x
|
ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934 (No Fee Required)
|
Delaware
|
|
14-1623047
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer
|
incorporation
or organization)
|
|
Identification
No.)
|
18th
Floor, Teda Building
87
Wing Lok Street, Sheungwan,
Hong Kong,
People’s
Republic of China
|
(Address
of principal executive offices)
|
+1-852-2543-2290
|
(Registrant’s
telephone number, including area
code)
|
|
|
Name
of Exchange
|
Title
of Class
|
|
On
Which Registered
|
Common
Stock, par value $0.001
|
|
The
NASDAQ Capital Market
|
|
|
PAGE
|
|
PART
I
|
|
|
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ITEM
1.
|
BUSINESS
|
5
|
|
ITEM
1A.
|
RISK
FACTORS
|
13
|
|
ITEM
1B.
|
UNRESOLVED
STAFF COMMENTS
|
25
|
|
ITEM
2.
|
PROPERTIES
|
25
|
|
ITEM
3.
|
LEGAL
PROCEEDINGS
|
26
|
|
ITEM
4.
|
SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
|
26
|
|
|
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||
PART
II
|
|
|
|
|
|
|
|
ITEM
5.
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MARKET
FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
|
26
|
|
ITEM
6.
|
SELECTED
FINANCIAL DATA
|
28
|
|
ITEM
7.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
28
|
|
ITEM
7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
38
|
|
ITEM
8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
39
|
|
ITEM
9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
|
40
|
|
ITEM
9A.
|
CONTROLS
AND PROCEDURES
|
40
|
|
ITEM
9B.
|
OTHER
INFORMATION
|
41
|
|
|
|
|
|
PART
III
|
|
|
|
|
|
|
|
ITEM
10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
41
|
|
ITEM
11.
|
EXECUTIVE
COMPENSATION
|
41
|
|
ITEM
12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
|
41
|
|
ITEM
13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
41
|
|
ITEM
14
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
41
|
|
|
|
|
|
PART
IV
|
|
|
|
|
|
|
|
ITEM
15
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES
|
42
|
|
SIGNATURES
|
|
44
|
|
FINANCIAL
STATEMENTS
|
F-1
|
§
|
plans
to expand our exports outside of
China;
|
§
|
plans
to increase our production capacity and the anticipated dates that
such
facilities may commence operations;
|
§
|
our
ability to obtain additional funding for our continuing operations
and to
fund our expansion;
|
§
|
our
ability to meet our financial projections for any financial
year;
|
§
|
our
ability to retain our key executives and to hire additional senior
management;
|
§
|
continued
growth of the Chinese economy and industries demanding our
products;
|
§
|
our
ability to produce and sell cold-rolled precision steel products
at high
margins;
|
§
|
our
ability to secure at acceptable prices the raw materials we need
to
produce our products;
|
§
|
political
changes in China that may impact our ability to produce and sell
our
products in our target markets;
|
§
|
general
business conditions and competitive factors, including pricing
pressures
and product development; and
|
§
|
changes
in our relationships with customers and
suppliers.
|
§
|
Focus
on Rapidly Growing Niche Segment.
We will continue to focus on niche markets. According to publicly
available information, the demand for precision cold-rolled steel
products
has been growing at a rate of 20% annually over the past five years
in
China. Export demand, coupled with domestic Chinese demand for
automobile
parts and components, steel roofing, plane friction discs, appliances,
food packaging materials, saw blades, textile needles and
microelectronics, is expected to continue, thereby increasing demand
for
high precision steel products. Moreover, new applications of steel
products are continually being developed. Our research and development
efforts are focused on advancing processing techniques and production
of
high strength and ultra-thin, cold-rolled precision steel products
to
enhance our product offerings and expand our market
share.
|
§
|
Leverage
Our Strengths to Compete Effectively with Imports.
Specialty precision steel is a relatively new industry in China
with the
majority of precision steel imported from Japan, Korea, the European
Union
and the United States. As a result, the average quality and standards
of
China’s high precision steel industry lags behind the international norm.
We believe that our lower cost base allows us to sell our products
at an
average of 5 to 10% below our international competitors and our
manufacturing in China gives us an advantage of shorter delivery
time to
users in China. We will leverage our lower operating cost base,
our
state-of-the-art patented manufacturing system and process, and
our
strategic relationships with our major suppliers to produce cold-rolled
steel products with quality similar to international standards
at lower
cost than international
competitors.
|
Focus
on High Margin Products.
We will continue to manufacture products with high sustainable
margins. We
increased our gross margin from 5.8% in 2004 to 26% in 2008. The
average
gross margin of our high carbon steel products are 20-40% and 10-30%
for
our low carbon steel products. We will provide additional services
such as
heat treatment and cutting and slitting to further enhance our
margins. We
believe these high gross margins are sustainable despite fluctuations
in
steel prices because of the specialty of the end product which
allows
price increases of raw material to be substantially passed directly
to our
customers.
|
§
|
Expand
Manufacturing Capacity.
We will increase our production capacity by commencing construction
of a
third cold-rolling mill with a design capacity of 120,000 tons
in calendar
year 2008. This will increase our total production capacity to
approximately 300,000 tons in four years when all three mills are
operating at full capacity.
|
§
|
Compete
Internationally.
We intend to expand our exports to compete in the international
marketplace. We believe we are the only non-Japanese company able
to
compete in the global marketplace with low carbon precision cold-rolled
steel products in the thickness range between 0.1 to 0.2 mm used
for steel
roofing. In addition, we are not aware of any other company that
currently
manufactures high strength high carbon cold-rolled steel with a
width of
1400mm. These products provide us with a unique opportunity to
compete in
the global marketplace.
|
§
|
Retain
Key Personnel.
The Chinese market is highly competitive for experienced and talented
executives and we will strive to retain our key executives, including
our
Chairman, Wo Hing Li, and the General Manager of Chengtong, Hai
Sheng
Chen. Their experience in strategic expansions and in steel manufacturing,
respectively, is critical to our continued growth and
success.
|
Categories
|
|
Uses
|
|
Thickness
|
|
|
|
|
|
1.
Low carbon steel (cold-rolled, hard-rolled)
|
|
Steel
roofing, food packaging, dry batteries, electronic devices, kitchen
tools
|
|
0.03-7.5mm
|
|
|
|
|
|
2.
High carbon steel (cold-rolled, hot-rolled)
|
|
Automobile
parts and components, grinding pieces, saw blades, weaving needles
|
|
0.5-6.0mm
|
|
|
|
|
|
3.
Stainless steel
|
|
Kitchen
tools, home appliances automobile components
|
|
0.5-2.5mm
|
|
|
|
|
|
4.
Steel services
|
|
Heat
treatment of hot-rolled steel coils; cutting and slitting
|
|
|
Principal Customers
|
2008
|
% to sales
|
2007
|
% to sales
|
|||||||||
|
|
|
|
|
|||||||||
Shanghai
Changshuo Stainless Steel Co., Ltd
|
18,513,819
|
21
|
5,428,110
|
10
|
|||||||||
Shanghai
Bayou Industrial Co., Ltd.
|
10,494,752
|
12
|
-*
|
-*
|
|||||||||
Shanghai
Shengdejia Metal Co. Ltd.
|
10,414,545
|
12
|
-*
|
-*
|
|||||||||
Unimax
and Far Corporation
|
7,695,294
|
9
|
-*
|
-*
|
|||||||||
Baosteel
Steel Products Trading Co., Ltd.
|
6,758,976
|
8
|
-*
|
-*
|
|||||||||
Shanghai
Ruixuefeng Metals Co. Ltd.
|
-*
|
-*
|
12,192,219
|
23
|
|||||||||
China
Railway Materials Shanghai Company
|
-*
|
-*
|
3,498,770
|
6
|
|||||||||
Hangzhou
Relian Company Limited
|
-*
|
-*
|
3,323,981
|
6
|
|||||||||
Sinosteel
Company Limited
|
-*
|
-*
|
3,251,450
|
6
|
|||||||||
|
53,877,386
|
62
|
27,694,530
|
51
|
|||||||||
Others
|
33,861,940
|
38
|
26,265,713
|
49
|
|||||||||
Total
|
87,739,326
|
100
|
53,960,243
|
100
|
§
|
one
1100 mm 12-high cold-roll reversing mill, with an operating capacity
of
60,000 to 70,000 tons, and
|
§
|
one
1400 mm 12-high cold-roll reversing mill, with an operation capacity
of
120,000 tons and a 50% utilization rate at
present.
|
Suppliers
|
2008
|
2007
|
|||||
|
|
|
|||||
BaoSteel
Steel Products Trading Co. Ltd.
|
16,439,918
|
4,633,054
|
|||||
Hangzhou
Relian Company Limited
|
11,050,813
|
8,598,117
|
|||||
Shanghai
Pinyun Steel Co., Limited
|
10,025,183
|
6,355,445
|
|||||
BaoSteel
Metal Co., Ltd.
|
4,515,089
|
-*
|
|||||
Shangahi
Rongrong Steel Plate Co., Ltd.
|
3,023,084
|
-*
|
|||||
Shanghai
Changshuo Stainless Steel Co., Ltd.
|
-*
|
3,408,301
|
|||||
Shanghai
Bao Gang Dev Co. Ltd.
|
-*
|
2,917,010
|
|||||
Total
direct materials consumed
|
55,722,054
|
33,809,809
|
|||||
%
of major suppliers to total consumption
|
81
|
%
|
77
|
%
|
§
|
Convention
establishing the World Intellectual Property Organization (WIPO
Convention) (June 4, 1980);
|
§
|
Paris
Convention for the Protection of Industrial Property (March 19,
1985);
|
§
|
Patent
Cooperation Treaty (January 1, 1994);
and
|
§
|
The
Agreement on Trade-Related Aspects of Intellectual Property Rights
(TRIPs)
(November 11, 2001).
|
§
|
economic
and political instability in China, including problems related
to labor
unrest,
|
§
|
lack
of developed infrastructure,
|
§
|
variances
in payment cycles,
|
§
|
currency
fluctuations,
|
§
|
overlapping
taxes and multiple taxation issues,
|
§
|
employment
and severance taxes,
|
§
|
compliance
with local laws and regulatory
requirements,
|
§
|
greater
difficulty in collecting accounts receivable,
and
|
§
|
the
burdens of cost and compliance with a variety of foreign
laws.
|
§
|
environmental
and waste management,
|
our
relationship with our employees, including: wage and hour requirements,
working and safety conditions, citizenship requirements, work permits
and
travel restrictions,
|
§
|
property
ownership and use in connection with our leased facilities in China,
and
|
§
|
import
restrictions, currency restrictions and restrictions on the volume
of
domestic sales.
|
§
|
quality,
|
§
|
price
competitiveness,
|
§
|
technical
expertise and development
capability,
|
§
|
innovation,
|
§
|
reliability
and timeliness of delivery,
|
§
|
product
design capability,
|
§
|
operational
flexibility,
|
§
|
customer
service, and
|
§
|
overall
management.
|
§
|
accurately
forecasting demand,
|
§
|
predicting
volatility,
|
§
|
timing
volume sales to our customers,
|
§
|
balancing
our productive resources with product mix,
and
|
§
|
planning
manufacturing services for new or other products that we intend
to
produce.
|
§
|
utilization
rates of manufacturing lines,
|
§
|
downtime
due to product changeover,
|
§
|
impurities
in raw materials causing shutdowns,
and
|
§
|
maintenance
of contaminant-free operations.
|
§
|
Implement
our business model and strategy and adapt and modify them as
needed;
|
§
|
Manage
our expanding operations and product
offerings;
|
§
|
Maintain
adequate control of our expenses;
|
§
|
Anticipate
and adapt to changing conditions in the precision steel markets
in which
we operate as well as the impact of any changes in government regulation;
and
|
§
|
Anticipate
mergers and acquisitions involving our competitors, technological
developments and other significant competitive and market
dynamics.
|
§
|
changes
in policies by the Chinese government resulting in changes in laws
or
regulations or the interpretation of laws or
regulations,
|
§
|
confiscatory
taxation,
|
§
|
changes
in employment restrictions,
|
§
|
restrictions
on imports and sources of supply,
|
§
|
import
duties,
|
§
|
corruption,
|
§
|
currency
revaluation, and
|
§
|
the
expropriation of private
enterprise.
|
§
|
levying
fines;
|
§
|
revoking
our business and other licenses;
|
§
|
requiring
that we restructure our ownership or operations;
and
|
§
|
requiring
that we discontinue any portion or all of our
business.
|
§
|
our
ability to obtain additional financing and, if available, the terms
and
conditions of the financing;
|
§
|
our
financial position and results of
operations;
|
§
|
period-to-period
fluctuations in our operating
results;
|
§
|
changes
in estimates of our performance by any securities
analysts;
|
§
|
substantial
sales of our common stock pursuant to Rule 144 or
otherwise;
|
§
|
new
regulatory requirements and changes in the existing regulatory
environment;
|
§
|
the
issuance of new equity securities in a future
offering;
|
§
|
changes
in interest rates; and
|
§
|
general
economic, monetary and other national conditions, particularly
in the U.S.
and China.
|
§ |
investors
may have difficulty buying and
selling;
|
§ |
market
visibility for our common stock may be limited;
and
|
§ |
a
lack of visibility for our common stock may have a depressive effect
on
the market for our common stock.
|
Location
|
Type of Facility
|
Size of the Land
(acre)
|
||
Jiading
District, Shanghai
|
Manufacturing
facilities, warehouse and office buildings
|
21.34
|
||
Jiading
District, Shanghai
|
Manufacturing
facilities
|
27.04
|
|
Year Ended June 30, 2008*
|
Year Ended June 30, 2007
|
|||||||||||
High
|
Low
|
High
|
Low
|
||||||||||
September
30
|
$
|
12.65
|
$
|
2.81
|
$
|
7.84
|
$
|
2.51
|
|||||
December
31
|
$
|
11.45
|
$
|
4.20
|
$
|
13.73
|
$
|
5.34
|
|||||
March
31
|
$
|
6.22
|
$
|
3.30
|
$
|
16.58
|
$
|
5.68
|
|||||
June
30
|
$
|
8.48
|
$
|
3.50
|
$
|
6.66
|
$
|
2.71
|
Plan Category
|
Number of
securities issued
upon exercise of
outstanding
options, warrants
and rights
|
Weighted-average
exercise price of
outstanding
options, warrants
and rights
|
Number of
securities
remaining
available for future
issuance under
equity
compensation
plans (excluding
securities reflected
in column (a))
|
|||||||
|
|
|
|
|||||||
|
(a)
|
(b)
|
(c)
|
|||||||
Equity
compensation plans approved by security holders
|
0
|
N/A
|
2,165,220
|
Year
Ended June 30,
|
||||||||||||||||
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||||||
|
(In
thousands, except share and per share amounts)
|
|||||||||||||||
|
|
|
|
|
|
|||||||||||
Statement
of Operations Data
|
||||||||||||||||
Sales
revenues
|
$
|
87,739
|
$
|
53,960
|
$
|
34,881
|
$
|
53,145
|
$
|
17,417
|
||||||
Cost
of goods sold
|
65,242
|
38,926
|
24,892
|
45,562
|
16,410
|
|||||||||||
Gross
profit
|
22,497
|
15,034
|
9,989
|
7,583
|
1,007
|
|||||||||||
Income(loss)
from continuing operations
|
18,583
|
7,473
|
7,514
|
6,366
|
199
|
|||||||||||
Net
income (loss) from discontinued operations
|
-
|
831
|
900
|
(341
|
)
|
(369
|
)
|
|||||||||
Net
income (loss)
|
$
|
18,583
|
$
|
8,304
|
$
|
8,415
|
$
|
6,026
|
$
|
(170
|
)
|
|||||
Income(loss)
per share from continuing operations
|
||||||||||||||||
Basic
|
$
|
0.43
|
$
|
0.26
|
$
|
0.31
|
$
|
0.26
|
$
|
0.01
|
||||||
Diluted
|
$
|
0.43
|
$
|
0.26
|
$
|
0.31
|
$
|
0.26
|
$
|
0.01
|
||||||
Income(loss)
per share from discontinued operations
|
||||||||||||||||
Basic
|
$
|
-
|
$
|
0.03
|
$
|
0.04
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
||||
Diluted
|
$
|
-
|
$
|
0.03
|
$
|
0.04
|
$
|
(0.01
|
)
|
$
|
(0.02
|
)
|
||||
Net
income(loss)
|
||||||||||||||||
Basic
|
$
|
0.43
|
$
|
0.29
|
$
|
0.35
|
$
|
0.25
|
$
|
(0.01
|
)
|
|||||
Diluted
|
$
|
0.43
|
$
|
0.29
|
$
|
0.35
|
$
|
0.25
|
$
|
(0.01
|
)
|
|||||
Shares
used in per share calculation
|
||||||||||||||||
Basic
|
43,044,420
|
28,438,313
|
24,283,725
|
24,283,725
|
24,283,725
|
|||||||||||
Diluted
|
43,256,434
|
28,759,553
|
24,283,725
|
24,283,725
|
24,283,725
|
|||||||||||
|
||||||||||||||||
Balance
Sheet Data (at period end)
|
||||||||||||||||
Current
assets
|
$
|
108,134
|
$
|
41,339
|
$
|
23,154
|
$
|
13,028
|
$
|
7,468
|
||||||
Total
assets
|
$
|
165,535
|
$
|
82,158
|
$
|
45,571
|
$
|
25,489
|
$
|
12,371
|
||||||
Working
Capital
|
$
|
60,905
|
$
|
14,574
|
$
|
(7,584
|
)
|
$
|
(1,326
|
)
|
$
|
(4,020
|
)
|
|||
Long-term
debt
|
$
|
-
|
$
|
6,878
|
$
|
3,152
|
$
|
7,713
|
$
|
-
|
||||||
Total
Stockholder’s equity
|
$
|
120,306
|
$
|
51,105
|
$
|
11,681
|
$
|
3,421
|
$
|
883
|
·
|
Overview
of the Company’s Business
-
This section provides a general description of the Group’s business, as
well as recent developments that have either occurred during the
fiscal
year ended June 30, 2008 and are important in understanding the results
of
operations and financial condition or disclose known
trends.
|
·
|
Results
of Operations
-
This section provides an analysis of our results of operations for
the
fiscal year ended June 30, 2008. This discussion includes a brief
description of significant transactions and events that have an impact
on
the comparability of the results being
analyzed.
|
·
|
Liquidity
and Capital Resources
-
This section provides an analysis of the Group’s cash flows for the fiscal
year ended June 30, 2008. Included in this section is a discussion
of the
Group’s outstanding debt and the financial capacity available to fund the
Group’s future commitments and
obligations.
|
|
2008
|
2007
|
|
|||||||||||||||||||
Product
category
|
Quantity
(tons)
|
$
Amount
|
%
of sales
|
Quantity
(tons)
|
$
Amount
|
%
of
sales
|
Year-on-year
Qty. Variance
|
|||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Low
carbon cold-rolled
|
35,163
|
27,497,894
|
32
|
37,066
|
22,072,438
|
41
|
(1,903
|
)
|
||||||||||||||
Low
carbon acid wash
|
-
|
-
|
-
|
14
|
5,732
|
-
|
(14
|
)
|
||||||||||||||
Low
carbon hard rolled
|
18,612
|
15,959,415
|
18
|
1,149
|
782,835
|
1
|
17,463
|
|||||||||||||||
High-carbon
cold-rolled
|
17,754
|
29,029,418
|
33
|
5,287
|
5,529,717
|
10
|
12,467
|
|||||||||||||||
High-carbon
hot-rolled
|
6,790
|
6,291,036
|
7
|
11,918
|
9,176,414
|
17
|
(5,128
|
)
|
||||||||||||||
High
end cold-rolled
|
-
|
-
|
-
|
865
|
14,618,831
|
27
|
(865
|
)
|
||||||||||||||
Sales
of Scrap Metal
|
-
|
2,536,555
|
3
|
-
|
851,742
|
2
|
-
|
|||||||||||||||
Subcontracting
income
|
10,803
|
6,425,008
|
7
|
10,722
|
922,534
|
2
|
81
|
|||||||||||||||
Total
|
89,122
|
87,739,326
|
100
|
67,021
|
53,960,243
|
100
|
22,101
|
Average
Selling Prices
|
2008
|
2007
|
Variance
|
||||||||||
|
$
|
$
|
$
|
%
|
|||||||||
Low-carbon
cold-rolled
|
782
|
595
|
187
|
31
|
|||||||||
Low-carbon
acid wash
|
-
|
409
|
(409
|
)
|
(100
|
)
|
|||||||
Low-carbon
hard rolled
|
857
|
681
|
176
|
26
|
|||||||||
High-carbon
cold-rolled
|
1,635
|
1,046
|
589
|
56
|
|||||||||
High-carbon
hot-rolled
|
927
|
770
|
157
|
20
|
|||||||||
High-end
cold-rolled
|
-
|
16,900
|
(16,900
|
)
|
(100
|
)
|
|||||||
Subcontracting
income
|
595
|
86
|
509
|
>
100
|
Customers
|
2008 ($ )
|
% to sales
|
2007 ($ )
|
% to sales
|
|||||||||
Shanghai
Changshuo Stainless Steel Co., Ltd.
|
18,513,819
|
21
|
5,428,110
|
10
|
|||||||||
Shanghai
Bayou Industrial Co., Ltd.
|
10,494,752
|
12
|
-*
|
-*
|
|||||||||
Shanghai
Shengdejia Metal Co. Ltd
|
10,414,545
|
12
|
-*
|
-*
|
|||||||||
Unimax
and Far Corporation
|
7,695,294
|
9
|
-*
|
-*
|
|||||||||
Baosteel
Steel Products Trading Co., Ltd.
|
6,758,976
|
8
|
-*
|
-*
|
|||||||||
Shanghai
Ruixuefeng Metals Co. Ltd
|
-*
|
-*
|
12,192,219
|
23
|
|||||||||
China
Railway Materials Shanghai Company
|
-*
|
-*
|
3,498,770
|
6
|
|||||||||
Hangzhou
Relian Company Limited
|
-*
|
-*
|
3,323,981
|
6
|
|||||||||
Sinosteel
Company Limited
|
-*
|
-*
|
3,251,450
|
6
|
|||||||||
53,877,386
|
62
|
27,694,530
|
51
|
||||||||||
Others
|
33,861,940
|
38
|
26,265,713
|
49
|
|||||||||
Total
|
87,739,326
|
100
|
53,960,243
|
100
|
|
2008
|
2007
|
Variance
|
||||||||||
|
|
$
|
|
$
|
|
$
|
%
|
||||||
Cost
of goods sold
|
|||||||||||||
-
Raw materials
|
55,722,054
|
33,809,809
|
21,912,245
|
65
|
|||||||||
-
Direct labor
|
746,032
|
635,885
|
110,147
|
17
|
|||||||||
-
Manufacturing overhead
|
8,773,739
|
4,480,293
|
4,293,446
|
96
|
|||||||||
|
65,241,825
|
38,925,987
|
26,315,838
|
68
|
|||||||||
|
|||||||||||||
Cost
per unit sold
|
|||||||||||||
Total
units sold (tons)
|
89,122
|
67,021
|
22,101
|
33
|
|||||||||
Average
cost per unit sold ($/ton)
|
732
|
581
|
151
|
26
|
§
|
significant
increases in sales of high-carbon cold-rolled steel to 17,754 tons
(compared to 5,287 tons for the year ended June 30, 2007) was generated
at
an average selling price of $1,635 per ton (compared to $1,046
per ton for
the year ended June 30, 2007) for the year ended June 30, 2008;
and
|
§
|
sales
of 18,612 tons of low-carbon hard-rolled steel (compared to 1,149tons
for
the year ended June 30, 2007) was generated at an average selling
price of
$857 per ton (compared to $681 per ton for the year ended June
30, 2007)
for the year ended June 30,
2008.
|
2007
|
2006
|
|||||||||||||||||||||
Product
category
|
Quantity
(tons)
|
|
$
Amount
|
%
of
sales
|
Quantity
(tons)
|
$
Amount
|
%
of
sales
|
Year-on-
year
Qty.
Variance
|
||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||||||
Low
carbon cold-rolled
|
37,066
|
22,072,438
|
41
|
22,540
|
11,482,265
|
33
|
14,526
|
|||||||||||||||
Low
carbon acid wash
|
14
|
5,732
|
-
|
-
|
-
|
-
|
14
|
|||||||||||||||
Low
carbon hard rolled
|
1,149
|
782,835
|
1
|
3,238
|
1,652,638
|
5
|
(2,089
|
)
|
||||||||||||||
High-carbon
cold-rolled
|
5,287
|
5,529,717
|
10
|
6,531
|
15,347,852
|
44
|
(1,244
|
)
|
||||||||||||||
High-carbon
hot-rolled
|
11,918
|
9,176,414
|
17
|
9,851
|
6,398,386
|
18
|
2,067
|
|||||||||||||||
High
end cold-rolled
|
865
|
14,618,831
|
27
|
-
|
-
|
-
|
865
|
|||||||||||||||
Sales
of Scrap Metal
|
-
|
851,742
|
2
|
-
|
-
|
-
|
-
|
|||||||||||||||
Subcontracting
income
|
10,722
|
922,534
|
2
|
-
|
-
|
-
|
10,722
|
|||||||||||||||
Total
|
67,021
|
53,960,243
|
100
|
42,160
|
34,881,141
|
100
|
24,861
|
Average
selling prices
|
2007
|
2006
|
Variance
|
||||||||||
$
|
$
|
$
|
%
|
||||||||||
Low-carbon
cold-rolled
|
595
|
509
|
86
|
17
|
|||||||||
Low-carbon
acid wash
|
409
|
-
|
409
|
100
|
|||||||||
Low-carbon
hard rolled
|
681
|
510
|
171
|
34
|
|||||||||
High-carbon
cold-rolled
|
1,046
|
2,350
|
(1,304
|
)
|
(55
|
)
|
|||||||
High-carbon
hot-rolled
|
770
|
650
|
120
|
18
|
|||||||||
High-end
cold-rolled
|
16,900
|
-
|
16,900
|
100
|
|||||||||
Subcontracting
income
|
86
|
-
|
86
|
100
|
Customers
|
2007
($)
|
%
to sales
|
2006
($)
|
%
to sales
|
|||||||||
|
|
|
|
|
|||||||||
Shanghai
Ruixuefeng Metals Co. Ltd
|
12,192,219
|
23
|
4,634,521
|
13
|
|||||||||
Shanghai
Changshuo Stainless Steel Co., Ltd.
|
5,428,110
|
10
|
-*
|
-*
|
|||||||||
China
Railway Materials Shanghai Company
|
3,498,770
|
6
|
-*
|
-*
|
|||||||||
Hangzhou
Relian Company Limited
|
3,323,981
|
6
|
-*
|
-*
|
|||||||||
Sinosteel
Company Limited
|
3,251,450
|
6
|
-*
|
-*
|
|||||||||
Jiangsu
Kaiteer Industrial Stove Co. Ltd.
|
-*
|
-*
|
5,212,171
|
15
|
|||||||||
Shanghai
Yiyi Industrial Co. Ltd.
|
-*
|
-*
|
4,305,918
|
12
|
|||||||||
Ningbo
Eco and Tech Shuntong Trading Co. Ltd.
|
-*
|
-*
|
2,042,191
|
6
|
|||||||||
Shanghai
Bayou Industrial Co. Ltd.
|
-*
|
-*
|
1,555,204
|
4
|
|||||||||
27,694,530
|
51
|
17,750,005
|
51
|
||||||||||
Others
|
26,265,713
|
49
|
17,131,136
|
49
|
|||||||||
Total
|
53,960,243
|
100
|
34,881,141
|
100
|
|
2007
|
2006
|
Variance
|
||||||||||
|
$
|
$
|
$
|
%
|
|||||||||
Cost
of goods sold
|
|
|
|
|
|||||||||
-
Raw materials
|
33,809,809
|
21,333,644
|
12,476,165
|
58
|
|||||||||
-
Direct labor
|
635,885
|
415,852
|
220,033
|
53
|
|||||||||
-
Manufacturing overhead
|
4,480,293
|
3,142,658
|
1,337,635
|
43
|
|||||||||
|
38,925,987
|
24,892,154
|
14,033,833
|
56
|
|||||||||
|
|
|
|
|
|||||||||
Cost
per unit sold
|
|
|
|
|
|||||||||
Total
units sold (tons)
|
67,021
|
42,160
|
24,861
|
59
|
|||||||||
Average
cost per unit sold ($/ton)
|
581
|
590
|
(9
|
)
|
(2
|
)
|
§
|
significant
increases in sales of low-carbon cold-rolled steel to 37,066 tons
(compared to 22,540tons for the year ended June 30, 2006) was generated
at
an average selling price of $595 per ton (compared to $509 per
ton for the
year ended June 30, 2006) for the year ended June 30,
2007;
|
§
|
sales
of 11,918tons of high-carbon hot-rolled steel (compared to 9,851tons
for
the year ended June 30, 2006) was generated at an average selling
price of
$770 per ton (compared to $650 per ton for the year ended June
30, 2006)
for the year ended June 30, 2007;
and
|
§
|
sales
of 865tons of high end cold-rolled steel (compared to none for
the year
ended June 30, 2006) was generated at an average selling price
of $16,900
per ton for the year ended June 30,
2007.
|
|
Payments Due By Period
|
|||||||||||||||
Total
|
Fiscal Year
2009
|
Fiscal
Year
2010-2011
|
Fiscal
Year
2012-2013
|
Fiscal Years
2014 and
Beyond
|
||||||||||||
Contractual obligations:
|
||||||||||||||||
Short-Term
Debt Obligations
|
$
|
18,808,919
|
$
|
18,808,919
|
$
|
—
|
$
|
—
|
$
|
—
|
||||||
Construction
Commitments
|
11,231,670
|
11,231,670
|
—
|
—
|
—
|
|||||||||||
|
$
|
30,040,589
|
$
|
30,040,589
|
$
|
—
|
$
|
—
|
$
|
—
|
Lender
|
Date
of Loan
|
Maturity
Date
|
Duration
|
Interest
Rate
|
Principal
Amount
|
|||||
Raiffeisen
Zentralbank
Österreich AG
|
July
23, 2007
|
July
31, 2008
|
1
year
|
USD:
SIBOR + 3%;
RMB:
PBOC rate*113%
|
$5,300,000
$2,886,952
(RMB20,000,000)
|
|||||
Raiffeisen
Zentralbank
Österreich AG
|
July
20, 2007
|
July
25, 2008
|
1
year
|
PBOC
rate * 115%
|
$9,278,847
(RMB63,600,000)
|
|||||
Total
|
$17,465,799
|
§
|
Functional
Currency and Translating Financial Statements
--
The consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States
of
America. Our functional currency is Chinese Renminbi; however,
the
accompanying consolidated financial statements have been expressed
in USD.
The consolidated balance sheets have been translated into USD at
the
exchange rates prevailing at each balance sheet date. The consolidated
statements of operations and cash flows have been translated using
the
weighted-average exchange rates prevailing during the periods of
each
statement.
|
§
|
Revenue
Recognition -
Revenue from the sale of goods and services is recognized on the
transfer
of risks and rewards of ownership, which generally coincides with
the time
when the goods are delivered to customers and the title has passed
and
services have been rendered and invoiced. Revenue is reported net
of all
VAT taxes. Other income is recognized when it is earned.
|
§
|
Accounts
Receivable
- The
Company provides an allowance for doubtful accounts equal to the
estimated
uncollectible amounts. It is reasonably possible that the Company’s
estimate of the allowance will change. At June 30, 2008 and 2007,
the
Company had $1,033,479 and $273,461 of allowances for doubtful
accounts,
respectively.
|
§
|
Inventory
- Inventory
is stated at the lower of cost or market. Cost is determined using
the
weighted average method. Market value represents the estimated
selling
price in the ordinary course of business less the estimated costs
necessary to complete the sale.
|
§
|
Other
Policies
-
Other accounting policies used by the Company are set forth in
the notes
accompanying our financial
statements.
|