The following discussion should be read in conjunction with the information contained in our unaudited consolidated financial statements and the notes thereto appearing elsewhere herein and in conjunction with the Management's Discussion and Analysis set forth in our Annual Report on Form 10-K for the year ended December 31, 2008.

We are on a calendar year; as such the three month period ending September 30, is referred to as our "third quarter". The past year ended December 31, 2008 is referred to as "2008", the current year ending December 31, 2009 is referred to as "2009", and the coming year ending December 31, 2010 is referred to as "2010".

OVERVIEW OF OUR PERFORMANCE AND OPERATIONS

Our Business

We import, sell and distribute to the metal refinery industry in China a variety of metal ore which includes iron, chrome, nickel, copper and manganese ore as well as non-ferrous metals, scrap metal and coal. We obtain these raw materials from global suppliers in Brazil, India, South America, Oman, Turkey, Libya, Nigeria, Indonesia, and the Philippines and distribute them. China is the largest developing country in the world, and the demand for steel has been growing steadily over the past decade as the country continues to experience an industrial revolution. Management estimates domestic steel production should continue to witness significant growth as China continues to grow.

We are in the final stages of constructing a scrap metal recycling facility in the Banqiao Industrial Zone of Lianyungang Economic Development Zone in the Jiangsu province of the PRC. Upon completion of our planned metal recycling facility, we will seek to recycle automobiles, machinery, building materials, dismantled ships and various other scrap metals and will sell and distribute recycled scrap metal to the metal refinery industry in the PRC utilizing our existing network of metal ore customers. We expect to commence recycling operations in the first quarter of 2010.

We believe scrap metal recycling will become a strong growth driver worldwide as natural resources continue to be depleted and larger amounts of unprocessed scrap metal becomes available as a result of increases in consumer demand for products made from steel that eventually are recycled. We have invested a total of approximately $14.5 million for construction and equipment purchases for the first phase of our scrap metal recycling facility. These capital expenditures were derived from a portion of the net proceeds from our 2008 offering (approximately $6.0 million) and borrowings of approximately $7.3 million. It does not appear that we will need to secure additional investment capital and/or bank and vendor financing to complete the first phase of our scrap metal recycling facility.

Our Performance

For the third quarter and nine months of 2009, our net revenues increased approximately 21% and approximately 34%, respectively, over the comparable periods in 2008. Our gross profit margin as a percentage of revenues, however, decreased for the third quarter and nine months of 2009 to approximately 4% and approximately 10%, respectively compared to approximately 12% and approximately 11% during the third quarter and nine months of 2008, respectively. Our performance during the third quarter and nine months of 2009 reveals the variable nature of our gross profit margins in our trading business; during the current year, our gross profit margin as a percentage of revenues began at approximately 10% for the first quarter of 2009, then increased to 18% for the second quarter of 2009, and then decreased to 4% for the third quarter of 2009. These fluctuations are attributable to variations in market prices of the ore and metals we sell. Our net income decreased a $2.2 million and $1.3 million for the third quarter and nine months of 2009, respectively. This decrease is partially due to a $1.1 million income tax accrual calculated in the third quarter of 2009. Our total assets increased approximately 187% in comparison to December 31, 2008, which was mainly due to the short-term increase of inventory resulting from the cut-off of the quarter end and the construction of our scrap metal recycling facility.

In addition to our long term borrowings of approximately $7.3 million for our scrap metal recycling facility, we borrowed from banks in China on a short term basis approximately $13 million during the third quarter of 2009 to finance the purchase of inventory on which we have executed contracts to resell at the time of purchase. These borrowings are secured by the inventory we purchase and the contracts for their sale and are repaid upon receipt of payment from our customers. In addition, our accounts receivable increased approximately $6.5 million mainly due to extension of credit terms given to our customers. Inventories and accounts payable both increased approximately $31.1 million at September 30, 2009 from December 31, 2008 due to timing differences between our receipt of product, shipment to our customers, and payment to our vendors.

Our Outlook

Our performance for the three and nine months of 2009 showed increased sales but a lower gross margin in comparison to our second quarter of 2009 as our strong second quarter gross margin was mainly due to a one time sales transaction during that period. We have witnessed a rebound in our revenue which we believe is a sign of the beginning of a global economic recovery. We note consistent sales increases quarter-over-quarter in the current year. Due to efforts to improve our performance and operate more efficiently, we now see our Company in the position to capitalize on trading opportunities as a global economic recovery emerges.

In November 2008, the Chinese government announced a $586 billion domestic economic stimulus program aimed at bolstering domestic economic activity. The two-year program includes tax rebates, spending in housing, infrastructure, agriculture, health care and social welfare, and a tax deduction for capital spending by companies. We can attribute a portion of our increased sales to this stimulus program. The Chinese government has been very supportive and a series of economically beneficial policies have recently been implemented. Based on these newly implemented policies we are beginning to see some signs of economic recovery. However, in the short-term, it remains to be seen whether domestic consumption can compensate for slower export growth on the products made from the ore and metal we sell, and the impact this will have on our revenues through the balance of this year. The metals markets has witnessed a significant rebound in pricing during the second quarter of 2009 followed by a leveling off during the third quarter of 2009. In both market situations, we have experienced an increase in trading volumes and the trading business has been more active through the second and third quarters of 2009.

Presentation of Financial Statements

The presentation of the statements of operations included in Part 1, Item 1 in this Form 10-Q have been modified to allow for the reporting of deductions from net income to arrive at income (loss) applicable to common stockholders. Items reflected in our comprehensive income for the periods reported are now included in our financial notes to the unaudited financial statements included in this Form 10-Q.

RESULTS OF OPERATIONS

The table below summarizes the consolidated operating results for the three and
nine months ended September 30, 2009 and 2008. The percentages represent each
line item as a percentage of revenues.

                                         For the Three Months Ended                   For the Nine Months Ended
                                                September 30,                               September 30,
                                         2009                  2008                  2009                  2008
Net revenues                       $ 27,312,276          $ 20,384,974          $ 55,207,948          $ 43,174,787
Cost of goods sold                   26,279,225   96 %     17,937,965   88 %     49,542,143   90 %     38,621,088   89 %
Gross profit                          1,033,051    4 %      2,447,009   12 %      5,665,805   10 %      4,553,699   11 %

Total operating expenses                452,771    2 %        344,116    2 %      1,457,768    3 %        717,070    2 %
Operating income                        580,280    2 %      2,102,893   10 %      4,208,037    8 %      3,836,629    9 %

Net Revenues

Revenues for the three and nine months ended September 30, 2009 increased approximately 34% and approximately 28% over the comparable periods in 2008, respectively. These increases are attributable to an increase in sales to existing customers as demand for the metal ore we sell in China has rebounded in response to Chinese government incentives and as signs of recovery from the global economic slowdown has allowed our customers to begin to ramp-up operations to pre-economic slowdown levels.

Cost of Goods Sold

Cost of goods sold as a percentage of revenues during the three and nine months ended September 30, 2009 were approximately 96% and 90%, respectively, compared to 88% and 89% for the comparable periods in 2008. These increases were mainly due to a sales price reduction we agreed to in light of the market price of chromium at the time of delivery to a customer in the third quarter of 2009. Overall, our gross profit margin decreased to approximately 4% and approximately 10% for the three and nine months ended September 30, 2009 as compared to approximately 12% and approximately 11% for the same periods in 2008.

Total Operating Expenses

Operating expenses for the three and nine months ended September 30, 2009 increased approximately 32% and approximately 103% over the comparable periods of 2008, respectively. Operating expenses as a percentage of revenues were 2% and 3% for the three and nine months ended September 30, 2009, respectively, compared to 2% for the comparable periods of 2008. The increase in our operating expense is due to an increase in both selling expenses and general and administrative expenses. Selling expense increased by approximately $78,000 and $459,000 over the prior three and nine months, respectively mainly due to higher selling expenses associated with a larger sales staff and higher salaries needed to retain talent, and higher inspection and warehousing fees on larger quantities of goods we were required to warehouse pending delivery to customers. Our general and administrative cost increased by approximately $31,000 and $281,000 over the prior three and nine month period, respectively mainly due to higher salaries and an increase in professional fees for regulatory compliance associated with our SEC reporting obligations. While we will seek to contain our operating expenses to the extent possible without negatively impacting our business, we expect these costs to stay within 2-3% of revenues through the end of 2009.

Total Other Expense

Total other expense decreased approximately $32,000 for the three months ended September 30, 2009 and increased $1.3 million for the nine months ended September 30, 2009. Total other income and expense includes interest expense, interest income, bank charges, government subsidy income, and penalties and fines. Interest expense increased approximately $41,000 and $35,000 for the three and nine months ended September 30, 2009, respectively. This increase is due to higher interest expense associated with the $20.3 million debt obligations we have incurred in connection with our trading and recycling facility construction. This increase in expense was partially offset by an increase in government subsidy income of approximately $11,000 and $52,000 for the three and nine months ended September 30, 2009, respectively. This subsidy income is related to Chinese government stimulus initiatives beginning in 2009. For the nine months of 2009, the change to other expense from other income for the comparative period in 2008 is mainly due to a one-time gain of $1.2 million related to a contract termination we recognized during the three months ended June 30, 2008, this gain was not repeated in 2009. We expect other expense to continue to be about 1% of revenues through the end of 2009.

Income Tax Expense

Income tax expense for the three and nine months ended September 30, 2009 increased by $730,626 and $344,735 respectively compared to the comparable periods of 2008, respectively. This increase is due to an income tax accrual we made based on an analysis of the applicability of a potential 16.5% income tax on the operations of our Hong Kong subsidiary during the nine months of 2009. Our income tax accrual and the related expense is an estimate and will be reevaluated at the end of 2009.

Net Income (Loss)

For the three months ended September 30, 2009 our net loss was ($859,959) and for the nine months ended September 30, 2009 our net income was $2,637,736. These amounts represented a decrease of approximately 163% and 33%, respectively, over the comparable periods in 2008 and were mainly due to a $1.1 million income tax expense in the third quarter of 2009 and a lower gross profit margin.

Comprehensive Income

For the three and nine months ended September 30, 2009 our comprehensive (loss) income amounted to ($819,090) and $2,620,205, respectively. Comprehensive income consists of our net (loss) income and foreign currency translation gain
(loss). The functional currency of two of our subsidiaries operating in the PRC is the Chinese dollar or RMB. The financial statements of our subsidiaries are translated to U.S. dollars using period end rates of exchange for assets and liabilities, and average rates of exchange (for the period) for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations. As a result of these translations, we reported a foreign currency translation gain of $40,869 for the third quarter of 2009 and a gain of $183,363 for the third quarter of 2008, and for the nine months of 2009 a loss of $17,532 and a gain of $497,263 for the nine months of 2008. These non-cash gains and losses had the effect of increasing our reported comprehensive income for the third quarter of 2009 and decreasing our reported comprehensive income for the nine months of 2009.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. At September 30, 2009 and December 31, 2008 we had cash and cash equivalents of $4,715,817 and $3,253,533, respectively. At September 30, 2009 our working capital was approximately $12.8 million as compared to approximately $10.7 million at December 31, 2008. We have historically met our liquidity requirements utilizing internally generated cash derived from our operations, raising capital by selling our common stock and warrants and debt financing.

On September 3, 2009, we entered into a RMB 70 million (equivalent to $8,931,306 at September 30, 2009) line of credit facility ("Line of Credit") with the Bank of China. The proceeds from the Line of Credit are designated for property, plant and equipment expenditures related to our scrap metal recycling facility and is secured by these assets in addition to our land use right on which this facility is being constructed. The Line of Credit expires on September 3, 2012. As of September 30, 2009, we drew RMB 50 million (equivalent to U.S. $7,312,507) of the Line of Credit with RMB 20 million (equivalent to U.S. $1,618,799 at September 30, 2009) remaining available to us.

On September 13, 2009, we borrowed $7,637,615 from Raiffeisen Zentralbank Österreich AG in China to finance the purchase of inventory that was subject to a contract for resale to one of our customers at the time of the loan. The loan accrues interest at rate of 3.30% per annum payable monthly, with the principal due February 3, 2010. The loan was secured by the inventory which was purchased with the proceeds of the loan and the contract for its sale and personally guaranteed by Kexuan Yao, our Chief Executive Officer and Chairman. This loan was repaid on November 13, 2009 upon receipt of payment from our customer in connection with the completion of the sale of the inventory.

In addition, on September 26, 2009, we borrowed $5,338,076 from Guangdong Development Bank in China to finance the purchase of additional inventory that was subject to a contract for resale to one of our customers at the time of the loan. The loan accrues interest at rate of 6.30% per annum payable monthly, with the principal due January 26, 2010. The loan was secured by the inventory which was purchased with the proceeds of the loan and the contract for its sale. We completed delivery of the goods in connection with this transaction and expect to repay this loan when we receive payment from our customer which is due prior to the date the loan matures.

As of September 30, 2009, we have invested a total of approximately $14.5 million for construction and equipment purchases for the first phase of our scrap metal recycling facility with approximately $1.8 million being invested by us in the third quarter of 2009. These capital expenditures were derived from our cash flow, a portion of the net proceeds from our 2008 offering (approximately $6.0) and the proceeds from our Line of Credit ($7.3 million). It does not appear that we will need to secure additional investment capital and/or bank and vendor financing to complete the first phase of our scrap metal recycling facility. While we expect to expand the production capacity of our planned recycling facility after completion of the first phase of construction, we have not set a timeframe for this expansion. Also, we have not determined how we plan to finance future expansion of our recycling facility and unless we can obtain additional financing, we will be unable to complete construction of additional phases of our scrap steel recycling facility. There is no assurance, however, that we will be successful in obtaining the additional financing that we require for additional phases or that such financing may not be on terms deemed to be desirable to our management. Furthermore, in the event we are successful, there is no assurance that such investment will result in enhanced operating performance and any inability on our part to secure additional financing over the next 12 months, if needed, could have a material adverse effect on our growth plans.

A majority of our cash reserves, $4,016,176 or approximately 95% at September 30, 2009, is held in the form of RMB held in bank accounts at financial institutions located in the PRC. Cash held in banks in the PRC is not insured. The value of cash on deposit in China at September 30, 2009 has been translated based on the exchange rate as of September 30, 2009. In 1996, the Chinese government introduced regulations which relaxed restrictions on the conversion of the RMB; however restrictions still remain, including but not limited to restrictions on foreign invested entities. Foreign invested entities may only buy, sell or remit foreign currencies after providing valid commercial documents at only those banks authorized to conduct foreign exchanges. Furthermore, the conversion of RMB for capital account items, including direct investments and loans, is subject to PRC government approval. Chinese entities are required to establish and maintain separate foreign exchange accounts for capital account items. We cannot be certain Chinese regulatory authorities will not impose more stringent restrictions on the convertibility of the RMB, especially with respect to foreign exchange transactions. Accordingly, cash on deposit in banks in the PRC is not readily deployable by us for purposes outside of China.

Our current assets at September 30, 2009 increased 189% from December 31, 2008; this reflects increases in current asset items including inventories of $31.1 million, accounts receivable of $6.5 million, prepayments and other current assets of $3.8 million, and deposits on future construction of $2.8 million. These increases were partially offset by a decrease in advances on purchases of $1.8 million.

Our current liabilities increased 324% at September 30, 2009 from December 31, 2008; this reflects an increase in accounts payable of $31.1 million, loans payable of $10.1 million and accrued expenses and other liabilities of $2.5 million which were partially offset by decreases in customer deposits of $0.5 million.

Pledged deposits increased approximately $507,000 at September 30, 2009 from December 31, 2008. The Company makes these pledged deposits with financial institutions as collateral to Letters of Credit; the amounts will be released to pay vendors upon acceptance of goods.

Our accounts receivable, net of allowance for doubtful accounts, increased approximately $6.5 million mainly due to extension of credit terms given to our customers. All of our accounts receivables are aged less than 90 days.

Due from related parties increased approximately $1.5 million at September 30, 2009 from December 31, 2008. This amount was advanced to Prime Armet Group, Inc., a company controlled by Kexuan Yao, our Chairman and Chief Executive Officer, which acted as a third party payor in order to facilitate a foreign exchange payment for equipment to be delivered to and incorporated into our recycling facility. Upon delivery of the equipment, this due from related party will be reclassified to property, plant, and equipment.

Inventories increased approximately $31.1 million at September 30, 2009 from December 31, 2008 mainly due to timing differences between our receipt of product and shipment to our customers. We hold inventory for short periods of time, normally less than one month, in situations where our customer has not accepted the shipment or delays in shipment occur. Along with this increase in inventory, accounts payable also increased $31.1 million from December 31, 2008 mainly due to similar timing differences as we normally pay for any goods held as inventory after we receive payment from our customer upon delivery.

Advances on purchases decreased approximately 50% at September 30, 2009 from December 31, 2008, and consisted of prepayments to vendors for merchandise and deposits on pending purchases. These advances on purchases are customary in our business and helps us secure inventory below prevailing market prices, thereby providing us with a better opportunity to increase our gross profit margins.

Our prepayment and other current assets increased approximately $3.9 million at September 30, 2009 from December 31, 2008. These were due to prepayments and deposits for start-up costs and deposits related to our recycling operation in Lianyungang in preparation for operations to begin at the recycling facility in the first quarter of 2010. The prepayments include a $1.5 million guarantee deposit to the recycling equipment vendor, $1.0 million in prepaid expenses related to the recycling facility, and $800,000 in prepaid expenses related to the trading business. This in an increase from prepaid expenses related to the recycling facility of $150,000 and prepaid expenses related to the trading business of $230,000 at December 31, 2009. Additionally, deposits on future construction increased $4.3 million for prepaid construction costs also related to our recycling operation.

Loans payable increased approximately $10.1 at September 30, 2009 from December 31, 2008 as a result of approximately $13.0 million in short-term borrowings in the third quarter of 2009 to finance inventory purchases partially offset by repayments. The short-term borrowings in the third quarter of 2009 carry interest rates ranging from 3.3% to 7.85%.

Advance from stockholder decreased approximately $188,000 at September 30. 2009 from December 31, 2008. Our Chairman and CEO, Mr. Kexuan Yao has advanced us funds for working capital purposes. We repaid approximately $60,000 during the third quarter of 2009 and $188,000 during the nine months ended September 30, 2009.

Customer deposits decreased 87% at September 30, 2009 from December 31, 2008. This decrease is due to timing of customer orders and amounts that we require for deposits. We recognize customer deposits as revenue when the goods have been delivered and risk of loss has transferred to the customer either at the port of origin or port of destination based on the shipping terms we agree to with our customer.

Accrued expenses and other current liabilities increased to approximately $2.5 million at September 30, 2009 from December 31, 2008. This line item consists of accrued expenses and other payables related to shipping fees. These expenses are due to timing differences of shipments and payments of our payables as compared to 2008.

Long-term debt increased approximately $7.3 million at September 30, 2009 from December 31, 2008 due to a bank loan, the proceeds of which were used for purchases of property, plant and equipment related to the construction of our scrap metal recycling facility. The term of the loan is for a period of three years bearing interest at the rate of 5.4% per annum and is secured by our fixed assets and land use right.

Statement of Cash Flows

As of September 30, 2009, our cash increased approximately $1.5 million to $4.7 million. This increase consisted of $3.1 million used in operating activities, $12.7 million used in investing activities, and $17.6 million provided by financing activities. Our cash increase of approximately $3.2 million at September 30, 2008 consisted of $9.5 million used in operating activities, $354,000 used in investing activities, and $12.9 million provided by financing activities.

Cash (Used in) Provided by Operating Activities

For the nine months ended September 30, 2009 cash used in operations of $3.1 million was mainly comprised of outflows related to an increase in inventories of $31.2 million, a increase in accounts receivable of $6.5 million, and an increase in prepayments of $3.9 million. These outflows were partially offset by cash provided by our net income of $2.6 million, and cash provided by an increase in accounts payable of $31.0 million, increase in accruals of $2.5, and decrease in advance on purchases of $1.8 million

For the nine months ended September 30, 2008 cash used in operations of $9.5 million included an increase in accounts receivables of $12.8 million due primarily to longer payment terms extended to clients during the three months ended September 30, 2008, prepayments and other current assets of $744,785, and an increase in advances on purchases of $5.7 million. These outflows were partially offset by an increase in accounts payables of approximately $2.5 million, deposits from customers of $1.9 million, taxes payable of approximately $785,000, accrued expenses and other current liabilities of approximately $442,000, and net income of $3.9 million.

Cash Used in Investing Activities

For the nine months ended September 30, 2009 cash used in investing activities of $12.7 million was due to purchases of property and equipment associated with our recycling facility construction project during the period of $7.9 million, deposits for future construction of $2.8 million, increase in advances to related parties of $1.5 million and payments made towards pledged deposits of $506,621.

For the nine months ended September 30, 2008 cash used in investing activities . . .