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

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20142015 AND 20132014

(UNAUDITED)

(In thousands)

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

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Organization and Operations

General Steel Holdings, Inc. (the “Company”) was incorporated on August 5, 2002 in the state of Nevada. The Company through its 100% owned subsidiary, General Steel Investment, operates steel companies serving various industries in the People’s Republic of China (“PRC”). The Company’s main operation is manufacturing and sales of steel products such as steel rebar, hot-rolled carbon and silicon sheets and spiral-weld pipes. The Company, together with its subsidiaries, majority owned subsidiaries and variable interest entity, is referred to as the “Group”.

On April 29, 2011, a 20-year Unified Management Agreement (“the Agreement”) was entered into between the Company, the Company’s 60%-owned subsidiary Shaanxi Longmen Iron and Steel Co., Ltd. (“Longmen Joint Venture”), Shaanxi Coal and Chemical Industry Group Co., Ltd. (“Shaanxi Coal”) and Shaanxi Iron and Steel Group (“Shaanxi Steel”). Shaanxi Steel is the controlling shareholder of Shaanxi Longmen Iron and Steel Group Co., Ltd (“Long Steel Group”) which is the non-controlling interest holder in Longmen Joint Venture, and Shaanxi Coal, a state owned entity, is the parent company of Shaanxi Steel. Under the terms of the Agreement, all manufacturing machinery and equipment of Longmen Joint Venture and the $605.8 million (or approximately RMB 3.7 billion) of the constructed iron and steel making facilities owned by Shaanxi Steel, which includes one 400 m² sintering machine, two 1,280 m³ blast furnaces, two 120 ton converters and some auxiliary systems, are managed collectively as a single virtual asset pool (“Asset Pool”). Longmen Joint Venture manages the Asset Pool as the principal operating entity and is responsible for the daily operations of the new and existing facilities. The Agreement leverages each of the parties’ operating strengths, allowing Longmen Joint Venture to derive the greatest benefit from the cooperation and the newly constructed iron and steel making facilities. At the designed efficiency level, the facilities contribute three million tons of crude steel production capacity per year.

Longmen Joint Venture pays Shaanxi Steel for the use of the constructed iron and steel making facilities an amount equaling the depreciation expense on the equipment constructed by Shaanxi Steel as well as 40% of the pre-tax profit generated by the Asset Pool. The remaining 60% of the pre-tax profit is allocated to Longmen Joint Venture. As a result, the Company’s economic interest in the profit or loss generated by Longmen Joint Venture decreased from 60% to 36%. However, the overall capacity under the management of Longmen Joint Venture increased by three million tons, or 75%. The Agreement improved Longmen Joint Venture’s cost structure through sustainable and steady sourcing of key raw materials and reduced transportation costs. The distribution of profit is subject to a prospective adjustment after the first two years based on each entity’s actual investment of time and resources into the Asset Pool. There has been no adjustment to the Agreement from its inception to the present time nor intention to make future adjustment by the Company and Shaanxi Steel.

The parties to the Agreement established the Shaanxi Longmen Iron and Steel Unified Management Supervisory Committee ("Supervisory Committee") to ensure that the facilities and related resources are operated and managed according to the stipulations set forth in the Agreement. The Board of Directors of Longmen Joint Venture, of which the Company holds 4 out of 7 seats, requires a simple majority vote and remains the controlling decision-making body of Longmen Joint Venture and the Asset Pool. See Note 2(c) “Consolidation of VIE.”

The Agreement constitutes an arrangement that involves a lease which meets certain of the criteria of a capital lease and therefore the assets constructed by Shaanxi Steel are accounted for by Longmen Joint Venture as a capital lease. The profit sharing liability portion of the lease obligation, representing 40% of the cumulative pre-tax profit generated by the Asset Pool, is accounted for by Longmen Joint Venture as a derivative financial instrument at fair value. See Notes 2 “Summary of significant accounting policies”, Note 15 “Capital lease obligations” and Note 16 “Profit sharing liability”.

In view of the near-term challenges for the steel sector (see Note 2(d) Liquidity and Going Concern), the Company strategically accelerating the Company’s business transformation. The Company’s transformation strategy is to pursue opportunities that offer compelling benefits to our organization and shareholders, including:

The Company formed a joint venture, Tianjin General Shengyuan IoT Technology Co., Ltd. (“General Shengyuan IoT”), in February of 2015 with an RFID Expert team to develop and commercialize RFID technologies and data solutions. The formation of this joint venture represents a unique opportunity to accelerate the Company’s expansion into the vibrant logistics and Internet-of-Things sectors. General Shengyuan IoT is still in the development stage and no revenues and significant operating expenses during the three and six months ended June 30, 2015.

Note 2 – Summary of significant accounting policies

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial statements include the accounts of all directly, indirectly owned subsidiaries and the variable interest entity listed below. All material intercompany transactions and balances have been eliminated in consolidation. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the financial statements have been included. Interim results are not necessarily indicative of results to be expected for the full year. The information included in this Form 10-Q should be read in conjunction with information included in the 20132014 annual report on Form 10-K/A10-K filed on August 19, 2014.April 10, 2015.

The consolidated financial statements of the Company reflect the activities of the following major directly owned subsidiaries:

TianwuBaotou Steel

Prior to November 19, 2013,December 31, 2014, the Company held a 60.0%an 80.0% equity interest in TianwuBaotou Steel – General Steel Material TradingSpecial Steel Pipe Joint Venture Co., Ltd. (“Tianwu”Baotou Steel”). 32% interest was held by through General Steel (China) and 28% interest was held by Yangpu Shengtong.. On November 19, 2013,December 31, 2014, the Company sold its 28%80.0% equity interest of Tianwu held by Yangpu Shengtongin Baotou Steel to Tianjin Dazhan IndustryShuangjie Liansheng Rolled Steel Co., Ltd., a relatedan unrelated party through indirect common ownership, for $13.6$0.7 million (RMB 84.34.0 million) while retaining 32% interest held by General Steel (China)., receivable within one year of the sale. As a result of this transaction, the Company met the criteria under ASC 810-10-40-4 to deconsolidate TianwuBaotou Steel at the disposal date and recognized a gain of $1.0 million in the fourth quarter of 2013 in accordance with ASC 810-10-40-5. At

General Shengyuan

On February 13, 2015, the same time,Company formed a joint venture entity, Tianjin General Steel (China)’s remaining 32% interest is accounted for as an investment in unconsolidated subsidiaries usingShengyuan IoT Technology Co., Ltd, with a team of radio-frequency identification (“RFID”) experts (the “Expert Team”), to develop and commercialize RFID technology data solutions. Under the equity method. See Note 2(t) - Investments in unconsolidated entities for details.terms of the Agreement, the Company owned 70% of the joint venture by contributing $1.6 million (RMB 10.0 million), while the Expert Team committed to contribute intellectual property, including proprietary RFID technologies, licensed patents and domain expertise.

The accompanying unaudited condensed consolidated financial statements include the financial statements of the Company, its subsidiaries, its variable interest entity (“VIE”) for which the Company is the ultimate primary beneficiary, and the VIE’s subsidiaries.

Subsidiaries are those entities in which the Company, directly or indirectly, controls more than one half of the voting power; or has the power to govern the financial and operating policies, to appoint or remove the majority of the members of the board of directors, or to cast a majority of votes at the meeting of directors.

A VIE is an entity in which the Company, or its subsidiary, through contractual arrangements, bears the risks of, and enjoys the rewards normally associated with ownership of the entity, and therefore the Company or its subsidiary is the primary beneficiary of the entity.

All significant inter-company transactions and balances have been eliminated upon consolidation.

Prior to entering into the Unified Management Agreement on April 29, 2011, Longmen Joint Venture had been consolidated as the Company’s 60% direct owned subsidiary. Upon entering into the Unified Management Agreement on April 29, 2011, Longmen Joint Venture was re-evaluated by the Company to determine if Longmen Joint Venture is a VIE and if the Company is the primary beneficiary.

Longmen Joint Venture’s equity at risk is considered insufficient to finance its activities and therefore Longmen Joint Venture is considered to be a VIE.

The Company would be considered the primary beneficiary of the VIE if it has both of the following characteristics:

A Supervisory Committee was formed during the negotiation of the Unified Management Agreement. Given there is both a Supervisory Committee and a Board of Directors with respect to Longmen Joint Venture , the powers (rights and roles) of both bodies were considered to determine which party has the power to direct the activities of Longmen Joint Venture, and by extension, whether the Company continues to have the power to direct Longmen Joint Venture’s activities after this Supervisory Committee was formed and the significant investment in plant and equipment by owners of the Longmen Joint Venture partner. The Supervisory Committee, in which the Company holds 2 out of 4 seats, requires a ¾ majority vote, while the Board of Directors, on which the Company holds 4 out of 7 seats, requires a simple majority vote. As the Supervisory Committee’s role is limited to supervising and monitoring management of Longmen Joint Venture and in the event there is any disagreement between the Board and the Supervisory Committee, the Board prevails, the Supervisory Committee is considered subordinate to the Board. Thus, the Board of Directors of Longmen Joint Venture continues to be the controlling decision-making body with respect to Longmen Joint Venture. The Company, which controls 60% of the voting rights of the Board of Directors, has control over the operations of Longmen Joint Venture and as such, has the power to direct the activities of the VIE that most significantly impact Longmen Joint Venture’s economic performance.

In connection with the Unified Management Agreement, the Company, Shaanxi Coal and Shaanxi Steel may provide such support on a discretionary basis or as needed in the future. See Note 2 item (d) Liquidity.2(d) Liquidity and Going Concern.

The Company has the obligation to absorb losses and the rights to receive benefits based on the profit allocation as stipulated by the Unified Management Agreement that are significant to the VIE. As both conditions are met, the Company is the primary beneficiary of Longmen Joint Venture and therefore, continues to consolidate Longmen Joint Venture as a VIE.

The Company believes that the Unified Management Agreement between Longmen Joint Venture and Shaanxi Coal is in compliance with PRC law and is legally enforceable. However, PRC law and/or uncertainties in the PRC legal system could limit the Company’s ability to enforce the Unified Management Agreement, which in turn, may lead to reconsideration of the VIE assessment and the potential for a different conclusion. If the Unified Management Agreement cannot be enforced, the Company would not consolidate Longmen Joint Venture as a VIE. However, the current PRC legal system has not limited the Company’s ability to enforce the Unified Management Agreement nor does the Company believe it is likely to do so in the future. The Company makes an ongoing assessment to determine whether Longmen Joint Venture is a VIE.

The carrying amount of the VIE and its subsidiaries’ consolidated assets and liabilities are as follows:

VIE and its subsidiaries’ liabilities consist of the following:

Longmen Joint Venture has two 100% owned subsidiaries, Yuxin Trading Co., Ltd. (“Yuxin”) and Yuteng Trading Co., Ltd. (“Yuteng”). Longmen Joint Venture also has two consolidated subsidiaries, Hualong and Huatianyulong, in which it does not hold a controlling interest. Hualong and Huatianyulong are separate legal entities which were established in the PRC as limited liability companies and subsequently invested in by Longmen Joint Venture in June 2007 and July 2008, respectively. However, these two entities do not meet the definition of variable interest entities. Further consideration was given to whether consolidation was appropriate under the voting interest model, specifically where the power of control may exist with a lesser percentage of ownership (i.e. less than 50%), for example, by contract, lease, agreement with other stockholders or by court decree.

Hualong

Longmen Joint Venture, the single largest shareholder, holds a 36.0% equity interest in Hualong. The other two shareholders, who own 34.67% and 29.33% respectively, assigned their voting rights to Longmen Joint Venture in writing at the time of the acquisition of Hualong. The voting rights have been assigned through the date Hualong ceases its business operations or the other two shareholders sell their interest in Hualong. Hualong’s main business is to supply refractory. The assets, liabilities and the operating results of Hualong are immaterial to the Company’s consolidated financial statements as of SeptemberJune 30, 20142015 and December 31, 2013, respectively,2014 and for the three and ninesix months ended SeptemberJune 30, 20142015 and 2013,2014, respectively.

Huatianyulong

Longmen Joint Venture holds a 50.0% equity interest in Huatianyulong and the other unrelated shareholder holds the remaining 50.0%. The other shareholder assigned its voting rights to Longmen Joint Venture in writing at the time of acquisition of Huatianyulong. The voting rights have been assigned through the date Huatianyulong ceases its business operation or the other unrelated shareholder sells its interest in Huatianyulong. Huatianyulong mainly sells imported iron ore. The assets, liabilities and the operating results of Huatianyulong are immaterial to the Company’s consolidated financial statements as of SeptemberJune 30, 20142015 and December 31, 2013, respectively,2014 and for the three and ninesix months ended SeptemberJune 30, 20142015 and 2013,2014, respectively.

The Company has determined that it is appropriate for Longmen Joint Venture to consolidate Hualong and Huatianyulong with appropriate recognition in the Company’s financial statements of the non-controlling interests in each entity, beginning on the acquisition dates as these were also the effective dates of the agreements with other stockholders granting a majority voting rights in each entity, and thereby, the power of control, to Longmen Joint Venture.

The Company’s accounts have been prepared underassuming that the company will continue as a going concern basis. The going concern basis assumes that assets are realized and liabilities are extinguished in the ordinary course of business at amounts disclosed in the financial statements. The Company’s ability to continue as a going concern depends upon aligning its sources of funding options (debt and equity) with the expenditure requirements of the Company and repayment of the short-term debt facilities as and when they fall due.

The steel business is capital intensive and as a normal industry practice in the PRC, the Company is highly leveraged. Debt financing in the form of short term bank loans, loans from related parties, financing sales, bank acceptance notes, and capital leases have been utilized to finance the working capital requirements and the capital expenditures of the Company. As a result, the Company’s debt to equity ratio as of SeptemberJune 30, 20142015 and December 31, 20132014 were (5.7)(1.8) and (6.5)(5.6), respectively. As of SeptemberJune 30, 2014,2015, the Company’s current liabilities exceed current assets (excluding non-cash item) by $1.5 billion.billion, which together with the gross loss from operations raises substantial doubt about its ability to continue as a going concern.

Our steel business has faced very tough market conditions and challenging profitability over the last several years, and based on current trends, we think the near-term challenges for the steel sector will likely linger. In reaction to this challenging market, we are proactively reviewing our strategy and asset portfolio and seeking to restructure low-efficient, non-core assets, as well as idle land resources to unlock hidden fair value.

The Company aims to transform into a leaner and fitter organization with better profitability. As such, the Company is strategically accelerating its business transformation to pursue opportunities that offer compelling benefits to the Company and shareholders, including:

Management has implemented the following plans that are intended to mitigate the conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern.

Longmen Joint Venture, as the most important entity of the Company, accounted for a majority of the total sales of the Company. As such, the majority of the Company’s working capital needs come from Longmen Joint Venture. The Company’s ability to continue as a going concern depends heavily on Longmen Joint Venture’s operations, as well as its ability to obtain external financial supports, including but not limited to lines of credit from banks and vendor financing. If Longmen Joint Venture does not maintain a sufficient level of financial support by renewing its financing terms with existing financing sources or obtaining new sources of financial support, there may be an immediate negative impact on the Company’s operations and its ability to continue as a going concern.operations. Longmen Joint Venture has obtained different types of financial support,supports, which are listed below by category:

LinesLine of credit

The Company has lines of credit from the listed major banks totaling $141.4$150.2 million with expiration dates ranging from November 28, 2015October 14, 2016 to January 30,December 26, 2016.

As of the date of this report, the Company utilized $80.0 million$nil of these lines of credit.

Vendor financing

Longmen Joint Venture signed additional vendor financing agreements, which will provide liquidity to the Company in a total amount of $893.8$1,060.8 million with the following companies:

Company A, a related party company and Company B, a third party company, are both Longmen Joint Venture’s major coke suppliers. They have been doing business with Longmen Joint Venture for many years. On July 30, 2014, Company A signed a five-year agreement with Longmen Joint Venture to finance its coke purchases up to $243.8$244.8 million. Company B signed a three-year agreement with Longmen Joint Venture on January 22, 2014 to finance its coke purchases up to $162.5$163.2 million. According to the above signed agreements, both Company A and B will not demand any cash payments during their respective financing periods. As of the date of this report, the Company’s payables to Company A and Company B were approximately $72.2$41.7 million and $78.6$55.0 million, respectively.

Company C is a Fortune 500 Company. On June 28, 2013, Company C signed an agreement with Longmen Joint Venture to finance Longmen Joint Venture’s purchase of iron ore for an amount up to $487.5$489.3 million to commence on October 1, 2013 and end on March 31, 2015. On August 1, 2014, Company C signed an extension agreement with the Company and extended the financing terms to March 31, 2016. On August 1, 2015, Company C signed another extension agreement with the Company and extended the financing terms to September 30, 2017 with amount up to $652.8 million. Subject to the terms of the agreement, Longmen Joint Venture is subject to a penalty of 0.05% of the daily outstanding balance owed to Company C in an event of late payment. As of the date of this report, the Company did not haveCompany’s payable to Company C.C was approximately $nil.

Other financing

On March 5, 2014, April 22, 2014, April 23, 2014, and OctoberApril 30, 2014,2015, Longmen Joint Venture signed two-to-three-year payment extension agreements with Company D, E, F, G H and IH listed below. In addition, Shaanxi Steel, a related party, agreed to finance the construction of Longmen Joint Venture’s #5 blast furnace, which commenced in March 2013, for construction-related payments up to $321.8 million (RMB 1.98 billion) and would not demand payment from Longmen Joint Venture until it would have available funds for repayment. As of September 30, 2014, Longmen Joint Venture’s payable related to the construction of the #5 blast furnace amounted to $218.9 million. In total, Longmen Joint Venture can obtain $662.6$412.9 million in financial support from payment extensions granted by the following sevenfive companies:

As of the date of this report, our payables to Company D, Company E, Company F, Company G, and Company H Company I and Shaanxi Steel are approximately $16.3$0.2 million, $41.4$2.4 million, $11.6$21.6 million, $0, $0, $0$3.3 million, and $81.3$0.9 million, respectively.

Amount due to sales representatives

Longmen Joint Venture entered into agreements with various entities to act as the Company’s exclusive sales agents in specified geographic areas.  These exclusive sales agents must meet certain criteria and are required to deposit a certain amount of money with the Company. In return, the sales agents receive exclusive sales rights in a specified area and discounted prices on products they order. These deposits bear no interest and are required to be returned to the sales agent once the agreement is terminated. As of SeptemberJune 30, 2014,2015, Longmen Joint Venture has collected a total amount of $32.2$18.7 million. Historically, this amount is quite stable and we do not expect a big fluctuation in this amount for the next twelve months from SeptemberJune 30, 20142015 onwards.

With the financial support from the banks and the companies above and management’s continued effort in obtaining additional financial supports from banks and other companies, management is of the opinion that the Company hasplans outlined above and summarized below are expected to provide sufficient funds to meet its future operations, working capital requirements and debt obligations until the end of SeptemberJune 30, 2015.2016. However, these plans are based on the demand of the Company's products, economic conditions, the overcapacity issue in the steel industry and the Company's operating results not continuing to deteriorate and on our continued significant reliance on vendors and related parties being able to provide continued liquidity, as summarized below. The detailed breakdown of Longmen Joint Venture’s estimated cash flows items are listed below.

As a result, the unaudited condensed consolidated financial statements as of September 30, 2014 have been prepared on a going concern basis.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying consolidated financial statements and footnotes. Significant accounting estimates reflected in the Company’s consolidated financial statements include the fair value of the profit sharing liability, the useful lives of and the weighted average calculation used in the impairment offor property, plant and equipment, and potential losses on uncollectible receivables, the allowance for inventory valuation, the interest rate used in the financing sales, the fair value of the assets recorded under capital leaseslease and the present value of the net minimum lease payments of the capital leases.lease. Actual results could differ from these estimates.

Impairment

One of the Company’s most significant estimates is the determination of fair value of the profit sharing liability see note 2(h). Since the liability is calculated and largely based on management’s expectations of product demand, pricing, raw materials cost and projected manufacturing efficiencies, it is susceptible to material changes when actual results deviate from those expectations. While management believes its current assumptions are reasonable and achievable, there is no assurance that those future expectations will be met or that significant adjustments won’t be required in the future.

The Company’s operations are carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC’s economy. The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America and Western Europe. The Company’s results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Through the quarter ended June 30, 2015, the Company has incurred recurring losses from the Company’s operations from the last several years as the Company’s steel business has faced very tough market conditions and challenging profitability. Management has continued its effort to implementing cost savings on our manufacturing overhead costs and to reduce our unit production cost. The Company has forecasted its loss will be continued until year 2021 and expected to make a turning point and become profitable in year 2022 and beyond. The Company’s forecast is based on current market condition, if the future market condition is different from its forecast, the Company might continue to incur additional loss in 2022 and beyond and the Company’s assets pool of its long-lived assets may become further impaired see note 2(j).

The Company has significant exposure to the price fluctuation of raw materials and energy prices as part of its normal operations. TheAs of June 30, 2015 and December 31, 2014, the Company doesdid not utilizehave any open commodity contracts to mitigate such risks.

Cash includes demand deposits in accounts maintained with banks within the PRC, Hong Kong and the United States. Total cash (including restricted cash balances) in these banks on SeptemberJune 30, 20142015 and December 31, 20132014 amounted to $405.4$266.5 million and $431.3$367.2 million, including $ 5.1$0.6 million and $ 2.0$1.0 million that were deposited in Shaanxi Coal and Chemical Industry Group Financial Co., Ltd., a related party, respectively. As of SeptemberJune 30, 2014, $ 0.12015, $0.02 million cash in the bank was covered by insurance. The Company has not experienced any losses in itsother bank accounts and depositsbelieves it is not exposed to any risks on its cash in a number of different banks to minimize its exposure to credit risk.bank accounts.

The Company’s five major customers are all distributors and collectively represented 16.0% and 16.9%One of the Company’s customers individually accounted for 11.6% and 11.2% of total sales for the three and ninesix months ended SeptemberJune 30, 2014,2015 respectively. Two of the Company’s customers individually accounted for 28.3% and 10.7% of total accounts receivable, including related parties as of June 30, 2015. None of the five majorCompany’s customers accounted for more than 10% of the total sales for the three and ninesix months ended SeptemberJune 30, 2014. The Company’s five major customers represented 25.5% and 23.4% of the Company’s total sales for the three and nine months ended September 30, 2013, respectively. None of the five majorTwo customers individually accounted for more than 10%32.1% and 20.5% of the total sales for the three months or the nine months ended September 30, 2013. None of the five major customers has accounts receivable, including related parties with the Company as of September 30, 2014 and December 31, 2013,2014, respectively.

ForOne of the company’s supplier individually accounted for 16.6% and 10.5% of the total purchases for the three months and ninesix months ended SeptemberJune 30, 2014, the Company purchased 18.8% and 29.5% of its raw materials from five major suppliers,2015, respectively. NoneOne of the five majorCompany’s suppliers individually accounted for more than 10%12.8% and 12.7% of the total purchases for the three and nine months end September 30, 2014. Purchases from the five major suppliers represented 15.3% and 29.3% of the Company’s total purchases for the three months and ninesix months ended SeptemberJune 30, 2013, respectively.2014. None of the five major suppliers individually accounted for more than 10% of the total purchases for the three months or nine months ended September 30, 2013, respectively. These five suppliers accounted for 25.7% and 29.1% of total accounts payable, including related parties, as of September 30, 2014 and December 31, 2013, respectively. None of the five majorCompany’s suppliers individually accounted for more than 10% of total accounts payable as SeptemberJune 30, 20142015 and December 31, 2013.2014.

The reporting currency of the Company is the U.S. dollar. The Company’s subsidiaries and VIE in China use the local currency, Renminbi (“RMB”), as their functional currency. Assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. The statementsstatement of operations accounts are translated at the average translation rates and the equity accounts are translated at historical rates. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Translation adjustments included in accumulated other comprehensive income amounted to $(0.2)$(1.3) million and $0.7$0.6 million as of SeptemberJune 30, 20142015 and December 31, 2013,2014, respectively. The balance sheet amounts, with the exception of equity at SeptemberJune 30, 20142015 and December 31, 20132014 were translated at 6.156.13 RMB and 6.116.14 RMB to $1.00, respectively. The equity accounts were stated at their historical rate. The average translation rates applied to the statementsstatement of operations accounts for the three months ended SeptemberJune 30, 2015 and 2014 and 2013 were 6.166.12 RMB and 6.16 RMB, respectively. The average translation rates applied to the statementsstatement of operations accounts for the ninesix months ended SeptemberJune 30, 2015 and 2014 and 2013 were 6.156.14 RMB and 6.216.14 RMB, respectively. Cash flows are also translated at average translation rates for the periods; as a result,periods, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances inon the consolidated balance sheet.

The PRC government imposes significant exchange restrictions on fund transfers out of the PRC that are not related to business operations. These restrictions have not had a material impact on the Company because it has not engaged in any significant transactions that are subject to the restrictions.

The accounting standard regarding fair value of financial instruments and related fair value measurements defines financial instruments and requires disclosure of the fair value of financial instruments held by the Company. The Company considers the carrying amount of cash, short term investments, accounts receivable, other receivables, accounts payable and accrued liabilities, to approximate their fair values because of the short period of time between the origination of such instruments and their expected realization. For short term loans and notes payable, the Company concluded the carrying values are a reasonable estimate of fair values because of the short period of time between the origination and repayment and as their stated interest rates approximate current rates available. The carrying value of the long term loans-related party approximates its fair value as of the reporting date as their stated interest rates approximate current market rates available.

The accounting standards define fair value, establish a three-level valuation hierarchy for disclosures of fair value measurement and enhance disclosure requirements for fair value measures. The three levels are defined as follow:

The Company analyzes all financial instruments with features of both liabilities and equity, pursuant to which warrants previously issued by the Company were required to be recorded as a liability at fair value and marked to market each reporting period. The warrants were accounted for as derivative liabilities and recorded at their fair value, with the change in fair value charged or credited to income each period.  The warrants expired unexercised on May 13, 2013. Prior to their expiration, the fair value of the warrants was estimated using a binomial lattice model, using level 3 inputs.

As described in Note 15 - Capital lease obligations, payments related to the capital lease of the Asset Pool consist of two components: (1) a fixed monthly payment of $2.3 million (RMB 14.6 million), based on Shaanxi Steel’s cost to construct the assets, to be paid for the 20 year term of the Unified Management Agreement; and (2) 40% of any remaining pre-tax profits from the Asset Pool, which includes Longmen Joint Venture and the constructed iron and steel making facilities. The aforementioned profit sharing component meets the definition of a derivative instrument under ASC 815-10-15-83 and, accordingly, the profit sharing liability is accounted for separately as a derivative liability. It was recognized initially at its estimated fair value at inception. The estimated fair value is adjusted each reporting period, with changes in the estimated fair value of the profit sharing liability charged or credited to operating income each period.

The Company determines the fair value of the profit sharing liability using Level 3 inputs by considering the present value of Longmen Joint Venture’s projected profits/losses, discounted based on our average borrowing rate, which is currently 7.3%6.5%.

The fair value of the profit sharing liability will change each period as a result of (a) any changes in our estimate of Longmen Joint Venture’s projected profits/losses over the remaining term of the Agreement, (b) any change in the discount rate used, based on changes in our current or expected borrowing rate, (c) the change in fair value related to the passage of time and change in the number of future periods over which the present value of future cash flows is estimated and (d) any difference between the previously estimated operating results for the current period and actual results.

Each period, the Company considers whether the discount rate based on the Company’s average borrowing rate should be adjusted based upon the current and expected future financial condition of the Company. To date,On November 22, 2014, the People’s Bank of China decreased standard bank borrowing rate across the board by 0.4%. Accordingly, the Company has not considered any adjustmentadjusted down the present value discount rate for profit sharing liability by 0.4% from 7.3% to be necessary based upon, but not limited6.9%. On May 11, 2015, the People’s Bank of China decreased the standard bank borrowing rate again across the board by 0.25%. Accordingly, the Company adjusted down the present value discount rate for profit sharing liability by 0.25% from 6.9% to 6.7%. On June 27, 2015 the following assumptions:People’s Bank of China decreased the standard bank borrowing rate again across the board by 0.25%. Accordingly, the Company adjusted down the present value discount rate for profit sharing liability by 0.25% from 6.7% to 6.5%.

The projected profits/losses in Longmen Joint Venture are based upon, but not limited to, the following assumptions:

From inception to December 31, 2012, the assumptions underlying the estimated fair value did not change significantly. Beginning in the first quarter of 2013, the assumptions related to unit selling prices and costs were revised, resulting in a reduction of the estimated profit sharing liability. These assumptions were further revised during 2013. The above assumptions were again reviewed by the Company at SeptemberJune 30, 2015 and December 31, 2014 and the assumptions related to the projected growth in the steel market and costs were revised, resulting in a further reduction of the estimated profit sharing liability. For

The major drivers of the nine monthschange in our estimate were the continuing decrease in the selling price of our products as well as a continuing downtrend in the sluggish infrastructure investment and consumption growth for the next ten years or so. As such, as of December 31, 2014 financial statement issuance we had lowered our projected growth in the steel market for approximately ten years as compared to our previous estimates at December 31, 2013. The variables and the impact on our inputs to the 2014 valuation of profit sharing fair value, as compared to the 2013 valuation of the profit sharing fair value can be summarized as follows:

The above reduced our Gross Profit % over the next 5 years by, on average, 0.4% from the 2013 valuation. In addition, the above reduced our Gross Profit % over the remaining profit sharing period of 11.33 years by, on average, 1.75% from the 2013 valuation at December 31, 2014.

As a result of the changes in valuation inputs noted above for the year ended September 30,December 31, 2014, the Company recognized a gain on the change in the fair value of the profit sharing liability of $11.8$91.0 million due to a $17.1$110.6 million reduction in the fair value of profit sharing liability resulting from the change in estimates of future operating profits and a $3.4$0.1 million reduction resulting from the Asset Pool’s operating results for the nine monthsyear ended September 30,December 31, 2014 being slightly less favorable than previously estimated as of December 31, 2013, offset by a $8.8$8.1 million loss resulting from the 0.4% reduction of the present value discount rate and a $11.5 million loss from the present value discount.

For the three months ended March 31, 2015, the Company recognized a $12.9 million reduction in the fair value of profit sharing liability resulting from the change in estimates of future operating profits based on the April 2015 actual operating results and consideration for the Chinese steel market trends in April 2015 as well as the May 11, 2015 change to the Borrowing Rate by 0.25%. These further recent changes in market conditions resulted in a decrease in the expected liability of $16.6 million primarily from adjustments to the 2015 and 2016 expected cash flows as well as a $2.5 million loss from the reduction in the present value discount rate of 0.25% and a $1.2 million loss from the present value discount.

The variables and the impact on the Company’s inputs to the first quarter of 2015 valuation of profit sharing fair value, as compared to the 2014 valuation of the profit sharing fair value can be summarized as follows:

For the three months ended June 30, 2015, the Company recognized a $57.5 million reduction in the fair value of profit sharing liability resulting from the change in estimates of future operating profits based on the actual operating results through June 2015 and the continued deterioration of steel market conditions in the second quarter of 2015, which deviated from our previously anticipated industry environment improvement, as well as the June 27, 2015 change to the Borrowing Rate by 0.25%. These further recent changes in market conditions resulted in a decrease in the expected liability of $54.8 million primarily from adjustments to the 2015 to 2031 expected cash flows as well as a $2.6 million loss from the reduction in the present value discount rate of 0.25%, a $1.2 million loss from the present value discount, and a $6.5 million gain resulting from the Asset Pool’s operating results for the three months ended June 30, 2015 being less favorable than previously estimated as of March 31, 2015. The estimated fair value of the profit sharing liability at SeptemberJune 30, 2014 is $149.4 million.2015 was reduced to $0. At the same time, the reduction in the estimated future cash flows expected to be generated from Longmen Joint Venture’s operations caused the value of the Assets Pool to fall below the carrying value of Longmen Joint Venture’s long-lived assets, which triggered an impairment of $973.9 million (see Note 2(j)).

The variables and the impact on the Company’s inputs to the second quarter of 2015 valuation of profit sharing fair value, as compared to the first quarter valuation of the profit sharing fair value can be summarized as follows:

Changes in any of the assumptions used to estimate the fair value of the profit sharing liability and to determine whether and how much the carrying value of Longmen Joint Venture’s long-lived assets has been impaired will change the liabilitydiscounted cash flows of Longmen Joint Venture and the impairment value accordingly. If we were to reduce the projected bank borrowingborrowings rate used to discount the liability to a present value by 1.0% and other factors remained unchanged, our profit sharing liability as of SeptemberJune 30, 20142015 would have been $170.5 million$0 and we would decrease the gain from the change in the fair value of the profit sharing liabilityimpairment expense by $21.2$95.7 million. If we were to reduce the projected selling units and growth in the steel market rate by 1.0% and other factors remained unchanged, our profit sharing liability as of SeptemberJune 30, 20142015 would have been $142.6 million$0 and we would increase the gain from the change in the fair value of the profit sharing liabilityimpairment expense by $6.8$54.6 million.