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

FORM 10-K

[X] Annual Report Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended: December 31, 2010

[_] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ______ to _______

Commission file number: 000-51527

CHINA GENGSHENG MINERALS, INC.
(Exact name of small business issuer as specified in its charter)

NEVADA	91-0541437
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

No. 88 Gengsheng Road
Dayugou Town, Gongyi, Henan
People’s Republic of China, 451271
(Address of Principal Executive Offices and Zip Code)

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

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

Title of each class	Name of each exchange on which registered
Common Stock, par value $0.001 per share	NYSE Amex Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

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

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [_]     No [X]

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate 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 [_]     No [_]

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

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

Large Accelerated Filer [_]           Non-Accelerated Filer [_]           Accelerated Filer [_]           Smaller Reporting Company [X]

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [_]     No [X]

The number of shares outstanding of our common stock as of June 30, 2010, was 24,294,386 shares. The aggregate market value of the common stock held by non-affiliates (9,042,638 shares), based on the closing market price ($1.34 per share) of the common stock as of June 30, 2010 was $12,117,135.

There were a total of 26,794,386 shares of the registrant’s common stock outstanding as of March 31, 2011.

Documents Incorporated by Reference: None

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TABLE OF CONTENTS

PART I
	ITEM 1. BUSINESS	2
	ITEM 1A. RISK FACTORS	11
	ITEM 1B. UNRESOLVED STAFF COMMENTS	20
	ITEM 2. PROPERTIES	20
	ITEM 3. LEGAL PROCEEDINGS	21
PART II
	ITEM 5. MARKET FOR OUR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.	21
	ITEM 6. SELECTED FINANCIAL DATA	22
	ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
	ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	30
	ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA	30
	ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	31
	ITEM 9A. CONTROLS AND PROCEDURES.	31
	ITEM 9B. OTHER INFORMATION	32
PART III
	ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	32
	ITEM 11. EXECUTIVE COMPENSATION	34
	ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	35
	ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE	36
	ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES	36
PART IV
	ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	37

Special Note Regarding 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. China GengSheng Minerals, Inc. is referred to herein as “we”, “us”, “our”, the “Registrant” or the “Company.” 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.

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Use of Certain Defined Terms

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

• “Powersmart” or “GengSheng International” refers to GengSheng International Corporation, a BVI company (formerly, Powersmart Holdings Limited) that is wholly owned by China GengSheng Minerals, Inc.;

• “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 RMB=$0.1517 for its audited balance sheet at December 31, 2010, and RMB1=$0.1467 for its audited balance sheet at December 31, 2009, which were determined based on the currency conversion rate at the end of each respective period. The conversion rates of RMB1=$0.148 is used for the consolidated statement of income and comprehensive income and consolidated statement of cash flows for its December 31, 2010, and RMB1=$0.1466 is used for that ended December 31, 2009, which were based on the average currency conversion rate for each respective period.

PART I

ITEM 1. BUSINESS

Overview

We are a Nevada holding company operating in the materials technology industry through our direct and indirect 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, primarily in the steel and oil industries. We manufacture products across four business segments: refractory products, industrial ceramics, fracture proppants and fine precision abrasives.

We sell our products to over 200 customers in the iron, steel, oil, glass, cement, aluminum and chemical businesses located in China and other countries in Asia, Europe and North America. Our largest customers, measured by percentage of our revenue, mainly operate in the steel industry. The majority of our revenues are derived from the sale of our monolithic refractory products to customers in China.

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”), and Guizhou Southeast Prefecture GengSheng New Materials Co., Ltd. (“Prefecture”), and through our majority owned subsidiary, Henan GengSheng High-Temperature Materials Co., Ltd. (“High-Temperature”). We manufacture:

• Refractory products through our wholly owned BVI subsidiary, GengSheng International, and its direct and wholly owned Chinese subsidiary, Refractories, which has an annual production capacity of approximately 127,000 tons. Our refractory customers are companies in the steel, iron, petroleum, chemical, coal, glass and mining industries.

• Fracture proppant products through our wholly owned subsidiary Duesail, which has an annual production capacity of approximately 60,000 tons. Our fracture proppant products are sold to oil and gas companies.

• Fine precision abrasives products through our wholly owned subsidiary Micronized, which has an annual production capacity of approximately 22,000 tons. Our fine precision abrasives are marketed to solar companies and optical equipment manufacturers.

• Industrial and functional ceramic products through our majority owned subsidiary High-Temperature, which has an annual production capacity of approximately 150,000 units. Our industrial ceramics are used in the utilities and petrochemical industries.

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) 371-6405-9818.

Available Information

We are required to file annual, quarterly and current reports, proxy statements and other information required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), with the Securities and Exchange Commission (the “SEC”). You may read and copy any document we file with the SEC at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. Our SEC filings are also accessible electronically on the SEC website at http://www.sec.gov.

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Our SEC filings are also available free of charge through our corporate website at http://www.gengsheng.com. Filings available include our annual reports on Form 10-K; quarterly reports on Form 10-Q; current reports on Form 8-K; proxy statements, if any, Forms 3, 4 and 5 filed by or on behalf of directors, executive officers and certain large stockholders; and any amendments to those documents filed or furnished pursuant to the Exchange Act. These filings will become available as soon as reasonably practicable after such material is electronically filed with or furnished to the SEC.

In addition, the following information is available on the Investor Relations page of our website: (i) Corporate Governance and (ii) Quarterly Results. These documents will also be available in print without charge to any person who requests them by writing or telephoning our principal executive offices: China Gengsheng Minerals Co.,Ltd, No.88 Gengsheng Road, Dayugou Town, Gongyi, Henan, 451271, P.R. China, Tel:86+371-6405-9818, Fax:86+371-6405-9846. The information posted on our web site is not incorporated into this annual report on Form 10-K.

Corporate History & Background

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. On April 25, 2007, we completed a reverse acquisition transaction through a share exchange with Gengsheng International whereby we issued to the sole shareholder of Gengsheng International, 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 Gengsheng International. By this transaction, Gengsheng International became our wholly owned subsidiary and Mr. Zhang became our controlling stockholder. From about 2001 until our reverse acquisition of GengSheng International 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 as we found a Delaware company with a similar corporate name.

Corporate Structure

We conduct our operations in China through our wholly owned subsidiaries Refractories, Duesail, 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.

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Segmental Information

Our operating segments are functioned by our manufacturing facilities and include four reportable segments: refractories, industrial ceramics, fracture proppants and fine precision abrasives.

For financial information relating to our business segments, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 22 to the consolidated financial statements appearing elsewhere in this annual report. For a discussion of the risks attendant to our foreign operations and of any dependence on one or more of the Company’s segments upon such foreign operations, please see Item 1A, “Risk Factors” .

Our Products and Markets

The following table set forth sales information about our product mix in each of the last two years.

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

		Year Ended December 31,
		2010						2009
		Revenue			percentage of			Revenue			percentage of
					net revenues						net revenues
Refractories		45,758			73.6%			47,818			84.0%
Industrial Ceramics		1,246			2.0%			1,098			1.9%
Fracture Proppants		14,320			23.0%			8,039			14.1%
Fine Precision Abrasives		865			1.4%			0			0%
		62,189			100%			56,955			100%

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Refractories

Our largest product segment is the refractories segment, which accounted for approximately 73.6% of our total revenue in 2010. Our refractory products have high-temperature resistant qualities and can function under thermal stress that is common in many heavy industrial production environments. Because of their unique high-temperature resistant qualities, the 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 the customer’s uniquely requested formula. 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 is beneficial because it lowers the overall cost of production and improves financial performance for our customers. 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 a description of their features are 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 includes refractory product installation, testing, maintenance, repair and replacement. Our on-site installation and technical support personnel services often serve as an add on tour refractory product sales which provide an additional revenue source with attractive margins. 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 provides assurances that our customers will 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 46.6% of our total sales in 2010, compared with 47.9% in 2009. We believe that these services together with our refractory products provide us with a strategic advantage to secure our profits.

Industrial Ceramics

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. We install and maintain some of these products.

Some examples and description of our products and their benefits are introduced as follows:

• Ceramic plates, tubes, elbows, and rollers. These products are used in heavy machines for steel production, power generation, and mining. They are highly resistant to heat, erosion, abrasion, and impact.

• Ceramic cylinders and plugs. Our ceramic cylinders and plugs are often used in plug pumps for drilling crude oil. They are highly resistant to pressure.

• Wearable ceramic valves. Our wearable ceramic valves are used for transferring gas and liquid products. They are highly resistant to wash out, erosion, abrasion, and impact.

In 2008, we signed a five-year collaboration agreement with the Ceramics Research Institute of Zhengzhou University (the "CRI") in Henan province of China, to research and develop innovative ways of improving the manufacturing process and functionality of an array of bauxite-based materials. Specifically, under this agreement we work with CRI to optimize and reduce costs for the production of fine precision abrasives, which are bauxite-based, ultra-fine, grain-like materials used to polish fine-metal or optical equipment surfaces, including solar panels. Under this agreement CRI will also help us develop next-generation industrial ceramics that can reduce energy use and pollution. We will jointly apply for government grants for bauxite-based materials research.

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Fracture Proppants

Our fracture proppants 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 (CNPC), China Petroleum & Chemical Corporation (the “Sinopec”) and the China National Offshore Oil Corporation (the “CNOOC”) as their supplier of fracture proppants for their oil and gas-drilling operations.

On April 27, 2009, Duesail finished construction of its second production line for fracture proppants, and successfully doubled its capacity for fracture proppants, from 33,000 tons per year to 66,000 tons per year. The newly completed production line ("Phase II") adopts a so-called Revolving Kiln technology which cuts down production time and costs by up to 10%. The Phase II improvements also include the ability to produce a wider range of proppants catering to oil wells with different underground pressures.

Fine precision abrasives

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 instrument 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 shining. Our products can be utilized in a broad range of areas including machinery manufacturing, electronics industry, optical glass, architecture industry development, semiconductor, silicon chip, plastic and lens. Our fine precision abrasives product was launched in 2009 and we began selling this product in the third quarter of 2010. Our ultrafine precision abrasives is a fine alumina or silicon carbide powder whose size is in microns. This product has characteristics suitable for wire slicing and specific polishing.

Our Competition Strength and Challenges

With over 1,500 manufacturers, the refractory market in which we compete is highly fragmented and highly competitive. In each of our product segments, there is at least one major competitor. Many of our products are made to industry specifications and may be interchangeable with our competitors’ products. Some of our competitors are large and well-established companies, such as Puyang Refractories Co., Ltd., Wuhan Ruisheng Specialty Refractory Materials Co., Ltd., and Beijing Lirr Refractories Co., Ltd., and their financial resources and ability to gain market share may be greater than ours, which limits our pricing power in the market. However, due to the diversity of our product offering, we believe that we enjoy a competitive advantage because most of our competitors do not offer the entire spectrum of our product line.

Refractories and Industrial Ceramics

Through our wholly-owned Chinese subsidiary Henan GengSheng and its direct majority-owned Chinese subsidiary, Refractories, and its majority-owned Chinese subsidiary High-Temperature, we manufacture refractory products and industrial ceramic products respectively in China. We are well positioned to compete in the refractories segment and the industrial ceramics segment, because of our long-standing business relationships with the major steel companies, the quality and diversity of our products and our price differential. In 2004 our line of furnace products won awards in Henan Province. Furthermore, our patented integral casting technology for mixer furnaces has been licensed by more than twenty steel plants since 2000. In addition, we took the lead in developing small and medium-sized aluminum-magnesium spinel castables which were recognized in May 1995 by the Henan Science and Technology Committee as “key new products” of the State. Refractories was awarded the AAA credit rating by the Zhengzhou Enterprise Creditworthiness Evaluation Committee ("the Committee") in Henan Province in December of 2008.

We have distinguished ourselves through our excellent customer service team that provides a full-range of refractory services, including refractory construction and on-site maintenance and technical support. Our national registered laboratory with its excellent research team is available to meet our customer’s diverse product requirements in a timely manner based on the differences of construction sites. Our products are largely marketed based on our comparatively more efficient operations, our price differential and our quality of service. We have also made ourselves more competitive through competitive pricing.

Our largest customers, measured by percentage of our revenue, operate in the steel industry. The steel industry is characterized by intense price competition, which results in a continuing emphasis on our need to increase product productivity and performance. We are generally able to keep our prices lower than many of our competitors because we have contracted a supplier who provides high quality products at relatively lower prices. Our strategy has been to fulfill the steel industry’s need by developing technologically advanced refractory products to help our customers increase their productivity. We believe that the trend towards even greater productivity in the highly competitive steel industry will continue to provide a growth opportunity for our products, especially monolithic refractories.

We believe our strategy based on diverse product offerings, comprehensive maintenance services and competitive pricing affords us a competitive advantage compared with competing companies.

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Fracture Proppants

We first produced fracture proppant products in December 2006, through our direct, wholly-owned BVI subsidiary, GengSheng International, and its wholly-owned Chinese subsidiary, Duesail. Our products have passed the testing conducted by the China Petroleum and Chemical Industry Association (CPCIA), which strengthens our competitive market position. We were recognized as the fracture proppant supplier by China National Petroleum Corporation (CNPC), China Petroleum & Chemical Corporation (Sinopec) and China National Offshore Oil Corp. (CNOOC), who monopolize the oil and gas drilling business in China, and we are the sole signed provider for China National Offshore Oil Corp. (CNOOC). Our main competitors for the production of fracture proppants are Carbo Ceramics Inc. and Saint-Gobain Proppants (Guanghan) Co., Ltd, while the two companies are both subsidiaries of international magnates, which focus on international sales. In addition, we doubled our production capacity in April 2009, to enlarge the production capacity to 66,000 tons from 33,000 tons, and the new Revolving Kiln technology in the second production line is designed to increase efficiency by shortening the production cycle and saving energy costs. After completion of the second production line, we are able to provide a wide range of products, with sizing from 52M Pa 69M Pa to 86M Pa and 102M Pa.

Fine Precision Abrasives

We finished construction of facility and started trial production for fine precision abrasives in July 2009, and commercially launched the abrasives products through our direct, wholly-owned BVI subsidiary, Gengsheng International Corporation, and its wholly-owned Chinese subsidiary Micronized. Our fine precision abrasives facility is designed to have capacity of 22,000 tons per year. From the trial use feedback we got from potential customers, our products are qualified for used in wire slicing of solar ingots for solar cell makers to make wafers and polishing surface of solar panels or high-precision instruments. Currently the fine precision abrasives market in China is dominated by two Japanese companies, namely Nanxing and FUJIMI. We source our key raw material, green silicon carbide (SiC) from a mine in Xinjiang to ensure the supply of highly purified material to produce high quality products. Because the production costs of precision abrasives remained high with the patented technology that we licensed, we terminated the agreement with the owner of the patent on December 30, 2010. Meanwhile the Company recruited a new director of technology, a senior engineer with 12 years of experience in the fine precision abrasive industry, to redesign our production technologies and processes so as to improve productivity and margin. We are now applying a different technology developed by ourselves and have started commercial production.

Overall, we believe that our competitive strengths include the following:

• Market Position. We believe that we hold a competitive position in the monolithic refractory marketplace. According to a Chinese steel industry publication, during 2010, total national sales were approximately $36 billion, 70% of which were from refractories applied in steel making, of which 73% were monolithic refractories. Based on our sales of monolithic refractories during fiscal 2010, which was approximately $27.6 million, we believe that our market share for monolithic refractories applied in steel making is approximately 0.1% . Our industry is highly competitive and consists of more than 2,000 manufacturers. However, we believe that our market share of 0.1%, as well as our well recognized “GengSheng” brand and leading position in research and development place us in a strong competitive position in the monolithic refractory marketplace. Our position affords us a broad customer base, superior recognition of the “GengSheng” brand, procurement leverage and pricing advantages with our suppliers, flexible manufacturing capabilities and easily accessed distribution channels. These capabilities and distribution channels enable us to introduce new refractory products and product categories to our customer base efficiently and cost effectively.

• Broad Product Offering. Our refractory product segment offers over 25 product categories that can be tailored to a wide range of customers’ specifications for use in the iron and steel manufacturing industries, in industrial furnaces, and in other heavy machinery. Our broad product offerings allow us to offer our customers a single source for many of their refractory product requirements.

• Diversified End Markets/Customer Base. We sell our refractory products in over 25 provinces in China and 11 overseas countries. In the 2010 fiscal year, for the refractories segment, we had 200 customers, none of which accounted for more than 20% of 2010 net sales. One customer, Shandong Steel Co., Ltd, Rizhao Subsidiary accounted for 14.5% of 2010 net sales. We believe that our broad product line and diverse target markets and customer base have contributed to greater stability in our sales and operating profit margin. We have long term relationships with significant steel and iron industry leaders in China, such as Bao Steel, Anshan Steel and Shandong Steel.

• Experienced Management Team. Our senior management team has, on average, over 20 years of experience in the refractory industry and with the company.

• Access to Raw Materials. We are located in Gongyi, Henan Province, an area of China which has an abundant reserve of bauxite and other key raw materials used in refractory manufacturing. We have diversified our access to raw materials by acquiring the Guizhou, a subsidiary of our wholly own subsidiary Refractories to secure and stabilize the supply and the prices of raw materials.. We also entered into a supply agreement with a raw material-green silicon carbide provider, Ehe Silicon Carbide Co., Ltd., located in Xinjiang, Currently, we are in the process of negotiating with Ehe Silicon Carbide Co., Ltd regarding establishing a joint venture, a new SiC producing company, in which we will have priority to obtain our raw materials-green SiC.

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• Research and Development Capabilities. We utilize our research and development capabilities to supply our customers with cutting edge refractory products designed to meet their specific demands. To ensure the highest quality product developments, we established a modern, state-of-the-art laboratory in China dedicated to quality control and testing.

• Maintenance Service Capabilities. The sale price of our refractory products also includes installation and ongoing maintenance services, which we believe can be developed into a high margin business if our products continue to be reliable and do not require extraordinary servicing other than ordinary maintenance. We dedicate over 300 employees to the installation and service of our products. We believe that this service offering solidifies a positive business relationship with our customers and makes our products more attractive to them.

Our Customers

We have over 200 customers in 25 Chinese provinces, as well as in greater Asia, North America and Europe. Our customers include some of the largest steel and iron producers and petroleum & chemical producers in China and elsewhere. During each of fiscal years 2010 and 2009, only two of our customers, Shandong Steel Co., Ltd, Rizhao Subsidiary and AMSAT International Co., represented 10% or more of our consolidated sales. Our sales to Shandong Steel Co., Ltd, Rizhao Subsidiary amounted to 14.5% or $9 million of our revenues for 2010 and 14.2%, or $8.1 million of our revenues for 2009. Our sales to AMSAT International Co., Ltd amounted to 10.4% or $6.5 million of our revenues for 2010 and 14.2%, or $2.7 million of our revenues for 2009.

During the fiscal year of 2010, our top ten customers among our segmental lines, which are listed below, accounted for approximately 55.5% of our consolidated revenues.

Our Top 10 Customers
(As of December 31, 2010)

Customers		Sales			Percentage			Locations
		(in US dollars)			of our net sales			of Customers
Shandong Steel Co., Ltd., Rizhao Subsidiary		8,991,759			14.5%			Rizhao City
AMSAT International		6,451,116			10.4%			USA
Zibo Hongda Steel LLC.		3,578,568			5.8%			Zibo City
Nanchang Changli Iron & Steel Co., Ltd.		2,992,841			4.8%			Nanchang City
Heilongjiang Jianlong Iron & Steel LLC.		2,680,449			4.3%			Shuangyashan City
Anhui Yangtze Steel LLC.		2,190,150			3.5%			Maanshan City
Anshan Baode Iron & Steel Ltd.		2,071,022			3.3%			Anshan City
Gansu Jiu Steel Group Hongxing Iron &Steel Co,Ltd.		1,858,349			3.0%			Jiayu City
CNPC Bohai Drilling Engineering Company Limited		1,875,010			3.0%			Handan City
Beijing Shenwu Thermal Energy Technology Co., Ltd.		1,836,227			3.0%			Beijing City
Total		34,525,491			55.5%

Our Suppliers of Raw Materials

The principal raw materials used in our refractory products and fracture proppants are various forms of aluminum oxide, including bauxite, corundum, processed AI203, magnesia, calcium aluminates cement, resin, and silica. Bauxite is used in the production of refractory materials, fracture proppants and some industrial ceramic products. Bauxite is abundantly available from mines nearby our manufacturing facilities. We purchase a significant portion of our magnesia requirements from sources in Liaoning province. We strive to source raw materials from geographically proximate suppliers as higher shipping costs increase the cost of raw materials when they are bought from other regions. If we experience supply interruptions of our refractory raw material requirements, we believe that we could obtain adequate supplies from alternate sources in local areas or elsewhere in China at reasonable costs. The costs of some of our raw materials from 2009 to 2010 are as follows:

(State in US dollar)

		2010			2009			% Change
Ordinary bauxite		73.57			61.15			20.3%
Refined bauxite		250.20			249.79			0.2%
Middle class magnesia		191.42			176.18			8.6%

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		2010			2009			% Change
High class magnesia		219.40			213.52			2.8%
Silica		317.09			308.21			2.9%
Calcium aluminates cement		756.14			799.48			-5.4%
Processed aluminum oxide		675.95			626.10			8.0%
Brown fused corundum		496.57			506.85			-2.0%
White fused corundum		545.62			676.58			-19.4%

We typically have supply agreements with terms of one to two years that do not impose minimum purchase requirements. The cost of raw materials purchased during the term of a supply agreement usually is the market price for the raw materials at the time of purchase. Our centralized procurement department makes an ongoing effort to maintain and reduce raw material costs. We generally are not engaged in speculative raw material commodity contracts and attempt to reflect raw material price changes in the sale price of our products. Our ability to achieve anticipated operating results depends in part on having an adequate supply of raw materials for our manufacturing operations. We typically pass through a portion of the cost of any increase in the price of raw materials to our customers if and when such prices increase. Because of our strategy to maintain multiple suppliers for each material we source, we do not rely on one single supplier

Our Sales and Marketing

Our sales and marketing group is comprised of over 100 employees who focus on managing specific product lines across several distribution channels. Our marketing process involves an integrated process of screening sales leads, preparing bid documents (in response to customer requests for a proposal, or RFP), making competitive bids and negotiating and executing definitive sales agreements.

To maximize the accessibility of our product offerings to a diverse group of end users, we market our products through a variety of distribution channels. We have separate sales and marketing groups that work directly with our customers in each of our target markets. Marketing and sales are accomplished through the mailing of brochures, industry trade advertising, trade show exhibitions, website applications and sales presentations.

Our Growth Strategy

We are committed to growing our business in the coming years. The key elements of our growth strategy are summarized below:

• Adjust Cost Structure Through Operating Efficiency and Productivity Improvements. We regularly evaluate our operating productivity and efficiency and focus on decreasing our manufacturing and distribution costs. We have planned to advance internal capacity for new refractory products and new product development while continuing to enhance our order completing capabilities throughout our supply chain. We believe that these initiatives will provide significant costs savings and improve operating profits.

• Expand Product Lines and Specialty Product Lines. We are actively seeking to identify, develop and commercialize new products that use our core technology and manufacturing competencies. In particular, we intend to develop a variety of specialty, higher margin mineral-based products, including fracture proppant and fine precision abrasive products.

• Pursue Sales Opportunities in Existing and New Markets. We believe that we have significant opportunities to grow our business by increasing our penetration within our existing customer base, adding new customers, expanding our already broad refractory product offering, and pursuing additional marketing channels for other segmental line products. In addition to continuing to target leading steel and iron manufacturers and become their major source provider of refractory products, we have been awarded contracts with major oil & chemical manufacturers in China.

• Selectively Pursue Strategic Acquisitions. As a strong competitor in our core refractory manufacturing market, we believe that we are well-positioned to benefit from the consolidation of manufacturers in these markets. We also believe that our management has the ability to identify and integrate strategic acquisitions. We will continue to selectively consider acquisitions that will improve our market position within our existing target markets, expand our product offerings or end markets, or increase our manufacturing efficiency.

• Expand International Operations. We have expanded the operations to address our new potential overseas markets to leverage resources from our existing operations, increase our geographic presence and our sales efforts in countries outside of China. We have received initial supply contracts from 11 other countries in Asia, Europe and North America and expect this contract volume to continue to increase.

Regulation

Because our operations are based in China, we are regulated by the national and local laws of the People’s Republic of China. The refractory materials industry is generally subject to state, local laws and regulations relating to the environment, health, and safety. The operation of refractory materials involves the release of powder and dust which are classified as environmental pollutants under applicable government laws and regulations. We regularly monitor and review our operations, procedures, and policies for compliance with these laws and regulations. We have made substantial capital investments in our facilities to ensure compliance with environmental and regulatory laws. We believe that our operations are in substantial compliance with the laws and regulations and that there are no violations that would have a material effect on us. The cost of compliance with these laws and regulations is not expected to have a large financial impact on our operations.

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There is no private ownership of land in China. All land ownership is held by the government of the PRC, its agencies and collectives. Land use rights can be obtained from the government for a period up to 50 years, and are typically renewable. Land use rights can be transferred upon approval by the land administrative authorities of the Chinese State Land Administration Bureau upon payment of the required land transfer fee. We have received the necessary land use right certificates for our primary operating facility which are located at No. 88 Gengsheng Road, Dayugou Town, Gongyi, Henan Province.

In addition, we are also subject to PRC’s foreign currency regulations. The PRC government has control over Renminbi reserves through, among other things, direct regulation of the conversion or Renminbi into other foreign currencies. Although foreign currencies which are required for “current account” transactions can be bought freely at authorized Chinese banks, the proper procedural requirements prescribed by Chinese law must be met. At the same time, Chinese companies are also required to sell their foreign exchange earnings to authorized Chinese banks and the purchase of foreign currencies for capital account transactions still requires prior approval of the Chinese government.

We do not face any significant government regulation of in connection with the production of our products. We do not require any special government permits to produce our products other than those permits that are required of all corporations in China.

Our Intellectual Property

While we consider our patents and trademarks to be valuable assets, we do not consider any single patent or trademark to be of such material importance that its absence would harm or cause a material disruption of our business. We also consider the production of our refractories to involve proprietary know-how, and we adjust and test the specific composition formulas to ensure optimal product performance.

Patents

We own nine Chinese patents which are approved by and registered with the China State Intellectual Property Office. The following table lists our patents:

In addition, we have pending patent applications with the China State Intellectual Property Office.

Trademarks

We also own the following registered trademarks associated with the brand “GengSheng” that were issued by the State Industrial and Commercial Administration Bureau of the PRC.

Trademark	Registered Number	Termination Date	Use
	560614	August 9, 2011	Used for products with high-carbon black lead catalogued as class number 1
	561260	August 9, 2011	Used for refractories catalogued as class number 19

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Our Research and Development

We believe that the development of new products and new technology is critical to our success. We are continuously working to improve the quality, efficiency and cost-effectiveness of our existing products and develop technology to expand the range of specifications of our products.

We have spent $817,179 and $478,422 on Company-sponsored research and development activities in fiscal years 2010 and 2009 respectively. The expenses on research and development include salary, cost of raw material consumed, testing expenses and other costs incurred for research and development of potential new products. We have not spent any money on customer-sponsored research and development activities.

Litigation

From time to time, we may become involved in various lawsuits and legal proceedings that arise in the ordinary course of business. We are currently not a party to any legal proceeding and are not aware of any legal claims that we believe will have a material adverse affect on our business, financial condition or operating results.

Our Employees

As of December 31, 2010, we had approximately 1,400 employees, all of whom are all salaried employees and members of a labor union. Over 25% of our employees hold a bachelor’s degree, and approximately 1% of our employees hold a master’s degree. We actively recruit our employees from the local market and expect to focus our recruiting efforts on bachelor degree candidates in the fields of material science, refractory materials and marketing as we implement our expansion plans. We have implemented a comprehensive training program for our employees that focus not just on skills and knowledge training for their specific duties, but also on our corporate philosophy and our product concepts.

Our employees participate in a mandated state pension scheme and social insurance programs organized by Chinese municipal and provincial governments which cover pensions, unemployment and injury insurance. We are required to contribute to the scheme at a rate of 20% of the average monthly salary for employee pensions, 2% of the average monthly salary for the state unemployment fund and 1% of the monthly average salary for injury insurance. Our compensation expenses related to this scheme were $324,810 and $356,076 for the years ended December 31, 2010 and 2009, respectively.

Our Chinese subsidiaries have trade unions which protect employees’ rights, aim to assist in the fulfillment of our economic objectives, encourage employee participation in management decisions and assist in mediating disputes between us and union members. We believe that we maintain a satisfactory working relationship with our employees and we have not experienced any significant labor disputes or any difficulty in recruiting staff for our operations.

China enacted a new Labor Contract Law, which became effective on January 1, 2008. We have updated our employment contracts and employee handbook and been in compliance with the new law. We will work with the employees and the labor union to ensure that the employees obtain the full benefit of the law. We do not anticipate that changes in the law will materially impact the Company balance sheet.

ITEM 1A. RISK FACTORS

The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

RISKS RELATED TO OUR BUSINESS

The slow recovery of the global economic crisis could affect the overall availability and cost of external financing for our operation.

The slow recovery of the global financial markets from the global economic crisis and turmoil may adversely impact our business, the business and financial condition of our customers and the business of potential investors from whom we expect to generate our potential sources of capital financing. Presently it is unclear to what extent the economic stimulus measures and other actions taken or contemplated by the Chinese governments and other governments throughout the world will mitigate the effects of the negative impact caused by the economic turmoil on our industry and other industries that affect our business. Although these conditions have not presently impaired our ability to access credit markets and finance our operations, the impact of the current crisis on our ability to obtain capital financing in the future, and the cost and terms of same, is unclear.

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A downturn or negative changes in the highly volatile steel and iron industry will harm our business and profitability.

The iron and steel industries accounted for approximately 60%-70% of the consumption in the Chinese refractory industry according to the industry association statistics. Because our largest customers are in the steel industry, our business performance is closely tied to the performance of the steel industry. The sector as a whole is cyclical and its profitability can be volatile as a result of general economic conditions, labor costs, competition, import duties, tariffs and currency exchange rates. These macroeconomic factors have historically resulted in wide fluctuations in the Chinese and the global economies in which steel companies sell their products. In our case, future economic downturns, stagnant economies or currency fluctuations in China or globally could decrease the demand for steel products both in China and overseas and, in turn, could negatively impact our sales, margins and profits.

Industry growth rate for refractory products may decelerate and may affect our future revenue growth.

In China, the production of refractory materials has experienced fast growth in recent years driven largely by growth in China’s steel production. China has become the largest country for producing and consuming refractories, among which 60%-70% were demanded by companies in the steel industry. Our industry’s growth has been primarily driven by the growth in the Chinese steel industry. According to figures provided by the National Statistics Bureau of China, the Chinese steel output grew from an annual output of 157 million tons in 2001 to 627 million tons in 2010, representing a compounded average growth rate of 9.3% . Going forward, however, the forecast provided by the China International Capital Corporation suggests that the annual output of steel in China will not maintain this growth rate.

If the steel industry experiences such a slowdown, our growth prospects will likewise be curtailed. Additionally, the market for monolithic refractories in China is still in the developmental stage, and successful market penetration of the monolithic refractories depends heavily on two factors. First, successful market penetration depends on technological progress that results in products that provide better performance by our customers, new varieties of products that meet our customer’s future requirements, and more efficient and effective installation and maintenance methods. Second, successful market penetration also depends on our marketing strategy and our ability to execute that strategy while maintaining a high quality of service to our customers. Our future revenue growth—without acquisitions—may maintain growth, but nevertheless, we may not match our past growth rate.

Our inability to overcome fierce competition in the highly fragmented and highly competitive Chinese refractory market could reduce our revenue and net income.

The refractory market in China is highly fragmented with over 2,000 producers of refractory products, according to the Chairman of the Association of China Refractory Industry. Our competitors manufacture products that are similar to and directly compete with the products that we manufacture and market. We compete with many other refractory manufacturers in China, on a region-by-region basis, and with international competitors on a world-wide basis. Our main competitors are located in China and include Puyang Punai High-temperature Materials Co., Ltd., Wuhan Ruisheng Specialty Refractory Materials Co., Ltd., Beijing Lirr Refractories Co., Ltd. and others. Currently, our primary international competitor is Mineral Technologies, Inc. in the United States.

As a market leader in the monolithic refractory marketplace in China, we can buy raw materials in large quantities allowing us to negotiate volume pricing that result in lower prices than what is offered to our smaller competitors. As our smaller competitors consolidate and grow larger, they may be able to negotiate similar volume pricing from raw material suppliers. Under that scenario, any cost advantage that we currently enjoy may be reduced or eliminated altogether. Although our smaller competitors may pay higher materials costs relative to our material costs, their operating and administrative costs may be lower than ours, which may allow our competitors to quote very competitive prices for their products and services. Their competitive prices may force us to lower our prices, and to sell products and services at a loss in order to maintain our market share. Currently, we have a policy for setting a pricing floor so that we do not sell products at a loss; however, we cannot assure that we can maintain this policy indefinitely. Thus, increased competition in our industry could reduce our revenue and net income.

Any decrease in the availability, or increase in the cost, of raw materials and energy could materially increase our costs and jeopardize our current profit margins and profitability.

The principal raw materials used in our refractory products are several forms of the minerals SiO₂, Al₂0₃, and MgO, including bauxite, mullite, corundum, processed Al₂0₃, Spinel, magnesia, calcium aluminates cement, and silica. We primarily use bauxite in the production of refractory materials, fracture proppants and some industrial ceramic products. The availability of these raw materials and energy resources may decrease and their prices can become volatile as a result of, among other things, changes in overall supply and demand levels and new laws or regulations. Our ability to achieve our sales target depends on our ability to maintain what we believe to be adequate inventories of raw materials to meet reasonably anticipated orders from our customers. In 2010, raw material costs accounted for 82.9% of the production cost for refractory products, 44.0% for fracture proppant products and 72.0% for industrial ceramics products 74% for Micropowder products.

Our production facilities are located in Gongyi, Henan Province, where there is currently an abundant reserve of bauxite and corundum for refractory manufacturing. Although our proximity to bauxite allows us to benefit from a relatively short delivery time and lower shipping costs, we may experience supply shortages or price increases or both due to sharp increases in overall industry demand for bauxite. Besides purchasing bauxite from local suppliers, we also purchase bauxite, mullite, magnesia, calcium aluminates cement and other raw materials from suppliers in Shanxi Province, Shandong Province, Liaoning Province and Gansu Province. All of these locations are outside of Henan Province. Any increase in shipping costs will increase our cost of raw materials from these sources and will decrease our revenues and profitability.

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Further, if our existing suppliers are unable or unwilling to deliver our raw materials requirements on time to meet our production schedules, we may be unable to produce certain products, which could result in a decrease in revenues and profitability, a loss of good will with our customers, and could tarnish our reputation as a reliable supplier in our industry. In the event that our raw material and energy costs increase, we may not be able to pass these higher costs on to our customers in full or at all due to contractual agreements or pricing pressures in the refractory market. Any increase in the prices for raw materials or energy resources could materially increase our costs and therefore lower our earnings and profitability.

Actions by the Chinese government could drive up our material costs and could have a negative impact on our profitability.

In the past years, the Chinese government has shut down some outdated mineral mines in China. These shutdowns have decreased the overall supply of raw materials needed to produce refractory products. As a result, the materials costs for our products have increased. If the Chinese government shuts down more mineral mines, we could experience further supply shortages and price increases that could have a negative impact on our profitability.

We may not be able to implement our business plan because we may be unable to both fund the substantial ongoing capital and maintenance expenditures that our operations require and invest in new projects at the same time.

Our operations are capital intensive and the nature of our business and our business strategy will require substantial additional working capital investment. We require capital for building new production lines, acquiring new equipment, maintaining the condition of our existing equipment and maintaining compliance with environmental laws and regulations, and to pursue new market opportunities. We may not be able to fund our capital expenditures from operating cash flow and from the proceeds of borrowings available for capital expenditures under our credit facilities, and we may require additional debt or equity financing. We cannot assure that this type of financing will be available or, if available, it may result in increased interest expenses, increased leverage and decreased income available to fund further expansion. In addition, future debt financings may limit our ability to withstand competitive pressures and render us more vulnerable to economic downtowns. If we are unable to fund our capital requirements, we may be unable to implement our business plan and our financial performance may be adversely impacted.

Approximately 55.5% of our sales revenues were derived from our ten largest customers, and any reduction in revenues from any of these customers would reduce our revenues and net income.

While we have over 200 active customers, approximately 55.5% of our sales revenue came from our top ten customers in 2010, with Shandong Steel Co., Ltd, Rizhao Subsidiary alone accounting for approximately 14.5% of our sales revenue in the same period. If we cease to do business at or above current levels with Shandong Steel Co., Ltd, Rizhao Subsidiary or any one of our other largest customers which contribute significantly to our sales revenues, and we are unable to generate additional sales revenues with new and existing customers that purchase a similar amount of our products, then our revenues and net income would decline considerably.

A significant interruption or casualty loss at any of our facilities could increase our production costs and reduce our sales and earnings.

Our manufacturing process requires large industrial facilities for crushing, smashing, batching, molding and baking raw materials. After the refractory products come off the production line, we need additional facilities to inspect, package, and store the finished goods. Our facilities may experience interruptions or major accidents and may be subject to unplanned events such as explosions, fires, inclement weather, acts of God, terrorism, accidents and transportation interruptions. Any shutdown or interruption of any facility would reduce the output from that facility, which could substantially impair our ability to meet sales targets. Interruptions in production capabilities will inevitably increase production costs and reduce our sales and earnings. In addition to the revenue losses, longer-term business disruption could result in the loss of goodwill with our customers. To the extent these events are not covered by insurance, our revenues, margins and cash flows may be adversely impacted by events of this type.

Environmental regulations impose substantial costs and limitations on our operations.

Our products are not considered environmentally hazardous materials, however, the dust produced during our production process is considered hazardous to the environment. We have environmental liability risks and limitations on operations brought about by the requirements of environmental laws and regulations. We are subject to various national and local environmental laws and regulations concerning issues such as air emissions, wastewater discharges, and solid and hazardous waste management and disposal. These laws and regulations are becoming increasingly stringent. While we believe that our facilities are in material compliance with all applicable environmental laws and regulations, the risks of substantial unanticipated costs and liabilities related to compliance with these laws and regulations are an inherent part of our business. It is possible that future conditions may develop, arise or be discovered that create new environmental compliance or remediation liabilities and costs. While we believe that we can comply with environmental legislation and regulatory requirements and that the costs of compliance have been included within budgeted cost estimates, compliance may prove to be more limiting and costly than anticipated.

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Climate change and related regulatory responses may impact our business.

Climate change as a result of emissions of greenhouse gases is a significant topic of discussion and may generate U.S. federal and other regulatory responses in the near future, including the imposition of a so-called “cap and trade” system. It is impracticable to predict with any certainty the impact of climate change on our business or the regulatory responses to it, although we recognize that they could be significant. The most direct impact is likely to be an increase in energy costs, which would increase slightly our operating costs, primarily through increased utility and transportations costs. In addition, many of our customers operate in the manufacturing industry. Any restrictions or penalties imposed under a cap and trade system might significantly impact their operations, which in turn, would adversely affect their demand for our products. However, it is too soon for us to predict with any certainty the ultimate impact, either directionally or quantitatively, of climate change and related regulatory responses.

If our customers and/or the ultimate consumers of products which use our products successfully assert product liability claims against us due to defects in our products, our operating results may suffer and our reputation may be harmed.

Our products are widely used as protective linings in industrial furnaces operating in highly hazardous environments because those furnaces must operate under extremely high temperatures in order to produce iron, steel and other industrial products. Significant property damage, personal injuries and even death can result from the malfunctioning of high temperature furnaces as a result of defects in our refractory products. The costs and resources needed to defend product liability claims could be substantial. We could be responsible for paying some or all of the damages if found liable. We do not have product liability insurance. The publicity surrounding these sorts of claims is also likely damage our reputation, regardless of whether such claims are successful. Any of these consequences resulting from defects in our products would hurt our operating results and stockholder value.

If we are not able to adequately secure and protect our patent, trademark and other proprietary rights our business may be materially affected.

We hold patents for (a) an integral casting technology in mixer furnaces (which expires on December 29, 2020), (b) a light-slag heat-retaining refractory castables in high-furnaces clinders (which expires on December 27, 2025), (c) a ceramic sealing double-gate valve (which expires on January 24, 2015), (d) a direct-fired gas generator (which expires on May 23, 2015) (e) a Ceramic plunger in pumps (which expires on January 24, 2015), (f) a ceramic cylinder in slurry pumps (which expires on July 25, 2018) , (g) a Ceramic plunger pump(which expires on July 21, 2018) , (h) a ceramic lining in abrasion-resistance tubes(which expires on July 21, 2018) and (i) an oversized particles removal method (which expires on October 30, 2021). We also rely on non-disclosure agreements and other confidentiality procedures to protect our intellectual property rights in various jurisdictions. These technologies are very important to our business and it may be possible for unauthorized third parties to copy or reverse engineer our products, or otherwise obtain and use information that we regard as proprietary. Furthermore, third parties could challenge the scope or enforceability of our patents. In certain foreign countries, including China where we operate, the laws do not protect our proprietary rights to the same extent as the laws of the United States. Decided court cases in China’s civil law system do not have binding legal effect on future decisions and even where adequate law exists in China, enforcement based on existing law may be uncertain and sporadic and it may be difficult to obtain enforcement of a judgment by a court of another jurisdiction. In addition, the relative inexperience of China’s judiciary in many cases creates additional uncertainty as to the outcome of any litigation, and interpretation of statutes and regulations may be subject to government policies reflecting domestic political changes. Any misappropriation of our intellectual property could have a material adverse effect on our business and results of operations, and we cannot assure you that the measures we take to protect our proprietary rights are adequate.

Expansion of our business may pull our management and operational infrastructure and impede our ability to meet any increased demand for our products.

Our business plan is to significantly grow our operations by meeting the anticipated growth in demand for existing products and by introducing new product offerings. Growth in our business may place a significant strain on our personnel, management, financial systems and other resources. Our business growth also presents numerous risks and challenges, including:

• Our ability to successfully and rapidly expand sales to potential customers in response to potentially increasing demand;

• The costs associated with such growth, which are difficult to quantify, but could be significant; and

• The costs associated with developing new products to keep pace with rapid technological changes.

To accommodate this growth and compete effectively, we may need to obtain additional funding to improve information systems, procedures and controls and expand, train, motivate and manage existing and additional employees. Funding may not be available in a sufficient amount or on favorable terms, if at all. If we are not able to manage these activities and implement these strategies successfully to expand to meet any increased demand, our operating results could suffer.

Improvements in the quality and lifespan of refractory products may decrease product turnover and our sales revenues.

Technological and manufacturing improvements have made refractory products more durable and more efficient. While making products more durable and more efficient is generally a positive development, the increased quality and durability of refractory products could lead to declining consumption and turnover of refractory products. With the growth rate in the steel industry decelerating and with the consumption rate of refractory products per metric ton of steel produced decreasing, the refractory industry’s future growth rate may decelerate. We can increase our prices to offset a decrease in product consumption, but we cannot assure that price increases will be acceptable to our customers.

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Our new products are complex and may contain defects that are detected only after their release to our customers, which may cause us to incur significant unexpected expenses and lost sales.

Our products are highly complex and must operate at high temperatures for a long period of time. Although our new products are tested prior to release, they can only be fully tested when they are used by our customers. Consequently, our customers may discover defects after new products have been released. Although we have test procedures and quality control standards in place designed to minimize the number of defects in our products, we cannot guarantee that our new products will be completely free of defects when released. If we are unable to quickly and successfully correct the defects identified after their release, we could experience significant costs associated with compensating our customers for damages caused by our products, costs associated with correcting the defects, costs associated with design modifications, and costs associated with service or warranty claims or both. Additionally, we could lose customers, lose market share and suffer damage to our reputation.

Our holding company structure may limit the payment of dividends.

We have no direct business operations, other than our ownership of our subsidiaries. While we have no current intention of paying dividends, should we decide in the future to do so, as a holding company, our ability to pay dividends and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiaries and other holdings and investments. In addition, our operating subsidiaries, from time to time, may be subject to restrictions on their ability to make distributions to us, including as a result of restrictive covenants in loan agreements, restrictions on the conversion of local currency into U.S. dollars or other hard currency and other regulatory restrictions as discussed below. If future dividends are paid in RMB, fluctuations in the exchange rate for the conversion of RMB into U.S. dollars may reduce the amount received by U.S. stockholders upon conversion of the dividend payment into U.S. dollars.

Chinese regulations currently permit the payment of dividends only out of accumulated profits as determined in accordance with Chinese accounting standards and regulations. Our subsidiaries in China are also required to set aside a portion of their after-tax profits according to Chinese accounting standards and regulations to fund certain reserve funds. Currently, our subsidiaries in China are the only sources of revenues or investment holdings for the payment of dividends. If they do not accumulate sufficient profits under Chinese accounting standards and regulations to first fund certain reserve funds as required by Chinese accounting standards, we will be unable to pay any dividends.

We completed our new fine precisions production line in 2009 and we have earned revenue in 2010 but we cannot guarantee that we will earn the estimated revenues in the future or that it ultimately will be profitable.

We initiated the construction of our fine precisions line in 2008 and completed it in 2009. We entered into trial production in July 2009 and after making various technological adjustments and remolding, we shipped some test products for trial use by potential customers in November 2009 and received positive feedback from these potential customers. We initiated sales in August 2010, and as of December 31, 2010 the company sold approximately 260 ton abrasive.

We may incur significant costs to ensure compliance with United States corporate governance and accounting requirements.

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

Currently we do not maintain an effective system of internal controls and may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of our stock may be adversely impacted.

Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future. If we fail to maintain an effective system of internal controls in the future, we may be unable to accurately report our financial results or prevent fraud and investor confidence and the market price of our stock may be adversely impacted. We maintain a system of internal controls and procedures and prepare our financial reports according to US GAAP. However, our CEO Mr. Shunqing Zhang and interim CFO Mr. Hongfeng Jin have concluded that our internal control over financial reporting was ineffective as of December 31, 2010, due to the fact that the Company does not have an US GAAP expert on its staff and the lack of such US GAAP consultant may result in the failure to accurately and timely report financial results. Since July 2010, we have been working to take corrective steps. Our CFO and accounting staff regularly supplement their knowledge related to U.S. GAAP and receive updates regarding changes to or developments in U.S. GAAP. Also, we plan to seek to recruit experienced professionals to augment our accounting staff when sufficient funds are available to us. No assurance can be given that we have identified all the material and significant internal control weakness and we will be able to adequately remediate existing deficiencies in our internal controls. We may be required to expend additional resources to identify, assess and correct any additional weakness in disclosure or internal control and to otherwise comply with the internal controls rules under Section 404(a) of the Sarbanes-Oxley Act.

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Japanese earthquake may affect the demand of our products and our financing plan.

Given the apparent magnitude of the Japanese earthquake and tsunami, the anticipated cumulative industry-wide effect of recent catastrophic events, and the fact that some of our customers may export their products to Japan, our sales revenue could be negatively affected by Japanese earthquake. On the other hand, considering the need of reconstructing the affected cities in Japan and the potential demand of steel materials, the events may increase our product sales which are aimed at steel makers or other related industries. In addition, given that Japanese earthquake has negatively impacted the global financing market, our financing plan could be delayed or unaccomplished. If we cannot raise needed fund to execute our business plan, our results of operation could be adversely affected.

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

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

RISKS RELATED TO DOING BUSINESS IN CHINA

Chinese corporate income tax law could adversely affect our business and our net income.

China passed a new Enterprise Income Tax Law, or the New EIT Law, and its implementation regulations, both of which became effective on January 1, 2008. Under the New EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese domestic enterprise for enterprise income tax purposes. The implementing rules of the New EIT Law define de facto management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. On April 22, 2009, the State Administration of Taxation issued the Notice Concerning Relevant Issues Regarding Cognizance of Chinese Investment Controlled Enterprises Incorporated Offshore as Resident Enterprises pursuant to Criteria of de facto Management Bodies, or the Notice, further interpreting the application of the New EIT Law and its implementation with respect to non-Chinese enterprises or group controlled offshore entities. Pursuant to the Notice, an enterprise incorporated in an offshore jurisdiction and controlled by a Chinese enterprise or group will be classified as a “non-domestically incorporated resident enterprise” if (i) its senior management in charge of daily operations reside or perform their duties mainly in China; (ii) its financial or personnel decisions are made or approved by bodies or persons in China; (iii) substantial assets and properties, accounting books, corporate chops, board and shareholder minutes are kept in China; and (iv) at least half of its directors with voting rights or senior management often resident in China. A resident enterprise would be generally subject to the uniform 25% enterprise income tax rate as to its worldwide income. Although the Notice is directly applicable to enterprises registered in an offshore jurisdiction and controlled by Chinese domestic enterprises or groups, it is uncertain whether the PRC tax authorities will make reference to the Notice when determining the resident status of other offshore companies, such as China GengSheng Minerals, Inc., Gengsheng International Corporation and Smarthigh Holding Limited. Since substantially all of our management is currently based in China, it is likely we may be treated as a Chinese resident enterprise for enterprise income tax purposes. The tax consequences of such treatment are currently unclear, as they will depend on how local tax authorities apply or enforce the New EIT Law or the implementation regulations.

In addition, under the New EIT Law and implementation regulations, PRC income tax at the rate of 10% is applicable to dividends payable to investors that are “non-resident enterprises” (and that do not have an establishment or place of business in the PRC, or that have such establishment or place of business but the relevant income is not effectively connected with the establishment or place of business) to the extent that such dividends have their source within the PRC unless there is an applicable tax treaty between the PRC and the jurisdiction in which an overseas holder resides which reduces or exempts the relevant tax. Similarly, any gain realized on the transfer of shares by such investors is also subject to the 10% PRC income tax if such gain is regarded as income derived from sources within the PRC.

If we are considered a PRC “resident enterprise”, it is unclear whether the dividends we pay with respect to our shares, or the gain you may realize from the transfer of our shares, would be treated as income derived from sources within the PRC and be subject to PRC tax. If we are required under the New EIT Law to withhold PRC income tax on our dividends payable to our foreign shareholders, or if you are required to pay PRC income tax on the transfer of your shares, the value of your investment in our shares may be materially and adversely affected.

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

In recent years, the Chinese economy has experienced periods of rapid expansion and highly fluctuating rates of inflation. During the past ten years, the rate of inflation in China has been as high as 5.9% and as low as -0.8% . These factors have led to the adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to impose controls on credit or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products and our company.

Our business is largely subject to the uncertain legal environment in China and our legal protection could be limited.

The Chinese legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which precedents set in earlier legal cases are not generally used. The overall effect of legislation enacted over the past 20 years has been to enhance the legal protections afforded to foreign-invested enterprises in China. However, these laws, regulations and legal requirements are relatively recent and are evolving rapidly, and their interpretation and enforcement involve uncertainties. These uncertainties could limit the legal protections available to foreign investors, such as the right of foreign-invested enterprises to hold licenses and permits such as requisite business licenses. In addition, all of our executive officers and our directors are residents of China and not of the U.S., and substantially all the assets of these persons are located outside the U.S. As a result, it could be difficult for investors to effect service of process in the U.S., or to enforce a judgment obtained in the U.S. against our Chinese operations and subsidiaries.

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

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

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

Restrictions on currency exchange may limit our ability to receive and use our revenues effectively.

The majority of our revenues are settled in Renminbi, or RMB. Any future restrictions on currency exchanges may limit our ability to use revenue generated in RMB to fund any future business activities outside of China or to make dividend or other payments in U.S. dollars. Although the Chinese government introduced regulations in 1996 to allow greater convertibility of the RMB for current account transactions, significant restrictions still remain, including primarily the restriction that foreign-invested enterprises may only buy, sell or remit foreign currencies after providing valid commercial documents at those banks in China authorized to conduct foreign exchange business. In addition, conversion of RMB for capital account items, including direct investment and loans, is subject to governmental approval in China, and companies are required to open and maintain separate foreign exchange accounts for capital account items. We cannot be certain that the Chinese regulatory authorities will not impose more stringent restrictions on the convertibility of the RMB.

Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident stockholders to personal liability, limit our ability to acquire PRC companies or to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute profits to us or otherwise materially adversely affect us.

In October 2005, the PRC State Administration of Foreign Exchange, or SAFE, issued the Notice on Relevant Issues in the Foreign Exchange Control over Financing and Return Investment Through Special Purpose Companies by Residents Inside China, generally referred to as Circular 75, which required PRC residents to register with the competent local SAFE branch before establishing or acquiring control over an offshore special purpose company, or SPV, for the purpose of engaging in an equity financing outside of China on the strength of domestic PRC assets originally held by those residents. Internal implementing guidelines issued by SAFE, which became public in June 2007 (known as Notice 106), expanded the reach of Circular 75 by purporting to cover the establishment or acquisition of control by PRC residents of offshore entities which merely acquire “control” over domestic companies or assets, even in the absence of legal ownership; adding requirements relating to the source of the PRC resident’s funds used to establish or acquire the offshore entity; covering the use of existing offshore entities for offshore financings; purporting to cover situations in which an offshore SPV establishes a new subsidiary in China or acquires an unrelated company or unrelated assets in China; and making the domestic affiliate of the SPV responsible for the accuracy of certain documents which must be filed in connection with any such registration, notably, the business plan which describes the overseas financing and the use of proceeds. Amendments to registrations made under Circular 75 are required in connection with any increase or decrease of capital, transfer of shares, mergers and acquisitions, equity investment or creation of any security interest in any assets located in China to guarantee offshore obligations, and Notice 106 makes the offshore SPV jointly responsible for these filings. In the case of an SPV which was established, and which acquired a related domestic company or assets, before the implementation date of Circular 75, a retroactive SAFE registration was required to have been completed before March 31, 2006; this date was subsequently extended indefinitely by Notice 106, which also required that the registrant establish that all foreign exchange transactions undertaken by the SPV and its affiliates were in compliance with applicable laws and regulations. Failure to comply with the requirements of Circular 75, as applied by SAFE in accordance with Notice 106, may result in fines and other penalties under PRC laws for evasion of applicable foreign exchange restrictions. Any such failure could also result in the SPV’s affiliates being impeded or prevented from distributing their profits and the proceeds from any reduction in capital, share transfer or liquidation to the SPV, or from engaging in other transfers of funds into or out of China.

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We believe our stockholders who are PRC residents as defined in Circular 75 have registered with the relevant branch of SAFE, as currently required, in connection with their equity interests in us and our acquisitions of equity interests in our PRC subsidiaries. However, we cannot provide any assurances that their existing registrations have fully complied with, and they have made all necessary amendments to their registration to fully comply with, all applicable registrations or approvals required by Circular 75. Moreover, because of uncertainty over how Circular 75 will be interpreted and implemented, and how or whether SAFE will apply it to us, we cannot predict how it will affect our business operations or future strategies. For example, our present and prospective PRC subsidiaries’ ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 75 by our PRC resident beneficial holders. In addition, such PRC residents may not always be able to complete the necessary registration procedures required by Circular 75. We also have little control over either our present or prospective direct or indirect stockholders or the outcome of such registration procedures. A failure by our PRC resident beneficial holders or future PRC resident stockholders to comply with Circular 75, if SAFE requires it, could subject these PRC resident beneficial holders to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiaries’ ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

Changes in China's political or economic situation could harm us and our operating results.

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

• Level of government involvement in the economy;
• Control of foreign exchange;
• Methods of allocating resources;
• Balance of payments position;
• International trade restrictions; and
• International conflict.

The Chinese economy differs from the economies of most countries belonging to the Organization for Economic Cooperation and Development, or OECD, in many ways. For example, state-owned enterprises still constitute a large portion of the Chinese economy and weak corporate governance and a lack of flexible currency exchange policy still prevail in China. As a result of these differences, we may not develop in the same way or at the same rate as might be expected if the Chinese economy was similar to those of the OECD member countries.

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

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

Our procurement strategy is to diversify our suppliers both in the PRC and overseas. And some of our raw materials and major equipments are currently imported. These transactions are often settled in U.S. dollars or other foreign currency. In the event that the U.S. dollars or other foreign currency appreciate against RMB, our costs will increase. Our profitability and operating results will suffer if we cannot pass the resulted cost increase to our customers. In addition, because our sales to international customers are growing, we are subject to the risk of foreign currency depreciation.

A slowdown or other adverse developments in the Chinese economy may materially and adversely affect our customers’ demand for our products and services.

All of our operations are conducted in China and part of our revenues are generated from sales to businesses operating in China. Although the Chinese economy has grown significantly in recent years, such growth may not continue. We do not know how sensitive we are to a slowdown in economic growth or other adverse changes in Chinese economy which may affect demand for our products. A slowdown in overall economic growth, an economic downturn or recession or other adverse economic developments in China may materially reduce the demand for our services and in turn reduce our results of operations.

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Failure to comply with the U.S. Foreign corrupt practices act and Chinese anti-corruption laws could subject us to penalties and other adverse consequences.

Our executive officers, employees and other agents may violate applicable law in connection with the marketing or sale of our products, including China’s anti-corruption laws and the U.S. Foreign Corrupt Practices Act, or the FCPA, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. In addition, we are required to maintain records that accurately and fairly represent our transactions and have an adequate system of internal accounting controls. Foreign companies, including some that may compete with us, are not subject to these prohibitions, and therefore may have a competitive advantage over us. The PRC also strictly prohibits bribery of government officials. However, corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in the PRC.

While we intend to implement measures to ensure compliance with the FCPA and Chinese anti-corruption laws by all individuals involved with our company, our employees or other agents may engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations. In addition, our brand and reputation, our sales activities or the price of our ordinary shares could be adversely affected if we become the target of any negative publicity as a result of actions taken by our employees or other agents.

The implementation of the new PRC employment contract law and increases in the labor costs in China may hurt our business and profitability.

A new employment contract law became effective on January 1, 2008 in China. It imposes more stringent requirements on employers in relation to entry into fixed-term employment contracts, recruitment of temporary employees and dismissal of employees. In addition, under the newly promulgated Regulations on Paid Annual Leave for Employees, which also became effective on January 1, 2008, employees who have worked continuously for more than one year are entitled to paid vacation ranging from 5 to 15 days, depending on the length of the employee’s service. Employees who waive such vacation entitlements at the request of the employer will be compensated for three times their normal daily salaries for each vacation day so waived. As a result of the new law and regulations, our labor costs may increase. There is no assurance that disputes, work stoppages or strikes will not arise in the future. Increases in the labor costs or future disputes with our employees could damage our business, financial condition or operating results.

RISKS RELATED TO THE MARKET FOR OUR STOCK

As our common stock is thinly traded, the stock price may be volatile and investors may have difficulty disposing of their investments at prevailing market prices.

On March 4, 2010, our common stock began trading on the NYSE Amex stock exchange (formerly the American Stock Exchange) under the symbol “CHGS”. Prior to March 4, our common stock traded over-the-counter under the symbol CHGS.OB. Despite the new listing on the larger stock exchange, our common stock remains thinly and sporadically traded and no assurances can be given that a larger market will ever develop, or if developed, that it will be maintained.

Our Common Stock is subject to price volatility unrelated to our operations.

The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

Techniques employed by manipulative short sellers in Chinese small cap stocks may drive down the market price of our common stock.

Short selling is the practice of selling securities that the seller does not own but rather has, supposedly, borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is therefore in the short seller’s best interests for the price of the stock to decline, many short sellers (sometime known as “disclosed shorts”) publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a stock short. While traditionally these disclosed shorts were limited in their ability to access mainstream business media or to otherwise create negative market rumors, the rise of the Internet and technological advancements regarding document creation, videotaping and publication by weblog (“blogging”) have allowed many disclosed shorts to publicly attack a company’s credibility, strategy and veracity by means of so-called research reports that mimic the type of investment analysis performed by large Wall Street firm and independent research analysts. These short attacks have, in the past, led to selling of shares in the market, on occasion in large scale and broad base. Issuers with business operations based in China and who have limited trading volumes and are susceptible to higher volatility levels than U.S. domestic large-cap stocks, can be particularly vulnerable to such short attacks.

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These short seller publications are not regulated by any governmental, self-regulatory organization or other official authority in the U.S., are not subject to the certification requirements imposed by the Securities and Exchange Commission in Regulation AC (Regulation Analyst Certification) and, accordingly, the opinions they express may be based on distortions of actual facts or, in some cases, fabrications of facts. In light of the limited risks involved in publishing such information, and the enormous profit that can be made from running just one successful short attack, unless the short sellers become subject to significant penalties, it is more likely than not that disclosed shorts will continue to issue such reports.

Recently, some short sellers actively attack on Chinese small cap stocks. We are a Chinese small cap public company and may be attacked by some short sellers. While we intend to strongly defend our public filings against any such short teller attacks, oftentimes we are constrained, either by principles of freedom of speech, applicable state law (often called “Anti-SLAPP statutes”), or issues of commercial confidentiality, in the manner in which we can proceed against the relevant short seller. You should be aware that in light of the relative freedom to operate that such persons enjoy - oftentimes blogging from outside the U.S. with little or no assets or identity requirements - should we be targeted for such an attack, our stock will likely suffer from a temporary, or possibly long term, decline in market price should the rumors created not be dismissed by market participants.

Our President and CEO hold a significant percentage of our outstanding voting securities.

As of December 31, 2010, Mr. Shunqing Zhang, our President and CEO, was the beneficial owner of approximately 56.8% of our outstanding voting securities. As a result, he possessed significant influence, giving him the ability to elect a majority of our board of directors and to authorize or prevent significant corporate transactions. His ownership and control may impede or delay any future change in control through merger, consolidation, takeover or other business combinations and may discourage a potential acquirer from making a tender offer.

Certain provisions of our articles of incorporation may make it more difficult for a third party to effect a change-in-control.

Our articles of incorporation authorize the Board of Directors to issue up to 50,000,000 shares of preferred stock. The preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the board of directors without further action by the stockholders. These terms may include voting rights including the right to vote as a series on particular matters, preferences as to dividends and liquidation, conversion rights and redemption rights provisions. The issuance of any preferred stock could diminish the rights of holders of our common stock, and therefore could reduce the value of such common stock. In addition, specific rights granted to future holders of preferred stock could be used to restrict our ability to merge with, or sell assets to, a third party. The ability of the board of directors to issue preferred stock could make it more difficult, delay, discourage, prevent or make it more costly to acquire or effect a change-in-control, which in turn could prevent the stockholders from recognizing a gain in the event that a favorable offer is extended and could materially and negatively affect the market price of our common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

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

We have obtained the right from the relevant governmental authority for periods ranging from 39 to 50 years to use the land on which our facilities are located. We currently have about 27 manufacturing facilities located on five manufacturing sites in China. In our Refractories subsidiary in Gongyi City, Henan Province, we have offices and workshops that total approximately 316,663 square feet. In our High-Temperature subsidiary in Zhengzhou City, Henan Province, we have offices and workshops that total approximately 115,777 square feet. In our Duesail subsidiary in Gongyi City, Henan Province, we have offices and workshops that total approximately 401,449 square feet. In April 2009, we finished constructing our production line for fine precision abrasives, with 22,000 tons of designed annual capacity, and we have offices and workshops that total approximately 739,114 square feet in the Micronized subsidiary.

We believe that our facilities, which are of varying ages and are of different construction types, have been satisfactorily maintained. They are in good conditions and are suitable for our operations and generally provide sufficient capacity to meet our production and operational requirements.

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ITEM 3. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

PART II

ITEM 5. MARKET FOR OUR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

On March 4, 2010, our common stock commenced trading on the NYSE Amex stock exchange (formerly the American Stock Exchange) under the symbol “CHGS”. Until March 3, 2010, our common stock traded over-the-counter under the symbol CHGS.OB. The CUSIP number is 16942P101.

The following table sets forth, for the periods indicated, the high and low bid prices of our common stock as reported on the OTC Bulletin Board. These prices reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

		Closing Bid Prices (1)
Year Ended December 31, 2010
		High			Low
4th Quarter	$	5.15		$	1.13
3rd Quarter		1.53			1.14
2nd Quarter		2.90			1.18
1st Quarter		3.82			2.26
Year Ended December 31, 2009
		High			Low
4th Quarter		2.53			1.59
3rd Quarter		1.94			0.80
2nd Quarter		1.05			0.55
1st Quarter		0.8			0.42

^{________________________
(1)} The above tables set forth the range of high and low bid prices per share of our common stock as reported in our SEC filings and by www.quotemedia.com for the periods indicated. The closing bid prices are only available from the quarter that began on April 1, 2006.

Holders

On December 31, 2010, there were approximately 202 stockholders of record of our common stock. The number of record holders does not include persons who held our common stock in nominee or “street name” accounts through brokers.

Dividend Policy

We have never declared dividends or paid cash dividends. Our board of directors, which currently consists of five directors, has complete discretion on whether to pay dividends, subject to the approval of our shareholders. We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the near future. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant.

Securities Authorized for Issuance under Equity Compensation Plans

We presently do not have any equity based or other long-term incentive programs. In the future, we may adopt and establish an equity-based or other long-term incentive plan if it is in the best interest of the Company and our stockholders to do so.

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Recent Sales of Unregistered Securities

None.

ITEM 6. SELECTED FINANCIAL DATA

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

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations, which we refer to as the MD&A, is intended to help the reader understand our Company, our operations and our present business environment. The MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and the accompanying notes.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes included elsewhere in this annual report on Form 10-K. Some of the information contained in this discussion and analysis constitutes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed below and elsewhere in this annual report on Form 10-K particularly under “Special Note Regarding Forward-Looking Statements” and “Risk Factors.”

Unless otherwise specified, references to Notes to our consolidated financial statements are to the Notes to our audited consolidated financial statements as of December 31, 2010 and 2009 and for the two-year period ended December 31, 2010.

Overview

We are a Nevada holding company that operates through our direct and indirect subsidiaries. Through our direct, wholly-owned BVI subsidiary, GengSheng International, and its direct and wholly-owned Chinese subsidiary, Refractories, we manufacture monolithic refractory products in China. Through our direct, wholly-owned BVI subsidiary, GengSheng International, and its direct and wholly-owned Chinese subsidiary, Duesail, we manufacture fracture proppant products. Through Micronized, wholly-owned subsidiary of Refractories, we manufacture fine precisions. Through High-Temperature, 89% owned subsidiary of Refractories, we manufacture industrial ceramic products.

We have four primary business segments: refractories, industrial ceramics, fracture proppants and fine precision abrasives. Refractories product is a nonmetallic material that is used in heavy industrial processes in which extremely high temperatures are present, and the main customers for the segment are steel makers. Our industrial ceramic products, including abrasive balls and tiles, valves, electronic ceramics and structural ceramics, are components for a variety of end-use 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. Our fracture proppants are very fine ball-like pellets, highly resistant to pressure, and 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. The newly introduced segment, fine precision abrasives are essentially very fine, uniformly round, silicon carbide (SiC) based particles. These ultra-fine high-strength particles are applicable in a broad range of applications, including machine manufacturing, electronics, optical glass, architecture, semiconductors, silicon chips, plastics and lenses. The Company finished construction for the fine precision abrasives facility in April 2009, and entered into trial production in late July 2009. In fiscal year 2010, the refractories segment accounted for $45.8 million or 73.6%, of our total revenue of $62.2 million, industrial ceramics accounted for approximately $1.2 million or 2% of the total revenue and fracture proppants contributed $14.3 million or 23.0% of our total revenue and fine precision abrasives accounted for approximately $0.9 million or 1.4% of the total revenue.

We sell our products to over 200 customers in the iron, steel, oil, glass, cement, aluminum and chemical businesses located in China and 11 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 products used by the utilities and petrochemical industries. The Company’s fine precision abrasives target solar companies and optical equipment manufacturers in the early stage of product manufacturing. Our largest customers, measured by percentage of our revenue, mainly operate in the steel industry. Currently, most of our revenues are derived from the sale of our monolithic refractory products to customers in China. We expect significant revenue growth from fracture proppants, and from fine precision abrasives in 2011.

The following table provides a percentage breakdown for our regional sales in China as of December 31, 2010:

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Highlights of Business Operations in 2010

During fiscal year 2010, our company has maintained a steady growth despite significant challenges from both the refractory and fracture proppant markets as the global economic slowdown continued. From the beginning of 2009, the PRC central government has labeled the steel sector in China an overcapacity-burdened industry and the government is resolved to cut back the industry's excessive capacity. Since then some small and mid-sized steel millers have been shut down, which decreased the demand of refractories.

To face the changing market environment, we have adjusted our products offered to our customers, to provide more efficient and environmental friendly products. Moreover, in our refractories segment, we secured two new customers: Panzhihua New Steel & Vanadium Co., Ltd and Fushun New Steel Co., Ltd. As a result, we expected that the revenue will continue to increase in 2011. In our fracture proppant segment, our sales increased significantly based on increased demand from international market. In 2010 we sold 41,270 metric tons of our fracture proppants,, representing an increase of 74.1% compared with 2009. In addition, we are actively cooperating with Doctor Ningsheng Zhou, who is an esteemed expert in refractories, and High Temperature Institute of Henan Technology University to enhance our research and development. Under these collaborations, we cumulatively developed 26 new products and technologies, three innovations in our techniques, and seven product upgrades. We currently have 52 patents that are under review based on these new developments.

The following are some financial highlights for fiscal year 2010:

• Sales revenue increased by approximately $5.2 million, or approximately 9.2%, to approximately $62.2 million for the fiscal year of 2010 from approximately $57.0 million for the same period of 2009.

• Our consolidated balance sheet as of December 31, 2010 included current assets of approximately $91.9 million and total assets of approximately $123.2 million.

Major Factors that Affect our Financial Condition in 2010

Industry Consolidation of Steel Makers

Although in China, the crude steel output in 2010 reached a new record of approximate 627 million metric tons, keeping a steady year-over-year growth rate of 9.3%, China's steel industry faces overcapacity and the global economic recession. In addition, the PRC government’s policy to make China’s steel industry more efficient and energy-saving will squeeze out small to mid-sized steel makers which may reduce the market’s demand for refractories. To address these challenges, we plan to focus on providing low carbon, more efficient and environmental friendly monolithic refractories.

Considerable Increase of Raw Material Prices and Decreasing Gross Margin

During 2010, the inflation expectation and upstream pressure of higher prices for raw materials, fuel and utilities continued. In a relatively fragmented market, our products’ selling price did not increase in step with the increased price of the raw materials. Although we are less impacted by the soaring materials costs and slower sales growth than our competitors, our gross margin and net income were impacted by the continued economic distress around the world. We will continue to optimize our products offering to allocate the available resources more efficiently.

Results of Operations

The following table summarizes the results of our operations during the fiscal years ended on December 31, 2010 and 2009, respectively, and provides information regarding the dollar and percentage increase or (decrease) during such years.

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

		2010						2009
					As a						As a
		All			percentage of			All			percentage of
		amounts			net revenues			amounts			net revenues
Statement of operations data:
Net sales		62,189			100%			56,955			100%
Cost of sales		44,499			71.6%			40,735			71.5%
Gross profit		17,690			28.4%			16,220			28.5%
Operating expenses
Provision for (Recovery of ) doubtful accounts		437			0.7%			(98	)		-0.2%
General & administrative expenses		5,741			9.2%			4,444			7.8%

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		2010						2009
					As a						As a
		All			percentage of			All			percentage of
		amounts			net revenues			amounts			net revenues
Research and development cost		817			1.3%			478			0.8%
Selling expenses		8,365			13.5%			6,281			11.0%
Total operating expenses		15,360			24.7%			11,105			19.5%
Income from operations		2,330			3.7%			5,115			9.0%
Government grant income		123			0.2%			1,149			2.0%
Interest income		364			0.6%			73			0.1%
Guarantee income		239			0.4%			-			0%
Other income		129			0.2%			334			0.6%
Finance costs		(1,768	)		-2.8%			(579	)		-1.0%
Guarantee expense		(622	)		-1%			-			0%
Income before income taxes and noncontrolling interest		794			1.3%			6,092			10.7%
Income taxes		(522	)		-0.8%			(412	)		-0.7%
Noncontrolling interest		(8	)		-0. 1%			(72	)		-0.1%
Net income attributable to Company’s common stockholders		264			0.4%			5,608			9.8%

Year Ended December 31, 2010 Compared with Year Ended December 31, 2009

Sales revenues. Sales revenues increased by approximately $5.2 million, or 9.2%, to $62.2 million in 2010 from approximately $57.0 million in 2009. Our sales revenue at present is generated from sales of our mineral-based refractory products, primarily our refractory products, industrial ceramic products , fracture proppant products and fine precision abrasive products. The increase was mainly attributable to our fracture proppant segment, with quantity sold growing steadily.

In our refractory segment, we sold approximately 101,711 metric tons of refractory products in 2010 compared to 115,400 metric tons sold in 2009. The revenue from our refractory products decreased to approximately $45.8 million in 2010 from approximately $47.8 million in 2009, with the average selling price increasing from $415 per metric ton in 2009 to $450 per metric ton in 2010. We increased our selling prices as a result of our increased cost of raw materials. Because of the fierce rivalry in the market, the selling price did not increase to a higher degree to keep pace with the increased price of raw materials.

In our fracture proppant segment, we sold approximately 41,270 metric tons of fracture proppant products in 2010, which grew by 74.1% compared with the 23,700 metric tons we sold in 2009. Revenue from fracture proppant products was approximately $14.3 million in 2010, which increased by 78.1% compared with approximately $8.0 million in 2009. Average selling price increased to $347 per metric ton in 2010, compared with $340 per metric ton in 2009, mainly due to more exports with higher selling price in 2010.

In our industrial ceramics segment, revenue was approximately $1.2 million in 2010 compared with approximately $1.1 million in 2009.

In our fine precision abrasives segment, we realized sales of approximately 260 ton in 2010, for a revenue of approximately $0.9 million.

Cost of sales. Our cost of sales increased by approximately $3.8 million, or 9.2%, to approximately $44.4 million in 2010 from approximately $40.7 million in 2009. As a percentage of net revenues, the cost of goods sold 71.6% in 2010, compared with 71.5% in 2009. In 2010, the cost of sales for refractory, industrial ceramic, fracture proppant and fine precision abrasive was approximately $35.0 million, $1.4 million, $11.6 million, and $0.8 million respectively.

Gross profit. Our gross profit increased by approximately $1.5 million, or 9.1%, to approximately $17.7 million in 2010 from approximately $16.2 million in 2009. For the whole year gross margin remained even compared with 2009; gross margin in the first three quarters of 2010 is higher than that of first three quarters in 2009. The decrease in goss margin in the fourth quarter of 2010 lies in the following reasons: first, there was a frequent power cut in our leased fracture proppant production line, which resulted in higher production costs per metric ton; Second, in the fourth quarter, domestic sales of fracture proppant represented 72% of total, much higher than the percentage in the first three quarters. Usually fracture proppants sold domestically are of lower grade and about 20% lower price per metric ton on average, compared with the fracture proppant products for export; Third, in Refractory subsidiary, the output in the fourth quarter was lower compared to that in the first three quarters, as a result, there were less economy of scale and cost of sales per metric ton became higher; Fourth, the fine precision abrasives subsidiary initiated sales in 2010. With overall low output, cost per metric ton remained high; Fifth, in High temperature segment, gross margin decreased to 35% in 2010 from 41% in 2009, primarily attributable to higher portion of lower-grade and lower margin products sold in the product mix as compared to 2009. In fiscal year 2010, the gross margin for refractories, industrial ceramic, fracture proppant and fine precision abrasives segments were 27.7%, 35.5%, 26.0% and 4.9%, respectively.

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Provision for (recovery of) doubtful accounts. Based on an assessment of our steel mill customers, which concluded their good reputation and satisfactory track record of collection, the management established the general provisioning policy that, no allowance is provided for the trade receivables aged below six months. Consequently, we recorded provision of approximately $0.4 million based on such policy.

General and administrative expenses. Our general and administrative expenses increased by approximately $1.3 million to about approximately $5.7 million in 2010 from approximately $4.4 million in 2009. As a percentage of net revenues, general and administrative expenses increased by 1.4% to 9.2% in 2010, as compared with 7.8% in 2009. It was mainly due to a $0.3 million increase in depreciation, a $0.4 million increase in compensation to independent directors and senior managers, and a $0.3 million increase in the travel expense and intermediary fee related with financing activities. We expect that our general and administrative expenses will increase in the long term as we hire additional personnel and incur additional costs in connection with the expansion of our business and being a publicly traded company, including costs of enhancing our internal controls.

Research and development cost. Our research and development cost increased by 70.8% from approximately $0.5 million for the fiscal year ended December 31, 2009 to approximately $0.8 million for the fiscal year ended December 31, 2010. This increase was primarily due to more resources we allocated to the afore-mentioned 26 new products development, three technique innovations, and seven product upgrades.

Selling expenses. Our selling expenses increased by approximately $2.1 million, or 33.2%, to approximately $8.4 million in 2010 from approximately $6.3 million in 2009. Selling expenses as a percentage of net revenues increased by 2.5% to 13.5% in 2010 as compared with 11.0% in 2009. The increase in our selling expenses was mainly contributable to a $0.3 million of initial market development expenses for launching of fine precision abrasive products, and approximate $0.2 million increase in traveling expenses related to sales activities, and a $0.4 million export-related logistics expense mainly for the export of fracture proppants, and a $0.4 million increase in transportation expenses due to higher freight cost per metric ton.

Government grant income. Our government grant income decreased by approximately $1.0 million, to approximately $0.1 million in 2010 from approximately $1.1 million in 2009. In 2009, our High-Temperature subsidiary was awarded $0.7 million for research and development efforts, and our Duesail subsidiary was awarded $0.4 million government grant for its contribution to energy conservation and emission reduction by applying the Revolving Kiln technology in its second production line. These were basically one-time grants and did not recur in 2010. In 2010, the Refractories subsidiary was awarded $122,914 mainly as government’s encouragement to the Company’s research and development.

Finance costs. Our finance cost increased by approximately $1.2 million, or 205.1%, to approximately $1.8 million in 2010 from approximately $0.6 million in 2009. As a percentage of net revenues, our finance cost was 2.8% in 2010 and 1.0% in 2009. This significant increase was primarily due to an approximately $0.4 million increase in discounted interest cost, and an approximate $0.6 million increase in loan interest expense.

Guarantee costs. Our guarantee expense was approximately $622,198 in 2010, mainly due to provision we recorded according to guarantee amount as of December 31, 2010. The Company has acted as guarantor for bank loans granted to certain local authorities and certain business associates. The Company recorded in its consolidated financial statements a liability for that guarantee at fair value at the date of inception and recognized as an expense in statements or income immediately. The amount of guarantee liability is amortized in profit or loss over the term of the guarantee issued.

Income before income taxes and noncontrolling interest. Our income before income taxes and minority interests decreased by approximately $5.3 million, or 87.0%, to approximately $0.8 in 2010 from approximately $6.1 million in 2009. As a percentage of net revenues, our income before income taxes and minority interests decreased by 9.4% to 1.3% in 2010, as compared with 10.7% in 2009. This decrease in percentage was primarily attributable to the increases in sales revenue, significant increase in finance costs, guarantee costs and operating expenses and less government grant income in 2010, as discussed above.

Income taxes. We incurred income taxes of approximately $0.5 million in 2010, increasing by approximately $0.1 million or 26.5% in 2010, compared with approximately $0.4 million in 2009. The increase in income tax expenses in spite of lower pretax income in 2010, was mainly attributable to: first, higher non-deductible items incurred in 2010; second, less tax-exempt income (such as government grants) in 2010; third, payment of $150,021 supplementary income tax for 2009 which was recorded in 2010, according to PRC enterprises income tax law; and fourth, changes in tax treatment status of our subsidiaries. Details are elaborated in Note 19.

Net income attributable to the Company’s common stockholders. As a result of the foregoing, our net income decreased by 95.2% to $264,163 for the fiscal year ended December 31, 2010 from approximately $5.6 million for the fiscal year ended December 31, 2009.

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Liquidity and Capital Resources

As of December 31, 2010, we had cash and cash equivalents of $925,052 and restricted cash of approximately $21.7 million. Our current assets were approximately $91.9 million and our current liabilities were approximately $71.8 million as of December 31, 2010 which resulted in a current ratio of approximately 1.3 to 1. Total stockholders' equity as of December 31, 2010 was approximately $51.3 million. The following table provides detailed information regarding our net cash flow for all financial statement periods presented in this report.

(in thousands of US dollar)		2010			2009
Net cash used in operating activities		(7,574	)		(3,775	)
Net cash used in investing activities		(6,406	)		(6,224	)
Net cash provided by financing activities		13,882			10,025
Effect of foreign currency translation on cash and cash equivalents		30			10
Net (decrease) increase in cash and cash equivalents		(67	)		36
Cash and cash equivalents – beginning of year		992			956
Cash and cash equivalents – end of year		925			992

Operating Activities

Net cash used in operating activities in 2010 totaled approximately $7.6 million, which is an increase of approximately $3.8 million from net cash used in operating activities of approximately $3.8 million in 2009. The increase in net cash used in operating activities was mainly due to reduced income, a approximately $8.3 million increase of changes in restricted cash, a $7.2 approximately million increase of changes in inventories, etc., despite a $8.9 million increase of changes in bills payable as well as other factors.

Investing Activities

Net cash used in investing activities in the fiscal year of 2010 was approximately $6.4 million, which is an increase of approximately $0.2 million from net cash used in investing activities of approximately $6.2 million in 2009. We paid approximately $6.4 million for the arrearage of fine precision abrasive project, approximately $2.3 million to expand construction of fracture proppants production lines, approximately $0.97 million for the vehicle and instruments renovation of Refractories, and approximately 0.44 million prepayment for investment in Xinjiang.

Financing Activities

Net cash provided by financing activities was approximately $13.9 million which consists of approximately $51.0 million new bank loans we got and approximately $39.1 million repayments in 2010 representing an increase of approximately $3.0 million from net cash provided by financing activities of approximately $10.0 million in 2009. The increased net cash provided by financing activities was mainly because of an increase of approximately $13.7 million bank loans and borrowings from domestic commercial banks and approximately $17.4 million increase of inflow due to changes in restricted cash, offset by a approximately $27.5 million increase in cash outflow for repayment of bank loans.

Loan Facilities

In 2010, we borrowed new loans for a total approximately $51.0 million from banks for the working capital needs and repaid approximately $39.0 million during the year ended on December 31, 2010. As a result, the balance of all our bank loans and borrowing as on December 31, 2010 was approximately $41.6 million, which includes approximately $26.2 million short-term bank loans and approximately $15.4 million of bank borrowing secured by bank deposits. We might need additional credit facilities for possible new production line construction and working capital requirements.

As of December 31, 2010, the Company and its subsidiaries have the following credit facilities with the following terms.(There is no loan due in more than 1 year term, so the payment amount due for all the loans within one year equals to the amount borrowed and listed in the table below under the Item of Amount.)

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

7	Facility Bank Loan	Agricultural Bank of China	2010-05-24 to 2011-05-23	1 year	6,068,000
8	Facility Bank Loan	Zhengzhou Bank	2010-12-17 to 2011-12-16	1 year	4,551,000
9	Facility Bank Loan	Zhengzhou Bank	2010-12-17 to 2011-12-16	1 year	3,034,000
10	Facility Bank Loan	China Merchants Bank	2010-06-24 to 2011-06-23	1 year	1,517,000
11	Facility Bank Loan	Shanghai Pudong Development Bank Village Bank	2010-09-16 to 2011-09-15	1 year	758,500
12	Facility Bank Loan	Shanghai Pudong Development Bank Village Bank	2010-09-16 to 2011-09-15	1 year	379,250
13	Facility Bank Loan	Kaifeng Commercial Bank	2010-09-28 to 2011-09-27	1 year	4,551,000
14	Bank borrowing	Luoyang Bank	2010-07-20 to 2011-01-20	6 months	3,034,000
15	Bank borrowing	Luoyang Bank	2010-09-06 to 2011-03-06	6 months	758,500
16	Bank borrowing	Luoyang Bank	2010-09-08 to 2011-03-08	6 months	1,213,600
17	Bank borrowing	Kaifeng Bank	2010-10-18 to 2011-04-17	6 months	1,365,300
18	Bank borrowing	Zhengzhou Bank	2010-12-20 to 2011-01-20	1 month	3,034,000
19	Bank borrowing	Guangdong Development Bank	2010-09-08 to 2011-03-08	6 months	1,213,600
20	Bank borrowing	Shanghai Pudong Development Bank	2010-07-22 to 2011-01-22	6 months	303,400

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We have approximately $41.6 million of collateralized bank loans, which includes approximately $30.7 million of facility bank loans, maturing on January 10, January 31, March 31, April 26, May 13, May 23, June 23, September 15 and September 27, December 16, December 16, 2011, respectively, and approximately $10.9 million of bank borrowing secured by approximately $13.2 million in bank deposits. We will repay each loan when it matures with our working capital and the collateralized bank deposits. We will also consider refinancing debt. However, we cannot provide assurances that we will be able to refinance any of our debt on terms favorable to us in a timely manner.

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

On April 27, 2010, 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 $0.8 million (RMB 5 million) to Refractories for a term of one year, at an interest rate of 10.512% per year on all outstanding principal.

On February 1, 2010, our subsidiary, High-Temperature, entered into a short-term working capital loan agreement with China Development Bank (“CDB”), whereby CDB has agreed to loan approximately $0.3 million (RMB 2 million) to High-Temperature for a term of one year, at an interest rate of 5.841% per year on all outstanding principal.

On February 1, 2010, our subsidiary, Duesail, entered into a short-term working capital loan agreement with CDB, whereby CDB has agreed to loan approximately $0.4 million (RMB 3 million) to Duesail for a term of one year, at an interest rate of 5.841% per year on all outstanding principal.

On March 1, 2010, our subsidiary, Refractories, entered into a short-term working capital loan agreement with Industrial and Commercial Bank of China Limited of Gongyi (“ICBC”), whereby ICBC has agreed to loan approximately $3.0 million (RMB 20 million) to Refractories for a term of ten months, at an interest rate of 5.841% per year on all outstanding principal.

On April 1, 2010, our subsidiary, Refractories, entered into a short-term working capital loan agreement with Luoyang Bank (“LYB”), whereby LYB has agreed to loan approximately $3.0 million (RMB 20 million) to Refractories for a term of one year, at an interest rate of 5.841% per year on all outstanding principal.

On May 14, 2010, our subsidiary, Refractories, entered into a short-term working capital loan agreement with China CITIC Bank (“CITIC”), whereby CITIC has agreed to loan approximately $2.3 million (RMB 15 million) to Refractories for a term of one year, at an interest rate of 5.310% per year on all outstanding principal.

On May 24, 2010, 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 $6.1 million (RMB 40 million) to Refractories for a term of one year, at an interest rate of 5.841% per year on all outstanding principal.

On December 17, 2010, our subsidiary Refractories entered into a short-term working capital loan agreement with Zhengzhou Bank , whereby Zhengzhou Bank has agreed to loan approximately $7.6 million (RMB 50 million) to for a term of one year, at an interest rate of 6.672% per year on all outstanding principal.

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On June 24, 2010, our subsidiary, Refractories, entered into a short-term working capital loan agreement with China Merchants Bank (“CMB”), whereby CMB has agreed to loan approximately $1.5 million (RMB 10 million) to Refractories for a term of one year, at an interest rate of 5.841% per year on all outstanding principal.

On September 16, 2010, 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 $0.8 (RMB 5 million) to Refractories for a term of one year, at an interest rate of 5.310% per year on all outstanding principal.

On September 16, 2010, our subsidiary, Duesail, 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 $0.4 (RMB 2.5 million) to Duesail for a term of one year, at an interest rate of 5.310% per year on all outstanding principal.

On September 28, 2011, our subsidiary, Refractories, entered into a short-term working capital loan agreement with Kaifeng Commercial Bank (“KCB”), whereby KCB has agreed to loan approximately $4.6 million (RMB 30 million) to Refractories for a term of one year, at an interest rate of 5.31% per year on all outstanding principal.

As of December 31, 2010, we had approximately $10.2 million bank borrowings, which were collateralized by bank deposits, in the Luoyang Bank, Kaifeng Bank, Zhengzhou Bank, Guangdong Development Bank andShanghai Pudong Development Bank, respectively.

Critical Accounting Policies

Basis of consolidation

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

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant 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 goodwill and know-how. 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 collectibility 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.

Based on the above assessment, during the reporting periods, the management established the general provisioning policy to make allowance equivalent to 1% of trade receivables due over 6 months but within 1 year, 5% of trade receivables due from 1 to 2 years, 40% of trade receivables due from 2 to 3 years and 70% 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.

Historically, losses from uncollectible accounts have not significantly deviated from the general allowance estimated by the management and no significant additional bad debts have been written off directly to the profit and loss. This general provisioning policy has not changed in the past since establishment and the management considers that the aforementioned general provisioning policy is adequate and not too excessive and they do not expect to change this established policy in the near future.

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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 customers 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.

Warranty

The Company maintains a policy of providing after sales support for certain products by way of a warranty program. As such these products are guaranteed for usage over a pre-agreed period of time of service life or a pre-determined number of heating times. Further, the relevant customers are allowed to defer the settlement of certain percentage (normally 10%) of the billed amount for certain period of time (normally one year) after acceptance of the Company’s products under the warranty program. As of December 31, 2010 and 2009, such receivables amounted to $1,241,255 and $1,314,651 respectively and were included in trade receivables.

Since such products were well developed and highly mature, the Company did not encounter any significant claims from such customers based on past experience. Only a fraction of the Company’s sales are under warranty programs. Sales with warranty programs of $3.4 million and $4.9 million accounted for 5.5% and 8.4% of total revenues for the fiscal years of 2010 and 2009, respectively. The warranty programs guarantee the products for usage over a pre-agreed period of time of service life or a pre-determined number of heating times. If a claim qualifies under the program, the Company will be responsible to repair the system. Based on past experience, the Company did not encounter any significant claims from such customers. During the year ended December 31, 2009, such warranty expenses amounted to approximately $71,282 and are included in the selling expenses. They represent 0.4% of sales revenue and 0.13% of net income for fiscal years of 2009. Accordingly the Company did not maintain a warranty reserve in view of its immateriality to the Company’s operation during the year of 2009.

Not accruing warranty expense would not materially impact our financial statements in the qualitative aspect because accruing warranty expenses would not, in management’s judgment, significantly influence users of the financial information who may be interested in this number, including customers and suppliers, governing bodies or investors. The fact that the actual warranty expense is disclosed in the notes to the consolidated financial statements provided, in the Company’s view, adequate information to users who may be interested in this number, as it provides an accurate measure of the extent of expenditure incurred, which perhaps may be an indication of the quality of the Company’s products. Based on the materiality criteria of SAB Topic 1.M, the Company’s policy to begin accruing for warranty expenses at the time of sale when the warranty programs reach 10% of total sales or when warranty expenses reach 5% of net income.

During the year of 2010, as the warranty expenses reached 5% of net income thus material to the consolidated financial statements, the Company began accruing of warranty expenses and making a general provision for warranty. The closing balance of this provision is equal to 2% of relevant sales for the year of 2010 (see Note 13).

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.

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Recently issued accounting pronouncements

Accounting for Transfers of Financial Assets (Included in amended Topic ASC 860 “Transfers and Servicing”, previously Statement of Financial Accounting Standards (“SFAS”) No. 166, “Accounting for Transfers of Financial Assets - an Amendment of Financial Accounting Standard Board (“FASB”) Statement No. 140.”). The amended topic addresses information a reporting entity provides in its financial statements about the transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement in transferred financial assets. Also, the amended topic removes the concept of a qualifying special purpose entity, limits the circumstances in which a transferor derecognizes a portion or component of a financial asset, defines participating interest and enhances the information provided to financial statement users to provide greater transparency. The amended topic is effective for the first annual reporting period beginning after November 15, 2009 and was effective for us as of January 1, 2010. The adoption of this amended topic has no material impact on the Company’s financial statements.

Consolidation of Variable Interest Entities - Amended (Included in amended Topic ASC 810 “Consolidation”, previously SFAS 167 “Amendments to FASB Interpretation No. 46(R)”). The amended topic requires an enterprise to perform an analysis to determine the primary beneficiary of a variable interest entity; to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity and to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity. The amended topic also requires enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity. The amended topic is effective for the first annual reporting period beginning after November 15, 2009 and was effective for us as of January 1, 2010. The adoption of this amended topic has no material impact on the Company’s financial statements.

The FASB issued Accounting Standards Update (ASU) No. 2009-13, Revenue Recognition (Topic 605): Multiple Deliverable Revenue Arrangements - A Consensus of the FASB Emerging Issues Task Force.” This update provides application guidance on whether multiple deliverables exist, how the deliverables should be separated and how the consideration should be allocated to one or more units of accounting. This update establishes a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific or third-party evidence is available. The Company will be required to apply this guidance prospectively for revenue arrangements entered into or materially modified after January 1, 2011; however, earlier application is permitted. The management is in the process of evaluating the impact of adopting this ASU on the Company’s financial statements.

The FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends ASC Topic 820 to require the following additional disclosures regarding fair value measurements: (i) the amounts of transfers between Level 1 and Level 2 of the fair value hierarchy; (ii) reasons for any transfers in or out of Level 3 of the fair value hierarchy and (iii) the inclusion of information about purchases, sales, issuances and settlements in the reconciliation of recurring Level 3 measurements. ASU 2010-06 also amends ASC Topic 820 to clarify existing disclosure requirements, requiring fair value disclosures by class of assets and liabilities rather than by major category and the disclosure of valuation techniques and inputs used to determine the fair value of Level 2 and Level 3 assets and liabilities. With the exception of disclosures relating to purchases, sales, issuances and settlements of recurring Level 3 measurements, ASU 2010-06 was effective for interim and annual reporting periods beginning after December 15, 2009. The disclosure requirements related to purchases, sales, issuances and settlements of recurring Level 3 measurements will be effective for financial statements for annual reporting periods beginning after December 15, 2010. The adoption of this ASU has no material impact on the Company’s financial statements.

The FASB issued ASU No. 2010-02, “Consolidation (Topic 810) Accounting and Reporting for Decreases in Ownership of a Subsidiary - a Scope Clarification”. This amendment affects entities that have previously adopted Topic 810-10 (formally SFAS 160). It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset derecognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts SFAS 160 (now included in Subtopic 810-10). For those entities that have already adopted SFAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted SFAS 160. The adoption of this ASU has no material impact on the Company’s financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES 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 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA

Consolidated Financial Statements

The financial statements required by this item begin on page F-1 hereof.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On April 25, 2007, our board of directors elected to appoint PKF, Certified Public Accounts, Hong Kong, China, a member firm of the PKF International Limited of legally independent firm (“PKF Hong Kong”), as our independent registered public accounting firm. We did not change our independent registered public accounting firm since then.

ITEM 9A. 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.

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, Mr. Hongfeng Jin, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2010. Based on our assessment, Mr. Zhang and Mr. Jin determined that, as of December 31, 2010, and as of the date that the evaluation of the effectiveness of our disclosure controls and procedures was completed, because of the material weaknesses in our internal control over financial reporting described below, our disclosure controls and procedures were not effective.

Notwithstanding management’s assessment that our internal control over financial reporting was ineffective as of December 31, 2010 due to the material weakness described below, we believe that the consolidated financial statements included in this Annual Report on Form 10-K fairly present our financial condition, results of operations and cash flows for the fiscal years covered thereby in all material respects.

Internal Controls over Financial Reporting

Management’s Annual Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Interim Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP, and includes those policies and procedures that:

	(1)	pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
	(2)	provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and
	(3)	provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2010. In making this assessment, management used the framework set forth in the report entitled Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our management concluded that our internal control over financial reporting was not effective, as of December 31, 2010, because of the material weaknesses in our internal control over financial reporting described below.

During its evaluation of the effectiveness of internal control over financial reporting as of December 31, 2010, management identified the following material weaknesses: lack of sufficient accounting personnel with appropriate understanding of U.S. GAAP and SEC reporting requirements.

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Since July 2010, we have been working to take corrective steps. Our interim CFO and accounting staff regularly supplement their knowledge related to U.S. GAAP and receive updates regarding changes to or developments in U.S. GAAP. The audit committee will provide oversight of our accounting and financial reporting. We also plan to seek to recruit experienced professionals to augment our accounting staff when sufficient funds are available to us. No assurance can be given that we have identified all the material and significant internal control weakness and we will be able to adequately remediate existing deficiencies in our internal controls. We may be required to expend additional resources to identify, assess and correct any additional weakness in disclosure or internal control and to otherwise comply with the internal controls rules under Section 404(a) of the Sarbanes-Oxley Act.

Because the Company is a smaller reporting company, this annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm.

Changes in Internal Controls over Financial Reporting

There have been no changes in our internal control over financial reporting during the fourth quarter of fiscal year 2010 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors, Executive Officers, Promoter and Control Persons

Identification of Directors and Executive Officers

The following sets forth the name and position of each of our current executive officers and our directors. All directors of our Company hold office until our next annual board meeting or until their successors have been elected and qualified. The executive officers of our Company and operating subsidiary are appointed by our board of directors and hold office until their death, resignation or removal from office.

Name	Age	Date of Appt.	Position
Shunqing Zhang	57	Apr.25, 2007	CEO, President and Chairman, Board Director
Hongfeng Jin	36	Apr. 25, 2007	Interim Chief Financial Officer
Lawrence Goldman	54	Nov. 16, 2009	Board Director
Ming He	40	Nov. 18, 2009	Board Director
Jingzhong Yu	46	Nov. 18, 2009	Board Director

___________
There are no arrangements or understandings between our directors and executive officers and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there are no arrangements, plans or understandings as to whether non-management shareholders will exercise their voting rights to continue to elect the current board of directors. There are also no arrangements, agreements or understandings to our knowledge between non-management shareholders that may directly or indirectly participate in or influence the management of our affairs.

Identification of Certain Significant Employees

Other than the executive officers named above, the Company does not have any “significant employees.”

Family Relationships

There are no family relationships among our directors or officers.

Business Experience

The following is a brief account of the education and business experience during at least the past five years of each director, executive officer and key employee of our Company and operating subsidiary, indicating the person’s principal occupation during that period, and the name and principal business of the organization in which such occupation and employment were carried out.

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Shunqing Zhang. Mr. Zhang became our CEO and President on April 25, 2007 and became our Chairman on May 3, 2007. Mr. Zhang was elected Chairman of the Board and CEO of Henan Gengsheng in December, 2005. Prior to that, he served as President of Henan Gengsheng for June 2002 to December 2005, and served as Chairman of the Board and President of the Gengsheng Industry Group of Henan Province, from 1997 to 2002. Prior to that, Mr. Zhang served as Director of the Academy of the Ministry of Metallurgy Lofa Resistance Associated Experimental Plant in Gongyi City, a refractories manufacturer, from 1986 to 1997. Mr. Zhang holds an associate degree from China Central Radio and TV University. In December of 2008, Mr. Zhang was awarded the title of "Gongyi City's Most Influential Person in the 30 Years of Opening & Reform" by the City of Gongyi in Henan Province. In naming Mr. Zhang, the city cited his achievements in creating jobs in the local community, stimulating the rapid growth of Gongyi's economy and setting excellent examples of taking social responsibilities.

Hongfeng Jin. Mr. Jin became our interim Chief Financial Officer on April 25, 2007. Mr. Jin was appointed as the Assistant Manager in charge of the Finance Department of Henan Gengsheng in December 2006. Prior to joining us, Mr. Jin served as a project manager for Asia-Pacific Accounting Group Limited, an accounting firm, from July 1997 to December 2006. Mr. Jin holds a bachelor’s degree in accounting from Central University of Finance and Economics.

Lawrence Goldman. Mr. Goldman is a certified public accountant with over 25 years of auditing, consulting and technical experience and from October 2007 to the present time works as a consultant providing CFO support to various US listed public companies. Mr. Goldman served from May 2006 to October 2007 as the Treasurer and Acting Chief Financial Officer of Lightbridge Corporation (NASDAQ: LTBR). Prior to joining Thorium Power, Ltd., Mr. Goldman worked as the Chief Financial Officer, Treasurer and Vice President of Finance of WinWin Gaming, Inc. (OTCBB: WNWN), a multi-media developer and publisher of sports, lottery and other games. Prior to joining WinWin in October 2004, Mr. Goldman was a partner at Livingston Wachtell & Co., LLP and had been with that firm for the past 19 years auditing public companies. Mr. Goldman currently serves as a director of the following U.S. public companies: Wonder Auto Technology, Inc., China Integrated Energy, Inc., China Advanced Construction Materials Group, Inc. and Winner Medical Group Inc. Mr. Goldman entered into an independent director’s agreement with the Company, dated November 16, 2009, in which the Company agrees to pay $25,000 and 10,000 shares of the Company’s common stock in annual compensation for services provided by Mr. Goldman as a director. Mr. Goldman serves as the chair of Nominating and Corporate Governance Committee, and a member of the Audit Committee and the Compensation Committee of the Board.

Ming He. Mr. He joined Shengkai Innovations, Inc. (NASDAQ: VALV) in March 2010 and serves as the Chief Financial Officer. Between January 2007 and February 2010, Mr. He served as CFO of Usunco Automotive Limited / Equicap, Inc. (EQPI.OB). From October 2004 until January 2007, Mr. He served as the Senior Manager of SORL Auto Parts, Inc. (NASDAQ: SORL). Mr. He holds designations of Chartered Financial Analyst and Illinois Certified Public Accountant. Mr. He serves as the chair of the Audit Committee and is a member of the Compensation Committee and Nominating and Corporate Governance Committee of the Board. Mr. He receives $25,000 cash and 10,000 shares of company’s common stock in annual compensation for his services, including his position as chair of the Audit Committee.

Jingzhong Yu. Mr. Yu currently is an accounting professor at Zhongnan University of Economics and Law and has served in such position since 1985. Mr. Yu also served as an investment advisor from December 2003 to December 2007 to China Wanke Co., Ltd., which is a residential property developer, 999 Group, which is a pharmaceutical manufacturing company, Sanyi Group., Ltd., which is in the equipment and machinery manufacturing business, and China National Salt Industry Corporation, which is in the business of producing salt and salt chemicals. From December 2003 to June 2008, Mr. Yu served as an investment advisor to China Tobacco Group, which manufactures tobacco products. Mr. Yu serves as the chair of the Compensation Committee and is a member of the Audit Committee and Nominating and Corporate Governance Committee of the Board.

Except as noted above, there are no other agreements or understandings for any of our executive officers or directors to resign at the request of another person and no officer or director is acting on behalf of nor will any of them act at the direction of any other person. Directors are elected until their successors are duly elected and qualified.

Board Meetings and Committees

All actions of board of directors require the approval of a majority of the directors in attendance at a meeting at which a quorum is present. Our board of directors is composed of Mr. Shunqing Zhang, who is also our President and Chief Executive Officer, Mr. Lawrence Goldman, Mr. Ming He and Mr. Jingzhong Yu.

We formed an audit committee, a nominating and a compensation committee in a board of directors meeting duly held on December 18, 2009. Our audit committee is primarily responsible for reviewing the services performed by our independent auditors, evaluating our accounting policies and our system of internal controls. Our nominating committee is primarily responsible for nominating directors and setting policies and procedures for the nomination of directors. Our nominating committee is also responsible for overseeing the creation and implementation of our corporate governance policies and procedures. Our compensation committee is primarily responsible for reviewing and approving our salary and benefit policies (including stock options), including compensation of executive officers.

Involvement in Certain Legal Proceedings

To the best of our knowledge, during the past ten years, none of our officers or directors were involved in any of the following: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

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Promoters and Certain Control Persons

We did not have any promoters at any time during the past five fiscal years.

As of March 31, 2011, Mr. Shunqing Zhang own 56.8% of share of the Company and is the Company’ chairman, CEO and president.

Section 16(A) Beneficial Ownership Reporting Compliance

Under U.S. securities laws, directors, certain executive officers and persons holding more than 10% of our common stock must report their initial ownership of the common stock, and any changes in that ownership, to the SEC. The SEC has designated specific due dates for these reports. Mr. Shunqing Zhang, our Chairman, CEO and President, who owns more than 10% of our common stock timely filed a Form 5 to report one late transaction in 2010.

Code of Ethics

On April 25, 2007, our then sole director adopted a code of ethics pursuant to Section 406 of the Sarbanes-Oxley Act of 2002, that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, and principal accounting officer. The code of ethics is designed to deter wrongdoing and to promote:

• Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

• Full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC, and in other public communications that we made;

• Compliance with applicable government laws, rules and regulations;

• The prompt internal reporting of violations of the code to the appropriate person or persons; and

• Accountability for adherence to the code.

The code requires the highest standard of ethical conduct and fair dealing of its senior financial officers, or SFO, defined as the Chief Executive Officer and Chief Financial Officer. While this policy is intended to only cover the actions of the SFO, in accordance with Sarbanes-Oxley, we expect our other officers, directors and employees will also review our code and abide by its provisions. We believe that our reputation is a valuable asset and must continually be guarded by all associated with us so as to cam the trust, confidence and respect of our suppliers, customers and stockholders.

Our SFO are committed to conducting business in accordance with the highest ethical standards. The SFO must comply with all applicable laws, rules and regulations. Furthermore, SFO must not commit an illegal or unethical act, or instruct or authorize others to do so.

ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the following persons for services rendered in all capacities during the noted periods: Shunqing Zhang, our President and Chief Executive Office, and Hongfeng Jin, our interim Chief Financial Officer.

No executive officer’s salary and bonus exceeded $100,000 in any of the applicable years. The following information includes the dollar value of base salaries, bonus awards, the number of stock options granted and certain other compensation, if any, whether paid or deferred.

SUMMARY COMPENSATION TABLE

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Narrative to Summary Compensation Table

(1)	On April 25, 2007, China GengSheng Minerals, Inc. acquired Gengsheng International in a reverse acquisition transaction that was structured as a share exchange and in connection with that transaction, Mr. Shunqing Zhang became our CEO and President. Prior to the effective date of the reverse acquisition, Mr. Zhang served as Chairman and Chief Executive Officer of Gengsheng International. The annual, long term and other compensation shown in this table includes the amount Mr. Zhang received from Gengsheng International prior to the consummation of the reverse acquisition.
(2)	On April 25, 2007, Mr. Jin became our interim Chief Financial Officer. Prior to the effective date of the reverse acquisition, Mr. Jin joined Henan Gengsheng in December 2006 as Vice Manager in charge of its Finance Department.

Outstanding Equity Awards at Fiscal Year End

We do not currently have a stock option or other equity incentive plan. We may adopt one or more such programs in the future.

Employment Agreement

As required by applicable PRC law, we have entered into employment agreements with most of our officers, managers and employees. Our subsidiary Henan Gengsheng has employment agreements with the following named executive officers:

Shunqing Zhang. Mr. Zhang’s preliminary employment agreement became effective as of January 1, 2007 and expired on December 31, 2009. We have renewed his employment agreement in January 2010, which will expire on December 31, 2011, and we expect that this agreement will be renewed by the parties upon its expiration. Mr. Zhang is receiving an annual salary of approximately $55,588 under the agreement.

Hongfeng Jin. Mr. Jin’s preliminary employment agreement became effective as of January 1, 2007 and expired on December 31, 2009. We have renewed his employment agreement in January 2010, which will expire on December 31, 2011, and we expect that this agreement will be renewed by the parties upon its expiration. Mr. Jin is receiving an annual salary of approximately $33,357 under the agreement.

Our executive officers are not entitled to severance payments upon the termination of their employment agreements. They are subject to the customary non-competition and confidentiality covenants.

Director Compensation

On November 18, 2009, we appointed Mr. Lawrence Goldman, Mr. Ming He and Mr. Jingzhong Yu as our independent directors, with engagement term to be one year. Our board consist of four members, including the CEO, Mr. Shunqing Zhang, sits as the Chairman, along with the three independent directors. During the 2010 fiscal year, we did not pay Mr. Shunqing Zhang any compensation for his services as our director, and we paid Mr. Goldman, Mr. He and Mr. Yu for their function as independent directors since November 18, 2009 in the amount of $30,118, $30,118 and $7,400(RMB50,000) respectively. We do reimburse our directors for reasonable travel expenses related to duties as a director. In addition, Mr. He and Mr. Goldman receive 10,000 shares of company’s common stock in annual compensation for their services respectively.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information regarding beneficial ownership of our common stock as of December 31, 2010 (i) by each person who is known by us to beneficially own more than 5% of our common stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors as a group.

Unless otherwise specified, the address of each of the persons set forth below is in care of GengSheng International, No. 88 Gengsheng Road, Dayugou Town, Gongyi, Henan, China 451271.

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Name & Address of Beneficial Owner	Office, if Any	Title of Class	Amount & Nature of Beneficial Ownership (1)	Percent of Class (2)
Officers and Directors
Shunqing Zhang	CEO and President	Common Stock, $0.001 par value	15,231,748	62.70%

* Less than 1%

¹Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to the shares of our common stock.

²As of December 31, 2010, a total of 24,294,386 shares of our common stock are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1). For each beneficial owner above, any options exercisable within 60 days have been included in the denominator.

Changes in Control

There are no arrangements known to us, including any pledge by any person of our securities, the operation of which may at a subsequent date result in a change in control of our Company.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

Transactions with related persons

On November 2, 2009, Mr. Hongfeng Jin, our interim chief financial officer, requested a loan of RMB 300,000 (approximately $45,510) from the Company for emergency family medical costs. Mr. Shunqing Zhang, our Chief Executive Officer and Chairman of the Board, approved the loan. The loan was subsequently repaid by Mr. Jin on March 28, 2011. Except for the transaction disclosed above, the Company does not have other related transactions for the period covered by this Report

Director Independence

Our board of directors is currently composed of four members, Mr. Shunqing Zhang, who is also our President and Chief Executive Officer, Mr. Lawrence Goldman, who is an independent director and Chairman of Nominating and Corporate Governance Committee, Mr. Ming He, who is an independent director and Chairman of Audit Committee, and Mr. Jingzhong Yu, who is an independent director and Chairman of Compensation Committee. Mr. Zhang is not an “independent director” as defined by Rule 4200(a)(15) of the Marketplace Rules of The Nasdaq Stock Market, Inc., or the Nasdaq Marketplace Rules.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

PKF Hong Kong, is our independent registered public accounting firm engaged to examine our consolidated financial statements since the date of recapitalization on April 25, 2007.

Fees for the fiscal years ended December 31, 2010 and 2009

Audit Fees. PKF Hong Kong, was paid aggregate fees of approximately $136,160 and $118,461 for professional services rendered for the audit of our annual financial statements and for the reviews of the financial statements for the fiscal years ended December 31, 2010 and 2009.

Audit Related Fees. PKF Hong Kong, was not paid additional fees for the fiscal years December 31, 2010 and December 31, 2009 for assurance and related services reasonably related to the performance of the audit or review of our financial statements.

Tax Fees. PKF Hong Kong, was not paid any fees for the fiscal years ended December 31, 2010 and December 31, 2009 for professional services rendered for tax compliance, tax advice and tax planning. This service was not provided.

All Other Fees. PKF Hong Kong, was paid no other fees for professional services during the fiscal years ended December 31, 2010 and December 31, 2009.

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Board of Directors Pre-Approval Policies and Procedures

We formed an audit committee, a Nominating and Corporate Governance Committee and a Compensation Committee in the board meeting duly held on December 18, 2009. Mr. Ming He serves as the chair of audit committee, and a member of Nominating and Corporate Governance Committee and the Compensation Committee of the Board. Mr. Lawrence Goldman, serves as the chair of Nominating and Corporate Governance Committee, and a member of the Audit Committee and the Compensation Committee of the Board. Mr. Jingzhong Yu serves as the chair of the Compensation Committee and is a member of the Audit Committee and Nominating and Corporate Governance Committee of the Board.

Our audit committee and board of directors reviewed and approved all audit services provided by PKF Hong Kong, and has determined that the firm's provision of such services to us during fiscal 2010 is compatible with and did not impair the independence of PKF Hong Kong. It is the practice of our board of directors to consider and approve in advance all auditing services provided to us by our independent auditors.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The following documents are filed as part of this report:

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].
10.1	Form of Securities Purchase Agreement, dated April 25, 2007 [Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
10.2	Form of Closing Escrow Agreement, dated April 25, 2007 [Incorporated by reference to Exhibit 10.2 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
10.3	Make Good Escrow Agreement, dated April 25, 2007, by and among the Registrant, Brean Murray Carret & Co., LLC, Shunqing Zhang and Securities Transfer Corporation [Incorporated by reference to Exhibit 10.3 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
10.4	Escrow Agreement, dated April 25, 2007, by and among the Registrant, HFG International, Limited, Shunqing Zhang and Securities Transfer Corporation [Incorporated by reference to Exhibit 10.4 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].

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Exhibit No.	Description
10.5	Purchase and Sales of Goods/Services Agreement, dated July 10, 2006, by and between Henan Gengsheng Refractories Co., Ltd. and Baoshan Iron & Steel Co., Ltd. [Incorporated by reference to Exhibit 10.5 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
10.6	Employment Agreement, dated January 1, 2007, by and between Henan Gengsheng Refractories Co., Ltd. and Shunqing Zhang [Incorporated by reference to Exhibit 10.6 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
10.7	Employment Agreement, dated January 1, 2007, by and between Henan Gengsheng Refractories Co., Ltd. and Zhenyong Bi [Incorporated by reference to Exhibit 10.7 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
10.8	Employment Agreement, dated January 1, 2007, by and between Henan Gengsheng Refractories Co., Ltd. and Bo Hu [Incorporated by reference to Exhibit 10.8 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
10.9	Employment Agreement, dated January 1, 2007, by and between Henan Gengsheng Refractories Co., Ltd. and Hongfeng Jin [Incorporated by reference to Exhibit 10.9 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
10.10	Short-term Loan Agreement, dated June 9, 2006, by and between Henan Gengsheng Refractories Co., Ltd. and Shanghai Pudong Development Bank Zhengzhou Wenhua Road Sub-branch [Incorporated by reference to Exhibit 10.10 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
10.11	Loan Agreement, dated December 30, 2006, by and between Henan Gengsheng Refractories Co., Ltd. and Gongyi Sub-branch of China Agricultural Bank [Incorporated by reference to Exhibit 10.11 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
10.12	Land Lease Agreement, dated February 9, 2006, by and among Henan Gengsheng Refractories Co., Ltd., Yangli Village Council, Dayugou Town, Gongyi City, and People’s Government of Dayugou Town of Gongyi City [Incorporated by reference to Exhibit 10.12 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
10.13	Financial Advisory Agreement, dated November 28, 2006, by and among HFG International, Limited, Gengsheng International and Smarthigh Holdings Limited [Incorporated by reference to Exhibit 10.13 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
10.14	First Amended Financial Advisory Agreement, dated April 17, 2007, by and among HFG International, Limited, Gengsheng International and Smarthigh Holdings Limited [Incorporated by reference to Exhibit 10.14 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
10.15	Consulting Agreement, dated January 19, 2007, by and between Heritage Management Consultants, Inc. and Gengsheng International [Incorporated by reference to Exhibit 10.15 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
10.16	Consulting Agreement, dated April 17, 2007, by and between the Registrant and Heritage Management Consultants, Inc. [Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on April 19, 2007, in commission file number 0-51527].
10.17	Consulting Agreement, dated April 17, 2007, by and between the Registrant and Shufang Zhang [Incorporated by reference to Exhibit 10.2 to the Registrant’s current report on Form 8-K filed on April 19, 2007, in commission file number 0-51527].
10.18	Subscription Agreement, dated November 1, 2006, by and between the Registrant and Halter Financial Investments, L.P. [Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on November 1, 2006, in commission file number 0-51527].
10.19	Subscription Agreement, dated November 1, 2006, by and between the Registrant and Glenn A. Little [Incorporated by reference to Exhibit 10.2 to the Registrant’s current report on Form 8-K filed on November 1, 2006, in commission file number 0-51527].
10.20	Loan Agreement, dated January 12, 2007, by and between Henan Gengsheng Refractories Co., Ltd. and the Zhengzhou Sub-branch of China Citic Bank. [Incorporated by reference to Exhibit 10.20 to the Registrant’s current report on Form S-1/A filed on September 28, 2007, in commission file number 0-51527].

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Exhibit No.	Description
10.21	Loan Agreement, dated March 13, 2007, by and between Henan Gengsheng Refractories Co., Ltd. and the Agricultural Bank of China. [Incorporated by reference to Exhibit 10.21 to the Registrant’s current report on Form S-1/A filed on September 28, 2007, in commission file number 0-51527].
10.22	English Translation of Short Term Loan Contract, dated July 20, 2007, between Henan Gengsheng Refractories and Shanghai Pudong Development Bank, Zhengzhou Wenhua Road Branch. [Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on July 26, 2007, in commission file number 0-51527].
10.23	English Translation of Short Term Loan Contract, dated September 14, 2007, between Henan Gengsheng Refractories and China Industrial & Commercial Bank. [Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on September 14, 2007, in commission file number 0-51527].
10.24	Supply Agreement, dated January 16, 2008, between Henan GengSheng Refractories Co., Ltd. and Hanbao Iron and Steel Co., Ltd. [Incorporated by reference to Exhibit 10.1, 10.2, 10.3, and 10.4 to the Registrant’s current report on Form 8-K filed on January 22, 2008, in commission file number 0-51527].
10.25	Supply Contract, dated May 19, 2008, between ZhengZhou Duesail Fracture Proppant Co. Ltd. and PetroChina Company Limited. [Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on May 21, 2008 in commission file number 0-51527].
10.26	Sales Contract, dated June 2, 2008, between ZhengZhou Duesail Fracture Proppant Co. Ltd. and Jilin Petroleum Group Co., Ltd. [Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on June 5, 2008 in commission file number 0-51527].
10.27	Equity Transfer Agreement, dated June 12, 2008, among Henan Gengsheng Refractories Co., Ltd., Huizong Zhang, Yuanwei Zhang, and Shuqin Yu. [Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on June 18, 2008 in commission file number 0-51527].
10.28	Sales Contract, dated June 24, 2008, between Zhengzhou Duesail Fracture Proppant Co. Ltd. and China National Petroleum Group Co., Ltd., Jidong Oilfield. [Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on June 30, 2008 in commission file number 0-51527].
10.29	Full Services Contract, dated November 12, 2008, by and between Henan Gengsheng Refractories Co., Ltd. and Heilongjiang Iron & Steel Co., Ltd. [Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on January 16, 2009 in commission file number 0-51527].
10.30	Full Services Contract, dated November 12, 2008, by and between Henan Gengsheng Refractories Co., Ltd. and Heilongjiang Iron & Steel Co., Ltd. [Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on January 16, 2009 in commission file number 0-51527].
10.31	Supply Contract between Zhengzhou Duesail Fracture Proppant Co., Ltd. and AMSAT International, dated November 20, 2008. [Incorporated by reference to Exhibit 10.1and Exhibit 10.2 to the Registrant’s current report on Form 8-K filed on December 23, 2009 in commission file number 0-51527].
10.32	Full Services Contract, dated November 21, 2008, by and between Henan Gengsheng Refractories Co., Ltd. and Hebei Wenfeng Iron and Steel Co., Ltd. [Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on December 3, 2008 in commission file number 0-51527].
10.33	Supply Contract between Zhengzhou Duesail Fracture Proppant Co., Ltd. and AMSAT International, dated November 22, 2008. [Incorporated by reference to Exhibit 10.3 and Exhibit 10.4 to the Registrant’s current report on Form 8-K filed on December 23, 2009 in commission file number 0-51527].
10.34	Full Services Contract, dated December 2, 2008, by and between Rizhao Iron & Steel Co., Ltd. [Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on January 16, 2009 in commission file number 0-51527].
10.35	Guarantee Contract, dated December 27, 2008, by and between Henan Gengsheng Refractories Co., Ltd. and Zhengzhou Commercial Bank, Jinshui Branch . [Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on December 31, 2008 in commission file number 0-51527].
10.36	Loan Agreement, dated December 31, 2008, by and between Henan Gengsheng Refractories Co., Ltd. and China Industrial & Commercial Bank, Zhengzhou Branch. [Incorporated by reference to Exhibit 10.1 to the Registrant’s current report on Form 8-K filed on January 7, 2009 in commission file number 0-51527].

39

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Exhibit No.	Description
14	Business Ethics Policy and Code of Conduct, adopted on April 25, 2007 [Incorporated by reference to Exhibit 14 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
21	Subsidiaries of the Registrant [Incorporated by reference to Exhibit 21 to the Registrant’s current report on Form 8-K filed on April 27, 2007, in commission file number 0-51527].
23	Consent of independent registered public accounting firm.*
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.*

Notes to exhibits
* Filed herewith

40

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China GengSheng Minerals, Inc.

Consolidated Financial Statements
For the years ended December 31,
2010 and 2009

Index to Consolidated Financial Statements

	Pages
Report of Independent Registered Public Accounting Firm	F- 1
Consolidated Balance Sheets	F - 2 - F - 3
Consolidated Statements of Income and Comprehensive Income	F - 4
Consolidated Statements of Cash Flows	F - 5 - F - 6
Consolidated Statements of Equity	F - 7
Notes to Consolidated Financial Statements	F - 8 - F - 32

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
China GengSheng Minerals, Inc.

We have audited the accompanying consolidated balance sheets of China GengSheng Minerals, Inc. (the "Company") and its subsidiaries as of December 31, 2010 and 2009, and the related consolidated statements of income and comprehensive income, equity and cash flows for each of the two years in the period ended December 31, 2010. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and its subsidiaries as of December 31, 2010 and 2009, and the consolidated results of their operations and their cash flows for each of the two years in the period ended December 31, 2010 in conformity with accounting principles generally accepted in the United States of America.

PKF
Certified Public Accountants
Hong Kong, China
March 31, 2011

F-1

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China GengSheng Minerals, Inc.
Consolidated Balance Sheets

		As of			As of
		December 31,			December 31,
		2010			2009
ASSETS
Current assets:
Cash and cash equivalents	$	925,052		$	992,204
Restricted cash (Note 4)		21,693,100			15,990,300
Trade receivables, net (Note 5)		43,240,996			36,909,518
Bills receivable		3,074,156			1,953,496
Other receivables and prepayments (Note 6)		7,024,142			7,627,968
Advances to senior management (Note 6)		51,449			-
Inventories (Note 7)		15,679,492			9,924,413
Deferred tax assets (Note 19)		244,046			56,787
Total current assets		91,932,433			73,454,686
Deposits for acquisition of a non-consolidated affiliate (Note 8)		2,275,500			-
Deposits for acquisition of land use right, property, plant and equipment		1,061,502			276,520
Goodwill (Note 9)		441,089			441,089
Intangible assets (Note 9)		379,250			953,550
Property, plant and equipment, net (Note 10)		26,188,235			21,980,340
Land use rights (Note 11)		944,166			934,981
TOTAL ASSETS	$	123,222,175		$	98,041,166
LIABILITIES AND EQUITY
Current liabilities:
Trade payables	$	14,279,568		$	12,327,618
Bills payable (Note 4)		8,495,200			1,512,200
Other payables and accrued expenses (Note 12)		5,198,131			4,294,606
Deferred revenue - Government grants (Note 3)		394,420			381,420
Provision of warranty (Notes 3 and 13)		69,739			-
Income taxes payable		606,877			313,430
Non-interest-bearing loans (Note 14)		1,062,114			1,520,160
Collateralized short-term bank loans (Note 15)		41,641,650			28,459,800
Deferred tax liabilities (Note 19)		149,578			89,244
TOTAL LIABILITIES		71,897,277			48,898,478
COMMITMENTS AND CONTINGENCIES (Note 21)

F – 2

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China GengSheng Minerals, Inc.
Consolidated Balance Sheets

		As of			As of
		December 31,			December 31,
		2010			2009
STOCKHOLDERS' EQUITY
Preferred stock - $0.001 par value 50,000,000 shares authorized, no shares            issued and outstanding		-			-
Common stock - $0.001 par value 100,000,000 shares authorized in 2010 and 2009;            issued and outstanding 24,294,386 shares in 2010 and 24,038,183 shares in 2009            (Note 16)		24,294			24,038
Additional paid-in capital (Note 16)		19,903,388			19,608,044
Statutory and other reserves (Note 17)		7,521,114			7,419,868
Accumulated other comprehensive income		5,949,455			4,344,766
Retained earnings		17,636,730			17,473,813
Total China GengSheng Minerals, Inc. stockholders' equity		51,034,981			48,870,529
NONCONTROLLING INTEREST		289,917			272,159
TOTAL EQUITY		51,324,898			49,142,688
TOTAL LIABILITES AND EQUITY	$	123,222,175		$	98,041,166

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

F – 3

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China GengSheng Minerals, Inc.
Consolidated Statements of Income and Comprehensive Income

		Year ended December 31,
		2010			2009
Sales revenue	$	62,188,656		$	56,955,310
Cost of goods sold		44,498,585			40,735,532
Gross profit		17,690,071			16,219,778
Operating expenses
Provision for (recovery of) doubtful accounts (Note 5)		437,318			(98,553	)
General and administrative expenses		5,740,604			4,444,021
Research and development expenses		817,179			478,422
Selling expenses		8,365,181			6,280,882
Total operating expenses		15,360,282			11,104,772
Income from operations		2,329,789			5,115,006
Other (expenses) income
Government grant income (Note 3)		122,914			1,149,566
Guarantee income (Notes 3 and 21b)		238,798			-
Guarantee expenses (Notes 3 and 21b)		(622,192	)		-
Interest income		363,856			72,926
Other income		128,759			334,417
Finance costs (Note 18)		(1,768,339	)		(579,562	)
Total other (expenses) income		(1,536,204	)		977,347
Income before income taxes and noncontrolling interest		793,585			6,092,353
Income taxes (Note 19)		(521,590	)		(412,271	)
Net income before noncontrolling interest		271,995			5,680,082
Net income attributable to noncontrolling interest		(7,832	)		(71,744	)
Net income attributable to Company’s common stockholders	$	264,163		$	5,608,338
Net income before noncontrolling interest	$	271,995		$	5,680,082
Other comprehensive income
Foreign currency translation adjustments		1,614,615			13,845
Comprehensive income		1,886,610			5,693,927
Comprehensive income attributable to noncontrolling interest		(17,758	)		(96,428	)
Comprehensive income attributable to Company’s common         stockholders	$	1,868,852		$	5,597,499
Earnings per share (Note 20) - Basic and diluted attributable to         Company’s common shareholders	$	0.01		$	0.23
Weighted average number of shares (Note 20) - Basic and diluted		24,243,716			24,038,183

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

F – 4

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China GengSheng Minerals, Inc.
Consolidated Statements of Cash Flows

		Year ended December 31,
		2010			2009
Cash flows from operating activities
Net income before noncontrolling interest	$	271,995		$	5,680,082
Adjustments to reconcile net income before noncontrolling interest to     net cash used in operating activities:
Depreciation		1,624,255			923,785
Amortization of land use rights		22,129			21,921
Amortization of intangible assets		53,818			-
Deferred taxes		(123,879	)		67,735
Gain on disposal of intangible assets		(53,818	)		-
Gain on disposal of property, plant and equipment		(72,926	)		(1,221	)
Share-based compensation		295,600			-
Guarantee expenses		622,192			-
Guarantee income		(238,798	)		-
Provision for (recovery of) doubtful accounts		437,318			(98,553	)
Written off of unsecured bank loan		-			(219,915	)
Changes in operating assets and liabilities:
Restricted cash		(7,548,000	)		708,000
Trade receivables		(5,387,059	)		(6,780,066	)
Bills receivable		(1,123,429	)		(1,310,985	)
Other receivables and prepayments		(1,276,659	)		(4,017,261	)
Inventories		(4,933,135	)		2,244,402
Trade payables		1,707,545			2,777,059
Provision of warranty		68,038			-
Bills payable		6,857,459			(2,017,510	)
Other payables and accrued expenses		947,365			(1,714,698	)
Income taxes payable		275,866			(37,757	)
Net cash flows used in operating activities		(7,574,123	)		(3,774,982	)
Cash flows from investing activities
Payments to acquire and deposit for acquisition of intangible assets		-			(216,827	)
Payments to acquire and deposit for acquisition of land use right,        property, plant and equipment		(5,970,774	)		(6,125,720	)
Proceeds from disposal of property, plant and equipment		9,021			118,798
Deposit paid for acquisition of a non-consolidated affiliate		(444,000	)		-
Net cash flows used in investing activities		(6,405,753	)		(6,223,749	)
Cash flows from financing activities
Government grant received in respect of property, plant and        equipment		-			381,186
Advances to senior management		(50,243	)		-
Restricted cash		2,516,000			(14,929,170	)
Proceeds from bank loans		50,986,000			37,238,940
Repayment of bank loans		(39,072,000	)		(11,552,868	)
Proceeds from non-interest bearing loans		2,437,067			1,346,594
Repayment of non-interest bearing loans		(2,934,489	)		-
Repayment to a director and senior management		-			(2,459,310	)
Net cash flows provided by financing activities		13,882,335			10,025,372

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

F – 5

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China GengSheng Minerals, Inc.
Consolidated Statements of Cash Flows (Cont’d)

		Year ended December 31,
		2010			2009
Effect of foreign currency translation on cash and cash equivalents		30,389			9,831
Net (decrease) increase in cash and cash equivalents		(67,152	)		36,472
Cash and cash equivalents - beginning of year		992,204			955,732
Cash and cash equivalents - end of year	$	925,052		$	992,204
Supplemental disclosure of cash flow information:
Cash paid for:
Interest	$	1,768,339		$	856,819
Income taxes	$	372,645		$	382,293
Non-cash operating and investing activities:-
Proceeds from disposal of property, plant and equipment settled by     offsetting trade payables	$	279,720		$	-
Deposits paid for acquisition of a non-consolidated affiliate settled by     offsetting other receivables		1,776,000			-
Proceeds from disposal of intangible assets settled by offsetting     other payables	$	592,000		$	-

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

F – 6

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China GengSheng Minerals, Inc.
Consolidated Statements of Equity

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

F – 7

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China GengSheng Minerals, Inc.
Notes to Consolidated Financial Statements

1.	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 Amex stock exchange (formerly the American Stock Exchange) under the symbol “CHGS.” Prior to March 4, 2010, our common stock traded over-the-counter bulletin board under the symbol CHGS.OB.
	Currently the Company has seven subsidiaries:

F- 8

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China GengSheng Minerals, Inc.
Notes to Consolidated Financial Statements

2.	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 AI2 O3 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 major raw material for producing monolithic refractory. Fine precision abrasive is the Company’s new product that was commercially launched in the fourth quarter of 2009, and 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.
3.	Summary of significant accounting policies
	Basis of consolidation
	The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America.
	The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.
	Noncontrolling interest
	Noncontrolling interest resulted from the consolidation of an 89.33% owned subsidiary, High-Temperature.
	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 goodwill and know-how. Actual results could differ from those estimates.
	Concentrations of credit risk
	Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents and trade, bills and other receivables. As of December 31, 2010 and 2009 substantially all of the Company’s cash and cash equivalents and restricted cash were held by major financial institutions located in the PRC, 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.

F- 9

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

3.	Summary of significant accounting policies (Cont’d)
	Concentrations of credit risk (Cont’d)
	During the reporting periods, customers representing 10% or more of the Company’s consolidated sales are:

			Year ended December 31,
			2010			2009
	Shandong Steel Co., Ltd. Rizhao Subsidiary	$	8,991,759		$	8,089,426
	AMSAT International		6,451,116		$	2,659,741
		$	15,442,875		$	10,749,167

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

Cash and cash equivalents

Cash and cash equivalents include all cash, deposits in banks and other highly liquid investments with initial maturities of three months or less. As of December 31, 2010 and 2009, almost all the cash and cash equivalents were denominated in Renminbi (“RMB”) and were placed with banks in the PRC. They are not freely convertible into foreign currencies and the remittance of these funds out of the PRC is subject to exchange control restrictions imposed by the PRC government. The remaining insignificant balance of cash and cash equivalents were denominated in Hong Kong dollars.

Restricted Cash

Deposits in banks pledged as collateral for bills payable and bank loans (Note 4) that are restricted in use are classified as restricted cash under current assets.

Allowance for doubtful accounts

The Company establishes an allowance for doubtful accounts based on management’s assessment of the collectibility 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.

Based on the above assessment, during the reporting periods, the management established the general provisioning policy to make allowance equivalent to 1% of trade receivables due over 6 months but within 1 year, 5% of trade receivables due from 1 to 2 years, 40% of trade receivables due from 2 to 3 years and 70% 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.

Historically, losses from uncollectible accounts have not significantly deviated from the general allowance estimated by the management and no significant additional bad debts have been written off directly to the profit and loss. This general provisioning policy has not changed in the past since establishment and the management considers that the aforementioned general provisioning policy is adequate and not too excessive and they do not expect to change this established policy in the near future.

F- 10

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China GengSheng Minerals, Inc.
Notes to Consolidated Financial Statements

3.	Summary of significant accounting policies (Cont’d)

Capitalized interest

The interest cost associated with the major development and construction projects is capitalized and included in the cost of the project. When no debt is incurred specifically for a project, interest is capitalized on amounts expended on the project using weighted-average cost of the Company’s outstanding borrowings. Capitalization of interest ceases when the project is substantially complete or development activity is suspended for more than a brief period.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined on a weighted average basis and includes all expenditures incurred in bringing the goods to the point of sale and putting them in a saleable condition. In case of manufacturing inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. In assessing the ultimate realization of inventories, the management makes judgments as to future demand requirements compared to current or committed inventory levels. Our reserve requirements generally increase as our projected demand requirements; decrease due to market conditions and product life cycle changes. The Company estimates the demand requirements based on market conditions, forecasts prepared by its customers, sales contracts and orders in hand.

In addition, the Company estimates net realizable value based on intended use, current market value and inventory ageing analyses. The Company writes down the inventories for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventories and the estimated market value based upon assumptions about future demand and market conditions.

Based on the above assessment, the Company establishes a general policy to make a 50% provision for inventories aged over 1 year. Historically, the actual net realizable value is close to the management’s estimation.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation. Cost represents the purchase price of the asset and other costs incurred to bring the asset into its existing use.

Depreciation is provided on straight-line basis over their estimated useful lives. The principal effective depreciation rates are as follows:

		Effective annual rate
	Buildings	5- 7 %
	Plant and machinery	9-33%
	Furniture, fixtures and equipment	9-20%
	Motor vehicles	9-18%

Maintenance or repairs are charged to expense as incurred. Upon sale or disposition, the applicable amounts of asset cost and accumulated depreciation are removed from the accounts and the net amount less proceeds from disposal is charged or credited to income.

Construction in progress mainly represents expenditures in respect of the Company’s new offices and factories under construction. All direct costs relating to the acquisition or construction of the Company’s new offices and factories are capitalized as construction in progress. No depreciation is provided in respect of construction in progress.

Intangible assets

The Company accounts for goodwill and intangible assets in accordance with the provisions of ASC 350 (previously SFAS No. 142). The provisions of ASC 350 (i) prohibit the amortization of goodwill and indefinite-lived intangible assets, (ii) require that goodwill and indefinite-lived intangible assets be tested annually for impairment (and in interim periods if certain events occur indicating that the carrying value may be impaired), and (iii) require that reporting units be identified for the purpose of assessing potential future impairments of goodwill.

F- 11

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China GengSheng Minerals, Inc.
Notes to Consolidated Financial Statements

3.	Summary of significant accounting policies (Cont’d)
	Intangible assets (Cont’d)
	The intangible assets of the Company are comprised of unpatented and patented technologies. Unpatented technology is determined to have an indefinite useful life pursuant to the purchase contract as detailed in Note 9a. It is not subject to amortization until its useful life is determined to be no longer indefinite. Accordingly, unpatented technology is stated at cost of purchase less any identified impairment losses in the annual impairment review.
	Patented technology is determined to have useful life of 10 or 12 years pursuant to the purchase contract as detailed in Note 9b. Patented technology is stated at cost of purchase less any accumulated amortization and any identified impairment losses in the annual impairment review.
	Goodwill
	Goodwill is recognized upon acquisition of the equity interest in Prefecture, which represents the excess of the purchase price over the fair value of acquired identified net assets of Prefecture at the time of acquisition. It is stated at cost less impairment losses.
	The goodwill was identified upon the acquisition of 100% equity interest in Prefecture, which represented the excess of the purchase price of $875,400 over the fair value of acquired identified net assets of Prefecture of $434,311 at the time of acquisition on June 12, 2008. Since its acquisition, an annual impairment review was performed by management and no impairment has been identified.
	Land use rights
	Land use rights are stated at cost less accumulated amortization. Amortization is provided using the straight-line method over the terms of the leases of 39 to 50 years obtained from the relevant PRC land authority.
	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.
	Government grant
	The government grant is recognized in the consolidated statements of income and comprehensive income when the relevant performance criteria are met. Grants applicable to purchase of property, plant and equipment are amortized over the life of the depreciable assets.
	The government grants for the year ended December 31, 2009 mainly represent incentive payment from the local government for the advanced technology subsidy of $674,416 paid to High-Temperature, energy conservation and emission reduction bonus of $370,400 granted to Duesail and subsidy of $104,750 to support the normal operation of the Company.
	The Company received certain government grants for the purchase of property, plant and equipment. Such subsidy was recorded as deferred revenue and was amortized as income over the useful lives of the relevant property, plant and equipment. The Company received such government grants of $381,420 during the year ended December 31, 2009.
	The government grants for the year ended December 31, 2010 mainly incentive payment of $122,914 from the local government for the advanced technology subsidy paid to Refractories.
	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.

F- 12

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China GengSheng Minerals, Inc.
Notes to Consolidated Financial Statements

3.	Summary of significant accounting policies (Cont’d)
	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 take 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 customers 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.
	Selling expenses
	Selling expenses mainly consist of advertising, commission, entertainment, salaries, shipping and handling cost and traveling expenses which are incurred during selling activities.
	Advertising, shipping and handling costs, research and development expenses
	Advertising, shipping and handling costs and other product-related costs are charged to expense as incurred.
	Advertising expense amounting to $13,909 and $13,943 for two years ended December 31, 2010 and 2009, respectively, were included in selling expenses.
	Shipping and handling costs amounting to $3,277,177 and $2,643,942 for two years ended December 31, 2010 and 2009, respectively, were included in selling expenses.
	Research and development include cost of raw material consumed, testing expenses and other costs incurred for research and development of potential new products. They are expensed when incurred.
	Research and development costs amounting to $817,179 and $478,422 for two years ended December 31, 2010 and 2009, respectively.
	Warranty
	The Company maintains a policy of providing after sales support for certain products by way of a warranty program. As such these products are guaranteed for usage over a pre-agreed period of time of service life or a pre-determined number of heating times. Further, the relevant customers are allowed to defer the settlement of certain percentage (normally 10%) of the billed amount for certain period of time (normally one year) after acceptance of the Company’s products under the warranty program. As of December 31, 2010 and 2009, such receivables amounted to $1,241,255 and $1,314,651 respectively and were included in trade receivables.
	Since such products were well developed and highly mature, the Company did not encounter any significant claims from such customers based on past experience. Only a fraction of the Company’s sales are under warranty programs. Sales with warranty programs of $3.4 million and $4.9 million accounted for 5.5% and 8.4% of total revenues for the fiscal years of 2010 and 2009, respectively. The warranty programs guarantee the products for usage over a pre-agreed period of time of service life or a pre-determined number of heating times. If a claim qualifies under the program, the Company will be responsible to repair the system. Based on past experience, the Company did not encounter any significant claims from such customers. During the year ended December 31, 2009, such warranty expenses amounted to approximately $71,282 and are included in the selling expenses. They represent 0.4% of sales revenue and 0.13% of net income for fiscal years of 2009. Accordingly the Company did not maintain a warranty reserve in view of its immateriality to the Company’s operation during the year of 2009.

F- 13

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China GengSheng Minerals, Inc.
Notes to Consolidated Financial Statements

3.	Summary of significant accounting policies (Cont’d)
	Warranty (Cont’d)
	Not accruing warranty expense would not materially impact our financial statements in the qualitative aspect because accruing warranty expenses would not, in management’s judgment, significantly influence users of the financial information who may be interested in this number, including customers and suppliers, governing bodies or investors. The fact that the actual warranty expense is disclosed in the notes to the consolidated financial statements provided, in the Company’s view, adequate information to users who may be interested in this number, as it provides an accurate measure of the extent of expenditure incurred, which perhaps may be an indication of the quality of the Company’s products. Based on the materiality criteria of SAB Topic 1.M, the Company’s policy to begin accruing for warranty expenses at the time of sale when the warranty programs reach 10% of total sales or when warranty expenses reach 5% of net income.
	During the year of 2010, as the warranty expenses reached 5% of net income thus material to the consolidated financial statements, the Company began accruing of warranty expenses and making a general provision for warranty. The closing balance of this provision is equal to 2% of relevant sales for the year of 2010 (see Note 13).
	Cost of sales
	Cost of sales consists primarily of material costs, freight charges, purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs, wages, employee compensation, depreciation and related costs, which are directly attributable to the production of products. Write-down of inventory to lower of cost or market is also recorded in cost of sales.
	General and administrative expenses
	General and administrative expenses consist of rent paid, office expenses, staff welfare, consumables, research and development costs, labor protection and salaries and wages which are incurred at the administrative level and exchange difference.
	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.
	Income taxes
	The Company uses the asset and liability method of accounting for income taxes pursuant to ASC 740 “Income Taxes”. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and loss carry forwards and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.
	Comprehensive income
	The Company has adopted ASC 220, “Comprehensive Income”, which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Components of comprehensive income include net income and foreign currency translation adjustments.
	Foreign currency translation
	The functional currency of the Company is RMB and RMB is not freely convertible into foreign currencies. The Company maintains its financial statements in the functional currency. Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet date. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transactions. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.

F- 14

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

3.	Summary of significant accounting policies (Cont’d)

Foreign currency translation (Cont’d)

For financial reporting purposes, the financial statements of the Company which are prepared using the functional currency have been translated into United States dollars. Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and stockholders’ equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign currency translation adjustments to other comprehensive income, a component of stockholders’ equity. The exchange rates in effect as of December 31, 2010 and 2009 were RMB1 for $0.1517 and $0.1467 respectively. The average exchange rates for the years end December 31, 2010 and 2009 were RMB1 for $0.1480 and $0.1446 respectively. There is no significant fluctuation in exchange rate for the conversion of RMB to US dollars after the balance sheet date.

Recorded in other comprehensive income are translation exchange gains which amounted to $1,614,615 and $13,845 for the two years ended December 31, 2010 and 2009, respectively.

Basic and diluted earnings per share

The Company reports basic earnings per share in accordance with ASC 260 “Earnings Per Share”. Basic earnings per share is computed using the weighted average number of shares outstanding during the periods presented. The weighted average number of shares of the Company represents the common stock outstanding during the reporting periods.

Commitments and Contingencies

Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.

Off-balance sheet arrangements

Apart from the guarantees given as stated in Note 21b by the Company to third parties, the Company does not have other off-balance sheet arrangements.

Fair value of financial instruments

The Company adopted ASC 820. The adoption of ASC 820 did not materially impact the Company’s financial position, results of operations or cash flows.

ASC 820 requires the disclosure of the estimated fair value of financial instruments including those financial instruments for which the fair value option was not elected. The carrying amount of financial assets and liabilities approximate their fair value due to short maturities.

F- 15

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

3.	Summary of significant accounting policies (Cont’d)
	Recently issued accounting pronouncements
	Accounting for Transfers of Financial Assets (Included in amended Topic ASC 860 “Transfers and Servicing”, previously Statement of Financial Accounting Standards (“SFAS”) No. 166, “Accounting for Transfers of Financial Assets - an Amendment of Financial Accounting Standard Board (“FASB”) Statement No. 140.”). The amended topic addresses information a reporting entity provides in its financial statements about the transfer of financial assets; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement in transferred financial assets. Also, the amended topic removes the concept of a qualifying special purpose entity, limits the circumstances in which a transferor derecognizes a portion or component of a financial asset, defines participating interest and enhances the information provided to financial statement users to provide greater transparency. The amended topic is effective for the first annual reporting period beginning after November 15, 2009 and was effective for us as of January 1, 2010. The adoption of this amended topic has no material impact on the Company’s financial statements.
	Consolidation of Variable Interest Entities - Amended (Included in amended Topic ASC 810 “Consolidation”, previously SFAS 167 “Amendments to FASB Interpretation No. 46(R)”). The amended topic requires an enterprise to perform an analysis to determine the primary beneficiary of a variable interest entity; to require ongoing reassessments of whether an enterprise is the primary beneficiary of a variable interest entity and to eliminate the quantitative approach previously required for determining the primary beneficiary of a variable interest entity. The amended topic also requires enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity. The amended topic is effective for the first annual reporting period beginning after November 15, 2009 and was effective for us as of January 1, 2010. The adoption of this amended topic has no material impact on the Company’s financial statements.
	The FASB issued Accounting Standards Update (ASU) No. 2009-13, Revenue Recognition (Topic 605): Multiple Deliverable Revenue Arrangements - A Consensus of the FASB Emerging Issues Task Force.” This update provides application guidance on whether multiple deliverables exist, how the deliverables should be separated and how the consideration should be allocated to one or more units of accounting. This update establishes a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific or third-party evidence is available. The Company will be required to apply this guidance prospectively for revenue arrangements entered into or materially modified after January 1, 2011; however, earlier application is permitted. The management is in the process of evaluating the impact of adopting this ASU on the Company’s financial statements.
	The FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends ASC Topic 820 to require the following additional disclosures regarding fair value measurements: (i) the amounts of transfers between Level 1 and Level 2 of the fair value hierarchy; (ii) reasons for any transfers in or out of Level 3 of the fair value hierarchy and (iii) the inclusion of information about purchases, sales, issuances and settlements in the reconciliation of recurring Level 3 measurements. ASU 2010-06 also amends ASC Topic 820 to clarify existing disclosure requirements, requiring fair value disclosures by class of assets and liabilities rather than by major category and the disclosure of valuation techniques and inputs used to determine the fair value of Level 2 and Level 3 assets and liabilities. With the exception of disclosures relating to purchases, sales, issuances and settlements of recurring Level 3 measurements, ASU 2010-06 was effective for interim and annual reporting periods beginning after December 15, 2009. The disclosure requirements related to purchases, sales, issuances and settlements of recurring Level 3 measurements will be effective for financial statements for annual reporting periods beginning after December 15, 2010. The adoption of this ASU has no material impact on the Company’s financial statements.
	The FASB issued ASU No. 2010-02, “Consolidation (Topic 810) Accounting and Reporting for Decreases in Ownership of a Subsidiary - a Scope Clarification”. This amendment affects entities that have previously adopted Topic 810-10 (formally SFAS 160). It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset derecognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts SFAS 160 (now included in Subtopic 810-10). For those entities that have already adopted SFAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted SFAS 160. The adoption of this ASU has no material impact on the Company’s financial statements.

F- 16

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

4.	Restricted cash and bills payable

			As of December 31,
			2010			2009
	Bank deposits held as collateral for bills payable (Note 4a)	$	8,495,200		$	733,500
	Bank deposits held as collateral for bank loans (Note 15)		13,197,900			15,256,800
		$	21,693,100		$	15,990,300

Note :-

a)

The Company is requested by certain of its 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 would be matured within six months from the date of issuance. As a security for the banks' undertakings, the Company is required to pay the banks' charges as well as maintaining deposits with such banks amounts equal to 50% to 100% of the bills' amounts issued.

5.	Trade receivables, net

			As of December 31,
			2010			2009
	Trade receivables	$	44,261,737		$	37,463,139
	Allowance for doubtful accounts		(1,020,741	)		(553,621	)
		$	43,240,996		$	36,909,518

An analysis of the allowance for doubtful debts accounts for the years ended December 31, 2010 and 2009 is as follows:

			Year ended December 31,
			2010			2009
	Balance at beginning of year	$	553,621		$	652,234
	Addition/(recovery) of doubtful debt expenses, net		437,318			(98,553	)
	Translation adjustments		29,802			(60	)
	Balance at end of year	$	1,020,741		$	553,621

F- 17

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

6.	Other receivables and prepayments and advances to senior management

			As of December 31,
			2010			2009
	Government grant receivables (Note 6a)	$	952,676		$	1,100,250
	Loans to third parties (Note 6b)		1,583,319			983,489
	Value added tax and other tax recoverable		-			644,869
	Deposits for purchase of raw materials		120,968			2,500,759
	Other deposit		307,366			321,015
	Prepayment		1,349,107			1,010,758
	Other receivables		569,031			71,580
	Advances to staff (Note 6c)		2,516,265			1,357,491
			7,398,732			7,990,211
	Allowance for doubtful accounts		(374,590	)		(362,243	)
		$	7,024,142		$	7,627,968
	Advances to senior management (Note 6b)	$	51,449		$	-

An analysis of the allowance for doubtful accounts for the years ended December 31, 2010 and 2009 is as follows:

			Year ended December 31,
			2010			2009
	Balance at beginning of year	$	362,243		$	362,243
	Translation adjustments		12,347			-
	Balance at end of year	$	374,590		$	362,243

Notes :-

	a)	As of December 31, 2010, government grant receivables mainly represented incentive bonus of $194,176 receivable from the local government for the good performance of energy conservation and emission reduction by Duesail and of $758,500 for successful back-door listing and good performance by Refractories.
	b)	The amounts are interest-free, unsecured and repayable on demand. The amount was advanced to senior management for his personal purpose and approved by the Chairmen of the Board of Directors. The advance was fully settled on March 28, 2011.
	c)	The amount mainly represents staff drawings for handling sourcing and logistic activities for the Company in the ordinary course of business.

F- 18

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

7.	Inventories

			As of December 31,
			2010			2009
	Raw materials	$	7,699,321		$	4,893,114
	Work-in-process		1,796,236			407,063
	Finished goods		6,209,411			4,648,872
			15,704,968			9,949,049
	Provision for obsolete inventories		(25,476	)		(24,636	)
		$	15,679,492		$	9,924,413

Note:

During the years ended December 31, 2010 and 2009, no provision for obsolete inventories was recognized in the cost of goods sold.

8.	Deposits paid for acquisition of a non-consolidated affiliate
	In August 2010, the Company paid RMB15 million (equivalent to $2.28 million) to acquire 24.5% equity interest in Yili YiQiang Silicon Limited (“Yili YiQiang”), a company established in the PRC and engaged in manufacturing and trading of silicon carbide. The acquisition had not been completed as of December 31, 2010 until the conclusion of equity transfer agreement signed on March 30, 2011. Further details are set out in Note 26.
9.	Intangible assets and goodwill

			As of December 31,
			2010			2009
	Unpatented technology - Note 9a	$	379,250		$	366,750
	Patented technology - Note 9b		-			586,800
		$	379,250		$	953,550
	Goodwill - Note 9c	$	441,089		$	441,089

Notes :-

	a)	During 2007, Refractories entered into a contract with an independent third party to purchase unpatented technical technology in relation to the production of mortar, at a cash consideration of $342,750. This consideration was mutually agreed between Refractories and such third party and this unpatented technology can be used for an unlimited period of time. Since its acquisition, an annual impairment review was performed by management and no impairment was identified and accordingly, it is stated at cost in 2008.
	b)	During 2008, GengSheng International, entered into a contract with an individual third party (the “Licensor”) for a patented technology license for use up to 2021. This patented technology represents “know-how” on methods and installation for removal particles from the powder for Abrasives. Amortization started form January 1, 2010, when the production commenced. On December 30, 2010, the Company entered into an agreement with the Licensor pursuant to which the Company agreed to dispose of the patented technology license with carrying amount of $552,982 back to the Licensor for a consideration of $606,800 and resulting in a gain of $53,818.
	c)	The goodwill was identified upon the acquisition of 100% equity interest in Prefecture, which represented the excess of the purchase price of $875,400 over the fair value of acquired identified net assets of Prefecture of $434,311 at the time of acquisition on June 12, 2008. Since its acquisition, annual impairment reviews have been performed by management and no impairment was identified. During the years ended December 31, 2010 and 2009, amortization charge was $53,818 and $Nil respectively.

F- 19

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

10.	Property, plant and equipment, net

			As of December 31,
			2010			2009
	Costs:
	Buildings	$	19,737,372		$	14,011,187
	Plant and machinery		9,070,723			6,135,012
	Furniture, fixtures and equipment		675,398			490,654
	Motor vehicles		2,093,928			1,525,936
			31,577,421			22,162,789
	Accumulated depreciation		(5,589,635	)		(4,085,915	)
	Construction in progress		200,449			3,903,466
	Net	$	26,188,235		$	21,980,340

(i) During the reporting periods, depreciation is included in:

			Year ended December 31,
			2010			2009
	Cost of goods sold and overhead of inventories	$	1,106,218		$	551,517
	Other		518,037			372,268
		$	1,624,255		$	923,785

	During the years ended December 31, 2010 and 2009, property, plant and equipment with carrying amounts of $215,815 and $117,577 were disposed of at considerations of $288,741 and $118,798 resulting in gain of $72,926 and $1,221, respectively.
	(ii) Construction in Progress
	Construction in progress mainly comprises capital expenditure for construction of the Company’s new offices and factories.

11.	Land use rights

			As of December 31,
			2010			2009
	Right to use land	$	1,071,283		$	1,035,974
	Accumulated amortization		(127,117	)		(100,993	)
		$	944,166		$	934,981

The Company obtained the right from the relevant PRC land authority for periods ranging from 39 to 50 years to use the land on which the office premises, production facilities and warehouses of the Company are situated.

During the years ended December 31, 2010 and 2009, amortization amounted to $22,129 and $21,921 respectively.

F- 20

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

11.	Land use rights (Cont’d)
	The estimated aggregate amortization expenses for land use right for the five succeeding years are as follows:

	Year
	2011	$	22,129
	2012		22,129
	2013		22,129
	2014		22,129
	2015		22,129
		$	110,645

12.	Other payables and accrued expenses

			As of December 31,
			2010			2009
	Accrued audit fee	$	98,605		$	70,416
	Interest payable		-			11,705
	Other accrued expenses		36,912			173,488
	Value added tax and other tax payables		2,042,014			2,168, 680
	Sales receipts in advance		457,636			192,580
	Salaries payable		999,043			686,004
	Staff welfare payable (Note 12a)		138,319			178,064
	Advances from staff		395,002			-
	Freight charges payable		82,976			38,451
	Payable for acquisition of property, plant and equipment		230,895			-
	Guarantee liability (Note 21b)		392,978			-
	Other payables		323,751			775,218
		$	5,198,131		$	4,294,606

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.

13.	Provision of warranty

			Year ended December 31,
			2010			2009
	Balance at beginning of year	$	-		$	-
	Provision for previous years		100,491			-
	Claims paid for the year		(100,491	)		-
	Provision for the year		69,739			-
	Balance at end of year	$	69,739		$	-

F- 21

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

14.	Non-interest-bearing loans
	The loans represent interest-free and unsecured loans from third parties and a government authority and are repayable on demand.
15.	Collateralized short-term bank loans

			As of December 31,
			2010			2009
	Bank loans wholly repayable within 1 year	$	41,641,650		$	28,459,800

	The above bank loans are denominated in RMB and carry average interest rates at 5.71% per annum with maturity dates ranging from four months to eight months.
	The bank loans as of December 31, 2010 were secured by the followings: -
	(a) Guarantee executed by Mr. Zhang Shunqing, a director of the Company, and a shareholder; (b) Guarantee executed by business associates (Note 21b); and (c) Bank deposits of $13,197,900 (Note 4).
16.	Common stock

			Common stock
			Number of						Additional
			shares			Amount			paid-in capital
	Balance, January 1, 2009 and January 1, 2010		24,038,183		$	24,038		$	19,608,044
	Common stock issued and allotted for share-based payment at fair value (Note 16a)		120,000			120			295,480
	Common stock issued and allotted upon exercise of warrants (Note 16b)		136,203			136			(136	)
	Balance, December 31, 2010		24,294,386		$	24,294		$	19,903,388

Notes :-

	a)	The Company issued 50,000 and 50,000 common shares on January 1, 2010 and April 21, 2010 respectively to RedChip Companies Inc. (“RedChip”) for the services provided. On April 21, 2010, the Company granted to two audit committee members of 10,000 common shares for each as awards for their services provided for the year of 2010. Further details are set out in Note 25.
	b)	The Company issued 27,869 common shares on March 10, 2010 and 108,334 common shares on May 4, 2010 to Civilian Capital, Inc. and Brean Murray Carret & Co., LLC respectively for their exercise of warrants to purchase 374,331 shares of common stock on cashless basis. Further details are set out in Note 25.

17.	Statutory and other reserves
	The Company’s statutory and other reserves were comprised as follows:

			As of December 31,
			2010			2009
	Statutory reserves	$	3,965,078		$	3,863,832
	Special reserve		3,556,036			3,556,036
		$	7,521,114		$	7,419,868

F- 22

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

17.	Statutory and other reserves (Cont’d)
	Statutory reserves
	Under PRC regulations, all 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, Gongyi GengSheng Refractories Co., Ltd. (“Furnace”) 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 Furnace 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 are not available for distribution. This reserve as maintained by Furnace has been combined into Refractories upon the combination and is subject to the same restrictions in its usage.
18.	Finance costs

			Year ended December 31,
			2010			2009
	Interest expenses	$	1,205,563		$	642,770
	Less: Interest capitalized		-			(247,392	)
	Bills discounting charges		562,776			184,184
		$	1,768,339		$	579,562

19.	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 December 31, 2010, as it is the Company's current policy to reinvest these earnings in non-U.S. operations.
	BVI
	GengSheng International Corporation and Smarthigh were incorporated in the BVI and are not subject to income taxes under the current laws of the BVI.

F- 23

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

19.	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 existing separate income tax laws for domestic enterprises and foreign-invested enterprises and became effective on January 1, 2008. Under the new tax law, an 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 : -

						Year ended December 31,
			Note			2010			2009
	Refractories		(a)			15%			12.5%
	High-Temperature					25%			25%
	Duesail		(a)			12.5%			0%
	Prefecture		(a)			25%			`12.5%
	Micronized					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 third year of tax holidays in 2010. Prefecture is in the fifth year of tax holidays in 2009. Refractories is in the third year of tax holidays in 2009 and starting from the fiscal year 2010, Refractories is subject to enterprise income tax at unified rate of 15% for three years due to its engagement in an advance technology industry and has passed the inspection of the provincial high-tech item. The relevant authority granted it a certificate at end of 2008.

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 operation. 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 that no additional provision for uncertainty in income taxes is necessary as of December 31, 2010 and 2009.

F- 24

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

19.	Income taxes (Cont’d)
	The components of the provision for income taxes from continuing operations are:

			Year ended December 31,
			2010			2009
	Current taxes - PRC	$	645,469		$	344,536
	Deferred taxes - PRC		(123,879	)		67,735
		$	521,590		$	412,271

The effective income tax expenses differ from the PRC statutory income tax rate from continuing operations in the PRC as follows:

			Year ended December 31,
			2010			2009
	Provision for income taxes at statutory income tax rate 25% in 2010 and 2009	$	198,396		$	1,523,088
	Non-deductible items for tax		538,592			185,388
	Income not subject to tax		(91,551	)		(649,999	)
	Under provision in prior year		150,021			21,311
	Tax holiday and tax concession		(273,868	)		(667,517	)
		$	521,590		$	412,271

During the years ended December 31, 2010 and 2009, the amounts of benefit from the tax holiday and tax concession were $273,868 and $667,517 and the effect on basic earnings per share were $0.01 and $0.03, respectively.

Deferred tax assets (liabilities) as of December 31, 2010 and 2009 are composed of the following:

			As of December 31,
			2010			2009
	PRC
	Current deferred tax assets:
	Temporary differences in recognizing net income for financial reporting purposes and for tax purposes	$	37,115		$	48,215
	Allowance for doubtful debts		206,931			8,572
		$	244,046		$	56,787
	Current deferred tax liabilities:
	Temporary differences in recognizing net income for financial reporting purposes and for tax purposes	$	(149,578	)	$	(89,244	)

F- 25

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

20.	Earnings per share
	During the reporting periods, certain share-based awards were not included in the computation of diluted earnings per share because they were anti-dilutive. Accordingly, the basic and diluted earnings per share are the same.
21.	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.
		During the years ended December 31, 2010 and 2009, the Company has incurred expenditures for routine pollutant discharge fees amounting to $14,800 and $18,361, respectively. These costs were included in general and administrative expenses.
	(b)	The Company guaranteed the following debts of third parties, which is summarized as follows:

			As of December 31,
			2010			2009
	Guaranteed amount	$	34,587,600		$	41,736,150

In 2010, the Company, in accordance with ASC 460, commenced to recognize the liability arising from guarantees given for the debts granted to third parties by financial institutions.

An analysis of the guarantee liability as of December 31, 2010 and 2009 is as follows:

			Year ended December 31,
			2010			2009
	Balance at beginning of year	$	-		$	-
	Recognized as expenses for the year		622,192
	Recognized as income for the year		(238,798	)		-
	Translation adjustments		9,584
	Balance at end of year	$	392,978		$	-

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

F- 26

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

21.	Commitments and contingencies (Cont’d)
	Guarantees as of December 31, 2010 are further analyzed as below:-

																					Outstanding
			Term loan						Interest						Principal repaid			Outstanding as of			interest as of			Estimated
			draw down						rate (per						up to December			December 31,			December 31,			maximum
	Guarantee		date			Expiry date			annum)			Loan principal			31, 2010			2010			2010			exposure
	Local government authorities and their controlled entity (Note i)		6/21/2010			6/20/2011			5.31%		$	3,792,500		$	-		$	3,792,500		$	111,449		$	3,903,949
			12/30/2009			12/29/2012			7.56%			7,585,000			-			7,585,000			1,143,710			8,728,710
	Business associates (Note ii)		3/8/2010			3/7/2011			11.66%			1,972,100			-			1,972,100			42,224			2,014,324
			3/21/2010			3/20/2011			5.84%			4,551,000			-			4,551,000			56,806			4,607,806
			8/13/2010			8/12/2011			5.31%			1,517,000			-			1,517,000			49,656			1,566,656
			7/29/2010			7/28/2011			6.37%			3,034,000			-			3,034,000			110,699			3,144,699
			9/27/2010			9/26/2011			5.31%			3,034,000			-			3,034,000			118,291			3,152,291
			10/29/2010			10/28/2011			5.31%			3,034,000			-			3,034,000			132,857			3,166,857
			12/8/2010			12/7/2011			5.56%			3,034,000			-			3,034,000			157,598			3,191,598
			12/22/2010			12/21/2011			5.56%			3,034,000			-			3,034,000			164,069			3,198,069
											$	34,587,600		$	-		$	34,587,600		$	2,087,359		$	36,674,959

Notes:-

	i)	To maintain a good relationship with the local government of Gongyi City, the Company has been so requested to act as guarantor for bank loans granted to certain local government authorities and their controlled entity.
	ii)	During the year, 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 15b). 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 December 31, 2010, the Company had capital commitments in respect of the acquisition of land use right amounting to $1,092,240, which was not contracted for and provided in these financial statements.

F- 27

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

21.	Commitments and contingencies (Cont’d)

	(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 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 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 director considers it is very unlikely that the tax penalty will be imposed.

22.	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 consolidated statements of income and comprehensive income. The Company contributed $324,810 and $356,076 for the two years ended December 31, 2010 and 2009, respectively.

F- 28

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

23.	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, functional 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, functional ceramic, fracture proppant and fine precision abrasives.
	Adjustments and eliminations of inter-company transactions were not included in determining segment profit (loss), as they are not used by the chief operating decision maker.

		Refractories						Functional ceramic						Fracture proppant						Fine precision abrasives						Total
		Year ended December 31,						Year ended December 31,						Year ended December 31,						Year ended December 31,						Year ended December 31,
		2010			2009			2010			2009			2010			2009			2010			2009			2010			2009
Revenue from external customers	$	45,757,524		$	47,818,000		$	1,245,996		$	1,097,777		$	14,320,081		$	8,039,533		$	865,055		$	-		$	62,188,656		$	56,955,310
Interest income		362,468			71,741			145			236			1,146			662			97			287			363,856			72,926
Interest expenses		1,178,850			407,862			21,160			4,105			568,329			164,027			-			3,568			1,768,339			579,562
Depreciation		574,434			535,098			109,624			119,371			449,905			269,316			490,292			-			1,624,255			923,785
Amortization		17,249			17,087			4,880			4,834			-			-			53,818			-			75,947			21,921
Segment profit (loss)		(217,140	)		4,142,959			129,611			688,457			1,803,519			1,554,986			(671,355	)		(272,962	)		1,044,635			6,113,440
Segment assets		77,755,761			50,393,011			3,919,714			3,808,548			22,978,666			29,437,474			18,533,348			14,374,938			123,187,489			98,013,971
Capital expenditures	$	1,285,092		$	253,690		$	64,837		$	19,369		$	2,304,310		$	1,601,326		$	2,316,535		$	4,468,162		$	5,970,774		$	6,342,547

F- 29

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

23.	Segment information (Cont'd)
	Segment information by products for the year ended December 31, 2010 and 2009

		Monolithic materials1			Mortar			Pre-cast roofs			Ceramic tubes2			Ceramic cylinders3			Fine precision abrasives			Wearable ceramic valves			Fracture proppant			Total
Year ended December 31, 2010
Revenue	$	27,594,818		$	408,441		$	17,754,265		$	517,892		$	712,908		$	865,055		$	15,196		$	14,320,081		$	62,188,656
Year ended December 31, 2009
Revenue	$	30,205,642		$	327,958		$	17,284,500		$	893,469		$	185,420		$	-		$	18,788		$	8,039,533		$	56,955,310

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

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

23.	Segment information (Cont’d)
	Reconciliation is provided for unallocated amounts relating to corporate operations which is not included in the segment information.

			Year ended December 31,
			2010			2009
	Total consolidated revenue	$	62,188,656		$	56,955,310
	Total profit for reportable segments	$	1,044,635		$	6,113,440
	Unallocated amounts relating to operations:
	General and administrative expenses		(295,600	)		(21,087	)
	Other income		44,550			-
	Income before income taxes and noncontrolling interest	$	793,585		$	6,092,353

			As of December 31,
			2010			2009
	Assets
	Total assets for reportable segments	$	123,187,489		$	98,013,971
	Other receivables		7,554			-
	Cash and cash equivalents		27,132			27,195
		$	123,222,175		$	98,041,166

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

			Year ended December 31,
			2010			2009
	PRC	$	53,282,279		$	53,617,711
	United States		6,451,116			2,659,741
	Others		2,455,261			677,858
	Total	$	62,188,656		$	56,955,310

24.	Related party transactions
	Apart from the information as disclosed in elsewhere in the consolidated financial statements, the Company had no material transactions carried out with related parties during the reporting periods.

F- 31

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China GengSheng Minerals, Inc.

Notes to Consolidated Financial Statements

25.	Share-based compensation
	The Company estimated the fair value of each warrant award on the date of grant using the Black-Scholes option-pricing model and the assumption noted in the following table. Expected volatility is based on the historical and implied volatility of a peer group of publicly traded entities. The expected term of options gave consideration to historical exercises, post-vesting cancellations and the options’ contractual term. The risk-free rate for the expected term of the option is based on the U.S. Treasury Constant Maturity at the time of grant. The assumptions used to value options granted during the year ended December 31, 2007 were as follows :-

	Risk free interest rate		4.75%
	Expected volatility		384%
	Expected life (years)		3

	Share-based compensation - The Company granted warrants for the purchase of 112,299 and 262,032 shares of common stock which exercise price of $2.06 to Civilian Capital, Inc., and Brean Murray Carret & Co., LLC, respectively, for the services in connection with the private placement on April 25, 2007. The Company valued the options by the Black-Scholes option-pricing model with the amount of $748,034 which was recorded as cost of raising capital against additional paid-in capital. The Company issued 27,869 common shares on March 10, 2010 and 108,334 common shares on May 4, 2010 to Civilian Capital, Inc. and Brean Murray Carret & Co., LLC respectively for their exercise of warrants to purchase 374,331 shares of common stock on cashless basis.
	In 2010, the Company granted to two audit committee members of 10,000 common shares for each as awards for their services provided for the year of 2010 and issued 100,000 common shares to RedChip for the services provided. The services of RedChip mainly including introducing and promoting the Company to its broker network, disseminate information about the Company and organize teleconferences. Share-based compensation expenses were calculated based on the market price on the date of common shares issued to those parties. The market price of 50,000 common shares issued to RedChip on January 1, 2010 was $2.30 per share. The market price of 20,000 common shares granted to two audit committee members and 50,000 common shares issued to RedChip on April 21, 2010 was $2.58 per share.
26.	Subsequent events
	The Company evaluated all events or transactions that occurred through the date the financial statements were issued and determined that, except for the transactions described below, there were no material recognizable or subsequent events or transactions which would require recognition or disclosure in the consolidated financial statements.

	(a)	On January 7, 2011 the Company filed a prospectus supplement with the SEC for an underwritten offering of its common stock up to 2,500,000 shares, par value $0.001 per share, together with 1,000,0000 warrants to purchase shares of the Company’s common stock. Each warrant entitles the investor to purchase one share of common stock, at an exercise price of $4.00 per share. The purchase price in the offering for each share of common stock and the related warrant is $4.00. The common stock and the warrants will be issued separately but will be purchased together in the offering.
	(b)	On March 30, 2010, the Company entered into equity transfer agreement with Mr. Zhang Zhi and Mr. Hou Yongbin and agreed to acquire 24.5% equity interest in Yili YiQiang at a cash consideration of RMB15 million (equivalent to $2.28 million). The consideration was fully paid in 2010. Upon the completion of investment, Yili YiQiang became a non-consolidated affiliate of the Company.

F-32

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 31, 2011

CHINA GENGSHENG MINERALS, INC.

/s/ Shunqing Zhang                   
Shunqing Zhang
Chief Executive Officer and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Signature	Capacity	Date
/s/ Shunqing Zhang	Chief Executive Officer, President and Chairman	March 31 , 2011
Shunqing Zhang	(Principal Executive Officer)
/s/ Hongfeng Jin	Interim Chief Financial Officer	March 31 , 2011
Hongfeng Jin	(Principal Financial and Accounting Officer)
/s/ Lawrence Goldman	Director	March 31 , 2011
Lawrence Goldman
/s/ Ming He	Director	March 31 , 2011
Ming He
/s/ Jingzhong Yu	Director	March 31 , 2011
Jingzhong Yu

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