----

----

| Nevada                                                         |   | 45-0538522                        |
|----------------------------------------------------------------|--------|-----------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (IRS Employer Identification No.) |

| Large Accelerated Filer | o |   | Accelerated Filer         | o |
|-------------------------|---|--------|---------------------------|---|
| Non-accelerated filer   | o |   | Smaller reporting company | x |

----

| PART I - FINANCIAL INFORMATION                                                     |                     |
|------------------------------------------------------------------------------------|--------------------------|
|                                                                               |                     |
| Item 1.  Financial Statements                                            | 1                        |
|                                                                               |                     |
| Condensed Consolidated Balance Sheets                                              | 1                        |
|                                                                               |                     |
| Condensed Consolidated Statements of Operations and Comprehensive Income (loss)    | 2                        |
|                                                                               |                     |
| Condensed Consolidated Statements of Cash Flows                                    | 3                        |
|                                                                               |                     |
| Notes to Condensed Consolidated Financial Statements                               |   4 – 19 |
|                                                                               |                     |
| Item 2.  Management’s Discussion and Analysis or Plan of Operation | 20                       |
|                                                                               |                     |
| Item 3.  Quantitative and Qualitative Disclosures About Market Risk      | 29                       |
|                                                                               |                     |
| Item 4. Controls and Procedures                                                    |   29                |
|                                                                               |                     |
| PART II – OTHER INFORMATION                                                  | 31                       |
|                                                                               |                     |
| Item 1.  Legal Proceedings                                               | 31                       |
|                                                                               |                     |
| Item 1A. Risk Factors                                                              | 31                       |
|                                                                               |                     |
| Item 2.  Unregistered Sales of Equity Securities And Use Of Proceeds     | 31                       |
|                                                                               |                     |
| Item 3.  Defaults Upon Senior Securities                                 | 31                       |
|                                                                               |                     |
| Item 4.  (Removed and Reserved)                                          | 31                       |
|                                                                               |                     |
| Item 5.  Other Information                                               | 31                       |
|                                                                               |                     |
| Item 6.  Exhibits                                                        | 32                       |

----

----

|                                                                            |   |   |   |   | June 30,    |   |        | December 31, |   |
|---------------------------------------------------------------------------------|--------|--------|--------|--------|-------------|--------|-------------|--------------|--------|
|                                                                            |   | Note   |   |   | 2012        |   |        | 2011         |   |
|                                                                            |   |   |   |   | (Unaudited) |   |        |         |   |
| ASSETS                                                                          |   |   |   |   |        |   |        |         |   |
| Current assets:                                                                 |   |   |   |   |        |   |        |         |   |
| Cash                                                                            |   |   | 3      |   |        | $      | 9,879,169   |         |   | $ | 7,325,017 |   |
| Pledged bank deposits                                                           |   |   |   |   |        |   | 239,816,494 |         |   |   | 156,318,066 |   |
| Bills receivable                                                                |   |   |   |   |        |   | 3,309,663   |         |   |   | 1,574,000 |   |
| Accounts receivable                                                             |   |   | 4      |   |        |   | 4,014,076   |         |   |   | 2,226,288 |   |
| Inventories                                                                     |   |   | 5      |   |        |   | 73,048,249  |         |   |   | 38,945,968 |   |
| Prepayments to suppliers                                                        |   |   | 6      |   |        |   | 44,507,626  |         |   |   | 15,781,294 |   |
| Consumption tax refund receivable                                               |   |   | 7      |   |        |   | 107,023,606 |         |   |   | 55,809,560 |   |
| Amounts due from related parties                                                |   |   | 22     |   |        |   | 39,625      |         |   |   | 39,350 |   |
| Other current assets                                                            |   |   | 8      |   |        |   | 60,646,615  |         |   |   | 45,978,428 |   |
| Deferred income tax assets                                                      |   |   | 17     |   |        |   | 37,609      |         |   |   | 37,348 |   |
|                                                                            |   |   |   |   |        |   |        |         |   |   |   |   |
| Total current assets                                                            |   |   |   |   |        |   | 542,322,732 |         |   |   | 324,035,319 |   |
|                                                                            |   |   |   |   |        |   |        |         |   |   |   |   |
| Property, plant and equipment, net                                              |   |   | 9      |   |        |   | 209,768,917 |         |   |   | 190,867,621 |   |
| Intangible assets, net                                                          |   |   | 10     |   |        |   | 931,848     |         |   |   | 978,503 |   |
| Land use rights                                                                 |   |   | 11     |   |        |   | 10,920,476  |         |   |   | 11,068,762 |   |
| VAT recoverable                                                                 |   |   |   |   |        |   | 2,541,215   |         |   |   | 2,893,635 |   |
|                                                                            |   |   |   |   |        |   |        |         |   |   |   |   |
| Total assets                                                                    |   |   |   |   |        | $      | 766,485,188 |         |   | $ | 529,843,840 |   |
|                                                                            |   |   |   |   |        |   |        |         |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY                                      |   |   |   |   |        |   |        |         |   |   |   |   |
| Current liabilities:                                                            |   |   |   |   |        |   |        |         |   |   |   |   |
| Short-term bank borrowings                                                      |   |   | 12     |   |        | $      | 393,534,612 |         |   | $ | 225,969,421 |   |
| Bills payable                                                                   |   |   |   |   |        |   | 111,267,000 |         |   |   | 63,550,250 |   |
| Current portion of long-term bank borrowings                                    |   |   | 13     |   |        |   | 15,850,000  |         |   |   | 15,740,000 |   |
| Accounts payable                                                                |   |   |   |   |        |   | 79,936,476  |         |   |   | 97,588,137 |   |
| Advances from customers                                                         |   |   | 4      |   |        |   | 41,202,535  |         |   |   | 7,821,623 |   |
| Accrued expenses and other payables                                             |   |   | 14     |   |        |   | 30,254,525  |         |   |   | 30,287,946 |   |
| Income taxes payable                                                            |   |   | 17     |   |        |   | 1,224,165   |         |   |   | 186,326 |   |
| Dividends payable                                                               |   |   |   |   |        |   | 2,381,759   |         |   |   | 2,381,759 |   |
| Amounts due to related parties                                                  |   |   | 22     |   |        |   | 768,313     |         |   |   | 621,077 |   |
|                                                                            |   |   |   |   |        |   |        |         |   |   |   |   |
| Total liabilities, all current                                             |   |   |   |   |        |   | 676,419,385 |         |   |   | 444,146,539 |   |
|                                                                            |   |   |   |   |        |   |        |         |   |   |   |   |
| Series B convertible preferred stock:                                           |   |   |   |   |        |   |        |         |   |   |   |   |
| Par value: $0.001; Authorized: 8,000,000 shares                                 |   |   |   |   |        |   |        |         |   |   |   |   |
| 6% cumulative dividend for one year from insurance, with liquidation preference |   |   |   |   |        |   |        |         |   |   |   |   |
| over common stock                                                               |   |   |   |   |        |   |        |         |   |   |   |   |
| Issued and outstanding: 5,333,340 shares,                                       |   |   |   |   |        |   |        |         |   |   |   |   |
| liquidation preference of $20,000,000                                           |   |   |   |   |        |   | 16,451,552  |         |   |   | 16,451,552 |   |
|                                                                            |   |   |   |   |        |   |        |         |   |   |   |   |
| Commitments and contingencies                                                   |   |   | 18     |   |        |   | -           |         |   |   | - |   |
|                                                                            |   |   |   |   |        |   |        |         |   |   |   |   |
| Stockholders’ equity:                                                     |   |   |   |   |        |   |        |         |   |   |   |   |
| Common stock:                                                                   |   |   |   |   |        |   |        |         |   |   |   |   |
| Par value:$0.001; Authorized: 100,000,000 shares;                               |   |   |   |   |        |   |        |         |   |   |   |   |
| Issued and outstanding: 57,646,160 shares as at June 30, 2012 and               |   |   |   |   |        |   |        |         |   |   |   |   |
| December 31, 2011                                                               |   |   |   |   |        |   | 57,646      |         |   |   | 57,646 |   |
| Additional paid-in capital                                                      |   |   |   |   |        |   | 49,951,346  |         |   |   | 49,198,278 |   |
| Statutory reserve                                                               |   |   |   |   |        |   | 3,744,304   |         |   |   | 3,744,304 |   |
| Accumulated other comprehensive income                                          |   |   |   |   |        |   | 7,253,902   |         |   |   | 6,545,811 |   |
| Retained earnings                                                               |   |   |   |   |        |   | 12,607,053  |         |   |   | 9,699,710 |   |
|                                                                            |   |   |   |   |        |   |        |         |   |   |   |   |
| Total stockholders’ equity                                                |   |   |   |   |        |   | 73,614,251  |         |   |   | 69,245,749 |   |
|                                                                            |   |   |   |   |        |   |        |         |   |   |   |   |
| Total liabilities and stockholders' equity                                      |   |   |   |   |        | $      | 766,485,188 |         |   | $ | 529,843,840 |   |

----

|                                                                       |   | Three Months Ended |             |   | Six Months Ended |   |
|----------------------------------------------------------------------------|--------|--------------------|------------------|--------|------------------|--------|
|                                                                       |   | June 30,           |             |   | June 30,         |   |
|                                                                       |   | 2012               |             |   | 2011             |   |   | 2012 |   |   | 2011 |   |
| Sales                                                                      |   |               |             |   |             |   |   |   |   |   |   |   |
|    External parties                                              |   | $                  | 184,425,717      |   |             | $      | 115,281,945 |   |   | $ | 367,750,405 |   |   | $ | 239,436,744 |   |
|    Related parties                                          |   |               | -                |   |             |   | 35,607,658 |   |   |   | - |   |   |   | 58,217,477 |   |
|                                                                       |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Total Sales                                                                |   |               | 184,425,717      |   |             |   | 150,889,603 |   |   |   | 367,750,405 |   |   |   | 297,654,221 |   |
|                                                                       |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Cost of sales                                                              |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
|    External parties                                         |   |               | 178,005,456      |   |             |   | 111,055,933 |   |   |   | 351,857,165 |   |   |   | 224,870,131 |   |
|    Related parties                                          |   |               | -                |   |             |   | 37,977,326 |   |   |   | - |   |   |   | 58,276,685 |   |
|                                                                       |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Total Cost of sales                                                        |   |               | 178,005,456      |   |             |   | 149,033,259 |   |   |   | 351,857,165 |   |   |   | 283,146,816 |   |
|                                                                       |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                               |   |               | 6,420,261        |   |             |   | 1,856,344 |   |   |   | 15,893,240 |   |   |   | 14,507,405 |   |
| Operating expenses                                                         |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
|    Selling expenses                                         |   |               | 388,217          |   |             |   | 215,548 |   |   |   | 641,123 |   |   |   | 754,680 |   |
| General and administrative expenses                                        |   |               | 2,656,620        |   |             |   | 4,529,744 |   |   |   | 5,266,815 |   |   |   | 7,764,824 |   |
|                                                                       |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Total operating expenses                                                   |   |               | 3,044,837        |   |             |   | 4,745,292 |   |   |   | 5,907,938 |   |   |   | 8,519,504 |   |
|                                                                       |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) from operations                                              |   |               | 3,375,424        |   |             |   | (2,888,948 | ) |   |   | 9,985,302 |   |   |   | 5,987,901 |   |
|                                                                       |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expense):                                                    |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Interest income                                                            |   |               | 1,882,812        |   |             |   | 781,941 |   |   |   | 2,822,046 |   |   |   | 1,688,885 |   |
| Interest expense                                                           |   |               | (2,930,281       | )      |             |   | (2,638,734 | ) |   |   | (7,308,982 | ) |   |   | (5,835,364 | ) |
| Foreign exchange (loss) gain, net                                          |   |               | (542,352         | )      |             |   | 3,200,356 |   |   |   | (364,518 | ) |   |   | 2,052,713 |   |
| Liquidated damages expense                                                 |   |               | -                |   |             |   | (1,300,730 | ) |   |   | - |   |   |   | (1,300,730 | ) |
| Other income (expense), net                                                |   |               | 147,022          |   |             |   | 1,689,404 |   |   |   | (217,039 | ) |   |   | 3,716,178 |   |
|                                                                       |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Total other expense (income)                                               |   |               | (1,442,799       | )      |             |   | 1,732,237 |   |   |   | (5,068,493 | ) |   |   | 321,682 |   |
|                                                                       |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) before income taxes                                          |   |               | 1,932,625        |   |             |   | (1,156,711 | ) |   |   | 4,916,809 |   |   |   | 6,309,583 |   |
|                                                                       |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Income tax expense                                                         |   |               | 870,277          |   |             |   | 665,828 |   |   |   | 2,009,469 |   |   |   | 2,917,979 |   |
| Net income (loss) attributable to Keyuan                                   |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
|    Petrochemicals Inc. stockholders                         |   |               | 1,062,348        |   |             |   | (1,822,539 | ) |   |   | 2,907,340 |   |   |   | 3,391,604 |   |
|                                                                       |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
|                                                                       |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Dividends to Series B convertible                                          |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
|     preferred stockholders                             |   |               | -                |   |             |   | 306,247 |   |   |   | - |   |   |   | 602,507 |   |
| Net income (loss) attributable to Keyuan                                   |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
|    Petrochemicals Inc. common stockholders                  |   | $                  | 1,062,348        |   |             | $      | (2,128,786 | ) |   | $ | 2,907,340 |   |   | $ | 2,789,097 |   |
| Net income (loss) attributable to Keyuan                                   |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
|    Petrochemicals Inc. stockholders                         |   | $                  | 1,062,348        |   |             | $      | (1,822,539 | ) |   | $ | 2,907,340 |   |   | $ | 3,391,604 |   |
|                                                                       |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income                                                 |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustment                                    |   |               | 130,680          |   |             |   | 617,550 |   |   |   | 708,091 |   |   |   | 1,174,874 |   |
|                                                                       |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive Income (loss)                                                |   | $                  | 1,193,028        |   |             | $      | (1,204,989 | ) |   | $ | 3,615,431 |   |   | $ | 4,566,478 |   |
|                                                                       |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Earnings (loss)  per share:Attributable to common stock:         |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| - Basic                                                                    |   | $                  | 0.02             |   |             | $      | (0.04 | ) |   | $ | 0.05 |   |   | $ | 0.05 |   |
| - Diluted                                                                  |   | $                  | 0.02             |   |             | $      | (0.04 | ) |   | $ | 0.05 |   |   | $ | 0.05 |   |
|                                                                       |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of shares of common stock used in calculation |   |               |             |   |             |   |   |   |   |   |   |   |   |   |   |   |
|    Basic                                                         |   |               |  57,646,160 |   |             |   | 57,579,239 |   |   |   | 57,646,160 |   |   |   | 57,578,896 |   |
|    Diluted                                                       |   |               | 62,979,500       |   |             |   | 57,579,239 |   |   |   | 62,979,500 |   |   |   | 63,836,892 |   |

----

|                                                      |   | Six Months Ended June 30, |         |
|-----------------------------------------------------------|--------|---------------------------|--------------|
|                                                      |   | 2012                      |         |   | 2011 |   |
|                                                      |   | (Unaudited)               |         |   | (Unaudited) |   |
| Cash flows from operating activities:                     |   |                      |         |   |   |   |
| Net income                                                |   | $                         | 2,907,340    |   |   | $ | 3,391,604 |   |
| Adjustments to reconcile net income to net cash           |   |                      |         |   |   |   |   |   |
| (Used in) provided by operating activities:               |   |                      |         |   |   |   |   |   |
| Loss on disposal of property and equipment                |   |                      | -            |   |   |   | 3,504 |   |
| Depreciation                                              |   |                      | 5,452,134    |   |   |   | 4,671,566 |   |
| Amortization                                              |   |                      | 53,548       |   |   |   | 51,675 |   |
| Land use rights amortization                              |   |                      | 225,868      |   |   |   | 217,999 |   |
| Share-based compensation expense                          |   |                      | 819,496      |   |   |   | 1,285,185 |   |
| Changes in operating assets and liabilities:              |   |                      |         |   |   |   |   |   |
| Bills receivable                                          |   |                      | (1,726,404   | ) |   |   | 5,665,046 |   |
| Account receivable                                        |   |                      | 2,244,109    |   |   |   | - |   |
| Inventories                                               |   |                      | (33,864,254  | ) |   |   | (14,517,420 | ) |
| Prepayments to suppliers                                  |   |                      | (25,882,018  | ) |   |   | 11,118,823 |   |
| Consumption tax refund receivable                         |   |                      | (50,875,322  | ) |   |   | 5,455,515 |   |
| Other current assets                                      |   |                      | (16,565,560  | ) |   |   | (23,036,081 | ) |
| Accounts payable                                          |   |                      | (18,462,125  | ) |   |   | 44,000,832 |   |
| Advances from customers                                   |   |                      | 29,341,763   |   |   |   | 4,320,196 |   |
| Income taxes payable                                      |   |                      | 879,675      |   |   |   | (9,427,659 | ) |
| Accrued expenses and other payables                       |   |                      | (1,483,151   | ) |   |   | 1,500,872 |   |
|                                                      |   |                      |         |   |   |   |   |   |
| Net cash(used in) provided by operating activities        |   |                      | (106,934,901 | ) |   |   | 34,701,657 |   |
|                                                      |   |                      |         |   |   |   |   |   |
| Cash flows from investing activities:                     |   |                      |         |   |   |   |   |   |
| Proceeds from property disposal of property and equipment |   |                      | -            |   |   |   | 10,512 |   |
| Purchase of property, plant and equipment,                |   |                      | (21,295,703  | ) |   |   | (11,574,245 | ) |
|                                                      |   |                      |         |   |   |   |   |   |
| Net cash used in investing activities                     |   |                      | (21,295,703  | ) |   |   | (11,563,733 | ) |
|                                                      |   |                      |         |   |   |   |   |   |
| Cash flows from financing activities:                     |   |                      |         |   |   |   |   |   |
| Pledged bank deposits used for bank borrowings            |   |                      | (82,489,175  | ) |   |   | (52,211,458 | ) |
| Proceeds from short-term bank borrowings                  |   |                      | 457,866,240  |   |   |   | 74,477,809 |   |
| Repayment of short-term bank borrowings                   |   |                      | (291,149,318 | ) |   |   | (45,167,450 | ) |
| Proceeds from bills payable                               |   |                      | 111,379,320  |   |   |   | 51,215,295 |   |
| Repayment of bills payable                                |   |                      | (64,058,975  | ) |   |   | (60,784,670 | ) |
| Repayments of long-term bank borrowings                   |   |                      | -            |   |   |   | (13,014,350 | ) |
| Short-term financing from related parties                 |   |                      | -            |   |   |   | 13,144,234 |   |
| Short-term financing to related parties                   |   |                      | -            |   |   |   | (13,144,234 | ) |
| Repayment to Ningbo Litong                                |   |                      | -            |   |   |   | (95,094 | ) |
| Proceeds from warrant exercise                            |   |                      | -            |   |   |   | 7,332 |   |
| Dividends paid                                            |   |                      | -            |   |   |   | (1,396,964 | ) |
|                                                      |   |                      |         |   |   |   |   |   |
| Net cash provided by (used in) financing activities       |   |                      | 131,548,092  |   |   |   | (46,969,550 | ) |
|                                                      |   |                      |         |   |   |   |   |   |
| Effect of foreign currency exchange rate changes on cash  |   |                      | (763,336     | ) |   |   | 278,395 |   |
|                                                      |   |                      |         |   |   |   |   |   |
| Net increase (decrease) in cash                           |   |                      | 2,554,152    |   |   |   | (23,553,231 | ) |
|                                                      |   |                      |         |   |   |   |   |   |
| Cash at beginning of the period                           |   |                      | 7,325,017    |   |   |   | 29,336,241 |   |
|                                                      |   |                      |         |   |   |   |   |   |
| Cash at end of the period                                 |   | $                         | 9,879,169    |   |   | $ | 5,783,010 |   |
|                                                      |   |                      |         |   |   |   |   |   |
| Supplemental disclosure of cash flow information:         |   |                      |         |   |   |   |   |   |
| Income taxes paid                                         |   | $                         | 1,028,792    |   |   | $ | 12,345,638 |   |
| Interest paid, net of capitalized interest                |   | $                         | 588,578      |   |   | $ | 5,835,363 |   |
| Non-cash financing activities:                            |   |                      |         |   |   |   |   |   |
| Payable for purchase of property, plant and equipment     |   | $                         | 4,433,893    |   |   | $ | 24,433,051 |   |

----

----

|            |   | June 30,                  |       |   | December 31, |   |
|-----------------|--------|---------------------------|------------|--------|--------------|--------|
|            |   | 2012                      |       |   | 2011         |   |
|            |   | (Unaudited) |       |   |         |   |
| Raw materials   |   | $                         | 48,865,084 |   |         | $      | 26,226,388 |   |
| Finished goods  |   |                      | 20,219,210 |   |         |   | 10,891,825 |   |
| Work-in-process |   |                      | 3,963,955  |   |         |   | 1,827,755 |   |
|            |   |                      |       |   |         |   |   |   |
| Total           |   | $                         | 73,048,249 |   |         | $      | 38,945,968 |   |

----

|                                      |   | June 30,                  |       |   | December 31, |   |
|-------------------------------------------|--------|---------------------------|------------|--------|--------------|--------|
|                                      |   | 2012                      |       |   | 2011         |   |
|                                      |   | (Unaudited) |       |   |         |   |
| VAT recoverable                           |   | $                         | 23,360,510 |   |         | $      | 9,991,877 |   |
| Receivable from Ningbo Litong (Note 22)   |   |                      | -          |   |         |   | 2,740,970 |   |
| Customs deposits for imported inventories |   |                      | 27,398,747 |   |         |   | 29,102,193 |   |
| Others                                    |   |                      | 9,887,358  |   |         |   | 4,143,388 |   |
|                                      |   |                      |       |   |         |   |   |   |
|                                      |   | $                         | 60,646,615 |   |         | $      | 45,978,428 |   |

|                           |   | June 30,                  |        |   | December 31, |   |
|--------------------------------|--------|---------------------------|-------------|--------|--------------|--------|
|                           |   | 2012                      |        |   | 2011         |   |
|                           |   | (Unaudited) |        |   |         |   |
|                           |   |                      |        |   |         |   |
| Buildings                      |   | $                         | 3,915,407   |   |         | $      | 3,888,234 |   |
| Machinery and equipment        |   |                      | 177,358,013 |   |         |   | 175,736,470 |   |
| Vehicles                       |   |                      | 786,083     |   |         |   | 663,985 |   |
| Office equipment and furniture |   |                      | 139,728     |   |         |   | 134,929 |   |
| Construction-in-progress       |   |                      | 50,141,011  |   |         |   | 27,449,846 |   |
|                           |   |                      |        |   |         |   |   |   |
|                           |   |                      | 232,340,242 |   |         |   | 207,873,464 |   |
| Less: Accumulated depreciation |   |                      | (22,571,325 | )      |         |   | (17,005,843 | ) |
|                           |   |                      |        |   |         |   |   |   |
|                           |   | $                         | 209,768,917 |   |         | $      | 190,867,621 |   |

|                                         |   | Three months ended June 30, |      |   | Six months ended June 30, |   |
|----------------------------------------------|--------|-----------------------------|-----------|--------|---------------------------|--------|
|                                         |   | 2012                        |      |   | 2011                      |   |   | 2012 |   |   | 2011 |   |
|                                         |   | (Unaudited)   |      |   | (Unaudited) |   |   | (Unaudited) |   |   | (Unaudited) |   |
|                                         |   |                        |      |   |                      |   |   |   |   |   |   |   |
| Cost of sales                                |   | $                           | 2,580,156 |   |                      | $      | 2,246,111 |   |   | $ | 5,347,643 |   |   | $ | 4,589,859 |   |
| Selling, general and administrative expenses |   |                        | 55,355    |   |                      |   | 40,473 |   |   |   | 104,491 |   |   |   | 81,707 |   |
|                                         |   |                        |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
|                                         |   | $                           | 2,635,511 |   |                      | $      | 2,286,584 |   |   | $ | 5,452,134 |   |   | $ | 4,671,566 |   |

----

|                           |   | Amortization |   |   | June 30,                  |   |      | December 31, |   |
|--------------------------------|--------|--------------|--------|--------|---------------------------|--------|-----------|--------------|--------|
|                           |   | Period       |   |   | 2012                      |   |      | 2011         |   |
|                           |   | Years        |   |   | (Unaudited) |   |      |         |   |
|                           |   |         |   |   |                      |   |      |         |   |
| Licensing agreements           |   |         | 10-20  |   |                      | $      | 1,505,750 |         |   | $ | 1,495,300 |   |
| Less: Accumulated amortization |   |         |   |   |                      |   | (573,902  | )            |   |   | (516,797 | ) |
|                           |   |         |   |   |                      |   |      |         |   |   |   |   |
|                           |   |         |   |   |                      | $      | 931,848   |         |   | $ | 978,503 |   |

|                           |   | June 30,                  |       |   | December 31, |   |
|--------------------------------|--------|---------------------------|------------|--------|--------------|--------|
|                           |   | 2012                      |       |   | 2011         |   |
|                           |   | (Unaudited) |       |   |         |   |
|                           |   |                      |       |   |         |   |
| Land use rights                |   | $                         | 12,267,235 |   |         | $      | 12,182,100 |   |
| Less: Accumulated amortization |   |                      | (1,346,759 | )      |         |   | (1,113,338 | ) |
|                           |   |                      |       |   |         |   |   |   |
|                           |   | $                         | 10,920,476 |   |         | $      | 11,068,762 |   |

|                               |   | June 30,                  |        |   | December 31, |   |
|------------------------------------|--------|---------------------------|-------------|--------|--------------|--------|
|                               |   | 2012                      |        |   | 2011         |   |
|                               |   | (Unaudited) |        |   |         |   |
|                               |   |                      |        |   |         |   |
| Bank borrowings-secured/guaranteed |   | $                         | 393,534,612 |   |         | $      | 225,969,421 |   |

----

|                              |   | June 30,                  |        |   | December 31, |   |
|-----------------------------------|--------|---------------------------|-------------|--------|--------------|--------|
|                              |   | 2012                      |        |   | 2011         |   |
|                              |   | (Unaudited) |        |   |         |   |
|                              |   |                      |        |   |         |   |
| Loan from China Construction Bank |   | $                         | 15,850,000  |   |         | $      | 15,740,000 |   |
| Less: current portion             |   |                      | (15,850,000 | )      |         |   | (15,740,000 | ) |
|                              |   |                      |        |   |         |   |   |   |
|                              |   | $                         | -           |   |         | $      | - |   |

|                                                       |   | June 30,                  |       |   | December 31, |   |
|------------------------------------------------------------|--------|---------------------------|------------|--------|--------------|--------|
|                                                       |   | 2012                      |       |   | 2011         |   |
|                                                       |   | (Unaudited) |       |   |         |   |
|                                                       |   |                      |       |   |         |   |
| Payables for the purchase of property, plant and equipment |   | $                         | 24,419,569 |   |         | $      | 24,590,217 |   |
| Accrued payroll and welfare                                |   |                      | 341,775    |   |         |   | 1,061,508 |   |
| Liquidated damages                                         |   |                      | 2,493,326  |   |         |   | 2,493,326 |   |
| Other accruals and payables                                |   |                      | 2,999,855  |   |         |   | 2,142,895 |   |
|                                                       |   |                      |       |   |         |   |   |   |
|                                                       |   | $                         | 30,254,525 |   |         | $      | 30,287,946 |   |

----

----

----

|                              |   | Three months ended June 30, |      |
|-----------------------------------|--------|-----------------------------|-----------|
|                              |   | 2012                        |      |   | 2011 |   |
|                              |   | (Unaudited)   |      |   | (Unaudited) |   |
|                              |   |                        |      |   |   |   |
| PRC                               |   | $                           | 3,447,170 |   |   | $ | 3,309,794 |   |
| U.S.                              |   |                        | (627,907  | ) |   |   | (3,765,742 | ) |
| Hong Kong and BVI                 |   |                        | (886,638  | ) |   |   | (700,763 | ) |
|                              |   |                        |      |   |   |   |   |   |
| Income (loss) before income taxes |   | $                           | 1,932,625 |   |   | $ | (1,156,711 | ) |

|                       |   | Six months ended June 30, |       |
|----------------------------|--------|---------------------------|------------|
|                       |   | 2012                      |       |   | 2011 |   |
|                       |   | (Unaudited) |       |   | (Unaudited) |   |
|                       |   |                      |       |   |   |   |
| PRC                        |   | $                         | 8,003,206  |   |   | $ | 11,939,586 |   |
| U.S.                       |   |                      | (1,426,030 | ) |   |   | (4,704,077 | ) |
| Hong Kong and BVI          |   |                      | (1,660,367 | ) |   |   | (925,926 | ) |
|                       |   |                      |       |   |   |   |   |   |
| Income before income taxes |   | $                         | 4,916,809  |   |   | $ | 6,309,583 |   |

| PRC:                       |   | Three months ended June 30, |    |   | Six months ended June 30, |   |
|----------------------------|--------|-----------------------------|---------|--------|---------------------------|--------|
|                       |   | 2012                        |    |   | 2011                      |   |   | 2012 |   |   | 2011 |   |
|                       |   | (Unaudited)   |    |   | (Unaudited) |   |   | (Unaudited) |   |   | (Unaudited) |   |
| Current income tax expense |   | $                           | 870,277 |   |                      | $      | 665,828 |   |   | $ | 2,009,469 |   |   | $ | 2,917,979 |   |
|                       |   |                        |    |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Total income tax expense   |   | $                           | 870,277 |   |                      | $      | 665,828 |   |   | $ | 2,009,469 |   |   | $ | 2,917,979 |   |

----

|                                           |   | Three months ended June 30, |      |
|------------------------------------------------|--------|-----------------------------|-----------|
|                                           |   | 2012                        |      |   | 2011 |   |
|                                           |   | (Unaudited)   |      |   | (Unaudited) |   |
|                                           |   |                        |      |   |   |   |   |   |   |   |   |   |
| Income (loss) before income taxes              |   | $                           | 1,932,625 |   |   |   |   |   | $ | (1,156,711 | ) |   |   |   |
|                                           |   |                        |      |   |   |   |   |   |   |   |   |   |   |   |
| Computed income tax expense (benefit)          |   |                        | 483,156   |   |   |   | 25.0 | % |   |   | (289.178 | ) |   |   | 25.0 | % |
| NOLs from overseas subsidiaries not recognized |   |                        | 378,636   |   |   |   | 19.6 | % |   |   | 1,433,636 |   |   |   | (123,9 | %) |
| Others                                         |   |                        | 8,485     |   |   |   | 0.4 | % |   |   | (478,630 | ) |   |   | 41.4 | % |
| Actual income tax expense                      |   | $                           | 870,277   |   |   |   | 45.0 | % |   | $ | 665,828 |   |   |   | (57.6 | %) |

|                                           |   | Six months ended June 30, |      |
|------------------------------------------------|--------|---------------------------|-----------|
|                                           |   | 2011                      |      |   | 2011 |   |
|                                           |   | (Unaudited) |      |   | (Unaudited) |   |
|                                           |   |                      |      |   |   |   |   |   |   |   |   |   |
| Income before income taxes                     |   | $                         | 4,916,809 |   |   |   |   |   | $ | 6,309,583 |   |   |   |   |
|                                           |   |                      |      |   |   |   |   |   |   |   |   |   |   |   |
| Computed expected income tax expense           |   |                      | 1,229,202 |   |   |   | 25.0 | % |   |   | 1,577,396 |   |   |   | 25.0 | % |
| NOLs from overseas subsidiaries not recognized |   |                      | 771,599   |   |   |   | 15.7 | % |   |   | 1,799,204 |   |   |   | 28.5 | % |
| Others                                         |   |                      | 8,668     |   |   |   | 0.2 | % |   |   | (458,621 | ) |   |   | (7.3 | %) |
| Actual income tax expense                      |   | $                         | 2,009,469 |   |   |   | 40.9 | % |   | $ | 2,917,979 |   |   |   | 46.2 | % |

----

|                                                                            |   | For the three months ended |       |   | For the six months ended  |   |
|---------------------------------------------------------------------------------|--------|----------------------------|------------|--------|---------------------------|--------|
|                                                                            |   | June 30                    |       |   | June 30                   |   |   | June 30 |   |   | June 30 |   |
|                                                                            |   | 2012                       |       |   | 2011                      |   |   | 2012 |   |   | 2011 |   |
|                                                                            |   | (Unaudited)  |       |   | (Unaudited) |   |   | (Unaudited) |   |   | (Unaudited) |   |
|                                                                            |   |                       |       |   |                      |   |   |   |   |   |   |   |
| Net income (loss) attribute to Keyuan                                           |   |                       |       |   |                      |   |   |   |   |   |   |   |
| Petrochemicals, Inc. stockholders                                               |   | $                          | 1,062,348  |   |                      | $      | (1,822,539 | ) |   | $ | 2,907,340 |   |   | $ | 3,391,604 |   |
|                                                                            |   |                       |       |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Less: Dividend attributable to preferred                                        |   |                       |       |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| stockholders                                                                    |   |                       | -          |   |                      |   | 306,247 |   |   |   | - |   |   |   | 602,507 |   |
|                                                                            |   |                       |       |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Net income (loss) attributable to Keyuan Petrochemical Inc. common shareholders |   | $                          | 1,062,348  |   |                      | $      | (2,128,786 | ) |   | $ | 2,907,340 |   |   | $ | 2,789,097 |   |
|                                                                            |   |                       |       |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average common shares                                                  |   |                       |       |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| (Denominator for basic income per share)                                        |   |                       | 57,646,160 |   |                      |   | 57,579,239 |   |   |   | 57,646,160 |   |   |   | 57,578,896 |   |
|                                                                            |   |                       |       |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Effect of diluted securities:                                                   |   |                       |       |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| - Series A convertible preferred stock                                          |   |                       | -          |   |                      |   | - |   |   |   | - |   |   |   | -  |   |
| - Series B convertible preferred stock                                          |   |                       | 5,333,340  |   |                      |   | - |   |   |   | 5,333,340 |   |   |   | 5,400,010 |   |
| - Series M convertible preferred stock                                          |   |                       | -          |   |                      |   | - |   |   |   | - |   |   |   | -  |   |
| - Warrants                                                                      |   |                       | -          |   |                      |   | - |   |   |   | - |   |   |   | 390,647 |   |
| - Options                                                                       |   |                       | -          |   |                      |   | - |   |   |   | - |   |   |   | 467,429 |   |
|                                                                            |   |                       |       |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average common shares                                                  |   |                       |       |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| (denominator for diluted income per share)                                      |   |                       | 62,979,500 |   |                      |   | 57,579,239 |   |   |   | 62,979,500 |   |   |   | 63,836,982 |   |
|                                                                            |   |                       |       |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Basic net income (loss) per share                                               |   | $                          | 0.02       |   |                      | $      | (0.04 | ) |   | $ | 0.05 |   |   | $ | 0.05 |   |
| Diluted net income (loss) per share                                             |   | $                          | 0.02       |   |                      | $      | (0.04 | ) |   | $ | 0.05 |   |   | $ | 0.05 |   |

----

| Three months ended June 30, 2012 |   | Three months ended June 30, 2011 |       |
|----------------------------------|--------|----------------------------------|------------|
|                             |   | (Unaudited)        |       |   |   |   |   |   | (Unaudited) |   |   |   |   |
| Largest                          |   | Amount of                        |       |   | % Total |   | Largest |   | Amount of |   |   | % Total |   |
| Customers                        |   | Sales                            |       |   | Sales |   | Customers |   | Sales |   |   | Sales |   |
|                             |   |                             |       |   |   |   |   |   |   |   |   |   |   |
| Customer A                       |   | $                                | 40,695,112 |   |   |   | 21 | % | Customer A |   | $ | 35,607,254 |   |   |   | 24 | % |
| Customer B                       |   |                             | 12,876,871 |   |   |   | 7 | % | Customer D |   |   | 14,540,619 |   |   |   | 10 | % |
| Customer C                       |   |                             | 12,615,883 |   |   |   | 7 | % | Customer  I |   |   | 14,278,678 |   |   |   | 10 | % |
| Customer D                       |   |                             | 11,234,274 |   |   |   | 6 | % | Customer J |   |   | 13,517,410 |   |   |   | 9 | % |
| Customer E                       |   |                             | 9,820,712  |   |   |   | 5 | % | Customer L |   |   | 6,314,579 |   |   |   | 4 | % |
|                             |   |                             |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                            |   | $                                | 87,242,852 |   |   |   | 47 | % | Total |   | $ | 84,258,540 |   |   |   | 57 | % |

| Six months ended June 30, 2012 |   | Six months ended June 30, 2011 |        |
|--------------------------------|--------|--------------------------------|-------------|
|                           |   | (Unaudited)      |        |   |   |   |   |   | (Unaudited) |   |   |   |   |
| Largest                        |   | Amount of                      |        |   | % Total |   | Largest |   | Amount of |   |   | % Total |   |
| Customers                      |   | Sales                          |        |   | Sales |   | Customers |   | Sales |   |   | Sales |   |
|                           |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Customer A                     |   | $                              | 52,843,930  |   |   |   | 14 | % | Customer A |   | $ | 58,150,912 |   |   |   | 20 | % |
| Customer H                     |   |                           | 24,777,298  |   |   |   | 7 | % | Customer J |   |   | 42,284,552 |   |   |   | 14 | % |
| Customer D                     |   |                           | 21,659,715  |   |   |   | 6 | % | Customer D |   |   | 28,430,114 |   |   |   | 10 | % |
| Customer G                     |   |                           | 17,177,359  |   |   |   | 4 | % | Customer I |   |   | 14,278,678 |   |   |   | 5 | % |
| Customer F                     |   |                           | 15,014,302  |   |   |   | 4 | % | Customer K |   |   | 13,176,798 |   |   |   | 4 | % |
|                           |   |                           |        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total                          |   | $                              | 131,472,604 |   |   |   | 36 | % | Total |   | $ | 156,321,054 |   |   |   | 53 | % |

| Name of parties  |   | Relationship                                                               |
|------------------|--------|----------------------------------------------------------------------------|
| Mr. Chunfeng Tao |   | Majority stockholder                                                       |
| Mr. Jicun Wang   |   | Principal stockholder                                                      |
| Mr. Peijun Chen  |   | Principal stockholder                                                      |
| Ms. Sumei Chen   |   | Member of the Company’s Board of Supervisors and spouse of Mr. Wang  |
| Ms. Yushui Huang |   | Vice President of Administration, Ningbo Keyuan                            |
| Mr. Weifeng Xue  |   | Vice President of Accounting, Ningbo Keyuan through  August 2011 |

----

| Mr. Hengfeng Shou                                                    |   | Vice President of Sales, Ningbo Keyuan  Petrochemical                                                                                                                           |
|----------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Ningbo Kewei Investment Co., Ltd.                                    |   | A company controlled by Mr. Tao through September 2011                                                                                                                                    |
|     (Ningbo Kewei)                                    |   |                                                                                                                                                                                      |
| Ningbo Pacific Ocean Shipping Co., Ltd                               |   | 100% ownership by Mr. Wang                                                                                                                                                                |
|     (Ningbo Pacific)                                  |   |                                                                                                                                                                                      |
| Ningbo Hengfa Metal Product Co., Ltd                                 |   | 100% ownership by Mr. Chen                                                                                                                                                                |
|     (Ningbo Hengfa, former name "Ningbo Tenglong")    |   |                                                                                                                                                                                      |
| Shandong Tengda Stainless Steel Co., Ltd                             |   | 100% ownership by Mr. Chen                                                                                                                                                                |
|     (Shandong Tengda)                                 |   |                                                                                                                                                                                      |
| Ningbo Xinhe Logistic Co., Ltd                                       |   |                                                                                                                                                                                      |
|     (Ningbo Xinhe)                                    |   | 10% ownership by Ms. Huang                                                                                                                                                                |
| Ningbo Kunde Petrochemical Co, Ltd.    (Ningbo Kunde) |   | Mr. Tao’s mother was a 65% nominee shareholder for Mr. Hu, a third party through September 2011, and included in transactions with certain other parties beginning October 1, 2011. |
| Ningbo Jiangdong Jihe Construction Materials                         |   | Controlled by Mr. Xue’s Brother-in-law                                                                                                                                              |
| Store (Jiangdong Jihe)                                               |   |                                                                                                                                                                                      |
| Ningbo Wanze Chemical Co., Ltd                                       |   | Mr. Tao’s sister-in-law is the legal representative                                                                                                                                 |
|     (Ningbo Wanze)                                    |   |                                                                                                                                                                                      |
| Ningbo Zhenhai Jinchi Petroleum Chemical                             |   | Controlled by Mr. Shou                                                                                                                                                                    |
| Co., Ltd (Zhenhai Jinchi)                                            |   |                                                                                                                                                                                      |

|                                                       |   | Three Months ended June 30, |      |
|------------------------------------------------------------|--------|-----------------------------|-----------|
|                                                       |   | 2012                        |      |   | 2011 |   |
|                                                       |   | (Unaudited)   |      |   | (Unaudited) |   |
|                                                       |   |                        |      |   |   |   |
| Sales of products (a)                                      |   | $                           | -         |   |   | $ | 35,607,658 |   |
| Purchase of raw material (b)                               |   | $                           | -         |   |   | $ | 42,920 |   |
| Purchase of transportation services (c)                    |   | $                           | 1,104,716 |   |   | $ | 316,506 |   |
| Credit line of guarantee provision for bank borrowings (d) |   | $                           | -         |   |   | $ | - |   |
| Loan guarantee fees (d)                                    |   | $                           | 113,084   |   |   | $ | 419,665 |   |
| Short-term financing from related parties (e)              |   | $                           | -         |   |   | $ | 5,406,139 |   |
| Short-term financing to related parties (e)                |   | $                           | -         |   |   | $ | 5,535,234 |   |

|                                                       |   | Six Months ended June 30, |      |
|------------------------------------------------------------|--------|---------------------------|-----------|
|                                                       |   | 2012                      |      |   | 2011 |   |
|                                                       |   | (Unaudited) |      |   | (Unaudited) |   |
|                                                       |   |                      |      |   |   |   |
| Sales of products (a)                                      |   | $                         | -         |   |   | $ | 58,217,477 |   |
| Purchase of raw material (b)                               |   | $                         | -         |   |   | $ | 7,066,055 |   |
| Purchase of transportation services (c)                    |   | $                         | 1,665,831 |   |   | $ | 927,879 |   |
| Credit line of guarantee provision for bank borrowings (d) |   | $                         | -         |   |   | $ | - |   |
| Loan guarantee fees (d)                                    |   | $                         | 203,984   |   |   | $ | 756,919 |   |
| Short-term financing from related parties (e)              |   | $                         | -         |   |   | $ | 13,144,234 |   |
| Short-term financing to related parties (e)                |   | $                         | -         |   |   | $ | 13,144,234 |   |

|                                 |   | June 30,                  |    |   | December 31, |   |
|--------------------------------------|--------|---------------------------|---------|--------|--------------|--------|
|                                 |   | 2012                      |    |   | 2011         |   |
|                                 |   | (Unaudited) |    |   |         |   |
| Amounts due from related parties (f) |   | $                         | 39,625  |   |         | $      | 39,350 |   |
| Amounts due to related parties (g)   |   | $                         | 768,313 |   |         | $      | 621,077 |   |

----

|                 |   | Bank loan guaranteed as of |       |
|----------------------|--------|----------------------------|------------|
|                 |   | June 30                    |       |   | December 31 |   |
|                 |   | 2012                       |       |   | 2011 |   |
|                 |   | (Unaudited)  |       |   |   |   |
| Mr. Tao              |   | $                          | 15,850,000 |   |   | $ | 34,628,000 |   |
| Jincun Wang and Chen |   |                       | 1,902,000  |   |   |   | 1,983,523 |   |
| Ningbo Kewei         |   |                       | -          |   |   |   | - |   |
| Ningbo Pacific       |   |                       | 18,318,901 |   |   |   | 27,918,200 |   |
| Ningbo Hengfa        |   |                       | 14,899,000 |   |   |   | 14,795,600 |   |
| Shandong Tengda      |   |                       | 951,000    |   |   |   | 944,400 |   |
| Total                |   | $                          | 51,920,901 |   |   | $ | 80,269,723 |   |

----

|           |   | Three Months Ended June 30 |   |
|----------------|--------|----------------------------|--------|
|           |   | (Unaudited)  |   |
|           |   | 2012                       |   |   | 2011 |   |
|           |   | From(i)                    |   |   | To(i) |   |   | Balance(ii) |   |   | From(i) |   |   | To(i) |   |   | Balance(ii) |   |
|           |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ningbo Kewei   |   | $                          | -      |   |   | $ | - |   |   | $ | - |   |   | $ | 5,358,850 |   |   | $ | (5,358,850 | ) |   | $ | - |   |
| Ningbo Kunde   |   |                       | -      |   |   |   | - |   |   |   | - |   |   |   | 32,550 |   |   |   | (32,550 | ) |   |   | - |   |
| Jiangdong Jihe |   |                       | -      |   |   |   | - |   |   |   | - |   |   |   | 14,739 |   |   |   | 143,834 |   |   |   | - |   |
|           |   |                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           |   | $                          | -      |   |   | $ | - |   |   | $ | - |   |   | $ | 5,406,139 |   |   | $ | (5,247,566 | ) |   | $ | - |   |

|           |   | Six Months Ended June 30  |   |
|----------------|--------|---------------------------|--------|
|           |   | (Unaudited) |   |
|           |   | 2012                      |   |   | 2011 |   |
|           |   | From(i)                   |   |   | To(i) |   |   | Balance(ii) |   |   | From(i) |   |   | To(i) |   |   | Balance(ii) |   |
|           |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ningbo Kewei   |   | $                         | -      |   |   | $ | - |   |   | $ | - |   |   | $ | 5,358,850 |   |   | $ | (5,358,850 | ) |   | $ | - |   |
| Ningbo Kunde   |   |                      | -      |   |   |   | - |   |   |   | - |   |   |   | 5,358,850 |   |   |   | (5,358,850 | ) |   |   | - |   |
| Jiangdong Jihe |   |                      | -      |   |   |   | - |   |   |   | - |   |   |   | 2,426,534 |   |   |   | (2,426,534 | ) |   |   |   |   |
|           |   |                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           |   | $                         | -      |   |   | $ | - |   |   | $ | - |   |   | $ | 13,144,234 |   |   | $ | 13,144,234 | ) |   | $ | - |   |

|          |   | June 30,                  |   |   | December 31, |   |
|---------------|--------|---------------------------|--------|--------|--------------|--------|
|          |   | 2012                      |   |   | 2011         |   |
|          |   | (Unaudited) |   |   |         |   |
| Related Party |   |                      |   |   |         |   |
| Mr. Tao       |   | $                         | 39,625 |   |         | $      | 39,350 |   |

|          |   | June 30,                  |    |   | December 31, |   |
|---------------|--------|---------------------------|---------|--------|--------------|--------|
|          |   | 2012                      |    |   | 2011         |   |
|          |   | (Unaudited) |    |   |         |   |
| Related Party |   |                      |    |   |         |   |
| Ninbo Xinhe   |   | $                         | 768,313 |   |         | $      | 621,077 |   |

| Name of parties                      |   | Relationship                                       |
|--------------------------------------|--------|----------------------------------------------------|
| Ningbo Litong Petrochemical Co., Ltd |   | Former 12.75% nominee shareholder of Ningbo Keyuan |
| (Ningbo Litong)                      |   |                                               |
| Ningbo Jiangdong Haikai Construction |   | Controlled by cousin of Mr. Weifeng Xue, Vice      |
| Materials Store (Jiangdong Haikai)   |   | President of Accounting through August 2011        |

----

| Ningbo Jiangdong Deze Chemical Co., Ltd (Jiangdong Deze) |   | Controlled by cousin of Mr. Weifeng Xue, Vice President of Accounting through August 2011 |
|----------------------------------------------------------|--------|-------------------------------------------------------------------------------------------|
| Ningbo Anqi Petrochemical Co., Ltd                       |   | Controlled by cousin of Mr. Weifeng Xue, Vice                                             |
| (Ningbo Anqi)                                            |   | President of Accounting through August 2011                                               |

| Ningbo Kewei Investment Co., Ltd (Ningbo Kewei)    |   | A related party through September 2011 when control transferred, and included in transactions with certain other parties beginning October 2011.    |
|----------------------------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
| Ningbo Kunde Petrochemical Co., Ltd (Ningbo Kunde) |   | A related party through September 2011 when control transferred, and included in transactions with certain other parties beginning October 1, 2011. |

|                                             |   | Three Months Ended June 30, (Unaudited) |        |
|--------------------------------------------------|--------|------------------------------------------------------------|-------------|
|                                             |   | 2012                                                       |        |   | 2011 |   |
|                                             |   |                                                       |        |   |   |   |
| Sales of products (h)                            |   | $                                                          | 47,734,203  |   |   | $ | - |   |
| Purchase of raw material (i)                     |   | $                                                          | 21,912,149  |   |   | $ | 9,536,282 |   |
| Credit line of guarantee for bank borrowings (j) |   | $                                                          | 141,062,000 |   |   | $ | - |   |
| Loan guarantee fees(j)                           |   | $                                                          | 382,116     |   |   | $ | 302,674 |   |
| Short-term financing from theses parties (k)     |   | $                                                          | -           |   |   | $ | 12,862,621 |   |
| Short-term financing to these parties (k)        |   | $                                                          | -           |   |   | $ | (7,142,275 | ) |
| Amounts due from these parties                   |   | $                                                          | 15,773,715  |   |   | $ | - |   |
| Amounts due to these parties                     |   | $                                                          | 2,690,514   |   |   | $ | 17,851 |   |

|                                             |   | Six Months Ended June 30, (Unaudited) |        |
|--------------------------------------------------|--------|-----------------------------------------------------|-------------|
|                                             |   | 2012                                                |        |   | 2011 |   |
|                                             |   |                                                |        |   |   |   |
| Sales of products (h)                            |   | $                                                   | 70,021,289  |   |   | $ | 772,762 |   |
| Purchase of raw material (i)                     |   | $                                                   | 22,358,020  |   |   | $ | 9,536,282 |   |
| Credit line of guarantee for bank borrowings (j) |   | $                                                   | 161,687,800 |   |   | $ | - |   |
| Loan guarantee fees(j)                           |   | $                                                   | 742,303     |   |   | $ | 505,626 |   |
| Short-term financing from theses parties (k)     |   | $                                                   | -           |   |   | $ | 47,612,617 |   |
| Short-term financing to these parties (k)        |   | $                                                   | -           |   |   | $ | (45,374,149 | ) |
| Amounts due from these parties                   |   | $                                                   | 15,773,715  |   |   | $ | - |   |
| Amounts due to these parties                     |   | $                                                   | 2,690,514   |   |   | $ | 17,851 |   |

----

|          |   | Guarantee provided during      |        |   | Guarantee provided during    |   |
|---------------|--------|--------------------------------|-------------|--------|------------------------------|--------|
|          |   | the three months ended June 30 |        |   | the six months ended June 30 |   |
|          |   | 2012                           |        |   | 2011                         |   |   | 2012 |   |   | 2011 |   |
|          |   | (Unaudited)      |        |   | (Unaudited)    |   |   | (Unaudited) |   |   | (Unaudited) |   |
| Ningbo Litong |   | $                              | 30,000,000  |   |                         | $      | - |   |   | $ | 50,625,800 |   |   | $ | - |   |
| Ningbo Kewei  |   |                           | 111,062,000 |   |                         |   | - |   |   |   | 111,062,000 |   |   |   | - |   |
|          |   |                           |        |   |                         |   |   |   |   |   |   |   |   |   |   |   |
|          |   | $                              | 141,062,000 |   |                         | $      | - |   |   | $ | 161,687,800 |   |   | $ | -  |   |

|                     |   | Bank loans guaranteed As of |       |
|--------------------------|--------|-----------------------------|------------|
|                     |   | June 30                     |       |   | December 31 |   |
|                     |   | 2012                        |       |   | 2011 |   |
|                     |   | (Unaudited)   |       |   |   |   |
| Ningbo Litong            |   | $                           | 55,586,521 |   |   | $ | 61,632,077 |   |
| Ningbo  Keiwei |   | $                           | 43,524,897 |   |   | $ | 29,700,067 |   |

|           |   | Three Months Ended June 30(Unaudited) |   |
|----------------|--------|-----------------------------------------------------|--------|
|           |   | 2012                                                |   |   | 2011 |   |
|           |   | From(i)                                             |   |   | To(i) |   |   | Balance(ii) |   |   | From(i) |   |   | To(i) |   |   | Balance(ii) |   |
|           |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ningbo Litong  |   | $                                                   | -      |   |   | $ | - |   |   | $ | - |   |   | $ | 12,862,621 |   |   | $ | (7,142,275 | ) |   | $ | - |   |
| Jiangdong Deze |   |                                                | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Ningbo Anqi    |   |                                                | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
|           |   |                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           |   | $                                                   | -      |   |   | $ | - |   |   | $ | - |   |   | $ | 12,862,621 |   |   | $ | (7,142,275 | ) |   | $ | - |   |

|           |   | Six Months Ended June 30(Unaudited) |   |
|----------------|--------|---------------------------------------------------|--------|
|           |   | 2012                                              |   |   | 2011 |   |
|           |   | From(i)                                           |   |   | To(i) |   |   | Balance(ii) |   |   | From(i) |   |   | To(i) |   |   | Balance(ii) |   |
|           |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ningbo Litong  |   | $                                                 | -      |   |   | $ | - |   |   | $ | - |   |   | $ | 38,142,763 |   |   | $ | (35,904,295 | ) |   | $ | - |   |
| Jiangdong Deze |   |                                              | -      |   |   |   | - |   |   |   | - |   |   |   | 2,602,870 |   |   |   | (2,602,870 | ) |   |   | - |   |
| Ningbo Anqi    |   |                                              | -      |   |   |   | - |   |   |   | - |   |   |   | 6,866,984 |   |   |   | (6,866,984 | ) |   |   | - |   |
|           |   |                                              |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|           |   | $                                                 | -      |   |   | $ | - |   |   | $ | - |   |   | $ | 47,612,617 |   |   | $ | (45,374,149 | ) |   | $ | - |   |

----

----

----

| ● Heavy oil catalytic pyrolysis processing equipment- risers/generators/precipitators, fuel gas boilers, fractionating tower, absorbing re-absorbing and desorbing towers, heat exchangers, pumps, a stabilizing tower; |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ● Gas fractionation processing equipment- de-propanizing tower, refining propylene tower, de-ethanizination tower, heat exchangers, pumps; |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|

| ● Ethylbenzene processing equipment- alkylation reactor, anti-alkylation reactor, dehydrogenation reactor, propylene absorbing tower, de-ethylene tower, ethylbenzene recovering tower, heating furnace for benzene, heating furnace for gas, steam overheating furnace, tail gas compressor, washing tower; and |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ● Liquefied petroleum gas (LPG) and sulfur recovery process- LPG desulfurization extraction tower, dry gas desulfurization tower, regenerating tower, LPG de-mecaptan extraction tower. |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

| ● BTX Aromatics: consisting of benzene, toluene, xylene and other chemical components for further processing into plastics, gasoline and solvents materials widely used in paint, ink, construction coating and pesticide. |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ● Propylene: a chemical intermediate as one of the building blocks for an array of chemical and plastic products that are commonly used to produce polypropylene, acrylonitrile, oxo alcohols, propylene oxide, cumene, isopropyl alcohol, acrylic acid and other chemicals for paints, household detergents, automotive brake fluids, indoor/outdoor carpeting, textile, insulating materials, auto parts and electrical appliances. |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ● Styrene: a precursor to polystyrene and several copolymers widely used for packaging materials, construction materials, electronic parts, home appliances, household goods, home furnishings, toys, sporting goods and others.  |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ● LPG:  a mixture of hydrocarbon gases used as fuel in heating appliances and vehicles. A replacement for chlorofluorocarbons as an aerosol propellant and a refrigerant which reduces damage to the ozone layer.            |
|                                                                                                                                                                                                                                         |
| ● MTBE & Other Chemicals: MTBE, oil slurry, sulphur and others are used for a variety of applications including fuel components, refrigeration systems, fertilizers, insecticides and fungicides, etc.                             |

|   | Completed SBS facility in September 2011(achieved)                                                     |
|--------|--------------------------------------------------------------------------------------------------------|
|   | Completed trial production and began SBS production and sales in the fourth quarter of 2011 (achieved) |
|   | Complete storage capacity expansion, pretreatment facility and asphalt by December 31, 2012            |
|   | Complete first phase construction of an ABS facility by the end of 2013                                |

----

|                                                                                            |   | For the three months |        |   | Year to Year Comparison |   |        | For the six months |   |   | Year to Year Comparison |   |
|-------------------------------------------------------------------------------------------------|--------|----------------------|-------------|--------|-------------------------|--------|-------------|--------------------|--------|--------|-------------------------|--------|
|                                                                                            |   | Ended June 30,       |        |   | Increase                |   |        | Percentage         |   |   | Ended June 30,          |   |   | Increase |   |   | Percentage |   |
|                                                                                            |   | 2012                 |        |   | 2011                    |   |        | /(Decrease)        |   |   | change                  |   |   | 2012 |   |   | 2011 |   |   | /(Decrease) |   |   | change |   |
|                                                                                            |   |                 |        |   |                    |   |        |               |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Sales                                                                                           |   |                 |        |   |                    |   |        |               |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Third parties                                   |   | $                    | 184,425,717 |   |                    | $      | 115,281,945 |               |   | $      | 69,143,772              |   |   |   | 60 | % |   | $ | 367,750,405 |   |   | $ | 239,436,744 |   |   | $ | 128,313,661 |   |   |   | 54 | % |
| Related Parties                                                                                 |   |                 | -           |   |                    |   | 35,607,658  |               |   |   | (35,607,658             | )      |   |   | (100 | %) |   |   | - |   |   |   | 58,217,477 |   |   |   | (58,217,477 | ) |   |   | (100 | %) |
| Total sales                                                                                     |   | $                    | 184,425,717 |   |                    | $      | 150,889,603 |               |   | $      | 33,536,116              |   |   |   | 22 | % |   | $ | 367,750,405 |   |   | $ | 297,654,221 |   |   | $ | 70,096,184 |   |   |   | 24 | % |
|                                                                                            |   |                 |        |   |                    |   |        |               |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cost of sales                                                                                   |   |                 |        |   |                    |   |        |               |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|         Third parties                                   |   |                 | 178,005,456 |   |                    |   | 111,055,933 |               |   |   | 66,949,523              |   |   |   | 60 | % |   |   | 351,857,165 |   |   |   | 224,870,131 |   |   |   | 126,987,034 |   |   |   | 56 | % |
|         Related Parties                                 |   |                 | -           |   |                    |   | 37,977,326  |               |   |   | (37,977,326             | )      |   |   | (100 | %) |   |   | - |   |   |   | 58,276,685 |   |   |   | (58,276,685 | ) |   |   | (100 | %) |
| Total cost of sales                                                                             |   |                 | 178,005,456 |   |                    |   | 149,033,259 |               |   |   | 28,972,197              |   |   |   | 19 | % |   |   | 351,857,165 |   |   |   | 283,146,816 |   |   |   | 68,710,349 |   |   |   | 24 | % |
|                                                                                            |   |                 |        |   |                    |   |        |               |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                                                    |   |                 | 6,420,261   |   |                    |   | 1,856,344   |               |   |   | 4,563,917               |   |   |   | 246 | % |   |   | 15,893,240 |   |   |   | 14,507,405 |   |   |   | 1,385,835 |   |   |   | 10 | % |
|                                                                                            |   |                 |        |   |                    |   |        |               |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses                                                                              |   |                 |        |   |                    |   |        |               |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Selling expenses                                                                                |   |                 | 388,217     |   |                    |   | 215,548     |               |   |   | 172,669                 |   |   |   | 80 | % |   |   | 641,123 |   |   |   | 754,680 |   |   |   | (113,557 | ) |   |   | (15 | %) |
| General and administrative expenses                                                             |   |                 | 2,656,620   |   |                    |   | 4,529,744   |               |   |   | (1,873,124              | )      |   |   | (41 | %) |   |   | 5,266,815 |   |   |   | 7,764,824 |   |   |   | (2,498,009 | ) |   |   | (32 | %) |
| Total operating expenses                                                                        |   |                 | 3,044,837   |   |                    |   | 4,745,292   |               |   |   | (1,700,655              | )      |   |   | (36 | %) |   |   | 5,907,938 |   |   |   | 8,519,504 |   |   |   | (2,611,566 | ) |   |   | (31 | %) |
|                                                                                            |   |                 |        |   |                    |   |        |               |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (Loss) from operations                                                                   |   |                 | 3,375,424   |   |                    |   | (2,888,948  | )                  |   |   | 6,264,372               |   |   |   | 217 | % |   |   | 9,985,302 |   |   |   | 5,987,901 |   |   |   | 3,997,401 |   |   |   | 67 | % |
|                                                                                            |   |                 |        |   |                    |   |        |               |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other income (expenses):                                                                        |   |                 |        |   |                    |   |        |               |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|       Interest expense, net                                       |   |                 | (1,047,469  | )      |                    |   | (1,856,793  | )                  |   |   | 809,324                 |   |   |   | (44 | %) |   |   | (4,486,936 | ) |   |   | (4,146,479 | ) |   |   | (340,457 | ) |   |   | 8 | % |
| Foreign exchange gain (loss), net                                                               |   |                 | (542,352    | )      |                    |   | 3,200,356   |               |   |   | (3,742,708              | )      |   |   | (117 | %) |   |   | (364,518 | ) |   |   | 2,052,713 |   |   |   | (2,417,231 | ) |   |   | (118 | %) |
| Liquidated damage expenses                                                                      |   |                 | -           |   |                    |   | (1,300,730  | )                  |   |   | 1,300,730               |   |   |   | (100 | %) |   |   | - |   |   |   | (1,300,730 | ) |   |   | 1,300,730 |   |   |   | (100 | %) |
| Non-operating income (expenses)                                                                 |   |                 | 147,022     |   |                    |   | 1,689,404   |               |   |   | (1,542,383              | )      |   |   | (91 | %) |   |   | (217,039 | ) |   |   | 3,716,178 |   |   |   | (3,933,217 | ) |   |   | (106 | %) |
|            Total other (expenses) Income |   |                 | (1,442,799  | )      |                    |   | 1,732,237   |               |   |   | (3,175,036              | )      |   |   | (183 | %) |   |   | (5,068,493 | ) |   |   | 321,682 |   |   |   | (5,390,175 | ) |   |   | (1676 | %) |
|                                                                                            |   |                 |        |   |                    |   |        |               |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (Loss) for income taxes                                                                  |   |                 | 1,932,625   |   |                    |   | (1,156,711  | )                  |   |   | 3,089,336               |   |   |   | 267 | % |   |   | 4,916,809 |   |   |   | 6,309,583 |   |   |   | (1,392,774 | ) |   |   | (22 | %) |
| Income tax expense                                                                              |   |                 | 870,277     |   |                    |   | 665,828     |               |   |   | 204,449                 |   |   |   | 31 | % |   |   | 2,009,469 |   |   |   | 2,917,979 |   |   |   | (908,510 | ) |   |   | (31 | %) |
| (Loss) Net Income                                                                               |   |                 | 1,062,348   |   |                    |   | (1,822,539  | )                  |   |   | 2,884,887               |   |   |   | 158 | % |   |   | 2,907,340 |   |   |   | 3,391,604 |   |   |   | (484,264 | ) |   |   | (14 | %) |
| Other comprehensive income                                                                      |   |                 |        |   |                    |   |        |               |   |   |                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustment                                                         |   |                 | 130,680     |   |                    |   | 617,550     |               |   |   | (486,870                | )      |   |   | (79 | %) |   |   | 708,091 |   |   |   | 1,174,874 |   |   |   | (466,783 | ) |   |   | (40 | %) |
| Comprehensive  income (loss)                                                          |   | $                    | 1,193,028   |   |                    | $      | (1,204,989  | )                  |   | $      | 2,398,017               |   |   |   | 199 | % |   | $ | 3,615,431 |   |   | $ | 4,566,478 |   |   | $ | (951,047 | ) |   |   | (21 | %) |

----

----

----

|                                                |   | For the Six Months Ended June 30, |         |
|-----------------------------------------------------|--------|-----------------------------------|--------------|
|                                                |   | 2012(Unaudited)                   |         |   | 2011(Unaudited) |   |
| Net cash (used in) provided by operating activities |   |                              | (106,934,901 | ) |   |   | 34,701,657 |   |
| Net cash used in investing activities               |   |                              | (21,295,703  | ) |   |   | (11,563,733 | ) |
| Net cash provided by (used in) financing activities |   |                              | 131,548,092  |   |   |   | (46,969,550 | ) |

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| (a)      Evaluation of disclosure controls and procedures |
|------------------------------------------------------------------------------------|

| (b)      Changes in internal control over financial reporting |
|---------------------------------------------------------------------------------------------|

| 1) | A review of the responsibilities of senior management and a restructuring of our organization chart in order to provide for proper segregation of duties, including but not limited to: |
|----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|           a) | Restructuring of our previous accounting department into Planning Finance Department and Funds Department, and streamlining the department’s roles to ensure clear responsibilities, work efficiency and adequate oversight of the CFO; and |
|----------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|           b) | Termination of Mr. Xue in August 2011, our former Vice President of Accounting/ PRC CFO and hiring of Mr. Fan Zhang as Vice President of Accounting/PRC CFO. |
|----------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2) | Continued and careful evaluation of control processes and systems by the Audit Committee, the Board of Directors and Management, including but not limited to: |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------|

|           a) | Engagement of a compliance officer to monitor the Company’s corporate governance and compliance, reporting directly to the Audit Committee; |
|----------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|

|           b) | Evaluation of the duties and responsibilities of the CEO and his role in day-to-day operations of the Company and the control environment; and the appointment of Mr. Jiangtao Ma as General Manger of Ningbo Keyuan in December 2011 to replace Mr. Tao, so that Mr. Tao can focus on the Company’s overall development and strategy; |
|----------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|           c) | Implementation of a comprehensive budget management procedure based upon the evaluation of the management and proposals from an outside consultant to assist with SOX 404 compliance; and |
|----------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|           d) | The addition of one or one or more additional independent, bilingual Chinese-speaking directors to facilitate the Board oversight and assist and augment the efforts of the current independent directors. |
|----------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| 3) | Implementation of additional controls and procedures to ensure the preparation and review of complete and transparent US GAAP financial statements in a timely and efficient manner, including but not limited to: |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|           a) | Additional training in U.S. GAAP for our accounting staff to ensure the accuracy of the Financial statement; and |
|----------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------|

|           b) | Hiring of additional qualified accounting personnel, including an experienced controller; |
|----------------------------------------------------------------|-------------------------------------------------------------------------------------------|

| 4) | Cessation of the use of an off-balance sheet cash account and the adoption of policies and procedures to prevent the future use of off balance sheet accounts as well as development of new policies and procedures to strengthen effective management and day-to-day operation of funds; |
|----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 5) | Implementation of new procedures for the identification and approval of and appropriate disclosure of related party transactions; |
|----|-----------------------------------------------------------------------------------------------------------------------------------|

| 6) | Development and implementation of Customer Access System and Database Management System to review business licenses and other related documents, as well as conducting site visits to current and potential customers to ensure their good standing and improve the Company’s recording of transactions; |
|----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 7) | Implementation of new policies and procedures to ensure that all transactions are supported by sufficient documentation; |
|----|--------------------------------------------------------------------------------------------------------------------------|

| 8) | Development and implementation of policies and procedures that provide continuous risk assessment of legal and regulatory considerations related to business activities; |
|----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 9) | Development of policies to ensure that all identified contingencies are evaluated completely and in a timely manner; |
|----|----------------------------------------------------------------------------------------------------------------------|

| 10) | Development and implementation of policies and procedures to ensure that revenues are properly recorded and all invoices are appropriately reviewed by accounting personnel; |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 11) | Implementation of policies and procedures to ensure inventory purchases are properly recorded; |
|-----|------------------------------------------------------------------------------------------------|

| 12) | Implementation of policies and procedures to ensure that all liabilities are recorded on the proper period; |
|-----|-------------------------------------------------------------------------------------------------------------|

| 13) | Development and implementation of policies and procedures to ensure that financial information is appropriately shared during inter-departmental meetings; |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 14) | Development and implementation of procedures to set up an effective incentive system and commitment system to retain personnel and prevent talent losses; and |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 15) | Planned adoption of a Corporate Best Practices Manual; |
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| 2.1   | Share Exchange Agreement dated April 22, 2010 (incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed on April 28, 2010)                                                                                                 |
|-------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.2   | Agreement and Plan of Merger (incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed on May 19, 2010)                                                                                                                    |
| 3.1   | Amended Articles of Incorporation of Keyuan Petrochemicals, Inc. (f/k/a Silver Pearls, Inc.), filed with the Secretary of State of Nevada (incorporated by reference to Exhibit 3.1 of the Registrant’s Form S-1 filed on December 29, 2010). |
| 3.2   | Articles of Merger (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on May 19, 2010)                                                                                                                              |
| 3.3   | Amended Bylaws of Keyuan Petrochemicals, Inc. dated June 29, 2010 (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on July 7, 2010)                                                                               |
| 4.1   | Certificate of Designation of Rights and Preferences of Series A Preferred Stock (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on April 28, 2010)                                                              |
| 4.2   | Certificate of Designation of Rights and Preferences of Series M Preferred Stock (incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on April 28, 2010)                                                              |
| 4.3   | Certificate of Designation of Rights and Preference of Series B Preferred Stock (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on September 30, 2010)                                                           |
| 10.1  | Translation copy of Transportation Agreement between Ningbo Keyuan Plastics Co., Ltd and Zibo Yancheng Logistics Co., Ltd dated February 2, 2012.                                                                                                   |
| 10.2  | Translation copy of Loan Guaranty Agreement between China Merchants bank Inc Ningbo Beilun Branch and Ningbo Litong Petrochemical dated April 16, 2012.                                                                                             |
| 10.3  | Translation copy of Loan Guaranty Agreement between Bank of China Inc Beilun Sub-branch and Ningbo Keyaun Plastics Co., Ltd dated May 14, 2012                                                                                                      |
| 10..4 | Translation copy of Loan Guaranty Agreement between Bank of China Inc Beilun Sub-Branch and Ningbo Kewei Fuels Co., Ltd dated May 4, 2012.                                                                                                          |
| 10.5  | Translation copy of Inward Bill Agreement between Ningbo Keyuan Plastic Co., Ltd and Bank of China Inc, Beilun Branch dated June 21, 2012                                                                                                           |
| 10.6  | Translation copy of Daifuda Business Contract (Short Term Loan) between Ningbo Keyuan Plastics Co., Ltd and Bank of China, Beilun Branch dated April 26, 2012.                                                                                      |
| 10.7  | Translation copy of Current Fund Loan Agreement between Ningbo Keyuan Plastics Co., Ltd and Shanghai Pudong Development Bank Co., Ltd., Ningbo Ximen Branch dated April 9, 2012                                                                     |
| 10.8  | Translation copy of Current Fund Loan Agreement between Ningbo Keyuan Plastics Co., Ltd and Shanghai Pudong Development Bank Co., Ltd., Ningbo Ximen Branch dated April 23, 2012                                                                    |
| 10.9  | Translation copy of Current Fund Loan Agreement between Ningbo Keyuan Plastics Co., Ltd and Shanghai Pudong Development Bank Co., Ltd., Ningbo Ximen Branch dated June 14, 2012                                                                     |
| 10.10 | Translation copy of Daifuda Business Contract (Short Term Loan) between Ningbo Keyuan Plastics Co., Ltd and Bank of China, Beilun Branch dated May 2, 2012.                                                                                         |
| 10.11 | Translation copy of Trust Receipt Loan Agreement between Ningbo Keyuan Plastics Co., Ltd and China Construction Bank Ningbo Beilun Branch dated June 28, 2012.                                                                                      |
| 31.1  | Certification of Chief Executive Officer required by Rule 13a-14/15d-14(a) under the Exchange Act                                                                                                                                                   |
| 31.2  | Certification of Chief Financial Officer required by Rule 13a-14/15d-14(a) under the Exchange Act                                                                                                                                                   |
| 32.1  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                  |
| 32.2  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                  |

| 101.INS* | XBRL Instance Document                                 |
|----------|--------------------------------------------------------|
| 101.SCH* | RL 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 |

| * | Pursuant to Rule 405(a)(2) of Regulation S-T, the registrant is relying upon the applicable 30-day grace period for the initial filing of its first Interactive Data File required to contain detail-tagged footnotes or schedules. The registrant intends to file the required detail-tagged footnotes or schedules by the filing of an amendment to this Quarterly Report on Form 10-Q within the 30-day period. |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Date:   August 20,  2012 | Keyuan Petrochemicals, Inc.                                          |
|----------------------------------------------|----------------------------------------------------------------------|
|                                         |                                                                 |
|                                         | By: /s/ Chunfeng Tao                                            |
|                                         | Chunfeng Tao                                                         |
|                                         | Chief Executive Officer & President                              |
|                                         |                                                                 |
|                                         | By:  /s/ Fan Zhang                                         |
|                                         | Fan ZhangActing Chief Financial Officer/Vice President of Accounting |

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