Cost of revenues increased by $5.4 million, or 8%, from $66.4 million for the second quarter ended June 30, 2012 to $71.8 million for the second quarter ended June 30, 2013 primarily due to increased sales volume from 74,353 tons for the second quarter ended June 30, 2012 to 83,896 tons for second quarter ended June 30, 2013.

Gross profit increased by $1.19 million, or 44%, to $3.9 million for the quarter ended June 30, 2013 as compared to $2.7 million in the quarter ended June 30, 2012. As a percentage of revenues, gross profit margin was 5.2% and 4% for the second quarter of 2013 and 2012, respectively.

Total operating expenses from continuing operations for the second quarter of fiscal 2013 were $2.8 million, an increase of 64.7% from $1.7 million in the prior year period.

Selling expenses decreased by $51,535, or 13%, from $409,510 for the second quarter of 2012 to $357,975 in the second quarter of 2013. This decrease is mainly due to reduced sales promotion expenses and lease expenses. As a percentage of revenues, selling expenses decreased from 0.6% for the second quarter of 2012 to 0.5% for the second quarter of 2013.

General and administrative expenses increased by $1.22 million, or 98%, from $1.25 million for the second quarter of 2012 to $2.48 million for the second quarter of 2013. The increase was caused by increases in the depreciation expense, bad debt reserves, professional services fees and consulting fees. As a percentage of revenues, general and administrative expenses increased from 1.8% for the second quarter of 2012 to 3.3% for the second quarter of 2013.

Interest expense increased by $1.9 million, from $0.92 million for the second quarter ended June 30, 2012 to $2.84 million for the second quarter ended June 30, 2013. The increase in interest expense was due to the increased bank acceptance bills for the second quarter ended June 30, 2013 as compared to the second quarter ended June 30, 2012.

Net loss attributable to the Company increased by $1.94 million, from a net income of $217,449 for the second quarter ended June 30, 2012 to net loss of $1.81 million for the second quarter ended June 30, 2013. The increase in net loss was mainly the result of increase in cost of revenue, increase in operating expense and increase in interest expense for the period indicated.

Financial Condition

As of June 30, 2013, the Company had cash balance of approximately $3.5 million, and an addition to $46.9 million in restricted cash.

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