UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number 001-33717

General Steel Holdings, Inc.

(Exact name of registrant as specified in its charter)

Nevada		41-2079252
(State or other Jurisdiction of		(I.R.S. Employer Identification No.)
Incorporation or Organization)

Suite 106, Tower H,

Phoenix Place, Shuguangxili

Chaoyang District, Beijing, China 100028

(Address of Principal Executive Office, Including Zip Code)

+86 (10) 8572 3073

(Registrant's Telephone Number, Including Area Code)

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 ¨ No x

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit such files). Yes ¨ No x

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

Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company x

Emerging Growth Company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of February 05, 2019, 41,838,864 (excluding 494,462 shares of treasury stock) shares of common stock, par value $0.001 per share, were outstanding.

Table of Contents

		Page
Part I. FINANCIAL INFORMATION

Item 1.	Unaudited Financial Statements.

	Condensed Consolidated Balance Sheets as of March 31, 2018 and December 31, 2017.	3

	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2018 and 2017.	4

	Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017.	5

	Notes to Condensed Consolidated Financial Statements.	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	18

Item 4.	Controls and Procedures.	23

Part II. OTHER INFORMATION		24

Item 1.	Legal Proceedings.	24

Item 1A.	Risk Factors.	24

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	24

Item 6.	Exhibits.	25

Signatures		26

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2018			2017
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	5,778		$	5,260
Other receivables, net		2,500			2,500
TOTAL CURRENT ASSETS		8,278			7,760


EQUIPMENT, NET		216			217
INVESTMENT IN UNCONSOLIDATED ENTITIES		18,762,663			14,708,681

TOTAL ASSETS	$	18,771,157		$	14,716,658

LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Other payables and accrued liabilities	$	620,417		$	2,129,754
Other payables - related parties		10,683,941			8,445,288
TOTAL CURRENT LIABILITIES		11,304,358			10,575,042

COMMITMENTS AND CONTINGENCIES

EQUITY:
Series A - Preferred stock, $0.001 par value, 50,000,000 shares authorized, 3,092,899 shares issued and outstanding as of March 31, 2018 and December 31, 2017		3,093			3,093
Series B - Preferred stock, $0.001 par value, 50,000,000 shares authorized, 0 shares issued and outstanding as of March 31, 2018 and December 31, 2017		-			-
Common stock, $0.001 par value, 200,000,000 shares authorized, 20,694,670 and 20,694,670 shares issued, 20,200,208 and 20,200,208 shares outstanding as of March 31, 2018 and December 31, 2017, respectively		20,695			20,695
Treasury stock, at cost, 494,462 shares as of March 31, 2018 and December 31, 2017		(839,686	)		(839,686	)
Additional paid-in-capital		1,256,955,395			1,256,955,395
Statutory reserves		1,107,010			1,107,010
Accumulated deficit		(1,252,604,065	)		(1,256,044,414	)
Accumulated other comprehensive income		2,824,357			2,939,523
TOTAL EQUITY		7,466,799			4,141,616

TOTAL LIABILITIES AND EQUITY	$	18,771,157		$	14,716,658

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

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

FOR THE THREE MONTHS ENDED MARCH 31

	2018			2017

GENERAL AND ADMINISTRATIVE EXPENSES	$	26,573		$	94,243

LOSS FROM OPERATIONS		(26,573	)		(94,243	)

OTHER EXPENSE
Income(Loss) from equity investment		3,467,056			(701,757	)
Finance/interest expense		(134	)		(2,010	)
Other expense, net		3,466,922			(703,767	)

INCOME(LOSS) BEFORE PROVISION FOR INCOME TAXES AND NONCONTROLLING INTEREST		3,440,349			(798,010	)

PROVISION FOR INCOME TAXES		-			-

NETINCOME (LOSS) FROM CONTINUING OPERATIONS		3,440,349			(798,010	)

NET LOSS FROM OPERATIONS DISPOSED, net of applicable income taxes		-			(6,505,134	)

NET INCOME (LOSS)	$	3,440,349		$	(7,303,144	)

OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation adjustments		(115,166	)		1,429,651

COMPREHENSIVE INCOME (LOSS)	$	3,325,183		$	(5,873,493	)

WEIGHTED AVERAGE NUMBER OF SHARES		20,200,208			20,000,208

INCOME(LOSS) PER SHARE - BASIC AND DILUTED
Continuing operations	$	0.16		$	(0.04	)
Operations disposed	$	-		$	(0.33	)

Net income(loss) per share	$	0.16		$	(0.37	)

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

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2018 AND 2017

	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	3,440,349		$	(7,303,144	)
Net loss from operations disposed		-			(6,505,134	)
Net income (loss) from continuing operations		3,440,349			(798,010	)
Adjustments to reconcile net loss to cash provided by (used in) operating activities from continuing operations:
Loss (income) from equity investment		(3,467,056	)		701,757
Changes in operating assets and liabilities
Other receivables		-			(2,502	)
Other payables and accrued liabilities		(1,545,566	)		46,598
Net cash used in operating activities from operations disposed		-			(4,939,858	)
Net cash used in operating activities		(1,572,273	)		(4,992,015	)

CASH FLOWS FINANCING ACTIVITIES:
Borrowings from related parties		1,572,599			61,331
Net cash provided by financing activities from operations disposed		-			4,972,827
Net cash provided by financing activities		1,572,599			5,034,158

EFFECTS OF EXCHANGE RATE CHANGE IN CASH		192			24,324

INCREASE IN CASH		518			66,467

CASH, beginning of period		5,260			3,797

CASH, end of period		5,778			70,264

Less: cash from operations disposed, end of period		-			(58,750	)

CASH FROM CONTINUING OPERATIONS, end of period	$	5,778		$	11,514

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 Co., Ltd, has been operating steel companies serving various industries in the People’s Republic of China (“PRC”). The Company’s main operation, since its disposal of its significant steel producing operating assets and trading business at December 31, 2017 has been the 32% equity holding in Tianwu General Steel Material Trading Co., Ltd (“Tianwu”). The Company, together with its subsidiaries and majority owned subsidiary is referred to as the “Group”.

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 and owned subsidiaries 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 2017 annual report on Form 10-K filed on December 17, 2018.

(a)

Basis of presentation

The consolidated financial statements of the Company reflect the activities of the following directly owned subsidiaries as of March 31, 2018:

Subsidiary		Percentage of Ownership
General Steel Investment Co., Ltd.	British Virgin Islands		100.0	%
Tongyong Shengyuan (Tianjin) Technology Development Co., Ltd. (“Tongyong Shengyuan”)	PRC		100.0	%
Tianjin Shuangsi Trading Co. Ltd. (“Tianjin Shuangsi”)*	PRC		-

*Tianjin Shuangsi was disposed on December 31, 2017 and its results of operations were presented as operations disposed for the three months ended March 31, 2017.

(b)

Principles of consolidation – subsidiaries

The accompanying consolidated financial statements include the financial statements of the Company and its 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.

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

(c)

Going concern

Pursuant to ASU 2014-15, the Company has assessed its ability to continue as a going concern for a period of one year from the date of the issuance of these consolidated financial statements. Substantial doubt about an entity’s ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year from the financial statement issuance date. The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principle, which contemplate continuation of the Company as a going concern. The Company currently has an accumulated deficit, working capital deficit, and incurred negative cash flows from operating activities. These conditions raise substantial doubt as to its ability to continue as a going concern. These consolidated financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Management anticipates that the Company will be dependent, for the near future, on its ability to obtain financial support and credit guarantee from the Company’s shareholders or other available resources from the PRC banks and other financial institutions given the Company’s credit history. However, there is no assurance that the Company will be successful in this or any of its endeavors or become financially viable to continue as a going concern.

(d)

Use of estimates

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. Actual results could differ from these estimates.

(e)

Concentration of risks and other uncertainties

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.

None of the Company’s customers individually accounted for more than 10% of total sales from operation disposed for the three months ended March 31, 2018, and one of the Company’s customers, a related party individually accounted for 99.6% of total sales from operation disposed for the three months ended March 31, 2017, respectively.

None of the Company’s suppliers individually accounted for more than 10% of the total purchases for the three months ended March 31, 2018 and three of the Company’s suppliers, all related parties accounted for more than 99.7% of the total purchases for the three months ended March 31, 2017.

(f)

Foreign currency translation and other comprehensive income

The reporting currency of the Company is the U.S. dollar. The Company’s subsidiaries 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 statement 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 $2.82 million and $2.94 million as of March 31, 2018 and December 31, 2017, respectively. The balance sheet amounts, with the exception of equity at March 31, 2018 and December 31, 2017 were translated at 6.28 RMB and 6.51 RMB to $1.00, respectively. The equity accounts were stated at their historical rate. The average translation rates applied to statement of operations accounts for the three months ended March 31, 2018 and 2017 were 6.36 RMB and 6.89 RMB, respectively. Cash flows are also translated at average translation rates for the periods, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on 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.

(g)

Financial instruments

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, other receivables, other 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.

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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:

Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.

Level 3 inputs to the valuation methodology are unobservable and significant to the fair value.

The Company did not identify any other assets or liabilities that are required to be presented on the balance sheet at fair value.

(h)

Cash

Cash includes cash on hand and demand deposits in banks with original maturities of less than three months.

(i)

Equipment, net

Equipment is stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets with a 3%-5% residual value. The depreciation expense on assets acquired under capital leases is included with depreciation expense on owned assets. The estimated useful lives are as follows:

Office equipment

5 Years

The Company considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations.

(j)

Investments in unconsolidated entities

Entities in which the Company has the ability to exercise significant influence, but does not have a controlling interest, are accounted for using the equity method. Significant influence is generally considered to exist when the Company has an ownership interest in the voting stock between 20% and 50%, and other factors, such as representation on the Board of Directors, voting rights and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate. The Company accounts for investments with ownership less than 20% using the cost method.

On December 28, 2015 General Steel (China) Co., Ltd sold its 32% equity interest in Tianwu General Steel Material Trading Co., Ltd. to Tongyong Shengyuan, one of the Company’s wholly owned subsidiaries, for $14.9 million (RMB 96.6 million). As of March 31, 2018, Tongyong Shengyuan’s net investment in the unconsolidated entity was $15.0 million.

Total investment income(loss) in unconsolidated subsidiaries amounted to $3.5 million and $(0.7) million for the three months ended March 31, 2018 and 2017, respectively, which was included in “Income(loss) from equity investment” in the consolidated statements of operations and comprehensive income(loss).

The Company performed significance tests in accordance with SEC Rule 1-02(w) of Regulation S-X and determined Tianwu qualify as significant equity investee, the condensed income statement of Tianwu is presented as follows:

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

CONDENSED STATEMENT OF OPERATIONS

(In thousands)	For the three months ended March 31, 2018			For the three months ended March 31, 2017
NET SALES	$	53		$	574

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		103			38
FINANCE EXPENSES		1,305			1,681
OTHER EXPENSES		-			10
TOTAL EXPENSES		1,408			1,729

LOSS BEFORE PROVISION FOR INCOME TAXES		(1,355	)		(1,155	)

PROVISION FOR INCOME TAXES		-			1

NET LOSS FOR CONTINUING OPERATIONS		(1,355	)		(1,156	)

NET INCOME(LOSS) FROM OPERATIONS HELD FOR SALE		12,190			(1,041	)

NET INCOME(LOSS)		10,835			(2,197	)

(k)

Revenue recognition

Sales is recognized at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, the Company has no other significant obligations and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are recorded as customer deposits. Sales represent the invoiced value of goods, net of value-added tax (VAT). All of the Company’s products sold in the PRC are subject to a Chinese value-added tax at a rate of 13% or 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing the finished product.

Gross versus Net Revenue Reporting

In the normal course of the Company’s trading business, the Company orders directly the iron ore, nickel-iron-manganese alloys, and other steel-related products from its suppliers and drop ships the products directly to its customers. In these situations, the Company generally collects the sales proceeds directly from its customers and pays for the inventory purchases to its suppliers separately. The determination of whether revenues should be reported on a gross or net basis is based on the Company’s assessment of whether it is the principal or an agent in the transaction. In determining whether the Company is the principal or an agent, the Company follows the accounting guidance for principal-agent considerations. Because the Company is not the primary obligor and is not responsible for (i) fulfilling the steel-related products delivery, (ii) establishing the selling prices for delivery of the steel-related products, (iii) performing all billing and collection activities including retaining credit risk and (iv) baring the back-end risk of inventory loss with respect to any product return from its customer, the Company has concluded that it is the agent in these arrangements, and therefore report revenues and cost of revenues on a net basis.

For the three months ended March 31, 2017, the Company reported gross sales of $13.0 million, 99.6% of which was related party sales and the Company had $19.5 million in purchases, of which 99.7% were related party purchases resulting in net cost of sales of $6.5 million in operations held for sale. See details of related party sales and purchases in Note 7.

(l)

Operations disposed

In accordance with ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations (which we presented as operations disposed), less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations in accordance with ASC 205-20-45.

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

On December 31, 2017, the Company sold Shuangsi to Wendler Investment & Management Group Co., Ltd, a related party, no consideration was received. The result of operations was presented as operations disposed in December 31, 2017 in the consolidated financial statements. The net deficiency of Shuangsi as of December 31, 2017 is as follows:

(In thousands)	December 31, 2017

CURRENT ASSETS:
Cash	$	6
Prepaid taxes		1,048
Receivables		147
Total current assets		1,201

CURRENT LIABILITIES:
Other payable and accrued liabilities		2,654
Other payables - related parties		2,008
Total current liabilities		4,662

Accumulated other comprehensive income		130
Total net deficiency		(3,331	)
Net consideration		-
Gain in disposal of subsidiary	$	3,331

Reconciliation of the amounts of major classes of income and losses from operations disposed in the unaudited condensed consolidated statements of operations and comprehensive loss which include Shuangsi’s operations for the three months ended March 31, 2018 and 2017.

	For the three months ended March 31,
Operations Disposed – Tianjin Shuangsi:	2018		2017
(In thousands)
NET LOSS	$	-	$	(6,499	)

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES		-		6
LOSS FROM OPERATIONS		-		(6,505	)
LOSS BEFORE PROVISION FOR INCOME TAXES AND NONCONTROLLING INTEREST		-		(6,505	)
PROVISION FOR INCOME TAXES				-
NET LOSS FROM OPERATIONS DISPOSED		-		(6,505	)
Less: Net loss attributable to noncontrolling interest from operations disposed		-		-
NET LOSS FROM OPERATIONS DISPOSED	$	-	$	(6,505	)

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(m)

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications have no effect on the accompanying consolidated statements of operations and cash flows.

(n)

Earnings (loss) per share

The Company has adopted the accounting principles generally accepted in the United States regarding earnings per share (“EPS”), which requires presentation of basic and diluted earnings (loss) per share in conjunction with the disclosure of the methodology used in computing such earnings (loss) per share.

Basic earnings (loss) per share are computed by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings (loss) per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock.

(o)

Treasury Stock

Treasury stock consists of shares repurchased by the Company that are no longer outstanding and are held by the Company. Treasury stock is accounted for under the cost method.

The Company has repurchased 494,462 total shares of its common stock, given retroactive effect to the 1-for-5 reverse stock split effective on October 29, 2015, under the share repurchase plan approved by the Board of Directors in December 2010.

(p)

Income taxes

The Company accounts for income taxes in accordance with the accounting principles generally accepted in the United States for income taxes. Under the asset and liability method as required by this accounting standard, the recognition of deferred income tax liabilities and assets for the expected future tax consequences of temporary differences between the income tax basis and financial reporting basis of assets and liabilities. Provision for income taxes consists of taxes currently due plus deferred taxes. The accounting principles generally accepted in the United States for accounting for uncertainty in income taxes clarify the accounting and disclosure for uncertain tax positions. A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded.

The charge for taxation is based on the results for the year as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the consolidated financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences. Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements, net operating loss carry forwards and credits, by applying enacted statutory tax rates applicable to future years. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. As of March 31, 2018, the Company’s income tax returns for December 31, 2016, 2015 and 2014 remain subject to examination by the taxing authorities.

(q)

Share-based compensation

The Company accounts for equity instruments issued in exchange for the receipt of goods or services from other than employees in accordance with the accounting standards regarding accounting for stock-based compensation and accounting for equity instruments that are issued to other than employees for acquiring or in conjunction with selling goods or services. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably determinable. The value of equity instruments issued for consideration other than employee services is determined on the earlier of a performance commitment or completion of performance by the provider of goods or services as defined by these accounting standards. In the case of equity instruments issued to consultants, the fair value of the equity instrument is recognized over the term of the consulting agreement.

(r)

Recently issued accounting pronouncements

In January 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, to enhance the reporting model for financial instruments to provide users of financial statements with more decision-useful information. The update requires equity investments (except those accounted for under the equity method or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. It eliminated the requirement for public entities to disclose the method(s) and significant assumptions used to estimate the fair value that is require to be disclosed for financial instruments measured at amortized cost on the balance sheet. For public entities, the ASU is effective for the fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company has evaluated and determined that the adoption would not have a material effect on the Company’s financial statements.

In February 2016, the FASB issued ASU 2016-02 Amendments to the ASC 842 Leases. This update requires lessee to recognize the assets and liability (the lease liability) arising from operating leases on the balance sheet for the lease term. When measuring assets and liabilities arising from a lease, a lessee (and a lessor) should include payments to be made in optional periods only if the lessee is reasonably certain to exercise an option to extend the lease or not to exercise an option to terminate the lease. Within a twelve months or less lease term, a lessee is permitted to make an accounting policy election not to recognize lease assets and liabilities. If a lessee makes this election, it should recognize lease expense on a straight-line basis over the lease term. In transition, this update will be effective for public entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company has evaluated and determined that the adoption would not have a material effect on the Company’s financial statements.

In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing. The objective is to clarify the two aspects of Topic 606: identifying performance obligations and the licensing implementation guidance, while retaining the related principles for these areas. The ASU affects the guidance in ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which is not yet effective. The effective date and transition requirements for this ASU are the same as the effective date and transition requirements in Topic 606 (and any other Topic amended by ASU 2014-09). ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date, defers the effective date of ASU 2014-09 by one year. The Company has evaluated and determined that the adoption would not have a material effect on the Company’s financial statements.

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In August 2016, the FASB has issued Accounting Standards Update (ASU) No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The amendments provide guidance on the following eight specific cash flow issues: (1) Debt Prepayment or Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made after a Business Combination; (4)Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned; (6) Life Insurance Policies; (7) Distributions Received from Equity Method Investees; (8) Beneficial Interests in Securitization Transactions; and Separately Identifiable Cash Flows and Application of the Predominance Principle. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The amendments should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company has evaluated and determined that the adoption would not have a material effect on the Company’s financial statements.

In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, which amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. For all entities, this ASU is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The Company does not believe the adoption of this ASU would have a material effect on the Company’s financial statements.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480) and Derivatives and Hedging (Topic 815). The amendments in Part I of the Update change the reclassification analysis of certain equity-lined financial instruments (or embedded features) with down round features. The amendments in Part II of this Update re-characterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The amendments in Part II of this Update do not require any transition guidance because those amendments do not have an accounting effect. Management plans to adopt this ASU during the year ending December 2019. The Company does not believe the adoption of this ASU would have a material effect on the Company’s financial statements.

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this Update affect any entity that is required to apply the provisions of Topic 220, Income Statement – Reporting Comprehensive Income, and has items of other comprehensive income for which the related tax effects are presented in other comprehensive income as required by GAAP. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption of the amendments in this Update is permitted, including adoption in any interim period, for public business entities for reporting periods for which financial statements have not yet been issued. The amendments in this Update should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. The Company does not believe the adoption of this ASU would have a material effect on the Company’s financial statements.

The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the consolidated financial position, statements of operations and cash flows.

Note 3– Other receivables, net

Other receivables, net of allowance for doubtful accounts consists of the following:

	March 31, 2018			December 31, 2017
	(in thousands)			(in thousands)
Other receivables	$	124		$	124
Less: allowance for doubtful accounts		(121	)		(121	)
Net other receivables	$	3		$	3

Movement of allowance for doubtful accounts, including related parties, is as follows:

	March 31, 2018			December 31, 2017
	(in thousands)			(in thousands)
Beginning balance	$	169		$	169
Write off		(48	)		(48	)
Ending balance		121			121

Note 4 - Other payable and accrued liabilities

Other payable and accrued liabilities consist of the following:

	March 31, 2018		December 31, 2017
	(in thousands)		(in thousands)
Salary payable	$	142	$	142
Short term payable, no interest due on demand		-		1,480
Professional fees		478		508
Other payable and accrued liabilities, net – continuing operations	$	620	$	2,130

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 5 - Supplemental disclosure of cash flow information

During the three months ended March 31, 2017, the Company incurred $0.2 million share-based compensation expense to pay off its accrued liabilities.

Note 6– Taxes

Deferred taxes assets – China

According to Chinese tax regulations, net operating losses can be carried forward to offset operating income for the next five years. Management took into consideration its operating forecast for the next five years and concluded that the beginning-of-the-year balance of deferred tax assets mainly relating to the net operating loss carry forward may not be fully realizable due to the reduction in the projection of income to be available in the next 5 years. Management therefore decided to provide 100% valuation allowance for the deferred tax assets.

Deferred taxes assets – U.S.

General Steel Holdings, Inc. was incorporated in the United States and has incurred net operating losses for income tax purposes for the three months ended March 31, 2018. The net operating loss carry forwards for United States income taxes amounted to $6.6 million, which may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, starting from 2027 through 2037. Management believes that the realization of the benefits from these losses appears uncertain due to the Company’s limited operating history and continuing losses for United States income tax purposes. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax asset benefit to reduce the asset to zero. The valuation allowance as of March 31, 2018 was $2.5 million. The net change in the valuation allowance for the three months ended March 31, 2018 was $0.03 million. Management will review this valuation allowance periodically and make adjustments as warranted

The Company has no cumulative proportionate retained earnings from profitable subsidiaries as of March 31, 2018. Accordingly, no provision has been made for U.S. deferred taxes related to future repatriation of these earnings, nor is it practicable to estimate the amount of income taxes that would have to be provided if we concluded that such earnings will be remitted in the future.

On December 22, 2017, the “Tax Cuts and Jobs Act” (the “Act”) was enacted. Under the provisions of the Act, the U.S. corporate tax rate decreased from 35% to 21%. Additionally, the Tax Act imposes a one-time transition tax on deemed repatriation of historical earnings of foreign subsidiaries, and future foreign earnings are subject to U.S. taxation. The enactment of the ACT did not have a material effect on the Company’s financials as the Company has accumulated deficits and has provided full valuation allowance to its deferred tax assets.

Note 7 – Related party transactions and balances

Related party transactions

a. The following chart summarized revenue from related parties for the three months ended March 31, 2018 and 2017.

Name of related parties	Relationship	For the three months ended March 31, 2018		For the three months ended March 31, 2017
		(in thousands)		(in thousands)
Tianjin Dazhen Trading Co., Ltd	Partially owned by CEO through indirect shareholding*		-		(44	)
Tianjin Hengying Trading Co., Ltd	Partially owned by CEO through indirect shareholding		-		12,969
Total		$	-		12,925
Less: Sales to related parties from operations disposed			-		(12,925	)

Sales–related parties – continuing operations		$	-	$	-

*The CEO is referred to herein as the chief executive officer of General Steel Holdings, Inc. Mr. Zuosheng Yu.

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Sales to related parties in trading transactions from disposed operations, which were netted against the corresponding cost of goods sold, amounted to $0 million and $6.5 million net cost of sales for the three months ended March 31, 2018 and 2017, respectively.

b. The following charts summarize purchases from related parties for the three months ended March 31, 2018 and 2017.

Name of related parties	Relationship	For the three months ended March 31, 2018		For the three months ended March 31, 2017
		(in thousands)		(in thousands)
Wendlar Tianjin Industry Co., Ltd	Partially owned by CEO through indirect shareholding		-		2,998
Tianjin Dazhen Trading Co., Ltd	Partially owned by CEO through indirect shareholding		-		7,035
General Steel (China) Co., Ltd	Partially owned by CEO through indirect shareholding		-		9,427
Total		$	-	$	19,460
Less Purchases from related parties from operations disposed			-		(19,460	)
Purchases–related parties–continuing operations		$	-	$	-

Related party balances

Other payables – related parties:

Other payables – related parties are those nontrade payables arising from transactions between the Company and its related parties, such as advances or payments from these related parties on behalf of the Group.

Name of related parties	Relationship	March 31, 2018		December 31, 2017
		(in thousands)		(in thousands)
Wendlar Investment & Management Group Co., Ltd	Common control under CEO	$	2	$	-
Yangpu Capital Automobile	Partially owned by CEO through indirect shareholding		95		95
General Steel (China) Co., Ltd	Partially owned by CEO through indirect shareholding		10,489		6,881
Zuosheng Yu	CEO		98		1,469
Total		$	10,684	$	8,445

Note 8 – Equity

In March 2017, the board approved to issue 200,000 restricted shares to a consultant pursuant to consulting services performed in 2016.

GENERAL STEEL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 9 – Subsequent event

On August 24, 2018, the Company entered into a subscription agreement with Hummingbird Holdings Limited, a BVI entity. Pursuant to the Subscription Agreement, the Investor purchased 7,352,941 shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $0.034 per share for aggregate gross proceeds of $250,000.

On November 30, 2018, the Company entered into another subscription agreement with Hummingbird Holdings Limited, a BVI entity. Pursuant to the Subscription Agreement, the Investor purchased 14,285,715 shares of the Company’s common stock, par value $0.001 per share, at a purchase price of $0.035 per share for aggregate gross proceeds of $500,000.

On December 31, 2018, the Company entered into a Share Exchange Agreement (the “Agreement”) with Fresh Human Global Ltd., a Cayman Islands corporation (“FH”) and Hummingbird Holdings Limited, the sole shareholder of FH (“Hummingbird”) holding one share of FH. Pursuant to the terms of the Agreement, Hummingbird exchanged its equity interest in FH for 4,175,095 shares of restricted stock (the “Shares”) of the Company (the “Exchange”). As a result of the Exchange, FH is now a wholly-owned subsidiary of the Company. FH was valued at $4,175,095.

The transactions contemplated by the Agreement are related party transactions. Hummingbird is a shareholder of the Company, holding 51.1% of the Company’s outstanding common stock and through ownership of the Company’s Series A Preferred Stock has voting power of 30% of the combined voting power of our common stock and preferred stock, and as a result of the Exchange, Hummingbird now holds 55.5 % of the common stock of the Company.

FH is the sole shareholder of Tuotuo River HK Limited, a Hong Kong limited liability company, which through various contractual arrangements between Tuotuo’s wholly-owned subsidiary Beijing Qianhaitong Technology Development Co., Ltd. and Beijing Ouruixi Medical Technology Co., Ltd., a PRC entity and its shareholders is in the business of cell research, development, storage and cell culture service in the People’s Republic of China.

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

Forward-Looking Statements

The following discussion of the financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes thereto. The following discussion contains forward-looking statements. General Steel Holdings, Inc. and its subsidiaries is referred to herein as “we,” “our,” “us” and “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 the People’s Republic of 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. Additional information regarding certain factors which could cause actual results to differ from such forward-looking statements include, but are not limited to, those described in Item 1A, “Risk Factors”, to our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 filed with the SEC on December 17, 2018.

OVERVIEW

We were incorporated on August 5, 2002, in the State of Nevada. We are headquartered in Beijing, China and through our 100% owned subsidiary, General Steel Investment Co., Ltd., we have been operating steel companies serving various industries in the People’s Republic of China (“PRC”). Our main operation through December 31, 2015 had been the manufacturing and sales of steel products such as steel rebar, hot-rolled carbon and silicon sheets and spiral-weld pipes while we commenced trading in 2016.

Our steel business after December 31, 2015 was primarily comprised of Tianjin Shuangsi Trading Co., Ltd., (“Tianjin Shuangsi”), a trading company that mainly sources overseas iron ore for steel mills. We acquired a 100% equity interest in Tianjin Shuangsi on February 16, 2016. On December 31, 2017, the Company sold Tianjin Shuangsi for RMB 20,000,000 (approximately $2.88 million) so the result of operations was presented as operations to be disposed in the consolidated financial statements. See Note 2(l) – Operations disposed.

Tianjin Shuangsi is presented as discontinued operations in our Consolidated Balance Sheets and Consolidated Statements of Operations.

RESULTS OF OPERATIONS

The Company’s remaining business consists of its 32% equity holding in Tianwu Tongyong (Tianjin) International Trade Co., Ltd, ("TianwuTongyong").

Statements of Operations for the three months ended March 31, 2018 and 2017:

(In thousands except share data)	2018			2017			Change			Percentage Change
Selling, General and Administrative Expenses	$	(27	)	$	(94	)	$	67			(71.3	)%
Loss from Operations		(27	)		(94	)	$	67			(71.3	)%

Other Income (Expense)		3,467			(704	)	$	4,171			(592.5	)%
Income (Loss) Before Provision for Income Taxes and Noncontrolling Interest		3,440			(798	)	$	4,238			(531.1	)%
Provision for Income Taxes		-			-		$	-			-	%
Income (Loss) from Continuing Operations		3,440			(798	)	$	4,238			(531.1	)%
Net Loss from Operations Disposed, Net of Income Taxes		-			(6,505	)	$	6,505			(100.0	)%
Net Income (Loss)	$	3,440		$	(7,303	)	$	(10,743	)		(147.1	)%
Foreign Currency Translation Adjustments		(115	)		1,430		$	(1,545	)		(108.0	)%
Comprehensive Income (Loss)		3,325			(5,873	)	$	9,198			(156.6	)%

Weighted Average Number of Shares		20,200			20,000			200			1.0	%
Loss Per Share – Basic and Diluted
Continuing Operations	$	0.16		$	(0.04	)	$	0.21			(526.8	)%
Operations disposed	$	-		$	(0.33	)	$	0.33			(100.0	)%
Net Loss	$	0.16		$	(0.37	)	$	0.54			(145.9	)%

General and Administrative Expenses (“G&A”)

Three months ended March 31, 2018 compared with three months ended March 31, 2017

(in thousands)
	March 31, 2018			March 31, 2017			Change %

General and administrative expenses	$	(27	)	$	(94	)		(71.3	)%

G&A expenses decreased by 71.3% to $(0.03) million for the three months ended March 31, 2018, compared to $(0.1) million for the same period in 2017. The increase was mainly due to the disposed major operations and decrease in professional expenses.

Loss from Operations

Three months ended March 31, 2018 compared with three months ended March 31, 2017

(in thousands)
	2018			2017			Change %

Loss from operations	$	(27	)	$	(94	)		(71.3	)%

Loss from operations for the three months ended March 31, 2018 was $(0.03) million as compared to a loss of $(0.1) million for the same period in 2017. The increase was mainly due to the disposed major operations and decrease in professional expenses.

Other Income(Expense)

Three months ended March 31, 2018 compared with three months ended March 31, 2017

(in thousands)
	2018		2017			Change %

Income(Loss) from equity investment		3,467		(702	)		(593.9	)%
Finance/interest expense				(2	)		(100.0	)%
Total other (expense)income	$	3,467	$	(704	)		(592.5	)%

Total other income for the three months ended March 31, 2018 was $3.5 million, as compared to $(0.7) other expenses for the same period in 2017. The increase in other income was mainly due to a gain from equity investment.

Net Income (Loss) from Continuing Operations

Three months ended March 31, 2018 compared with three months ended March 31, 2017

(in thousands)
	2018		2017		Change %

Net Income (loss) from continuing operations	$	3,440	$	(798)		(531.1	)%

Net income from continuing operations for the three months ended March 31, 2018 was $3.4 million as compared to a loss of approximately $(0.8) million for the same period in 2017. The increase in net income from operations was predominantly due to the reasons stated above.

Net Loss from Operations Disposed

Three months ended March 31, 2018 compared with three months ended March 31, 2017

(in thousands)
	2018		2017			Change %

Net loss from operations disposed, net of applicable income taxes	$	-	$	(6,505	)		(100.0)	%

Net loss from operations disposed for the three months ended March 31, 2017 was approximately $(6.5) million. Net loss from operations disposed was mainly from Tianjin Shuangsi as it had operating losses in its trading business.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2018, our current liabilities exceeded the current assets by approximately $11.3 million. Given our expected expenditures in the foreseeable future together with our cash flow from the trading operations, we have comprehensively considered our available sources of funds as follows:

Financial support and credit guarantee from related parties; and

Additional equity or debt financing

Based on the above considerations, our Board of Directors is of the opinion that we are able to obtain sufficient funds to meet our working capital requirements and debt obligations as they become due over the twelve months from the balance sheet date. In addition, we have completed the divestiture of our steel manufacturing business as planned on terms favorable to the Company by reducing our net deficiency.

Substantially all our operations are conducted in China and all of our revenues are denominated in Renminbi (RMB). RMB is subject to the exchange control regulation in China, and, as a result, we may have difficulty distributing any dividends outside of China due to PRC exchange control regulations that restrict its ability to convert RMB into U.S. Dollars.

Under applicable PRC regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at least 10.0% of its after-tax profit based on PRC accounting standards each year to its general reserves until the accumulative amount of such reserves reaches 50.0% of its registered capital. These reserves are not distributable as cash dividends. The board of directors of a foreign-invested enterprise has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation. Under PRC law, RMB is currently convertible into U.S. Dollars under a company’s “current account,” which includes dividends, trade and service-related foreign exchange transactions, without prior approval of the State Administration of Foreign Exchange (SAFE), but is not from a company’s “capital account,” which includes foreign direct investments and loans, without the prior approval of the SAFE.

Going concern

These consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to repay its debt obligations, to obtain necessary financing resources to continue operations, along with the market and general economic condition. Management anticipates that the Company will be dependent, for the near future, on equity financing and debt financing in the form of short-term loans, loans from related parties, to finance the working capital requirements of the Company. However, there is no assurance that the Company will be successful in this or any of its endeavors or become financially viable and continue as a going concern.

The Company had working capital deficit of $11.3 million as of March 31, 2018 and working capital deficit of $10.6 million as of December 31, 2017. In addition, the Company had accumulated deficit of $1.3 billion as of March 31, 2018 and incurred negative cash flows from operating activities totaling $(1.6) million for three-month ended March 31, 2018. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent on its ability to seek equity financing and obtain financial support and credit guarantee from the Company’s related parties or other available resources from the PRC banks and other financial institutions given the Company’s credit history. The Company’s consolidated financial statements do not include any adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Cash-flow

Operating Activities

Net cash used in operating activities for the three months ended March 31, 2018 and 2017 was $1.5 million and $5.0 million, respectively. This change was mainly due to the combination of the following factors:

The net income from continuing operations of $3.4 million, mainly from non-cash income from equity investment for the three months ended March 31, 2018 compared to net loss of $0.8 million in the same period in 2017 which were mainly due to loss from equity investment.

The cash outflow was mainly due to the change in other payables and accrued liabilities.

Investing activities

We did not use any cash for investing activities for the three months ended March 31, 2018 or the three months ended March 31, 2017.

Financing activities

Net cash provided by financing activities was $1.6 million for the three months ended March 31, 2018 compared to $5.0 million provided by financing activities for the three months ended March 31, 2017. The decrease of cash inflow from financing activities was because we had no borrowings from our related parties.

Restrictions on our ability to distribute dividends

Substantially all of our assets are located within the PRC. Under the laws of the PRC governing foreign invested enterprises, dividend distribution and other funds transfers are allowed but subject to special procedures under relevant rules and regulations. Foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, a foreign-invested enterprise in China is required to set aside at least 10.0% of its after-tax profit based on PRC accounting standards each year to its general reserves until the accumulative amount of such reserves reaches 50.0% of its registered capital. These reserves are not distributable as cash dividends. The board of directors of a foreign-invested enterprise has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation. Under PRC regulations, RMB is currently convertible into U.S. Dollars under a company’s “current account” which includes dividends, trade and service-related foreign exchange transactions, without prior approval of the State Administration of Foreign Exchange (SAFE). Transfers from a company’s “capital account,” which includes foreign direct investments and loans, can’t be executed without the prior approval of the SAFE.

There are no restrictions to distribute or transfer other funds from General Steel Investment to us.

We have never declared or paid any cash dividends to our shareholders. We do not plan to pay any dividends out of our retained earnings for the three months ended March 31, 2018. With respect to retained earnings accrued after such date, our Board of Directors may declare dividends after taking into account our operations, earnings, financial condition, cash requirements and availability and other factors as it may deem relevant at such time. Any declaration and payment, as well as the amount, of dividends will be subject to our By-Laws, charter and applicable Chinese and U.S. state and federal laws and regulations, including the approval from the shareholders of each subsidiary which intends to declare such dividends, if applicable.

We have previously raised money in the U.S. capital markets which has provided the capital needed for our operations and investments activities. Thus, the foreign currency restrictions and regulations in the PRC on the dividends distribution will not have a material impact on our liquidity, financial condition, and results of operation.

Impact of Inflation

We are subject to commodity price risks arising from price fluctuations in the market prices of the steel-related products. We have generally been able to pass on cost increases through price adjustments. However, the ability to pass on these increases depends on market conditions influenced by the overall economic conditions in China. We do not believe that inflation risk is material to our business or our financial position, results of operations or cash flows.

OFF-BALANCE SHEET ARRANGEMENTS

There were no off-balance sheet arrangements for the three months ended March 31, 2018 that have or that in the opinion of management are likely to have, a current or future material effect on our financial condition or results of operations.

Critical Accounting Policies

We prepare our consolidated financial statements in accordance with US GAAP. These accounting principles require us to make judgments, estimates and assumptions on the reported amounts of assets and liabilities at the end of each fiscal period, and the reported amounts of revenues and expenses during each fiscal period. We continually evaluate these judgments and estimates based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and assumptions that we believe to be reasonable.

There have been no other material changes during the quarter ended March 31 2018 in our significant accounting policies from those previously disclosed in the Company’s annual report for the fiscal year ended December 31, 2017. The discussion of our critical accounting policies contained in Note 2 to our unaudited condensed consolidated financial statements in this Report, “Summary of our Significant Accounting Policies”, is incorporated herein by reference.

ITEM 4. CONTROLS AND PROCEDURES

Our Company, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the design and operation of our disclosure controls and procedures, as defined under Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of March 31, 2018. Our Company’s disclosure controls and procedures are designed: (i) to ensure that information required to be disclosed by us in the reports that we file or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms; and (ii) to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Based on their evaluations, our Chief Executive Officer and Chief Financial Officer have concluded that our Company’s disclosure controls and procedures were not effective as of March 31, 2018 due to the material weaknesses in our internal control over financial reporting previously identified in our December 31, 2017 Form 10K filing and described below:

Ineffective review process in our accounting department.

Lack of a qualified full-time accountant who possesses U.S. GAAP knowledge to oversee the recording of our daily transaction.

Based on the above material weakness, our Chief Executive Officer and Chief Financial Officer concluded that our Company’s disclosure controls and procedures were not effective as of March 31, 2018.

Remediation

Our management has dedicated significant resources to correcting the control deficiencies and to ensuring that we take proper steps to improve our internal control over financial reporting after the completion of divesture of our steel business and current business model from our trading business.

We have taken a number of remediation actions that we believe will improve the effectiveness of our internal control over financial reporting including the following:

Implement an internal review process over financial reporting to review all recent accounting pronouncements and to verify that the accounting treatment identified in such report have been fully implemented. In the future, we will continue to improve our ongoing review and supervision of our internal control over financial reporting;

Revise our internal control over financial reporting procedure on potential acquisition and unusual transactions.

Management believes the foregoing efforts will effectively remediate the material weaknesses described above.

Despite the existence of the material weaknesses discussed above, our management, including our Chief Executive Officer and Chief Financial Officer, have concluded that the consolidated financials included in this Quarterly Report on Form 10-Q present, in all material aspects, our financial position, results of operations, comprehensive loss and cash flows for the periods presented, in conformity with U.S. GAAP.

Changes in Internal Controls over Financial Reporting

Except as otherwise noted above, there has not been any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we are subject to certain legal proceedings, claims and disputes that arise in the ordinary course of our business. Although we cannot predict the outcomes of these legal proceedings, we do not believe these actions, in the aggregate, will have a material adverse impact on our financial position, results of operations or liquidity. We are currently not a party to any material legal proceedings.

ITEM 1A. RISK FACTORS

To our knowledge and to the extent additional factual information disclosed in this Quarterly Report on Form 10-Q relates to such risk factors, there have been no other changes in the risk factors described in “ITEM 1A. RISK FACTORS” in our Annual Report on Form 10-K for the year ended December 31, 2017, which was filed with the SEC on December 17, 2018.

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

None.

ITEM 6. EXHIBITS

31.1*		Certification of the CEO (Principal Executive Officer) pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as filed herewith.

31.2*		Certification of the CFO (Principal Financial Officer) pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, as filed herewith.

32.1*		Certification of the CEO (Principal Executive Officer) pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as filed herewith.

32.2*		Certification of the CFO (Principal Financial Officer) pursuant to 18 U.S.C. Section 1350 adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, as filed herewith.

101.INS*		XBRL Instance Document

101.SCH*		XBRL Taxonomy Extension Schema Document

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document

*Filed herewith.

SIGNATURES

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

	General Steel Holdings, Inc.

Date: February 07, 2019	By:	/s/ Zuosheng Yu
	Zuosheng Yu
	Chief Executive Officer

Date: February 07, 2019	By:	/s/ John Chen
	John Chen
	Director and Chief Financial Officer

GENERAL STEEL HOLDINGS INC 10-Q