The following discussion and analysis of our consolidated financial condition and results of operations for the fiscal years ended September 30, 2012 and September 30, 2011, should be read in conjunction with the consolidated financial statements and other information presented in this Annual Report on Form 10-K.

Our Business

We are a U.S. company that manages a portfolio of entities in China and the Americas. We also provide business and financial consulting services to public and private American and Chinese businesses. We operate in three identifiable segments: Magnesium, Basic Materials, and Consulting.

Historically, our Magnesium segment has represented our largest segment by assets and revenues. We manufacture and sell pure magnesium and related by-products sourced and produced in China. We also purchase and resell magnesium products sourced and produced in China by third parties. Magnesium is the lightest and strongest of the structural metals; it is one fourth the weight of steel, two fifths the weight of titanium and two thirds the weight of aluminum. Magnesium is used in a variety of markets and applications due to the physical and mechanical properties of the element and its alloys. Magnesium ingots are the feedstock for the manufacturing process of titanium and aluminum alloying. Magnesium powder and granules are used as a desulphurizer that removes sulfur in the production process of steel. Additionally, various types of magnesium alloys which are produced from the pure magnesium ingots are used in aircraft, automobile parts, and in electronic equipment such as computers, cameras and cellular phones. As described elsewhere herein, in February 29, 2012, we completed the acquisition of 100% of Golden Trust and 80% of Lingshi Magnesium. Golden Trust and Lingshi Magnesium are both engaged in the production of pure magnesium ingots. We have added approximately 20,000 metric tons of annual production capacity from Golden Trust and approximately 12,000 metric tons of annual production capacity from Lingshi Magnesium, bringing our total magnesium production capacity to approximately 90,000 metric tons. Additionally, and as discussed elsewhere herein, in September 2012 we impaired two magnesium facilities, Baotou Changxin Magnesium and Chang Magnesium due to continuous operating stoppages resulting from high cost of production and poor market economic conditions.

Our Basic Materials segment engages in the sale and distribution of basic resources within China and the global purchase and sale of industrial commodities in the Americas which includes mineral ores and non-ferrous metals. As described elsewhere in this report, in September 2012 we sold our majority interest in Lang Chemical and in October 2012 we sold our interest in CDI Beijing. While revenues in prior periods from CDI Beijing were not material to our operations, Lang Chemical's assets represented substantially all of the assets in this segment. This disposition is consistent with our strategy to streamline our investment and assets in China committed to this segment due to poor performance over the past fiscal year and realign our investments to our industrial commodities business in the Americas to maximize our profits and cash flow over the next fiscal year and beyond.

Our Consulting segment provides services to public and private American and Chinese entities seeking access to the U.S. and Chinese capital markets. These services include general business consulting, Chinese regulatory advice, translation services, formation of entities in the PRC, coordination of professional resources, mergers and acquisitions, strategic alliances and partnerships, advice on effective means of accessing U.S. capital markets, coordination of Sarbanes-Oxley compliance, and corporate asset evaluations.

A significant portion of our business and operations are in China and, accordingly, its national economy plays a significant role in our results of operations. China's gross domestic product growth (GDP) rate slowed to approximately 7.4% in the third quarter of calendar year 2012, down from 7.6% in the second calendar quarter of 2012, and down from 8.1% in the first quarter, as compared to the same period in calendar 2011, which is the lowest rate since the second calendar quarter of 2009 as the European debt crisis and weaker demand has put the global economic recovery in jeopardy and pushed China's export-driven manufacturing activities to its lowest levels in the past three years. The 7.4% GDP growth in the third calendar quarter of 2012 reflected a combination of weak demand from abroad, flagging investment at home, and insufficient spending by China's households to pick up the slack. Furthermore, China's housing market and particularly its real estate construction market experienced a significant correction due to a tighter regulatory environment, bank lending curbs, and slower demand during fiscal 2012. In response to this slowdown, China's Central Bank cut the nation's commercial banks' reserve requirement ratio by 0.5 percentage point, the first such cut since December 2008, and in June 2012 cut the interest rate twice, in order to provide additional liquidity for commercial lending. This represents a significant shift in China's economic policy signaling that China has put economic growth at the top of its agenda, rather than concerns about inflation.

China's import fell 2.6% year-on-year in August 2012 while exports grew a lackluster 2.7% over the same period. The poor export growth reading in August of 2012 confirmed the weakness of the export sector in China's economy. Profits at China's major industrial enterprises fell more steeply in August 2012, extending the decline into a fifth straight month as earnings were dragged down by the continued slowdown in economic growth and rising labor costs.

During fiscal 2012, the overall economic environment, particularly in China, showed no improvement, and our Basic Materials segment continued to struggle with slower customer demand due to tightened credit conditions in China impacting customer financing needs to purchase our products. We still face a number of challenges in continuing the growth of our business, which is primarily tied to the overall health of the global economy. During this fourth quarter of fiscal 2012 and into fiscal 2013, we also intend to realign our investments, and streamline and restructure our operations in China, in our Basic Materials segment, as we shift our business and strategic focus in the Basic Materials segment to the expansion of our industrial commodities sourcing and distribution business in the Americas. As discussed above, we sold our 51% interest in Lang Chemical for $1.2 million in late September of 2012 and in October 2012 we also sold our 51% interest in CDI Beijing for $1.6 million as part of our streamline steps and restructuring strategy to redirect our investments to our industrial commodities in the Americas so as to maximize our profits and cash flow during the coming years.

Two additional events during fiscal 2012 have the ability to adversely impact our overall business and operations. The NASDAQ Stock Market notified us of the delisting of our common stock. Our common stock was delisted on July 11, 2012 and is now quoted in the over-the-counter market on the OTCQB Tier of the OTC Markets. This occurrence will make our ability to raise capital in future periods much more difficult and will adversely impact our shareholders' liquidity in our common stock. The second event is the bankruptcy of our CDII Trading subsidiary which is described in greater detail elsewhere in this report.

Information On Trends Impacting Our Reporting Segments Follows:

Magnesium segment.

According to the International Magnesium Association (IMA), an industry trade group, from January 2012 to July 2012 (most recent available data) China's domestic magnesium exports totaled approximately 228,000 metric tons, down12.2% compared to the same period in 2011. This downward trend has persisted for the past three quarters of 2012. Furthermore, according to statistics by the General Administration of Customs in China, as published by China Minor Metals, China's export of magnesium products fell by approximately 31,000 metric tons in May of 2012, down 9.6% on a year to year basis. The May figure was 10.6% lower than the volume in April 2012 and was the third consecutive month to see a decline. In recent months, particularly in the months of October 2012and November 2012, we have seen some improvement in the export growth as China continues to emerge from its economic slowdown during the past year.

During fiscal 2012, our Magnesium segment produced, sold or distributed approximately 36,808 metric tons of magnesium products, including 853 metric tons of magnesium powder, generating revenues of $102.2 million. During fiscal 2011, our Magnesium segment produced, sold or distributed approximately 36,637 metric tons of magnesium products, including 3,484 metric tons of magnesium powder, generating revenues of $98.8 million.

Our average magnesium sales price over fiscal 2012 was approximately $2,696 per metric ton, compared to an average magnesium sales price of approximately $2,703 per metric ton for fiscal 2011. Magnesium prices incrementally improved over the course of fiscal 2011 reflecting an improved worldwide demand pattern during the first three quarters of calendar 2011, characterized by a gradual increase in prices driven by an increased demand from the global aerospace, automotive and consumer electronics sectors. This was followed by a softening in overall demand beginning in October 2011, which has continued through the fourth quarter of fiscal 2012, mostly due to renewed concerns over the European debt crisis, tightening credit availability in China forcing domestic competitors to liquidate inventory to raise cash balances and a general slowdown in China manufacturing activities. As a result, we built additional inventory in the quarter in anticipation of an improvement in demand in the fourth quarter of calendar 2012 and into 2013. Additionally, we impaired two magnesium facilities, Baotou Changxin Magnesium and Chang Magnesium, in the fourth quarter of 2012for a total of $21.0millionin impairment charges, $3.8 million charge to operations for Chang Magnesium and $17.2 million to discontinued operations for Baotou Changxin Magnesium. The Baotou Changxin Magnesium facility was reported separately under discontinued operations in our consolidated financial statements appearing elsewhere in this report since this facility will no longer be used in the future.

Based on the current trends and quoting activities, and indications from the economic activities worldwide, we believe that magnesium demand and prices will begin to increase progressively in the last quarter of calendar 2012 and into 2013. Further, we believe that the long term industry trends for magnesium are favorable and will allow us to rapidly ramp up our production to capitalize on expected growth during fiscal 2013. We intend to continue with our strategic plan to further streamline and consolidate our own production capacity subject to the availability of additional capital.

Basic Materials Segment.

During fiscal 2012, we experienced much lower demand for our products in this segment in our China market sector, primarily due to tightened credit conditions in China impacting our customers' ability to obtain financing to purchase our products. Furthermore, the overall domestic market for our products in the Basic Material segment continued its downtrend during fiscal 2012, resulting in a weaker business environment in both our specialty chemicals and construction steel related sales. For fiscal 2012, there were basically nominal revenues from our specialty chemical and steel related product ssales and gross margins which were netted with related costs and included in discontinued operations as compared to the same period in fiscal 2011. Our comparative financials for fiscal 2012 and 2011 have been adjusted to reclassify from this segment operations into discontinued operations the disposition of Lang Chemical and CDI Beijing which were our main subsidiaries in the Basic Materials segment.

As a result of the substantial economic slowdown and lack of new sales in the domestic market in China for our specialty chemicals and steel related products, we disposed of the two main subsidiaries in the fourth quarter of fiscal 2012, which have negatively impacted this segment over fiscal 2012, namely Lang Chemical and CDI Beijing, as previously discussed, and have further realigned our capital investment in these businesses toward our industrial commodities and distribution business in the Americas in order to maximize our revenues, gross profit, and cash flow in this segment in fiscal 2013 and in future years.

In fiscal 2012, we experienced delays in completing a shipment out of Mexico due to a longer than expected timeframe to receive environmental permits needed to process the iron ore to meet our customer's specifications and necessary export approvals. During the second quarter of fiscal 2012, we applied for and received the required environmental permits to process iron ore, however, we are still waiting for the approval to export. We are also exploring opportunities for domestic sales. Our operations in Chile experienced shipping delays due to a longer than expected timeframe to receive port authority approval to export the iron ore. During the third quarter of fiscal 2012 we also worked to establish new relationships with suppliers/exporters. One of our suppliers/exporters received port authority approval for shipment during the fourth quarter and we expect to begin revenue generation during fiscal 2013. In Bolivia, we established new relationships with a supplier and are working with an engineering specialist to further strengthen our sourcing capabilities and a logistics provider to meet our inland transportation needs.

In fiscal 2013 and future years, the Basic Material segment will be driven by our industrial commodities business in South America. Our China market presence in chemicals and steel related construction products have been disposed as of the end of fiscal 2012, as previously discussed.

Consulting Segment.

We believe demand for our consulting services will improve in fiscal 2013. In September of 2011, we launched a marketing initiative for our new One-Stop China Value™ program in an effort to capitalize on the current environment. This program is designed to implement a broad range of strategies to enhance and maximize shareholder value for China-based U.S. public companies. Other marketing plans include sponsoring trade symposiums, investment forums, and forming strategic alliances with industry and trade associations.

Our financial statements have been prepared assuming we will continue as a going concern. For fiscal 2012 we reported a net loss of $53.3 which is primarily attributable to the impact of discontinued operations primarily related to Basic Materials and Magnesium segments and one-time impairment charges in the Magnesium and Consulting segments. This, among other operational issues, raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As described elsewhere in this report, during the fourth quarter of 2012 we sold our interests in Lang Chemical and CDI Beijing and discontinued the operations of CDI Jingkun Zinc and CDI Jixiang Metal, all of which were part of our Basic Materials segment. In addition, in the fourth quarter of 2012, we discontinued the operations of Baotou Changxin Magnesium which was part of our Magnesium segment and also took an impairment charge for Chang Magnesium. The results of operations of each of these entities, and all related costs of revenues and operating expenses, for fiscal 2012 and 2011 are included in discontinued operations appearing on consolidated statements of operations and comprehensive income (loss) appearing later in this report.

Summary of Selected Consolidated Financial Information

                                             Twelve Months Ended September 30,
                                             2012                          2011
                                                    % of                          % of         % Increase
 (Dollars in thousands)             Amount         Revenues       Amount        Revenues       (Decrease)
Magnesium segment                 $  102,229             90%     $  98,820            81%                3%
Basic Materials segment                  0.8              0%         4,294             3%            (100%)
Consulting segment                    11,828             10%        19,007            16%             (38%)
Consolidated Revenues             $  114,058            100%     $ 122,121           100%              (7%)
Cost of revenues                     102,528             90%       105,630            86%              (3%)
Gross profit                          11,530             10%        16,491            14%             (30%)

Total operating expenses              19,859             17%         9,558             8%              107%
Total operating (loss) income     $  (8,329)            (7%)     $   6,933             6%            (220%)

                    Analysis of Operating Results by Segment

A summary of our comparative operating results by segment for the twelve months
ended September 30, 2012 and 2011, follows:

                            Twelve months ended           Increase
 Magnesium Segment             September 30,             (Decrease)
 (Dollars in thousands)      2012          2011

 Total revenues             $ 102,229     $ 98,820      $      3,409
Cost of revenues              100,924       95,420             5,504
Gross profit                    1,305        3,400           (2,095)
Total operating expenses        8,864        3,417             5,447
Operating (loss)            $ (7,559)     $    (18 )    $    (7,541)




                            Twelve months ended        Increase
Basic Materials Segment        September 30,          (Decrease)
(Dollars in thousands)       2012          2011

Total revenues              $      0.8     $ 4,294     $  (4,293)
Cost of revenues                   0.6       3,692        (3,691)
Gross profit                       0.2         602          (602)
Total operating expenses         1,491         915            576

Operating (loss) income     $  (1,491)     $ (313)      $ (1,178)

                            Twelve months ended        Increase
Consulting Segment             September 30,          (Decrease)
(Dollars in thousands)       2012          2011

 Total revenues             $  11,828     $ 19,007      $ (7,179)
Cost of revenues                1,604        6,517        (4,913)
Gross profit                   10,224       12,490        (2,266)
Total operating expenses        9,505        5,226          4,279
Operating income            $     719     $  7,264      $ (6,545)

Consolidated Revenues

Revenues in fiscal 2012 decreased by 6.6%, as compared to fiscal 2011, primarily due to basically no revenues from the Basic Materials segment resulting from economic slowdown in China and a substantial drop in sales, including the fact that both of the main subsidiaries in Basic Materials segment were sold in the fourth quarter of 2012 to realign investment resources for the future, coupled with a decrease of 37.7% in revenues from the Consulting segment due to the cyclical nature of the consulting business and the lack of new clients over the past two fiscal quarters of fiscal 2012, offset by a 3.5% increase in revenues from our Magnesium segment.

Revenues by Segment

Our Magnesium segment sold and distributed approximately 36,808 metric tons of magnesium, including 853 metric tons of magnesium powder, generating revenues of $102.2 million for fiscal 2012, as compared to 36,637 metric tons, including 3,484 metric tons of magnesium powder, for revenues of $98.8 million for fiscal 2011, after adjustment for discontinued operations on a comparative basis shown separately in our statement of operations. The average selling price of our magnesium for ingot and powder sales for fiscal 2012, excluding processing fees increased slightly by 0.2% while volume increased by 0.5%, resulting in slightly higher revenues for fiscal year 2012. Included in the $102.2 million for fiscal 2012 was approximately $3.0 million in processing fees which is a new source of revenue for the Magnesium segment. During the quarter we reduced trading activity in anticipation of a strengthening in demand and prices for magnesium in the last quarter of calendar 2012 and into 2013.

Our Basic Materials segment generated nominal revenues in fiscal 2012 as compared to $4.2 million for fiscal 2011. The decrease of 100% in revenues for fiscal 2012 was primarily due to much lower sales volumes from our construction steel related products due to reduced demand caused by slower construction expansion and tightened credit conditions in China impacting our customers' ability to obtain financing to purchase our products. We disposed of the two main subsidiaries in this segment in the last quarter of fiscal 2012, and included the dispositions in our discontinued operations.

Our Consulting segment revenues primarily consist of consulting and advisory service fees we received from certain publicly traded U.S. companies with their primary business operations located in the PRC. We receive a fixed number of shares of their marketable securities or fees from those client companies, including both recurring and one-time transaction fees for services provided to clients. Consulting segment revenues vary from period to period depending upon the timing, nature and scope of services we provide to a particular client. Our Consulting segment generated $11.8 million in revenues during fiscal 2012, as compared to $19.0 million in fiscal 2011, primarily due to lack of new client additions during the last two quarters of fiscal 2012 as opposed to new clients added during the same period in fiscal 2011, coupled with a reduction in scope of consulting and transactional services provided to the new clients during fiscal 2012.

Consolidated Gross Profit

Our consolidated gross profit in fiscal 2012 decreased by 30.0% as compared to fiscal 2011. Our consolidated gross profit margin decreased to 10.1% in fiscal 2012, as compared to 13.5% in fiscal 2011. The decrease in gross profit was primarily due to basically no sales revenues from our Basic Materials segment, coupled with a 61.6% decrease in gross profit within our Magnesium segment and an 18.1% decrease in gross profit from our Consulting segment.

Gross Profit by Segment

Gross profit in fiscal 2012 for our Magnesium segment decreased by $2.1 million, or 61.6%, over fiscal 2011, with a gross profit margin of 1.3% as compared to 3.4% in fiscal 2011. The decrease in gross profit for fiscal 2012 was primarily due to an increase in sales revenues of 3.5%, offset by a 5.8% increase in cost of revenues, including lower depreciation expense from a change to units of production method to reflect allocation of costs in the production cycle, as compared to fiscal 2011. As described in Note 3 to the consolidated financial statements appearing elsewhere in this report, during the second quarter of 2012, we changed our depreciation method in the Magnesium segment from straight-line to units of production to better reflect the allocation of costs to the production cycle given the production capacity available and capital investment committed to this segment.

Our gross profit in our Basic Materials segment for fiscal 2012 was negligible as compared to a gross profit of $0.6 million for fiscal 2011.The gross profit and margins for our Basic Materials segment was negatively impacted during the entire fiscal 2012 by substantially lower sales revenues from Lang Chemical and our CDI Beijing subsidiary that sells and distributes steel related products, including reinforcing steel bars and other industrial related commodities, primarily due to tightened credit conditions in China impacting our customers' ability to obtain financing to purchase our products. Both of these subsidiaries were discontinued during the fourth quarter of fiscal 2012.

Gross profit in our Consulting segment for fiscal 2012 was $10.2million with a margin of 86.4%, as compared to $12.5 million with a margin of 65.7% for fiscal 2011. The increase in gross profit was primarily due to lower cost of revenues in serving our clients.

Total Operating Expenses

Total operating expenses, net of other operating income, increased by $10.3 million, or 107.0%, in fiscal 2012, as compared to fiscal 2011. The increase was primarily due to a write off for prepaid expenses to suppliers in our Basic Materials and Consulting segments of $4.0 million, an impairment charge for the Chang Magnesium facility of $3.8 million, and $2.4 million in higher general and administrative expenses in the Consulting and Magnesium segments. During fiscal 2011, we also collected approximately $0.4 million from a customer for manufacture processing fees we previously discharged as a bad debt within our Magnesium segment and recognized it as other operating income with no comparable other operating income for fiscal 2012.

Operating Expenses by Segment

Operating expenses in our Magnesium segment during fiscal 2012 increased by $5.4 million, as compared to fiscal 2011, primarily due an impairment charge of $3.8 million for the Chang Magnesium facility and higher selling, general and administrative expenses resulting from the additions of the costs associated with Golden Trust and Lingshi Magnesium and higher employee benefit expenses.

Operating expenses in our Basic Materials segment for fiscal 2012 increased 63.0% as compared to fiscal 2011, primarily due to a $0.9 million write off of prepaid expenses to suppliers offset by lower selling, general and administrative expenses resulting from lower sales demand for products and the disposition of two of our main subsidiaries in this segment, as previously discussed.

Operating expenses in our Consulting segment for fiscal 2012 increased 81.9% as compared to fiscal 2011, primarily due to a write off of $2.8 million for prepaid expenses to suppliers and general and administrative expenses, including write off of receivable securities of $0.8 million, and higher travel expenses incurred in serving our client base for both our U.S. headquarters and China-based operations, and executive management. Operating expenses in our Consulting segment also include our general corporate operating expenses.

Impairment losses

In the fourth quarter of fiscal 2012, we impaired two magnesium facilities, Baotou Changxin Magnesium and Chang Magnesium, and recorded a charge of approximately $3.8 million to operating expenses for the Chang Magnesium impairment, and $14.8 million for Baotou Changxin Magnesium which is included separately in discontinued operations, to reflect the impairment of these facilities. The remaining assets of Baotou Changxin Magnesium have been transferred to assets held for sale on our consolidated balance sheet appearing later in this report. We also impaired the assets of CDI Jingkun and CDI Jixiang . . .