.24 | % |
| 2007Q1  |   |   | Revenues                             |    |   | 1,495,847    |   |     | 1,253,725  |                                      |   | 5,619,385                              |   |                               | 792,690 |   |   | 22,597 |   |   | 24,133 |   |
|         |   |   | COGS                                 |    |   | 1,097,157    |   |     | 1,102,438  |                                      |   | 4,696,330                              |   |                               | 604,816 |   |   | 17,488 |   |   | 23,946 |   |
|         |   |   | Gross                  Profit        |    |   | 398,690      |   |     | 151,287    |                                      |   | 923,055                                |   |                               | 187,874 |   |   | 5,109 |   |   | 187 |   |
|         |   |   | Gross                  Profit %      |    |   | 26.65        | %      |     | 12.07      | %                                         |   | 16.43                                  | %      |                               | 23.70   | % |   | 22.61 | % |   | 0.77 | % |
| Changes |   |   | Revenues                             |    |   | 2,929,091    |   |     | (1,195,515 | )                                         |   | 3,597,747                              |   |                               | 5,985   |   |   | 152,224 |   |   | 29,381 |   |
|         |   |   | Revenue                  Growth      |    |   | 195.81       | %      |     | (95.36     | %)                                        |   | 64.02                                  | %      |                               | 0.76    | % |   | 673.65 | % |   | 121.75 | % |
|         |   |   | Gross                  Margin Growth |    |   | (12.60       | %)     |     | (7.01      | %)                                        |   | 4.77                                   | %      |                               | (21.85  | %) |   | (17.55 | %) |   | 13.46 | % |

----

----

**Operating      Expenses**

**Income      From Operations**

----

**Income      Tax**

**Net      Income (Loss)**

**LIQUIDITY      AND CAPITAL RESOURCES**

*Cash      Flows*

|                                                                            |   | **Three                    months ended June 30,** |       |
|---------------------------------------------------------------------------------|--------|----------------------------------------------------|------------|
|                                                                            |   | **2007**                                           |       | **2006** |   |
|                                                                            |   | **(US                    $)**                      |       | **(US                    $)** |   |
| Net                    cash provided by (used in)                               |   |                                               |       |   |   |
| Operating                    activities                                         |   |                                               | (702,000   | ) |   | 180,322 |   |
| Investing                    activities                                         |   |                                               | (2,591,948 | ) |   | (848,761 | ) |
| Financing                    activities                                         |   |                                               | 3,776,085  |   |   | (519,561 | ) |
| Net                    change in cash and cash equivalents                      |   |                                               | 482,137    |   |   | (1,188,000 | ) |
|                                                                            |   |                                               |       |   |   |   |   |
| Effect                    of exchange rate changes on cash and cash equivalents |   |                                               | 183,149    |   |   | 23,374 |   |
|                                                                            |   |                                               |       |   |   |   |   |
| Cash                    and cash equivalents at beginning of period             |   |                                               | 2,616,149  |   |   | 3,281,761 |   |
|                                                                            |   |                                               |       |   |   |   |   |
| Cash                    and cash equivalents at end of period                   |   |                                               | 3,281,435  |   |   | 2,117,135 |   |

----

** **

*Liquidity*

----

*Capital      Resources*

**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.**

----

**SIGNATURES**

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

----