UNITED ~~STATESSECURITIES~~STATES SECURITIES AND EXCHANGE ~~COMMISSIONWashington~~COMMISSION Washington, D.C. 20549

FORM 10-Q

(Mark one)

~~[ ]~~ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2013

For the quarterly period ended: March 31, 2013

~~[ ]~~ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF ~~1934~~1934For the transition period from _______________ to ________________

For the transition period from _______________to ________________

Commission File Number: 001-34649

CHINA GENGSHENG MINERALS, INC. (Exact Name of Registrant as Specified in Its Charter)

NEVADA	91-0541437
(State or Other jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

CHINA GENGSHENG MINERALS, INC.
No. 88 Gengsheng Road, Dayugou Town, Gongyi, Henan Province P.R. China	451271
(Address of Principal Executive Offices)	(Zip Code)

(86) 371-64059863 (Registrant’s Telephone Number, Including Area Code)

N/A (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [xX] No [ ]

Yes [X] No [ ]

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 definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large Accelerated Filer [ ] Accelerated Filer [ ] Non-Accelerated Filer [ ] Smaller Reporting Company [x 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]~~

AsYes of[ ] No ~~June 3, 2013, there were 26,803,044 shares of Common Stock of the Company, $0.001 par value, outstanding.~~ [X]

As of August 19, 2013, there were 26,803,044 shares of Common Stock of the Company, $0.001 par value, outstanding.

Table of Contents

		Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.		1
Item 1.	Financial Statements.	1
	Condensed Consolidated Balance Sheets as of March 31, 2013 (Unaudited) and December 31, 2012 (Unaudited)	1
	Condensed Consolidated Balance Sheets as of June 30, 2013 (Unaudited) and December 31, 2012	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2013 (Unaudited) and 2012 (Unaudited)	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months and Six Months Ended June 30, 2013 (Unaudited) and 2012 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2013 (Unaudited) and 2012 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 (Unaudited) and 2012 (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.		21
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	21
Item 3. Quantitative and Qualitative Disclosure About Market Risk.		34
Item 3.	Quantitative and Qualitative Disclosure About Market Risk.	38
Item 4. Controls and Procedures.		34
Item 4.	Controls and Procedures.	38
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.		35
Item 1.	Legal Proceedings.	38
Item 1A. Risk Factors.		35
Item 1A.	Risk Factors.	38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.		35
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	38
Item 3. Defaults Upon Senior Securities.		35
Item 3.	Defaults Upon Senior Securities.	38
Item 4. Mine Safety Disclosures.		35
Item 4.	Mine Safety Disclosures.	38
Item 5. Other Information.		35
Item 5.	Other Information.	38
Item 6. Exhibits.		35
Item 6.	Exhibits.	39
SIGNATURES

China GengSheng Minerals, Inc. Condensed Consolidated Balance Sheets ~~(Unaudited)~~

		March 31,		December 31,
		June 30,
		2013		~~2012~~December 31,
		(Unaudited)		2012
ASSETS
Current assets:
Cash and cash equivalents	$	43,~~323~~041,~~040~~206	$	5,408,309
Restricted cash		2636,~~093~~409,~~780~~854		20,113,452
Trade receivables, net		4750,~~750~~048,~~053~~029		55,811,468
Bills receivable		97,~~104~~951,~~834~~443		9,913,668
Other receivables and prepayments, including related parties, net		16,~~269~~250,~~074~~857		16,466,252
Advances to senior management		~~9,056~~-		9,005
Inventories, net		1213,~~463~~384,~~888~~865		12,971,168
Deferred tax assets, net of valuation allowance		~~211~~214,~~740~~928		210,544
Total current assets		~~116~~127,~~225~~301,~~465~~182		120,903,866
Investment in a non-consolidated affiliate		1,~~021~~011,~~176~~749		1,040,492
Property, plant and equipment, net		36,~~720~~348,~~739~~623		36,425,004
Land use rights, net		4,~~039~~033,~~879~~441		4,035,948
TOTAL ASSETS	$	~~158~~168,~~007~~694,~~259~~995	$	162,405,310
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Trade payables	$	2224,~~203~~349,~~342~~129	$	23,808,926
Bills payable		46,~~096~~358,~~580~~740		13,995,550
Other payables and accrued expenses, including related parties		6,~~698~~996,~~668~~388		7,561,146
Deferred revenue - Government grants		1,~~187~~205,~~291~~167		649,612
Provision of warranty		~~139~~57,~~086~~042		100,570
Income taxes payable		~~177~~180,~~836~~514		166,719
Non-interest-bearing loans, including related parties		98,~~584~~187,~~445~~752		6,760,465
Collateralized short-term bank loans		7680,~~574~~443,~~835~~109		65,196,883
Loan from third party		-		3,170,000
Loans from a third party		5,663,000		3,170,000
Deferred tax liabilities		~~515~~523,~~972~~298		513,524
TOTAL LIABILITIES		~~121~~133,~~178~~964,~~055~~139		121,923,395
COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

China GengSheng Minerals, Inc. Condensed Consolidated Balance Sheets (Cont’d) ~~(Unaudited)~~

		March 31,			December 31,
		June 30,
		2013			~~2012~~December 31,
		(Unaudited)			2012
STOCKHOLDERS' EQUITY
Preferred stock - $0.001 par value per share; authorized 50,000,000 shares in 2013 and 2012, none issued and outstanding	$	-		$	-
Common stock - $0.001 par value per share; authorized 100,000,000 shares in 2013 and 2012, issued and outstanding 26,803,044 shares in 2013 and 2012		26,803			26,803
Additional paid-in capital		28,197,310			28,197,310
Statutory and other reserves		8,110,972			8,110,972
Accumulated other comprehensive income		8,~~155~~576,~~655~~774			7,994,358
Retained deficit		(710,~~806~~312,~~522~~255	)		(3,997,894	)
Total China GengSheng Minerals, Inc. stockholders' equity		3634,~~684~~599,~~218~~604			40,331,549
NONCONTROLLING INTEREST		~~144~~131,~~986~~252			150,366
TOTAL STOCKHOLDERS’ EQUITY		3634,~~829~~730,~~204~~856			40,481,915
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	~~158~~168,~~007~~694,~~259~~995		$	162,405,310

The accompanying notes are an integral part of these condensed consolidated financial statements.

China GengSheng Minerals, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

		Three Months Ended March 31,
		Three months ended						Six months ended
		2013			2012
		June 30,						June 30,
Sales revenue	$	10,433,417		$	13,710,663
		2013			2012			2013			2012
Cost of goods sold		9,551,749			10,994,309
Sales revenue	$	15,975,951		$	19,620,215		$	26,409,368		$	33,330,878
Gross profit		881,668			2,716,354
Cost of goods sold		(12,240,442	)		(16,565,669	)		(21,792,191	)		(27,559,978	)
Operating expenses
Gross profit		3,735,509			3,054,546			4,617,177			5,770,900
General and administrative expenses		1,720,985			1,728,711
Operating expenses
Research and development expenses		216,454			162,996
General and administrative expenses		1,744,305			1,937,379			3,465,290			3,666,090
Selling expenses		1,607,669			2,480,591
Research and development expenses		430,917			236,283			647,371			399,279
Total operating expenses		3,545,108			4,372,298
Selling expenses		2,101,448			2,790,552			3,709,117			5,271,143
Loss from operations		(2,663,440	)		(1,655,944	)
Total operating expenses		4,276,670			4,964,214			7,821,778			9,336,512
Other (expenses) income
Loss from operations		(541,161	)		(1,909,668	)		(3,204,601	)		(3,565,612	)
Government grant income		15,920			385,314
Other (expenses) income
Guarantee income		98,543			153,554
Government grant income		58,186			-			74,106			385,314
Guarantee expenses		(91,540	)		(129,178	)
Guarantee income		93,902			147,732			192,445			301,286
Equity in net loss of a non-consolidated affiliate		(25,193	)		-
Guarantee expenses		(61,505	)		(107,630			(153,045	)		(236,808	)
Interest income		350,965			52,574
Equity in net loss of a non-consolidated affiliate		(24,996	)		(8,567	)		(50,189	)		(8,567	)
Other income (expenses)		(3,503	)		5,939
Interest income		171,895			186,375			522,860			238,949
Finance costs		(1,427,589	)		(1,750,192	)
Other income (expenses)		(51,252	)		37,905			(54,755	)		43,844
Total other expenses		(1,082,397	)		(1,281,989	)
Finance costs		(1,765,382	)		(1,949,938	)		(3,192,971	)		(3,700,130	)
Loss before income taxes and noncontrolling interest		(3,745,837	)		(2,937,933	)
Total other expenses		(1,579,152	)		(1,694,123	)		(2,661,549	)		(2,976,112	)
Income taxes		(79,981	)		(12,348	)
Loss before income taxes and noncontrolling interest		(2,120,313	)		(3,603,791	)		(5,866,150	)		(6,541,724	)
Net loss before noncontrolling interest		(3,825,818	)		(2,950,281	)
Income taxes		(399,153	)		(202,018	)		(479,134	)		(214,366	)
Net loss attributable to noncontrolling interest		17,190			37,449
Net loss before noncontrolling interest		(2,519,466	)		(3,805,809	)		(6,345,284	)		(6,756,090	)
Net loss attributable to Company’s common stockholders	$	(3,808,628	)	$	(2,912,832	)
Net loss attributable to noncontrolling interest		13,733			12,039			30,923			49,488
Net loss before noncontrolling interest	$	(3,825,818	)	$	(2,950,281	)
Net loss attributable to Company’s common stockholders	$	(2,505,733	)	$	(3,793,770	)	$	(6,314,361	)	$	(6,706,602	)
Other comprehensive income
Net loss before noncontrolling interest	$	(2,519,466	)	$	(3,805,809	)	$	(6,345,284	)	$	(6,756,090	)
Foreign currency translation adjustment		138,727			239,812
Other comprehensive income
Comprehensive loss		(3,687,091	)		(2,710,469	)
Foreign currency translation adjustments		393,652			20,630			532,379			260,442
Comprehensive loss attributable to noncontrolling interest		(22,570	)		(20,005	)
Comprehensive loss		(2,125,814	)		(3,785,179	)		(5,812,905	)		(6,495,648	)
Comprehensive loss attributable to Company’s common stockholders	$	(3,709,661	)	$	(2,730,474	)
Comprehensive loss attributable to noncontrolling interest		(27,467	)		12,055			(50,037	)		(7,950	)
Loss per share - Basic and diluted attributable to Company’s common stockholders	$	(0.14	)	$	(0.11	)
Comprehensive loss attributable to Company’s common stockholders	$	(2,153,281	)	$	(3,773,124	)	$	(5,862,942	)	$	(6,503,598	)
Weighted average number of shares - Basic and diluted		26,803,044			26,803,044
Loss per share - Basic and diluted attributable to Company’s common stockholders	$	(0.08	)	$	(0.14	)	$	(0.22	)	$	(0.25	)
Weighted average number of shares - Basic and diluted		26,803,044			26,803,044			26,803,044			26,803,044

The accompanying notes are an integral part of these condensed consolidated financial statements.

China GengSheng Minerals, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

		Three Months Ended March 31,
		Six Months Ended June 30,
		2013			2012
Cash flows from operating activities
Net loss before noncontrolling interest	$	(36,~~825~~345,~~818~~284	)	$	(26,~~950~~756,~~281~~090	)
Adjustments to reconcile net loss before noncontrolling interest
Adjustments to reconcile net loss before noncontrolling interest to net cash flows used in operating activities:
to net cash flows used in operating activities:
Depreciation		1,554,300			1,545,430
Depreciation		769,959			725,675
Amortization of land use rights		50,066			38,380
Amortization of land use rights		18,963			21,649
Equity in net loss of a non-consolidated affiliate		50,189			8,567
Equity in net loss of a non-consolidated affiliate		25,193			-
Deferred taxes		(208	)		12,157
Deferred taxes		(274	)		12,348
Loss on disposal of property, plant and equipment		-			115,742
Loss on disposal of property, plant and equipment		-			447
Guarantee expenses		153,045			236,808
Guarantee expenses		91,540			129,178
Guarantee income		(192,443	)		(301,286	)
Guarantee income		(98,543	)		(153,554	)
Allowance for doubtful accounts		524,936			573,147
Allowance for doubtful accounts		234,153			304,678
Exchange gain		(173,653	)		(65,741	)
Exchange gain		(35,728	)		(55,660	)
Changes in operating assets and liabilities:
Restricted cash		-			~~(118~~9,~~875~~833,472	)
Trade receivables		85,~~133~~910,~~661~~843			1(4,~~445~~422,~~883~~097	)
Bills receivable		12,~~010~~708,~~283~~159			(45,~~622~~921,~~703~~005	)
Other receivables and prepayments		1,~~668~~763,~~409~~362			(2965,~~437,411~~360	)
Advances to senior management		-9,153			362,~~678~~450
Inventories		~~580~~(142,~~287~~712	)		(41,~~230~~184,~~052~~365	)
Trade payables		(1774,~~738,591~~711	)		13,~~273~~513,~~464~~956
Provision of warranty		37(45,~~897~~425	)		(1875,~~160~~223	)
Bills payable		(108,~~112~~442,~~163~~812	)		(17,~~024~~741,~~020~~312	)
Other payables and accrued expenses		(~~886~~631,~~628~~666	)		(31,~~217~~965,~~498~~058	)
Income taxes payable		-			(147,~~063~~762	)
Net cash flows used in operating activities		(42,~~127~~475,~~400~~439	)		(1413,~~699~~305,~~277~~190	)
Cash flows from investing activities
Payments for acquisition of property, plant and equipment		(~~858~~819,~~748~~904	)		(1,~~196~~677,~~013~~628	)
Net cash flows used in investing activities		(~~858~~819,~~748~~904	)		(1,~~196~~677,~~013~~628	)
Cash flows from financing activities
Government grant received		~~533~~539,~~320~~685			~~171~~357,~~180~~984
Restricted cash		(515,~~858~~808,~~759~~944	)		(1027,~~048~~070,~~900~~560	)
Proceeds from bank loans		3871,~~514~~927,~~333~~316			2449,~~361~~859,~~925~~412
Repayment of bank loans		(2758,~~520~~098,~~395~~588	)		(211,~~932~~555,~~250~~280	)
Proceeds from non-interest-bearing loans		37,~~122~~016,~~268~~030			~~642~~576,~~137~~646
Repayment of non-interest-bearing loans		(17,~~724~~135,~~970~~792	)		(~~375~~379,~~884~~822	)
Proceeds from third party loans		-5,638,500			34,~~170~~752,000
Repayment of third party loans		(3,~~184~~222,000	)		-
Net cash flows provided by financing activities		3856,~~881,797~~207			1416,~~988~~540,~~208~~380

China GengSheng Minerals, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

		Three Months Ended March 31,
		Six Months Ended June 30,
		2013			2012
Effect of foreign currency translation on cash and cash equivalents		1972,~~082~~033			911,~~531~~026
Net decrease in cash and cash equivalents		(1,085,269	)		(897,551	)
Net increase (decrease) in cash and cash equivalents		(2,367,103	)		1,568,588
Cash and cash equivalents - beginning of period		5,408,309			3,594,361
Cash and cash equivalents - end of period	$	43,~~323~~041,~~040~~206		$	25,~~696~~162,~~810~~949
Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	13,~~417~~295,~~501~~665		$	~~688~~1,~~791~~559,143
Income taxes	$	68422,~~291~~645		$	~~158~~346,~~232~~552
Non-cash investing and financing activities:
Proceeds from disposal of property, plant and equipment settled by offsetting trade
Proceeds from disposal of property, plant and equipment settled by offsetting trade payables	$	-		$	88,707
payables	$	-		$	11,095
Acquisition of Yili YiQiang Silicon Limited by offsetting deposit for acquisition of a non-consolidated affiliate	$	-		$	1,098,979

The accompanying notes are an integral part of these condensed consolidated financial statements.

China GengSheng Minerals, Inc. Notes to Condensed Consolidated Financial Statements ~~March~~June 3130, 2013 and 2012 (Unaudited)

1. Basis of presentation

1.	Basis of presentation

	Basis of presentation

	These unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (the “US GAAP”) have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements and should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2012, included in our Annual Report on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on April 15, 2012.

	In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three-month period have been made. Results for the interim period presented are not necessarily indicative of the results that might be expected for the entire fiscal year.

	Certain reclassifications have been made to December 31, 2012 to conform with current period’s presentation.

2.	Corporate information

	The Company was originally incorporated on November 13, 1947, in accordance with the laws of the State of Washington as Silver Mountain Mining Company. On August 20, 1979, the Articles of Incorporation were amended to change the corporate name of the Company to Leadpoint Consolidated Mines Company. On August 15, 2006, the Company changed its state of incorporation from Washington to Nevada by means of a merger with and into a Nevada corporation formed on May 23, 2006, solely for the purpose of effecting the reincorporation and changed its name to Point Acquisition Corporation. On June 11, 2007, the Company changed its name to China Minerals Technologies, Inc. and on July 26, 2007, the Company changed its name to China GengSheng Minerals, Inc. On March 4, 2010, the Company’s common stock began trading on the NYSE MKT LLC (formerly the American Stock Exchange) under the symbol CHGS. Prior to March 4, 2010, the Company’s common stock traded on the Over-the-Counter Bulletin Board under the symbol CHGS.OB.

	Currently the Company has the following eight subsidiaries:

Basis of presentation

Company name	Place/date of	The Company's	Common stock/	Principal activities
	incorporation or	effective ownership	registered capital
	establishment	interest

GengSheng International Corporation (“GengSheng International” )	The British Virgin Islands (the “BVI”)/ November 3, 2004	100%	Ordinary shares :- Authorized: 50,000 shares of $1 each Paid up: 100 shares of $1 each	Investment holding

Henan GengSheng Refractories Co., Ltd. (“Refractories”)	The People's Republic of China (the “PRC”)/ December 20, 1996	100%	Registered capital of $12,089,879 fully paid up	Manufacturing and selling of refractory products

Henan GengSheng High-Temperature Materials Co., Ltd. (“High-Temperature”)	PRC/ September 4, 2002	89.33%	Registered capital of $1,246,300 fully paid up	Manufacturing and selling of functional ceramic products

These unaudited condensed consolidated financial statements of the Company and its subsidiaries have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) including the instructions to Form 10-Q and Regulation S-X. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (the “US GAAP”) have been condensed or omitted from these statements pursuant to such rules and regulations and, accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements and should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2012, included in our Annual Report on Form 10-K for the year ended December 31, 2012 as filed with the Securities and Exchange Commission on April 15, 2012.

In the opinion of the management of the Company, all adjustments, which are of a normal recurring nature, necessary for a fair statement of the results for the three-month period have been made. Results for the interim period presented are not necessarily indicative of the results that might be expected for the entire fiscal year.

Certain reclassifications have been made to December 31, 2012 to conform with current period’s presentation.

2. Corporate information

The Company was originally incorporated on November 13, 1947, in accordance with the laws of the State of Washington as Silver Mountain Mining Company. On August 20, 1979, the Articles of Incorporation were amended to change the corporate name of the Company to Leadpoint Consolidated Mines Company. On August 15, 2006, the Company changed its state of incorporation from Washington to Nevada by means of a merger with and into a Nevada corporation formed on May 23, 2006, solely for the purpose of effecting the reincorporation and changed its name to Point Acquisition Corporation. On June 11, 2007, the Company changed its name to China Minerals Technologies, Inc. and on July 26, 2007, the Company changed its name to China GengSheng Minerals, Inc. On March 4, 2010, the Company’s common stock began trading on the NYSE MKT LLC (formerly the American Stock Exchange) under the symbol CHGS. Prior to March 4, 2010, the Company’s common stock traded on the Over-the-Counter Bulletin Board under the symbol CHGS.OB.

Currently the Company has the following eight subsidiaries:

Company name	Place/date of	The Company's	Common stock/	Principal activities
	incorporation or	effective ownership	registered capital
	establishment	interest
GengSheng International Corporation ( “GengSheng International” )	The British Virgin Islands (the “BVI”)/ November 3, 2004	100%	Ordinary shares :- Authorized: 50,000 shares of $1 each Paid up: 100 shares of $1 each	Investment holding
Henan GengSheng Refractories Co., Ltd. ( “Refractories” )	The People's Republic of China (the “PRC”)/ December 20, 1996	100%	Registered capital of $12,089,879 fully paid up	Manufacturing and selling of refractory products
Henan GengSheng High-Temperature Materials Co., Ltd. ( “High-Temperature” )	PRC/ September 4, 2002	89.33%	Registered capital of $1,246,300 fully paid up	Manufacturing and selling of functional ceramic products

China GengSheng Minerals, Inc. Notes to Condensed Consolidated Financial Statements ~~March~~June 3130, 2013 and 2012 (Unaudited)

2.	Corporate information (Cont’d)

Company name	Place/date of	The Company's	Common stock/	Principal activities
Smarthigh Holdings Limited (“Smarthigh”)		BVI/ November 5, 2004		100%	Ordinary shares :- Authorized: 50,000 shares of $1 each Paid up: 100 shares of $1 each	Investment holding
	incorporation or	effective ownership	registered capital
Zhengzhou Duesail Fracture Proppant Co., Ltd. (“Duesail”)		PRC/ August 14, 2006		100%	Registered capital of $2,800,000 fully paid up	Manufacturing and selling of fracture proppant products
	establishment	interest
Henan GengSheng Micronized Powder Materials Co., Ltd. (“Micronized”)		PRC/ March 31, 2008		100%	Registered capital of $5,823,000 fully paid up	Manufacturing and selling of fine precision abrasives
Smarthigh Holdings Limited ( “Smarthigh” )	BVI/ November 5, 2004	100%	Ordinary shares :- Authorized: 50,000 shares of $1 each Paid up: 100 shares of $1 each	Investment holding
Guizhou Southeast Prefecture GengSheng New Materials Co., Ltd. (“Prefecture”)		PRC/ April 13, 2004		100%	Registered capital of $141,840 fully paid up	Manufacturing and selling of corundum materials
Zhengzhou Duesail Fracture Proppant Co., Ltd. ( “Duesail” )	PRC/ August 14, 2006	100%	Registered capital of $2,800,000 fully paid up	Manufacturing and selling of fracture proppant products
Henan Yuxing Proppant Co., Ltd. (“Yuxing”)		PRC/ June 3, 2011		100%	Registered capital of $3,086,000 fully paid up	Manufacturing and selling of fracture proppant products
Henan GengSheng Micronized Powder Materials Co., Ltd. ( “Micronized” )	PRC/ March 31, 2008	100%	Registered capital of $5,823,000 fully paid up	Manufacturing and selling of fine precision abrasives
Guizhou Southeast Prefecture GengSheng New Materials Co., Ltd. ( “Prefecture” )	PRC/ April 13, 2004	100%	Registered capital of $141,840 fully paid up	Manufacturing and selling of corundum materials
Henan Yuxing Proppant Co., Ltd. (“Yuxing”)	PRC/ June 3, 2011	100%	Registered capital of $3,086,000 fully paid up	Manufacturing and selling of fracture proppant products

3. Description of business

3.	Description of business

	The Company is a holding company whose primary business operations are conducted through its subsidiaries located in the PRC’s Henan Province. Prefecture is located in Guizhou Province and is manufacturing corundum materials, a major raw material for monolithic refractory. Through its operating subsidiaries, the Company produces and markets a broad range of monolithic refractory, functional ceramics, fracture proppants, fine precision abrasives, and corundum materials.

	The principal raw materials used in the products are several forms of aluminum oxide, including bauxite, processed AI₂O₃and calcium aluminates cement, and other materials, such as corundum, magnesia, resin and silica, which are primarily sourced from suppliers located in the PRC. The production facilities of the Company, other than the Prefecture’s sub-processing factory located in Guizhou, are also located in Henan Province.

	Refractories products allow steel makers and other customers to improve the productivity and longevity of their equipment and machinery. Functional ceramic products mainly include abrasive balls and tiles, valves, electronic ceramics and structural ceramics. Fracture proppant products are used to reach trapped pockets of oil and natural gas deposits, which lead to higher productivities of oil and natural gas wells. Due to their heat-resistant qualities and ability to function under thermal stress, refractories serve as components in industrial furnaces and other heavy industrial machinery. Corundum materials are a major raw material for producing monolithic refractory. Fine precision abrasive is used for slicing the solar-silicon bar and polishing the equipment surface. The Company’s customers include some of the largest steel and iron producers located in 25 provinces in the PRC, as well as other countries in Asia and Europe.

The Company is a holding company whose primary business operations are conducted through its subsidiaries located in the PRC’s Henan Province. Prefecture is located in Guizhou Province and is manufacturing corundum materials, a major raw material for monolithic refractory. Through its operating subsidiaries, the Company produces and markets a broad range of monolithic refractory, functional ceramics, fracture proppants, fine precision abrasives, and corundum materials.

The principal raw materials used in the products are several forms of aluminum oxide, including bauxite, processed AI2O3 and calcium aluminates cement, and other materials, such as corundum, magnesia, resin and silica, which are primarily sourced from suppliers located in the PRC. The production facilities of the Company, other than the Prefecture’s sub-processing factory located in Guizhou, are also located in Henan Province.

Refractories products allow steel makers and other customers to improve the productivity and longevity of their equipment and machinery. Functional ceramic products mainly include abrasive balls and tiles, valves, electronic ceramics and structural ceramics. Fracture proppant products are used to reach trapped pockets of oil and natural gas deposits, which lead to higher productivities of oil and natural gas wells. Due to their heat-resistant qualities and ability to function under thermal stress, refractories serve as components in industrial furnaces and other heavy industrial machinery. Corundum materials are a major raw material for producing monolithic refractory. Fine precision abrasive is used for slicing the solar-silicon bar and polishing the equipment surface. The Company’s customers include some of the largest steel and iron producers located in 25 provinces in the PRC, as well as in the United States and other countries in Asia, and Europe.

China GengSheng Minerals, Inc. Notes to Condensed Consolidated Financial Statements ~~March~~June 3130, 2013 and 2012 (Unaudited)

4. Summary of significant accounting policies

4.	Summary of significant accounting policies

	Basis of consolidation

	The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation.

	Concentrations and credit risk

	Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, trade, bills and other receivables. As of June 30, 2013 and December 31, 2012, substantially all of the Company’s cash and cash equivalents and restricted cash were held by major financial institutions located in the PRC and Hong Kong, which management believes are of high credit quality. With respect to trade and other receivables, the Company extends credit based on an evaluation of the customer’s financial condition. The Company generally does not require collateral for trade and other receivables and maintains an allowance for doubtful accounts of trade and other receivables.

	Regarding bills receivable, they are undertaken by the banks to honor the payments at maturity and the customers are required to place deposits with the banks equivalent to a certain percentage of the bills amount as collateral. These bills receivable can be sold to any third party at a discount before maturity. The Company does not maintain allowance for bills receivable in the absence of bad debt experience and the payments are undertaken by the banks.

	During the reporting periods, sales to the following customers represented 10% or more of the Company’s condensed consolidated sales:

Basis of consolidation

		Three months ended				Six months ended
		June 30,				June 30,
		2013		2012		2013		2012

Shangdong Steel Co., Ltd. Rizhao Subsidiary	$	2,296,747	$	2,300,576	$	4,397,797	$	4,445,120
Fushun New Steel Co., Ltd.		1,943,986		1,455,371		3,020,028		2,986,161
CNPC Changqing Oilfield		2,695,321		-		2,695,321		-
Trina Solar		31,925		1,839,836		87,985		3,878,390

	$	6,967,979	$	5,595,783	$	10,201,131	$	11,309,671

The condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation.

Concentrations of credit risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents, trade, bills and other receivables. As of March 31, 2013 and December 31, 2012, substantially all of the Company’s cash and cash equivalents and restricted cash were held by major financial institutions located in the PRC and Hong Kong, which management believes are of high credit quality. With respect to trade and other receivables, the Company extends credit based on an evaluation of the customer’s financial condition. The Company generally does not require collateral for trade and other receivables and maintains an allowance for doubtful accounts of trade and other receivables.

Regarding bills receivable, they are undertaken by the banks to honor the payments at maturity and the customers are required to place deposits with the banks equivalent to a certain percentage of the bills amount as collateral. These bills receivable can be sold to any third party at a discount before maturity. The Company does not maintain allowance for bills receivable in the absence of bad debt experience and the payments are undertaken by the banks.

During the reporting periods, sales to the following customers represented 10% or more of the Company’s condensed consolidated sales:

		Three Months Ended
		March 31,
		2013		2012
Shangdong Steel Co., Ltd. Rizhao Subsidiary	$	2,101,050	$	2,144,544
Fushun New Steel Co., Ltd.		1,076,042		1,530,790
Trina Solar		56,060		2,038,554
	$	3,233,152	$	5,713,888

During the reporting periods, no customer represented 10% or more of the Company’s trade receivables.

Fair value of financial instruments

ASC 820 requires the disclosure of the estimated fair value of financial instruments including those financial instruments for which fair value option was not elected. The fair value of collateralized borrowings are estimated using discounted cash flow analysis, based on the Company’s current incremental borrowing rates for similar types of borrowing arrangement. The carrying amount of financial assets and liabilities approximate their fair value due to short maturities.

Recently issued accounting pronouncements

In February 2013, the FASB issued ASU No. 2013-02, Topic 350 - Comprehensive Income, (“ASU 2013-02”), which amends Topic 220 to improve the reporting of reclassifications out of accumulated other comprehensive income to the respective line items in net income. ASU 2013-02 is effective for reporting periods beginning after December 15, 2012. The adoption of this ASU had no significant impact on the Company’s condensed consolidated financial statements.

China GengSheng Minerals, Inc. Notes to Condensed Consolidated Financial Statements ~~March~~June 3130, 2013 and 2012 (Unaudited)

5.	Restricted cash and bills payable

		March 31,		December 31,
		June 30,		December 31,
		2013		2012
Bank deposits held as collateral for bills payable (Note 5a)	$	14,~~694~~858,~~741~~854	$	2,168,082
Bank deposits held as collateral for bank loans (Note 14)		2431,~~399~~551,~~039~~000		17,945,370
	$	2636,~~093~~409,~~780~~854	$	20,113,452

Notes :

a) The Company is requested by certain suppliers to settle amounts owed to such suppliers by the issuance of bills through banks for which the banks undertake to guarantee the Company’s settlement of these amounts at maturity. These bills are interest free and usually mature within six months from the date of issuance. As collateral security for the banks’ undertakings, the Company is required to pay the bank charges as well as maintain deposits with such banks in amounts equal to 20%, ~~40%,~~ 50% or 100% of the bills’ amounts issued. Bills payable amounted to $46,~~096~~358,~~580~~740 and $13,995,550 as of ~~March~~June 3130, 2013 and December 31, 2012, respectively.

6.	Trade receivables, net

		March31,			December 31,
		June 30,			December 31,
		2013			2012
Trade receivables	$	5053,~~731~~363,~~456~~563		$	58,542,915
Allowance for doubtful accounts		(23,~~981~~315,~~403~~534	)		(2,731,447	)
	$	4750,~~750~~048,~~053~~029		$	55,811,468

An analysis of the allowance for doubtful accounts for the three months ended ~~March~~June 3130, 2013 and 2012 is as follows:

		Three Months Ended
		Six Months Ended
		March 31,
		June 30,
		2013		2012
Balance at beginning of period	$	2,731,447	$	2,046,820
(Reversal) addition of doubtful accounts expense, net		234,153		(12,322	)
Addition of doubtful accounts expense, net		524,936		256,347
Translation adjustments		1559,~~803~~151		1113,~~719~~004
Balance at end of period	$	23,~~981~~315,~~403~~534	$	2,~~046~~316,~~217~~171

7. Bills receivables

7.	Bills receivables

	Bills receivable represents bank undertakings that essentially guarantee the payment of amounts owed by our customers to us. The undertakings are provided by banks upon receipt of collateral deposits from the customers. Bills receivable can be sold by us at a discount before maturity.

	As of June 30, 2013, the balance of bills receivable was $7,951,443 with maturities ranging from 5 days to 6 months. As of December 31, 2012, the balance of bills receivable was $9,913,668.

Bills receivable represents bank undertakings that essentially guarantee the payment of amounts owed by our customers to us. The undertakings are provided by banks upon receipt of collateral deposits from the customers. Bills receivable can be sold by us at a discount before maturity.

As of March 31, 2013, the balance of bills receivable was $9,104,834 with maturities ranging from 1 month to 6 months. As of December 31, 2012, the balance of bills receivable was $9,913,668.

China GengSheng Minerals, Inc. Notes to Condensed Consolidated Financial Statements ~~March~~June 3130, 2013 and 2012 (Unaudited)

8. Other receivables and prepayments, ~~including related parties,~~ net and advances to senior management

		March 31,			December 31,
		June 30,			December 31,
		2013			2012
Government grant receivables (Note 8a)	$	~~401~~407,~~178~~218		$	398,913
Loans to third parties (Note 8b)		1,~~490~~501,~~482~~006			1,532,455
Value added tax and other tax recoverable		~~452~~440,~~912~~602			569,886
Deposits for purchase of raw materials		2,~~298~~408,~~895~~228			2,145,583
Other deposit		1,~~352~~325,~~860~~854			1,140,410
Prepayment		~~907~~2,~~247~~105,862			874,873
Other receivables		1904,~~038,251~~632			489,653
Related party advances (Note 8c)		109,~~161~~019,~~720~~547			11,138,593
		18,103,545			18,290,366
		18,112,949			18,290,366
Allowance for doubtful accounts		(1,~~834~~862,~~471~~092	)		(1,824,114	)
	$	16,~~269~~250,~~074~~857		$	16,466,252
Advances to senior management (Note 8b)	$	~~9,056~~-		$	9,005

An analysis of the allowance for doubtful accounts for the three months ended ~~March~~June 3130, 2013 and 2012 is as follows:

		Three Months Ended
		Six Months Ended
		March 31,
		June 30,
		(Unaudited)
		2013		2012
Balance at beginning of period	$	1,824,114	$	757,217
Addition of doubtful debt expenses, net		-		~~317~~316,~~000~~800
Translation adjustments		1037,~~357~~978		34,~~930~~811
Balance at end of period	$	1,~~834~~862,~~471~~092	$	1,078,~~147~~828

Notes :

a) As of ~~March~~June 3130, 2013, government grant receivables represented incentive bonus of $~~401~~407,~~178~~218 from the local government for successful back-door listing and good performance by Refractories. The Company is currently evaluating the collectability and timing of the receipt of the grants. b) The loans to third parties mainly represent the loans to companies and government entity which have business connections with the Company. The amounts are interest-free, unsecured and repayable on demand. The advances to senior management were mainly for travel and other expenses in the ordinary course of business. c) The amounts represent staff drawings for handling sourcing and logistic activities for the Company in the ordinary course of business and staff advances of $64,~~391~~854,~~940~~000 and $6,~~966~~355,~~075~~850 used as collateral for the Company’s loans and bills payable related to financing activities as of ~~March~~June 3130, 2013 and December 31, 2012, respectively.

China GengSheng Minerals, Inc. Notes to Condensed Consolidated Financial Statements ~~March~~June 3130, 2013 and 2012 (Unaudited)

9.	Inventories, net

		March 31,			December 31,
		June 30,			December 31,
		2013			2012
Raw materials	$	43,~~205~~851,~~269~~303		$	4,327,856
Work-in-progress		23,~~657~~011,~~127~~906			2,249,471
Finished goods		56,~~752~~674,~~462~~899			6,543,959
		12,614,858			13,121,286
		13,538,108			13,121,286
Allowance for obsolete inventories		(~~150~~153,~~970~~243	)		(150,118	)
	$	1213,~~463~~384,~~888~~865		$	12,971,168

No allowance for obsolete inventories was recognized in the cost of goods sold during the three months ended March 31, 2013 and 2012.

	No allowance for obsolete inventories was recognized in the cost of goods sold during the three months and six months ended June 30, 2013 and 2012.

10.	Investment in a non-consolidated affiliate

	The Company paid RMB 15 million (equivalent to $2.37 million) in August 2010 to acquire 24.5% equity interest in Yili YiQiang Silicon Limited ("Yili"), a company established in the PRC and engaged in manufacturing and trading of silicon carbide. The acquisition was completed on May 28, 2012.

10. Investment in a non-consolidated affiliate

		June 30,			December 31,
		2013			2012

Investment in a non-consolidated affiliate, beginning balance	$	1,040,492		$	1,092,041
Less: Equity in net loss of a non-consolidated affiliate		(50,189	)		(59,143	)
Translation adjustments		21,446			7,594

Investment in a non-consolidated affiliate	$	1,011,749		$	1,040,492

The Company paid RMB 15 million (equivalent to $2.37 million) in August 2010 to acquire 24.5% equity interest in Yili YiQiang Silicon Limited ("Yili"), a company established in the PRC and engaged in manufacturing and trading of silicon carbide. The acquisition was completed on May 28, 2012.

		March 31,			December 31,
		2013			2012
Investment in a non-consolidated affiliate, beginning balance	$	1,040,492		$	1,092,041
Less: Equity in net loss of a non-consolidated affiliate		(25,193	)		(59,143	)
Translation adjustments		5,877			7,594
Investment in a non-consolidated affiliate	$	1,021,176		$	1,040,492

China GengSheng Minerals, Inc. Notes to Condensed Consolidated Financial Statements ~~March~~June 3130, 2013 and 2012 (Unaudited)

11.

Property, plant and equipment, net

		March 31,			December 31,
		June 30,			December 31,
		2013			2012
Costs:
Buildings	$	25,~~449~~990,~~226~~156		$	25,669,609
Plant and machinery		1516,~~856~~405,~~899~~834			15,289,765
Furniture, fixture and equipment		1,~~830~~863,~~848~~115			1,670,067
Motor vehicles		2,~~382~~879,~~933~~388			2,369,478
		45,519,906			44,998,919
		47,138,493			44,998,919
Accumulated depreciation		(1112,~~680~~634,~~696~~351	)		(10,848,175	)
Impairment charge		-			(223,539	)
Construction in progress		21,~~881~~844,~~529~~481			2,497,799
Property, plant and equipment, net	$	36,~~720~~348,~~739~~623		$	36,425,004

(i)

During the reporting periods, depreciation is included in:

		Three Months Ended
		Six Months Ended
		March 31,
		June 30,
		2013		2012
Cost of goods sold and overhead of inventories	$	~~571~~1,~~699~~150,415	$	~~542~~1,~~685~~181,401
General and administrative expenses		~~198~~403,~~260~~885		~~182~~364,~~990~~029
	$	~~769~~1,~~959~~554,300	$	~~725~~1,~~675~~545,430

		There was no disposal of property, plant and equipment during the three months ended March 31, 2013. During the three months ended March 31, 2012, property, plant and equipment with carrying amounts of $11,542 were disposed for consideration of $11,095 to offset a trade payable balance, resulting in a loss of $447.
		There was no disposal of property, plant and equipment during the six months ended June 30, 2013. During the six months ended June 30, 2012, property, plant and equipment with carrying amounts of $204,449 were disposed for consideration of $88,707 to offset a trade payable balance, resulting in a loss of $115,742.
	(ii)	Construction in progress
		Construction in progress mainly comprises capital expenditure for construction of the Company’s new offices and factories.
	(iii)	Impairment charge
		The management opined that there was an indication of impairment related to the buildings, machinery and equipments, and construction in progress at Prefecture as of December 31, 2012. Based on the impairment review performed by the management, an impairment loss was recognized in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2012.

China GengSheng Minerals, Inc. Notes to Condensed Consolidated Financial Statements ~~March~~June 3130, 2013 and 2012 (Unaudited)

12.

Other payables and accrued expenses, including related parties

		March 31,		December 31,
		June 30,		December 31,
		2013		2012
Accrued audit fee	$	~~12,000~~-	$	90,135
Other accrued expenses		~~236~~242,~~629~~212		216,273
Value added tax and other tax payables		2,~~367~~614,~~125~~615		2,979,263
Sales receipts in advance		~~310~~224,~~090~~099		392,898
Salaries payable		1,~~226~~566,~~039~~508		1,360,136
Staff welfare payable (Note 12a)		~~103~~134,~~773~~578		196,048
Advances from staff, including related parties		~~848~~686,~~399~~851		869,196
Freight charges payable		3,855		3,833
Other payable to senior management (Note 12b)		23,829		-
Guarantee liability (Note 18b)		204,875		210,690
Freight charges payable		3,913		3,833
Other payables		1,385,883		1,242,674
Guarantee liability (Note 18b)		175,506		210,690
	$	6,698,668	$	7,561,146
Other payables		1,324,277		1,242,674
	$	6,996,388	$	7,561,146

Note :

a) Staff welfare payable represents accrued staff medical, industry injury claims, labor and unemployment insurances. All of which are third parties insurance and the insurance premiums are based on certain percentages of salaries. The obligations of the Company are limited to those premiums contributed by the Company. b) Other payable to senior management was the unpaid reimbursed business expenses of Mr. Shunqing Zhang, the Chairman and CEO.

13. Non-interest-bearing loans, including related parties The loans represent interest-free and unsecured loans from the Company’s associates and a government entity and are repayable on demand. The balance of non-interest-bearing loans as of June 30, 2013 and December 31, 2012 included loans from related parties. Details of non-interest-bearing loans as of June 30, 2013 and December 31, 2012 are as follow.

The loans represent interest-free and unsecured loans from the Company’s associates and a government entity and are repayable on demand. The balance of non-interest-bearing loans as of March 31, 2013 and December 31, 2012 included loans from related parties. Details of non-interest-bearing loans as of March 31, 2013 and December 31, 2012 are as follow.

		June 30,		December 31,
		2013		2012

Loans from third parties	$	4,470,977	$	3,763,741
Loan from a government entity		64,720		63,400
Loans from employees		3,490,255		2,774,824
Loan from Mr. Shunqing Zhang, the Chairman and CEO		161,800		158,500

Total non-interest-bearing loans	$	8,187,752	$	6,760,465

		March 31,		December 31,
		2013		2012
Loans from third parties	$	6,729,283	$	3,763,741
Loan from a government entity		63,760		63,400
Loans from employees		2,632,002		2,774,824
Loan from Mr. Shunqing Zhang, the Chairman and CEO		159,400		158,500
Total non-interest-bearing loans	$	9,584,445	$	6,760,465

China GengSheng Minerals, Inc. Notes to Condensed Consolidated Financial Statements ~~March~~June 3130, 2013 and 2012 (Unaudited)

14.

Collateralized short-term bank loans

		March 31,		December 31,
		June 30,		December 31,
		2013		2012
Bank loans repayable within 1 year	$	7680,~~574~~443,~~835~~109	$	65,196,883

The above bank loans are denominated in RMB and carry average interest rates at 5.8796% (2012: 86.1486%) per annum with maturity dates ranging from ~~one~~10 ~~month~~days to twelve months.

The bank loans as of ~~March~~June 3130, 2013 ~~were~~ were secured by the following:

(a) Guarantees executed by business associates up to the amount of $2522,~~185~~004,~~200~~800; (b) Land use rights with carrying amount of $34,~~066~~033,~~896~~441; (c) Bank deposits of $2431,~~399~~551,~~039~~000 (Note 5); and (d) Bills issued by banks.

15. Finance costs

15.	Loans from a third party

	The loans are interest-bearing at 24% per annum from an unrelated company. They were guaranteed by Mr. Shunqing Zhang, the Chairman and CEO of the Company and another employee of the Company. These loans are payable no later than November 15, 2013 and November 30, 2013.

16.	Finance costs

		Three Months Ended
		Three months ended				Six months ended
		March 31,
		June 30,				June 30,
		2013		2012		2013		2012
Interest expense	$	806,313	$	889,601
Interest expenses	$	1,124,915	$	853,622	$	1,931,228	$	1,743,223
Bills discounting charges		~~621~~640,~~276~~467		~~860~~1,~~591~~096,316		1,261,743		1,956,907
	$	1,~~427~~765,~~589~~382	$	1,~~750~~949,~~192~~938	$	3,192,971	$	3,700,130

16. Income taxes

17.	Income taxes

	UNITED STATES

	The Company is incorporated in the United States of America (“U.S.”) and is subject to U.S. tax law. No provisions for income taxes have been made as the Company has no U.S. taxable income for reporting periods. The applicable income tax rate for the reporting periods is 34%. The Company has not provided deferred tax on undistributed earnings of its non-U.S. subsidiaries as of June 30, 2013, as it is the Company's current policy to reinvest these earnings in non-U.S. operations.

	BVI

	GengSheng International and Smarthigh were incorporated in the BVI and are not subject to income taxes under the current laws of the BVI.

UNITED STATES

The Company is incorporated in the United States of America (“U.S.”) and is subject to U.S. tax law. No provisions for income taxes have been made as the Company has no U.S. taxable income for reporting periods. The applicable income tax rate for the reporting periods is 34%. The Company has not provided deferred tax on undistributed earnings of its non-U.S. subsidiaries as of March 31, 2013, as it is the Company's current policy to reinvest these earnings in non-U.S. operations.

BVI

GengSheng International and Smarthigh were incorporated in the BVI and are not subject to income taxes under the current laws of the BVI.

China GengSheng Minerals, Inc. Notes to Condensed Consolidated Financial Statements ~~March~~June 3130, 2013 and 2012 (Unaudited)

16. Income taxes (Cont’d)

17.	Income taxes (Cont’d)

	PRC

	The PRC’s legislative body, the National People’s Congress, adopted the unified Corporate Income Tax Law (“CIT Law”) on March 16, 2007. This new tax law replaces the then separate income tax laws for domestic enterprises and foreign-invested enterprises and became effective on January 1, 2008. Under the new tax law, a unified income tax rate is set at 25% for both domestic enterprises and foreign-invested enterprises. However, there will be a transition period for enterprises, whether foreign-invested or domestic, that are currently receiving preferential tax treatments granted by relevant tax authorities. Enterprises that are subject to an enterprise income tax rate lower than 25% may continue to enjoy the lower rate and will transit into the new tax rate over a five year period beginning on the effective date of the CIT Law. Enterprises that are currently entitled to exemptions for a fixed term will continue to enjoy such treatment until the exemption term expires. Preferential tax treatment will continue to be granted to industries and projects that qualify for such preferential treatments under the new tax law.

	Pursuant to the income tax rules and regulations of the PRC, provision for PRC income tax of the PRC subsidiaries is calculated based on the following rates:

PRC

		Period ended June 30,
	Note	2013	2012

Refractories	(a)	15%	15%
High-Temperature	(a)	15%	15%
Duesail	(a)	15%	12.5%
Prefecture		25%	25%
Micronized		25%	25%
Yuxing		25%	25%

~~The~~Note: PRC’s legislative body, the National People’s Congress, adopted the unified Corporate Income Tax Law (“CIT Law”) on March 16, 2007. This new tax law replaces the then separate income tax laws for domestic enterprises and foreign-invested enterprises and became effective on January 1, 2008. Under the new tax law, a unified income tax rate is set at 25% for both domestic enterprises and foreign-invested enterprises. However, there will be a transition period for enterprises, whether foreign-invested or domestic, that are currently receiving preferential tax treatments granted by relevant tax authorities. Enterprises that are subject to an enterprise income tax rate lower than 25% may continue to enjoy the lower rate and will transit into the new tax rate over a five year period beginning on the effective date of the CIT Law. Enterprises that are currently entitled to exemptions for a fixed term will continue to enjoy such treatment until the exemption term expires. Preferential tax treatment will continue to be granted to industries and projects that qualify for such preferential treatments under the new tax law.

Pursuant to the income tax rules and regulations of the PRC, provision for PRC income tax of the PRC subsidiaries is calculated based on the following rates:

		Period ended March 31,
	Note	2013	2012
Refractories	(a)	15%	15%
High-Temperature	(a)	15%	15%
Duesail	(a)	15%	12.5%
Prefecture		25%	25%
Micronized		25%	25%
Yuxing		25%	25%

Note :

(a)

Entities entitled to a tax holiday in which they are fully exempted from the PRC enterprise income tax for 2 years starting from their first profit-making year after netting off accumulated tax losses, followed by a 50% reduction in the PRC enterprise income tax for the next 3 years (“tax holidays”). Any unutilised tax holidays will continue until expiry while tax holidays were deemed to start from January 1, 2008, even if the entity was not yet making profit after netting off its accumulated tax losses. Duesail is in the fifth year of tax holidays in 2013. Refractories was in the third year of tax holidays in 2009 and starting from the fiscal year 2011, Refractories is subject to enterprise income tax at unified rate of 15% for three years due to its engagement in an advanced technology industry and has passed the inspection of the provincial high-tech item. The relevant authority granted it a certificate during 2011. Starting from the fiscal year 2011, High-Temperature is subject to enterprise income tax at unified rate of 15% for three years due to its engagement in an advanced technology industry. The relevant authority granted it a certificate during 2011.

In July 2006, the FASB issued ASC 740-10-25. This interpretation requires recognition and measurement of uncertain income tax positions using a “more-likely-than-not” approach. The Company adopted this ASC 740-10-25 on January 1, 2007. Under the new CIT Law which became effective on January 1, 2008, the Company may be deemed to be a resident enterprise by the PRC tax authorities. If the Company was deemed to be resident enterprise, the Company may be subject to the CIT at 25% on the worldwide taxable income and dividends paid from the PRC subsidiaries to their overseas holding companies may be exempted from 10% PRC withholding tax. Except for certain immaterial interest income from bank deposits placed with financial institutions outside the PRC, all of the Company’s income is generated from the PRC operations. Given the immaterial amount of income generated from outside the PRC and the PRC subsidiaries do not intend to pay dividends for the foreseeable future, the management considers that the impact arising from resident enterprise on the Company’s financial position is not significant. The management evaluated the Company's tax positions and considered no provision for uncertainty in income taxes is necessary as of ~~March~~June 3130, 2013 and December 31, 2012.

China GengSheng Minerals, Inc. Notes to Condensed Consolidated Financial Statements ~~March~~June 3130, 2013 and 2012 (Unaudited)

17. Loss per share

18.	Loss per share

	During the reporting periods, all the potential dilutive shares were not included in the computation of diluted loss per share because they were anti-dilutive. Accordingly, the basic and diluted loss per share are the same.

19.	Commitments and contingencies

During the reporting periods, all the potential dilutive shares were not included in the computation of diluted loss per share because they were anti-dilutive. Accordingly, the basic and diluted loss per share are the same.

18. Commitments and contingencies

	(a)	The Company’s operations are subject to the laws and regulations in the PRC relating to the generation, storage, handling, emission, transportation and discharge of certain materials, substances and waste into the environment, and various other health and safety matters. Governmental authorities have the power to enforce compliance with their regulations, and violators may be subject to fines, injunctions or both. The Company must devote substantial financial resources to ensure compliance and believes that it is in substantial compliance with all the applicable laws and regulations.

		The Company is currently not involved in any environmental remediation and has not accrued any amounts for environmental remediation relating to its operations. Under existing legislation, management believes that there are no probable liabilities that will have a material adverse effect on the financial position, operating results or cash flows of the Company.

	(b)	The Company guaranteed the following debts of third parties, which is summarized as follows:

		March 31,		December 31,
		June 30,		December 31,
		2013		2012
Guaranteed amount	$	3027,~~608~~861,~~645~~960	$	30,939,200

In accordance with ASC 460, the Company recognized a liability arising from guarantees given for the debts granted to third parties by financial institutions.

An analysis of the guarantee liability is as follows:

		March 31,			December 31,
		June 30,			December 31,
		2013			2012
Balance at beginning of period/year	$	210,690		$	309,858
Recognized as expenses for the period/year		91153,~~540~~045			461,578
Recognized as income for the period/year		(98192,~~543~~445	)		(562,847	)
Translation adjustments		14,~~188~~216			2,101
Balance at end of period/year	$	~~204~~175,~~875~~506		$	210,690

The fair value of such guarantees is determined by reference to fees charged in an arm’s length transaction for similar services.

China GengSheng Minerals, Inc. Notes to Condensed Consolidated Financial Statements ~~March~~June 3130, 2013 and 2012 (Unaudited)

1819. Commitments and contingencies (Cont’d)

Guarantees as of ~~March~~June 3130, 2013 are further analyzed as below:-

							Principal		Outstanding		~~Outstanding~~
	Term loan		Interest				repaid up to		as of		~~interest as of~~Outstanding		Estimated
	draw down	Expiration	rate (per				~~March~~June 3130,		~~March~~June 3130,		~~March~~interest ~~31,~~as of		maximum
Guarantee	date	date	annum)		Loan principal		2013		2013		June 30,2013		exposure
Business associates	67/516/2012	67/415/2013	7.~~930~~200%		43,~~782~~236,000		-		43,~~782~~236,000		7715,~~920~~320		43,~~859~~251,~~920~~320
	6/29/2012	6/26/2013	12.096%		797,000		-		797,000		25,620		822,620
	8/27/2012	8/26/2015	11.664%		1,618,000		-		1,618,000		412,089		2,030,089
	7/16/2012	7/15/2013	7.200%		3,188,000		-		3,188,000		72,948		3,260,948
	8/31/2012	8/30/2013	6.600%		728,100		-		728,100		9,216		737,316
	8/27/2012	8/26/2015	11.664%		1,594,000		-		1,594,000		452,840		2,046,840
	9/10/2012	9/9/2013	6.000%		436,860		-		436,860		5,745		442,605
	8/31/2012	8/30/2013	6.600%		717,300		-		717,300		21,012		738,312
	9/20/2012	9/19/2013	6.000%		3,236,000		-		3,236,000		47,875		3,283,875
	9/10/2012	9/9/2013	6.000%		430,380		-		430,380		12,169		442,549
	10/26/2012	10/25/2013	6.160%		3,236,000		-		3,236,000		68,812		3,304,812
	9/20/2012	9/19/2013	6.000%		3,188,000		-		3,188,000		95,378		3,283,378
	11/23/2012	11/22//2013	6.160%		3,236,000		-		3,236,000		84,104		3,320,104
	10/26/2012	10/25/2013	6.160%		3,188,000		-		3,188,000		117,290		3,305,290
	1/12/2013	1/11/2014	8.640%		8,090,000		-		8,090,000		390,661		8,480,661
	11/23/2012	11/22//2013	6.160%		3,188,000		-		3,188,000		132,355		3,320,355
	6/8/2013	6/6/2014	6.000%		3,236,000		-		3,236,000		186,181		3,422,181
	1/12/2013	1/11/2014	8.640%		7,970,000		-		7,970,000		558,433		8,528,433
	6/29/2013	6/25/2014	11.520%		809,000		-		809,000		92,431		901,431
				$	2927,~~042~~861,~~680~~960	$	-	$	2927,~~042~~861,~~680~~960	$	1,~~565~~312,~~965~~434	$	3029,~~608~~174,~~645~~394

Notes:

During the period, the Company has acted as guarantor for bank loans granted to certain business associates. Certain of these associates also provided guarantees for bank loans to the Company (Note 14). None of our directors, director nominees or executive officers is involved in normal operation or investing in the business of the guaranteed business associates. All the business associates have a healthy record to pay back loans on a timely manner, in the People’s Bank of China’s (Central Bank of China) credit rating system.

All the above guarantees have no recourse provision that would enable the Company to recover from third parties of any amounts paid under the guarantees and any assets held either as collateral or by third parties that the Company can obtain or liquidate to recover all or a portion of the amounts paid under the guarantees.

If the third parties fail to perform under their contractual obligation, the Company will make future payments including the contractual principal amounts, related interest and penalties.

	(c)	As of ~~March~~June 3130, 2013, the Company had capital commitments of $~~798~~1,~~817~~058,372 in respect of the construction of new office buildings and workshops; ~~and $340,204 in respect of the purchase of machinery,~~ which ~~were~~was not contracted for and provided in these financial statements.
	(d)	In accordance with the PRC tax regulations, the Company’s sales are subject to value added tax (“VAT”) at 17% upon the issuance of VAT invoices to its customers. When preparing these condensed consolidated financial statements, the Company recognized revenue when the significant risks and rewards of ownership have been transferred to the buyer at the time when the products are delivered to and accepted by customers, and made full tax provision in accordance with relevant national and local laws and regulations of the PRC.
		The Company follows the practice of reporting its revenue for PRC tax purposes when invoices are issued. In the local statutory financial statements prepared under PRC GAAP, the Company recognized revenue on an “invoice basis” instead of when the significant risks and rewards of ownership have been transferred to the buyer at the time when the products are delivered to and accepted by customers. Accordingly, despite the fact that the Company has made full tax provision in the condensed consolidated financial statements, the Company may be subject to a penalty for the deferred reporting of tax obligations. The exact amount of penalty cannot be estimated with any reasonable degree of certainty. The management considers it is very unlikely that the tax penalty will be imposed.

China GengSheng Minerals, Inc. Notes to Condensed Consolidated Financial Statements ~~March~~June 3130, 2013 and 2012 (Unaudited)

19. Defined contribution plan

20.	Defined contribution plan

	The Company has a defined contribution plan for all qualified employees in the PRC. The employer and its employees are each required to make contributions to the plan at the rates specified in the plan. The only obligation of the Company with respect to the retirement plan is to make the required contributions under the plan. No forfeited contribution is available to reduce the contribution payable in the future years. The defined contribution plan contributions were charged to the condensed consolidated statements of operations and comprehensive loss. The Company contributed $234,020 and $213,075 for the six months ended June 30, 2013 and 2012, respectively.

21.	Segment information

	The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company's chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company's reportable segments. Management, including the chief operating decision maker, reviews operating results solely by the revenue of monolithic refractory products, industrial ceramic products, fracture proppant products, fine precision abrasives and operating results of the Company. As such, the Company has determined that it has four operating segments as defined by ASC 280, “Segment Reporting”: refractories, industrial ceramic, fracture proppant and fine precision abrasives.

	Adjustments and eliminations of inter-company transactions were not included in determining segment (loss) profit, as they are not used by the chief operating decision maker.

	Three months ended June 30, (Unaudited)

The Company has a defined contribution plan for all qualified employees in the PRC. The employer and its employees are each required to make contributions to the plan at the rates specified in the plan. The only obligation of the Company with respect to the retirement plan is to make the required contributions under the plan. No forfeited contribution is available to reduce the contribution payable in the future years. The defined contribution plan contributions were charged to the condensed consolidated statements of operations and comprehensive loss. The Company contributed $116,353 and $124,491 for the three months ended March 31, 2013 and 2012, respectively.

		Refractories						Industrial ceramic						Fracture proppant						Fine precision abrasives						Total
		2013			2012			2013			2012			2013			2012			2013			2012			2013			2012

Revenue from external customers	$	10,267,475		$	11,616,165		$	281,162		$	529,519		$	5,029,567		$	4,220,857		$	397,747		$	3,253,674		$	15,975,951		$	19,620,215

Segment (loss)	$	(865,134	)	$	(1,567,820	)	$	(128,713	)	$	(112,835	)	$	(27,852	)	$	(114,779	)	$	(794,740	)	$	(1,679,410	)	$	(1,816,439	)	$	(3,474,844	)

~~20.~~Six ~~Segment~~months ~~information~~ended June 30, (Unaudited)

The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company's chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company's reportable segments. Management, including the chief operating decision maker, reviews operating results solely by the revenue of monolithic refractory products, industrial ceramic products, fracture proppant products, fine precision abrasives and operating results of the Company. As such, the Company has determined that it has four operating segments as defined by ASC 280, “Segment Reporting”: refractories, industrial ceramic, fracture proppant and fine precision abrasives.

		Refractories						Industrial ceramic						Fracture proppant						Fine precision abrasives						Total
		2013			2012			2013			2012			2013			2012			2013			2012			2013			2012

Revenue from external customers	$	17,502,845		$	21,557,792		$	545,407		$	860,798		$	7,676,382		$	5,219,202		$	684,734		$	5,693,086		$	26,409,368		$	33,330,878

Segment (loss)	$	(2,910,675	)	$	(2,633,348	)	$	(289,820	)	$	(463,805	)	$	(377,971	)	$	(643,853	)	$	(1,920,698	)	$	(2,518,970	)	$	(5,499,164	)	$	(6,259,976	)

Adjustments and eliminations of inter-company transactions were not included in determining segment (loss) profit, as they are not used by the chief operating decision maker.

		June 30,	December		June 30,		December		June 30,		December		June 30,		December		June 30,		December
		2013	31, 2012		2013		31, 2012		2013		31, 2012		2013		31, 2012		2013		31, 2012
Segment assets	$	84,163,970	80,170,355	$	3,702,050	$	3,778,461	$	46,673,235	$	44,524,087	$	32,527,034	$	31,709,484	$	167,066,289	$	160,182,387

Three months ended March 31, (Unaudited)

		Refractories						Industrial ceramic						Fracture proppant						Fine precision abrasives						Total
		2013			2012			2013			2012			2013			2012			2013			2012			2013			2012
Revenue from external customers	$	7,235,370		$	9,941,627		$	264,245		$	331,279		$	2,646,815		$	998,345		$	286,987		$	2,439,412		$	10,433,417		$	13,710,663
Segment loss	$	(2,045,541	)	$	(1,065,528	)	$	(161,107	)	$	(350,970	)	$	(350,119	)	$	(529,074	)	$	(1,125,958	)	$	(839,560	)	$	(3,682,725	)	$	(2,785,132	)
		March 31,			December			March 31,			December			March 31,			December			March 31,			December			March 31,			December
		2013			31, 2012			2013			31, 2012			2013			31, 2012			2013			31, 2012			2013			31, 2012
Segment assets	$	81,881,311		$	80,170,355		$	3,670,651		$	3,778,461		$	42,695,709		$	44,524,087		$	27,782,853		$	31,709,484		$	156,030,524		$	160,182,387

China GengSheng Minerals, Inc. Notes to Condensed Consolidated Financial Statements ~~March~~June 3130, 2013 and 2012 (Unaudited)

2021. Segment information (Cont'd) Segment information by products for the three months ended June 30, 2013 and 2012

Segment information by products for the three months ended March 31, 2013 and 2012

		Monolithic materials¹		Mortar		Pre-cast roofs		Ceramic tubes²		Ceramic cylinders³		Wearable ceramic valves		Fracture proppant		Fine precision abrasives		Total

Three months ended June 30, 2013 (Unaudited)

Revenue	$	6,701,949	$	453,978	$	3,111,548	$	210,474	$	64,298	$	6,390	$	5,029,567	$	397,747	$	15,975,951

Three months ended June 30, 2012 (Unaudited)

Revenue	$	6,959,840	$	9,438	$	4,646,887	$	377,538	$	147,029	$	4,952	$	4,220,857	$	3,253,674	$	19,620,215

																Fine
		Monolithic				Pre-cast		Ceramic		Ceramic		Wearable		Fracture		precision
		materials1		Mortar		roofs		tubes2		cylinders3		ceramic valves		proppant		abrasives		Total
Three months ended March 31, 2013 (Unaudited)
Revenue	$	4,199,664	$	508,156	$	2,527,550	$	251,896	$	-	$	12,349	$	2,646,815	$	286,987	$	10,433,417
Three months ended March 31, 2012 (Unaudited)
Revenue	$	5,813,991	$	26,790	$	4,100,846	$	316,635	$	8,620	$	6,024	$	998,345	$	2,439,412	$	13,710,663

Segment information by products for the six months ended June 30, 2013 and 2012

		Monolithic materials¹		Mortar		Pre-cast roofs		Ceramic tubes²		Ceramic cylinders³		Wearable ceramic valves		Fracture proppant		Fine precision abrasives		Total

Six months ended June 30, 2013 (Unaudited)

Revenue	$	10,901,613	$	962,134	$	5,639,098	$	462,370	$	64,298	$	18,739	$	7,676,382	$	684,734	$	26,409,368

Six months ended June 30, 2012 (Unaudited)

Revenue	$	12,773,831	$	36,228	$	8,747,733	$	694,173	$	155,649	$	10,976	$	5,219,202	$	5,693,086	$	33,330,878

¹Castable, coating, and dry mix materials & low-cement and non-cement castables generally refer as Monolithic materials.
²Ceramic plates, tubes, elbows, and rollers generally refer as Ceramic tubes.
³Ceramic cylindsers and plugs comprehensively refer to Ceramic cylinders.

Reconciliation is provided for unallocated amounts relating to corporate operations which are not included in the segment information.

		Three Months Ended March 31,
		Three months ended						Six months ended
		2013			2012
		June 30,						June 30,
Total consolidated revenue	$	10,433,417		$	13,710,663
		2013			2012			2013			2012
Total loss for reportable segments	$	(3,682,725	)	$	(2,785,132	)
Total consolidated revenue	$	15,975,951		$	19,620,215		$	26,409,368		$	33,330,878
Unallocated amounts relating to operations:
Total loss for reportable segments	$	(1,816,439	)	$	(3,474,844	)	$	(5,499,164	)	$	(6,259,976	)
General and administrative expenses		(63,112	)		(152,963	)
Unallocated amounts relating to operations:
Other income		-			162
General and administrative expenses		(303,874	)		(97,138	)		(366,986	)		(250,101	)
Loss before income taxes and noncontrolling interest	$	(3,745,837	)	$	(2,937,933	)
Other expenses		-			(31,809	)		-			(31,647	)
Loss before income taxes and noncontrolling interest	$	(2,120,313	)	$	(3,603,791	)	$	(5,866,150	)	$	(6,541,724	)

China GengSheng Minerals, Inc. Notes to Condensed Consolidated Financial Statements ~~March~~June 3130, 2013 and 2012 (Unaudited)

2021. Segment information (Cont'd)

		March 31,		December 31,
		June 30,		December 31,
		2013		2012
Assets
Total assets for reportable segments	$	~~156~~167,~~030~~066,~~524~~289	$	160,182,387
Other receivables		~~737~~734,~~498~~825		737,866
Cash and cash equivalents		1893,~~239,237~~881		1,485,057
	$	~~158~~168,~~007~~694,~~259~~995	$	162,405,310

All of the Company's long-lived assets are located in the PRC. Geographic information about the revenues, which are classified based on customers, is set out as follows:

		Three Months Ended March 31,
		Three months ended				Six months ended
		2013		2012
		June 30,				June 30,
PRC	$	10,164,056	$	13,434,453
		2013		2012		2013		2012
United States		-		24,523
PRC	$	15,388,638	$	19,099,190	$	25,552,694	$	32,533,643
Others		269,361		251,687
United States		-		58,148		-		82,671
Total	$	10,433,417	$	13,710,663
Others		587,313		462,877		856,674		714,564
Total	$	15,975,951	$	19,620,215	$	26,409,368	$	33,330,878

22.	Subsequent events

	The Company evaluated all events or transactions that occurred through the date the condensed consolidated financial statements were issued and determined that there is no material recognizable or subsequent events or transactions which would require recognition or disclosure in the condensed consolidated financial statements.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward-Looking Statements:

The following discussion of the financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes thereto. The following discussion contains forward-looking statements. Unless the context requires otherwise, references to “we”, “us”, “our”, “the Registrant”, or the “Company” refer to China GengSheng Minerals, Inc. and its subsidiaries. The words or phrases “would be,” “will allow,” “expect to,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” or similar expressions are intended to identify forward-looking statements. Such statements include those concerning our expected financial performance, our corporate strategy and operational plans. Actual results could differ materially from those projected in the forward-looking statements as a result of a number of risks and uncertainties, including: (a) those risks and uncertainties related to general economic conditions in China, including regulatory factors that may affect such economic conditions; (b) whether we are able to manage our planned growth efficiently and operate profitable operations, including whether our management will be able to identify, hire, train, retain, motivate and manage required personnel or that management will be able to successfully manage and exploit existing and potential market opportunities; (c) whether we are able to generate sufficient revenues or obtain financing to sustain and grow our operations; and (d) whether we are able to successfully fulfill our primary requirements for cash which are explained below under “Liquidity and Capital Resources.” Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim any obligation, to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

Conventions

In this Form 10-Q, unless indicated otherwise, references to:

“China GengSheng Minerals”, “we”, “us”, “our”, the “Registrant” or the “Company” refer to the combined business of China GengSheng Minerals, Inc., a Nevada corporation (formerly, China Minerals Technologies, Inc.) and its wholly-owned BVI subsidiary, GengSheng International Corporation, or GengSheng International, GengSheng International’s wholly-owned BVI subsidiary, Smarthigh Holding Limited, or Smarthigh and GengSheng International’s wholly-owned Chinese subsidiary, Zhengzhou Duesail Fracture Proppant Co. Ltd., or Duesail, and Duesail’s wholly-owned subsidiary, Henan Yuxing Proppant Co., Ltd., or Yuxing and GengSheng International’s wholly-owned Chinese subsidiary, Henan GengSheng Refractories Co., Ltd., or Refractories, and Refractories’s majority-owned subsidiary, Henan GengSheng High-Temperature Materials Co., Ltd., or High Temperature, and Refractories’s wholly-owned subsidiary, Henan GengSheng Micronized Powder Materials Co., Ltd., or Micronized, and Henan GengSheng's wholly-owned subsidiary, Guizhou Southeast Prefecture GengSheng New Materials Co., Ltd, or Prefecture;
“Powersmart” or “GengSheng International” refer to GengSheng International Corporation, a BVI company (formerly, Powersmart Holdings Limited) that is wholly-owned by China GengSheng Minerals;
“Securities Act” refers to the Securities Act of 1933, as amended, and “Exchange Act” refer to Securities Exchange Act of 1934, as amended;
“China” and “PRC” refer to the People's Republic of China, and “BVI” refers to the British Virgin Islands;
“RMB” refers to Renminbi, the legal currency of China; and
“U.S. dollar,” “$” and “US$” refers to the legal currency of the United States. For all U.S. dollar amounts reported, the dollar amount has been calculated on the basis that RMB1 = $0.1585 for its December 31, 2012 audited balance sheet, and RMB1 = $0.~~1594~~1618 for its ~~March~~June 3130, 2013 unaudited balance sheet, which were determined based on the currency conversion rate at the end of each respective period. The conversion rates of RMB1 = $0.~~1592~~1611 is used for the condensed consolidated statement of income and comprehensive income and consolidated statement of cash flows for the ~~first~~second quarter of 2013, and RMB1 = = $0.~~1585~~1584 is used for the condensed consolidated statement of income and comprehensive income and consolidated statement of cash flows for the ~~first~~second quarter of 2012; both of which were based on the average currency conversion rate for each respective quarter.

Overview of Company

We are a Nevada holding company operating in the materials technology industry through our subsidiaries in China. We develop, manufacture and sell a broad range of mineral-based, heat-resistant products capable of withstanding high temperatures, saving energy and boosting productivity in industries such as steel and oil. Our products include refractory products, industrial ceramics, fracture proppants and fine precision abrasives.

Currently, we conduct our operations in China through our wholly owned subsidiaries, Henan GengSheng Refractories Co., Ltd. (“Refractories”), Zhengzhou Duesail Fracture Proppant Co., Ltd. (“Duesail”), Henan GengSheng Micronized Powder Materials Co., Ltd. (“Micronized”), Guizhou Southeast Prefecture GengSheng New Materials Co., Ltd. (“Prefecture”) and Henan Yuxing Proppant Co., Ltd., (“Yuxing”), and through our majority owned subsidiary, Henan GengSheng High-Temperature Materials Co., Ltd. (“High-Temperature”). Through our wholly owned BVI subsidiary, GengSheng International, and its wholly owned Chinese subsidiary, Refractories, which has an annual production capacity of approximately 127,000 tons, we manufacture refractories products. We manufacture fracture proppant products through Duesail, which has an annual production capacity of approximately 66,000 tons, and Yuxing, which has designed annual production capacity of approximately 60,000 tons. We manufacture fine precision abrasives products through Micronized, which has designed annual production capacity of approximately 22,000 tons. Through our majority owned subsidiary, High-Temperature, which has an annual production capacity of approximately 150,000 units, we manufacture industrial and functional ceramic products.

We sell our products to over 300 customers in the iron, steel, oil, glass, cement, aluminum, chemical and solar industries located in China and other countries in Asia, Europe and North America. Our refractory customers are companies in the steel, iron, petroleum, chemical, coal, glass and mining industries. Our fracture proppant products are sold to oil and gas companies. Our industrial ceramics are used in the utilities and petrochemical industries. Our fine precision abrasives are marketed to solar companies and optical equipment manufacturers. Our largest customers, measured by percentage of our revenue, mainly operate in the steel industry and oil industry. Currently, most of our revenues are derived from the sale of our monolithic refractory products and fracture proppants products to customers in China.

Our principal executive offices are located at No. 88 Gengsheng Road, Dayugou Town, Gongyi, Henan, People’s Republic of China 451271 and our telephone number is (86) 371-6405-9863.

Corporate Structure

We conduct our operations in China through our wholly owned subsidiaries Refractories, Duesail, Yuxing, Micronized and Prefecture and through our majority owned subsidiary, High-Temperature.

The following chart reflects our organizational structure as of the date of this report.

Corporate History

We were originally incorporated under the laws of the State of Washington, on November 13, 1947, under the name Silver Mountain Mining Company. From our inception until 2001, we operated various unpatented mining claims and deeded mineral rights in the State of Washington, but we abandoned these operations entirely by 2001. On August 15, 2006, we changed our domicile from Washington to Nevada when we merged with and into Point Acquisition Corporation, a Nevada corporation. From about 2001 until our reverse acquisition of Powersmart on April 25, 2007, which is discussed in the next section entitled "Acquisition of Powersmart and Related Financing", we were a blank check company and had no active business operations. On June 11, 2007, we changed our corporate name from "Point Acquisition Corporation" to "China Minerals Technologies, Inc." and subsequently changed our name again to "China GengSheng Minerals, Inc." on July 26, 2007.

Acquisition of Powersmart and Related Financing

On April 25, 2007, we completed a reverse acquisition transaction through a share exchange with GengSheng International Corporation (formerly, Powersmart Holdings Limited) whereby we issued to the sole shareholder of Powersmart Holdings Limited, Shunqing Zhang, 16,887,815 shares of China GengSheng Minerals, Inc. common stock, in exchange for all of the issued and outstanding capital stock of Powersmart. By this transaction, Powersmart became our wholly owned subsidiary and Mr. Zhang became our controlling stockholder.

On April 25, 2007, we also completed a private placement financing transaction pursuant to which we issued and sold 5,347,594 shares of our common stock to certain accredited investors for $10 million in gross proceeds.

On January 4, 2011, the Company and certain institutional investors entered into a securities purchase agreement pursuant to which the Company sold to such investors an aggregate of 2,500,000 shares of common stock at a price of $4.00 per share for aggregate gross proceeds to the Company of $10,000,000. The shares of common stock were issued pursuant to a prospectus supplement dated as of January 10, 2011, which was filed with the Securities and Exchange Commission in connection with a takedown from the Company’s shelf registration statement on Form S-3 (File No. 333-165486), which became effective on April 28, 2010, and the base prospectus dated as of April 28, 2010 contained in such registration statement.

Our Products

The following table set forth sales information about our product mix in each of the ~~first~~second quarter of 2013 and 2012, and the first six months of 2013 and 2012.

(All amounts, other than percentages, in thousands of U.S. dollars)

		Three Months Ended March 31,
		Three Months Ended June 30						Six Months Ended June 30
		2013			2012			2013			2012
			Percentage of			Percentage of
			Percentage			Percentage			Percentage			Percentage
		Revenue	net revenues		Revenue	net revenues
			of net			of net			of net			of net
Refractories	$	7,235	69.4%	$	9,942	72.5%
		Revenue	revenues		Revenue	revenues		Revenue	revenues		Revenue	revenues
Industrial Ceramics		264	2.5%		332	2.4%
Refractories	$	10,268	64.3%	$	11,616	59.2%	$	17,503	66.3%	$	21,558	64.7%
Fracture Proppants		2,647	25.4%		998	7.3%
Industrial Ceramics		281	1.7%		529	2.7%		545	2.0%		861	2.5%
Fine Precision Abrasives		287	2.7%		2,439	17.8%
Fracture Proppants		5,029	31.5%		4,221	21.5%		7,676	29.1%		5,219	15.7%
	$	10,433	100.0%	$	13,711	100.0%
Fine Precision Abrasive		398	2.5%		3,254	16.6%		685	2.6%		5,693	17.1%
	$	15,976	100.0%	$	19,620	100.0%	$	26,409	100.0%	$	33,331	100.0%

Refractories

Our largest product segment is the refractories segment, which accounted for approximately 6964.43% of total revenue in the ~~first~~second quarter of 2013. Our refractory products have high-temperature resistance and can function ~~under~~ under thermal stress that is common in many heavy industrial production environments. Because of their unique high-temperature resistant qualities, the ~~refractory~~ refractory products are used as linings and key components in many industrial furnaces, such as steel production furnaces, ladles, vessels, and other high-temperature processing machines that must operate at high temperatures for a long period of time without interruption. The majority of our customers are in the iron, steel, cement, chemical, coal, glass, petro-chemical and nonferrous industries.

We provide a customized solution for each order of our monolithic refractory materials based on customer-specific formulas. Upon delivery to customers, the monolithic materials are applied to the inner surfaces of our customers’ furnaces, ladles or other vessels to improve the productivity of that equipment. The product benefits our customers as it lowers the overall cost of production and improves financial performance. The reasons that the monolithic materials can help our customers improve productivity, lower production costs and achieve stronger financial performance include the following: (i) monolithic refractory castables can be cast into complex shapes which are unavailable or difficult to achieve by alternative products such as shaped bricks; (ii) monolithic refractory linings can be repaired, and in some cases, even reinstalled, without furnace cool-down periods or steel-production interruptions, and therefore improve the steel makers’ productivity; (iii) monolithic refractories can form an integral surface without joints, enhancing resistance to penetration, impact and erosion, and thereby improving the equipment’s operational safety and extending their useful service lives; (iv) monolithic refractories can be installed by specialty equipment either automatically or manually, thus saving construction and maintenance time as well as costs; and (v) monolithic refractories can be customized to specific requirements by adjusting individual formulas without the need to change batches of shaped bricks, which is a costly procedure. Our refractory products and their features are described as follows:

Castable, coating, and dry mix materials. Offerings within this product line are used as linings in containers such as a tundish used for pouring molten metal into a mold. The primary advantages of these products are speed and ease of installation for heat treatment.
Low-cement and non-cement castables. Our low-cement and non-cement castable products are typically used in reheating furnaces for producing steel. These castable products are highly durable and can last up to five years.
Pre-cast roofs. These products are usually used as a component of electric arc furnaces. They are highly durable, and in the case of our corundum-based, pre-cast roof, products can endure approximately 160 to 220 complete operations of furnace heating.

We also have a production line for pressed bricks, which is a type of “shaped” refractory, for steel production. The annual designed production capacity of our shaped refractory products is approximately 15,000 metric tons.

Finally, we provide a full-service option to our steel customers, which include refractory product installation, testing, maintenance, repair and replacement. Refractory product sales are often enhanced by our on-site installation and technical support personnel. Our installation services include applying refractory materials to the walls of steel-making furnaces and other high temperature vessels to maintain and extend their lives. Our technical service staff assure that our customers can achieve their desired productivity objectives. They also measure the refractory wear at our customer sites to improve the quality of maintenance and overall performance of our customers’ equipment. Full-service customers contributed approximately 4240.25% of the Company’s total sales in the first ~~quarter~~six months of 2013, compared with 4135.8% in ~~the~~ the same period of 2012. We believe that these services, together with our refractory products, provide us a strategic advantage for profits.

Industrial Ceramics

Industrial Ceramics accounted for approximately 21.57% of the total revenue in the ~~first~~second quarter of 2013. Our industrial ceramic products, including abrasive balls and tiles, valves, electronic ceramics and structural ceramics, are components for a variety of end products such as fuses, vacuum interrupters, electrical components, mud slurry pumps, and high-pressure pumps. Such end use products are used in the electric power, electronic component, industrial pump, and metallurgy industries.

Fracture Proppants

Fracture Proppants accounted for approximately 2531.45% of the total revenue in the ~~first~~second quarter of 2013. Our fracture proppant products are very fine ball-like pellets, used to reach pockets of oil and natural gas deposits that are trapped in the fractures under the ground. Oil drillers inject the pellets into those fractures, squeezing out the trapped oil or natural gas, which leads to higher yield. Our fracture proppant products are available in several different particle sizes (measured in millimeters). They are typically used to extract crude oil and natural gas, which increases the productivity of crude oil and natural gas wells. These products are highly resistant to pressure. In October 2007, our fracture proppant products were recognized by China National Petroleum Corporation (the “CNPC”), China Petroleum & Chemical Corporation (the “Sinopec”) and China National Offshore Oil Corporation (the “CNOOC”) as their supplier of fracture proppant products for their oil and gas-drilling operation.

Fine Precision Abrasives

Fine Precision Abrasives accounted for approximately 2.75% of our total revenue in the ~~first~~second quarter of 2013. Fine precision abrasives are used for producing a super-fine, super-consistent finish on certain products. A high-strength polyester backing provides a uniform base for a coating of micron-graded mineral particles that are uniformly dispersed for greater finishing efficiency. Our fine precision abrasives are made from silicon carbide (“SiC”). They are ultra-fine, high-strength pellets with uniform shape, and they are used for surface-polishing and slicing of precision instruments such as solar panels. Currently, the type of abrasives that we produce is in high demand among solar-energy companies. Solar energy companies use fine precision abrasives to cut silicon bars and to polish equipment surfaces so that they can be smooth and reflective. Our products can be utilized in a broad range of areas including machinery manufacturing, electronics, optical glass, architecture, industry development, semiconductor, silicon chip, plastic and lens.

Summary of Business Operations in ~~First~~Second Quarter of 2013

Our financial performance in the ~~first~~second quarter of 2013 is summarized as follows:

Sales revenue decreased by approximately $3.36 million, or 2318.96%, to approximately $1016.40 million ~~for~~in the ~~first~~second quarter of 2013, from approximately $1319.76 million for the same period in 2012.
Gross profit ~~decreased~~increased by approximately $~~1.8 million~~680,000, or 6722.53%, to approximately $~~882,000~~3.7 ~~for~~million in the ~~first~~second quarter of 2013, from approximately ~~$2.7~~ $3.1 million for the same period in 2012. Gross profit margin was 823.54% ~~for~~in the ~~first~~second quarter of 2013, compared with 1915.86% for the same period inof 2012. The ~~decrease~~increase in gross profit margin was primarily due to the ~~lower~~higher gross profit margin in our refractories segment as the ~~rising~~cost ~~costs~~ of production ~~continued~~declined in the tosecond ~~impact~~quarter usof 2013. Net loss ~~increased~~decreased by approximately $~~896~~1.3 million,~~000,~~ to ~~approximately~~ approximately $32.85 million ~~for~~in the ~~first~~second quarter of 2013, from a net loss of ~~approximately~~ approximately $23.98 million for the same period in 2012.
Our condensed consolidated balance sheet (unaudited) as of ~~March~~June 3130, 2013 included current assets of approximately $~~116~~127.23 million and total assets of approximately $~~158~~168.07 million.

Uncertainties that Affect our Financial Condition

Continued Industry Consolidation of Steel Makers Further Squeezed Our Profit in Refractories Segment

Although the crude steel output in China reached a new record of approximate 717 million metric tons in 2012, the steel industry still faces overcapacity and weak demand from both domestic and international market. In addition, the PRC government’s continued policy to close small to mid-sized steel makers reduced the overall demand for refractories. As revenue from our Refractories segment accounted for a large portion of our total sales revenue and many of our customers are in the steel industry, the continued industry consolidation of steel makers have a deep impact on us and further reduced our profit in the refractories segment.

Considerable Increase in Raw Material Prices and Decrease in Gross Profit Margin

While the overall inflation in China started to ease in ~~2012~~2013, the increase in raw materials prices, labor costs and fuel and utilities costs continued to impact us. Also, in a fragmented market, the selling price of our products could not keep pace with the increase in raw materials prices.

Increase in Financing Costs Further Limited Our Ability to Expand Business

The unfavorable payment term offered by our customers in refractories segment and fine precision abrasives segment strained our working capital needs, and as a result significantly increased our financing costs, as banks charged higher interest rates when we discounted more bills receivables to meet our working capital needs.

Uncertainties Facing Our Fracture Proppants Segment

Starting from 2012, more and more Chinese manufacturers of fracture proppants products started to sell their products directly in the U.S. market. Since our sales of fracture proppants products in the U.S. market were mainly through wholesalers and distributors, the change in the market condition made it nearly impossible for us to continue sales in the U.S. market while still maintaining a reasonable profit margin. As a result, our sales in the U.S. market were discontinued in 2012. We are currently selling all our fracture proppants products to oil drillers in the domestic market.

Deteriorating Market for Our Fine Precision Abrasives Segment

China’s solar industry is experiencing severe challenge with many large solar panel manufacturers struggling to survive. As a supplier of solar-energy companies, we are facing remarkable uncertainties in maintaining our current customers. If we cannot continue our sales of fine precision abrasives products to solar industry we may have to reduce selling price significantly to stay competitive, and this will affect our revenue negatively and we may ultimately need to discontinue our production.

Results of Operations

Comparison of Three-Month Periods Ended ~~March~~June 3130, 2013 ~~and~~ and 2012

The following table summarizes the results of our operations during the three-month periods ended ~~March~~June 3130, 2013 and 2012, respectively, and provides information regarding the dollar and percentage increase or (decrease) during the three-month periods ended ~~March~~June 3130, 2013 and 2012.

(All amounts, other than percentages, in U.S. dollars)

	Three-Month Period			Three-Month Period
	Ended March 31, 2013			Ended March 31, 2012
	Ended June 30, 2013			Ended June 30, 2012
			As a percentage			As a
			As a			As a
	Dollars in		percentage of	Dollars in		percentage of
Statement of operations data:	thousands		net revenues	thousands		net revenues
Sales Revenue	1015,~~433~~976		100.0%	1319,~~711~~620		100.0%
Cost of goods sold	912,~~551~~241		9176.56%	1016,~~995~~565		8084.24%
Gross profit	~~882~~3,735		823.54%	23,~~716~~055		1915.86%
Operating expenses
General & administrative expenses	1,~~721~~744		1610.59%	1,~~729~~937		129.69%
Research and development expenses	~~216~~431		2.17%	~~163~~236		1.2%
Selling expenses	12,~~608~~101		1513.42%	2,~~480~~791		1814.12%
Total operating expenses	34,~~545~~276		3426.08%	4,~~372~~964		3125.93%
Loss from operations	(~~2,663~~541	)	-253.54%	(1,~~656~~909	)	-129.17%
Government grant income	1658		0.23%	~~385~~-		20.80%
Guarantee income	9993		0.96%	~~153~~148		10.27%
Guarantee expenses	(9261	)	-0.94%	(~~129~~108	)	-0.96%
Equity in net loss of a non-consolidated affiliate	(25	)	-0.2%	-(9	)	0.0%
Interest income	~~351~~172		31.41%	53186		0.49%
Other income (expenses)	(451	)	-0.03%	638		0.02%
Finance costs	(1,~~428~~765	)	-1311.70%	(1,~~750~~950	)	-129.89%
Loss before income taxes and noncontrolling interest	(32,~~746~~120	)	-3513.93%	(23,~~938~~604	)	-2118.4%
Income taxes	(80399	)	-02.85%	(12202	)	-0.1.0%
Noncontrolling interest	1714		0.21%	3712		0.31%
Net loss attributable to Company’s common stockholders	(32,~~809~~505	)	-3615.57%	(23,~~913~~794	)	-2119.23%

	Three-Month		Three-Month		Dollar ($)
	Period Ended		Period Ended		Increase		Percentage
Dollars in thousands	June 30, 2013		June 30, 2012		(Decrease)		Change
Sales Revenue	15,976		19,620		(3,644	)	-18.6%
Cost of goods sold	12,241		16,565		(4,324	)	-26.1%
Gross profit	3,735		3,055		680		22.3%

Operating expenses
General & administrative expenses	1,744		1,937		(193	)	-10.0%
Research and development expenses	431		236		195		82.6%
Selling expenses	2,101		2,791		(690	)	-24.7%
Total operating expenses	4,276		4,964		(688	)	-13.9%

Loss from operations	(541	)	(1,909	)	1,368		-71.7%

Government grant income	58		-		58		100.0%
Guarantee income	93		148		(55	)	-37.2%
Guarantee expenses	(61	)	(108	)	47		-43.5%
Equity in net loss of a non-consolidated affiliate	(25	)	(9	)	(16	)	177.8%
Interest income	172		186		(14	)	-7.5%
Other income (expenses)	(51	)	38		(89	)	-234.2%
Finance costs	(1,765	)	(1,950	)	185		-9.5%

Loss before income taxes and noncontrolling interest	(2,120	)	(3,604	)	1,484		-41.2%
Income taxes	(399	)	(202	)	(197	)	97.5%
Noncontrolling interest	14		12		2		16.7%

Net loss attributable to Company’s common stockholders	(2,505	)	(3,794	)	1,289		-34.0%

	Three-Month		Three-Month		Dollar ($)		Percentage
	Period Ended		Period Ended		Increase		Increase
Dollars in thousands	March 31, 2013		March 31, 2012		(Decrease)		(Decrease)
Sales Revenue	10,433		13,711		(3,278	)	-23.9%
Cost of goods sold	9,551		10,995		(1,444	)	-13.1%
Gross profit	882		2,716		(1,834	)	-67.5%
Operating expenses
General & administrative expenses	1,721		1,729		(8	)	-0.5%
Research and development expenses	216		163		53		32.5%
Selling expenses	1,608		2,480		(872	)	-35.2%
Total operating expenses	3,545		4,372		(827	)	-18.9%
Loss from operations	(2,663	)	(1,656	)	(1,007	)	60.8%
Government grant income	16		385		(369	)	-95.8%
Guarantee income	99		153		(54	)	-35.3%
Guarantee expenses	(92	)	(129	)	37		-28.7%
Equity in net loss of a non-consolidated affiliate	(25	)	-		(25	)	-100.0%
Interest income	351		53		298		562.3%
Other income (expenses)	(4	)	6		(10	)	-166.7%
Finance costs	(1,428	)	(1,750	)	322		-18.4%
Loss before income taxes and noncontrolling interest	(3,746	)	(2,938	)	(808	)	27.5%
Income taxes	(80	)	(12	)	(68	)	566.7%
Noncontrolling interest	17		37		(20	)	-54.1%
Net loss attributable to Company’s common stockholders	(3,809	)	(2,913	)	(896	)	30.8%

The average conversion rates between RMB and U.S. dollar used for the condensed consolidated statements of operations and comprehensive loss increased approximately 1.7% during the reporting period of 2013 compared with the reporting period of 2012. As substantially all of our revenues and most expenses are denominated in RMB, the appreciation in the value of RMB relative to the U.S. dollar affected our financial results reported in the U.S. dollar terms without giving effect to any underlying change in our business or results of operations.

~~The~~Sales ~~average~~revenue. ~~conversion~~Sales ~~rates~~revenue ~~between~~decreased ~~RMB and U~~approximately $3.S.6 ~~dollar~~million, ~~used for~~or ~~the~~18.6% ~~condensed~~to ~~consolidated~~approximately ~~statements~~$16.0 ofmillion ~~operations~~in ~~and~~the ~~comprehensive~~second ~~loss~~quarter of ~~increased~~2013, from approximately 0$19.4%6 ~~during~~million in the ~~reporting~~same period of ~~2013~~2012. Excluding foreign currency translation, the revenue decreased 20.6% compared with the ~~reporting~~ same period of 2012. AsOur ~~substantially~~sales ~~all~~revenue is currently generated from sales of our mineral-based ~~revenues~~products, ~~and~~primarily ~~most expenses~~our ~~are~~refractory ~~denominated~~products, infracture ~~RMB~~proppant products, ~~the~~fine ~~appreciation~~precision inabrasives ~~the~~products ~~value~~and ofindustrial ~~RMB~~ceramic ~~relative~~products. The decrease was primarily attributable to the ~~U.S.~~decreased ~~dollar~~sales ~~affected~~from our ~~financial~~fine precision ~~results~~abrasives ~~reported~~products inand ~~the~~refractories ~~U.S.~~products ~~dollar~~which were partially ~~terms~~offset ~~without~~by ~~giving~~the ~~effect~~increased tosales ~~any~~from ~~underlying~~our ~~change~~fracture inproppant ~~our~~products ~~business~~in orthe ~~results~~second quarter of ~~operations~~2013.

~~Sales~~In ~~revenues~~our refractory segment, we sold 26,491 metric tons of refractory products in the second quarter of 2013, a 16.0% ~~Sales~~increase ~~revenues~~compared with 22,842 metric tons sold in the same period of 2012. The revenue from our refractory products decreased by approximately $31.3 million, or 2311.96% to approximately $10.4 3 million in the ~~first~~second quarter of 2013, from approximately $1311.76 million in the same period of 2012. ~~Our~~Excluding ~~sales~~ foreign currency translation, the revenue decreased is13.9% ~~currently~~compared ~~generated~~with ~~from~~the ~~sales~~same period of ~~our~~2012. ~~mineral-based~~In ~~products, primarily~~the ~~our~~second ~~refractory~~quarter ~~products~~of 2013, ~~fracture~~the ~~proppant~~average ~~products,~~selling ~~fine~~prices ~~precision abrasives~~was ~~products~~$388 ~~and~~per ~~industrial~~metric ~~ceramic~~ton, ~~products.~~a ~~The~~ decrease ~~was~~of ~~mainly~~23.9% ~~attributable~~compared towith the ~~decreased~~average ~~sales~~selling ~~from~~price ~~our~~of ~~refractories~~$509 ~~products~~in ~~and~~the ~~fine precision~~second ~~abrasives~~quarter ~~products~~of ~~which~~2012. The ~~was~~decrease ~~partially~~in ~~offset~~average byselling prices in the ~~increased~~second ~~sales~~quarter of 2013 resulted from our ~~fracture~~decreased ~~proppant~~sales ~~products~~of incustomized ~~the~~refractory ~~first~~products ~~quarter~~which ofusually ~~2013~~have higher selling prices.

In our ~~refractory~~fracture proppant segment, we sold 1619,~~619~~846 metric tons of ~~refractory~~fracture proppant products in the ~~first~~second quarter of 2013, ~~a 17.5% decrease~~ compared with ~~20,143~~ 16,030 metric tons sold in the same period of 2012. The ~~revenue~~increase ~~from~~in ~~our~~sales volume was ~~refractory~~primarily ~~products~~driven ~~decreased~~by the increased sales in domestic market as we started to sell our products to oil producers in China from the second quarter of 2012. Revenue was approximately $75.20 million in the ~~first~~second quarter of 2013, ~~from~~an increase of 19.1% compared with approximately $94.92 million in the same period of 2012. Excluding Inforeign currency translation, the ~~first~~revenue increased approximately ~~quarter~~16.4% ofcompared ~~2013,~~with the ~~average~~same period of 2012. Average selling ~~prices~~price ~~was~~decreased to $~~435~~253 per metric ton, ain ~~decrease~~ the second quarter of ~~11.9%~~2013, compared with ~~the~~$263 ~~average~~per ~~selling~~metric ton ~~price of $494~~ in the ~~first~~same ~~quarter~~period of 2012. The decrease in average selling ~~prices~~price ~~reflected~~was primarily due to the ~~weak~~increased ~~demand~~sales of ~~our refractories~~low-grade products in the second quarter of 2013.

In our ~~fracture~~industrial ~~proppant~~ceramics segment, ~~we sold 10,699 metric tons of fracture proppant products in the first quarter of 2013, compared with 2,673 metric tons sold in the same period of 2012. The increase in~~ sales ~~volume~~revenue was ~~primarily driven by the increased sales in domestic market as we started to sell our products to oil producers in China from the second quarter of 2012. Revenue was~~ approximately $~~2.6~~281,000 ~~million~~ in the ~~first~~second quarter of 2013, ~~an increase of 165.2%~~ compared with approximately $~~998~~529,000 in the same period of 2012~~. Excluding~~ ~~foreign~~as ~~currency~~demand ~~translation,~~for ~~the~~our ~~revenue~~industrial ~~increased approximately~~ceramics 164.1% compared with the same period of 2012. Average selling price decreased to $247 per metric ton in the first quarter of 2013, compared with $373 per metric ton in the same period of 2012. The decrease in average selling price was primarily due to the increased sales of low-grade products ~~with lower selling prices in the first quarter of 2013~~declined.

In our ~~industrial~~fine ~~ceramics~~precision abrasives segment, ~~sales~~we ~~revenue~~realized ~~was~~sales of ~~approximately~~166 ~~$264,000~~metric tons in the ~~first~~second quarter of 2013, ~~compared~~generating ~~with~~revenue ~~approximately~~of approximately $~~332~~398,000. We sold 1,172 metric tons of fine precision abrasives products for approximately $3.3 million in the same period of 2012. The decrease in sales revenue was a result of weak demand for our fine precision abrasives products under current market condition and discontinued sales to a major customer.

InCost ~~our~~of ~~fine~~goods ~~precision~~sold. ~~abrasives~~Our ~~segment,~~cost weof ~~realized~~goods ~~sales~~sold is primarily comprised of the cost of raw materials, components, labor and overhead. Our cost ~~174~~of ~~metric~~goods ~~tons~~sold decreased approximately $4.4 million, or 26.1%, to approximately $12.2 million in the ~~first~~second quarter of 2013 from approximately $16.6 million in the same period of 2012. Excluding foreign currency translation, ~~generating~~our ~~revenue~~cost of ~~approximately~~goods ~~$287,000~~sold decreased 28.1% Wecompared ~~sold~~with ~~883~~the ~~metric~~same ~~tons~~period of ~~fine~~2012. ~~precision~~As ~~abrasives~~a ~~products~~percentage ~~for~~of ~~approximately~~net $2revenue, the cost of goods sold decreased by 7.48% ~~million~~to 76.6% in the second quarter of 2013 from 84.4% in the same period of 2012. The decrease in ~~sales~~cost ~~revenue~~of goods sold was ~~the~~a result of ~~weaker~~decreased ~~demand~~sales ~~for~~as ~~fine~~we ~~precision~~started ~~abrasives~~to terminate ~~products~~unprofitable ~~under~~full-service ~~current~~contracts ~~market~~in ~~conditions~~the second quarter of 2013.

Cost of goods sold. Our cost of goods sold is primarily comprised of the cost of raw materials, components, labor and overhead. Our cost of goods sold decreased approximately $1.4 million, or 13.1%, to approximately $9.6 million in the first quarter of 2013 from approximately $11.0 million in the same period of 2012. Excluding foreign currency translation, our cost of goods sold decreased approximately $1.5 million, or 13.5% compared with the same period of 2012. As a percentage of net revenues, the cost of goods sold increased by 11.3% to 91.5% in the first quarter of 2013 from 80.2% in the same period of 2012. This increase was primarily due to higher raw material costs and lower revenue compared with the same period in 2012.

Gross profit. Our gross profit decreased approximately $1.8 million, or 67.5% to approximately $882,000 in the first quarter of 2013 from approximately $2.7 million in the same period of 2012. Gross profit as a percentage of net revenues was 8.5% in the first quarter of 2013, as compared with 19.8% in the same period of 2012. The decrease was primarily attributable to the higher raw material costs and labor and overhead costs in our refractory segment and the decreased gross profit in our fracture proppant segment as we sold more low-grade products with lower proft margin compared with the same period in 2012.

~~General~~Gross ~~and administrative expenses~~profit. Our ~~general~~gross ~~and administrative~~profit ~~expenses~~increased ~~consist of the expenses associated with staff and~~approximately ~~support~~$680,000, ~~personnel~~or ~~who~~22.3% ~~manage our business activities and professional fees paid~~ to ~~third~~approximately ~~parties~~$3.7 ~~Our~~million ~~general~~in ~~administrative~~the ~~expenses~~second ~~stayed~~quarter ~~flat~~of at2013, compared with approximately $13.71 million in the ~~first~~same ~~quarter~~period of ~~2013~~2012. AsGross profit as a percentage of net revenues, ~~administrative~~was ~~expenses increased to 16~~23.54% in the ~~first~~second quarter of ~~2013~~ 2013, as compared with 1215.6% in the same period inof 2012. The increase was primarily attributable to the lower labor and overhead costs in our refractory segment and decline in sales of fine precision abrasives products which usually have a very low gross profit margin.

~~Research~~General and ~~development~~administrative expenses. Our ~~research~~general and ~~development~~administrative expenses ~~increased~~consist of the expenses associated with staff and support personnel who manage our business activities and professional fees paid to ~~approximately~~third parties. Our general administrative expenses declined approximately $~~216~~193,000 or 10.0% to approximately 1.7 million in the ~~first~~second quarter of 2013, compared with approximately $~~163,000~~1.9 million in the same period in 2012,. ~~mainly~~Excluding ~~due~~foreign tocurrency ~~more~~translation, ~~research~~our general and ~~development~~administrative ~~activities~~expenses declined 12.6% compared with the same period of 2012. As a percentage of net revenues, administrative expenses increased to 10.9% in the ~~first~~second quarter of 2013, compared with 9.9% in the same period in 2012.

~~Selling~~Research ~~expenses. Our selling expenses include sales commissions, expenses of advertising~~ and ~~promotional~~development ~~materials, transportation~~ expenses,. ~~benefits~~Our ofresearch ~~sales personnel, after-sale support services~~ and ~~other~~ ~~sales~~development ~~related~~ expenses. ~~Selling~~increased ~~expenses~~to ~~decreased by~~ approximately $~~872~~431,000, ~~or 35.2% to approximately $1.6 million~~ in the ~~first~~second quarter of 2013, compared with approximately $~~2.5 million in the same period in 2012. As a percentage of net revenues~~236,000 ~~our selling expenses decreased to 15.4%~~ in the ~~first quarter of 2013, as compared with 18.1% in the~~ same period in 2012. The ~~decrease in selling~~ ~~expenses~~increase was primarily attributable to ~~the~~more ~~decrease~~research inand ~~the~~development ~~transportation~~activities ~~expenses~~in ~~and other sales related expenses compared to~~ the ~~same~~second ~~period~~quarter ~~in 2012~~of 2013.

~~Government~~Selling ~~grant income~~expenses. Our ~~government~~selling ~~grant~~expenses ~~income~~include ~~was~~sales commissions, expenses of advertising and promotional materials, transportation expenses, benefits of sales personnel, after-sale support services and other sales related expenses. Selling expenses decreased by approximately $16690,000, or 24.7% to approximately $2.1 million in the ~~first~~second quarter of 2013, compared with ~~approximately~~ approximately $~~385,000~~2.8 million in the same period in 2012. Excluding foreign currency translation, our selling expenses declined 26.7% compared with the same period of 2012. As a percentage of net revenues, our selling expenses decreased to 13.2% in the second quarter of 2013, as compared with 14.2% in the same period in 2012. The decrease in selling expenses was primarily attributable to the decrease in the after-sales expenses and transportation expenses as we terminated several unprofitable full-service contracts in the second quarter of 2013.

~~Equity~~Government ingrant ~~net loss of a non-consolidated affiliate~~income. ~~Equity~~ inOur ~~net~~government ~~loss~~grant ofincome ~~a non-consolidated affiliate~~ was approximately $2558,000 in the ~~first~~second quarter of 2013, ~~relating~~There towas ~~our~~no ~~investment~~government grant income in ~~Yili~~the ~~YiQiang~~same ~~Silicon Limited~~period ~~(“Yili”)~~in 2012.

~~Interest~~Equity ~~income.~~in ~~Our~~net ~~interest~~loss ~~income~~of ~~increased~~a bynon-consolidated affiliate. Equity in net loss of a non-consolidated affiliate was approximately $~~298~~25,000 in asthe ~~more~~second ~~bank~~quarter ~~deposits~~of ~~are~~2013, ~~used~~compared aswith ~~collateral~~approximately ~~for~~$5,000 ~~loans~~in the same period in 2012. Equity in net loss of a non-consolidated affiliate was related ~~These~~to ~~deposits~~our ~~usually~~investment ~~have~~in ~~higher~~Yili ~~interest~~YiQiang ~~rates~~Silicon Limited (“Yili”).

~~Finance~~Interest ~~costs~~income. Our ~~finance~~interest ~~costs~~income ~~decreased~~was by approximately $~~322~~172,000, ~~or 18.4% to approximately $1.4 million~~ in the ~~first~~ second quarter of 2013, ~~from approximately $1.8 million in the same period in 2012. The decrease was primarily attributable to~~ a decrease of approximately $~~239~~14,000 in ~~bills~~compared ~~discounting~~with ~~charges and a decrease of~~ approximately $83186,000 infor ~~interest expense as~~ the ~~interest~~same ~~rates~~period ~~charged by banks were lower in the first quarter~~ of ~~2013~~2012.

~~Loss~~Finance ~~before~~costs. ~~income~~Our ~~taxes~~finance ~~and~~costs ~~non-controlling~~decreased ~~interests.~~by ~~Our~~approximately ~~loss~~$185,000, ~~before~~or ~~income~~9.5% ~~taxes~~to ~~and non-controlling interest was~~ approximately $31.78 million in the ~~first~~ second quarter of 2013, compared with approximately $2.9 0 million in the same period ofin 2012. Excluding foreign currency translation, our finance costs decreased by 11.9% compared with the same period in 2012. The decrease was primarily attributable to ~~the~~ ~~increase~~a indecrease ~~loss~~of ~~from~~approximately ~~operations~~$456,000 in ~~the~~bills ~~first~~discounting charges ~~quarter~~which was partially offset by an increase of ~~2013~~approximately $271,000 in interest expense.

~~Income~~Loss before income taxes. and non-controlling interests. Our loss before income taxes ~~were~~and non-controlling interest was approximately $~~80,000~~2.1 million in the ~~first~~second quarter of 2013, ancompared ~~increase~~with of approximately $~~68,000~~3.6 ~~from~~million ~~approximately $12,000~~ in the same period of 2012. ~~Despite~~The adecrease ~~net~~was ~~loss,~~primarily asattributable ~~certain~~to the ofdecrease ~~our~~in ~~PRC~~loss ~~subsidiaries~~from ~~recognized~~operations ~~taxable~~in ~~income, we still incurred income taxes for~~ the ~~first~~second quarter of 2013.

~~Net~~Income ~~loss~~taxes. Our ~~net~~income ~~loss~~taxes were approximately $399,000 in the ~~first~~second quarter of 2013 ~~was approximately $3.8 million~~, an increase of approximately $~~896~~197,000 ~~from~~ from approximately $~~2.9~~202,000 ~~million~~ in the same period inof 2012. ~~The~~Despite ~~decrease~~a ~~was~~net loss, as ~~attributable~~certain toof our PRC subsidiaries recognized taxable income in China, we still incurred income taxes for the ~~factors~~second ~~described~~quarter ~~above~~of 2013.

~~Liquidity~~Net ~~and~~loss. ~~Capital~~Our ~~Resources~~net loss in the second quarter of 2013 was approximately $2.5 million, a decrease of approximately $1.3 million from approximately $3.8 million in the same period in 2012. The decrease was attributable to the factors described above.

AsComparison of ~~March~~Six-Month ~~31,~~Periods ~~2013,~~Ended weJune had cash and cash equivalents of approximately $4.3 million and restricted cash of approximately $26.1 million. Our current assets were approximately $116.2 million and our current liabilities were approximately $121.2 million as of March 3130, 2013 ~~which resulted in a~~and ~~current~~2012 ~~ratio of approximately 0.96. Total stockholders’ equity as of March 31, 2013 was approximately $36.8 million. The following table sets forth a summary of our cash flows for the periods indicated:~~

	Three Months ended March 31,
Dollars in thousands	2013		2012
Net cash used in operating activities	(4,127	)	(14,699	)
Net cash used in investing activities	(859	)	(1,196	)
Net cash provided by financing activities	3,882		14,988
Net cash outflows	(1,085	)	(898	)

The following table summarizes the results of our operations during the six-month periods ended June 30, 2013 and 2012, respectively, and provides information regarding the dollar and percentage increase or (decrease) during the six-month periods ended June 30, 2013 and 2012.

(All amounts, other than percentages, in U.S. dollars)

	Six-Month Period Ended			Six-Month Period Ended
	June 30, 2013			June 30, 2012
			As a			As a
	Dollars in		percentage of	Dollars in		percentage of
Statement of operations data:	thousands		net revenues	thousands		net revenues

Sales Revenue	26,409		100.0%	33,331		100.0%
Cost of goods sold	21,792		82.5%	27,560		82.7%
Gross profit	4,617		17.5%	5,771		17.3%

Operating expenses
General & administrative expenses	3,465		13.1%	3,666		11.0%
Research and development expenses	647		2.4%	399		1.2%
Selling expenses	3,709		14.1%	5,271		15.8%
Total operating expenses	7,821		29.6%	9,336		28.0%

Loss from operations	(3,204	)	-12.1%	(3,565	)	-10.7%

Government grant income	74		0.3%	385		1.2%
Guarantee income	192		0.7%	301		0.9%
Guarantee expenses	(153	)	-0.6%	(237	)	-0.7%
Equity in net loss of a non-consolidated affiliate	(50	)	-0.2%	(9	)	0.0%
Interest income	523		2.0%	239		0.7%
Other income (expenses)	(55	)	-0.2%	44		0.1%
Finance costs	(3,193	)	-12.1%	(3,700	)	-11.1%

Loss before income taxes and noncontrolling interest	(5,866	)	-22.2%	(6,542	)	-19.6%
Income taxes	(479	)	-1.8%	(214	)	-0.6%
Noncontrolling interest	31		0.1%	49		0.1%

Net loss attributable to Company’s common stockholders	(6,314	)	-23.9%	(6,707	)	-20.1%

	Six-Month		Six-Month		Dollar ($)
	Period Ended		Period Ended		Increase		Percentage
Dollars in thousands	June 30, 2013		June 30, 2012		(Decrease)		Change
Sales Revenue	26,409		33,331		(6,922	)	-20.8%
Cost of goods sold	21,792		27,560		(5,768	)	-20.9%
Gross profit	4,617		5,771		(1,154	)	-20.0%

Operating expenses
General & administrative expenses	3,465		3,666		(201	)	-5.5%
Research and development expenses	647		399		248		62.2%
Selling expenses	3,709		5,271		(1,562	)	-29.6%
Total operating expenses	7,821		9,336		(1,515	)	-16.2%

Loss from operations	(3,204	)	(3,565	)	361		-10.1%

Government grant income	74		385		(311	)	-80.8%
Guarantee income	192		301		(109	)	-36.2%
Guarantee expenses	(153	)	(237	)	84		-35.4%
Equity in net loss of a non-consolidated affiliate	(50	)	(9	)	(41	)	455.6%
Interest income	523		239		284		118.8%
Other income (expenses)	(55	)	44		(99	)	-225.0%
Finance costs	(3,193	)	(3,700	)	507		-13.7%

Loss before income taxes and noncontrolling interest	(5,866	)	(6,542	)	676		-10.3%
Income taxes	(479	)	(214	)	(265	)	123.8%
Noncontrolling interest	31		49		(18	)	-36.7%

Net loss attributable to Company’s common stockholders	(6,314	)	(6,707	)	393		-5.9%

Sales revenue. Sales revenue decreased approximately $6.9 million, or 20.8% to approximately $26.4 million in the six months ended June 30, 2013, from approximately $33.3 million in the same period of 2012. Excluding foreign currency translation, the revenue decreased 22.1% compared with the same period of 2012. The decrease was mainly attributable to the decreased sales from our fine precision abrasives products and refractories products which were partially offset by the increased sales from our fracture proppant products in the six months ended June 30, 2013.

In our refractory segment, we sold 43,110 metric tons of refractory products in the six months ended June 30, 2013 compared with 42,985 metric tons sold in the same period of 2012. The revenue from our refractory products decreased approximately $4.1 million, or 18.8% to approximately $17.5 million in the six months ended June 30, 2013 from approximately $21.6 million in the same period of 2012. Excluding foreign currency translation, the revenue decreased 20.2% compared with the same period of 2012. In the six months ended June 30, 2013, the average selling prices was $406 per metric ton, a decrease of 19.1% compared with the average selling price of $502 in the six months ended June 30, 2012. The decrease in average selling prices resulted from our decreased sales of customized refractory products which usually have higher selling prices.

In our fracture proppant segment, we sold 30,545 metric tons of fracture proppant products in the six months ended June 30, 2013, compared with 18,703 metric tons sold in the same period of 2012. The increase in sales volume was primarily driven by the increased sales in domestic market as we started to sell our products to oil producers in China from the second quarter of 2012. Revenue was approximately $7.7 million in the six months ended June 30, 2013, an increase of 47.1% compared with approximately $5.2 million in the same period of 2012. Excluding foreign currency translation, the revenue increased 44.6% compared with the same period of 2012. Average selling price decreased to $251 per metric ton in the six months ended June 30, 2013, compared with $279 per metric ton in the same period of 2012. The decrease in average selling price was primarily attributable to the increased sales of low-grade products in the six months ended June 30, 2013.

In our industrial ceramics segment, sales revenue was approximately $545,000 in the six months ended June 30, 2013 compared with approximately $861,000 in the same period of 2012 as demand for our products declined in 2013.

In our fine precision abrasives segment, we realized sales of 340 metric tons in the six months ended June 30, 2013, generating revenue of approximately $685,000. We sold 2,055 metric tons of fine precision abrasives products for approximately $5.7 million in the same period of 2012. The decrease in sales revenue was a result of weak demand for our fine precision abrasives products under current market condition and discontinued sales to a major customer.

Cost of goods sold. Our cost of goods sold decreased approximately $5.8 million, or 20.9%, to approximately $21.8 million in the six months ended June 30, 2013 from approximately $27.6 million in the same period of 2012. Excluding foreign currency translation, our cost of goods sold decreased 22.3% compared with the same period of 2012. As a percentage of net revenues, the cost of goods sold decreased slightly to 82.5% in the six months ended June 30, 2013 from 82.7% in the same period of 2012. The decrease was in line with the decrease in sales revenue.

Gross profit. Our gross profit decreased approximately $1.2 million, or 20.0% to approximately $4.6 million in the six months ended June 30, 2013 from approximately $5.8 million in the same period of 2012. Gross profit as a percentage of net revenues increased slightly to 17.5% in the six months ended June 30, 2013 compared with 17.3% in the same period of 2012.

General and administrative expenses. Our general administrative expenses decreased 5.5% to approximately $3.5 million in the six months ended June 30, 2013 from approximately $3.7 million in the same period of 2012. Excluding foreign currency translation, our general administrative expenses decreased 7.1% compared with the same period of 2012. As a percentage of net revenues, administrative expenses increased to 13.1% in the six months ended June 30, 2013 as compared with 11.0% in the same period in 2012.

Research and development expenses. Our research and development expenses increased to approximately $647,000 in the six months ended June 30, 2013, compared with approximately $399,000 in the same period in 2012 due to more research and development activities incurred in the six months ended June 30, 2013.

Selling expenses. Selling expenses decreased by approximately $1.6 million, or 29.6% to approximately $3.7 million in the six months ended June 30, 2013, compared with approximately $5.3 million in the same period in 2012. Excluding foreign currency translation, our selling expenses decreased by 30.8% compared with the same period of 2012. As a percentage of net revenues, our selling expenses decreased to 14.1% in the six months ended June 30, 2013, as compared with 15.8% in the same period in 2012. The decrease in selling expenses was primarily attributable to the decrease in the after-sales expenses and transportation expenses as we terminated several unprofitable full-service contracts in the second quarter of 2013.

Government grant income. Our government grant income was approximately $74,000 in the six months ended June 30, 2013 compared with approximately $385,000 in the same period in 2012.

Equity in net loss of a non-consolidated affiliate. Equity in net loss of a non-consolidated affiliate was approximately $50,000 in the six months ended June 30, 2013, compared with approximately $9,000 in the same period in 2012. Equity in net loss of a non-consolidated affiliate was related to our investment in Yili.

Interest income. Our interest income was approximately $523,000 in the six months ended June 30, 2013, an increase of approximately $284,000 from approximately $239,000 in the same period of 2012 as more bank deposits are used as collateral for loans in the first quarter of 2013.

Finance costs. Our finance costs decreased by approximately $507,000, or 13.7% to approximately $3.2 million in the six months ended June 30, 2013, compared with approximately $3.7 million in the same period of 2012. The decrease was primarily attributable to a decrease of approximately $695,000 in bills discounting charges which was partially offset by an increase of approximately $188,000 in interest expense.

Loss before income taxes and non-controlling interests. Our loss before income taxes and non-controlling interest decreased 10.3% to approximately $5.9 million in the six months ended June 30, 2013, compared with approximately $6.5 million in the same period of 2012. Excluding foreign currency translation, our loss before income taxes and non-controlling interest decreased 11.8% compared with the same period of 2012. The decrease was primarily attributable to the decrease in loss from operations in the six months ended June 30, 2013.

Income taxes. Our income taxes were approximately $479,000 in the six months ended June 30, 2013, an increase of approximately $265,000 from approximately $214,000 in the same period of 2012. Despite a net loss, as certain of our PRC subsidiaries recognized taxable income, we still incurred income taxes in the six months ended June 30, 2013.

Net loss. Our net loss in the six months ended June 30, 2013 was approximately $6.3 million, a decrease of approximately $393,000, or 5.9% from approximately $6.7 million in the same period of 2012. Excluding foreign currency translation, our net loss decreased by 7.4% compared with the same period of 2012. The decrease was attributable to the factors described above.

Liquidity and Capital Resources

As of June 30, 2013, we had cash and cash equivalents of approximately $3.0 million and restricted cash of approximately $36.4 million. Our current assets were approximately $127.3 million and our current liabilities were approximately $134.0 million as of June 30, 2013 which resulted in a current ratio of approximately 0.95. Total stockholders’ equity as of June 30, 2013 was approximately $34.7 million.

We believe that we can meet the cash requirements for the next twelve months. Although the cash flows from operating activities are not expected to improve significantly, we are confident that we can still get short-term loans from local banks. We expect the good relationship with local banks will continue as we never incurred late payments of principles and interests.

The following table sets forth a summary of our cash flows for the periods indicated:

	Six Months ended June 30,
Dollars in thousands	2013		2012
Net cash used in operating activities	(2,475	)	(13,305	)
Net cash used in investing activities	(820	)	(1,677	)
Net cash provided by financing activities	856		16,540
Net cash outflows/inflows	(2,367	)	1,569

Operating Activities

Net cash used in operating activities was approximately $42.15 million in the ~~first~~six ~~quarter~~months ofended June 30, 2013, compared with net cash used in ~~operating~~ operating activities of approximately $1413.73 million in the same period of 2012. ~~The~~ The decrease in net cash used in operating activities was primarily due to the decrease in trade receivables and bills receivable which was partially offset by the decrease in bills payable in the ~~first~~six ~~quarter~~months ofended June 30, 2013.

Investing Activities

Net cash used in investing activities in the ~~first~~six ~~quarter~~months ofended June 30, 2013 was approximately $~~859~~820,000, a decrease of approximately $~~337~~857,000 from net cash used in investing activities of approximately $1.27 million in the ~~same~~ same period in 2012. The decrease in net cash used in investing activities in ~~the~~ ~~first~~the ~~quarter~~six ofmonths ended June 30, 2013 was primarily due to fewer activities related to our construction of manufacturing and administrative facilities.

Financing Activities

Net cash provided by financing activities was approximately $~~3.9~~856,000 ~~million~~ in the ~~first~~six ~~quarter~~months ofended June 30, 2013, compared with net cash provided by by financing activities of approximately $1516.05 million in the same period of 2012. The decrease in cash flows from financing activities was primarily due to ~~the~~ the increased repayments of loans in the ~~first~~six ~~quarter~~months ofended June 30, 2013.

Loan Facilities

We secured new loans totaling approximately $3871.69 million from banks for our working capital needs and we repaid approximately $2758.61 million in bank loans in the ~~three~~six months ended ~~March~~June 3130, 2013. As a result, the balance of all our bank loans and bank borrowings as of ~~March~~June 3130, 2013 was approximately $7680.64 million, which includes short-term bank loans of approximately $3032.6 million and bank borrowings secured by bank deposits of approximately $4647.08 million.

As of ~~March~~June 3130, 2013, ~~the details of~~ all our ~~short-term bank~~ loans ~~and~~due ~~bank~~were ~~borrowings~~paid ~~are~~off. ~~as follows:~~

As of June 30, 2013, the details of all our short-term bank loans and bank borrowings are as follows:

All amounts, other than percentages, are in U.S. dollar.

No	Type	Contracting Party	Valid Date	Duration	Amount
1	Facility Bank Loan	~~Luoyang~~City ~~Bank~~Credit Cooperatives in Gongyi	2012-0407-2531 to 2013-0407-2425	1 year	$3728,~~188,000~~100
2	Facility Bank Loan	~~Agricultural~~Shanghai Pudong Development Bank ofVillage ~~China~~Bank	2012-0408-2827 to 2013-0408-2726	1 year	$5809,~~100,800~~000
3	Facility Bank Loan	~~Industrial~~Shanghai ~~and~~Pudong ~~Commercial~~Development Bank ofVillage ~~China~~Bank	2012-0508-0929 to 2013-~~05-~~08-28	1 year	$~~717~~404,~~300~~500
4	Facility Bank Loan	~~China~~Shanghai ~~CITIC~~Pudong Development Bank	2012-0609-2605 to 2013-0609-2504	1 year	$2,~~391~~912,~~000~~400
5	Facility Bank Loan	~~City~~Shanghai ~~Credit~~Pudong ~~Cooperatives~~Development inBank ~~Gongyi~~Village Bank	2012-0710-3115 to 2013-0710-2514	1 year	$~~717~~436,~~300~~860
6	Facility Bank Loan	~~Shanghai~~City ~~Pudong~~Credit ~~Development~~Cooperatives ~~Bank~~in ~~Village Bank~~Gongyi	2012-0812-2726 to 2013-0812-2625	1 year	$~~797~~2,~~000~~912,400
7	Facility Bank Loan	~~Shanghai~~Zhengzhou ~~Pudong Development~~ Bank ~~Village Bank~~	~~2012~~2013-0801-2907 to ~~2013~~2014-0801-2806	1 year	$~~398~~4,~~500~~854,000
8	Facility Bank Loan	~~Shanghai~~Industrial ~~Pudong~~and ~~Development~~Commercial Bank of China	~~2012~~2013-0902-0526 to 2013-0908-0402	16 ~~year~~months	$2,~~869~~588,~~200~~800
9	Facility Bank Loan	~~Shanghai~~Pingdingshan ~~Pudong Development~~ Bank ~~Village Bank~~	~~2012~~2013-1002-1527 to 2013-1008-1426	16 ~~year~~months	$~~430~~1,~~380~~618,000
10	Facility Bank Loan	~~City~~Pingdingshan ~~Credit Cooperatives in Gongyi~~Bank	~~2012~~2013-1202-2627 to 2013-1208-2526	16 ~~year~~months	$2809,~~869,200~~000
11	Facility Bank Loan	~~Zhengzhou~~Pingdingshan Bank	2013-0103-0728 to 2014-0103-0628	1 year	$41,~~782~~383,~~000~~390
12	Facility Bank Loan	~~Industrial~~Luoyang ~~and Commercial~~ Bank ~~of China~~	2013-0204-2610 to ~~2013~~2014-0804-0209	61 ~~months~~year	$23,~~550~~236,~~400~~000
13	Facility Bank Loan	~~Pingdingshan~~Agricultural Bank of China	2013-0205-2708 to ~~2013~~2014-0805-2607	61 ~~months~~year	$1,~~594~~618,000
14	Facility Bank Loan	~~Pingdingshan~~ Bank of China	2013-0205-2714 to ~~2013~~2014-0805-2613	61 ~~months~~year	$~~797~~1,~~000~~294,400
15	Facility Bank Loan	~~Pingdingshan~~Kunlun Bank	2013-0305-2831 to 2014-0305-2830	1 year	$1,~~362~~618,~~870~~000
16	Facility Bank ~~Borrowing~~Loan	~~Puyang~~Shanghai ~~Commerical~~Pudong Development Bank Village Bank	~~2012~~2013-1006-1624 to ~~2013~~2014-0406-1624	61 ~~months~~year	$~~797~~728,~~000~~100
17	Facility Bank Loan	China CITIC Bank	2013-06-26 to 2014-06-26	1 year	$2,265,200
18	Facility Bank Loan	China CITIC Bank	2013-06-27 to 2014-06-26	1 year	$1,456,200
19	Facility Bank Loan	China CITIC Bank	2013-06-28 to 2014-06-27	1 year	$970,800
20	Bank Borrowing	China EverBright Bank	2013-01-17 to 2013-07-10	6 months	$1,100,499
21	Bank Borrowing	Puyang Commerical Bank	2013-01-21 to 2013-07-21	6 months	$889,900
22	Bank Borrowing	Puyang Commerical Bank	2013-01-22 to 2013-07-22	6 months	$889,900
23	Bank Borrowing	Puyang Commerical Bank	2013-01-23 to 2013-07-23	6 months	$889,900
24	Bank Borrowing	Puyang Commerical Bank	2013-01-24 to 2013-07-24	6 months	$809,000

2932

17	Bank Borrowing	Puyang Commerical Bank	2012-10-17 to 2013-04-17	6 months	$797,000
25	Bank Borrowing	Puyang Commerical Bank	2013-01-28 to 2013-07-25	6 months	$809,000
18	Bank Borrowing	Puyang Commerical Bank	2012-10-30 to 2013-04-30	6 months	$797,000
26	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2013-01-29 to 2013-07-23	6 months	$485,400
19	Bank Borrowing	Puyang Commerical Bank	2012-10-31 to 2013-04-30	6 months	$797,000
27	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2013-01-31 to 2013-09-03	8 months	$1,294,400
20	Bank Borrowing	Puyang Commerical Bank	2012-11-01 to 2013-05-01	6 months	$478,200
28	Bank Borrowing	Puyang Commerical Bank	2013-02-01 to 2013-09-11	8 months	$1,456,200
21	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2012-11-02 to 2013-04-30	6 months	$844,820
29	Bank Borrowing	Puyang Commerical Bank	2013-02-05 to 2013-08-04	6 months	$970,800
22	Bank Borrowing	Puyang Commerical Bank	2012-11-12 to 2013-05-12	6 months	$1,594,000
30	Bank Borrowing	Puyang Commerical Bank	2013-02-06 to 2013-08-05	6 months	$647,200
23	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2012-11-13 to 2013-05-02	6 months	$478,200
31	Bank Borrowing	China Construction Bank	2013-02-07 to 2013-07-11	6 months	$323,600
24	Bank Borrowing	Puyang Commerical Bank	2012-11-13 to 2013-05-31	6 months	$3,188,000
32	Bank Borrowing	China EverBright Bank	2013-03-05 to 2013-09-01	6 months	$193,998
25	Bank Borrowing	China Minsheng Bank	2012-11-15 to 2013-05-15	6 months	$2,657,198
33	Bank Borrowing	Puyang Commerical Bank	2013-03-07 to 2013-09-06	6 months	$1,456,200
26	Bank Borrowing	Other	2012-11-16 to 2013-04-26	6 months	$79,700
34	Bank Borrowing	Puyang Commerical Bank	2013-03-08 to 2013-09-08	6 months	$1,456,200
27	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2012-11-19 to 2013-05-16	6 months	$223,160
35	Bank Borrowing	Puyang Commerical Bank	2013-03-13 to 2013-09-13	6 months	$1,618,000
28	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2012-11-29 to 2013-05-20	6 months	$79,700
36	Bank Borrowing	Puyang Commerical Bank	2013-03-15 to 2013-09-14	6 months	$1,456,200
29	Bank Borrowing	Puyang Commerical Bank	2012-11-29 to 2013-05-28	6 months	$318,800
37	Bank Borrowing	Shanghai Pudong Development Bank	2013-03-19 to 2013-09-16	6 months	$2,022,500
30	Bank Borrowing	Puyang Commerical Bank	2012-12-06 to 2013-06-05	6 months	$2,391,000
38	Bank Borrowing	China EverBright Bank	2013-03-21 to 2013-09-15	6 months	$141,348
31	Bank Borrowing	Puyang Commerical Bank	2012-12-12 to 2013-06-11	6 months	$876,700
39	Bank Borrowing	Puyang Commerical Bank	2013-03-21 to 2013-09-20	6 months	$9,708,000
32	Bank Borrowing	Puyang Commerical Bank	2012-12-13 to 2013-06-13	6 months	$398,500
40	Bank Borrowing	Puyang Commerical Bank	2013-03-26 to 2013-09-25	6 months	$1,294,400
33	Bank Borrowing	Puyang Commerical Bank	2012-12-14 to 2013-06-13	6 months	$462,260
41	Bank Borrowing	Puyang Commerical Bank	2013-04-08 to 2013-10-08	6 months	$1,618,000
34	Bank Borrowing	Puyang Commerical Bank	2012-12-18 to 2013-06-17	6 months	$478,200
42	Bank Borrowing	China EverBright Bank	2013-04-10 to 2013-09-25	6 months	$218,754
35	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2012-12-20 to 2013-06-13	6 months	$797,000
43	Bank Borrowing	Puyang Commerical Bank	2013-04-12 to 2013-10-11	6 months	$809,000
36	Bank Borrowing	China EverBright Bank	2013-01-17 to 2013-07-10	6 months	$1,084,175
44	Bank Borrowing	Puyang Commerical Bank	2013-04-24 to 2013-10-23	6 months	$809,000
37	Bank Borrowing	Puyang Commerical Bank	2013-01-21 to 2013-07-21	6 months	$876,700
45	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2013-05-03 to 2013-10-26	6 months	$80,900
38	Bank Borrowing	Puyang Commerical Bank	2013-01-22 to 2013-07-22	6 months	$876,700
46	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2013-05-17 to 2013-09-08	4 months	$161,800
39	Bank Borrowing	Puyang Commerical Bank	2013-01-23 to 2013-07-23	6 months	$876,700
47	Bank Borrowing	Puyang Commerical Bank	2013-05-21 to 2013-11-20	6 months	$809,000
40	Bank Borrowing	Puyang Commerical Bank	2013-01-24 to 2013-07-24	6 months	$797,000
48	Bank Borrowing	Puyang Commerical Bank	2013-05-22 to 2013-11-22	6 months	$809,000
41	Bank Borrowing	Puyang Commerical Bank	2013-01-28 to 2013-07-25	6 months	$797,000
49	Bank Borrowing	Puyang Commerical Bank	2013-05-24 to 2013-11-23	6 months	$809,000
42	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2013-01-29 to 2013-07-23	6 months	$478,200
50	Bank Borrowing	Puyang Commerical Bank	2013-05-27 to 2013-11-24	6 months	$809,000
43	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2013-01-31 to 2013-09-03	8 months	$1,275,200
51	Bank Borrowing	Puyang Commerical Bank	2013-05-28 to 2013-11-28	6 months	$809,000
44	Bank Borrowing	Puyang Commerical Bank	2013-02-01 to 2013-09-11	8 months	$1,434,600
52	Bank Borrowing	Puyang Commerical Bank	2013-05-29 to 2013-11-29	6 months	$809,000
45	Bank Borrowing	Puyang Commerical Bank	2013-02-05 to 2013-08-04	6 months	$956,400
53	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2013-06-05 to 2013-11-29	6 months	$113,260
46	Bank Borrowing	Puyang Commerical Bank	2013-02-06 to 2013-08-05	6 months	$637,600
54	Bank Borrowing	Puyang Commerical Bank	2013-06-05 to 2013-12-04	6 months	$809,000
47	Bank Borrowing	China Construction Bank	2013-02-07 to 2013-07-11	6 months	$318,800
55	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2013-06-07 to 2013-08-24	3 months	$323,600
48	Bank Borrowing	China EverBright Bank	2013-03-05 to 2013-09-01	6 months	$191,121
56	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2013-06-07 to 2013-12-06	6 months	$809,000
49	Bank Borrowing	Puyang Commerical Bank	2013-03-07 to 2013-09-06	6 months	$1,434,600
57	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2013-06-08 to 2013-12-06	6 months	$809,000
50	Bank Borrowing	Puyang Commerical Bank	2013-03-08 to 2013-09-08	6 months	$1,434,600
58	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2013-06-08 to 2013-12-07	6 months	$809,000
51	Bank Borrowing	Puyang Commerical Bank	2013-03-13 to 2013-09-13	6 months	$1,594,000
59	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2013-06-08 to 2013-12-08	6 months	$809,000
52	Bank Borrowing	Puyang Commerical Bank	2013-03-15 to 2013-09-14	6 months	$1,434,600
60	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2013-06-13 to 2013-12-08	6 months	$1,618,000
53	Bank Borrowing	China EverBright Bank	2013-03-21 to 2013-09-15	6 months	$139,252
61	Bank Borrowing	Nanyang Bank	2013-06-17 to 2013-12-14	6 months	$1,618,000
54	Bank Borrowing	Puyang Commerical Bank	2013-03-21 to 2013-09-20	6 months	$9,564,000
62	Bank Borrowing	Shanghai Pudong Development Bank Village Bank	2013-06-19 to 2013-12-14	6 months	$1,618,000
55	Bank Borrowing	Puyang Commerical Bank	2013-03-26 to 2013-09-25	6 months	$1,275,200

We33 have facility bank loans of approximately $30.6 million, maturing from April 24, 2013 to March 28, 2014 and bank borrowings secured by bank deposits of approximately $46.0 million. We will also consider refinancing debts. However, we cannot provide assurance that we will be able to refinance any of our debts on terms favorable to us in a timely manner.

We have facility bank loans of approximately $32.6 million, maturing from July 25, 2013 to June 27, 2014 and bank borrowings secured by bank deposits of approximately $47.8 million. We will also consider refinancing debts. However, we cannot provide assurance that we will be able to refinance any of our debts on terms favorable to us in a timely manner.

Below is a brief summary of the payment obligations under material contracts to which we are a party:

30On July 31, 2012, our subsidiary, Duesail, entered into a short term working capital loan agreement with City Credit Cooperatives in Gongyi (“CCCG”), whereby CCCG has agreed to loan approximately $728,000 (RMB4.5 million) to Duesail for a term of one year, at an interest rate of 11.52% per year on all outstanding principal.

On ~~April~~August 2527, 2012, our subsidiary, Refractories, entered into a a short-term working capital loan agreement with ~~Luoyang~~Shanghai Pudong Development Bank Village Bank of Gongyi (“~~LYB~~SPDVB”), whereby ~~LYB~~ SPDVB has agreed to loan approximately $~~3.2~~809,000 ~~million~~ (RMB 205.0 million) to Refractories for a term of one year, at an interest rate of 78.2240% per year on all outstanding principal.

On ~~April~~August 2829, 2012, our subsidiary, ~~Refractories~~Duesail, entered into a short-term working capital loan agreement with ~~Agricultural Bank of China (“ABC”)~~SPDVB, whereby ~~ABC~~SPDVB has agreed to loan approximately $~~5.1~~405,000 ~~million~~ (RMB 32 2.5 million) to ~~Refractories~~Duesail for a term of one year, at an interest rate of 8.5340% per year on all outstanding principal.

On May 9, 2012, our subsidiary, Micronized, entered into a short-term working capital loan agreement with Industrial and Commercial Bank of China (“ICBC”), whereby ICBC has agreed to loan approximately $717,000 (RMB 4.5 million) to Micronized for a term of one year, at an interest rate of 6.56% per year on all outstanding principal.

On June 26, 2012, our subsidiary, Refractories, entered into a short-term working capital loan agreement with China CITIC Bank (“CITIC”), whereby CITIC has agreed to loan approximately $2.4 million (RMB 15 million) to Refractories for a term of one year, at an interest rate of 6.94% per year on all outstanding principal.

On July 31, 2012, our subsidiary, Duesail, entered into a short term working capital loan agreement with City Credit Cooperatives in Gongyi (“CCCG”), whereby CCCG has agreed to loan approximately $717,000 (RMB4.5 million) to Duesail for a term of one year, at an interest rate of 11.52% per year on all outstanding principal.

On August 27, 2012, our subsidiary, Refractories, entered into a short-term working capital loan agreement with Shanghai Pudong Development Bank Village Bank of Gongyi (“SPDVB”), whereby SPDVB has agreed to loan approximately $797,000 (RMB 5.0 million) to Refractories for a term of one year, at an interest rate of 8.40% per year on all outstanding principal.

On August 29, 2012, our subsidiary, Duesail, entered into a short-term working capital loan agreement with SPDVB, whereby SPDVB has agreed to loan approximately $399,000 (RMB 2.5 million) to Duesail for a term of one year, at an interest rate of 8.40% per year on all outstanding principal.

On September 5, 2012, our subsidiary, Refractories, entered into a short-term working capital loan agreement with Shanghai Pudong Development Bank (“SPD”), whereby SPD has agreed to loan approximately $2.9 million (RMB 18 million) to Refractories for a term of one year, at an interest rate of 6.60% per year on all outstanding principal.

On October 15, 2012, our subsidiary, Refractories, entered into a short-term working capital loan agreement with SPDVB, whereby SPDVB has agreed to loan approximately $~~430~~437,000 (RMB 2.7 million) to Refractories for a term of one year, at an interest rate of 6.56% per year on all outstanding principal.

On December 26, 2012, our subsidiary, Duesail, entered into a short term working capital loan agreement with CCCG, whereby CCCG has agreed to loan approximately $2.9 million (RMB18 million) to Duesail for a term of one year, at an interest rate of 11.81% per year on all outstanding principal.

On January 7, 2013, our subsidiary, Refractories, entered into a short-term working capital loan agreement with Zhengzhou Bank (“ZB”), whereby ZB has agreed to loan approximately $4.89 million (RMB 30 million) to Refractories for a term of one year, at an interest rate of 7.80% per year on all outstanding principal.

On February 26, 2013, our subsidiary, Refractories, entered into a short-term working capital loan agreement with Industrial and Commercial Bank of China (“ICBC”), whereby ICBC has agreed to loan approximately $2.6 million (RMB 16 million) to Refractories for a term of six months, at an interest rate of 7.56% per year on all outstanding principal.

On February 27, 2013, our subsidiary, Refractories, entered into a short-term working capital loan agreement with Pingdingshan Bank (“PB”), whereby PB has agreed to loan approximately $1.6 million (RMB 10 million) to Refractories for a term of six months, at an interest rate of 6.16% per year on all outstanding principal.

On February 27, 2013, our subsidiary, Duesail, entered into a short-term working capital loan agreement with PB, whereby PB has agreed to loan approximately $~~797~~809,000 (RMB 5 million) to Duesail for a term of six months, at an interest rate of 6.16% per year on all outstanding principal.

On March 28, 2013, our subsidiary, Refractories, entered into a short-term working capital loan agreement with PB, whereby PB has agreed to loan approximately $1.4 million (RMB 8.655 million) to Refractories for a term of one year, at an interest rate of 6.60% per year on all outstanding principal.

31On April 10, 2013, our subsidiary, Refractories, entered into a short-term working capital loan agreement with Luoyang Bank (“LYB”), whereby LYB has agreed to loan approximately $3.2 million (RMB 20 million) to Refractories for a term of one year, at an interest rate of 7.22% per year on all outstanding principal.

On May 8, 2013, our subsidiary, Refractories, entered into a short-term working capital loan agreement with Agricultural Bank of China (“ABC”), whereby ABC has agreed to loan approximately $1.6 million (RMB 10 million) to Refractories for a term of one year, at an interest rate of 8.53% per year on all outstanding principal.

On May 14, 2013, our subsidiary, Duesail, entered into a short-term working capital loan agreement with Bank of China (“BC”), whereby BC has agreed to loan approximately $1.3 million (RMB 8 million) to Duesail for a term of one year, at an interest rate of 7.86% per year on all outstanding principal.

On May 31, 2013, our subsidiary, Duesail, entered into a short-term working capital loan agreement with Kunlun Bank, (“KB”), whereby KB has agreed to loan approximately $1.6 million (RMB 10 million) to Duesail for a term of one year, at an interest rate of 8.70% per year on all outstanding principal.

On June 24, 2013, our subsidiary, Refractories, entered into a short-term working capital loan agreement with SPDVB, whereby SPDVB has agreed to loan approximately $728,000 (RMB 4.5 million) to Refractories for a term of one year, at an interest rate of 6.06% per year on all outstanding principal.

On June 26, 2013, our subsidiary, Micronized, entered into a short-term working capital loan agreement with China CITIC Bank (“CITIC”), whereby CITIC has agreed to loan approximately $2.3 million (RMB 14 million) to Micronized for a term of one year, at an interest rate of 6.60% per year on all outstanding principal.

On June 27, 2013, our subsidiary, Refractories, entered into a short-term working capital loan agreement with CITIC, whereby CITIC has agreed to loan approximately $1.5 million (RMB 9 million) to Refractories for a term of one year, at an interest rate of 6.60% per year on all outstanding principal.

On June 28, 2013, our subsidiary, Refractories, entered into a short-term working capital loan agreement with CITIC, whereby CITIC has agreed to loan approximately $971,000 (RMB 6 million) to Refractories for a term of one year, at an interest rate of 6.60% per year on all outstanding principal.

Statutory Reserves

Under PRC regulations, all our subsidiaries in the PRC may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC GAAP. In addition, these companies are required to set aside at least 10% of their after-tax net profits each year, if any, to fund the statutory reserves until the balance of the reserves reaches 50% of their registered capital. The statutory reserves are not distributable in the form of cash dividends to the Company and can be used to make up cumulative prior year losses.

Special Reserve

Before the reorganization, a former subsidiary of Refractories, Gongyi GengSheng Refractories Co., Ltd., was entitled to a special tax concession (“Tax Concession”) because it employed the required number of disabled staff according to the relevant PRC tax rules. In particular, this Tax Concession exempted the subsidiary from paying enterprise income tax. However, these tax savings can only be used for future development of its production facilities or welfare matters, and cannot be distributed as cash dividends. Accordingly, the same amount of tax savings was set aside and taken to special reserve which is not available for distribution. This reserve as maintained by the subsidiary has been combined into Refractories upon the reorganization and is subject to the same restrictions in its usage.

Restrictions on net assets also include the conversion of local currency into foreign currencies, tax withholding obligations on dividend distributions, the need to obtain State Administration of Foreign Exchange approval for loans to a non-PRC consolidated entity and the covenants or financial restrictions related to outstanding debt obligations. We did not have these restrictions on our net assets as of ~~March~~June 3130, 2013 and December 31, 2012.

The following table provides the amount of our statutory reserves, special reserve, the amount of restricted net assets, consolidated net assets, and the amount of restricted net assets as a percentage of consolidated net assets, as of ~~March~~June 3130, 2013 and December 31, 2012.

		As of		As of
		March 31,		December 31,
		June 30,		December 31,
		2013		2012
Statutory reserves	$	4,554,936	$	4,554,936
Special reserve		3,556,036		3,556,036
Total restricted net assets	$	8,110,972	$	8,110,972
Consolidated net assets	$	3634,~~684~~599,~~218~~604	$	40,331,549
Restricted net assets as percentage of consolidated net assets		2223.14%		20.1%

Total restricted net assets accounted for approximately 2223.14% of our consolidated net assets as of ~~March~~June 3130, 2013. As our subsidiaries usually set aside only 10% of after-tax net profits each year to fund the statutory reserves and are not required to fund the statutory reserves when they incur losses, we believe the potential impact of such restricted net assets on our liquidity is limited.

Accounts Receivable and Bills Receivable

Accounts receivable represents amounts due to us by our customers on the sale of products or services on credit.

The following is the aging analysis for accounts receivable as of ~~March~~June 3130, 2013 and December 31, 2012:

		As of		As of
		March 31,		December 31,
		June 30,		December 31,
		2013		2012
Due within 1 year	$	41,~~263~~366,~~128~~553	$	49,553,183
Due from 1 to 2 years		46,~~686~~691,~~250~~394		4,821,849
Due from 2 to 3 years		32,~~113~~855,~~558~~420		2,521,481
Due over 3 years		12,~~668~~450,~~520~~196		1,646,402
Total	$	5053,~~731~~363,~~456~~563	$	58,542,915

32The following is the aging analysis for bills receivable as of June 30, 2013 and December 31, 2012:

The following is the aging analysis for bills receivable as of March 31, 2013 and December 31, 2012:

		As of		As of
		June 30,		December 31,
		2013		2012

Due within 6 months	$	7,951,443	$	9,913,668

Total	$	7,951,443	$	9,913,668

		As of		As of
		March 31,		December 31,
		2013		2012
Due within 6 months	$	9,104,834	$	9,913,668
Total	$	9,104,834	$	9,913,668

We generally provide our customers in the refractories segment with a payment period of 90 days and our customers in the fine precision abrasives segment with a payment period of 180 days. As there are many producers in the refractories and fine precision abrasives market competing with us, we find it difficult to change these payment terms. The payment term for our other segments varies by customers.

We noted that turnover days of accounts receivable in our refractories segment increased in the ~~first~~six ~~quarter~~months ofended June 30, 2013 due to the ~~macro~~ macro economic situation. However, we are usually willing to continue the ~~relationship~~ relationship with our customers in the refractory segment and allow for additional time for them to make payments. In the meantime, since most of our large customers are state-owned steel producers and our products are essential for their daily operations, we have not seen a significant increase of risk related to the collection of accounts receivables.

Critical Accounting Policies

Basis of consolidation

The accompanying consolidated financial statements of the Company have been prepared in accordance with the accounting principles generally accepted in the United States of America.

The consolidated financial statements include the accounts of the Company and its subsidiaries. All inter-company accounts and transactions have been eliminated in consolidation.

Use of estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting periods. These accounts and estimates include, but are not limited to, the valuation of trade receivables, other receivables, inventories, deferred income taxes, provision of warranty, the estimation on useful lives of property, plant and equipment and the impairment of long-lived assets. Actual results could differ from those estimates.

Allowance for doubtful accounts

The Company establishes an allowance for doubtful accounts based on management’s assessment of the collectability of trade receivables. A considerable amount of judgment is required in assessing the amount of the allowance. The Company considers the historical level of credit losses and applies percentages to aged receivable categories. The Company makes judgments about the creditworthiness of each customer based on ongoing credit evaluations, and monitors current economic trends that might impact the level of credit losses in the future. If the financial condition of the customers were to deteriorate, resulting in their inability to make payments, a larger allowance may be required.

A considerable amount of judgment is required in assessing the amount of the allowance. The Company considers the historical level of credit losses and applies percentages to aged receivable categories. The Company makes judgments about the creditworthiness of each customer based on ongoing credit evaluations, and monitors current economic trends that might impact the level of credit losses in the future. If the financial condition of the customers were to deteriorate, resulting in their inability to make payments, a larger allowance may be required.

The Company’s general provisioning policy is to record an allowance equivalent to 5% of trade receivables due from 1 to 2 years, 40% of trade receivables due from 2 to 3 years and 90% of trade receivables due over 3 years. Additional specific provision is made against trade receivables to the extent which they are considered to be doubtful.

Bad debts are written off when identified. The Company does not accrue interest on trade receivables.

Investment in a non-consolidated affiliate

Investment in an entity over which the Company does not have control, but has significant influence, is accounted for using the equity method of accounting. The Company’s investment in Yili YiQiang Silicon Limited ("Yili") is reported in the consolidated balance sheets as investment in a non-consolidated affiliate.

Impairment of long-lived assets

Long-lived assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. The Company recognizes impairment of long-lived assets in the event that the net book values of such assets exceed the future undiscounted cash flows attributable to such assets.

During the reporting periods, the Company has not identified any indicators that would require testing for impairment.

Financial guarantee issued

The Company has acted as guarantor for bank loans granted to certain local authorities and certain business associates. The Company assessed its obligation under this guarantee pursuant to the provision of ASC 460 “Guarantee”. The Company recognized in its consolidated financial statements a liability for that guarantee at fair value at the date of inception and recognized as an expense in profit or loss immediately. The amount of guarantee liability is amortized in profit or loss over the term of the guarantee as income from financial guarantees issued.

Revenue recognition

Pure products sales - Sales revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer at the time when the products are delivered to and accepted by customers, the sales price is fixed or determinable and collection is reasonably assured.

Products sales with installation, testing, maintenance, repair and replacement - This kind of contract is signed as a whole such that all of these services are provided for one fixed fee, and it does not separate the components of products, installation, testing, maintenance, repair and replacement. After delivery of products/materials to customers, the Company will do the installation and testing works, which takes one to two days, before acceptance and usage by customers. The product life cycle is very short and can normally be used for 80 cycles of production by customers (about two to three days). Thereafter the customers will need maintenance, repair and replacement of the Company’s materials. For each maintenance, repair and replacement, the Company will supply materials and do the installation and testing works again, which are regarded as separate sales by the Company. In other words, the Company will have sales to this kind of customer every couple of days. This kind of sales revenue is recognized when the significant risks and rewards of ownership have been transferred to the buyer at the time when the installation and testing works are completed and after acceptance by customers, the sales price is fixed or determinable and collection is reasonably assured.

Revenue from sales of the Company’s product represents the invoiced value of goods, net of the value-added tax (“VAT”). The Company’s products that are sold in the PRC are subject to VAT at a rate of 17 percent of the gross sales price. The VAT may be offset by VAT paid by the Company on raw materials, other materials or costs included in the cost of producing the Company’s products.

Stock-based compensation

The Company adopted the provisions of ASC 718, which requires the use of the fair value method of accounting for share-based compensation. Under the fair value based method, compensation cost related to employee stock options or similar equity instruments which are equity-classified awards, is measured at the grant date based on the value of the award and is recognized over the requisite service period, which is usually the vesting period. ASC 718 also requires measurement of cost of a liability-classified award based on its current fair value.

Recently issued accounting pronouncements

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Interim Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

34As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer, Mr. Shunqing Zhang, and our Interim Chief Financial Officer, Ms. Shuxian Li, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2013. Based on our assessment, Mr. Zhang and Ms. Li determined that, as of June 30, 2013, our disclosure controls and procedures were effective.

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer, Mr. Shunqing Zhang, and our Interim Chief Financial Officer, Ms. Shuxian Li, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2013. Based on our assessment, Mr. Zhang and Ms. Li determined that, as of March 31, 2013, our disclosure controls and procedures were effective.

Changes in Internal Control

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our fiscal quarter ended ~~March~~June 3130, 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None for the period covered by this report.

ITEM 1A. RISK FACTORS.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

We have not sold any equity securities during the fiscal quarter ended ~~March~~June 3130, 2013.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

There were no defaults upon senior securities during the fiscal quarter ended ~~March~~June 3130, 2013.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS.

(a) Exhibits

Exhibit No.	Description
2.1	Share Exchange Agreement, dated April 25, 2007, among the Registrant, Gengsheng International and Shunqing Zhang [Incorporated by reference to Exhibit 2.1 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
3.1	Articles of Incorporation of the Registrant as filed with the Secretary of State of the State of Nevada on May 22, 2006 [Incorporated by reference to Exhibit 3i.1 to the Registrant’s current report on Form 8-K filed on October 10, 2006, in commission file number 0-51527].
3.2	Articles of Merger of the Registrant as filed with the Secretary of State of the State of Nevada on August 15, 2006 [Incorporated by reference to Exhibit 3i.2 to the Registrant’s current report on Form 8-K filed on October 10, 2006, in commission file number 0-51527].
3.3	Certificate of Amendment to Articles of Incorporation as filed with the Secretary of State of the State of Nevada [Incorporated by reference to Exhibit 3.1 to the Registrant’s current report on Form 8-K filed on December 13, 2006, in commission file number 0-51527].
3.4	Certificate of Correction as filed with the Secretary of State of the State of Nevada on April 17, 2007 [Incorporated by reference to Exhibit 3.4 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
3.5	Amended and Restated Bylaws of the Registrant, adopted on May 23, 2006 [Incorporated by reference to Exhibit 3.5 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
4.1	Form of Registration Rights Agreement, dated April 25, 2007 [Incorporated by reference to Exhibit 4.1 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
4.2	Lock-up Agreement, dated April 25, 2007, by and between Shunqing Zhang and the Registrant [Incorporated by reference to Exhibit 4.2 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
4.3	Form of Common Stock Purchase Warrant [Incorporated by reference to Exhibit 4.3 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
31.1	Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2	Certification of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase*
101.DEF	XBRL Taxonomy Extension Definition Linkbase*
101.LAB	XBRL Taxonomy Extension Label Linkbase*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase*

4.1	Form of Registration Rights Agreement, dated April 25, 2007 [Incorporated by reference to Exhibit 4.1 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
4.2	Lock-up Agreement, dated April 25, 2007, by and between Shunqing Zhang and the Registrant [Incorporated by reference to Exhibit 4.2 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
4.3	Form of Common Stock Purchase Warrant [Incorporated by reference to Exhibit 4.3 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
31.1	Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
32.2	Certification of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.**
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase*
101.DEF	XBRL Taxonomy Extension Definition Linkbase*
101.LAB	XBRL Taxonomy Extension Label Linkbase*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase*

*Filed herewith.
**Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CHINA GENGSHENG MINERALS, INC.
Date: June 3, 2013	By: /s/ Shunqing Zhang
Date: August 19, 2013	By: /s/ Shunqing Zhang
	Shunqing Zhang
	Chief Executive Officer and Chairman
Date: June 3, 2013	By: /s/ Shuxian Li
Date: August 19, 2013	By: /s/ Shuxian Li
	Shuxian Li
	Interim Chief Financial Officer

3740

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