CHINA SHEN ZHOU MINING & RESOURCES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands, except share data)

September 30,
2012

December 31,
2011

(Unaudited)

ASSETS

Current assets:

Cash and cash equivalents

$

2,367

$

5,569

Notes receivable, net

535

1,019

Accounts receivable, net

1,168

3,332

Advances to suppliers

672

1,833

Acquisition deposit

–

2,359

Other deposits

209

258

Due from related parties

3,201

–

Inventories

10,611

7,479

Restricted assets

–

2,536

Deferred financing costs

479

–

Total current assets

19,242

24,385

Restricted assets

377

175

Prepayment for vehicle rent

378

443

Property, machinery and mining assets, net

81,331

60,313

Total assets

$

101,328

$

85,316

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

$

3,393

$

3,324

Short term loans

8,862

11,996

Receipts in advance

4,984

1,528

Other payables and accruals

3,999

2,772

Government loan

1,709

–

Convertible preferred stock

1,667

–

Derivative liabilities

667

–

Due to related parties

226

250

Taxes payable

2,021

1,877

Total current liabilities

27,528

21,747

Long term loan

1,899

–

Total liabilities

29,427

21,747

STOCKHOLDERS’ EQUITY:

Convertible preferred stock ($0.001 par value; 10,000 shares and
0 share authorized as of September 30, 2012 and December 31,
2011, respectively; 1,666 shares and 0 shares issued and
outstanding as of September 30, 2012 and December 31, 2011,
respectively)

–

–

Common stock ($0.001 par value; 100,000,000 shares and
50,000,000 shares authorized as of September 30, 2012 and
December 31, 2011, respectively; 44,686,758 shares and
32,285,973 shares issued and outstanding as of September 30,
2012 and December 31, 2011, respectively)

45

32

Additional paid-in capital

65,326

58,425

Statutory reserves

1,732

1,732

Accumulated other comprehensive income

6,489

6,109

Accumulated deficit

(20,021)

(13,344)

Stockholders’ equity – China Shen Zhou Mining & Resources, Inc. and
Subsidiaries

53,571

52,954

Noncontrolling interest

18,330

10,615

Total stockholders’ equity

71,901

63,569

Total liabilities and stockholders’ equity

$

101,328

$

85,316

CHINA SHEN ZHOU MINING & RESOURCES, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Amounts in thousands, except per share data)

(Unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,
2012

September 30,
2011

September 30,
2012

September 30,
2011

Net revenue

$

7,473

$

7,104

$

16,529

$

18,117

Cost of sales

7,200

4,242

14,226

10,247

Gross profit

273

2,862

2,303

7,870

Operating expenses:

Selling and distribution expenses

57

24

101

84

General and administrative expenses

2,650

2,055

8,374

7,558

Provision for doubtful accounts

(1,086)

(22)

1,027

(99)

Impairment provision for inventories

206

–

753

–

Total operating expenses

1,827

2,057

10,255

7,543

Net income (loss) from operations

(1,554)

805

(7,952)

327

Other income (expense):

Interest expense

(291)

(174)

(1,184)

(520)

Warrant modification

(156)

–

(734)

–

Fair value change at derivative liabilities

710

–

3,716

–

Amortization of warrants attached to preferred stock

(349)

–

(724)

–

Amortization of deferred financing cost for preferred stock

(261)

–

(531)

–

Preferred stock dividends

(39)

–

(100)

–

Other, net

(15)

(79)

(150)

(6)

Total other income (loss)

(401)

(253)

293

(526)

Income (loss) from continuing operations before income taxes

(1,955)

552

(7,659)

(199)

Income tax benefits (expenses)

(175)

36

(353)

(244)

Income (loss) from continuing operations

(2,130)

588

(8,012)

(443)

Discontinued operations:

Loss from operations of discontinued component, net of taxes

–

–

–

(7)

Loss on disposal of discontinued subsidiary, net of taxes

–

–

–

(82)

Loss from discontinued operations

–

–

–

(89)

Net income (loss)

(2,130)

588

(8,012)

(532)

Add (less): Noncontrolling interests attributable to the
noncontrolling interests

596

93

1,335

(268)

Net income (loss) – attributable to China Shen Zhou Mining & Resources, Inc. and Subsidiaries

(1,534)

681

(6,677)

(800)

Other comprehensive income:

Foreign currency translation adjustments

13

534

380

1,306

Comprehensive income (loss)

$

(1,521)

$

1,215

$

(6,297)

$

506

Net income (loss) per common share – basic and diluted

From continuing operations

$

(0.04)

$

0.02

$

(0.18)

$

(0.03)

From discontinued operations

–

–

–

(0.00)

$

(0.04)

$

0.02

$

(0.18)

$

(0.03)

Weighted average common shares outstanding

Basic and Diluted

41,396

32,270

37,103

31,060

CHINA SHEN ZHOU MINING & RESOURCES, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands, except share data)

(Unaudited)

For the Nine Months Ended

September 30,
2012

September 30,
2011

Cash flows from operating activities:

Net loss before non-controlling interest

$

(8,012)

$

(532)

Adjustments to reconcile net loss to net cash used in operating activities:

Loss from operations of discontinued component, net of income tax benefits

–

7

Loss on sale of discontinued operations, net of income taxes

–

82

Provision for doubtful accounts

1,027

(99)

Impairment provision for inventories

753

–

Warrant modification

734

–

Amortization of warrants attached to preferred stock

724

–

Amortization of deferred financing costs for preferred stock

531

–

Fair value change at derivative liabilities

(3,716)

–

Depreciation and amortization

5,408

2,838

Stock-based compensation

234

972

Changes in operating assets and liabilities:

(Increase) decrease in

Notes receivable

491

(992)

Accounts receivable

2,599

(771)

Advances to suppliers

1,509

(1,840)

Other receivable

(624)

–

Other deposits

195

(1,313)

Prepayment for vehicle rent

68

–

Prepayment for office rent

–

82

Due from related parties

(3,187)

–

Inventories

(3,398)

(578)

Restricted assets

2,435

(103)

Increase (decrease) in

Accounts payable

(558)

(867)

Receipts in advance

2,576

2,666

Other payables and accruals

(4,581)

(2,848)

Taxes payable

(1,016)

184

Net cash used in operating activities from continuing operations

(5,808)

(3,112)

Net cash used in operating activities from discontinued operations

–

(37)

Net cash used in operating activities

(5,808)

(3,149)

Cash flows from investing activities:

Purchases of property, machinery and mining assets

(2,482)

(3,368)

Acquisition of subsidiaries, net of cash and cash equivalents acquired

–

(3,642)

Net cash used in investing activities

(2,482)

(7,010)

Cash flows from financing activities:

Due to related parties

(262)

(737)

Government loan

78

–

Proceeds from issuance of common stock

–

20,000

Issuance costs of common stock

–

(1,516)

Proceeds from convertible preferred stock

5,000

–

Proceeds from warrants

214

–

Issuance costs of convertible preferred stock

(495)

–

Repayment of short-term loans

(15,667)

(7,599)

Proceeds from short-term loans and long-term loans

16,142

6,521

Net cash provided by financing activities

5,010

16,669

Foreign currency translation adjustment

78

367

Net (decrease) increase in cash and cash equivalents

(3,202)

6,877

Cash and cash equivalents at the beginning of the period

5,569

1,545

Cash and cash equivalents at the end of the period

$

2,367

$

8,422

Non-cash investing and financing activities

Shares issued to Acquire Xinyi Fluorite

$

–

$

9,467

Additional shares issued to Acquire Xinyi Fluorite

$

1

$

–

Shares issued as acquisition consideration for Dongsheng Mining, Meilan Mining and Qianshi Resources

$

5,676

$

–

Shares issued as the installment shares to redeem a third of the convertible preferred stock

$

3,334

$

–

Supplemental disclosures of cash flow information:

Cash paid for interest expenses

$

1,169

$

424

Cash paid for income tax

$

849

$

54