- Annual Report (10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________

FORM 10-K

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

For the fiscal year ended March 31, 2009

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

For the transition period from ______ to ______.

Commission file number: 001-33470

NEW ORIENTAL ENERGY & CHEMICAL CORP.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of
incorporation or organization)

20-1917956

(I.R.S. Employer Identification No.)

Xicheng Industrial Zone of Luoshan, Xinyang

Henan Province, The People’s Republic of China

(Address of principal executive offices, including zip code)

(86) 27 853 75701

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, par value $0.001 per share

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes ¨ No x

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceeding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ No x

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

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

Large accelerated filer ¨	Accelerated filer ¨

Non-accelerated filer ¨	Smaller reporting company x

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

As of September 30, 2008, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $12,336,000.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class		Outstanding as of June 29, 2009
Common Stock, $.001 par value per share		12,640,000 shares

DOCUMENTS INCORPORATED BY REFERENCE: None.

PART I

Item 1.

Business.

Except as otherwise indicated by the context, references in this Annual Report to “we,” “us,” “our,” or the “Company” are to the combined business of New Oriental Energy & Chemical Corp. and its wholly-owned subsidiary, Henan Jinding Chemical Co., Ltd. (“Jinding”).

Introduction

New Oriental Energy & Chemical Corp. (formerly Sports Source, Inc.) (“NOEC” or the "Company") was incorporated under the laws of the State of Delaware on November 15, 2004. On November 22, 2006 the Company changed its name to New Oriental Energy & Chemical Corp.

On October 11, 2006, we completed a stock exchange transaction (the “Exchange Transaction”) with the stockholder of Kinfair Holding Limited (“KHL”). The Exchange Transaction was consummated under Delaware law and pursuant to the terms of that certain Securities Exchange Agreement dated effective as of October 11, 2006 (the “Exchange Agreement”).

Pursuant to the Exchange Agreement, 13,700,000 shares of common stock held by the Company’s sole director and majority shareholder were cancelled and the Company issued shares of our common stock to the stockholder of KHL, in exchange for 100% of the outstanding capital stock of KHL. Pursuant to the Exchange Transaction, KHL became our wholly owned subsidiary. We carry on our business through KHL’s wholly owned subsidiary, Jinding.

Description of Business

We, through the operations of Jinding, have been engaged in the manufacture and distribution of fertilizer and chemical products. The products are distributed to markets in the Peoples’ Republic of China (“PRC”).

Our primary business is the manufacture and sale of urea, a chemical used as fertilizer for crops and in certain manufacturing processes, including the manufacture of resin, plastic and medicine. In the last fiscal year, 65.65% of our revenue was generated through the sale of urea. We also produce and sell methanol. Methanol sales accounted for approximately 3.45% of our revenue in our last full fiscal year.

Our other products include Ammonium Hydrogen Carbonate, which can be used as a fertilizer for crops and in the pharmaceutical and food industries. In addition, another product we have developed is Dimethyl Ether (“DME”). DME has a variety of industrial applications in the production of pesticides, cosmetics and as a refrigerant. It may also be used as a component of a variety of common industrial chemicals. We believe the potential market for DME is particularly attractive because it can be used as an alternative to conventional petroleum-based diesel fuel in diesel engines that have undergone minor modifications to permit the use of DME.

DME can be derived from methanol and possess several advantages over conventional diesel fuel. Petroleum-based diesel fuel is increasingly expensive in the PRC. Because the PRC has limited petroleum reserves in relation to its growing demand, the cost of petroleum-based fuels is driven by global oil prices. Also, the use of DME addresses environmental concerns. DME burns cleaner, producing relatively little exhaust as compared with diesel fuel. It also has a better combustion efficiency, increasing the performance of engines burning DME by 10% to 15%, as compared with conventional diesel fuel. We believe the market for DME in the PRC will expand.

All of our products are manufactured in our factory in Xicheng Industrial Zone, Luoshan, Henan Province in the PRC. We own and operate a thermal power station with the capacity to generate 3000 kilowatt of thermal power per hour at our factory in Henan. The power station uses thermal energy that is a by-product of our chemical production operations. We use the resulting electricity in our plant. We sell all of our products inside the PRC, primarily through regional distributors with whom we have long term relationships. We have approximately 1,211 full-time employees (including 200 new employees in the training period), of which 127 employees are part of our management and 20 employees are involved in research and development. For the fiscal year ended March 31, 2009, we had gross revenue of $52,545,647 with a net loss of $3,729,007.

History and Organizational Structure

NOEC (formerly known as Sports Source, Inc.) was incorporated under the laws of the State of Delaware on November 15, 2004. Jinding was incorporated in September 2003 and commenced business on October 1, 2003. KHL was formed on January 7, 2006 as a Hong Kong company. Jinding is a wholly-owned subsidiary of KHL. KHL is a wholly-owned subsidiary of NOEC whose sole business is to act as a holding company for Jinding.

Jinding is located in the Xicheng Industrial Zone of Luoshan, Henan Province, PRC. KHL is located in Room 42, 4/F, New Henry House, 10 Ice House Street, Central, Hong Kong.

Jinding was originally formed and named the Luoshan Fertilizer Factory. In October 2003, the assets of the Luoshan Fertilizer Factory were acquired by the following shareholders: Xinyang Hongchang Group, a company formed in China, with a 63.63% interest, Mr. Wang Guiquan with a 9% interest, Mr. Mai Xiaofu, with a 15% interest, Mr. Zhou Dianchang, with a 5% interest, Mr. Yu Zhiyang, with a 3.685% interest and Mr. Yang Hongtao, with a 3.685% interest in Jinding.

On February 29, 2006, KHL entered into a Share Transfer Agreement with Xinyang Hongchang Group, Mai Xiaofu, Wang Guiquan, Zhou Dianchang, Yu Zhiyang and Yang Hongtao (collectively, the “Sellers”), in which the Sellers transferred their interest in Jinding to KHL for an aggregate purchase price of RMB 38,000,000. As a result of this transaction, KHL owns all of the capital stock of Jinding.

As noted above, on October 11, 2006, NOEC entered into the Exchange Agreement with KHL and Auto Chance Limited, the sole stockholder of KHL. Auto Chance International Limited, is owned by the following six shareholders: Messrs. Chen Si Qiang, Mai Xiao Fu, Wang Gui Quan, Zhou Dian Chang, You Zhi Yang and Yang Hong Tao. Of this group of shareholders, Messrs. Chen Si Qiang, Wang Gui Quan and Zhou Dian Chang are involved in the management of Jinding and NOEC. Pursuant to the Exchange Agreement, 13,700,000 shares of common stock held by the Company’s sole director and majority shareholder were cancelled and the Company issued shares of our common stock to the stockholder of KHL, in exchange for 100% of the outstanding capital stock of KHL. Pursuant to the Exchange Transaction, KHL became a wholly-owned subsidiary of NOEC. NOEC carries on its business through KHL’s wholly owned subsidiary, Jinding.

Products

As an overview, we manufacture urea and coal-based chemicals including Ammonium Bicarbonate, Liquid Ammonia, Methanol and DME. Ammonium Bicarbonate and Liquid Ammonia are mainly used for nitrogenous fertilizers and raw materials of chemical products. Methanol and DME are chemical materials and clean alternatives to fossil fuel. They are used in the chemical industry, pharmaceutical industry, light industry and textile industry.

We develop and produce the following top-selling products with the following chemical composition:

Fuel Product	Product General Information
DME CH 3 OCH 3	DME is a type of clean fuel. It has a single component, short carbon chain, and is contains oxygen, it therefore, has a strong burning performance, high thermal efficiency and no smoking combustion. Similar to the Liquefied Petroleum Gas (“LPG”), DME is in a gas state when decompressed and the combustor can be used without being changed.
Methanol CH 3 OH	Methanol is a clear, colorless, combustible, toxic liquid. Methanol is a clear, combustible, toxic liquid, Methanol, or methyl alcohol, also called wood alcohol, has a molecular weight of 32.04. Methanol is a poisonous chemical which attacks the nervous system and contains a strong anesthetic effect.

Fertilizer Product	Product General Information
Urea CO(NH 2 ) 2	Urea is a nitrogen-containing chemical product. It is produced chemically from synthetic ammonia and carbon dioxide. Urea can be produced in a variety of forms, such as pills, granules, flakes, pellets, crystals and solutions. The Company produces urea in the form of granules.
Ammonium hydrogen carbonate NH 4 HCO 3	Ammonium hydrogen carbonate is a nitrogenous fertilizer which contains approximately 17% nitrogen. Ammonium hydrogen carbonate is stable in 20°C temperature. When the temperature rises, it is easily decomposed.

Urea

Features of Urea

Urea is a nitrogen-containing chemical product which is produced on a scale of some 100,000,000 tons per year worldwide. Urea is produced commercially from synthetic ammonia and carbon dioxide. Urea can be produced as pills, granules, flakes, pellets, crystals and solutions. The Company produces urea in the form of granules.

More than 90% of world production is destined for use as a fertilizer. Urea is highly soluble in water and is therefore also very suitable for use in fertilizer solutions, e.g. in “foliar feed” fertilizers. Urea has the highest nitrogen content of all solid nitrogenous fertilizers in common use. It therefore has the lowest transportation costs per unit of nitrogen nutrient.

Urea is produced commercially from two raw materials, ammonia and carbon dioxide. Large quantities of carbon dioxide are produced during the manufacture of ammonia from coal or from hydrocarbons such as natural gas and petroleum derived raw materials. This allows direct synthesis of urea from these raw materials. Our Urea products are derived from coal that is domestically produced in the PRC.

Applications of Urea

Urea’s principal commercial applications include use as: (i) a main component of fertilizer, providing a relatively cheap source of fixed nitrogen to promote crop growth, (ii) a raw material for the manufactures of plastics specifically, urea-formaldehyde resin, (iii) a raw material for the manufacture of various glues (urea-formaldehyde or urea-melamine-formaldehyde (the latter being waterproof and used for marine plywood) and (iv) a component of animal feed, providing a relatively cheap source of fixed nitrogen.

Methanol

Features of Methanol

Methanol (or methyl alcohol), also called wood alcohol, is not only an important chemical product and raw material but also one of China’s future “clean energies.” Among the fundamental organic chemical materials in the world, methanol is second only to ethylene.

The molecular formula of methanol is CH4O and structural formula of being CH3OH (with molecular weight of 32.04), methanol is a colorless liquid at normal temperature and pressure. Methanol can dissolve in water, and in organic solvents, such as ethanol, ether and acetone. It may be volatile and the explosion limit of its vapor in the air is 6.0-36.5% (volume ratio). Methanol is a neurotoxin, which is also a relatively strong narcotic. In use of methanol, special attention should be paid to explosion and fire protection.

Applications of Methanol

Methanol is mainly used for the production of medicine, pesticide, dye, plastic, synthetic protein, fiber, formaldehyde, methyl ether. It can also be used as a component of a type of new fuel, improving the performance of gasoline or diesel oil when combined and used in engines that have been built or modified for this fuel.

Production and Revenue

With the completion of its 100,000 tons/year DME project in August 2007, the Company is no longer selling methanol to customers (with few exceptional cases when the margin of methanol is higher than that of DME). Currently, our self-made methanol with 50,000 tons/year capacity can support around 20% to 25% of our 150,000 tons/year DME production.

Ammonium Bicarbonate

Features of Ammonium Bicarbonate

Ammonium acid carbonate is also called “salvolatile” or “Ammonium Bicarbonate.” Ammonium acid carbonate currently constitutes approximately 50% of China’s aggregate nitrogenous fertilizer and plays an important role in China’s agricultural production. Ammonium acid carbonate is a white, crystalline powder that is soluble in water.

The molecular formula of ammonium acid carbonate is NH4HCO3. It contains approximately 17% nitrogen. Ammonium acid carbonate is a nitrogenous fertilizer free from (sulfur) sulfate radical. It contains no harmful medium substance and final decompounding substance does not affect soil quality and is one of the safest nitrogenous fertilizers.

Another characteristic of ammonium acid carbonate is that its ammonium ion is easily absorbed by soil particles. When buried in soil, it is liable to run off due to infiltration along with water, with leaching loss of only being 1/3 to 1/10 of other nitrogenous fertilizers. Thus, as long as ammonium acid carbonate can be thoroughly exposed to soil and can be absorbed sufficiently, it is not any more volatile than other nitrogenous fertilizers. In some conditions, for example when buried deeply in calcareous soil, there’s less loss of ammonium acid carbonate than with other nitrogenous fertilizers.

Applications of Ammonium Bicarbonate

Ammonium acid carbonate is mainly used for agricultural purposes and is suitable for various crops as well as all types of soil. The purified product can be used in the food industry, as well as in such industries as pharmaceutical, galvanization and rubber overshoes.

In the food industry, ammonium acid carbonate is used as a leavening agent in breads, cookies, waffles and cake and also as a substitute for yeast in baking. During baking, ammonium acid carbonate decomposes into gaseous products without affecting the flavor.

In the chemical industry, ammonium acid carbonate acts as an auxiliary in the production of catalysts. The product is also a neutralizing and buffering agent for organic and inorganic acids. Ammonium acid carbonate is additionally used to reduce formaldehyde emissions from wood particle boards. Furthermore, ammonium acid carbonate can also and has been used as an additive in cleaners and polishes.

Dimethyl Ether (“DME”)

Background

As the PRC’s dependency on imported petroleum has increased in recent years, the PRC continues to seek to develop alternatives to petroleum fuels that are cleaner and can be produced domestically. As a petroleum alternative fuel, DME has already drawn wide attention in various countries. Taking advantage of the PRC’s rich coal and natural gas resources, companies in the PRC are producing DME using a combination of their own technology and advanced foreign techniques.

Our production of DME has been limited by market demands. We anticipate that as the demand for diesel grows with increasing consumption of petroleum in the PRC, there will be increasing demand for DME. While the PRC has a relatively low petroleum reserve, it is a country rich in coal resources. It is therefore of strategic significance for the PRC to take advantage of its rich domestic coal resources and produce a clean domestically produced fuel as an alternative to petroleum products.

Features of DME

DME is a colorless gas with a slight ether flavor. DME can be combined with liquidated petroleum gas (“LPG”), coal gas or natural gas to improve their combustion properties and increase heat quantities. DME with a purity rate of 95% or more can be used to substitute LPG as a fuel. Furthermore, DME can be used as chemical feedstock for production of spray paint, insecticides, air fresheners, fixtures, anti-rust sprays and lubricants.

The Company is utilizing the catalytic dehydration of methanol process and such process is protected by a patent in the PRC jointly owned by Sichuan Tianyi Technology Co., Ltd and Southwestern Chemical Industry Design Institute.

To produce DME, the Company uses the advanced technique of catalytic dehydration of methanol. The material is run through an oil segregator into a methanol synthetic tower to be synthesized into crude methanol which then enters an ether tower together with hydrogen and nitrogen. The methanol is dehydrated into DME by combining pressure catalyzers and a mixture of methanol. DME is then cooled and put into a segregating machine and the separated gases are further refined. DME can achieve a purity level of 99.9%. DME can be a substitute of LPG. This technique involves a simpler process and consumes less energy, while producing a high quality product.

Application of DME

In addition to being widely adopted in the fine chemical industry, pharmaceutical industry and pesticide industry, DME can substitute for Freon as an aerosol propellant and a refrigerant. DME also can be substituted for LPG as a non-industrial fuel, as well as a bio-diesel fuel for automotive vehicles (modified to accept bio-diesel). With a better combustion property, DME has greater heating efficiency producing safe and clean exhaust.

Below are some of the currently-known applications of DME:

An Additive for Liquefied Petroleum Gas (“LPG”) and Non-Industrial Fuel Substitute to LPG (for residential and automotive uses) .

Like LPG, DME can be stored as a gas state after being compressed. However, compared to LPG, DME has a stronger combustion performance and greater heating efficiency. Furthermore, DME is safer than LPG with regard to transportation, storage and use. DME has a higher evaporation rate and when used as an automobile fuel, it increases the power of engines by approximately 10% to 15%. In addition, when used as a fuel for automobiles DME increases combustion efficiency by approximately 2% to 3%. Automobiles that have been modified to use DME as a fuel typically exhibit a reduction in combustion noise by 5-10 decibels. As a result of the higher evaporation power rate, pollutant emissions including nitric oxide and carbon monoxide are quite low, thereby satisfying modern emission standards, including European directives 94/12/ec and 96/69/ec as established by the European Economy Committee (“Europe III”).

Environmental Friendly Refrigerant for Refrigerators and Air Conditioners

DME can be used as a substitute for Freon as the refrigerant used in refrigerators and in air conditioners. Unlike Freon, DME does not harm the earth’s ozone layer. Other benefits of using DME include its low boiling point, stronger vaporizing effects and its lower prices as compared with Freon.

Pesticide, Cosmetics and Everyday Chemical Products

As an aerosol product, DME has been widely adopted in the production of pesticides, cosmetics, and everyday chemical products (e.g. detergent, hair gel).

Chemical Feedstock

DME has been widely adopted in the chemical industry as an alkylation agent and a coupling agent. DME is the chemical feedstock for the production of acetic acid, acetate and hydrocyanic acid.

Production and Revenue

	Production (ton)		Sales (ton)		Price (RMB)		Revenue (RMB)		Price with Tax (RMB)		Price ($)		Revenue ($)
April 2008		4,172		4,133	￥	4,298	￥	17,762,923	￥	5,028	$	620	$	2,564,117
May 2008		2,433		2,479	￥	4,691	￥	11,629,325	￥	5,489	$	677	$	1,678,719
June2008		1,241		975	￥	4,903	￥	4,780,740	￥	5,736	$	708	$	690,110
July 2008		2,605		2,801	￥	4,441	￥	12,440,602	￥	5,018	$	641	$	1,795,830
Aug 2008		807		436	￥	4,530	￥	1,975,040	￥	5,119	$	654	$	285,101
Sept 2008		2,814		3,198	￥	4,026	￥	12,874,450	￥	4,549	$	581	$	1,858,455
Oct 2008		2,407		1,913	￥	3,598	￥	6,883,889	￥	4,066	$	519	$	993,705
Nov 2008		-		383	￥	2,561	￥	981,677	￥	2,894	$	370	$	141,707
Dec 2008		2,906		2,882	￥	2,594	￥	7,475,696	￥	2,931	$	374	$	1,079,133
Jan 2009		-		207	￥	2,469	￥	511,095	￥	2,789	$	356	$	73,778
Feb 2009		-		-		-		-		-		-		-
March 2009		-		-		-		-		-		-		-

Products Under Development

Product development is a core element of the Company’s historical as well as its current growth strategy in each of its existing business segments. The Company’s research and development activities currently consist principally of:

developing new agricultural products which may be based upon refinements to our existing products;

developing new fuel alternatives similar to DME; and

pursuing new technology in the area of ammonia synthesis which would reduce the energy consumed in the production process and enables the use of recycled water.

The scientific process of developing new products is complex, costly and time-consuming. There can be no assurance that any commercially feasible products will be developed despite the amount of time and money spent on research and development. The development of products may be curtailed at any stage of development as a response to the introduction of competing products by our competitors, changes in existing laws or regulations or for other reasons which we cannot currently foresee.

Further Production and Improvement of DME

The Company’s current product research and development partners are:

Southwest Chemical Institute; and

Sichuan Tianyi Science & Technology Co., Ltd.

The Company’s current product research and development conditions are:

First-stage : The initial phase of this project was to enable the Company to achieve an annual DME output of 10,000 tons. This target has been met and we have been producing at this level since March of 2006. By September 2006, the Company expanded this capacity to 50,000 tons.

	·	Second-stage : The second phase of the project is to enable the Company to achieve an annual production level of 150,000 tons of DME with a new facility (the production capacity of such new facility will be 100,000 tons). This stage was completed in August 2007.

It is anticipated and planned that during calendar year 2010, the Company will have the manufacturing capacity (and equipment) to produce 600,000 tons of DME per year.

Further Production and Improvement of Bio-diesel

Due to limited feedstock and resources, the Company does not have any production or project plan in the near future. But we will keep on our research and development cooperation with external research centers.

The Company’s current product research and development partners are:

Tsinghua University;

Hunan Chemical and Pharmaceutical Design Institute; and

Institute of Oil Crop, Chinese Academy of Agricultural Sciences.

Other significant underpinnings for our expansion plan include:

The Company’s feasibility report, which was completed in December 2005.

A Technology Cooperative Contract, dated September 1, 2005, entered into between Tsinghua University and Jinding Company

A Cooperative Agreement on Oil Crop Technology, dated May 8, 2006, entered into among the Institute of Oil Crop, Chinese Academy of Agricultural Sciences and the Company. This agreement establishes the parties’ cooperation to test various new plants in order to develop bio-diesel products.

Further Production and Improvement of Methanol

The first phase of the Company’s methanol project with 50,000 tons capacity was started in October 2003 and put into production in May 2004. The second phase of methanol project with another 50,000 tons capacity was started in August 2004 and put into production in May 2005. The third phase of methanol project with another 200,000 tons capacity was started in November 2007, and we expect it to be completed around December 2009. The project will be entering the debugging stage at the first quarter of calendar year 2010 after the completion of the foundational construction and we expect to see the production being ramped up during the first quarter of calendar year 2010.

Further Production and Improvement of Synthesized Ammonia

The Company’s 60,000 tons/year project for synthetic (liquefied) ammonia was completed and put into production in November 2005. This brings the Company’s capacity to 150,000 tons/year.

In addition, by the first quarter of calendar year 2010 the Company plans to expand its overall production scale and engage in a 200,000 ton coal-based gas-methanol production project, a 600,000 ton DME production project, a 300,000 ton bio-diesel production project, a 300,000 ton ammonia ash-agglomerating fluidized-bed coal gasification production project, and a railway goods warehouse project with a storage capacity of one million tons. The Company is striving to convert itself into a large-scale, comprehensive new energy and chemical fertilizer corporation.

Research and Development Costs

With respect to the Company’s research and development activities, in the fiscal year ended March 31, 2005, the Company spent an aggregate amount of $160,000. In the fiscal year ended March 31, 2006, the Company spent an aggregate amount of $210,000. In the fiscal year ended March 31, 2007, the Company spent an aggregate amount of $350,139. In the fiscal year ended March 31, 2008, the Company spent an aggregate amount of $75,961. In the fiscal year ended March 31, 2009, the Company spent an aggregate amount of $141,029.

Raw Materials and Major Suppliers

The Company purchases the raw materials used in the manufacturing of its chemical products from numerous sources. The Company believes that all necessary raw materials for its chemical products are readily available and will continue to be so in the foreseeable future. The Company has never had, nor does it anticipate experiencing, any shortages of such materials. The raw materials for chemical products consist primarily of electricity and coal. China is abundant in many minerals and organic elements and China is a significant contributor in world coal production and consumption. The Company generally maintains sufficient quantities of inventories of its chemical products to meet customer demand. Purchasing transactions are conducted in accordance with an invitation for bidding procedure. Potential suppliers are provided the quality standard for the raw material and are invited to make initial offers, which are compared objectively according to relevant quality guidelines. After validating the various suppliers’ service and capabilities for stable supply, we acquire the needed materials from the supplier offering at the lowest cost. Our financial department establishes an oversight process by appointing individuals to conduct independent market research of key price points periodically. There is a standard procedure for conducting such bidding processes and accepting the bids to insure that the all purchasing procedures are being strictly adhered to.

Our Company has entered into written contracts with several suppliers and vendors. The Company’s three key suppliers are as follows:

Boai county Coal Transport and Sales Department ;

Qingyang Desheng Coal Limited; and

Shanxi Jing Cheng Coal Transport and Sales Department (supplier of coal) has direct access to a mining base in China and therefore, the Company has enjoyed access to a steady supply of coal since February of 2004.

The Company’s products are manufactured at its facility in Xicheng Industrial Zone, Luoshan County, Xinyang City, Henan Province, PRC.

Quality Management

The Company has established various quality inspection departments to oversee the quality of the Company’s products. These departments have a full range of responsibilities - ranging from testing equipment to monitoring the quality of the raw materials, the quality of the Company’s products and the storage of the products.

The Company has adopted detailed regulations and a strict supervisory system with respect to its production workshops, storing, chemical testing, personnel policies and records archives. The Company has detailed reports and examines all stages of a product’s production.

The Company’s Production Unit is responsible for managing the quality of urea, ammonium bicarbonate, methanol and DME. With respect to any issues or queries arising during the production products and/or equipments, the supervisor in charge of production at such time shall make adjustments, observations, comparisons and sampling on a frequent basis to identify any potential quality defects on a timely basis and coordinate with the production and technical management staff to make corresponding adjustment, if necessary, so as to prevent defective products from being produced on a large scale. For any defective products identified, measures including sealing-up such product(s) shall be taken to prevent such products from entering into the warehouse or being sold to customers.

The Company’s Central Analysis Lab is responsible for the inspection and analysis of the quality of urea, ammonium bicarbonate, methanol and DME. The Analysis Lab reports its results to the Production Unit. When defective products are identified, notice shall be given to the dispatch department, the sales department, and the goods warehouse and safeguards will be made to prevent any defective products from entering the warehouse and being sold to customers.

The Packaging Department is responsible for:

Packaging and rendering the products compliant with the Company’s standards.

Taking random samples of urea and ammonium bicarbonate, especially when abnormal changes occur with respect to color, temperature, ash and size. The results are then reported to the Company’s Production Unit.

The Company’s products are not allowed to be transported to the warehouse and sold to customers unless the Company’s sales department and the goods warehouse receive a corresponding quality notice. Those departments are responsible for any quality problems which arise during the storage period. The sale of methanol, in particular, must comply with strict requirements. Customers’ orders may only be filled when the finished products are certified as qualified, and the finished products are available for transportation outside of the factory when the sample analysis are completed and responsible persons both for sales and purchase have signed the requisite documentation.

Any person who does not comply with the specifications and does not adhere or observe the Company’s procedures on packaging and product analysis, thus affecting the accuracy of product analysis, or does not abide by the procedures of product analysis, inbound and sales, shall bear corresponding liabilities including, but not limited to, immediate termination of employment, and monetary fines.

Product Sales, Distribution and Marketing

We sell most of our products through various regional distributors in China. We have established and maintained long term relationships with major distributors who we believe have local business experience and established regional sales networks. We regularly host our distributors to promote our products through various ordering conferences. We host an annual ordering conference for our major distributors to place purchasing orders through written sales agreements. In addition, we also sell certain products to end users directly. All purchasing orders on our products are served on a first-come, first-served basis.

According to a report in China Petro-Chemical Journal , dated February 15, 2006, the agricultural sector in China makes extensive use of chemical fertilizers, consisting of approximately 1/3 of the world’s total consumption. Of this amount, about 70% is nitrogenous fertilizers. According to China Statistics Almanac, dated December 31, 2004, the national total output of nitrogenous fertilizers (including urea, bicarbonate ammonia, etc.) was 42,222,000 metric tons (based on percentage of nitrogen), a 14.6% increase over the total output in 2003. Since 2004, the growth rate is over 10%.

Methanol is a major raw material chemical next to ethylene, propylene and benzene. According to China Nitrogenous Fertilizers Association in 2006, domestic capacity in the PRC reached 13,648,000 tons/year with 219 producers. Nationwide production in 2006 was 8,860,000 tons with a growth rate of 35.9% as compared to 2005. During the most recent fiscal year, domestic methanol prices reached a 10-year record high, driven by a markup in the international market.

For the fiscal-years ended March 31, 2009 and March 31, 2008, distribution for urea through our largest distributors accounted for approximately 21% and 20% of our total annual sales, respectively, distribution for ammonium bicarbonate through our three largest customers accounted for approximately 2% and 1% of our total annual sales and in the fiscal-years ended March 31, 2009 and March 31, 2008, distribution for DME accounted for 62% and 48% of our total annual sales, respectively.

Our largest distributors are:

Product		Top Distributors
Urea CO(NH 2 ) 2		(1) Sinochem Fertilizer Co., Ltd., Guangdong Branch
Urea CO(NH 2 ) 2		(2) Shantou Supply & Marketing Co-operative Enterprises Group Co.
		(3) Luoshan Farming Material Co.
		(4) Guangdong Province Materials Import and Export Co.
		(5) Yang, Ming An
Methanol CH 3 OH		(1) Zaoyang Hailong Chemical Co., Ltd.
Methanol CH 3 OH		(2) Yeji Linxing Fine Chemical Co., Ltd.
		(3) Anhui Fuyang Weida Chemical Co., Ltd.
DME CH 3 OCH 3		(1) Xinyang Chen Dongshen
DME CH 3 OCH 3		(2) Xin'ao Energy Group (3) Jingmen Nancheng LPG Co. (4) Jingzhou Longteng Railway LPG Limited.
Ammonium hydrogen carbonate NH 4 HCO 3		Retail Sales by Cash

The Company provides our customers with a variety of customer services, including a customer service department.

We have also been marketing and promoting our products through the following means:

Organizing annual visits to customers,

Organizing customer satisfaction questionnaire and customer conference to well understand customers’ requirements,

Advertising in Chinese local newspapers,

Broadcasting on Chinese local TV channels or radio stations,

Distribution of newsletters to distributors and farmers, and

Participation in activities organized by local governments to promote information about, and use of, fertilizers.

Competition

In general, the chemical fertilizer industry in China is highly competitive. While China is the world’s largest consumer of fertilizers, its chemical fertilizer industry is highly fragmented with many small regional factories serving local requirements. Most fertilizer producers in China do not have the national brand name recognition the Company has as a basis for promoting their products. We expect existing and new competitors will continue to introduce products that are directly or indirectly competitive with our products. Such competitors may be more successful in marketing such products. However, the Company has not had any quality issues to date. The brand “Jinding” enjoys a strong reputation and credibility in China.

Urea industry

According to China Nitrogenous Fertilizer Association, in 2007, there were over 20 companies in China producing urea with an aggregate gross output of approximately 24.85 million tons per annum with growth rate of 11.5% compared to 2006. The Company’s main competitors are Henan Zhongyuan Dahua Group, Junma Group, Xinlianxin Corp., Shandong Luxi Group, Anhui Linquan Group and Woyang Chemical Corp.

Methanol industry

According to China Nitrogenous Fertilizer Association, in 2007, the output of methanol was 10.76 million tons per year in China with growth rate of 41.9% compared to 2006. There are currently over 20 methanol factories located in Henan Province with an aggregate gross output of 1.3 million tons. The Company’s main competitors are the Junma Group and the Lantian Group.

DME industry

China currently has 21 factories that currently produce DME (with capacity over 10,000 tons/year) and the aggregate annual gross output for these factories reaches 1 million tons. The Company is the biggest company in China’s Henan Province that can produce an annual output of approximately 150,000 tons of DME. The Company’s main domestic competitors are the Sandong Juitai Company and the Sichuan Lutianhua Chemical Company.

Ammonium Hydrogen Carbonate industry

The Company currently has the capacity to produce 60,000 tons of ammonium bicarbonate per year. During the fiscal year ended March 31, 2009, the Company produced 40,778 tons of ammonium bicarbonate, which was a part of the Fertilizer production. The sale of ammonium bicarbonate represented 5.4% of the Company’s revenue for fiscal year 2007 and 3.4% for fiscal year 2008, and 4.4% for fiscal year 2009. The Company’s major customers are all within the PRC. The Company’s main competitors are the Asia New Energy Holding Limited (Former Shiji Jinyuan Group) the Lantian Group and Zhu Ma Dian Jun Ma Group.

Intellectual Property

We have registered the trademark for the “Jinding” logo with the Trademark Office of the State Administration for Industry and Commerce of China (Registration Number: 3861603), which is used on all of our products distributed in China. The trademark expires in 2016.

We rely on trade secrets to protect our proprietary technology and formulas. We currently do not own any patents and have not applied for patents on our proprietary technology and formulas because a patent application requires a detailed description of our technology and formulas which will be made available to the general public. We believe a patent application and disclosure of our technology formulas would be detrimental to our future business. If knowledge of our formulas and processes are not tightly controlled, more competitors would likely emerge in this market. Only certain of our key executives have knowledge of our proprietary technology and formulas.

Pricing

The Company’s pricing is a combination of Chinese pricing regulation and market demand. The Ministry of Administration and Commerce and the Price Regulation Bureau monitor and control the price of the chemical fertilizer products in the market place.

The Costs and Effects of Compliance with Environmental Laws

The Company’s Methanol and DME projects have been tested for its environmental effect and the results are very positive. These projects had obtained licenses from the Henan province regarding waste water and exhaust gas production. In the fiscal year ended March 31, 2008, the Company incurred costs of $300,000 (RMB 2 million) in complying with China’s environmental laws, and the compliance costs incurred by the Company during the fiscal year ended March 31, 2009 were approximately $1,000,000 (RMB 7 million). At this time, the Company’s entire project regarding waste water and exhaust gas production has been fully completed. In October 2006, the Company was certified by International Environmental Management System ISO-1400 standard.

Employees

As of March 31, 2009, the Company has approximately 1,211 full-time employees, 127 of whom are part of the Company’s management, and 20 of whom are directly involved in the research and development department. None of our employees are covered by a collective bargaining agreement. We believe we have good relations with our employees.

Chinese Government Regulation

The Chinese government maintains a tight control over the production and sale of dangerous chemical products. The Company must comply with the following Chinese environmental laws and regulations in connection with the production of our products:

PRC Environment Protection Law, issued and executed on December 26, 1989 and passed in the Eleventh meeting of the Seventh National People’s Congress.

The Prevention and Cure Temporary Ordinance on Huaihe Basin Water Pollution Control, issued and executed on August 8, 1995.

The Discharge Standard of Water Pollutants for Ammonia Industry GB13458-92.

In September 2005, Jinding obtained an industrial usage methanol production license (license number XK13-222-0047) from the Henan Safe Production Management Administration. The license expires on August 17, 2011, at which time, the Company will reapply for such license. The local enterprise of chemical fertilizer in China does not require the Company to apply for a production permit. Specifically, the production of urea and ammonium hydrogen carbonate does not require a production permit under Chinese Government Regulation.

The Company has also received a production license to produce liquefied anhydrous ammonia and methanol (license number XK13-220-00155) from the Henan Quality Control Administration. The license expires on August 17, 2011, at which time, the Company will reapply for such license.

Additional Information

We are obligated to file periodic, quarterly and annual reports with the Securities and Exchange Commission (“SEC”) pursuant to the Exchange Act. The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE., Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. We file electronically with the SEC. The address of that site is http://www.sec.gov.

Item 1A.

Risk Factors.

The financial condition, business, operations, and prospects of the Company involve a high degree of risk. You should carefully consider the risks and uncertainties described below, which constitute the material risks relating to the Company, and the other information in this report. The risks described below are not the only ones facing our Company and you should pay particular attention to the fact that we conduct our operations in China and are governed by a legal and regulatory environment that in some respects differs significantly from the environment that may prevail in other countries. Additional risks not presently known to us or that we currently deem immaterial may also impair our operations. If any of the following risks are realized, the Company’s business, operating results and financial condition could be harmed and the value of the Company’s stock could suffer. This means that investors and stockholders of the Company could lose all or a part of their investment

RISKS RELATING TO OUR COMPANY

We cannot assure you that our organic growth strategy will be successful.

One of our growth strategies is to grow organically through increasing the distribution and sales of our products by increasing our market share and entering new markets in the PRC. However, many obstacles to increasing our market share and entering such new markets exist, including, but not limited to, costs associated with increasing market share and entering into such markets and attendant marketing efforts. We cannot, therefore, assure you that we will be able to successfully overcome such obstacles and establish our products in any additional markets. Our inability to implement this organic growth strategy successfully may have a negative impact on our ability to grow and on our future financial condition, results of operations or cash flows.

If we are not able to implement our strategies in achieving our business objectives, our business operations and financial performance may be adversely affected.

Our business plan is based on circumstances currently prevailing and the bases and assumptions that certain circumstances will or will not occur, as well as the inherent risks and uncertainties involved in various stages of development. However, there is no assurance that we will be successful in implementing our strategies or that our strategies, even if implemented, will lead to the successful achievement of our objectives. If we are not able to successfully implement our strategies, our business operations and financial performance may be adversely affected.

If we need additional capital to fund our growing operations, we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations.

As we implement our growth strategies, we may experience increased capital needs and we may not have enough capital to fund our future operations without additional capital investments. Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the release of competitive products by our competition; (iii) the level of our investment in research and development; and (iv) the amount of our capital expenditures. We cannot assure you that we will be able to obtain capital in the future to meet our needs.

If we cannot obtain additional funding, we may be required to:

reduce our investments in research and development;

limit our marketing efforts; and

decrease or eliminate capital expenditures.

Such reductions could materially adversely affect our business and our ability to compete. Even if we do find a source of additional capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us. Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing shareholders. We cannot give you any assurance that any additional financing will be available to us, or if available, will be on terms favorable to us.

We may have difficulty defending our intellectual property rights from infringement.

We regard our service marks, trademarks, trade secrets, patents and similar intellectual property as critical to our success. We rely on trademark, patent and trade secret law, as well as confidentiality and license agreements to protect our proprietary rights. Our brand name “Jinding” has received trademark protection in the PRC. No assurance can be given that such trademark and licenses will not be challenged, invalidated, infringed or circumvented, or that such intellectual property rights will provide competitive advantage to us.

Presently we sell our products mainly in China. China will remain our primary market for the foreseeable future. To date, no trademark filings have been made other than in China. Therefore, the measures we take to protect our proprietary rights may be inadequate and we cannot give you any assurance that our competitors will not independently develop formulations and processes that are substantially equivalent or superior to our own or copy our products.

A disproportionate amount of our sales revenue is derived from the sale of urea and a disruption in, or compromise of, our sales operations, or distribution channels, related to the sale of urea could adversely impact our financial condition and results of operations.

The Company’s sale of urea constituted more than approximately 65.65% and 45.37% of its total sales in the fiscal years ended March 31, 2009 and 2008, respectively. A disruption in, or compromise of, our manufacturing or sales operations, or distribution channels, relating to the sale of urea could have a material adverse effect on our financial condition and results of operations.

We have no firm long-term commitments from our suppliers to supply raw materials to us for any specific period, or in any specific quantity, except as may be provided in a particular purchase order.

If our suppliers experience delays, disruptions, capacity constraints or quality control problems in their operations or become insolvent, their product shipments to us could be delayed, which would decrease our production and harm our revenues, competitive position and reputation.

Further, our business would be harmed if we fail to effectively manage the production of our products. Because we establish our minimum inventory threshold based on our forecasts of expected demand for our products, if we inaccurately forecast demand, we may be unable to obtain adequate quantities of raw materials to meet our production requirements.

We purchase some key raw materials used in the manufacture of our products from our source suppliers, and we may not be able to obtain supplies from replacement suppliers on a timely or cost-effective basis. A reduction or stoppage in supply while we seek a replacement supplier would limit our ability to manufacture our products, which could result in a significant reduction in sales and profitability. In addition, an impurity or variation in a raw material either unknown to us or incompatible with our products, could significantly reduce our ability to manufacture products. Our inventories may not be adequate to meet our production needs during any prolonged interruption of supply. We have products under development which, if developed, may require us to enter into additional supplier arrangements. Failure to obtain a supplier for our future products, if any, on commercially reasonable terms, would prevent us from manufacturing our future products and limit our growth.

Intense competition from existing chemical companies and new entities may adversely affect our revenues and profitability.

We compete with other companies, many of whom are developing or can be expected to develop products similar to ours. Our market is a large market with many competitors. Our major competitors are the Junma Group and the Luxi Group. Many of our competitors are more established than we are, and have significantly greater financial, technical, marketing and other resources than we presently possess. Some of our competitors have greater name recognition and a larger customer base. These competitors may be able to respond more quickly to new or changing opportunities and customer requirements and may be able to undertake more extensive promotional activities, offer more attractive terms to customers, and adopt more aggressive pricing policies. Our competitors can be expected to continue to develop and introduce new and enhanced products, which could cause a decline in market acceptance of our chemical products. Current and future consolidation among our competitors and customers may also cause a loss of market share as well as put downward pressure on pricing. Our competitors could cause a reduction in the prices for some of our chemical products as a result of intensified price competition. Competitive pressures can also result in the loss of major customers. We intend to create greater brand awareness for our brand name so that we can successfully compete with our competitors. We cannot assure you that we will be able to compete effectively with current or future competitors or that the competitive pressures we face will not harm our business.

We face competition from other chemical companies, which could force us to lower our prices thereby adversely affecting our operating margins, financial condition, cash flows and profitability.

The markets in which we operate are highly competitive, and this competition could harm our business, results of operations, cash flow and financial condition. Our competitors include major international producers as well as smaller regional competitors. We believe that a significant competitive factor for our products is selling price. We could be subject to adverse results caused by our competitors’ pricing decisions. In addition, current and anticipated future consolidation among our competitors and customers may cause us to lose market share as well as put downward pressure on pricing. Some of our competitors are larger and have greater financial resources. As a result, those competitors may be better able to withstand a change in conditions within our industry and throughout the economy as a whole. If we do not compete successfully, our business, operating margins, financial condition, cash flows and profitability could be adversely affected.

The products and the processes we use could expose us to substantial liability.

We face an inherent business risk of exposure to product liability claims in the event that the use of our technologies or products is alleged to have resulted in adverse side effects. Side effects or marketing or manufacturing problems pertaining to any of our products could result in product liability claims or adverse publicity. To date, we have not experienced any product liability claims. However, that does not mean that we will not have any problems with respect to our products in the future. We do not currently carry product liability insurance. The lack of product liability insurance may expose us to enormous risks associated with potential product liability claims. We currently carry insurance policies which are customary for enterprises in China providing for property coverage of $12,726,927 transport vehicles of $217,589, and workers’ medical and accident coverage of $82,562. There are no special restrictions or exceptions attached to this coverage other than fraudulent or criminal conducts on part of the claimant.

We have limited business insurance coverage.

The insurance industry in the PRC is still at an early stage of development. Insurance companies in the PRC offer limited business insurance products, and do not, to our knowledge, offer business liability insurance. As a result, we do not have any business liability insurance coverage for our operations. Any business disruption, litigation or natural disaster might result in substantial costs and diversion of resources.

We depend on key personnel for the success of our business. Our business may be severely disrupted if we lose the services of our key executives and employees or fail to add new senior and middle managers to our management.

We place substantial reliance upon the efforts and abilities of our executive officers, Messrs. Zhou Dianchang , Wang Gui Quan, Li Dong Lai, Wu Peng and Wang Xiang Fu. The loss of the services of any of our executive officers could have a material adverse effect on our business, operations, revenues or prospects. Our future success is also dependent upon our ability to attract and retain qualified senior and middle managers to our management team. If one or more of our current or future key executives and employees are unable or unwilling to continue in their present positions, we may not be able to easily replace them, and our business may be severely disrupted. In addition, if any of these key executives or employees joins a competitor or forms a competing company, we could lose customers and suppliers and incur additional expenses to recruit and train personnel. We do not maintain key man life insurance on the lives of these individuals.

Our results of operations may be materially harmed if we are unable to recoup our investment in research and development.

The rapid change in technology in our industry requires that we continue to make investments in research and development in order to not only develop technologies, but we must also enhance the performance and functionality of our products and keep pace with competitive products and satisfy customer demands for improved performance, features, functionality and costs. There can be no assurance that revenues from future products or product enhancements will be sufficient to recover the development costs associated with such products or enhancements or that we will be able to secure the financial resources necessary to fund future development. Research and development costs typically are incurred before we confirm the technical feasibility and commercial viability of a product, and not all development activities result in commercially viable products. In addition, we cannot ensure that these products or enhancements will receive market acceptance or that we will be able to sell these products at prices that are favorable to us. Our business could be seriously harmed if we are unable to sell our products at favorable prices or if the market in which we operate does not accept our products.

Failure to develop new chemical products and/or improve our existing products will make us less competitive.

Our results of operations depend, in part, on our ability to expand our chemical product offerings. We are committed to remaining a competitive producer and believe that our portfolio of new or re-engineered products is strong. However, we may not be able to continue to develop new products, re-engineer our existing products successfully or bring them to market in a timely manner. While we believe that the products, pricing and services we offer customers are competitive, we may not be able to continue to attract and retain customers to which to sell our chemical products.

Changes in our customers’ products could reduce the demand for our chemical products, which may decrease our net sales and operating margins.

Our chemical products are used for a broad range of applications by our customers. Changes, including technological changes, in our customers’ products or processes may make our chemical products unnecessary, which would reduce the demand for those products. Other customers may find alternative materials or processes that no longer require our products. If the demand for our chemical products is reduced, our net sales and operating margins may be reduced as well.

Our projects involve long development cycles that result in high costs and uncertainty.

The development, operation and management of our products and facilities involve a long development cycle and decision-making process. Delays in the parties’ decision-marking process are outside of our control and may have a negative impact on our development costs, cost of sales, receipt of revenue and sales projections. We expect that, in some cases, it may take a year or more to obtain decisions and to negotiate and close the agreements. Such delays could harm our operating results and financial condition.

We are a small company, and the entrance of large companies into the alternative fuels, renewable energy and chemical fertilizer business will likely harm our business.

Competition in the alternative fuels, renewable energy and chemical fertilizer business is expanding with the growth of the industry and the advent of many new technologies. Larger companies, due to their better capitalization, will be better positioned to develop new technologies and to install existing or more advanced renewable energy generators, which could harm our market share and business.

Because the market for renewable energy is unproven, it is possible that we may expend large sums of money to bring our offerings to market and the revenue that we derive may be insufficient to fund our operations.

Our business approach to the renewable energy industry may not produce results as anticipated, be profitable or be readily accepted by the marketplace. We cannot estimate whether demand for facilities based on our technology, or the gas produced by such facilities, will materialize at anticipated prices, or whether satisfactory profit margins will be achieved. If such pricing levels are not achieved or sustained, or if our technologies and business approach to our markets do not achieve or sustain broad acceptance, our business, operating results and financial condition will be materially and negatively impacted.

We depend on only one factory to manufacture our products and any disruption of the operations in this factory would damage our business.

All of our products are manufactured in the Company’s one factory in Xicheng Industrial Zone, Luoshan, Henan, PRC which we depend on to produce the products that we sell. Our operations could be interrupted by fire, flood, earthquake and other events beyond our control. Any disruption of the operations in this factory would have a significant negative impact on our ability to deliver products, which would cause a potential diminution on sales, the cancellation of orders, damage to our reputation and potential lawsuits.

Our revenues from chemical products depend heavily on government policies. If the government changes its policies, our revenues and profit from our chemical products could decrease significantly.

To boost the income of millions of Chinese farmers and enhance China’s national security, the Chinese government has instituted policies that encourage farmers in China to increase their production of grains by limiting the price of ammonium fertilizers while at the same time providing the fertilizer industry some relief, including capping the price of raw materials, providing for preferential pricing for electricity and exempting value added tax. Due to the policies, our chemical business is able to realize a profitable margin. However, the Chinese government changes its policies from time to time. If the Chinese government changes the policies currently in place that compensate our loss due to the price control, our revenues and profit from our chemical business could suffer.

Our chemical manufacturing business is highly risky and hazardous. We may face environmental and safety problems.

Our chemical manufacturing process produces exhaust gas and waste water which may pollute the environment. If an accident occurs in our chemical plant, toxic gas and other pollutants could leak and cause serious pollution problems. Moreover, most of our chemical products are flammable, explosive, and dangerous and pose a threat to the health and safety of our employees and residents around our facility, and if any accident occurs during manufacturing or in transportation, there could be dire consequences.

The cost of our raw materials fluctuates significantly, which may adversely impact our profit margin and financial position

Our chemical business uses coal as raw material. In the last two years, coal prices have fluctuated substantially. Although the price for coal dropped last year, it may go up again in the future due to the rapid development of the Chinese economy and the resulting huge demand for energy. If the price for coal increases again, our profit margin could decrease considerably.

Our failure to comply with ongoing governmental regulations could hurt our operations and reduce our market share.

In China, the chemical industry is undergoing increasing regulations as environmental awareness increases in China. The trend is that the Chinese government toughens its regulations and penalties for violations of environmental regulations. New regulatory actions are constantly changing our industry. Although we believe we have complied with applicable government regulations, there is no assurance that we will be able to do so in the future.

Our financial results may be affected by mandated changes in accounting and financial reporting.

We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. These principles are subject to interpretation by the Securities and Exchange Commission and various bodies formed to interpret and create appropriate accounting policies. A change in these policies may have a significant effect on our reported results and may even retroactively affect previously reported transactions.

Our auditors have qualified the Company as a “Going Concern” in the audit opinion.

The Company received a report from its independent registered public accounting firm for the year ended March 31, 2009, containing an explanatory paragraph stating that the Company's net loss for the year and working capital deficit raise substantial doubt about the Company's ability to continue as a going concern.

RISKS RELATING TO THE PEOPLE’S REPUBLIC OF CHINA

Certain political and economic considerations relating to PRC could adversely affect our Company.

The PRC is transitioning from a planned economy to a market economy. While the PRC government has pursued economic reforms since its adoption of the open-door policy in 1978, a large portion of the PRC economy is still operating under five-year plans and annual state plans. Through these plans and other economic measures, such as control on foreign exchange, taxation and restrictions on foreign participation in the domestic market of various industries, the PRC government exerts considerable direct and indirect influence on the economy. Many of the economic reforms carried out by the PRC government are unprecedented or experimental, and are expected to be refined and improved.

Other political, economic and social factors can also lead to further readjustment of such reforms. This refining and readjustment process may not necessarily have a positive effect on our operations or future business development. Our operating results may be adversely affected by changes in the PRC’s economic and social conditions as well as by changes in the policies of the PRC government, such as changes in laws and regulations (or the official interpretation thereof), measures which may be introduced to control inflation, changes in the interest rate or method of taxation, and the imposition of additional restrictions on currency conversion.

The recent nature and uncertain application of many PRC laws applicable to us create an uncertain environment for business operations and they could have a negative effect on us.

The PRC legal system is a civil law system. Unlike the common law system, the civil law system is based on written statutes in which decided legal cases have little value as precedents. In 1979, the PRC began to promulgate a comprehensive system of laws and has since introduced many laws and regulations to provide general guidance on economic and business practices in the PRC and to regulate foreign investment. Progress has been made in the promulgation of laws and regulations dealing with economic matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. The promulgation of new laws, changes of existing laws and the abrogation of local regulations by national laws could have a negative impact on our business and business prospects. In addition, as these laws, regulations and legal requirements are relatively recent, their interpretation and enforcement involve significant uncertainty.

Currency conversion and exchange rate volatility could adversely affect our financial condition.

The PRC government imposes control over the conversion of Renminbi into foreign currencies. Under the current unified floating exchange rate system, the People’s Bank of China publishes an exchange rate, which we refer to as the PBOC exchange rate, based on the previous day’s dealings in the inter-bank foreign exchange market. Financial institutions authorized to deal in foreign currency may enter into foreign exchange transactions at exchange rates within an authorized range above or below the PBOC exchange rate according to market conditions.

Pursuant to the Foreign Exchange Control Regulations of the PRC issued by the State Council which came into effect on April 1, 1996, and the Regulations on the Administration of Foreign Exchange Settlement, Sale and Payment of the PRC which came into effect on July 1, 1996, regarding foreign exchange control, conversion of Renminbi into foreign exchange by Foreign Investment Enterprises, or FIEs, for use on current account items, including the distribution of dividends and profits to foreign investors, is permissible. FIEs are permitted to convert their after-tax dividends and profits to foreign exchange and remit such foreign exchange to their foreign exchange bank accounts in the PRC. Conversion of Renminbi into foreign currencies for capital account items, including direct investment, loans, and security investment, is still under certain restrictions. On January 14, 1997, the State Council amended the Foreign Exchange Control Regulations and added, among other things, an important provision, which provides that the PRC government shall not impose restrictions on recurring international payments and transfers under current account items.

Enterprises in the PRC (including FIEs) which require foreign exchange for transactions relating to current account items, may, without approval of the State Administration of Foreign Exchange, or SAFE, effect payment from their foreign exchange account or convert and pay at the designated foreign exchange banks by providing valid receipts and proofs.

Convertibility of foreign exchange in respect of capital account items, such as direct investment and capital contribution, is still subject to certain restrictions, and prior approval from the SAFE or its relevant branches must be sought.

Since 1994, the exchange rate for Renminbi against the United States dollars has remained relatively stable, most of the time in the region of approximately RMB8.28 to US$1.00. However, in 2005, the Chinese government announced that would begin pegging the exchange rate of the Chinese Renminbi against a number of currencies, rather than just the U.S. dollar. As our operations are primarily in China, any significant revaluation of the Chinese Renminbi may materially and adversely affect our cash flows, revenues and financial condition. For example, to the extent that we need to convert United States dollars into Chinese Renminbi for our operations, appreciation of this currency against the United States dollar could have a material adverse effect on our business, financial condition and results of operations. Conversely, if we decide to convert Chinese Renminbi into United States dollars for other business purposes and the United States dollar appreciates against this currency, the United States dollar equivalent of the Chinese Renminbi we convert would be reduced.

It may be difficult to effect service of process and enforcement of legal judgments upon our company and our officers and directors because they reside outside the United States.

As our operations are presently based in China and our officers and certain of our directors reside in China, service of process on our company and our officers and certain directors may be difficult to effect within the United States. Also, our main assets are located in China and any judgment obtained in the United States against us may not be enforceable outside the United States.

Any future outbreak of avian influenza, or the Asian Bird Flu, or any other epidemic in China could have a material adverse effect on our business operations, financial condition and results of operations.

Since mid-December 2003, a growing number of Asian countries have reported outbreaks of highly pathogenic avian influenza in chickens and ducks. Since all of our operations are in China, an outbreak of the Asian Bird Flu in China in the future may disrupt our business operations and have a material adverse effect on our financial condition and results of operations. For example, an new outbreak of Asian Bird Flu, or any other epidemic, may reduce the level of economic activity in affected areas, which may lead to a reduction in our revenue if our clients cancel existing contracts or defer future expenditures. In addition, health or other government regulations may require temporary closure of our offices, or the offices of our customers or partners, which will severely disrupt our business operations and have a material adverse effect on our financial condition and results of operations.

Our business may be affected by unexpected changes in regulatory requirements in the jurisdictions in which we operate.

We are subject to many general regulations governing business entities and their behavior in China and in other jurisdictions in which we have operations. In particular, we are subject to laws and regulations covering food, health supplements and pharmaceutical products. Such regulations typically deal with licensing, approvals and permits. Any change in product licensing may make our products more or less available on the market. Such changes may have a positive or negative impact on the sale of our products and may directly impact the associated costs in compliance and our operational and financial viability. Such regulatory environment also covers any existing or potential trade barriers in the form of import tariff and taxes that may make it difficult for us to import our products to certain countries and regions, which would limit any potential expansion.

We may have difficulty in attracting talent.

As we plan to expand, we will have to attract managerial staff. We may not be able to identify and retain qualified personnel due to our lack of understanding of different cultures and lack of local contacts. This may impede any potential expansion.

We may experience currency fluctuation and longer exchange rate payment cycles.

The local currencies in the countries in which we sell our products may fluctuate in value in relation to other currencies. Such fluctuations may affect the costs of our products sold and the value of our local currency profits. While we are not conducting any meaningful operations in countries other than China at the present time, we may expand to other countries and may then have an increased risk of exposure of our business to currency fluctuation.

All of our assets are located in China, any dividends of proceeds from liquidation is subject to the approval of the relevant Chinese government agencies.

Our assets are located inside China. Under the laws governing foreign invested enterprises in China, dividend distribution and liquidation are allowed but subject to special procedures under the relevant laws and rules. Any dividend payment will be subject to the decision of the board of directors and subject to foreign exchange rules governing such repatriation. Any liquidation is subject to both the relevant government agency’s approval and supervision as well the foreign exchange control. This may generate additional risk for our investors in case of dividend payment and liquidation.

Changes in China’s political or economic situation could harm us and our operational results

Economic reforms adopted by the Chinese government have had a positive effect on the economic development of the country, but the government could change these economic reforms or any of the legal systems at any time. This could either benefit or damage our operations and profitability. Some of the things that could have this effect are:

Level of government involvement in the economy;

Control of foreign exchange;

Methods of allocation resources;

Balance of payments position;

International trade restrictions; and

International conflict.

The Chinese government exerts substantial influence over the manner in which we must conduct our business activities.

China only recently has permitted provincial and local economic autonomy and private economic activities. Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, import and export tariffs, environmental regulations, land use rights, property and other matters. We believe that our operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations.

Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties or joint ventures.

Future inflation in China may inhibit our activity to conduct business in China.

In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation. During the past ten years, the rate of inflation in China has been as high as 20.7% and as low as -2.2%. These factors have led to the adoption by Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. While inflation has been more moderate since 1995, high inflation may in the future cause Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China and thereby harm the market for our products.

The value of our securities will be affected by the foreign exchange rate between U.S. dollars and Renminbi.

The value of our common stock will be affected by the foreign exchange rate between U.S. dollars and Renminbi, and between those currencies and other currencies in which our sales may be denominated. For example, to the extent that we need to convert U.S. dollars into Renminbi for our operational needs and should the Renminbi appreciate against the U.S. dollar at that time, our financial position, the business of the Company, and the price of our common stock may be harmed. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of declaring dividends on our common stock or for other business purposes and the U.S. dollar appreciates against the Renminbi, the U.S. dollar equivalent of our earnings from our subsidiaries in China would be reduced.

We are subject to the United States Foreign Corrupt Practices Act.

We are required to comply with the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. In addition, we are required to maintain records that accurately and fairly represent our transactions and have an adequate system of internal accounting controls. Foreign companies, including some that may compete with us, are not subject to these prohibitions, and therefore may have a competitive advantage over us. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in the PRC, particularly in our industry since it deals with contracts from the Chinese Government, and our executive officers and employees have not been subject to the United States Foreign Corrupt Practices Act prior to the completion of the Exchange Agreement (defined herein). If our competitors engage in these practices they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. We can make no assurance that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

RISKS RELATING TO OUR COMMON STOCK

The market price for shares of our common stock could be volatile; the sale of material amounts of our common stock could reduce the price of our common stock and encourage short sales.

The market price for the shares of our common stock may fluctuate in response to a number of factors, many of which are beyond our control. Such factors may include, without limitation, the general economic and monetary environment, quarter-to-quarter variations in our anticipated and actual operating results, future financing activities and the open-market trading of our shares in particular.

Our common stock price is volatile and could decline in the future.

The stock market, in general, and the market price for shares of pharmaceutical companies in particular, have experienced extreme stock price fluctuations. In some cases, these fluctuations have been unrelated to the operating performance of the affected companies. Many companies in the pharmaceutical and related industries have experienced dramatic volatility in the market prices of their common stock. We believe that a number of factors, both within and outside of our control, could cause the price of our common stock to fluctuate, perhaps substantially. Factors such as the following could have a significant adverse impact on the market price of our common stock:

the results of preclinical studies and clinical trials by us or by our competitors;

concern as to, or other evidence of, the safety or efficacy of our proposed products or our competitors’ products;

announcements of technological innovations or new products by us or our competitors;

developments concerning our proprietary rights or our competitors’ rights (including litigation);

our ability to obtain additional financing and, if available, the terms and conditions of the financing;

our financial position and results of operations;

litigation;

period-to-period fluctuations in our operating results;

changes in estimates of our performance by any securities analysts;

new regulatory requirements and changes in the existing regulatory environment;

market conditions for life science stocks in general;

the issuance of new equity securities in a future offering;

changes in interest rates;

market conditions of securities traded on the NASDAQ Stock Market;

investor perceptions of us and the medical device industry generally; and

general economic and other national conditions.

Shares eligible for future sale may adversely affect the market price of our common stock.

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144, promulgated under the Securities Act of 1933, as amended, subject to certain limitations. In general, pursuant to Rule 144, a stockholder (or stockholders whose shares are aggregated) who is an affiliate of the Company and has satisfied a six-month holding period may, under certain circumstances, sell within any three-month period a number of securities which does not exceed the greater of 1% of the then outstanding shares of common stock or the average weekly trading volume of the class during the four calendar weeks prior to such sale. Rule 144 also permits, under certain circumstances, the sale of securities, without any limitations, by a non-affiliate of our company that has satisfied a one-year holding period. Any substantial sale of common stock pursuant to Rule 144 or pursuant to this resale prospectus may have an adverse effect on the market price of our common stock.

One stockholder exercises significant control over matters requiring shareholder approval.

After giving effect to the issuance of all the shares of common stock, Auto Chance International Limited has voting power equal to approximately 59.34% of our voting securities. As a result, Auto Chance International Limited, through such stock ownership, exercises significant control over all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership in Auto Chance International Limited may also have the effect of delaying or preventing a change in control of us that may be otherwise viewed as beneficial by shareholders other than Auto Chance International Limited.

We may incur significant costs to ensure compliance with U.S. corporate governance and accounting requirements.

We may incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002 and other rules implemented by the SEC. We expect all of these applicable rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

We may be required to raise additional financing by issuing new securities with terms or rights superior to those of our shares of common stock, which could adversely affect the market price of our shares of common stock.

We may require additional financing to fund future operations, including expansion in current and new markets, programming development and acquisition, capital costs and the costs of any necessary implementation of technological innovations or alternative technologies. We may not be able to obtain financing on favorable terms, if at all. If we raise additional funds by issuing equity securities, the percentage ownership of our current shareholders will be reduced, and the holders of the new equity securities may have rights superior to those of the holders of shares of common stock, which could adversely affect the market price and the voting power of shares of our common stock. If we raise additional funds by issuing debt securities, the holders of these debt securities would similarly have some rights senior to those of the holders of shares of common stock, and the terms of these debt securities could impose restrictions on operations and create a significant interest expense for us.

We may have difficulty raising necessary capital to fund operations as a result of market price volatility for our shares of common stock.

In recent years, the securities markets in the United States have experienced a high level of price and volume volatility, and the market price of securities of many companies have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying asset values or prospects of such companies. For these reasons, our shares of common stock can also be expected to be subject to volatility resulting from purely market forces over which we will have no control. If our business development plans are successful, we may require additional financing to continue to develop and exploit existing and new technologies and to expand into new markets. The exploitation of our technologies may, therefore, be dependent upon our ability to obtain financing through debt and equity or other means.

Standards for compliance with Section 404 of the Sarbanes-Oxley Act of 2002 are uncertain, and if we fail to comply in a timely manner, our business could be harmed and our stock price could decline.

Rules adopted by the SEC, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 require annual assessment of our internal control over financial reporting, and attestation of our assessment by our independent registered public accountants. The annual assessment of our internal controls over financial reporting by our management applies to our financial reporting for the fiscal year ended March 31, 2009. The rules regarding the attestation of our assessment by our independent registered public accountants will apply to our financial reporting for the fiscal year ending March 31, 2010. The standards that must be met for management to assess the internal control over financial reporting as effective are new and complex, and require significant documentation, testing and possible remediation to meet the detailed standards and will impose significant additional expenses on us. We may encounter problems or delays in completing activities necessary to make an assessment of our internal control over financial reporting. In addition, the attestation process by our independent registered public accountants is new and we may encounter problems or delays in completing the implementation of any requested improvements and receiving an attestation of our assessment by our independent registered public accountants. If we cannot assess our internal control over financial reporting as effective, or our independent registered public accountants are unable to provide an unqualified attestation report on such assessment, investor confidence and share value may be negatively impacted.

We do not foresee paying cash dividends in the foreseeable future.

We have not paid cash dividends on our stock and we do not plan to pay cash dividends on our stock in the foreseeable future.

Item 1B.

Unresolved Staff Comments.

Not applicable.

Item 2.

Properties.

All land in China is owned by the State. Individuals and companies are permitted to acquire rights to use land or land use rights for specific purposes. In the case of land used for industrial purposes, the land use rights are granted for a period of 50 years. This period may be renewed at the expiration of the initial and any subsequent terms. Granted land use rights are transferable and may be used as security for borrowings and other obligations.

Our office in Henan, China is located at Xicheng Industrial Zone, Luoshan, Xinyang, Henan, PRC. This office consists of approximately 342,142 square meters. The land use agreement has a 50-year term which expires on January 15, 2055.

For the year ended March 31, 2009, the Company incurred $14,881,798 in construction-in-progress costs, which are primarily attributable to the construction of the third phase of Methanol project (200,000 Tons/Year). All these development projects are on the Company’s Henan property.

On August 15, 2006, the Company put in use the 100,000 Ton/Year DME project. This is the 3rd DME project on top of its original 50,000 Ton/Year capacity. With total investment of RMB 80 million (approximately $10 million), this project will leverage advanced technique of a catalytic dehydration methanol process to produce DME.

The third phase of Methanol project with another 200,000 tons capacity was started in November 2007, and we expect it to be completed around the first quarter of calendar year 2010. The project will be entering the debugging stage at the first quarter of calendar year 2010 after the completion of the foundational construction; we expect to see the production be ramped up at the first quarter of calendar year 2010.

We believe that all our property and equipment have been adequately maintained, are generally in good condition, and are suitable and adequate for our business.

Item 3.

Legal Proceedings

On December 29, 2004, the Company entered into an agreement (the “Luoshan Agreement”) for the acquisition of the bankrupted Luoshan Fertilizer Factory and to pay back approximately $1.3 million in debt owed by Xixian Fertilizer Factory (the principal shareholder of Luoshan Fertilizer Factory). Under the Luoshan Agreement, Jinding was to receive a reimbursements of $650,000 from each of the Luoshan county government and the Xi county government, which were to be received before December 29, 2007.

In November 2007, the Company initiated a lawsuit in the Intermediate Court of Xinyang City against the Xi county government for the refusal to repay the note receivable on its due date as set forth under the Luoshan Agreement, seeking the enforcement of the terms of the note receivable and the Luoshan Agreement for payment of the $650,000 by the Xi county government. Final judgment of the lawsuit is still pending and expected to be announced in June or July 2009.

Item 4.

Submission of Matters to a Vote of Security Holders

Our 2009 Annual Meeting of Stockholders (the “Annual Meeting”) was held on March 24, 2009. At the Annual Meeting, each of the Company’s 7 Director nominees was elected to serve on the Board of Directors of the Company until the next Annual Meeting of Stockholders and until their successors are elected and qualified, or until their earlier death, resignation or removal. The voting results are as follows:

Nominated Person	Votes For		Votes Abstained		Votes Against

Chen Si Qiang		11,339,099		110,087		0

Wang Gui Quan		11,340,507		108,679		0

Zhou Dian Chang		11,339,099		110,087		0

Howard S. Barth		11,341,307		107,879		0

Yan Shi		11,340,507		108,679		0

Qi Lei		11,340,307		108,879		0

Xiaokai Cao		11,339,099		110,087		0

No other person received any votes.

PART II

Item 5.

Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

The shares of our common stock are currently traded on the NASDAQ Global Market under the trading symbol “NOEC”. Our shares of common stock were traded on the OTC Bulletin Board until November 2006 under the trading symbol “SPSI.OB” at which point the Company changed its name from Sports Source, Inc. to New Oriental Energy & Chemical Corp. and its trading symbol to “NOEC.OB”. In May of 2007 the Company received approval to list its shares on the NASDAQ Capital Market and began trading under the symbol “NOEC”. On March 6, 2008, NASDAQ Stock Market approved our application to upgrade our listing from the NASDAQ National Market to the NASDAQ Global Market.

Holders

As of June 22, 2009, we had approximately 1,650 holders of record of our common stock, and our common stock had a closing bid price of $1.46 per share.

The following table sets forth the high and low bid information for our common stock for each quarter within the last two fiscal years:

Fiscal Year Ended	Common Stock
	High		Low
March 31, 2009
First Quarter	$	7.40	$	4.65
Second Quarter	$	5.39	$	2.29
Third Quarter	$	2.54	$	0.76
Fourth Quarter	$	1.30	$	0.47

March 31, 2008
First Quarter	$	6.24	$	3.50
Second Quarter	$	8.25	$	2.93
Third Quarter	$	10.10	$	4.20
Fourth Quarter	$	8.59	$	4.26

The source for the high and low closing bid quotations is the Google Finance website and does not reflect inter-dealer prices. Such quotations are without retail mark-ups, mark-downs or commissions, and may not represent actual transactions and have been adjusted for stock dividends or splits.

Outstanding Options, Conversions, and Planned Issuance of Common Stock

There are no warrants or options outstanding to acquire any shares of our common stock

Preferred Stock

Our corporate charter permits us to issue up to 10 million shares of preferred stock from time to time, as are determined by resolution of our Board of Directors. The issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of our Company without further action by stockholders and could adversely affect the rights and powers, including voting rights, of holders of common stock, with us acting in accordance with our corporate charter and bylaws. In certain circumstances, the issuance of preferred stock could depress the market price of the common stock.

There are no shares of preferred stock outstanding.

Dividends

We have never declared or paid any cash dividends or distributions on our common stock. We currently intend to retain our future earnings to support operations and to finance future growth and expansion and, therefore, do not anticipate paying any cash dividends on our common stock in the foreseeable future.

Transfer Agent and Registrar

Our transfer agent is Corporate Stock Transfer, located at 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado 80209. Their telephone number is (303) 282-4800.

Securities Authorized for Issuance Under Equity Compensation Plans

As of the fiscal year ended March 31, 2009, we have no shares of our common stock or preferred stock that are issuable under compensation plans approved by our security holders.

Recent Sales of Unregistered Securities

On October 11, 2006, pursuant to the terms of the Exchange Agreement, the Company acquired all of the issued and outstanding capital stock of KHL from Auto Chance International Limited in exchange for 7,500,000 newly-issued shares of the Company’s common stock.

The issuance set forth above was made in reliance upon the exemptions from registration requirements of the Securities Act of 1933, as amended, contained in Section 4(2) on the basis that such transaction did not involve a public offering. When appropriate, we determined that the purchaser of securities described above was a sophisticated investor with the financial ability to assume the risk of its investment in our securities and acquired such securities for its own account and not with a view to any distribution thereof to the public. Where required by applicable law, the certificates evidencing the securities bear legends stating that the securities are not to be offered, sold or transferred other than pursuant to an effective registration statement under the Securities Act or an exemption from such registration requirements.

Item 6.

Selected Financial Data.

Not required.

Item 7.

Management Discussion and Analysis of Financial Conditions and Results of Operations

The following is management's discussion and analysis of certain significant factors which have affected our financial position and operating results during the periods included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management. This report includes forward-looking statements. Generally, the words "believes," "anticipates," "may," "will," "should," "expect," "intend," "estimate," "continue," and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the SEC from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be place on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.

The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes thereto and other financial information contained elsewhere in this Form 10-K.

Our Company engages in the business of manufacturing and selling urea, liquefied ammonium, methanol, ammonium bicarbonate, dimethyl ether (“DME”) products. The Company’s products are primarily marketed and sold in the PRC.

Our Company currently has the capacity to produce 150,000 tons of ammonia per year, 150,000 tons of DME per year, 150,000 tons of urea per year, 60,000 tons of ammonium bicarbonate per year and 100,000 tons of methanol per year. During the second quarter of fiscal year ended March 31, 2009, we expanded the Company’s annual DME capacity to 150,000 ton per year. For the year end of March 31, 2009, the Company’s total revenues were $52,545,647.

Forward Looking Statements

We are including the following discussion to inform our existing and potential security holders generally of some of the risks and uncertainties that can affect us and to take advantage of the “safe harbor” protection for forward-looking statements that applicable federal securities law affords. From time to time, our management or persons acting on our behalf make forward-looking statements to inform existing and potential security holders about our Company. These forward-looking statements include information about possible or assumed future results of our operations. All statements, other than statements of historical facts, included or incorporated by reference in this report that address activities, events or developments that we expect or anticipate may occur in the future, including such things as future capital expenditures, business strategy, competitive strengths, goals, growth of our business and operations, plans and references to future successes may be considered forward-looking statements. Also, when we use words such as “anticipate,” “believe,” “estimate,” “intend,” “plan,” “project,” “forecast,” “may,” “should,” “budget,” “goal,” “expect,” “probably” or similar expressions, we are making forward-looking statements. Many risks and uncertainties may impact the matters addressed in these forward-looking statements. Our forward-looking statements speak only as of the date made and we will not update such forward-looking statements unless the securities laws require us to do so.

Some of the key factors which could cause our future financial results and performance to vary from those expected include:

The loss of primary customers;

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

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

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

The timing of planned capital expenditures;

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

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

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

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

Other People’s Republic of China (“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.

The information contained in this report, identifies additional factors that could cause our results or performance to differ materially from those we express in our forward-looking statements. Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these assumptions and, therefore, the forward-looking statements based on these assumptions, could themselves prove to be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements which are included in this report and the exhibits and other documents incorporated herein by reference, our inclusion of this information is not a representation by us or any other person that our objectives and plans will be achieved.

SIGNIFICANT ACCOUNTING POLICIES AND MANAGEMENT ESTIMATES

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The policies discussed below are considered by management to be critical to an understanding of our financial statements.

Revenue recognition

Revenue represents the invoiced value of goods sold recognized upon the delivery of goods to the customers. We generally recognize product revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price fee is fixed or determinable, and collectibility is reasonably assured.

Income taxes

Provision for income and other related taxes have been provided in accordance with the tax rates and laws in effect in the PRC.

Income tax expense is computed based on pre-tax income included in the consolidated statements of operations. Deferred income taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if there is a strong likelihood the items will expire before its benefits are realized or if its future utilization is uncertain.

In June 2006, the Financial Accounting Standards Board (“FASB”) issued FIN 48, "Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109," which seeks to reduce the diversity in practice associated with the accounting and reporting for uncertainty in income tax positions. This Interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in an income tax return. FIN 48 presents a two-step process for evaluating a tax position. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, based on the technical merits of the position. The second step is to measure the benefit to be recorded from tax positions that meet the more likely than not recognition threshold, by determining the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement, and recognizing that amount in the financial statements. At the date of adoption, and as of March 31, 2009, the Company does not have a liability for unrecognized tax benefits.

The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is subject to U.S. federal or state income tax examinations by tax authorities for years after 2006. During the periods open to examination, the Company has net operating loss (“NOL”) and tax credit carry forwards for U.S. federal and state tax purposes that have attributes from closed periods. Since these NOLs and tax credit carry forwards may be utilized in future periods, they remain subject to examination. The Company also files certain tax returns in China. As of March 31, 2009 the Company was not aware of any pending income tax examinations by China tax authorities.

The Company’s policy is to record interest and penalties on uncertain tax positions as income tax expense. As of March 31, 2009, the Company has no accrued interest or penalties related to uncertain tax positions.

Inventories

Inventories are stated at the lower of cost or net realizable value, which is based on estimated selling prices less any further costs expected to be incurred for completion and disposal. Cost of raw materials is calculated using the weighted average method. Finished goods costs are determined using the weighted average method and comprise direct materials, direct labor and an appropriate proportion of overhead.

Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements SFAS No. 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No.160 is effective for the Company’s fiscal year beginning April 1, 2009. Management is currently evaluating the effect of this pronouncement on the consolidated financial statements.

SFAS No. 141(R) also establishes principles and requirements for how the acquirer: a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree ; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) will apply prospectively to business combinations for which the acquisition date is on or after Company’s fiscal year beginning December 15, 2008. While the Company has not yet evaluated this statement for the impact, if any, that SFAS No. 141(R) will have on its consolidated financial statements, the Company will be required to expense costs related to any acquisitions after September 30, 2009.

In March 2008, FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities. The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company are currently evaluating the impact of adopting SFAS No.161 on our consolidated financial statements.

In June 2008, the FASB ratified EITF Issue No. 07-05, “Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity's Own Stock” ("EITF 07-05"). EITF 07-05 mandates a two-step process for evaluating whether an equity-linked financial instrument or embedded feature is indexed to the entity's own stock. It is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company do not expect the adoption of EITF 07-05 will have a material impact on results of operations, financial position, or cash flows.

KNOWN TRENDS OR UNCERTAINTIES

The fertilizer production segment is the traditional business of the Company. The market for this segment is stable and rigid. China is one of the largest agricultural producing countries, so the demand for such products are strong. We believe the market demands for the alternative energy products segment, which includes Methanol and DME, will continually increase. We will focus our efforts on fertilizer production, but there will not be any significant expansion plan in the near future. We have put more effort in alternative energy production by building a new 200,000 tons/year methanol production line, which is expected to be completed by the first quarter of calendar year 2010.

All the Company’s current products are manufactured using coal as the raw material. As the market price of feed coal has shown a significant increasing trend, production costs have increased as well. The selling prices of some of our fertilizer products have increased correspondingly. For example, the current market selling price for Urea is about 1,700 RMB/Ton. Recently, the National Development and Reform Committee of People’s Republic of China have announced to increase the price for refined oil and electricity. This might stimulate further growth in such a trend of increasing prices.

CAPITAL EXPENDITURES

Capital expenditures are mainly related to the on-going project of 200,000 tons/year Methanol, which is expected to be completed around the first quarter of calendar year 2010. The funding for those projects mainly comes from bank debt.

OFF BALANCE-SHEET FINANCING ARRANGEMENTS

The Company does not have any off-balance sheet financing arrangements.

RESULTS OF OPERATION

Our operating results are presented on a consolidated basis for the year ended March 31, 2009, as compared to the year ended March 31, 2008.

The following table sets forth the amounts and the percentage relationship to revenues of certain items in our consolidated statements of income (loss) for the 12 months ended March 31, 2009 and 2008.

	The year Ended March 31, 2009						The year Ended March 31, 2008						Comparisons
	Amount			Percentage of Revenues			Amount			Percentage of Revenues			Change in Amount			Increase (Decrease) in
Item	US $			(%)			US $			(%)			US $			Percentage (%)

Revenues		52,545,647			100.00	%		67,832,920			100.00	%		(15,287,273	)		(22.54	)%
Cost of Goods Sold		54,038,734			102.84	%		56,978,425			84.00	%		(2,939,691	)		(5.16	)%
Gross (loss) profit		(1,493,087	)		(2.84	)%		10,854,495			16.00	%		(12,347,582	)		(113.76	)%
General & administrative		2,626,115			5.00	%		3,088,184			4.55	%		(462,069	)		(14.96	)%
Selling and distribution		1,147,596			2.18	%		1,171,737			1.73	%		(24,141	)		(2.06	)%
Research and development		141,029			0.27	%		75,961			0.11	%		65,068			85.66	%
(Loss) income from operations		(5,407,827	)		(10.29	)%		6,518,613			9.61	%		(11,926,440	)		(182.96	)%
Interest expense, net		(1,095,716	)		(2.09	)%		(516,032	)		(0.76	)%		(579,684	)		112.33	%
Government grants		1,437,748			2.74	%		85,405			0.13	%		1,352,343			1583.45	%
Other (expenses) income, net		(98,206	)		(0.19	)%		(115,016	)		(0.17	)%		16,810			(14.62	)%
(Loss) income before tax		(5,164,001	)		(9.83	)%		5,972,970			8.81	%		(11,136,971	)		(186.46	)%
Income tax benefit (expense)		1,434,994			2.73	%		(1,932,695	)		(2.85	)%		3,367,689			(174.25	)%
(Loss) income from continuing operations		(3,729,007	)		(7.10	)%		4,040,275			5.96	%		(7,769,282	)		(192.30	)%
Income from discontinued operation		-			-			1,760			0.00	%		(1,760	)		(100.00	)%
Gain from disposition of discontinued operation		-			-			20,906			0.03	%		(20,906	)		(100.00	)%
Net (loss) income		(3,729,007	)		(7.10	)%		4,062,941			5.99	%		(7,791,948	)		(191.78	)%
Foreign currency translation gain		457,781			0.87	%		1,618,430			2.39	%		(1,160,649	)		(71.71	)%
Other comprehensive income		457,781			0.87	%		1,618,430			2.39	%		(1,160,649	)		(71.71	)%
Comprehensive (loss) income		(3,271,226	)		(6.23	)%		5,681,371			8.38	%		(8,952,597	)		(157.58	)%
Weighted average shares outstanding basic and diluted		12,640,000						12,640,000						0			0.00	%
Net (loss) income per share, basic and diluted		(0.30	)					0.32						(0.62	)		(191.78	)%

REVENUE

The Company’s consolidated revenue for the year ended March 31, 2009 was $52,545,647, which represented a decrease of 22.54% from the same period in the prior year. This decrease was mainly due to the decrease in the selling price and sales volume of DME product and the increase of the price of raw materials, which resulted in higher production costs. As a result, the gross profit of DME decreased accordingly. The Company adjusted its product structure and reduced the production volume of DME.

	2009					2008					Comparisons
Products	Amount US $		Percentage of Revenue (%)			Amount US $		Percentage of Revenue (%)			Change in Amount US $			Increase (Decrease) in Percentage (%)
Urea		34,490,637		65.65	%		30,774,271		45.37	%		3,716,366			12.08	%
Ammonium bicarbonate		3,716,301		7.07	%		2,320,609		3.42	%		1,395,692			60.14	%
Methanol		1,813,959		3.45	%		417,180		0.62	%		1,396,779			334.81	%
Liquefied Ammonia		972,655		1.85	%		1,468,603		2.17	%		(495,948	)		(33.77	)%
DME		11,160,655		21.24	%		32,626,266		48.10	%		(21,465,611	)		(65.79	)%
Ammonia Water		391,440		0.74	%		225,991		0.33	%		165,449			73.21	%
Total		52,545,647		100.00	%		67,832,920		100.00	%		(15,287,273	)		(22.54	)%

The sales of Urea increased 12.08% to $34,490,637 for the year ended March 31, 2009 from $30,774,271 for the year ended March 31, 2008. This increase was mainly due to the increase in the selling price of Urea as compared to the same period of last year.

The revenue generated from Ammonium Bicarbonate increased 60.14% to $3,716,301 for the year ended March 31, 2009 from $2,320,609 for the year ended March 31, 2008. This increase was mainly due to the increase in sales volume and the selling price of Ammonium Bicarbonate as compared to the same period of last year.

The sales of Methanol increased 334.81% to $1,813,959 for the year ended March 31, 2009 from $417,180 for the year ended March 31, 2008. This increase was mainly due to the increase in sales volume of Methanol as compared to the same period of last year.

The revenue contribution from Liquefied Ammonia decreased 33.77% to $972,655 for the year ended March 31, 2009 from $1,468,603 for the year ended March 31, 2008. The Liquefied Ammonia is an intermediate product created during the synthetic ammonia production process and can be sold directly as finished product. Normally, Liquefied Ammonia is converted to Urea which results in a higher return for the Company. Therefore, we only sell Liquefied Ammonia to external buyers when: i) the Urea production line was unable to fully convert the Liquefied Ammonia (such as failure of the production line); or ii) the selling price of Liquefied Ammonia is relatively high due to market conditions.

The sales of DME decreased 65.79% to $11,160,655 for the year ended March 31, 2009 from $32,626,266 for the year ended March 31, 2008. This decrease was mainly due to the decrease in the selling price and sales volume of DME product. Additionally, the increase of the price of raw materials resulted in higher production costs. As a result, the gross profit of DME decreased accordingly. The Company adjusted its product structure and reduced the production volume of DME.

The sales of Ammonia Water increased 73.21% to $391,440 for the year ended March 31, 2009 from $225,991 for the year ended March 31, 2008. Ammonia Water is a by product created during the synthetic ammonia production process. During the year, we improved our technology and organized production more scientifically to enhance the recycle rate of Ammonia Water, which has resulted in higher output and sales of Ammonia Water. The increase of Ammonia Water output not only could increase income, but also could reduce environmental pollution.

The following is a breakdown of our revenues geographically:

	2009					2008					Comparisons
Provinces	Amount US $		Percentage of Revenue (%)			Amount US $		Percentage of Revenue (%)			Change in Amount US $			Increase (Decrease) in Percentage (%)
Henan Province		19,284,127		36.71	%		23,858,024		35.17	%		(4,573,897	)		(19.17	)%
Guangdong Province		21,892,372		41.66	%		16,382,947		24.15	%		5,509,425			33.63	%
Anhui Province		3,038,519		5.78	%		3,553,826		5.24	%		(515,307	)		(14.50	)%
Hubei Province		4,672,991		8.89	%		13,857,085		20.43	%		(9,184,094	)		(66.28	)%
Hunan Province		250,896		0.48	%		276,842		0.41	%		(25,946	)		(9.37	)%
Guangxi Province		-		-			322,413		0.48	%		(322,413	)		(100.00	)%
Jiangxi Province		1,053,286		2.00	%		2,569,424		3.79	%		(1,516,138	)		(59.01	)%
Zhe Jiang Province		-		—			179,288		0.26	%		(179,288	)		(100.00	)%
Shan Dong Province		1,855,865		3.53	%		24,604		0.04	%		1,831,261			7442.94	%
Hebei Province		497,591		0.95	%		6,796,978		10.02	%		(6,299,387	)		(92.68	)%
Fujian Province		-		-			11,489		0.02	%		(11,489	)		(100.00	)%
Total		52,545,647		100.00	%		67,832,920		100.00	%		(15,287,273	)	(22.54		)%

For the year ended March 31, 2009, sales in Guangdong Province and Shandong Province increased by 33.63% and 7,442.94%, respectively, as compared to the same period last year. This was mainly attributable to the Company taking advantage of the increase in the selling price of fertilizer product in the domestic market, adjusting its product structure and enhancing its marketing efforts. The sales of Urea to these provinces increased as compared to the same period last year.

The sales for the year ended March 31, 2009 in other provinces decreased as compared to the same period last year. The Company made adjustments to its product structure, the sales volume of DME in these provinces decreased, and the decrease was in line with the increase in the price of raw materials, which resulted in higher production costs.

Top 5 Customers:

		% of Total Revenue
Customer Name	Sales	Fiscal Year Ended March 31, 2009			Fiscal Year Ended March 31, 2008
1. Sinofert Co., Ltd	32% Urea		20.89	%		19.81	%
2. Shan Tou Supply and Marketing Cooperatives Group	17% Urea		11.46	%		4.30	%
3. Xinyang Chen Dongsheng	34% DME		7.20	%		7.79	%
4. Guangdong Province Materials Import and Export Co., Ltd	11% Urea		6.98	%		-
5. Yang Xin Yong Chang Fuel Co., Ltd.	14% DME		2.96	%		-

Urea was mainly sold to customers 1, 2 and 4, which accounted for 60% of the total sales of Urea. We expect this trend to continue for the foreseeable future. DME was sold to customers 3 and 5, which accounted for 48% of the total sales of DME. We expect this trend will continue for the foreseeable future.

COST OF GOODS SOLD (COGS)

COGS for the year ended March 31, 2009 was $54,038,734 which is 102.84%% of total revenues and represents a 5.16% decrease as compared to $56,978,425 and 84% of total revenues for the year ended March 31, 2008. This was in line with the lower sales volume offset by increased raw materials prices.

China has significant coal resources, and while the price of coal has been at elevated levels compared to historical norms, management believes that a consolidation is in order, which should reduce prices and benefit the Company going forward. Initially it was not feasible to include the sifted fine-coal derived from lump-coal directly in the chemical process, so it was utilized together with other fine-coal purchased from other suppliers only as a heating and burning resource due to fine-coal having a market price 25% less than lump-coal. With the launch of the “coal-stick” line last year, which utilized fine-coal in a new stick-shaped product, and the launch of differential-pressure dynamos in fiscal year 2009, our management team is confident that production costs will be reduced next year.

COGS sold as a percentage of revenue may fluctuate in the future. This fluctuation may primarily be due to changes in the price of raw materials, which can have a significant impact on the COGS. The Company will adopt proper measures to reduce fluctuations in the COGS.

GROSS PROFIT

For the fiscal years ended March 31, 2009 and 2008, the relevant portions of the statements of income (loss) are presented below:

	2009						2008					Comparisons
Item	Amount US $			Percentage of Revenue (%)			Amount US $		Percentage of Revenue (%)			Change in Amount US $			Increase (Decrease) in Percentage (%)
Revenues		52,545,647			100.00	%		67,832,920		100.00	%		(15,287,273	)		(22.54	)%
Cost of Goods Sold		54,038,734			102.84	%		56,978,425		84.00	%		(2,939,691	)		(5.16	)%
Gross (Loss) Profit		(1,493,087	)		(2.84	)%		10,854,495		16.00	%		(12,347,582	)		(113.76	)%

Gross profit is calculated by deducting from revenues the raw materials used to produce the finished products as well as charges for depreciation, employee welfare, repairs to machinery and equipment, all inventorial costs and all other costs incident to or necessary for the production of our products.

The Company’s gross profit decreased by $12,347,582, or 113.76%, to $(1,493,087) for the year ended March 31, 2009 as compared to $10,854,495 for the year ended March 31, 2008. This decrease was mainly due to the decrease in the selling price of DME product, and the increase of the price of raw materials, which resulted in higher production costs. As a result, the Company adjusted its product structure, and the production volume and the sales volume of DME decreased substantially as compared to the same period last year.

OPERATING (LOSS) INCOME

The Company’s consolidated operating (loss) income for the year ended March 31, 2009 decreased 182.96% to a loss of $(5,407,827), from income of $6,518,613 reported for the year ended March 31, 2008. This decrease was mainly due to the decrease in the selling price of DME product, and the increase of the price of raw materials, which resulted in higher production costs.

OPERATING EXPENSES

Selling and distribution expenses

The Company incurred selling and distribution expenses of $1,147,596 for the year ended March 31, 2009, a decrease of $24,141, or 2.06%, as compared to $1,171,737 for the year ended March 31, 2008. This decrease was mainly attributable to the decrease in sales of urea to other provinces, which resulted in the decrease in the selling and distribution expenses as compared to the same period last year.

General and administrative expenses

The Company incurred general and administrative expenses of $2,626,115 for the year ended March 31, 2009, representing a decrease of $462,069 or 14.96%, as compared to $3,088,184 for the year ended March 31, 2008. This decrease was mainly due to the decrease in the implementation costs of internal control and the relevant consulting fees as the Company has improved the corporate governance structure and strengthened internal controls in this reporting period as compared to the same period last year.

Research and development

The Company incurred R&D expenses of $141,029 for the year ended March 31, 2009, representing an increase of $65,068, or 85.66%, compared to $75,961 for the year ended March 31, 2008.

INTEREST EXPENSE, NET

Interest expense for the fiscal year ended March 31, 2009 was $1,095,716, which represents a 112.33% increase from $516,032 for the prior fiscal year. The increase was the result of the increase scale of operation, which has led to the growing demand for financing; therefore the cost of financing increased correspondingly.

GOVERNMENT GRANTS

Government grants represent grants received from the PRC Government to assist the Company’s environment protection. This amount is recognized when the proceeds are received or collectible.

During the fiscal years ended March 31, 2009 and 2008, grants amounting to $1,437,748 and $85,405 were received from Henan provincial bureau of finance, respectively. This grant money is used to support the Company’s environmental protection program. This subsidy is allocated according to the progress of the project.

OTHER EXPENSES, NET

Other expenses for the fiscal year ended March 31, 2009 were $98,206, which represents a 14.62% decrease from $115,016 for the year ended March 31, 2008.

INCOME TAX

On March 16, 2007, the National People’s Congress of China approved the Corporate Income Tax Law (the “new CIT Law”), which became effective on January 1, 2008. Under the new CIT Law, the corporate income tax rate applicable to the Company beginning January 1, 2008 is 25%, replacing the previously applicable tax rate of 33%.

The Company’s income tax expense differs from the “expected” tax expense (computed by applying the CIT rate, varying from 25% to 33% percent to income before income taxes) as follows:

	2009		2008

Computed “expected” benefit (expense)	$	1,291,000	$	(1,971,080	)
Effect of tax rate change		-		(101,242	)
Permanent differences		143,994		139,627

Income tax benefit (expense)	$	1,434,994	$	(1,932,695	)

For the year ended March 31, 2009, the Company had an income tax benefit of $1,434,994 mainly due to the net operating loss which can be carried forward for five years under PRC tax law. The Company believes that it will generate sufficient profit in future years to deduct such net operating loss.

NET INCOME (LOSS)

The Company’s net loss of $3,729,007 for the year ended March 31, 2009 represented a decrease of $7,791,948, or 191.78%, as compared to a net income of $4,062,941 for the year ended March 31, 2008. This decrease was mainly due to the following factors: (i) the increase in the price of raw materials resulting in higher production costs, in response to which the Company adjusted its product structure, and (ii) the decrease in the selling price and the sales volume of DME product, which resulted in a substantial decrease in the sales revenue of DME.

Earnings (loss) per share decreased from $0.32 earnings per share to $0.30 loss per share, which was due to a change from net income to net loss as compared to the same period last year.

RESULTS BY SEGMENT

The Company has determined that there are two reportable segments:

The fertilizer segment is made up of four business units, which involve the manufacture and sale of Urea, Ammonium Bicarbonate, Liquefied Ammonia and Ammonia Water.

The fuel segment involves the manufacture and sale of Methanol, Dimethyl Ether (“DME”).

Fuel Segment

DME

	For the Years Ended March 31,
	2009			2008
Revenues	$	11,160,655		$	32,626,266
COGS	$	11,472,683		$	27,439,177
Gross (loss) profit	$	(312,028	)	$	5,187,089
Gross (loss) profit %		(2.80	)%		15.90	%

DME revenues decreased by $21,465,611 for the fiscal year ended March 31, 2009 as compared to 2008. This decrease was mainly due to the decrease in the selling price and sales volume of DME product.

COGS decreased by $15,966,494 for the fiscal year ended March 31, 2009 as compared to 2008. This reflects the decrease in sales volume of DME, resulting in a corresponding decrease in COGS.

Gross profit decreased by $ 5,499,117 for the fiscal year ended March 31, 2009 as compared to 2008. Gross profit as a percentage of revenues decreased from 15.90% to (2.80) %. This decrease was mainly due to the decrease in the selling price and sales volume of DME product. At the meanwhile, the increase of the price of raw materials resulted in higher production costs. As a result, the gross profit of DME decreased accordingly.

Methanol

	For the Years Ended March 31,
	2009			2008
Revenues	$	1,813,959		$	417,180
COGS	$	2,541,367		$	309,292
Gross (loss) profit	$	(727,408	)	$	107,888
Gross (loss) profit %		(40.10	)%		25.86	%

Methanol revenues increased by $1,396,779 for the fiscal year ended March 31, 2009 as compared to 2008. This increase was mainly due to the increase in sales volume of Methanol product as compared to the same period last year.

COGS increased by $2,232,075 for the fiscal year ended March 31, 2009 as compared to 2008, which is in line with the increase in sales.

Gross (loss) profit decreased by $835,296 for the fiscal year ended March 31, 2009 as compared to the fiscal year ended March 31, 2008. Gross profit as a percentage of revenues decreased from 25.86% to (40.10)%. This decrease was mainly due to the decrease in the selling price of Methanol product and the increase of the price of raw materials, which resulted in higher production costs.

Fertilizer Segment

Urea

	For the Years Ended March 31,
	2009			2008
Revenues	$	34,490,637		$	30,774,271
COGS	$	34,353,676		$	25,257,671
Gross profit	$	136,961		$	5,516,600
Gross profit %		0.40	%		17.93	%

Urea revenues increased by $3,716,366 for the fiscal year ended March 31, 2009 as compared to 2008. This increase is attributable to the increase in the selling price of Urea as compared to the same period last year.

COGS increased by $9,096,005 for the fiscal year ended March 31, 2009 as compared to 2008. This increase was mainly due to the increase of the price of raw materials, which resulted in higher production costs.

Gross profit decreased by $5,379,639 for the fiscal year ended March 31, 2009 as compared to 2008. Gross profit as a percentage of revenues decreased from 17.93% to 0.40%. This decrease is due to the increase of the price of raw materials, which resulted in higher production costs.

Ammonium Bicarbonate

	For the Years Ended March 31,
	2009			2008
Revenues	$	3,716,301		$	2,320,609
COGS	$	3,983,331		$	2,327,743
Gross loss	$	(267,030	)	$	(7,134	)
Gross loss %		(7.19	)%		(0.31	)%

Ammonium Bicarbonate revenues increased by $1,395,692 for the fiscal year ended March 31, 2009 as compared to 2008. This increase was mainly due to the increase in the sales volume of product as compared to the same period last year.

COGS increased by $1,655,588 for the fiscal year ended March 31, 2009 as compared to 2008, which is in line with the increase in sales.

Gross loss increased by $(259,896) for the fiscal year ended March 31, 2009 as compared to 2008. Gross loss as a percentage of revenues increased from (0.31%) to (7.19%). The increase of gross loss is attributable to the increase of the price of raw materials, which resulted in higher production costs.

Liquefied Ammonia

	For the Years Ended March 31,
	2009			2008
Revenues	$	972,655		$	1,468,603
COGS	$	1,230,332		$	1,434,359
Gross (loss) profit	$	(257,677	)	$	34,244
Gross (loss) profit %		(26.49	)%		2.33	%

Liquefied Ammonia revenues decreased by $495,948 for the fiscal year ended March 31, 2009 as compared to 2008. This reflected the decrease of the quantity of sales.

COGS decreased by $204,027 for the fiscal year ended March 31, 2009 as compared to 2008, which is in line with the sales decrease.

Gross profit decreased by $291,921 for the fiscal year ended March 31, 2009 as compared to 2008. Gross profit as a percentage of revenues decreased from 2.33% to (26.49) %. The Liquefied Ammonia is an intermediate product created during the synthetic ammonia production process and can be sold directly as finished product. Normally, Liquefied Ammonia is converted to Urea which results in a higher return for the Company. Therefore, we only sell Liquefied Ammonia to external buyers when: i) the Urea production line was unable to fully convert the Liquefied Ammonia (such as failure of the production line); or ii) the selling price of Liquefied Ammonia is relatively high due to market conditions.

Ammonia Water

	For the Years Ended March 31,
	2009			2008
Revenues	$	391,440		$	225,991
COGS	$	457,345		$	210,183
Gross (loss) profit	$	(65,905	)	$	15,808
Gross profit %		(16.84	)%		6.99	%

Ammonia Water revenues increased by $165,449 for the fiscal year ended March 31, 2009 as compared to 2008. This is mainly due to the increase in sales volume.

COGS increased by $247,162 for the fiscal year ended March 31, 2009 as compared to 2008, which is in line with the increase in sales.

Gross profit decreased by $81,713 for the fiscal year ended March 31, 2009 as compared to 2008. Gross profit as a percentage of revenues decreased from 6.99% to (16.84)%. The decrease of gross profit is attributable to the increase of the price of raw materials, which resulted in higher production costs. Ammonia Water is a by-product created during the synthetic ammonia production process.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

	2009			2008
Net cash provided by (used in)
Operating activities	$	5,207,899		$	6,549,448
Investing activities		(15,526,229	)		(13,305,135	)
Financing activities		3,244,955			10,918,691
Net change in cash and cash equivalents		(7,073,375	)		4,163,004

Effect of exchange rate changes on cash and cash equivalents		(3,563	)		708,655

Cash and cash equivalents at beginning of year		7,487,808			2,616,149

Cash and cash equivalents at end of year	$	410,870		$	7,487,808

Cash flows provided by operating activities during the year ended March 31, 2009 amounted to $5,207,899, representing a decrease of $1,341,549, or 20.48% as compared with cash flows provided in operating activities of $6,549,448 during the year ended March 31, 2008. The decrease in cash flow from operating activities was primarily due to the decrease of our income from operations from income of $6,518,613 to a loss of $5,407,827 offset by the increase in accounts payable by $8,040,536.

As of March 31, 2009, the cash used in investing activities was $15,526,229, which represented an increase of $2,221,094, or 16.69%, as compared to $13,305,135 for the year ended March 31, 2008. This was mainly due to allocation to construction in progress and the increasing cash outflow by $2,843,124, or 23.62%, which represented the expenditure on construction of the third phase of the 600,000 ton DME facility project.

As of March 31, 2009, the cash provided by financing activities was $3,244,955, which represented a decrease of $7,673,736, or 70.28%, as compared to $10,918,691 for the year ended March 31, 2008. This change was mainly due to an increase in the cash outflow for the repayment of short-term debt in the reporting period as compared to the same period last year.

Liquidity

The Company has a working capital deficit of $31,976,507 as of March 31, 2009, and the Company incurred a net loss of $3,729,007 for the year ended March 31, 2009. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management recognizes that the Company’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to allow the Company to continue the development of its business plans and satisfy its current and long-term obligations on a timely basis. The Company believes that it will be able to complete the necessary steps in order to meet its cash requirements throughout the fiscal year ending March 31, 2010.

The Company expects to obtain new long term bank loans from a local bank. Our major shareholder has represented to extend the due dates of loans to the Company. Our major shareholder has also committed to provide financing aid, if necessary. The Company believes revenue and gross profits will increase in the near term.

On May 13, 2009, the Company obtained a short-term line of credit for RMB 30 million (approximately $4.389 million) with an interest rate of 5.31% per annum from Guangdong Development Bank, which is due on May 12, 2010. The land use rights of $1,646,286 are pledged as collateral for the short-term line of credit. The line of credit was fully utilized in May 2009.

Capital Resources

As of March 31, 2009, our total assets were $58,164,760 and our total liabilities were $44,146,493. Our debt to asset ratio, calculated as total liabilities (including short-term debt and payables) over total assets, was 0.76.

As of March 31, 2009, our total assets were $58,164,760 and our operating revenue was $52,545,647 reflecting a total asset turnover of 0.90.

As of March 31, 2009, we had a working capital deficiency of $31,976,507. This was mainly due to the increase in capital expenditure for third phase of the 600,000 ton DME project.

Properties description

Our office in Henan, China is located at Xicheng Industrial Zone, Luoshan, Xinyang, Henan, PRC. This office consists of approximately 328,544 square meters. The land use agreement has a 50-year term which expires on January 15, 2055.

As of March 31, 2009, the Company incurred $14,881,798 in construction-in-progress costs, which are primarily attributable to the construction of the third phase of Methanol project (200,000 Ton/Year).

All these development projects are on the Company’s Henan property.

We believe that all our properties and equipment have been adequately maintained, are generally in good condition, and are suitable and adequate for our business.

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

Not required.

Item 8.

Financial Statements and Supplementary Data.

Reference is made to pages F- 2 through F- 21 comprising a portion of this annual report on Form 10-K.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A(T).

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the Company’s management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2009.

Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules, regulations and related forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management is required to apply its judgment in evaluating and implementing possible controls and procedures.

Based upon its evaluation, our management has concluded that, as of March 31, 2009, our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in the reports that we file and furnish under the Exchange Act was recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules, regulations and related forms, and that such information was accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control Over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures are being made only with proper authorizations; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

The Company’s management has assessed the effectiveness of our internal control over financial reporting as of March 31, 2009. In making its assessment, management used the criteria described in Internal Control - Integrated Framework (1992), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on these criteria, the Company’s management has concluded that the Company’s internal control over financial reporting was effective as of March 31, 2009.

This annual report on Form 10-K does not include an attestation report of the Company’s registered independent public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered independent public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report. Beginning with the fiscal year ending March 31, 2010, Section 404 of the Sarbanes-Oxley Act will require us to provide with our annual report on Form 10-K an attestation report of our independent registered public accounting firm regarding our internal control over financial reporting.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during the fiscal year ended March 31, 2009 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

Item 9B. Other Information.

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

As of March 31, 2009, set forth below are the names of our directors and executive officers, their ages, all positions and offices that they hold with the Company, the period during which they have served as such, and their business experience during at least the last five years.

Name	Age	Position Held	Experience
Chen Si Qiang	45	Chairman of the Board Chief Executive Officer	Mr. Chen has been the Chairman of the Board and the Chief Executive Officer of the Company since October 2006. Mr. Chen has been the Chairman of the Board of Directors of Jinding since 2003. From 2000 to present, he served as the Chairman of the Board of Directors of Xinyang Hongchang Channel Gas Engineering Company Limited. From 1999 to 2000, Mr. Chen served as the Chairman to Xinyang City Channel Gas Company.
Wang Gui Quan	40	Director, President	Mr. Wang has been the President and Director of the Company since October 2006. Mr. Wang has been a director of Jinding since 2003 and the General Manager and Secretary of Jinding since October 2003. From May 1998 to September 2003, Mr. Wang was the Factory Director and Vice Secretary of Xixian Chemical Fertilizer.
Zhou Dian Chang	43	Director	Mr. Zhou has been a Director of the Company since October 2006. Mr. Zhou has been the Chairman of the Board of Directors of Jinding since November 2004. From August 2004 to November 2004, he served as Deputy General Manager of the Xinyang Hongchang Group. From August 1997 to August 2004, Mr. Zhou served as the General Manager of the Henan Xinyang Real Estate Trading Center.
Howard S. Barth	56	Director	Mr. Barth has been a Director of the Company since April 2007. Mr. Barth is a member of the Canadian Institute of Chartered Accountants and the Ontario Institute of Chartered Accountants. He earned his B.A. and M.B.A. at York University and has over 26 years of experience as a certified accountant. Until recently, he was chief executive officer and president with Yukon Gold Corporation, Inc., a public company which is dual-listed in the U.S. and Canadian markets. He is currently a director of Yukon Gold Corporation Inc. and has served on its audit committee. He is also a member of the Board of Directors and chairman of the audit committee for Nuinsco Resources Limited, a TSX-listed exploration company.

Yan Shi	45	Director	Mr. Yan has been a Director of the Company since April 2007. Mr. Yan is a registered CPA in the People’s Republic of China, a registered assets evaluator, registered coinage master and has worked as the vice managing director of Henan Yili Accountancy since 2002. Prior to that he was the vice general manager of Henan Huajian Project Evaluation & Consulting Corp. and the director of the Auditing Department of Henan Huajian Accountancy.
Qi Lei	35	Director	Mr. Qi has been a Director of the Company since April 2007. Mr. Qi is an economist who has worked as the general manager of Henan Yuanneng Mining Investment Corp. for the past five years. Prior to that he was the general manager of Henan Xinyang Hongchang Pipeline Gas Co. Ltd. and the manager of Henan Xinyang Shihe Borough Pipeline Gas Corp.
Xiaokai Cao	40	Director	Mr. Xiaokai has been a Director of the Company since April 2007. Mr. Xiaokai is an economist who received an MBA from Hull University in the United Kingdom. From 2002 to 2005, he was the general manager of Shanghai Pulan Pawn Corp., from 2006 to present he worked as general manager of Henan Yuan-Neng Investment Corp.
Li Dong Lai	43	Chief Financial Officer	Mr. Li has been the Vice President of the Company since October 2006. Mr. Li has been the Chief Financial Officer of Jinding since September 2003. From October 1999 to August 2003, he served as the Vice Finance to Controller of the Xinyang Tianti Mining Development Co., Ltd.
Wu Peng	43	Vice President	Mr. Wu has been the Vice President of the Company since October 2006. Mr. Wu has been the standing Deputy General Manager of Jinding since 1996. He has been involved in Jinding from 1990 since the Company’s days as the Luoshan Chemical Fertilizer Factory.
Wang Xiang Fu	42	Vice President	Mr. Wang has been the Vice President of the Company since October 2006. Mr. Wang has been the Deputy General Manager of Jinding since 1987.

Committees of the Board of Directors

On April 9, 2007, our Board of Directors approved and authorized the establishment of three new committees to facilitate and assist the Board of Directors in the execution of its responsibilities: the Audit Committee, the Compensation Committee and the Nominations/Corporate Governance Committee. In accordance with the listing standards of the NASDAQ Stock Market, all the committees are comprised solely of non-employee, independent Directors. Charters for each committee are available on the Company’s website at www.neworientalenergy.com. The charter of each committee is also available in print to any stockholder who requests it. The table below shows current membership for each of the standing committees of our Board of Directors.

Audit Committee	Compensation Committee	Nominating/Corporate Governance Committee
Howard S. Barth (Chair)	Xiaokai Cao (Chair)	Qi Lei (Chair)
Yan Shi	Yan Shi	Xiaokai Cao
Xiaokai Cao	Qi Lei	Howard S. Barth

Audit Committee

Pursuant to its charter, the Audit Committee provides assistance and guidance to the Board of Directors in fulfilling its oversight responsibilities to the Company’s stockholders with respect to the Company’s corporate accounting and reporting practices as well as the quality and integrity of the Company’s financial statements and reports. Membership on the Audit Committee is intended to be restricted to directors who are independent of management and free from any relationship that, in the opinion of the Board of Directors, could interfere with the exercise of independent judgment as a committee member.

The Audit Committee is comprised solely of non-employee Directors, all of whom our Board of Directors has determined are independent pursuant to the rules of the Nasdaq Stock Market (the “Nasdaq Rules”). Our Board of Directors has determined that all the members of the Audit Committee are financially literate pursuant to the Nasdaq Rules. Our Board of Directors also conducted a qualitative assessment of Mr. Barth’s level of knowledge and experience based on a number of factors, including his formal education and experience, and has determined that Mr. Barth is an Audit Committee Financial Expert within the meaning stipulated by the Securities and Exchange Commission.

Code of Ethics

On April 9, 2007, the Company adopted a Code of Business Conduct and Ethics that applies to all its employees including its executive officers. The Company’s Code of Business Conduct and Ethics was filed as an exhibit to the Company’s Form 8-K, filed on April 10, 2007.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

Based on a review of the copies of such reports furnished to us, or representations from certain reporting persons that no other reports were required, we believe that all applicable filing requirements were complied with during the fiscal year ended March 31, 2009.

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s directors, executive officers and persons who own more than 10% of our common stock, to file with the SEC initial reports of ownership on Form 3, reports of changes in ownership on Form 4 and annual reports concerning their ownership on Form 5. Directors, executive officers and greater than 10% shareholders are required to furnish the Company with copies of all Section 16(a) forms they file.

To the Company’s knowledge, based solely on a review of the copies of such reports furnished to the Company, with respect to the fiscal year ended March 31, 2009, the executive officers, directors and beneficial owners of more than 10% of our common stock have filed their initial statements of ownership on Form 3 on a timely basis, and the officers, directors and beneficial owners of more than 10% of our common stock have also filed the required Forms 4 or 5 on a timely basis. There were no transactions that were not reported timely.

Item 11. Executive Compensation.

Summary Compensation Table

The following table sets forth information about compensation paid or accrued by us during the years ended March 31, 2009, 2008 and 2007 to our executive officers who served during the fiscal year ended March 31, 2009. No executive officers who served during the most recently completed fiscal year have been omitted from the table.

Name & Principal
Position

Year

Salary

($)

Bonus

($)

Stock

Awards

($)

Option

Awards

($)

Non-Equity

Incentive Plan Compensation

($)

Change in Pension

value and Nonqualified

deferred compensation

earnings

($)

All other Compensation

($)

Total

($)

Chen Si Qiang

CEO

2009

22,500

N/A

22,500

2008

22,500

N/A

22,500

2007

22,500

N/A

22,500

Wang Gui Quan

President

2009

15,000

N/A

15,000

2008

15,000

N/A

15,000

2007

15,000

N/A

15,000

Zhou Dian Chang (1)

2009

18,750

N/A

18,750

2008

18,750

N/A

18,750

2007

18,750

N/A

18,750

Li Dong Lai

CFO (2)

2009

10,000

N/A

10,000

2008

10,000

N/A

10,000

2007

10,000

N/A

10,000

Wu Peng

Vice President

2009

10,000

N/A

10,000

2008

10,000

N/A

10,000

2007

10,000

N/A

10,000

Wang Xiang Fu

Vice President

2009

10,000

N/A

10,000

2008

10,000

N/A

10,000

2007

10,000

N/A

10,000

Ben Wang

Former CFO (3)

2009

50,000

N/A

50,000

2008

61,550

N/A

61,550

2007

N/A

(1) Mr. Zhou received compensation with respect to his position as Chairman of Jinding.

(2) Mr. Li was appointed as Chief Financial Officer of the Company, effective February 9, 2009.

(3) Mr. Wang resigned from his position as Chief Financial Officer of the Company, effective February 7, 2009.

As of March 31, 2009, the Company did not have any “Grants of Plan-Based Awards”, “Outstanding Equity Awards at Fiscal Year-End”, “Option Exercises and Stock Vested”, “Pension Benefits”, or “Nonqualified Deferred Compensation”. Nor did the Company have any “Post-Employment Payments” to report.

There was no officer whose salary and bonus for the period exceeded $100,000. The amounts listed in the table above were paid by Jinding, the wholly owned subsidiary of our wholly owned subsidiary KHL.

While we do have employment agreements with our executive officers, the salary for our executive officers is at the discretion of our Board of Directors. We expect to pay substantially similar compensation to our executives in the future. The Board of Directors seeks to provide senior management with level of assured cash compensation in the form of base salary that facilitates an appropriate lifestyle given their professional status and accomplishments.

We have no stock option or profit-sharing programs for the benefit of directors, officers or other employees, but our Board of Directors may recommend adoption of one or more such programs in the future.

Employment Agreements

Employment Contract, dated April 27, 2006, by and between Henan Jinding Chemical Industry Co., Ltd (“Jinding”) and Mr. Wang Xiang Fu. Mr. Wang shall serve as Jinding’s Deputy General Manager for a period of five (5) years until April 30, 2011.

Employment Contract, dated September 28, 2003, by and between Henan Jinding Chemical Industry Co., Ltd. and Mr. Li Dong Lai. Mr. Li shall serve as Jinding’s Deputy General Manager for a period of eight (8) years until September 30, 2011.

Employment Contract, dated April 28, 2006, by and between Henan Jinding Chemical Industry Co., Ltd. and Mr. Wu Peng. Mr. Wu shall serve as Jinding’s Deputy General Manager for a period of five (5) years until April 30, 2011.

Benefit Plans

The Company’s employees enjoy the rights and benefits of the Company’s official benefit plan. The Company pays for our employees’ pension, unemployment insurance, medical insurance and work injury insurance. The Company also maintains a reserve fund for any medical emergency necessities.

Compensation of Directors

The Company does not pay compensation to its directors. All directors are reimbursed for out-of-pocket expenses in connection with attendance at Board of Director’s and/or committee meetings. The Company may establish other compensation plans (e.g. options, cash for attending meetings, etc.) in the future.

Compensation Committee Interlocks and Insider Participation in Compensation Decisions

During the last fiscal year, none of the Company’s executive officers served on the board of directors or compensation committee of any other entity whose executive officers served either the Company’s Board of Directors or Compensation Committee.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table sets forth information regarding the beneficial ownership of our common stock as of June 29, 2009 for each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock. Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.

		Amount and Nature of Beneficial Ownership (2)
Title of Class	Name and Address of Beneficial Owner (1)	Number of Shares (3)		Percent of Voting Stock (4)
Common	Auto Chance International Limited		7,500,000		59.34	%
Common	Chen Si Qiang (5)		7,500,000		(6	)

(1)

Unless otherwise noted, the address is that of the Company.

(2)

On June 29, 2009, there were 12,640,000 shares of our common stock outstanding. Each person named above has sole investment and voting power with respect to all shares of the common stock shown as beneficially owned by the person, except as otherwise indicated below.

(3)

Under applicable rules promulgated by the U. S. Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), a person is deemed the “beneficial owner” of a security with regard to which the person, directly or indirectly, has or shares (a) the voting power, which includes the power to vote or direct the voting of the security, or (b) the investment power, which includes the power to dispose or direct the disposition of the security, in each case irrespective of the person’s economic interest in the security. Under these SEC rules, a person is deemed to beneficially own securities which the person has the right to acquire within 60 days through (x) the exercise of any option or warrant or (y) the conversion of another security.

(4)

In determining the percent of our common stock owned by a person (a) the numerator is the number of shares of our common stock beneficially owned by the person, including shares the beneficial ownership of which may be acquired within 60 days upon the exercise of options or warrants or conversion of convertible securities, and (b) the denominator is the total of (i) the 12,640,000 shares of our common stock outstanding on June 29, 2009 and (ii) any shares of our common stock which the person has the right to acquire within 60 days upon the exercise of options or warrants or conversion of convertible securities. Neither the numerator nor the denominator includes shares which may be issued upon the exercise of any other options or warrants or the conversion of any other convertible securities.

(5)

Through his position as a stockholder in Auto Chance International Limited, Chen Si Qiang has the power to dispose of or direct the disposition of the 7,500,000 shares of Common Stock of the Company owned by Auto Chance International Limited. As a result, Chen Si Qiang may, under the rules of the Securities and Exchange Commission, be deemed to be the beneficial owner of the shares of Common Stock. Chen Si Qiang disclaims beneficial ownership of the shares of Common Stock reported as beneficially owned by him, except to the extent of his pecuniary interest as a stockholder of Auto Chance International Limited.

(6)

Represents the individual’s ownership of the 7,500,000 shares of Auto Chance International Limited.

The following table sets forth information regarding the beneficial ownership of our common stock as of June 29, 2009 for each of our officers and directors and all our officers and directors as a group. Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all shares of common stock beneficially owned by them.

		Amount and Nature of Beneficial Ownership (2)
Title of Class	Name and Address of Beneficial Owner (1)	Number of Shares (3)		Percent of Voting Stock (4)
Common	Chen Si Qiang, Chairman and CEO (5)		7,500,000		(6	)
Common	Wang Gui Quan, Director and President		-0-		-0-
Common	Zhou Dian Chang, Director		-0-		-0-
Common	Howard S. Barth, Director		-0-		-0-
Common	Yan Shi, Director		-0-		-0-
Common	Qi Lei, Director		-0-		-0-
Common	Xiaokai Cao, Director		-0-		-0-
Common	Li Dong Lai, Chief Financial Officer		-0-		-0-
Common	Wu Peng, Director		-0-		-0-
Common	Wang Xiang Fu, Vice President		-0-		-0-
Common	All Directors and Officers as a Group (10 persons)		7,500,000		59.34	%

(1)

Unless otherwise noted, the address is that of the Company.

(2)

(3)

(4)

(5)

(6)

Represents the individual’s ownership of the 7,500,000 shares of Auto Chance International Limited.

Securities Authorized for Issuance Under Equity Compensation Plans.

As of the fiscal year ended March 31, 2009, we have no shares of our common stock or preferred stock that are issuable under compensation plans approved by our security holders.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

1. Huaiyang Desheng Chemical Co., Ltd (“Huaiyang Desheng”) is a company controlled by a director of the Company. For the year ended March 31, 2009, Huaiyang Desheng purchased $29,941 of raw materials from Henan Jinding, and sold $61,633 of finished goods to Henan Jinding. The remaining balance represents an advance for the purchase of raw materials from Huaiyang Desheng. The amount is unsecured, interest free, and has no fixed repayment terms.

2. Xinyang Hong Chang Pipeline Gas Co., Ltd. is a company controlled by the Chairman of the board and chief executive officer of the Company. As of March 31, 2009, the outstanding principal of the advances made by Xinyang Hong Chang Pipeline Gas Co., Ltd. to the Company was $4,973,742. The amount is unsecured. Included in the $4,973,742 is (i) $877,719, which has an interest rate of 8.748% per annum and is due on June 30, 2009, (ii) $2,048,011, which has an interest rate of 8.748% per annum and is due on August 8, 2009, and (iii) $731,433, which has an interest rate of 15% per annum and is due on September 25, 2009. The interest expense for the years ended March 31, 2009 and 2008 is $308,495 and $101,791, respectively. Of the $308,495 of interest expense, $252,559 was capitalized interest in construction in progress, since the amount was used for construction. The remaining balance of $1,316,579 is unsecured, interest free, and has no fixed repayment terms. Xinyang Hong Chang Pipeline Gas Co., Ltd. represented to the Company that the due dates of the loans will be extended.

3. Long Triumph Investments Limited is a former shareholder of the Company. As of March 31, 2009, the outstanding principal of advances made by Long Triumph Investments Limited to the Company was $1,344,328. The amount is unsecured, interest free, and has no fixed repayment terms. Long Triumph Investments Limited presented to the Company that the due date of the amount will be extended.

4. Chen Siqiang is the chairman of the board and chief executive officer of the Company. As of March 31, 2009, the outstanding principal of advances made by Chen Siqiang to the Company was $1,024,006. The amount is unsecured and has an interest rate of 9.6% per annum. Included in the $1,024,006 is $731,433, which is due on February 3, 2010. The balance of $292,573 is due on November 21, 2009. The interest expense for the years ended March 31, 2009 and 2008 of $93,309 and $10,303, was capitalized in construction in progress, since the amount was used for construction. Chen Siqiang presented to the Company that the due date of the amount will be extended.

5. Wang Guiquan is the president and director of the Company. As of March 31, 2009, the outstanding principal of advances made by Wang Guiquan to the Company was $131,658. The amount is unsecured, has an interest rate of 9.6% per annum and is due on October 18, 2009. The interest expense for the years ended March 31, 2009 and 2008 of $11,883 and $0, was capitalized interest in construction in progress, since the amount was used for construction. Wang Guiquan presented to the Company that the due date of the amount will be extended.

6. Zhou Dianchang is a director of the Company. As of March 31, 2009, the outstanding principal of advances made by Zhou Dianchang to the Company was $73,143. The amount is unsecured, has an interest rate of 9.6% per annum and is due October 18, 2009. The interest expense for the years ended March 31, 2009 and 2008 of $6,602 and $0, was capitalized in construction in progress, since the amount was used for construction. Zhou Dianchang presented to the Company that the due date of the amount will be extended.

7. Mai Xiaofu is a director of the Company. As of March 31, 2009, the outstanding principal of advances made by Mai Xiaofu to the Company was $146,287. The amount is unsecured, has an interest rate of 9.6% per annum and is due on October 2, 2009. The interest expense for the years ended March 31, 2009 and 2008 of $13,819 and $0, was capitalized in construction in progress, since the amount was used for construction. Mai Xiaofu presented to the Company that the due date of the amount will be extended.

8. Yu Zhiyang is a significant shareholder of the Company. As of March 31, 2009, the outstanding principal of advances made by Yu Zhiyang to the Company was $43,886. The amount is unsecured, has an interest rate of 9.6% per annum and is due on October 2, 2009. The interest expense for the years ended March 31, 2009 and 2008 of $4,146 and $0, was capitalized in construction in progress, since the amount was used for construction. Also see Note 10. Yu Zhiyang presented to the Company that the due date of the amount will be extended.

9. Yang Hongtao is a significant shareholder of the Company. As of March 31, 2009, the outstanding principal of advances made by Yang Hongtao to the Company was $43,886. The amount is unsecured, has an interest rate of 9.6% per annum and is due on October 2, 2009. The interest expense for the years March 31, 2009 and 2008 of $4,146 and $0, was capitalized in construction in progress, since the amount was used for construction. Yang Hongtao presented to the Company that the due date of the amount will be extended.

Director Independence

Messrs. Howard S. Barth, Yan Shi, Qi Lei and Xiaokai Cao are all non-employee Directors, and all of whom our Board of Directors has determined are independent pursuant to Nasdaq Rules and the rules of the Securities and Exchange Commission. All of the members of our Audit Committee, Nominating/Corporate Governance Committee and Compensation Committee are independent pursuant to the Nasdaq Rules and the rules of the Securities and Exchange Commission.

Item 14. Principal Accounting Fees and Services.

The firm of Weinberg & Company, P.A. acts as our principal accountant. The following is a summary of fees incurred for services rendered.

Audit Fees

During the fiscal years ended March 31, 2009 and 2008, the fees for our principal accountant were the following:

	Fiscal Year ended
	March 31, 2008		March 31, 2009
Quarterly reviews	$	60,000	$	150,604
Audit of consolidated financial statements included in this Annual Report on Form 10-K	$	245,000	$	155,000
Total	$	305,000	$	305,604

Audit Related Fees

During the fiscal years ended March 31, 2009 and 2008, the fees for our principal accountant for the rendering of assurance and related services reasonably related to the performance of the audit or review of financial statements were $1,150 and $0, respectively.

Tax Fees

During the fiscal years ended March 31, 2009 and 2008, the fees for our principal accountant for the rendering of tax compliance, tax advice and tax planning were $0 and $4,371, respectively.

All Other Fees

During the fiscal years ended March 31, 2009 and 2008, there were no fees billed for products and services provided by the principal accountant other than those set forth above.

Policy on Audit Committee Pre-Approval of Audit and Non-Audit Services of Independent Accountant

The policy of the Audit Committee is to pre-approve all audit and non-audit services provided by the independent accountants. These services may include audit services, audit-related services, tax fees, and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is subject to a specific budget. The Audit Committee has delegated pre approval authority to certain committee members when expedition of services is necessary. The independent accountants and management are required to periodically report to the full Audit Committee regarding the extent of services provided by the independent accountants in accordance with this pre-approval delegation, and the fees for the services performed to date. All of the services described above in this Item 14 were approved in advance by the Audit Committee during the fiscal year ended March 31, 2009.

PART IV

Item 15. Exhibits and Financial Statement Schedules

The following exhibits, which are numbered in accordance with Item 601 of Regulation S-B, are filed herewith or, as noted, incorporated by reference herein:

Exhibit Number		Exhibit Description

2.1		Share Exchange Agreement dated as of October 11, 2006, between Sports Source, Kinfair Holdings Limited and Auto Chance International Limited. (2)

2.2		Share Transfer Agreement, dated February 29, 2006, between Kinfair Holdings Limited, Xinyang Hongchang Channel Gas Engineering Co., Ltd., Mai XiaoFu, Wang Guiquan, Yu Zhiyang and Yang Hongtao. (2)

2.3		Stock Purchase Agreement, dated February 19, 2006, by and between Henan Jinding Chemical Industry Co., Ltd. and Kinfair Holdings Limited. (2)

3.1		Certificate of Incorporation of the Company, as amended by the current report on Form 8-K filed with the SEC on February 7, 2007 (1)

3.2		Bylaws of the Company, as amended by the current report on Form 8-K/A filed with the SEC on February 23, 2007 (1)

4.1		Specimen of Common Stock Certificate (3)

10.1		Form of Labor Contract for Henan Jinding Chemical Industry Co., Ltd. (2)

10.2		Employment Contract, dated April 27, 2006, by and between Henan Jinding Chemical Industry Co., Ltd and Mr. Wang Xiang Fu. (2)

10.3		Employment Contract, dated September 28, 2003, by and between Henan Jinding Chemical Industry Co., Ltd. and Mr. Li Dong Lai. (2)

10.4		Employment Contract, dated April 28, 2006, by and between Henan Jinding Chemical Industry Co., Ltd. and Mr. Wu Peng. (2)

10.5		Land Use Certificates issued to Luoshan Jinding Chemical Industry Co., Ltd. by the People’s Government of Luoshan County. (2)

14.1		Code of Business Conduct and Ethics, adopted April 9, 2007 (4)

22.1		Subsidiaries of the Company (5)

24.1		Power of Attorney (set forth on signature page)

31.1		Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 (5)

31.2		Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002 (5)

32.1		Certification under Section 906 of the Sarbanes-Oxley Act of 2002 (5)

99.1		Loan Agreement, dated August 8, 2008, by and between New Oriental Energy & Chemical Corp. and Xinyang Hong Chang Pipeline Gas Co., Ltd. (6)

(1)	Incorporation by reference to the Company's Registration Statement on Form SB-2, as amended (Registration No. 333-125131).

(2)	Incorporated by reference to the Company's Current Report on Form 8-K dated October 13, 2006.

(3)	Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended December 31, 2008.

(4)	Incorporated by reference to the Company's Current Report on Form 8-K dated April 10, 2007.

(5)	Filed herewith.

(6)	Incorporated by reference to the Company’s Form 10-Q for the period ended June 30, 2008.

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

CONTENTS

PAGE	F - 1	REPORT OF INDEPENDENT REGISTERED PUBLIC ACOUNTING FIRM

PAGE	F - 2	CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2009 AND 2008

PAGE	F - 3	CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS) FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

PAGE	F - 4	CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

PAGE	F - 5	CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

PAGE	F - 6-21	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

REPORT OF INDEPENDENT REGISTERED PUBLIC ACOUNTING FIRM

To the Board of Directors and Shareholders of:

New Oriental Energy & Chemical Corp.

We have audited the accompanying consolidated balance sheets of New Oriental Energy & Chemical Corp. and Subsidiaries (the “Company”) as of March 31, 2009 and 2008, and the related consolidated statements of income (loss) and comprehensive income (loss), changes in shareholders' equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of New Oriental Energy & Chemical Corp. and Subsidiaries as of March 31, 2009 and 2008, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company incurred a net loss of $3,729,007 for the year ended March 31, 2009 and has a working capital deficit of $31,976,507 at March 31, 2009. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Weinberg & Company, P.A.

Boca Raton, Florida

June 19, 2009

F - 1

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31, 2009		March 31, 2008

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	410,870	$	7,487,808
Restricted cash		4,388,596		5,438,809
Notes receivable, net of reserve of $146,287 and $135,563 at March 31, 2009 and 2008, respectively		722,242		647,908
Inventories, net		1,678,626		2,171,040
Prepayments for goods		301,450		1,196,831
Due from employees		18,424		13,213
Other assets		19,152		134,993
Due from a related party		253,959		-
Deferred taxes-current portion		307,404		179,541
Total current assets		8,100,723		17,270,143

Long-term investment		469,580		29,919
Plant and equipment, net		18,695,469		20,102,938
Land use rights, net		1,637,352		1,629,633
Construction in progress		25,703,868		9,740,638
Deposits		2,123,963		1,978,389
Deferred taxes-non-current portion		1,422,756		-
Other long-term assets		11,049		2,655
Total long-term assets		50,064,037		33,484,172

TOTAL ASSETS	$	58,164,760	$	50,754,315

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	9,697,419	$	1,656,883
Other payables and accrued liabilities		887,920		545,090
Short-term debt		15,743,355		17,954,837
Customer deposits		2,907,587		4,220,527
Payable to contractors		1,477,066		506,364
Due to related parties		8,361,642		5,708,995
Deferred taxes-current portion		432,232		399,080
Taxes payable		570,009		1,424,992
Total current liabilities		40,077,230		32,416,768

LONG-TERM LIABILITIES
Long-term bank loan		2,925,730		-
Long-term note payable		531,020		517,168
Deferred taxes-non-current portion		452,242		374,369
Due to employees		160,271		156,517
Total long-term liabilities		4,069,263		1,048,054

TOTAL LIABILITIES	$	44,146,493	$	33,464,822

SHAREHOLDERS' EQUITY
Common stock, par value $0.001 per share; 30,000,000 shares authorized, 12,640,000 shares issued and outstanding as of March 31, 2009 and 2008, respectively		12,640		12,640
Additional paid-in capital		4,573,205		4,573,205
Retained earnings (restricted portion is $950,327 as of March 31, 2009 and 2008)		6,897,492		10,626,499
Accumulated other comprehensive income		2,534,930		2,077,149
TOTAL SHAREHOLDERS' EQUITY		14,018,267		17,289,493

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	58,164,760	$	50,754,315

See accompanying notes to the consolidated financial statements

F - 2

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND COMPREHENSIVE INCOME (LOSS)

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

	2009			2008

REVENUES	$	52,545,647		$	67,832,920

COST OF GOODS SOLD		54,038,734			56,978,425

GROSS (LOSS) PROFIT		(1,493,087	)		10,854,495

General and administrative		2,626,115			3,088,184

Selling and distribution		1,147,596			1,171,737

Research and development		141,029			75,961

(LOSS) INCOME FROM OPERATIONS		(5,407,827	)		6,518,613

OTHER INCOME (EXPENSES)

Interest expense, net		(1,095,716	)		(516,032	)

Government grants		1,437,748			85,405

Other expenses, net		(98,206	)		(115,016	)

(LOSS) INCOME BEFORE INCOME TAXES		(5,164,001	)		5,972,970

INCOME TAX BENEFIT (EXPENSE)		1,434,994			(1,932,695	)

(LOSS) INCOME FROM CONTINUING OPERATIONS		(3,729,007	)		4,040,275

DISCONTINUED OPERATION

Gain from discontinued operation		-			1,760

Gain from disposition of discontinued operation		-		20,906

NET (LOSS) INCOME		(3,729,007	)		4,062,941

OTHER COMPREHENSIVE INCOME

Foreign currency translation gain		457,781			1,618,430

OTHER COMPREHENSIVE INCOME		457,781			1,618,430

COMPREHENSIVE (LOSS) INCOME	$	(3,271,226	)	$	5,681,371

WEIGHTED AVERAGE SHARES OUTSTANDING, BASIC AND DILUTED		12,640,000			12,640,000

(LOSS) INCOME FROM CONTINUING OPERATIONS PER SHARE, BASIC AND DILUTED	$	(0.30	)	$	0.32
INCOME FROM DISCONTINUED OPERATION PER SHARE, BASIC AND DILUTED	$	-		$	0.00
NET (LOSS) INCOME PER SHARE, BASIC AND DILUTED	$	(0.30	)	$	0.32

See accompanying notes to the consolidated financial statements.

F - 3

NEW ORIENTAL ENERGY & CHEMICAL CORP.AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

					Additional
	Common stock				Paid-in		Retained			Accumulated Other
	Shares		Par value		Capital		Earnings			Comprehensive Income		Total

BALANCE AT MARCH 31, 2007		12,640,000	$	12,640	$	4,573,205	$	6,563,558		$	458,719	$	11,608,122

Foreign currency translation gain		-		-		-		-			1,618,430		1,618,430

Net income		-		-		-		4,062,941			-		4,062,941
BALANCE AT MARCH 31, 2008		12,640,000	$	12,640	$	4,573,205	$	10,626,499		$	2,077,149	$	17,289,493

Foreign currency translation gain		-		-		-		-			457,781		457,781

Net loss		-		-		-		(3,729,007	)		-		(3,729,007	)
BALANCE AT MARCH 31, 2009		12,640,000	$	12,640	$	4,573,205	$	6,897,492		$	2,534,930	$	14,018,267

See accompanying notes to the consolidated financial statements

F - 4

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$	(3,729,007	)	$	4,062,941
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Depreciation and amortization		2,688,996			2,215,412
Loss on disposal of plant and equipment		40,278			-
Deferred taxes		(1,439,594	)		(933,579	)
Provision for notes receivable		-			135,563
Write-down of inventories to net realizable value		337,532			-

Changes in operating assets and liabilities:

(Increase) Decrease In:
Inventories		154,882			1,615,090
Prepayments for goods		895,381			(813,192	)
Taxes receivable		-			160,800
Due from employees		6,809			130,272
Other assets		115,841			85,189
Due from a related party		(253,959	)		-

Increase (Decrease) In:
Accounts payable		8,040,536			(602,950	)
Other payables and accrued liabilities		462,191			136,065
Customer deposits		(1,312,940	)		(1,164,898	)
Due to a related party		55,936			-
Taxes payable		(854,983	)		1,394,992
Proceeds from disposition of discontinued operation		-			127,743
Net cash provided by operating activities		5,207,899			6,549,448

CASH FLOWS FROM INVESTING ACTIVITIES:
Payment for long-term investment		(433,057	)		-
Purchases of plant and equipment		(159,978	)		(607,252	)
Purchases of construction in progress		(14,881,798	)		(12,038,674	)
Deposit for land use rights		(91,358	)		(956,363	)
Proceeds from disposal of plant and equipment		96,188			103,039
Notes receivable		(56,226	)		194,115
Net cash used in investing activities		(15,526,229	)		(13,305,135	)

CASH FLOWS FROM FINANCING ACTIVITIES
Restricted cash		1,050,213			(8,383	)
Proceeds from short-term debt		26,404,908			29,677,345
Repayments of short-term debt		(29,061,711	)		(20,306,522	)
Due to related parties		1,925,815			1,664,702
Repayment of notes payable		-			(108,451	)
Proceeds from long-term bank loans		2,925,730			-
Net cash provided by financing activities		3,244,955			10,918,691

NET (DECREASE) INCREASE IN CASH AND CASH QUIVALENTS		(7,073,375	)		4,163,004

Effect of exchange rate changes on cash		(3,563	)		708,655
Cash and cash equivalents at beginning of year		7,487,808			2,616,149

CASH AND CASH EQUIVALENTS AT END OF YEAR	$	410,870		$	7,487,808

SUPPLEMENTARY CASH FLOW INFORMATION
Income taxes paid	$	880,549		$	737,269
Interest paid	$	748,657		$	689,332

SUPPLEMENTAL NON-CASH DISCLOSURES:

During 2009 and 2008, $718,045 and $8,640,514 were transferred from construction in progress to plant and equipment, respectively.

F - 5

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

New Oriental Energy & Chemical Corp. was incorporated under the laws of the State of Delaware on November 15, 2004. The principal activities of New Oriental Energy & Chemical Corp. and subsidiaries (“NOEC” or the “Company”) are the manufacture and distribution of fertilizer and chemical products. The products are distributed to China markets.

On October 11, 2006, a share exchange agreement was entered into by and among the Company, Kinfair Holding Limited (“KHL”) and KHL’s shareholders, whereby the Company issued 7,500,000 shares, representing 59.34% of total common stock in exchange of 100% of KHL common stock (the “Share Exchange”). Henan Jinding Chemical Co., Ltd. (“Jinding”) is a wholly owned subsidiary of KHL. Jinding is the principal operating subsidiary of KHL.

After the Share Exchange, KHL and its wholly owned subsidiary, Jinding, became a wholly-owned subsidiary of the Company and Jinding became the principal operating subsidiary of the Company and is deemed to be the accounting acquirer and the exchange transaction has been accounted for as a reverse acquisition in accordance with Statement of Financial Accounting Standards (“SFAS”) No.141, Business Combinations. The Share Exchange has been accounted for as the recapitalization of Jinding.

On November 13, 2007, Luoshan Jinding Chemical Co., Ltd. (“Luoshan Jinding”) was incorporated as a wholly owned subsidiary of Henan Jinding under the law of the People’s Republic of China (“PRC”).

2. GOING CONCERN

The Company expects to obtain new long term bank loans from a local bank. Our major shareholder has represented to extend the due dates of loans to the Company amounting to $3,657,163. Our major shareholder has also committed to provide financing aid, if necessary.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)

Principles of Consolidation

The consolidated financial statements include the accounts of New Oriental Energy & Chemical Corp. and the following subsidiaries:

(i)

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

(ii)

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

(iii)

Luoshan Jinding Chemicals Co., Ltd. (“Luoshan Jinding”) ( 100% subsidiary of Henan Jinding)

Inter-company accounts and transactions have been eliminated in consolidation.

(b)

Concentrations

The Company has major customers who accounted for the following percentages of total sales and total customer deposits:

F - 6

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Customer	Sales						Customer Deposits
	2009			2008			2009			2008
Company A		21	%		20	%		4	%		36	%
Company B		11	%		4	%		14	%		-
Company C		7	%		8	%		50	%		1	%
Company D		7	%		-			-			-

The Company has major suppliers who accounted for the following percentages of total purchases and total accounts payable/deposits:

Supplier	Purchases						Accounts Payable /Deposits
	2009			2008			2009			2008
Company E		18	%		14	%		1	%		29	%
Company F		14	%		-			10	%		-
Company G		13	%		-			7	%		-
Company H		7	%		-			3	%		-
Company I		6	%		-			5	%		-

The sole market of the Company is the PRC for the years ended March 31, 2009 and 2008.

The Company's operations are conducted in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC economy. The Company's operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company's results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

(d) Use of Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.

Management makes these estimates using the best information available at the time the estimates are made. Actual results could differ materially from those estimates.

(e) Fair Value of Financial Instruments

Statement of Financial Accounting Standards (“SFAS”) No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market.

These tiers include:

•

Level 1—defined as observable inputs such as quoted prices in active markets;

• Level 2—defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and

F - 7

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

•

Level 3—defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

The assets measured at fair value on a recurring basis subject to the disclosure requirements of SFAS 157 as of March 31, 2009 are as follows:

	Fair Value Measurements at Reporting Date Using
	Carrying value as of March 31,2009		Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
			(Level 1)		(Level 2)		(Level 3)
Cash and cash equivalents	$	410,870	$	410,870	$	-	$	-
Restricted cash	$	4,388,596	$	4,388,596	$	-	$	-
Long-term investment	$	469,580	$	-	$	-	$	469,580

Cash and cash equivalents consist primarily of high rated money market funds at a variety of well-known institutions with original maturities of three months or less. Restricted cash represent time deposits on account to secure short-term debt. The original cost of these assets approximates fair value due to their short term maturity.

Long-term investment is valued at cost, which approximates fair value.

Long-term investment has no quoted market prices and it is not practicable to estimate its fair value. The Company reviews the investment for impairment whenever events or changes in circumstances indicate that the carrying amount may no longer be recoverable.

(f) Cash and Cash Equivalents

For financial reporting purposes, the Company considers all highly liquid investments purchased with original maturity of three months or less to be cash equivalents.

Restricted cash represents time deposits on account to secure short-term debt. See Note 11. These balances are subject to withdrawal restrictions and totaled $4,388,596 and $5,438,809 as of March 31, 2009 and 2008, respectively.

(g) Inventories

Inventories are stated at the lower of cost or net realizable value (market). The cost of raw materials is determined on a weighted average basis. Finished goods costs are determined on a weighted average basis and comprise direct materials, direct labor and an appropriate proportion of overhead.

Net realizable value is based on estimated selling prices less any further costs expected to be incurred for completion and disposal.

(h) Prepayments for Goods

Prepayments for goods represent cash paid in advance to suppliers for purchases of raw materials.

(i) Customer Deposits

Customer deposits consist of amounts paid to the Company in advance for the sale of products in the PRC. The Company receives these amounts and recognizes them as a current liability until the revenue can be recognized when the goods are delivered.

(j) Plant and Equipment

Plant and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is provided over their estimated useful lives, using the straight-line method. Estimated useful lives are as follows:

Buildings	40 years
Machinery	10 years
Motor vehicles	10 years
Office equipment	5 years

F - 8

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income. The cost of maintenance and repairs is charged to income as incurred, whereas significant renewals and betterments are capitalized.

(k)

Construction in Progress

Construction in progress represents direct costs of construction or the acquisition cost of buildings or machinery and prepayments. Capitalization of these costs ceases and the construction in progress is transferred to fixed assets when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until the assets are completed and ready for their intended use.

(l)

Capitalized Interest

The interest cost associated with debt relating to construction projects is capitalized and included in the cost of the project. When no debt is incurred specifically for a project, interest is capitalized on amounts expended on the project using weighted-average cost of the Company’s outstanding borrowings. Capitalization of interest ceases when the project is substantially complete or development activity is suspended for more than a brief period. Capitalized interest for the years ended March 31, 2009 and 2008 was $386,464 and $112,094, respectively.

(m)

Land Use Rights

According to the laws of China, the government owns all the land in China. Companies or individuals are authorized to possess and use the land only through land use rights granted by the Chinese government. The land use rights granted to the Company are being amortized using the straight-line method over the lease term of fifty years.

(n)

Impairment of Long-Term Assets

Long-term assets of the Company are reviewed annually as to whether their carrying value has become impaired, pursuant to the guidelines established in Statement of Financial Accounting Standards (“SFAS”) No. 144,“Accounting for the Impairment or Disposal of Long-Lived Assets”. The Company also periodically evaluates the amortization periods of its depreciable assets to determine whether subsequent events and circumstances warrant revised estimates of the useful lives. There was no impairment for the years ended March 31, 2009 and 2008.

(o)

Revenue Recognition

Revenue represents the invoiced value of goods sold recognized upon the delivery of goods to customers. Revenue is recognized when all of the following criteria are met:

-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

-Collectability is reasonably assured.

(p)

Government Grants

Government grants represented grants received from the PRC Government for assisting the Company’s environment protection. The amount is recognized when the proceeds are received or collectible. During 2009 and 2008, respectively $1,437,748 and $85,405 were received from the PRC Government for assisting the Company’s environment protection procedures.

F - 9

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(q)

Retirement Benefits

Retirement benefits in the form of contributions under defined contribution retirement plans to the relevant authorities are charged to operations as incurred. Retirement benefits amounting to $169,803 and $141,379 were charged to operations for the years ended March 31, 2009 and 2008, respectively.

(r)

Foreign Currency Translation

The accompanying consolidated financial statements are presented in United States dollars. The functional currency of the Company is the Renminbi (RMB). The consolidated financial statements are translated into United States dollars from RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

	2009		2008
Year end RMB: $ exchange rate		6.8359		7.0190
Average yearly RMB: $ exchange rate		6.9275		7.3766

(s)

Income Taxes

The Company accounts for income tax using the liability method. Deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future utilization is uncertain.

(t)

Comprehensive Income

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to recognize under current accounting standards as components of comprehensive income should be reported in a financial statement that is presented with the same prominence as other financial statements. The Company’s current components of comprehensive income are the foreign currency translation adjustment and the unrealized gain on marketable securities.

(u)

Earnings (Loss) Per Share

Basic earnings (loss) per share is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (loss) per share is computed similar to basic earnings (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no potentially dilutive securities for 2009 and 2008.

(v)

Segments

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance.

The Company has determined that there are two reportable segments:

The fertilizer segment is made up of four business units, which involve the manufacture and sale of Urea, Carbonate Hydrogen Ammonia, Liquefied Ammonia and Ammonia Water.

The fuel segment involves the manufacture and sale of Methanol, Dimethyl Ether. The Company believes it is not feasible to separately identify the assets and operating expenses of each segment because of the similarities shared by each in the manufacturing process. Both segments share the same coal-to-gas primary system, and also share the same

F - 10

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(v)

Segments (Continued)

manufacturing sub-systems and cycles. Therefore, the following represents the revenue, cost of goods sold and gross profit by each product within each segment:

Fuel Segment :

For The Year Ended March 31, 2009
	DME			Methanol			Segment Total
Revenues	$	11,160,655		$	1,813,959		$	12,974,614
COGS		11,472,683			2,541,367			14,014,050
Gross loss	$	(312,028	)	$	(727,408	)	$	(1,039,436	)

For The Year Ended March 31, 2008
	DME			Methanol			Segment Total
Revenues	$	32,626,266		$	417,180		$	33,043,446
COGS		27,439,177			309,292			27,748,469
Gross profit	$	5,187,089		$	107,888		$	5,294,977

Fertilizer Segment :

For The Year Ended March 31, 2009
	Urea		Ammonium Bicarbonate			Liquefied Ammonia			Ammonia Water			Segment Total
Revenues	$	34,490,637	$	3,716,301		$	972,655		$	391,440		$	39,571,033
COGS		34,353,676		3,983,331			1,230,332			457,345			40,024,684
Gross profit (loss)	$	136,961	$	(267,030	)	$	(257,677	)	$	(65,905	)	$	(453,651	)

For The Year Ended March 31, 2008
	Urea		Ammonium Bicarbonate			Liquefied Ammonia		Ammonia Water		Segment Total
Revenues	$	30,774,271	$	2,320,609		$	1,468,603	$	225,991	$	34,789,474
COGS		25,257,671		2,327,743			1,434,359		210,183		29,229,956
Gross profit	$	5,516,600	$	(7,134	)	$	34,244	$	15,808	$	5,559,518

Combined Segments:

For The Year Ended March 31, 2009
	Fuel Segment			Fertilizer Segment			Consolidated Total
Revenues	$	12,974,614		$	39,571,033		$	52,545,647
COGS		14,014,050			40,024,684			54,038,734
Gross loss	$	(1,039,436	)	$	(453,651	)	$	(1,493,087	)

For The Year Ended March 31, 2008
	Fuel Segment		Fertilizer Segment		Consolidated Total
Revenues	$	33,043,446	$	34,789,474	$	67,832,920
COGS		27,748,469		29,229,956		56,978,425
Gross profit	$	5,294,977	$	5,559,518	$	10,854,495

F - 11

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(w)

New Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements . SFAS No. 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No.160 is effective for the Company’s fiscal year beginning April 1, 2009. Management is currently evaluating the effect of this pronouncement on the consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141(R), Business Combinations . SFAS No. 141(R) replaces SFAS No. 141, Business Combinations. SFAS No. 141(R) retains the fundamental requirements in SFAS 141 that the acquisition method of accounting (which SFAS 141 called the purchase method) be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141(R) also establishes principles and requirements for how the acquirer: a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141(R) will apply prospectively to business combinations for which the acquisition date is on or after Company’s fiscal year beginning December 15, 2008. While the Company has not yet evaluated this statement for the impact, if any, that SFAS No. 141(R) will have on its consolidated financial statements, the Company will be required to expense costs related to any acquisitions after March 31, 2009.

In March 2008, FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities . The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. The Company is currently evaluating the impact of adopting SFAS No.161 on our consolidated financial statements.

In June 2008, the FASB ratified EITF Issue No. 07-05, “Determining Whether an Instrument (or Embedded Feature) is Indexed to an Entity's Own Stock” ("EITF 07-05"). EITF 07-05 mandates a two-step process for evaluating whether an equity-linked financial instrument or embedded feature is indexed to the entity's own stock. It is effective for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company does not expect the adoption of EITF 07-05 will have a material impact on results of operations, financial position, or cash flows.

F - 12

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

4.	NOTES RECEIVABLE

Notes receivable at March 31, 2009 and 2008 consist of the following:

	2009			2008
Bank acceptance notes:

Due July 8, 2009 (subsequently settled)	$	14,629		$	-
Due June 29, 2009 (subsequently settled)		36,571			-
Due June 28, 2009 (subsequently settled)		29,257			-
Due June 25, 2009 (subsequently settled)		5,851			-
Due June 30, 2009 (subsequently settled)		6,901			-
Due April 30, 2009 (subsequently settled)		14,629			-
Due April 9, 2009 (subsequently settled)		14,629			-
Due April 21, 2009 (subsequently settled)		14,629			-
Due May 9, 2008 (subsequently settled)		-			21,371
Due April 30, 2008 (subsequently settled)		-			17,096
Due July 17, 2008 (subsequently settled)		-			32,966
Due April 30, 2008 (subsequently settled)		-			6,593
Subtotal	$	137,096		$	78,026

Notes receivable from unrelated companies:

Due December 31, 2007 (past due)		731,433			712,352
Provision for notes receivable		(146,287	)		(142,470	)
Total	$	722,242		$	647,908

The balance of notes receivable due December 31, 2007 from unrelated companies represents due from the Xi county government which is interest-free and unsecured. Also see Note 16.

5.	INVENTORIES

Inventories consist of the following:

	March 31, 2009		March 31, 2008
Finished goods	$	182,559	$	281,851
Raw materials		1,006,135		1,185,758
Packing materials		489,932		703,431
Total inventories, net	$	1,678,626	$	2,171,040

The net book value of $182,559 and $281,851 of finished goods inventory is pledged as collateral for short-term debt at March 31, 2009 and 2008, respectively. See Note 11.

As of March 31, 2009 and 2008, the Company recorded a write-down of inventories to net realizable value for $337,532 and $0, respectively.

6.	RELATED PARTY TRANSACTIONS

(I)

Due from Related Party

	March 31, 2009		March 31, 2008
Current:
Huaiyang Desheng Chemical Co., Ltd	$	253,959	$	-

Huaiyang Desheng Chemical Co., Ltd (“Huaiyang Desheng”) is a company controlled by a director of the Company. For the year ended March 31, 2009, Huaiyang Desheng purchased $29,941 of raw materials from Henan Jinding, and sold $61,633 of finished goods to Henan Jinding. The remaining balance represents an advance for the purchase of raw materials from Huaiyang Desheng. The amount is unsecured, interest free, and has no fixed repayment terms.

F - 13

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

6.	RELATED PARTY TRANSACTIONS (CONTINUED)

(II)

Due to Related Parties

		March 31, 2009		March 31, 2008
Principal:
Xinyang Hong Chang Pipeline Gas Co., Ltd.	(a)	$	4,973,742	$	4,131,643
Long Triumph Investments Limited	(b)		1,344,328		862,035
Chen Siqiang	(c)		1,024,006		712,352
Wang Guiquan	(d)		131,658		-
Zhou Dianchang	(e)		73,143		-
Mai Xiaofu	(f)		146,287		-
Yu Zhiyang	(g)		43,886		-
Yang Hongtao	(h)		43,886		-
Due to employees	(i)		11,419		2,965
Subtotal		$	7,792,355	$	5,708,995

Interest:
Xinyang Hong Chang Pipeline Gas Co., Ltd.	(a)		422,472		-
Chen Siqiang	(c)		105,677		-
Wang Guiquan	(d)		12,042		-
Zhou Dianchang	(e)		6,690		-
Mai Xiaofu	(f)		14,004		-
Yu Zhiyang	(g)		4,201		-
Yang Hongtao	(h)		4,201		-
Subtotal		$	569,287	$	-

Total		$	8,361,642	$	5,708,995

(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. Included in the $4,973,742 is $877,719, which has an interest rate of 8.748% per annum and is due on June 30, 2009. Included in the $4,973,742 is $2,048,011, which has an interest rate of 8.748% per annum and is due on August 8, 2009. Included in the $4,973,742 is $731,433, which has an interest rate of 15% per annum and is due on September 25, 2009. The interest expense for the years ended March 31, 2009 and 2008 is $308,495 and $101,791, respectively. Of the $308,495 of interest expense, $252,559 was capitalized interest in construction in progress, since the amount was used for construction. Also see Note 10. The remaining balance of $1,316,579 is unsecured, interest free, and has no fixed repayment terms. Xinyang Hong Chang Pipeline Gas Co., Ltd. represented to the Company that the due dates of the loans will be extended.

(b)

Long Triumph Investments Limited is a former shareholder of the Company. The amount represents advances from Long Triumph Investments 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 and has an interest rate of 9.6% per annum. Included in the $1,024,006 is $731,433, which is due on February 3, 2010. The balance of $292,573 was due on May 20, 2009, and the due date was extended to February 3, 2010. The interest expense for the years ended March 31, 2009 and 2008 of $93,309 and $10,303, was capitalized in construction in progress, since the amount was used for construction. Also see Note 10.

F - 14

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

6.	RELATED PARTY TRANSACTIONS (CONTINUED)

(d)

Wang Guiquan is the president and director of the Company. The amount is unsecured, has an interest rate of 9.6% per annum and was due on April 18, 2009, and the due date was extended to October 18, 2009. The interest expense for the years ended March 31, 2009 and 2008 of $11,883 and $0, was capitalized interest in construction in progress, since the amount was used for construction. Also see Note 10.

(e)

Zhou Dianchang is a director of the Company. The amount is unsecured, has an interest rate of 9.6% per annum and was due on April 18, 2009, and the due date was extended to October 18, 2009. The interest expense for the years ended March 31, 2009 and 2008 of $6,602 and $0, was capitalized in construction in progress, since the amount was used for construction. Also see Note 10.

(f)

Mai Xiaofu is a director of the Company. The amount is unsecured, has an interest rate of 9.6% per annum and was due on April 2, 2009, and the due date was extended to October 2, 2009. The interest expense for the years ended March 31, 2009 and 2008 of $13,819 and $0, was capitalized in construction in progress, since the amount was used for construction. Also see Note 10.

(g)

Yu Zhiyang is a significant shareholder of the Company. The amount is unsecured, has an interest rate of 9.6% per annum and was due on April 2, 2009, and the due date was extended to October 2, 2009. The interest expense for the years ended March 31, 2009 and 2008 of $4,146 and $0, was capitalized in construction in progress, since the amount was used for construction. Also see Note 10.

(h)

Yang Hongtao is a significant shareholder of the Company. The amount is unsecured, has an interest rate of 9.6% per annum and was due on April 2, 2009, and the due date was extended to October 2, 2009. The interest expense for the years March 31, 2009 and 2008 of $4,146 and $0, was capitalized in construction in progress, since the amount was used for construction. Also see Note 10.

(i)

The amount due to employees is unsecured, interest free, and has no fixed repayment terms.

(III)

Due from Employees

	March 31, 2009		March 31, 2008

Current	$	18,424	$	13,213
Total amount due from employees	$	18,424	$	13,213

Amounts due from employees are interest-free, unsecured and have no fixed repayment terms. The amounts primarily represent advances to employees for business related expenses.

(IV)

Due to Employees

	March 31, 2009		March 31, 2008

Long-term	$	160,271	$	156,517
Total amount due to employees	$	160,271	$	156,517

Amounts due to employees are interest-free, unsecured and have no fixed repayment terms. The amounts represent training deposits due to employees.

7.	LONG-TERM INVESTMENT

	March 31, 2009		March 31, 2008

Luoshan Rural Credit Cooperatives	$	469,580	$	29,919

The Company purchased 2.87% and 0.2% of Luoshan Rural Credit Cooperatives for cash for the years ended March 31, 2009 and 2008, respectively. The Company accounted for its investment in Luoshan Rural Credit Cooperative using the cost method.

F - 15

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

8.	PLANT AND EQUIPMENT

Plant and equipment consist of the following:

	March 31, 2009		March 31, 2008
At cost:
Buildings	$	2,432,852	$	2,133,765
Machinery		25,102,781		23,988,684
Motor vehicles		328,878		314,870
Office equipment		269,743		247,367
		28,134,254		26,684,686
Less: Accumulated depreciation
Buildings		413,860		304,052
Machinery		8,699,555		6,063,257
Motor vehicles		196,885		136,381
Office equipment		128,485		78,058
		9,438,785		6,581,748
Plant and equipment, net	$	18,695,469	$	20,102,938

Depreciation expense for the years ended March 31, 2009 and 2008 is $2,651,794 and $2,182,115, respectively.

The net book value of machinery of $7,322,029 and $0 are pledged as collateral for the long-term bank loans at March 31, 2009 and 2008, respectively. See Note 13.

9.	LAND USE RIGHTS

	March 31, 2009		March 31, 2008

Cost	$	1,796,542	$	1,749,677
Less: Accumulated amortization		159,190		120,044
Land use rights, net	$	1,637,352	$	1,629,633

Amortization expense for the years ended March 31, 2009 and 2008 is $35,456 and $33,297, respectively.

The net book value of $0 and $1,629,633 of the land use rights are pledged as collateral for the short-term bank loans at March 31, 2009 and 2008, respectively. See Note 11.

Amortization expense for the next five years and thereafter is as follows:


2010	$	35,931
2011		35,931
2012		35,931
2013		35,931
2014		35,931
Thereafter		1,457,697
Total	$	1,637,352

F - 16

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

10.	CONSTRUCTION IN PROGRESS

Construction in progress at March 31, 2009 and 2008 consist of the following:

	March 31, 2009		March 31, 2008
Plant	$	23,461,536	$	4,525,886
Machinery		2,086,359		5,213,755
Other		155,973		997
	$	25,703,868	$	9,740,638

Capitalized interest for the years ended March 31, 2009 and 2008 is $386,464 and $112,094, respectively.

The net book value of $3,107,418 and $0 of plant construction in progress is pledged as collateral for the short-term bank loans at March 31, 2009 and 2008, respectively. See Note 11.

11.	SHORT-TERM DEBT

Short-term debt consists of the following:

	March 31, 2009		March 31, 2008
Bank Loans:
Xinyang Commercial Bank, Due April 25, 2009, interest rate at 11.56% per annum, collateralized by finished goods inventory. (Subsequently repaid on its due date)	$	1,462,865	$	-

Rural Credit Cooperatives, Due June 12, 2009, interest rate at 14.19% per annum, collateralized by construction in progress. (Subsequently repaid on its due date)		570,517		-

Rural Credit Cooperatives, Due October 16, 2009, interest rate at 14.19% per annum, collateralized by construction in progress.		570,517		-

Xinyang Commercial Bank, Due August 3, 2009, interest rate at 11.34% per annum, collateralized by finished goods inventory.		1,462,865		1,424,704

Xinyang Commercial Bank, Due December 29, 2009, interest rate at 11.56% per annum, collateralized by finished goods inventory.		2,340,584		-

Xinyang Commercial Bank, Due December 27, 2008, interest rate at 11.23% per annum, collateralized by finished goods inventory. (Subsequently repaid on its due date)		-		2,279,527

Bank of China Luoshan Branch, Due August 13, 2008, interest rate at 6.84% per annum, collateralized by land use rights. (Subsequently repaid on its due date)		-		2,849,409

China Construction Bank Luoshan Branch, Due June 30, 2008, interest rate at 7.29% per annum, collateralized by land use rights. (Subsequently repaid on its due date)		-		2,849,409

Xinyang Commercial Bank, Due April 16, 2008, interest rate at 9.55% per annum, collateralized by finished goods inventory. (Subsequently repaid on its due date)		-		1,424,704

F - 17

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

	March 31, 2009		March 31, 2008
Notes Payable to Unrelated Companies :
Due July 11, 2008 (subsequently repaid on its due date)		-		142,470
Due July 18, 2008 (subsequently repaid on its due date)		-		569,882
Due August 19, 2008 (subsequently repaid on its due date)		-		96,168
Due August 25, 2008 (subsequently repaid on its due date)		-		854,823
Due August 28, 2008 (subsequently repaid on its due date)		-		71,235
Due September 11, 2008 (subsequently repaid on its due date)		-		427,411
Due September 25, 2008 (subsequently repaid on its due date)		-		854,823
Due April 28, 2009 (subsequently repaid on its due date)		731,433		-
Due April 30, 2009 (subsequently repaid on its due date)		1,462,866		-
Due May 24, 2009 (subsequently repaid on its due date)		877,719		-
Due May 25, 2009 (subsequently repaid on its due date)		877,719		-
Due May 26, 2009 (subsequently repaid on its due date)		1,024,006		-
Due May 27, 2009 (subsequently repaid on its due date)		877,719		-
Due July 15, 2009		731,433		-
Due July 16, 2009		731,433		-
Due July 23, 2009		877,719		-
Due August 10, 2009		585,146		-
Due April 11, 2008 (subsequently repaid on its due date)		-		185,212
Due April 15, 2008 (subsequently repaid on its due date)		-		765,065
Due April 17, 2008 (subsequently repaid on its due date)		-		176,663
Due April 19, 2008 (subsequently repaid on its due date)		-		247,899
Due April 30, 2008 (subsequently repaid on its due date)		-		569,882
Due May 13, 2008 (subsequently repaid on its due date)		-		284,941
Due May 23, 2008 (subsequently repaid on its due date)		-		284,941
Due May 28, 2008 (subsequently repaid on its due date)		-		598,376
Due May 30, 2008 (subsequently repaid on its due date)		-		142,470
Due June 5, 2008 (subsequently repaid on its due date)		-		569,882
Due June 26, 2008 (subsequently repaid on its due date)		-		284,941

Notes Payable to an Unrelated Individual :
Due December 3, 2009		558,814		-
	$	15,743,355	$	17,954,837

Interest expense for the years ended March 31, 2009 and 2008 was $1,274,696 and $616,971, respectively.

Notes payable to unrelated companies are interest-free and were paid on their due dates. All the notes payable are subject to bank charges of 0.05% of the principal as a commission on each loan transaction. Bank charges for notes payable were $9,910 and $8,332 for the years ended March 31, 2009 and 2008, respectively.

Notes payable to an unrelated individual is unsecured, has an interest rate of 15% per annum and is due on December 3, 2009.

Restricted cash of $4,388,596 and $5,438,809 is collateralized for the notes payable at March 31, 2009 and 2008, respectively.

Inventory of $182,559 and $281,851 is collateralized for the notes payable at March 31, 2009 and 2008, respectively.

The net book value of $182,559 and $281,851 of finished goods inventory is pledged as collateral for short-term bank loans at March 31, 2009 and 2008, respectively. See Note 4.

F - 18

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

12.	LONG-TERM NOTE PAYABLE

In September 2003, the Company purchased a plant and machinery, a building and a land use right from Luoshan Fertilizer Plant, a bankrupt company, for $4,633,601. The remaining balance at March 31, 2009 and 2008 is $531,020 and $517,168, respectively. The note is due on December 31, 2010 and is interest free.

13.	LONG-TERM BANK LOAN

	March 31, 2009		March 31, 2008

Luoshan Rural Credit Cooperatives	$	2,925,730	$	-

The long-term bank loan was collateralized by the Company’s machinery, has an interest rate of 9.558% per annum and is due on March 19, 2012. See Note 8.

14.	INCOME TAXES

Corporation Income Tax (“CIT”)

On March 16, 2007, the National People’s Congress of China approved the Corporate Income Tax Law of the People’s Republic of China (the “new CIT Law”), which is effective from January 1, 2008. Since under the new CIT Law, the corporate income tax rate applicable to the Company starting from January 1, 2008 is 25%, replacing the currently applicable tax rate of 33%.

Income tax expense for the years ended March 31, 2009 and 2008 is summarized as follows:

	2009		2008

Current:
CIT	$	225,056	$	(2,233,226	)
Deferred:
CIT		1,209,938		300,531

Income tax benefit (expense)	$	1,434,994	$	(1,932,695	)

The Company’s income tax expense differs from the “expected” tax expense (computed by applying the CIT rate of varying from 25% to 33% percent to income before income taxes) as follows:

	2009		2008

Computed “expected” benefit (expense)	$	1,291,000	$	(1,971,080	)
Effect of tax rate change		-		(101,242	)
Permanent differences		143,994		139,627

Income tax benefit (expense)	$	1,434,994	$	(1,932,695	)

F - 19

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

14.	INCOME TAXES (CONTINUED)

The tax effects of temporary differences that give rise to the Company’s net deferred tax assets and liabilities as of March 31, 2009 and 2008 are as follows:

	March 31, 2009		March 31, 2008
Deferred tax assets:
Current portion:
Cost of sales	$	169,956	$	73,207
Financial expense		13,876		11,840
Welfare		21,263		11,893
Provision for notes receivable		36,571		35,618
Other expense		65,738		46,983
Total current deferred tax assets		307,404		179,541
Non-current portion:
Net operating loss carry forward		1,422,756		-
Total non-current deferred tax assets		1,422,756		-
Total deferred tax assets		1,730,160		179,541

Deferred tax liabilities:
Current portion:
Cost of sales		348,565		314,511
Government grant		49,006		57,344
Investment income		17,233		16,785
Other expenses		17,428		10,440
Total current deferred tax liabilities		432,232		399,080
Non-current portion:
Amortization		26,586		21,330
Depreciation		425,656		353,039
Total non-current deferred tax liabilities		452,242		374,369
Non-current portion:		884,474		773,449

Net deferred tax liabilities	$	845,686	$	(593,908	)

In June 2006, the FASB issued FIN 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109, which seeks to reduce the diversity in practice associated with the accounting and reporting for uncertainty in income tax positions. This interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in an income tax return. FIN 48 presents a two-step process for evaluating a tax position. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, based on the technical merits of the position. The second step is to measure the benefit to be recorded from tax positions that meet the more likely than not recognition threshold, by determining the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement, and recognizing that amount in the financial statements. At the date of adoption, and as of December 31, 2008, the Company does not have a liability for unrecognized tax benefits. There was no effect on financial condition or results of operations as a result of implementing FIN48.

The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is subject to U.S. Federal or State income tax examinations by tax authorities for years after 2006. During the periods open to examination, the Company has net operating loss (“NOL”) and tax credit carry forwards for U.S. federal and state tax purposes that have attributes from closed periods. Since these NOLs and tax credit carry forwards may be utilized in future periods, they remain subject to examination. The Company also files certain tax returns in the PRC. As of March 31, 2009 the Company was not aware of any pending income tax examinations by tax authorities in the PRC.

F - 20

NEW ORIENTAL ENERGY & CHEMICAL CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2009 AND 2008

14.	INCOME TAXES (CONTINUED)

At March 31, 2009, the Company had net operating loss carry forwards for PRC income tax purposes of $5,691,022 (the “NOL – China”), which are available to offset future PRC taxable income from 2010 through 2014.

The Company has not recorded a provision for U.S. federal income tax for the year ended March 31, 2009 due to the net operating loss carry forward in the United States. Net operating loss carry forward in the United States as of March 31, 2009 was $934,870 and it will begin to expire in 2010 and will end in 2015.

15.	SHAREHOLDERS’ EQUITY

On October 11, 2006, a share exchange agreement was reached between the Company, Kinfair Holding Limited (“KHL”) and KHL’s shareholders. The Company issued 7,500,000 shares representing 59.34% of total common stock in exchange of 100% of KHL common stock at the completion of the transaction. Henan Jinding Chemical Co., Ltd. (“Jinding”) is a wholly owned subsidiary of KHL. Jinding is the principal operating subsidiary of KHL.

In 2009 and 2008, the subsidiaries of the Company in China transferred 10% of its PRC profit after taxation to the surplus reserve fund in the amount of $0 and $511,079, respectively. Subject to certain restrictions set out in the PRC Companies Law, the surplus reserve fund may be distributed to shareholders in the form of share bonus issues and/or cash dividends. The Company’s retained earnings in the amount of $950,327 and $950,327 are restricted as of March 31, 2009 and 2008, respectively.

16.	CONTINGENCIES

Pending litigation:

On December 29, 2004, the Company entered into an agreement (the “Luoshan Agreement”) for the acquisition of the bankrupted Luoshan Fertilizer Plant and to pay back approximately $1.3 million in debt owed by Xixian Fertilizer Plant (the principal shareholder of Luoshan Fertilizer Plant). Under the Luoshan Agreement, the Company was to receive reimbursements of $650,000 from each of the Luoshan county government and the Xi county government, which were to be received before December 29, 2007. In November 2007, the Company initiated a lawsuit in the Intermediate Court of Xinyang City against the Xi county government for the refusal to repay the note receivable on its due date as set forth under the Luoshan Agreement, and seeking the enforcement of the terms of the note receivable and the Luoshan Agreement for payment of the $650,000 by the Xi county government. Final judgment of the lawsuit is still pending and expected to be announced in June or July 2009.

17.	CAPITAL COMMITMENT

As of March 31, 2009, the Company entered into an agreement and made a down payment of $5,934,171 toward the purchase of production equipment to be used in the Methanol project. The Company is required to pay the remainder of the purchase price, of approximately $8.4 million, prior to delivery, estimated to occur in 2010.

F - 21

SIGNATURES

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

	NEW ORIENTAL ENERGY & CHEMICAL CORP.

	By:	/s/ Chen Si Qiang
		Chen Si Qiang
		Chief Executive Officer and Chairman of the Board

Dated: June 29, 2009

POWER OF ATTORNEY

The registrant and each person whose signature appears below hereby appoint Chen Si Qiang as attorney-in-fact with full power of substitution, severally, to execute in the name and on behalf of the registrant and each such person, individually and in each capacity stated below, one or more amendments to the annual report which amendments may make such changes in the report as the attorney-in-fact acting deems appropriate and to file any such amendment to the report with the U. S. Securities and Exchange Commission.

In accordance with Section 13 or 15(d) of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Chen Si Qiang
Chen Si Qiang	Chief Executive Officer (Principal Executive Officer) and Chairman of the Board	June 29, 2009

/s/ Donglai Li
Donglai Li	Chief Financial Officer (Principal Accounting Officer)	June 29, 2009

/s/ Wang Gui Quan
Wang Gui Quan	President and Director	June 29, 2009

/s/ Zhou Dian Chang
Zhou Dian Chang	Director	June 29, 2009

/s/ Yan Shi
Yan Shi	Director	June 29, 2009

/s/ Qi Lei
Qi Lei	Director	June 29, 2009

/s/ Xiaokai Cao
Xiaokai Cao	Director	June 29, 2009

/s/ Howard S. Barth
Howard S. Barth	Director	June 29, 2009

S-1

Index to Exhibits

Exhibit Number		Exhibit Description

2.1		Share Exchange Agreement dated as of October 11, 2006, between Sports Source, Kinfair Holdings Limited and Auto Chance International Limited. (2)

2.2		Share Transfer Agreement, dated February 29, 2006, between Kinfair Holdings Limited, Xinyang Hongchang Channel Gas Engineering Co., Ltd., Mai XiaoFu, Wang Guiquan, Yu Zhiyang and Yang Hongtao. (2)

2.3		Stock Purchase Agreement, dated February 19, 2006, by and between Henan Jinding Chemical Industry Co., Ltd. and Kinfair Holdings Limited. (2)

3.1		Certificate of Incorporation of the Company, as amended by the current report on Form 8-K filed with the SEC on February 7, 2007 (1)

3.2		Bylaws of the Company, as amended by the current report on Form 8-K/A filed with the SEC on February 23, 2007 (1)

4.1		Specimen of Common Stock Certificate (3)

10.1		Form of Labor Contract for Henan Jinding Chemical Industry Co., Ltd. (2)

10.2		Employment Contract, dated April 27, 2006, by and between Henan Jinding Chemical Industry Co., Ltd and Mr. Wang Xiang Fu. (2)

10.3		Employment Contract, dated September 28, 2003, by and between Henan Jinding Chemical Industry Co., Ltd. and Mr. Li Dong Lai. (2)

10.4		Employment Contract, dated April 28, 2006, by and between Henan Jinding Chemical Industry Co., Ltd. and Mr. Wu Peng. (2)

10.5		Land Use Certificates issued to Luoshan Jinding Chemical Industry Co., Ltd. by the People’s Government of Luoshan County. (2)

14.1		Code of Business Conduct and Ethics, adopted April 9, 2007 (4)

21.1		Subsidiaries of the Company (5)

24.1		Power of Attorney (set forth on signature page)

31.1		Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 (5)

31.2		Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002 (5)

32.1		Certification under Section 906 of the Sarbanes-Oxley Act of 2002 (5)

99.1		Loan Agreement, dated August 8, 2008, by and between New Oriental Energy & Chemical Corp. and Xinyang Hong Chang Pipeline Gas Co., Ltd. (6)

(1)

Incorporation by reference to the Company's Registration Statement on Form SB-2, as amended (Registration No. 333-125131).

(2)

Incorporated by reference to the Company's Current Report on Form 8-K dated October 13, 2006.

(3)

Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended December 31, 2008.

(4)

Incorporated by reference to the Company's Current Report on Form 8-K dated April 10, 2007.

(5)

Filed herewith.

(6)

Incorporated by reference to the Company’s Form 10-Q for the period ended June 30, 2008.

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