*Table
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**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB**





x
            ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934


For
      the
      fiscal year ended **December
      31, 2006**





o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT




For
      the
      transition period from: ______________ to __________





**Commission
      file number: 0-13628**





**BEICANG
      IRON & STEEL INC.**


(Exact
      name of small business issuer as specified in it charter)


**Nevada**
            
            **13-3183646**(State
                or other jurisdiction of incorporation or
            
            (IRS
                Employer Identificationorganization)
            
            No.)





**8/F
      Beicang Building**


**76
      Jianshe North Road**


**Taiyuan
      City, Shanxi Province**


**People’s
      Republic of China 030013**


(Address
      of principal executive offices)






**0086-351-4656727**


(issuer’s
      telephone number)





Securities
      registered pursuant to Section 12(b) of the Act:




Title
                of each class
            
            Name
                of each exchange on which registeredNone
            
            None




Securities
      registered pursuant to Section 12(g) of the Act:




Common
      stock, $0.001 par value





(Title
        of
        Class)





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act. o





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange


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Act
      during the past 12 months (or for such shorter period that the registrant was
      required to file such reports), and (2) has been subject to such filing
      requirements for the past 90 days. Yes xNo o





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B is not contained in this form, and no disclosure will be
      contained, to the best of registrant's knowledge, in definitive proxy or
      information statements incorporated by reference in Part III of this Form 10-KSB
      or any amendment to this Form 10-KSB. x


Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes oNo x





The
      issuer's revenues for the fiscal year ended December 31, 2006: $38,388,475





As
      of May
      15, 2007, the aggregate market value of the Common Stock held by non-affiliates,
      approximately 99,869,330 shares of Common Stock, was approximately $3,495,427
      based on an average of the bid and ask price of approximately $0.035 per share
      of Common Stock on such date.





The
      number of shares outstanding of the issuer's Common Stock, $0.001 par value,
      as
      of May 15, 2007 was 999,066,260 s hares.





Documents
      Incorporated By Reference: None.





Transitional
      Small Business Disclosure Format (check one): Yes oNo x


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TABLE
      OF CONTENTS


TO
      ANNUAL
      REPORT ON FORM 10-KSB


FOR
      YEAR
      ENDED DECEMBER 31, 2006




PART
                I
            
            PageItem
                1.
            Description
                of Business
            1Item
                2.
            Description
                of Property
            7Item
                3.
            Legal
                Proceedings
            7Item
                4.
            Submission
                of Matters to a Vote of Security
                Holders
            8




PART
                IIItem
                5.
            Market
                for Registrant's Common Equity and Related StockholderMatters
            9Item
                6.
            Management's
                Discussion and Analysis or Plan of
                Operation
            10Item
                7.
            Financial
                Statements
            27Item
                8.
            Changes
                in and Disagreements with Accountants on Accounting
                and Financial Disclosure
            28Item
                8A.
            Controls
                and Procedures
            28Item
                8B.
            Other
                Information
            29




PART
                IIIItem
                9.
            Directors,
                Executive Officers, Promoters and Control Persons
                and Corporate Governance; Compliance with Section 16(a) of the Exchange
                Act
            29Item
                10.
            Executive
                Compensation
            30Item
                11.
            Security
                Ownership of Certain Beneficial Owners and
                Management and Related Stockholder Matters
            33Item
                12.
            Certain
                Relationships and Related Transactions; Director
                Independence
            34Item
                13.
            Exhibits
            36Item
                14.
            Principal
                Accountant Fees and Services
            37





Signatures
            
            39






(REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK)





-i-
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**CAUTIONARY
      NOTES REGARDING**


**FORWARD
      LOOKING INFORMATION**





Readers
      of this document and any document incorporated by reference herein, are advised
      that this document and documents incorporated by reference into this document
      contain both statements of historical facts and forward looking statements.
      Forward looking statements are subject to certain risks and uncertainties,
      which
      could cause actual results to differ materially for those indicated by the
      forward-looking statements. Examples of forward looking statements include,
      but
      are not limited to (i) projections of revenues, income or loss, earning or
      loss
      per share, capital expenditures, dividends, capital structure and other
      financial items, (ii) statements of the plans and objectives of the Company
      or
      its management or Board of Directors, including the introduction of new
      products, or estimates or predictions of actions by customers, suppliers,
      competitors or regulatory authorities, (iii) statements of future economic
      performance, and (iv) statements of assumptions underlying other statements
      and
      statements about the Company or its business.





This
      document and any documents incorporated by reference herein also identify
      important factors which could cause actual results to differ materially from
      those indicated by forward looking statements. These risks and uncertainties
      include price competition, the decisions of customers, the actions of
      competitors, the effects of government regulation, possible delays in the
      introduction of new products and services, customer acceptance of products
      and
      services, the Company's ability to secure debt and/or equity financing on
      reasonable terms, and other factors which are described herein and/or in
      documents incorporated by reference herein.





The
      cautionary statements made above and elsewhere by the Company should not be
      construed as exhaustive or as any admission regarding the adequacy of
      disclosures made by the Company. Forward looking statements are beyond the
      ability of the Company to control and in many cases the Company cannot predict
      what factors would cause results to differ materially from those indicated
      by
      the forward looking statements. Unless otherwise required by applicable law,
      we
      do not undertake, and we specifically disclaim any obligation, to update any
      forward looking statements to reflect occurrences, developments, unanticipated
      events or circumstances after the date of such statement.


-ii-
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**PART
      I**





**Item
              1.**
            **Description
                of Business.**





Beicang
      Iron & Steel Inc. (the “Company” or the “Registrant” or “Beicang” or “we” or
“us”), is a Nevada corporation in the business of producing ferrochromium alloy
      and pelletized ores in the People’s Republic of China (“PRC” or
“China”).





**Company
      History**





We
      were
      originally incorporated in **** 1993
      as
      Turco Computer Systems, Inc., under the laws of the State of
      Colorado . **** In
      December 2001, we entered into a share exchange agreement with Alpha Sky
      Investment Limited (“ASI”), a British Virgin Islands (“BVI”) company pursuant to
      which we acquired from ASI all of its equity interests in both Accuhigh
      Investments Limited, a BVI company (“Accuhigh”), and Tidy Sum Investments
      Limited, a BVI company (“Tidy Sum”), in exchange for 10,000,000 shares of our
      convertible preferred stock, which shares were convertible into 900,000,000
      shares of our Common Stock (the “ASI Share Exchange Transaction”). Accuhigh and
      Tidy Sum collectively owned 100% of Alpha Spacecom Limited (“ASL”), a Hong Kong
      company engaged in the business of developing a satellite system to provide
      broadband telecommunications services to China and neighboring Asia Pacific
      countries. As a result of the ASI Share Exchange Transaction, our primary
      business activity became that of ASL.





In
      February 2002, our Board and the majority holders of the Company’s capital stock
      approved amendments to our Articles of Incorporation by written consent,
      including: (1) a change of our corporate name to Alpha Spacecom, Inc., and
      (2)
      an increase in the authorized common stock of the Company from 100,000,000
      to 2,000,000,000 shares. The Certificate of Amendment to our Articles of
      Incorporation to effectuate the name change and the increase in authorized
      shares was filed with Colorado’s Secretary of State on August 20, 2002.





In
      June
      2005, with approval of our Board and the holders of a majority of the Company’s
      capital stock, we (1) merged with a newly formed Nevada corporation and our
      wholly-owned subsidiary, Alpha Spacecom, Inc., in order to reincorporate our
      Company in the State of Nevada, and (2) effectuated a 1-for-10 reverse stock
      split (the “Stock Split”). The Articles of Merger to effectuate this merger was
      filed with Nevada’s Secretary of State on June 16, 2005, and the Stock Split
      became effective on June 30, 2005.





On
      April
      8, 2006, we entered into a merger agreement (the “Merger Agreement”) with East
      Glory Investments Group, Ltd., a Cayman Islands company (hereinafter “EGIG”).
      Under the terms of the Merger Agreement, we issued an aggregate of 899,196,930
      shares of our common stock to the sole shareholder of EGIG in exchange for
      all
      of the issued and outstanding shares of EGIG’s common stock, and EGIG merged
      with and into the Company (the “Merger”), with the Company as the surviving
      company. Additionally, pursuant to the Merger Agreement, our Board and the
      holders of a majority of the Company’s capital stock approved amendments to our
      Articles of Incorporation by written consent, including: (1) a change of our
      corporate name from Alpha Spacecom, Inc. to the present name, Beicang Iron
&
Steel Inc., and (2) an increase in the authorized common stock of the Company
      from 200,000,000 to 1,000,000,000 shares. The Articles of Merger to effectuate
      the Merger and the Amendment to our Articles of Incorporation to effectuate
      the
      name change and to increase in authorized shares were filed with Nevada’s
      Secretary of State on October 25, 2006. The Company’s name change and its new
      trading symbol (OTCBB: BEIC) became effective on the OTC Bulletin Board also
      on
      October 25, 2006. Upon the closing of the Merger, the former sole shareholder
      of
      EGIG beneficially own approximately 90% of the issued and outstanding shares
      of
      our common stock, and we became a Chinese refinery company that produces
      ferrochromium alloy and pelletized ores that are distributed to steel and iron
      manufacturers in China.  -1-
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EGIG
      was
      incorporated under the laws of the Cayman Islands on July 26, 2005, and owns
      100% of Trinity Link Holdings Ltd. (“Trinity Link”), a British Virgin Islands
      company, which in turns owns 100% of Shanxi Bestlink Management Consulting
      Co.,
      Ltd. (“Bestlink”), which is a wholly foreign owned enterprise under the laws of
      the PRC. Pursuant to and concurrent with the Merger, we have acquired all the
      issued and outstanding share capitals of both Trinity Link and
      Bestlink.





Since
      their inceptions, EGIG, Trinity Link and Bestlink have not carried any
      substantive operations of their own. Through a series of contractual
      arrangements, however, Bestlink operates, controls and beneficially owns the
      businesses of two companies in China that refine the raw materials for iron
      and
      steel: Pinglu County Changhong Ferroalloy Co., Ltd. (“PL”) and Fanshi County
      Xinyu Iron Resources Co., Ltd. (“FS”). These contractual arrangements include an
      Operating and Service Agreement, an Option Agreement, and a Loan Agreement.
      Through the Operation and Service Agreement, Bestlink has the exclusive right
      to
      advise, consult, manage and operate each of PL and FS, and to collect and own
      95% of each company’s revenues less operating costs. In addition, the
      shareholders of these companies have granted Bestlink the exclusive right and
      option to acquire, to the extent permitted under PRC laws, all of their shares
      of PL and FS (“Option Agreement”). In order to further reinforce the rights of
      Bestlink to control and operate PL and FS, the Option Agreement contains
      provisions under which voting control over the outstanding shares of PL and
      FS
      are vested in Bestlink and the board of directors of the Bestlink. Bestlink
      has
      also agreed to provide loans to each of PL and FS (“Loan Agreement”). The
      shareholders of PL and FS are not only guaranteeing the loans, but have pledged
      all right, title and interest in their shares of PL and FS to Bestlink.
      Collectively, the Operating and Service Agreement, Option Agreement, and Loan
      Agreement are referred to herein as the “Restructuring Agreements,” copies of
      which are included with this annual report on Form 10-KSB as Exhibits 10.1,
      10.2, and 10.3, respectively.





As
      a
      result of these contractual arrangements, which obligates Bestlink to absorb
      a
      majority of the risk of loss from the activities of PL and FS, and enables
      Bestlink to receive a majority of its expected residual returns, the Company
      believes PL and FS should be considered its variable interest entities (“VIE”)
      under FASB Interpretation No. 46R (“FIN 46R”), “Consolidation of Variable
      Interest Entities, an Interpretation of ARB No. 51”, because the equity
      investors in PL and FS do not have the characteristics of a controlling
      financial interest and the Company should be considered the primary beneficiary
      of PL and FS. Accordingly, the Company consolidates the results, assets and
      liabilities of PL and FS in the accompanying financial statements.





Both
      PL
      and FS are limited liability companies formed under the laws of the PRC. The
      paid-in capitals of PL and FS are RMB 20,000,000 and RMB 10,050,000
      respectively, which were largely funded by the former sole shareholder of EGIG,
      Mr. Beicang Hou. The shareholders of PL are Messrs. Beicang Hou, Yaoting Ren
      and
      Zengguan Li, who respectively own 65%, 30% and 5% of the company. The
      shareholders of FS are Messrs. Beicang Hou and Junsheng Wang, who respectively
      own 80% and 20% of the company.





**Contractual
      Arrangements with PL, FS and Their Respective Shareholders**




Our
      relationships with PL, FS and their respective shareholders are governed by
      a
      series of contractual arrangements. Under PRC laws, each of Bestlink, PL and
      FS
      is an independent legal person and none of them is exposed to liabilities
      incurred by the other parties. Other than pursuant to the contractual
      arrangements between Bestlink and each of PL and FS, PL and FS do not transfer
      any other funds generated from its operations to Bestlink. On January 5, 2006,
      Bestlink entered into the following contractual arrangements:




***Operating
      and Service Agreement*** .
      Pursuant to the Operation and Service Agreement, Bestlink has the exclusive
      right to provide PL and FS with general business operations services, including
      management of their business assets, human resources and sales distributions.
      Under this agreement, PL and FS each agrees that without the prior consent
      of
      Bestlink, they will not engage in any tractions that  -2-
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            of Contents*


may
      affect their respective assets, rights, obligations or operations. For its
      services, Bestlink will be paid by each of PL and FS a quarterly service fee
      in
      Renminbi (“RMB”) equal to 95% of each company’s revenues for such quarter, less
      its operating costs.  The
      term
      of this agreement is twenty (20) years from January 5, 2006.




***Option
      Agreement*** *.*  ** Under
      the
      Option Agreement, the shareholders of PL who
      collectively hold the majority of the outstanding shares of PL (“PL’s Majority
      Shareholders”) and the
      minority shareholder of FS (“FS’s
      Minority Shareholders”) have
      irrevocably granted Bestlink or its designated person an exclusive option to
      purchase, to the extent permitted under PRC law, all or part of their equity
      interests in PL and in FS for the cost of the initial contributions to the
      registered capital or an amount to be agreed to by the parties. Bestlink or
      its
      designated person has sole discretion to decide when to exercise the option,
      whether in part or in full. The agreement additionally contains a provision
      under which PL’s Majority Shareholders and FS’s Minority Shareholder have agreed
      to
      irrevocably grant all the rights to exercise their respective voting power
      to
      Bestlink or its designee (“Proxy Provision”). The
      term
      of the Option Agreement is the earlier of December 31, 2025, or the date that
      the company establishes a wind-up committee; the term of the Proxy Provision
      is
      until December 31, 2025.




***Loan
      Agreement*** *.* Under
      the Loan Agreement, Bestlink agrees to loan to each of PL and FS, on an
      interest-free basis, the sum of RMB 500,000 to be used in connection with their
      respective business operations. The term of the loan is from January 5, 2006
      until December 31, 2025. To ensure repayments, each of PL and FS’s loans is
      guaranteed by its respective shareholders. Additionally, the shareholders have
      pledged all right, title and interest in their shares of PL and FS to Bestlink
      to further ensure PL and FS’s performance of their respective obligations under
      the Loan Agreement.





**Overview
      of Our Business.**





The
      principal activity of the Company is refining ores, through PL and FS, into
      ferrochromium alloy and pelletized ores for steel and iron manufacturing in
      the
      PRC.





***Pinglu
      County Changhong Ferroalloy Co., Ltd. (PL)*** . PL,
      incorporated under the laws of the PRC on March 3, 2003, is located in Pinglu
      County in the Southern part of Shanxi Province and produces ferrochromium alloy,
      the core furnace material in making stainless steel.





***Fanshi
      County Xinyu Iron Resources Co., Ltd. (FS)*** .
      FS,
      incorporated under the laws of the PRC on January 17, 2004, is located in Fanshi
      County in the Northern part of Shanxi Province and produces pelletized ore,
      a
      key component of iron manufacturing.





**Our
      Product Distribution Methods and Our Customers**





Our
      products are sold to stainless steel and iron manufacturers in the PRC either
      directly or through distribution agents.





***Ferrochromium
      Alloy*** .
      Approximately 69.05% of the ferrochromium alloy that we produced is sold
      directly to large stainless steel manufacturers throughout China, including
      in
      Shanxi, Shanghai, Zhejiang, Shangdong, Hebei and Henan. Our largest customer
      is
      Taiyuan Iron and Steel (Group) Co., Ltd. (“TISCO”), which is presently the
      largest stainless steel manufacturer in China and one of the eight largest
      in
      the world. Through PL, we have had a long and well-established relationship
      with
      TISCO. A large portion of the remaining 30.95% of our ferrochromium alloy
      products is sold through distribution agents.


-3-
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            of Contents*




For
      the
      year ended December 31, 2006, our gross revenue from ferrochromium alloy was
      $22,970,346. The following two customers each accounted for more than 10% of
      our
      revenue from ferrochromium alloy of the period: TISCO and Zhejiang Hengshan
      Ferroalloy Co. Ltd, accounting for 39.98% and 11.69% of our gross revenue
      respectively. A lthough
      we are considered by TISCO to be an important strategic partner, we do not
      have
      long-term contracts with the company. Thus, while we feel that our significant
      relationships with TISCO will likely to continue, TISCO is not contractually
      bound to purchase from us. The loss of this customer could hurt our business
      by
      reducing our revenues and profitability.





***Pelletized
      ore*** .
      For
      fiscal year ended December 31, 2006, all of the pelletized ores that we produced
      were sold to two customers: Shanxi Changchi Enterpise Co., Ltd. (“Changchi”) and
      Rongchang Trading Co., Ltd. (“Rongchang”), both of which are controlled by Mr.
      Beicang Hou, our CEO and Chairman. Under a five-year contract with FS, Changchi
      is committed to purchase a minimum of 75% of FS’s annual production of
      pelletized ore. A number of large-scale steel manufacturers in China, including
      Linfen Iron & Steel Co., Ltd. (which currently purchases pelletized ores
      from Changchi), Handan Iron & Steel Group Co., Ltd., Changzhi Iron &
Steel (Group) Co., Ltd., Qingdao Iron & Steel Plant and Tianjin Steel Plant,
      are also seeking to enter into purchase contracts with us for pelletized ores.





For
      the
      year ended December 31, 2006, our gross revenue from pelletized ore was
      $15,418,129. Changchi and Rongchang accounted for all of our revenue from
      pelletized ore for the period, with Changchi accounting for approximately 80%
      and Rongchang the remaining 20%. Changchi
      is presently under contract to purchase pelletized ore from us, although there
      is no assurance that the contract will be renewed in the future. Rongchang,
      on
      the other hand, is not contractually bound to purchase any products from us.
      The
      loss of either of these two customers could hurt our business by reducing our
      revenues and profitability. As these companies are controlled by Mr. Hou, we
      expect to maintain a strong business relationship with them for the foreseeable
      future.




**Our
      Competitions and Our Competitive Advantages**




We
      face
      competition from a number of refineries in the PRC that also produce
      ferrochromium alloy and/or pelletized ore. There are approximately 230 producers
      of ferrochromium alloy in China, including larger refineries such as Jilin
      Ferroalloy Co., Ltd., Guangxi Qingzhou Guixin Refinery Co., Ltd., and Chongqin
      Xinteng Metallurgical Furnace Co., Ltd., although we are presently not in direct
      competition with many of these companies. Our competitors for the pelletized
      ore
      products number approximately 70 in China, including Fanshi Huamao Acid Pellet
      Factory, Jiujia Acid Pellet Factory (a division of Fanshi Jiujia Iron &
Steel Co.), and Shougang Miyun Iron Ore Factory.





Despite
      the competitions, however, we believe that we have certain advantages over
      the
      other refineries. As both PL and FS are located in Shanxi Province, we have
      low
      production expenses with respect to labor and energy costs. In terms of our
      ferrochromium alloy products, we are accessible by a major highway to our
      largest customer, TISCO, which is also located in Shanxi Province. Additionally,
      in 2005, PL became one of the first 70 producers of ferrochromium alloy in
      the
      entire PRC, and one of only three in Shanxi Province, to have successfully
      acquired a Ferrochromium Alloy Market Admittance Certificate (the “Admittance
      Certificate”) from the National Development & Renovation Committee (“NDRC”).
      The NDRC is a government committee of the PRC’s State Council, and is
      responsible for devising and implementing national economic and social
      development strategies, including annual, middle-range and long term planning,
      and setting vital economic targets and policies relating to national economic
      developments. By being awarded the Admittance Certificate, PL has not only
      become one of the earliest ferrochromium alloy producers with official approval
      in China, but is also being recognized for the quality of its
      products.


-4-
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            of Contents*




In
      terms
      of our pelletized ores products, FS is located in Fanshi County, where numerous
      iron-ore mines are situated, thereby greatly reducing our costs for raw
      materials. The present market demand for our pelletized ore products is also
      outpacing our current production capability, due primarily to the quality of
      our
      products resulting from our advance production techniques. A number of iron
      manufacturers are seeking to enter into sales contracts with us, but we have
      not
      done so because our current production capacity is unable to meet their
      projected purchase orders.





**Our
      Manufacturing Facilities**





Our
      ferrochromium alloy and pelletized ore products are produced at the facilities
      of PL and SL, respectively. PL currently operates three furnaces: we own two
      6,300 kilo volt-amp (KVA) ore furnaces and lease one 12,500 KVA ore furnace.
      These furnaces collectively have an annual production capacity of 40,000 tons
      of
      ferrochromium alloy. The Company is planning to expand its operation, and has
      secured governmental approval to increase its production capacity to 80,000
      tons
      of ferrochromium alloy per year. FS currently operates one 10m 2 shaft
      furnace with an annual production capacity of 400,000 tons of pelletized ores,
      making FS one of the largest pelletized ore producers in Shanxi Province. We
      are
      also planning to expand our operation for this product, and have acquired
      governmental approval to raise our annual production capacity to 800,000 tons
      of
      pelletized ores.





**Sources
      and Availability of Raw Materials and Our Principal
      Suppliers**




***Pelletized
      Ores*** .
      The
      table below sets forth the raw materials for pelletized ore and our principal
      suppliers of these raw materials. All raw materials are purchased locally in
      or
      around Fanshi County where FS is situated.





**Raw
                Materials**
            **Major
                Suppliers**Refined
                iron mine powder
            Hongshan
                Concentration Plant, Fanshi County Tongda Metallurgy Mining Co.,
                Ltd.,
                Pingxingguan Mining Industrial Co., Ltd.Rare
                earth
            Shanxi
                Changchi Enterprise Co., Ltd.Coal
            Fanshi
                County Tongda Metallurgy Mining Co., Ltd.Range
                coal
            Pingxingguan
                Iron MinePulverized
                coal
            Fanshi
                County Hongshan Iron Mine




***Ferrochromium
      Alloy*** .
      The
      table below sets forth the raw materials for ferrochromium alloy and our
      principal suppliers of these raw materials. These raw materials are imported
      from Tibet, India, Pakistan, Turkey and the Philippines and are purchased
      through our import agent, Shanxi Jiaomei International Co. Ltd..





**Raw
                Material**
            **Major
                Suppliers**Chromium
                ore
            Shanxi
                Jiaomei International Co., Ltd., Pinglu Changsheng Stainless Steel
                Material Co., Ltd., Taiyuan Hengfeng Metallurgy Trading Co., Ltd.,
                Germu
                Hengda Mining Product Co., Ltd., Lianyungang Shunming Maite Co.,
                Ltd.Silica
                stone
            Taiyuan
                Longda Co., Ltd.Scorched
                particle
            Taiyuan
                Longda Co., Ltd.Iron
                oxides
            Shanxi
                Hengshan Industrial Co., Ltd.Electric
                plate
            Taiyuan
                Jinxing Commercial & Trading Co.,
                Ltd.





-5-
 *Table
            of Contents*




Our
      strategy is to procure all of our raw materials for both ferrochromium alloy
      and
      pelletized ores from a limited number of suppliers, usually one or two for
      each
      type or category of raw materials. Centralized purchasing allows us to exert
      the
      maximum amount of volume purchasing power and to negotiate the largest discounts
      per unit purchased. We have no long term agreements with our suppliers, and
      purchase each raw material on a purchase order basis. Management recognizes
      that
      this strategy also carries with it the potential disadvantages and risks of
      shortages and supply interruptions. We believe our suppliers are willing to
      continue to give us favorable pricing in order to secure our loyalty in the
      long
      term. Our suppliers generally are meeting our supply requirements, and we
      believe our relationships with our suppliers are stable.




**Government
      Approval and Regulation of Our Principal Products**





Our
      operations at PL and FS are subject to significant regulatory requirements
      relating to environmental, waste management, health, and safety matters, as
      more
      fully discussed in the section below entitled “Costs and Effects of Compliance
      with Environmental Laws”. While our management believes that both PL and FS are
      in full compliance with all governmental regulations presently applicable to
      our
      business operations, there can be no assurance that material costs and
      liabilities will not arise from complying with these or from new, modified,
      or
      more stringent requirements. In addition, our past, current, or future
      operations may give rise to claims of exposure by employees or the public or
      to
      other claims or liabilities relating to environmental, waste management, or
      health and safety concerns.




**Research
      and Development**





Our
      research and development programs focus on improving our existing and developing
      advance production techniques, such as the capture and utilization of exhaust
      from our furnaces and the development of techniques for sintering and for
      preparing consistent raw material mixtures. In 2006, we spent approximately
      $31,320, or approximately 0.08% of the Company’s 2006 revenue, on research and
      development, as compared to 2005, when we spent approximately $6,335 or
      approximately 0.02% of the Company’s 2005 revenue.




**Costs
      and Effects of Compliance with Environmental Laws**




As
      refineries, both PL and FS are subject to numerous and substantial environmental
      laws and regulations of the PRC.





***Regulations
      Relating to Production of Ferrochromium Alloy*** .
      In
      November 2004, the National Development Reform Committee (“NDRC”), in
      conjunction with six other ministries and committees of the central government,
      enacted certain policies in an effort to, among other things, moderate the
      environmental impact of the ferrochromium alloy industry. One such policy
      mandates all ferrochromium alloy producers to be examined by the National
      Environment Committee (“NEC”) and approved by the NDRC in order to operate.
      Those producers that fail to comply would be cut off from access to credits,
      land use rights, and power. PL was duly examined by the NEC and approved and
      issued a Market Admittance Certificate by the NDRC in 2005. PL has additionally
      obtained the GB certification and the certificate from the Shanxi Province
      Pollution Discharge Authority in 2005. Additionally, in order to reduce energy
      consumption, the price of electricity applicable to the ferrochromium alloy
      industry was raised by RMB 0.02. Lastly, to temper overall production of
      ferrochromium alloy and refocus the industry to meet the needs of the country
      rather than exportation, the NDRC cancelled the tax credits and/or refunds
      previously given to our industry. The aggregate effect of these regulations
      is
      that in 2006, PL expended approximately RMB 200,000 in environmentally related
      costs and fees, or approximately 0.126% of the Company’s revenue for the fiscal
      year 2006.  -6-
 *Table
            of Contents*


***Regulations
      Relating to Production of Pelletized Ore*** .
      Pelletized ores are currently produced both in the PRC and throughout the world
      using one of three methods: the grate-kiln system, the belt pellet system or
      the
      shaft furnace pellet system. The grate-kiln system, being the most
      environmentally friendly of the three methods, is actively encouraged by the
      NDRC, although the Committee has yet to make a determination regarding the
      other
      two methods. Like most pelletized ore producers in China, FS uses the shaft
      furnace pellet system. It is within the power of the NDRC to discourage the
      shaft furnace pellet system, to the extent that the NDRC can restrict or even
      cease the production capacity of all facilities using such system. Our
      management believes, however, that such move by the NDRC is remote at least
      in
      the short term, as such a move would effectively shut down the pelletized ore
      industry in China as it presently exists. For the fiscal year 2006, FS spent
      approximately $12,671 in environmentally related costs and fees, primarily
      in
      reforestation efforts, amounting to approximately 0.033% of the Company’s
      revenue for the fiscal year 2006.





**Our
      Employees**




At
      December 31, 2006, we employed a total of 529 persons, all of whom were
      full time employees, including 291 employees at PL comprising of 32 management
      personnel, 19 distribution staff and 240 workers, and including 238 employees
      at
      FS comprising of 22 management personnel and 218 workers. We normally enter
      into
      labor agreement with our employees for an initial term of one year, renewable
      thereafter annually based on each employee’s job performance. We consider our
      relationship with our employees to be good.




**Item
              2.**
            **Description
                of Property.**





The
      Company’s headquarters is located at 8/F, Beicang Building, 76, Jianshe North
      Road, Taiyuan City, Shanxi Province, PRC, which consists of 443 square feet
      of
      executive office space. We are leasing this space pursuant to a written lease
      agreement that expires in December 2010.





PL's
      production plant is on leased premises located in Shangling Village, Economic
      Development Zone of Pinglu County of Shanxi Province, PRC. The plant currently
      includes two 6,300KVA ore furnaces that we own, and one 12,500KVA ore furnace
      that is leased. The lease of the premises expired on September 30, 2006, and
      we
      are still in negotiation for the new lease. In the meantime, we continue to
      pay
      monthly rents and are allowed to continue our operations pending the new lease.





FS's
      production plant is located at southern of Daying Town Village, Fanshi County
      in
      the northern part of Shanxi Province, PRC. The plant occupies a space of 6.76
      hectors (approximately 16.7 acres) on land zoned for industrial use and which
      land use right is owned by FS. The land is situated along the south side of
      the
      National 108 Highway





We
      believe that the current facilities occupied by the Company and its subsidiaries
      will be able to meet the Company’s operational needs for the coming
      year.




**Item
              3.**
            **Legal
                Proceedings.**





We
      are
      presently parties in two legal proceedings, one before the Colorado State Court
      (the "Colorado Lawsuit") initiated in November 2004, and the other before the
      U.S. District Court for the Central District of California (the "California
      Lawsuit") initiated in May 2005. The Colorado Lawsuit is entitled: *Alpha
      Spacecom, Inc. and Tridon Trust v. Xuedong Hu, Jian Wang, and Alpha Sky
      Investment LTD* .
      (Case
      Number 04 CV 9819). The California Lawsuit is entitled: *Alpha
      Spacecom,Inc. and Tridon Trust v. Xuedong Hu, the United States Securities
      and
      Exchange Commission and Does 1-10* (Case
      No. CV05 3295DT(RCx)).We became a plaintiff in both of these lawsuits at the
      direction of two former Directors,


-7-
 *Table
            of Contents*




Terrence
      Sien and Brian Brick. Both lawsuits concern events related to or that transpired
      from the ASI Share Exchange Transaction. (For greater details regarding the
      ASI
      Share Exchange Transaction, please refer to our discussion in the Section
      entitled “Company History” in Item 1 above.)




The
      Colorado Lawsuit primarily seeks to remove from office the two directors and
      the
      CEO appointed as a result of the ASI Share Exchange Transaction. These directors
      and the CEO are no longer in office, as they resigned from their positions
      as a
      result of the Merger. (For greater details regarding the Merger, please refer
      to
      our discussion in the Section entitled “Company History” in Item 1 above.) The
      California Lawsuit, on the other hand, primarily seeks to void the ASI Share
      Exchange Transaction on grounds of fraud. Should plaintiffs prevail, a possible
      ramification may be the invalidation of the Merger. As of the date of this
      report, however, neither lawsuit has been resolved in its entirety.





For
      a
      greater discussion concerning the backgrounds and procedural histories of both
      the Colorado Lawsuit and the California Lawsuit, please refer to our Current
      Report on Form 8-K that was filed with the Securities & Exchange Commission
      (“Commission”) on November 2, 2006, which is incorporated by reference herein.
      For a discussion concerning recent development in the Colorado Lawsuit, please
      refer to our current report on Form 8-K that was filed with the Commission
      on
      March 16, 2007, which is incorporated by reference herein.





Other
      than the Colorado Lawsuit and the California Lawsuit, the Company is not a
      party
      to any other legal proceedings and to the Company's knowledge, no such other
      proceedings are threatened or contemplated. At this time, the Company has no
      bankruptcy, receivership, or similar proceedings pending.




**Item
              4.**
            **Submission
                of Matter to a Vote of Security
                Holders.**





The
      Company did not submit any matters to a vote of the shareholders in the fourth
      quarter of 2006.


-8-
 *Table
          of Contents*




**PART
      II**





**Item
              5.**
            **Market
                for Registrant’s Common Equity and Related Stockholder
                Matters.**





The
      Common Stock of the Company is currently trading on the Over the Counter
      Bulletin Board system under the symbol "BEIC". There is no assurance that the
      Common Stock will continue to be quoted or that any liquidity exists for the
      Company’s shareholders.





The
      following table sets forth the range of high and low bid prices for the
      Company's Common Stock for each quarterly period indicated. Quotations reflect
      inter-dealer prices without retail markup, markdown or commissions and may
      not
      represent actual trades.





Common
      Stock


Quarter
                Ended
            
            High
                Bid
            
            Low
                BidDecember
                31, 2006
            
            $
            0.07
            
            $
            0.02September
                30, 2006
            
            $
            0.05
            
            $
            0.02June
                30, 2006
            
            $
            0.06
            
            $
            0.02March
                31, 2006
            
            $
            0.08
            
            $
            0.05December
                31, 2005
            
            $
            0.16
            
            $
            0.04September
                30, 2005*
            
            $
            0.51
            
            $
            0.09June
                30, 2005
            
            $
            0.10
            
            $
            0.04March
                31, 2005
            
            $
            0.09
            
            $
            0.03


*
              Increase
                  in stock price commencing in the third quarter of the Company’s 2005
                  fiscal year reflect the effect of a 1-for-10 reverse stock split
                  of the
                  Company’s common stock that became effective on June 30, 2005.


**Holders**





As
      of May
      15, 2007, there were 999,066,260 shares
      of the Company's common stock outstanding held of record by approximately 835 persons
      (not including beneficial owners who hold shares at broker/dealers in “street
      name”).




**Dividends**





The
      Company has never paid cash dividends on its Common Stock and does not intend
      to
      do so in the foreseeable future. Our management does not foresee that we will
      have the ability to pay a dividend on our Common Stock in the foreseeable
      future.





**Sales
      of Unregistered Securities**





In
      connection with the Merger in 2006, we issued 899,196,930 shares (the “Shares”)
      of our common stock to the shareholders of EGIG in exchange for all of the
      issued and outstanding shares of EGIG’s common stock, and EGIG merged with and
      into the Company, with the Company as the surviving company. The Shares were
      issued to non-US persons in reliance on an exemption from the registration
      requirements of the Securities Act under Regulation S. The shares issued have
      not been registered under the Securities Act or any state securities of “blue
      sky” laws, and the securities may not be offered or sold absent
      registration


-9-
 *Table
            of Contents*




or
      an
      applicable exemption from the registration requirements of the Securities Act
      and applicable state securities laws.





In
      2005,
      shareholders converted 9,587,111 shares of our Series B Preferred Stock to
      86,293,920 shares of our common stock. We relied upon the exemption from
      registration provided by Section 4(2) and Regulation S, each promulgated under
      the Securities Act of 1933, as amended, to issue these securities.





During
      2004, we issued 11,585,785 common shares to retire an accrued advance from
      a
      shareholder in the amount of $231,716, including principal of $176,729 and
      interest of $54,987. In addition, we issued 1,666,667 shares (166,667 shares
      post reverse stock split) for $50,000 in cash. Also in 2004, a shareholder
      converted 38,889 shares of the Series B Preferred Stock to 3,500,000 shares
      (350,000 shares post reverse stock split) of our Common Stock. We relied upon
      the exemption from registration provided by Section 4(2) and Regulation S,
      each
      promulgated under the Securities Act of 1933, as amended, to issue these
      securities.




**Repurchases
      of Equity Securities**





The
      Company did not repurchase any of its outstanding equity securities during
      the
      fourth quarter of the year ended December 31, 2006.




**Item
              6.**
            **Management’s
                Discussion and Analysis or Plan of
                Operation**





**General**





Statements
      contained herein that are not historical facts are forward-looking statements
      as
      that term is defined by the Private Securities Litigation Reform Act of 1995.
      Althou gh
      we
      believe that the expectations reflected in such forward looking statements
      are
      reasonable, the forward looking statements are subject to risks and
      uncertainties that could cause actual results to differ from those projected.
      We
      caution investors that any forward looking statements made by us are not
      guarantees of future performance and that actual results may differ materially
      from those in the forward-looking statements. Such risks and uncertainties
      include, without limitation: well-established competitors who have substantially
      greater financial resources and longer operating histories, regulatory delays
      or
      denials, ability to compete as a start-up company in a highly competitive
      market, and access to sources of capital.





The
      following discussion and analysis should be read in conjunction with our
      financial statements and notes thereto included elsewhere in this Form 10-KSB.
      Except for the historical information contained herein, the discussion in this
      Form 10-KSB contains certain forward-looking statements that involve risks
      and
      uncertainties, such as statements of our plans, objectives, expectations and
      intentions. The cautionary statements made in this Form 10-KSB should be read
      as
      being applicable to all related forward looking statements wherever they appear
      in this Form 10-KSB. The Company's actual results could differ materially from
      those discussed here.





**Overview**





Beicang
      Iron & Steel Inc., ("we, "us," "our," or the "Company"), was incorporated in
      the State of Colorado in 1983 under the name "Turco Computer Systems, Inc."
      In
      February 2002, we changed our name to Alpha Spacecom, Inc. following a share
      exchange transaction. In June 2005, we became a Nevada corporation after merging
      with our wholly owned subsidiary, Alpha Spacecom, Inc., a Nevada corporation.





On
      April
      8, 2006, we entered into a merger agreement (the "Merger Agreement") with East
      Glory Investments Group Limited, a Cayman Islands corporation ("EGIG") that
      has
      its principal place of business


-10-
 *Table
            of Contents*




located
      at 8/F, Beicang Building, No.76 Jianshe North Road, Taiyuan City, Shanxi
      Province, PRC. EGIG owns 100% of Trinity Link Holdings Ltd. (“Trinity Link”), a
      British Virgin Islands company, which in turns owns 100% of Shanxi Bestlink
      Management Consulting Co., Ltd. (“Bestlink”), which is a wholly foreign owned
      enterprise under the laws of the PRC. Pursuant to the Merger Agreement, we
      issued an aggregate of 899,196,930 shares of our Common Stock (representing
      approximately 90% of all shares outstanding after the Merger) to the
      shareholders of EGIG and, in exchange, EGIG merged with and into the Company
      (the “Merger”), with the Company being the surviving company. Pursuant to and
      concurrent with the Merger, we have also acquired all the issued and outstanding
      share capitals of Trinity Link and Bestlink. This Merger was successfully
      consummated on October 25, 2006, and in connection therewith, the Company
      further changed its name to “Beicang Iron & Steel Inc.” to reflect its
      current business operations.





Having
      no
      substantive operation of its own, the Company, through its VIEs, Pinglu County
      Changhong Ferroalloy Co., Ltd. (“PL”) and Fanshi
      County Xinyu Iron Resources Co., Ltd. (“FS”) ,
      engages
      in the production of ferrochromium alloy and pelletized ore in the People’s
      Republic of China (“China” or the “PRC”). Please see “ Contractual
      Arrangements with PL, FS and their Respective Shareholders ”
in
      Item
      1 above and Note 1 to our consolidated financial statements included in this
      report for the contractual arrangements between Bestlink on the one hand and
      each of PL and FS on the other, and their impact on our consolidated financial
      statements.




**Critical
      Accounting Policies and Estimates**





Our
      management's discussion and analysis of our financial condition or plan of
      operations are based on our consolidated financial statements, which have been
      prepared in accordance with accounting principles generally accepted in the
      United States. Preparing financial statements requires our management to make
      estimates and assumptions that affect the reported amounts of assets,
      liabilities, revenue, and expenses. We base our estimates on historical
      experience and on various other factors that we believe are reasonable under
      the
      circumstances, the results of which form the basis for making judgments about
      the carrying value of assets and liabilities that are not readily apparent
      from
      other sources. Actual results may differ from these estimates under different
      assumptions or conditions.





These
      estimates and assumptions are affected by management’s application of certain
      accounting policies. We believe an understanding of the basis and nature of
      the
      estimates and assumptions involved with the following aspects of our
      consolidated financial statements is critical to an understanding of our
      financial condition. While our significant accounting policies are more fully
      described in Note 3 to our consolidated financial statements contained in this
      report, we believe that the following accounting policies are the most critical
      to aid you in fully understanding and evaluating our reported financial results.





***Litigation
      regarding control of the Company.*** Since
      October 2004, we have been involved in an ongoing dispute concerning control
      of
      our Company, which has resulted in two separate lawsuits which are more fully
      described in note 19. In particular, the complaints allege that the 2001 Share
      Exchange Agreement, pursuant to which Mr. Xuedong Hu obtained a beneficial
      interest in our shares of Series B Preferred convertible stock and a majority
      interest in the Company, was invalid and the stock received by Mr. Hu should
      be
      returned. Based on the Colorado District Court's Orders of March 18, 2005 and
      May 11, 2005 and the decisions of the Colorado Court of Appeals on February
      22,
      2007, the Company believes that the actions the Company has taken since issuance
      of the order, including engaging in the shareholder meeting and subsequently,
      the Merger between the Company and East Glory Investments Group, were validly
      undertaken.


-11-
 *Table
            of Contents*




***Consolidation
      of variable interest entities.*** Through
      a
      series of contractual arrangements, Beicang, through its subsidiaries, operates,
      controls and beneficially owns the businesses of two companies in China that
      refine the raw materials for iron and steel: Pinglu County Changhong Ferroalloy
      Co., Ltd. (“PL”) and Fanshi County Xinyu Iron Resources Co., Ltd. (“FS”). These
      contractual arrangements obligate the Company to absorb a majority of the risk
      of loss from PL and FS’s activities and enable Bestlink to receive a majority of
      its expected residual returns, the Company believes that PL and FS should be
      considered its variable interest entities (“VIE”) under FASB Interpretation No.
      46(R) (“FIN 46R”), “Consolidation of Variable Interest Entities - An
      Interpretation of ARB No. 51”, because the equity investors in PL and FS do not
      have the characteristics of a controlling financial interest and the Company
      should be considered the primary beneficiary of PL and FS. Accordingly, the
      Company believes that PL and FS’s results of operations, assets and liabilities
      should be consolidated.





***Revenue
      Recognition.*** We
      recognize revenue when there is persuasive evidence of an arrangement, goods
      are
      shipped and title passes, collection is probable, and the fee is fixed or
      determinable. Customer acceptance is used as the criterion for revenue
      recognition when the product sold does not have an established sales history
      to
      allow management to reasonably estimate returns and future provisions. Sales
      revenue is presented net of value added tax (VAT). No return allowance is made
      as products delivered are not returnable upon delivery and acceptance by the
      customer. Beicang recognizes revenue when the products are delivered and
      accepted by the customer.





***Inventory.*** Inventory
      is carried at the lower of cost, determined on the first-in first out method,
      or
      market. Market value is determined by reference to the selling prices after
      the
      balance sheet date or to management estimates based on prevailing market
      conditions. This valuation requires significant judgment from the management
      as
      to the future market prices of its products. The market prices of Beicang’s
      products are subject to rapid changes and affected by the PRC government
      policies in control of steel supplies.





***Allowance
      for Doubt Debts.*** Beicang
      performs ongoing credit evaluations of each individual customer and monitors
      their payments on an ongoing basis. Outstanding account balances are reviewed
      individually for collectibility. Beicang makes an allowance for bad and doubtful
      debts once any specific customer collection issue is identified. This policy
      for
      allowance of bad and doubtful debt is based on management’s estimates of the
      ultimate realization of the receivables. Credit losses have historically been
      within the Company’s expectation. However, any unexpected adverse changes in the
      financial conditions of the customer, leading to an impairment of their ability
      to make payments, may result in additional allowances and affect the Company’s
      income statement in the future.





***Impairment
      of Long-Lived and Amortized Intangible Assets.*** Beicang
      accounts for impairment of plant and equipment and amortizable intangible assets
      in accordance with SFAS No. 144, “Accounting for Impairment of Long-Lived Assets
      and Long-Lived Assets to be Disposed Of,” which requires Beicant to evaluate a
      long-lived asset for recoverability when there is event or circumstance that
      indicates the carrying value of the asset may not be recoverable. An impairment
      loss is recognized when the carrying amount of a long-lived asset or asset
      group
      is not recoverable (when the carrying amount exceeds the gross, undiscounted
      cash flows from use and disposition) and is measured as the excess of the
      carrying amount over the asset’s (or asset group’s) fair value.




**Recent
      Accounting Pronouncements**





On
      January 1, 2006, we adopted Statement of Financial Accounting Standards (SFAS)
      No. 123(R), “Share-Based Payment- Revised 2004,” using the modified prospective
      transition method.


-12-
 *Table
            of Contents*




In
      June
      2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
      No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB
      Statement No. 109” (FIN 48). This interpretation prescribes a minimum
      recognition threshold and measurement attribute for the financial statement
      recognition and measurement of a tax position taken or expected to be taken
      in a
      tax return. This interpretation also provides guidance on recognition,
      measurement, classification, interest and penalties, accounting in interim
      periods, disclosure and transition. The interpretation is effective for fiscal
      years beginning after December 15, 2006 (i.e., the beginning of our fiscal
      year
      2007). We do not expect that the adoption of FIN 48 will have a material impact
      on our consolidated financial statements.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      157, “Fair Value Measurements” (SFAS 157). SFAS 157 defines fair value,
      establishes a framework for measuring fair value, and expands disclosures about
      fair value instruments. SFAS 157 does not require any new fair value
      measurements, but applies under other accounting pronouncements that require
      or
      permit fair value measurements. SFAS 157 is effective for financial statements
      issued for fiscal years beginning after November 15, 2007 (our fiscal 2008).
      We
      believe that implementation of SFAS 157 will have little or no impact on our
      Consolidated Financial Statements.





In
      September 2006, the FASB issued Statement of Financial Accounting Standards
      No.
      158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
      Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (SFAS 158).
      SFAS 158 requires plan sponsors of defined benefit pension and other
      postretirement benefit plans (collectively, “postretirement benefit plans”) to
      fully recognize the funded status of their postretirement benefit plans in
      the
      statement of financial position, measure the fair value of plan assets and
      benefit obligations as of the date of the fiscal year-end statement of financial
      position and provide additional disclosures. We believe that implementation
      of
      SFAS 157 will have little or no impact on our Consolidated Financial Statements
      since we have no applicable plans,.





In
      September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements (SAB 108), to address diversity in practice
      in
      quantifying financial statement misstatements. SAB 108 requires that we quantify
      misstatements based on their impact on each of our financial statements and
      related disclosures. On December 30, 2006, we adopted SAB 108. Our adoption
      of
      SAB 108 did not impact our financial statements.




**Results
      of Operations**




Comparison
      of Results of Operations for the Fiscal Years Ended December 31, 2006 and
      December 31, 2005.





***Net
      Sales*** *.* For
      the
      year ended December 31, 2006, net sales increased approximately 9.85% from
      $34,944,732 to $38,388,475 relative to the year ended December 31, 2005. The
      increase in revenue was mainly due to the steady increase in the amount of
      ferrochromium alloy and pelletized ores that we produced during 2006 to satisfy
      orders for our products, which resulted in an increase of our sales volumes.
      Net
      sales to related parties increased approximately 290.69%, from $4,563,245 in
      2005 to $17,828,391 in 2006 in large part due to our operations at FS. 75%
      of
      the pelletized ores produced by FS during 2006 were sold to Shanxi Changchi
      Enterprise Limited (“Changchi”), which is controlled by Mr. Beicang Hou, our CEO
      and Chairman. Changchi in turn sold all of FS’s pelletized ores to Linfen Iron
& Steel Co., Ltd. (“LISCO”), one of the largest steel manufacturers in
      China. Because LISCO is presently under a five-year exclusive contract to
      purchase pelletized ores from Changchi, FS can only sell directly to LISCO
      after
      the expiration of this exclusive contract. The remaining 25% of our pelletized
      ores were sold to Rongchang Trading Co., Ltd. (“Rongchang”), which is also
      controlled by Mr. Hou.  -13-
 *Table
            of Contents*




***Cost
      of Goods Sold*** *.* Cost
      of
      goods sold slightly increased from $32,935,217, or approximately 94.24% of
      net
      sales for the year ended December 31, 2005, to $36,299,757, or approximately
      94.56% of net sales for the year ended December 31, 2006. The approximately
      0.32% increase was primarily attributable to the rising costs for our raw
      materials. The small increase in the cost of sales is also consistent with
      the
      increase in our net sales.





***Gross
      Profit.*** Gross
      profit increased approximately 3.94% from $2,009,515 for the year ended December
      31, 2005 to $2,088,718 for the year ended December 31, 2006. This increase
      in
      gross profit was primarily due to our increased sales in 2006. Our gross profit
      percentage, however, decreased from approximately 5.75% for the year ended
      December 31, 2005 to approximately 5.44% for the year ended December 31, 2006
      as
      a result of the increased costs for our raw materials in 2006.





***Selling
      Expenses*** .
      For the
      year ended December 31, 2006, selling expenses increased approximately 156.7%
      from $648,357 to $1,664,303 relative to the year ended December 31, 2005. This
      significant increase in selling and distribution costs is due in part to a
      difference in the treatment of shipping costs for 2005 and 2006. A portion
      of
      the shipping costs that we incurred in 2005 was accounted for as costs of goods
      sold, while the entire shipping costs incurred in 2006 was accounted for as
      selling expenses. Additionally, the rising costs of fuel and increased
      competitions during 2006, coupled with our increased sales during the same
      period, all contributed to the increase in our selling expenses.





***General
      and Administrative Expenses.*** Administrative
      expenses increased approximately 65.37% from $644,835 for the year ended
      December 31, 2005 to $1,066,384 for the year ended December 31, 2006. General
      and administrative expenses include expenses for travel and for the running
      of
      our offices. This increase in general and administrative expenses during the
      year ended December 31, 2006 was the result of our efforts to maintain our
      competitiveness in the marketplace.





***Professional
      Expenses Related To Merger.*** For
      the
      year ended December 31, 2006, we incurred $1,560,227 in such expenses, compared
      to $0 for the year ended December 31, 2005. These one-off payments were made
      to
      different professional parties who provided services in connection with the
      Merger during the period. The professional expenses comprised the following
      items:





Financial
                Advisory Fees
            
            $
            107,020Reverse
                Merger Fees
            
            
            419,620Other
                Professional Parties’ Fees
            
            
            718,639Others
            
            
            314,948Total
            
            $
            1,560,227





***Finance
      Costs.*** Finance
      costs increased approximately 241.79% from $123,231 for the year ended December
      31, 2005 to $421,197 for the year ended December 31, 2006. This increase in
      finance costs during the year ended December 31, 2006 mainly arises out of
      our
      increased short-term borrowings to meet our working capital requirements.
      Additionally, many of our customers made payments during 2006 in the form of
      banker’s acceptance bills, which are discounted when exchanged for cash, thereby
      adding to our finance costs.





***Net
      (Loss)/Income*** **.** Net
      income decreased approximately 684.2% from $399,450 for the year ended December
      31, 2005 to ($2,333,617) for the year ended December 31, 2006. Further, the
      net
      loss margin was 6.08% and 1.14% in the same comparable periods in 2006 and
      2005,
      respectively. This significant decrease in net income was attributable in large
      part to the professional expenses related to our Merger of approximately
      $1,560,227 for the year ended December 31, 2006. Excluding the effect of the
      professional expenses related to the Merger, our adjusted net income for the
      year ended December 31, 2006 is  -14-
 *Table
            of Contents*


($773,390),
      as compared to the net income of $399,450 for the year ended December 31, 2005.
      Other significant contributing factors to the net loss for fiscal year 2006
      include the selling and the general and administrative expenses, as well as
      our
      finance costs in the same period.





**Liquidity
      and Capital Resources**





***Cash
      Flows*** *.* Net cash
      flow provided by operating activities was $2,035,026 for the year ended December
      31, 2006 and $381,869 for the year ended December 31, 2005. The increase in
      our
      net cash flow provided by operating activities for the year ended December
      31,
      2006 was mainly due to a significant increase in our bills payable.





Net
      cash
      flow used in investing activities was $4,762,482 and $2,463,615 for the years
      ended December 31, 2006 and 2005, respectively. Uses of cash flow for investing
      activities mainly related to advances made to related parties.





Net
      cash
      flow provided by financing activities was $3,012,871 for the year ended December
      31, 2006. Compared with net cash flow provided by financing activities of
      $1,925,528 for the year ended December 31, 2005, the increase in our net cash
      flow was mainly due to certain advances made to us by Changchi and Changsheng,
      two related parties under control of Mr. Beicang Hou and Mr. Yaoting Ren
      respectively.





***Contractual
      Obligations*** *.* We
      have certain fixed contractual obligations and commitments that include future
      estimated payments. Changes in our business needs, cancellation provisions,
      changing interest rates, and other factors may result in actual payments
      differing from the estimates. We cannot provide certainty regarding the timing
      and amounts of payments.





The
      following tables summarize our contractual obligations as of December 31, 2006,
      and the effect these obligations are expected to have on our liquidity and
      cash
      flows in future periods.





**Payments
                Due by Period****Total**
            
            **Less
                than 1 year**
            
            **1-3
                Years**
            
            **4-5
                Years**
            
            **5
                Years +****(in
                thousands)**Contractual
                Obligations:Total
                Indebtedness
            
            
            1,855
            
            
            1,855
            
            
            —
            
            
            —
            
            
            —Capital
                Lease Obligations
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Operating
                Leases
            
            
            —
            
            
            —
            
            
            —
            
            
            —
            
            
            —Total
                Contractual Obligations:
            
            
            1,855
            
            
            1,855
            
            
            —
            
            
            —
            
            
            —




***Off-Balance
      Sheet Arrangements*** .
      As of
      December 31, 2006, we have not entered into any off-balance sheet arrangements
      with any individuals or entities.





**Quantitative
      and Qualitative Disclosures About Market Risk**




We
      do not
      use derivative financial instruments in our investment portfolio and have no
      foreign exchange contracts. Our financial instruments consist of cash and cash
      equivalents, trade accounts receivable,  -15-
 *Table
            of Contents*




accounts
      payable and long-term obligations. We consider investments in highly-liquid
      instruments purchased with a remaining maturity of 90 days or less at the
      date of purchase to be cash equivalents.




***Interest
      Rates*** .
      Our
      exposure to market risk for changes in interest rates relates primarily to
      our
      short-term investments and short-term obligations; thus, fluctuations in
      interest rates would not have a material impact on the fair value of these
      securities. At December 31, 2006, we had approximately $0.47  million in
      cash and cash equivalents. A hypothetical 5% increase or decrease in either
      short term or long term interest rates would not have a material impact on
      our
      earnings or loss, or the fair market value or cash flows of these instruments.




***Foreign
      Exchange Rates*** .
      Our
      sales are principally in Renminbi. The translation of Renminbi amounts into
      US
      dollars are for reference purposes only. The People’s Bank of China sets and
      publishes daily a base exchange rate with reference primarily to the supply
      and
      demand of Renminbi against the United States dollar in the market during the
      prior day. The People’s Bank of China also takes into account other factors such
      as the general conditions existing in the international foreign exchange
      markets. Although Chinese governmental policies were introduced in 1996 to
      reduce restrictions on the convertibility of Renminbi into foreign currency
      for
      current amount items, conversion of Renminbi into any other currency for capital
      items, such as foreign direct investment, loans or security, requires the
      approval of the State Administration for Foreign Exchange. Renminbi which had
      been tightly pegged at Rmb 8.28 for US $1 for the previous decade, was revalued
      on July 21, 2005 to Rmb 8.11 for US $1 following the removal of the peg to
      the
      US dollar and partly in response to pressure from the United States government.
      The Peoples Bank of China also announced that the Renminbi would float according
      to a basket of foreign currencies, rather then being strictly pegged to the
      US
      dollar, and would trade within a narrow 0.3% band against this basket of
      currencies, which is dominated by the US dollar, Euro, Japanese Yen and South
      Korean Won, with a smaller proportion made up of the British pound, Thai Baht
      and Russian Ruble. The translation of Renminbi amounts in this report on Form
      10-KSB is not a representation that the Renminbi amounts could actually be
      converted into United States dollars at that rate or at any other rate on that
      date or on any other date, and does not imply free convertibility of RMB to
      other foreign currencies. All foreign exchange transactions continue to take
      place either through the Bank of China or other banks authorized to buy and
      sell
      foreign currencies at the exchange rates quoted by the People's Bank of China.
      Approval of foreign currency payments by the Bank of China or other institutions
      requires submitting a payment application form together with invoices, shipping
      documents and signed contracts. As a result, we are exposed to risk of foreign
      exchange rate changes that will result from any change in the PRC governmental
      policies with regard to currency exchange and remittance abroad. However, see
      the section titled “Risk Factors - Fluctuation in the value of RMB relative to
      other currencies may have a material adverse effect on our business and/or
      an
      investment in our shares.”





**Risk
      Factors Affecting Our Operating Results and Common Stock**





Before
      investing in our common stock you should carefully consider the following risk
      factors, the other information included herein and the information included
      in
      our other reports and filings.  Our business, financial condition, and the
      trading price of our common stock could be adversely affected by these and
      other
      risks.




**Risks
      Related to Our Industry**





***Rapid
      and significant changes in the price of metals could negatively impact our
      industry.***





Prices
      for ferrochromium alloy and pelletized ore have experienced large increases
      and
      increased volatility in recent years. With a few exceptions, our markets have
      been able to adapt to this changing pricing environment. However, should prices
      experience further unanticipated and even more substantial rapid increases
      or be
      subjected to sudden substantial decreases it would impact us in several
      ways.


-16-
 *Table
            of Contents*




Overall
      we believe that rapid substantial price changes, should they occur, will not
      be
      to our industry’s benefit. Our customer and supplier base would be impacted due
      to uncertainty as to future prices. A reluctance to purchase inventory in the
      face of extreme price decreases or sell quickly during a period of rapid price
      increases would likely reduce our volume of business. Marginal industry
      participants or speculators may attempt to participate in an unhealthy extent
      during a period of rapid price escalation with a substantial risk of contract
      default should prices suddenly reverse. Risks of default in contract performance
      by customers or suppliers as well as an increased risk of bad debts and customer
      credit exposure would increase during periods of rapid and substantial price
      changes.





***Our
      industry is affected by cyclical and regional economic factors including the
      risk of a slow down in economic activity or recession.***





Many
      of
      our products are commodities subject to cyclical fluctuations in supply and
      demand in metal consuming industries. Metals industries have historically been
      vulnerable to significant declines in consumption and product pricing during
      prolong periods of economic downturn. A recession in the PRC or the public
      perception that a slowdown or recession may occur could decrease the demand
      for
      our products and adversely affect our business. Our overall financial results
      will be dependent substantially upon the extent to which economic conditions
      in
      the PRC remain strong. Overall economic activity has historically been
      susceptible to declines following periods of rapidly increased energy costs
      or
      interest rates. A slower expansion or recession will adversely affect our
      financial results. Our geographic concentration in China exposes us to the
      local
      market conditions in this country. Economic downturns in these areas or
      decisions by governments that have an impact on the level and pace of overall
      economic activity could adversely affect our sales and profitability.





Our
      business supports cyclical industries such as commercial construction, energy,
      service center, petrochemical and original equipment manufacturing. These
      industries may experience significant fluctuations in demand for our products
      based on economic conditions, energy prices, consumer demand and decisions
      by
      governments to fund infrastructure projects such as highways, schools, energy
      plants and airports. Many of these factors are beyond our control. As a result
      of the volatility in the industries we serve, we may have difficulty increasing
      or maintaining our level of sales or profitability. If the industries we serve
      suffer a prolonged downturn, then our business may be adversely affected.





Our
      industry is characterized by low backlogs, which means that our results of
      operations are promptly affected by short-term economic fluctuations.





***Compliance
      with and changes in environmental and remediation requirement could result
      in
      substantially increased capital requirements and operating costs.***





Existing
      laws or regulations, as currently interpreted or reinterpreted in the future,
      or
      future laws or regulations, may have a material adverse effect on our results
      of
      operations and financial condition. Compliance with environmental laws and
      regulations is a significant factor in our business. We are subject to local,
      provincial, and national environmental laws and regulations concerning, among
      other matters, waste disposal, air emissions, waste water effluent and disposal
      and employee health. Our manufacturing and recycling operations produce
      significant amounts of by-products, some of which are handled as industrial
      waste or hazardous waste.





Although
      we believe that we are in substantial compliance with all applicable laws and
      regulations, legal requirements are changing frequently and are subject to
      interpretation. New laws, regulations and changing interpretations by regulatory
      authorities, together with uncertainty regarding adequate pollution control
      levels, testing and sampling procedures, new pollution control technology and
      cost benefit analysis based on market conditions are all factors that may
      increase our future expenditures to comply with environmental requirements.
      Accordingly, we are unable to predict the ultimate cost of
      future


-17-
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            of Contents*




compliance
      with these requirements or their effect on our operations. We cannot predict
      whether such costs can be passed on to customers through product price
      increases. Competitors in various regions or countries where environmental
      regulation might not be so restrictive, subject to different interpretation
      or
      generally not enforced may enjoy a competitive advantage.




**Risks
      Related to Our Operation**





***A
      significant reduction in China’s steel consumption may negatively impact our
      gross margins.***




China
      now
      accounts for approximately one third of the world’s steel consumption.
      Expansions and contractions in China’s economy can have major effects on the
      pricing of the price of our products. Should demand in the PRC weaken or, prices
      for our products may fall causing erosion in our gross margins and subjecting
      us
      to possible renegotiation of contracts or increases in bad debts.





***We
      rely on the availability of large amounts of electricity for our ore refinery
      operations. Disruptions in delivery or substantial increases in energy costs,
      including crude oil, could adversely affect our financial
      performance.***





As
      large
      consumers of electricity, often the largest in the geographic area where our
      refineries are located, we must have dependable delivery of electricity in
      order
      to operate. Accordingly, we are at risk in the event of an energy disruption.
      Prolonged black-outs or brown-outs or disruptions caused by natural disasters
      would substantially disrupt our production. Prolonged substantial increases
      in
      energy costs would have an adverse effect on the costs of operating our ore
      refineries and would negatively impact our gross margins unless we were able
      to
      fully pass through the additional expense. Our products are typically delivered
      by truck. Rapid increases in the price of fuel attributable to increases in
      crude oil prices will have a negative impact on our costs and on many of our
      customers’ financial results which could result in reduced margins and declining
      demand for our products.





***Unexpected
      equipment failures may lead to production curtailments or shutdowns.***





Interruptions
      in our production capabilities will adversely affect our production costs,
      products available for sales and earnings for the affected period. In addition
      to equipment failures, our facilities are also subject to the risk of
      catastrophic loss due to unanticipated events such as fires, explosions or
      violent weather conditions. Our manufacturing processes are dependent upon
      critical pieces of refining equipment, such as our furnaces, as well as
      electrical equipment, such as transformers, and this equipment may, on occasion,
      be out of service as a result of unanticipated failures. We have experienced
      and
      may in the future experience material plant shutdowns or periods of reduced
      production as a result of such equipment failures.




***Although
        we are dependent on a steady flow of raw materials for our operations, we
        do not
        have in place long term supply agreements for all of our raw material
        needs.***





FS
      is
      party to a sales and supply contract whereby the supplier has agreed to
      guarantee the supply of some raw materials for the next five years. If, for
      any
      reason, the supplier fails to perform its obligations, FS will need to purchase
      its raw materials from other sources, which may be only available at higher
      prices, which will lead to higher production costs.


-18-
 *Table
            of Contents*




PL
      relies
      on several agents that import its raw materials from abroad. While PL maintains
      good relationship with these agents, the supply of raw materials may
      nevertheless be interrupted on account of events outside the control of PL
      and/or the agents, such as war or natural disasters, which will negatively
      impact PL’s operations.





***We
      are dependent on certain customers for our business.***





Approximately
      75% of our pelletized ores are sold to one company, who in turn sells the
      pelletized ores to a single customer. While the company is presently under
      contract to purchase from us, there can be no assurance that the contract will
      be renewed in the future. The remaining 25% of our pelletized ores are sold
      to
      another company, which is not contractually bound to purchase from us. The
      loss
      of either one these customers could hurt our business by reducing our revenues
      and profitability.





While
      we
      sell our ferrochromium alloy to numerous customers, we
      do not
      have long-term contracts with any of them. Thus, while we feel that our
      relationships with these customers are good and will likely to continue, they
      are not contractually bound to purchase any products from us. The loss of any
      one of these customer could hurt our business by reducing our revenues and
      profitability.





***Our
      success depends on attracting and retaining qualified
      personnel***




We
      depend
      on a core management and scientific team.  The loss of any of these
      individuals could prevent us from achieving our business objective of
      commercializing our product candidates.  Our future success will depend in
      large part on our continued ability to attract and retain other highly qualified
      scientific, technical and management personnel, as well as personnel with
      expertise in clinical testing and government regulation.  We face
      competition for personnel from other companies, universities, public and private
      research institutions, government entities and other organizations.  If our
      recruitment and retention efforts are unsuccessful, our business operations
      could suffer.




**Risks
      Related to Our Corporate Structure**




***We
      are subject to litigation which could invalidate the
      Merger.***





As
      discussed in Item 3 (“Legal Proceedings”) above, we are currently party to
      certain pending litigations. As of the date of this report, while we have been
      successful in obtaining favorable rulings from the respective Courts, the
      litigations are ongoing. In the event that the ultimate disposition of either
      litigation is not in our favor, the Court may impose a range of remedies,
      including under equitable (fairness) theories, the effects of which may render
      the Merger void or voidable.





***PRC
      laws and regulations governing our businesses and the validity of certain of
      our
      contractual arrangements are uncertain. If we are found to be in violation,
      we
      could be subject to sanctions. In addition, changes in such PRC laws and
      regulations may materially and adversely affect our business.***




There
      are
      substantial uncertainties regarding the interpretation and application of PRC
      laws and regulations, including, but not limited to, the laws and regulations
      governing our business, or the enforcement and performance of our contractual
      arrangements with our affiliated Chinese entities, PL and FS, and their
      shareholders. We are considered a foreign person or foreign invested enterprise
      under PRC law. As a result, we are subject to PRC law limitations on foreign
      ownership of Chinese companies. These laws and regulations are relatively new
      and may be subject to change, and their official interpretation and enforcement
      may involve substantial uncertainty. The effectiveness of newly enacted laws,
      regulations or amendments may be delayed, resulting in detrimental reliance
      by
      foreign investors. New laws and regulations that affect existing and proposed
      future businesses may also be applied retroactively.


-19-
 *Table
            of Contents*




The
      PRC
      government has broad discretion in dealing with violations of laws and
      regulations, including levying fines, revoking business and other licenses
      and
      requiring actions necessary for compliance. In particular, licenses and permits
      issued or granted to us by relevant governmental bodies may be revoked at a
      later time by higher regulatory bodies. We cannot predict the effect of the
      interpretation of existing or new PRC laws or regulations on our businesses.
      We
      cannot assure you that our current ownership and operating structure would
      not
      be found in violation of any current or future PRC laws or regulations. As
      a
      result, we may be subject to sanctions, including fines, and could be required
      to restructure our operations or cease to provide certain services. Any of
      these
      or similar actions could significantly disrupt our business operations or
      restrict us from conducting a substantial portion of our business operations,
      which could materially and adversely affect our business, financial condition
      and results of operations.





***In
      order to comply with PRC laws limiting foreign ownership of Chinese companies,
      we conduct our ore refinery business through PL and FS by means of contractual
      arrangements. If the PRC government determines that these contractual
      arrangements do not comply with applicable regulations, our business could
      be
      adversely affected.***




We
      operate our business in China through PL and FS. PL and FS each holds the
      licenses and approvals necessary to operate our ore refinery in China. We have
      contractual arrangements with both PL and FS and their respective shareholders
      that allow us to substantially control both PL and FS. We cannot assure you,
      however, that we will be able to enforce these contracts.




Although
      we believe we comply with current PRC regulations, we cannot assure you that
      the
      PRC government would agree that these operating arrangements comply with PRC
      licensing, registration or other regulatory requirements, with existing policies
      or with requirements or policies that may be adopted in the future. If the
      PRC
      government determines that we do not comply with applicable law, it could revoke
      our business and operating licenses, require us to discontinue or restrict
      our
      operations, restrict our right to collect revenues, require us to restructure
      our operations, impose additional conditions or requirements with which we
      may
      not be able to comply, impose restrictions on our business operations or on
      our
      customers, or take other regulatory or enforcement actions against us that
      could
      be harmful to our business.




***Our
      contractual arrangements with PL and FS, and their respective shareholders
      may
      not be as effective in providing control over these entities as direct
      ownership.***




We
      operate our business through PL and FS. We have no equity ownership interest
      in
      either PL or FS, and rely on contractual arrangements to control and operate
      such businesses. These contractual arrangements may not be as effective in
      providing control over PL and FS as direct ownership. For example, either PL
      and/or FS could fail to take actions required for our business despite its
      contractual obligation to do so. If either PL or FS fails to perform under
      their
      agreements with us, we may have to rely on legal remedies under PRC law, which
      may not be effective. In addition, we cannot assure you that either of PL or
      FS’s shareholders would always act in our best interests.




**Risks
      Related to Doing Business in China**




***Adverse
      changes in economic and political policies of the PRC government could have
      a
      material adverse effect on the overall economic growth of China, which could
      adversely affect our business.***





Substantially
      all of our business operations are conducted in China. Accordingly, our results
      of operations, financial condition and prospects are subject to a significant
      degree to economic, political and legal developments in China. China’s economy
      differs from the economies of most developed countries in many respects,
      including with respect to the amount of government involvement, level of
      development,


-20-
 *Table
            of Contents*




growth
      rate, control of foreign exchange and allocation of resources. While the PRC
      economy has experienced significant growth in the past 20 years, growth has
      been
      uneven across different regions and among various economic sectors of China.
      The
      PRC government has implemented various measures to encourage economic
      development and guide the allocation of resources. Some of these measures
      benefit the overall PRC economy, but may also have a negative effect on us.
      For
      example, our financial condition and results of operations may be adversely
      affected by government control over capital investments or changes in tax
      regulations that are applicable to us. Since early 2004, the PRC government
      has
      implemented certain measures to control the pace of economic growth. Such
      measures may cause a decrease in the level of economic activity in China, which
      in turn could adversely affect our results of operations and financial
      condition.





***PL
      and FS are subject to restrictions on making payments to us.***




We
      are a
      holding company incorporated in the Cayman Islands and do not have any assets
      or
      conduct any business operations other than our investments in our affiliated
      entities in China, PL and FS. As a result of our holding company structure,
      we
      rely entirely on payments from PL and FS under our contractual arrangements.
      The
      PRC government also imposes controls on the conversion of RMB into foreign
      currencies and the remittance of currencies out of China. We may experience
      difficulties in completing the administrative procedures necessary to obtain
      and
      remit foreign currency. See “Government control of currency conversion may
      affect the value of your investment.” Furthermore, if our affiliated entity in
      China incurs debt on their own in the future, the instruments governing the
      debt
      may restrict their ability to make payments. If we are unable to receive all
      of
      the revenues from our operations through these contractual or dividend
      arrangements, we may be unable to pay dividends on our ordinary shares.





***Uncertainties
      with respect to the PRC legal system could adversely affect us.***




We
      conduct our business primarily through our affiliated Chinese entities, PL
      and
      FS. Our operations in China are governed by PRC laws and regulations. We are
      generally subject to laws and regulations applicable to foreign investments
      in
      China and, in particular, laws applicable to wholly foreign-owned enterprises.
      The PRC legal system is based on written statutes. Prior court decisions may
      be
      cited for reference but have limited precedential value.




Since
      1979, PRC legislation and regulations have significantly enhanced the
      protections afforded to various forms of foreign investments in China. However,
      China has not developed a fully integrated legal system and recently enacted
      laws and regulations may not sufficiently cover all aspects of economic
      activities in China. In particular, because these laws and regulations are
      relatively new, and because of the limited volume of published decisions and
      their nonbinding nature, the interpretation and enforcement of these laws and
      regulations involve uncertainties. In addition, the PRC legal system is based
      in
      part on government policies and internal rules (some of which are not published
      on a timely basis or at all) that may have a retroactive effect. As a result,
      we
      may not be aware of our violation of these policies and rules until some time
      after the violation. In addition, any litigation in China may be protracted
      and
      result in substantial costs and diversion of resources and management attention.





***You
      may experience difficulties in effecting service of legal process, enforcing
      foreign judgments or bringing original actions in China based on United States
      or other foreign laws against us, our management or the experts named in the
      prospectus.***




We
      conduct substantially all of our operations in China and substantially all
      of
      our assets are located in China. In addition, all of our senior executive
      officers reside within China. As a result, it may not be possible to effect
      service of process within the United States or elsewhere outside China upon
      our
      senior executive officers, including with respect to matters arising under
      U.S.
      federal securities laws or applicable state securities laws. Moreover, our
      PRC
      counsel has advised us that the PRC does not have


-21-
 *Table
            of Contents*




treaties
      with the United States or many other countries providing for the reciprocal
      recognition and enforcement of judgment of courts.




***Governmental
      control of currency conversion may affect the value of your investment.***




The
      PRC
      government imposes controls on the convertibility of RMB into foreign currencies
      and, in certain cases, the remittance of currency out of China. We receive
      substantially all of our revenues in RMB. Under our current structure, our
      income is primarily derived from payments from the net profit of PL and FS.
      Shortages in the availability of foreign currency may restrict the ability
      of
      our PRC subsidiaries and our affiliated entity to remit sufficient foreign
      currency to pay dividends or other payments to us, or otherwise satisfy their
      foreign currency denominated obligations. Under existing PRC foreign exchange
      regulations, payments of current account items, including profit distributions,
      interest payments and expenditures from trade-related transactions, can be
      made
      in foreign currencies without prior approval from the PRC State Administration
      of Foreign Exchange by complying with certain procedural requirements. However,
      approval from appropriate government authorities is required where RMB is to
      be
      converted into foreign currency and remitted out of China to pay capital
      expenses such as the repayment of bank loans denominated in foreign currencies.
      The PRC government may also at its discretion restrict access in the future
      to
      foreign currencies for current account transactions. If the foreign exchange
      control system prevents us from obtaining sufficient foreign currency to satisfy
      our currency demands, we may not be able to pay dividends in foreign currencies
      to our shareholders.




***Fluctuation
      in the value of RMB may have a material adverse effect on your investment.***




The
      value
      of RMB against the U.S. dollar and other currencies may fluctuate and is
      affected by, among other things, changes in political and economic conditions.
      Our revenues and costs are mostly denominated in RMB, while a significant
      portion of our financial assets are denominated in U.S. dollars. We rely
      entirely on fees paid to us by our affiliated entity in China. Any significant
      fluctuation in value of RMB may materially and adversely affect our cash flows,
      revenues, earnings and financial position, and the value of, and any dividends
      payable on, our stock in U.S. dollars. For example, an appreciation of RMB
      against the U.S. dollar would make any new RMB denominated investments or
      expenditures more costly to us, to the extent that we need to convert U.S.
      dollars into RMB for such purposes. An appreciation of RMB against the U.S.
      dollar would also result in foreign currency translation losses for financial
      reporting purposes when we translate our U.S. dollar denominated financial
      assets into RMB, as RMB is our reporting currency.




**Risks
      Related to an Investment in Our Securities**




***To
      date, we have not paid any cash dividends and no cash dividends will be paid
      in
      the foreseeable future.***





We
      do not
      anticipate paying cash dividends on our common stock in the foreseeable future
      and we may not have sufficient funds legally available to pay dividends. Even
      if
      the funds are legally available for distribution, we may nevertheless decide
      not
      to pay any dividends. We intend to retain all earnings for the company's
      operations.





***The
      application of the "Penny Stock" rules could adversely affect the market price
      of our common stock and increase your transaction costs to sell those shares.***





As
      long
      as the trading price of our common shares is below $5 per share, the open-market
      trading of our common shares will be subject to the "penny stock" rules. The
      "penny stock" rules impose additional sales practice requirements on
      broker-dealers who sell securities to persons other than established customers
      and accredited investors (generally those with assets in excess of $1,000,000
      or
      annual income  -22-
 *Table
            of Contents*


exceeding
      $200,000 or $300,000 together with their spouse). For transactions covered
      by
      these rules, the broker-dealer must make a special suitability determination
      for
      the purchase of securities and have received the purchaser's written consent
      to
      the transaction before the purchase. Additionally, for any transaction involving
      a penny stock, unless exempt, the broker-dealer must deliver, before the
      transaction, a disclosure schedule prescribed by the Securities and Exchange
      Commission relating to the penny stock market. The broker-dealer also must
      disclose the commissions payable to both the broker-dealer and the registered
      representative and current quotations for the securities. Finally, monthly
      statements must be sent disclosing recent price information on the limited
      market in penny stocks. These additional burdens imposed on broker-dealers
      may
      restrict the ability or decrease the willingness of broker-dealers to sell
      our
      common shares, and may result in decreased liquidity for our common shares
      and
      increased transaction costs for sales and purchases of our common shares as
      compared to other securities.




***Our
      common shares are thinly traded and, you may be unable to sell at or near ask
      prices or at all if you need to sell your shares to raise money or otherwise
      desire to liquidate your shares.***





The
      Company cannot predict the extent to which an active public market for its
      common stock will develop or be sustained. However, the Company does not rule
      out the possibility of applying for listing on the Nasdaq National Market or
      other exchanges.




Our
      common shares have historically been sporadically or "thinly-traded" on the
      “Over-the-Counter Bulletin Board”, meaning that the number of persons interested
      in purchasing our common shares at or near bid prices at any given time may
      be
      relatively small or non-existent. This situation is attributable to a number
      of
      factors, including the fact that we are a small company which is relatively
      unknown to stock analysts, stock brokers, institutional investors and others
      in
      the investment community that generate or influence sales volume, and that
      even
      if we came to the attention of such persons, they tend to be risk-averse and
      would be reluctant to follow an unproven company such as ours or purchase or
      recommend the purchase of our shares until such time as we became more seasoned
      and viable. As a consequence, there may be periods of several days or more
      when
      trading activity in our shares is minimal or non-existent, as compared to a
      seasoned issuer which has a large and steady volume of trading activity that
      will generally support continuous sales without an adverse effect on share
      price. We cannot give you any assurance that a broader or more active public
      trading market for our common stock will develop or be sustained, or that
      current trading levels will be sustained.





The
      market price for our common stock is particularly volatile given our status
      as a
      relatively small company with a small and thinly traded “float” and lack of
      current revenues that could lead to wide fluctuations in our share price. The
      price at which you purchase our common stock may not be indicative of the price
      that will prevail in the trading market. You may be unable to sell your common
      stock at or above your purchase price if at all, which may result in substantial
      losses to you.





The
      market for our common shares is characterized by significant price volatility
      when compared to seasoned issuers, and we expect that our share price will
      continue to be more volatile than a seasoned issuer for the indefinite future.
      The volatility in our share price is attributable to a number of factors. First,
      as noted above, our common shares are sporadically and/or thinly traded. As
      a
      consequence of this lack of liquidity, the trading of relatively small
      quantities of shares by our shareholders may disproportionately influence the
      price of those shares in either direction. The price for our shares could,
      for
      example, decline precipitously in the event that a large number of our common
      shares are sold on the market without commensurate demand, as compared to a
      seasoned issuer which could better absorb those sales without adverse impact
      on
      its share price. Secondly, we are a speculative or "risky" investment due to
      our
      lack of revenues or profits to date and uncertainty of future market acceptance
      for our current and potential products. As a consequence of this enhanced risk,
      more risk-adverse investors may, under the fear of losing all or most of their
      investment in the event of negative news or lack of progress, be more inclined
      to sell their shares on the market more quickly and at greater discounts than
      would be the case


-23-
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            of Contents*




with
      the
      stock of a seasoned issuer. The following factors may add to the volatility
      in
      the price of our common shares: actual or anticipated variations in our
      quarterly or annual operating results; adverse outcomes; the termination of
      our
      contractual agreements with Shiming Technology; and additions or departures
      of
      our key personnel, as well as other items discussed under this "Risk Factors"
      section, as well as elsewhere in this Form 10-KSB. Many of these factors are
      beyond our control and may decrease the market price of our common shares,
      regardless of our operating performance. We cannot make any predictions or
      projections as to what the prevailing market price for our common shares will
      be
      at any time, including as to whether our common shares will sustain their
      current market prices, or as to what effect that the sale of shares or the
      availability of common shares for sale at any time will have on the prevailing
      market price. However, the Company does not rule out the possibility of applying
      for listing on the Nasdaq National Market or other exchanges.





Shareholders
      should be aware that, according to SEC Release No. 34-29093, the market for
      penny stocks has suffered in recent years from patterns of fraud and abuse.
      Such
      patterns include (1) control of the market for the security by one or a few
      broker-dealers that are often related to the promoter or issuer; (2)
      manipulation of prices through prearranged matching of purchases and sales
      and
      false and misleading press releases; (3) boiler room practices involving
      high-pressure sales tactics and unrealistic price projections by inexperienced
      sales persons; (4) excessive and undisclosed bid-ask differential and markups
      by
      selling broker-dealers; and (5) the wholesale dumping of the same securities
      by
      promoters and broker-dealers after prices have been manipulated to a desired
      level, along with the resulting inevitable collapse of those prices and with
      consequent investor losses. Our management is aware of the abuses that have
      occurred historically in the penny stock market. Although we do not expect
      to be
      in a position to dictate the behavior of the market or of broker-dealers who
      participate in the market, management will strive within the confines of
      practical limitations to prevent the described patterns from being established
      with respect to our securities. The occurrence of these patterns or practices
      could increase the volatility of our share price.





***Volatility
      in our common share price may subject us to securities litigation.***





The
      market for our common stock is characterized by significant price volatility
      when compared to seasoned issuers, and we expect that our share price will
      continue to be more volatile than a seasoned issuer for the indefinite future.
      In the past, plaintiffs have often initiated securities class action litigation
      against a company following periods of volatility in the market price of its
      securities. We may, in the future, be the target of similar litigation.
      Securities litigation could result in substantial costs and liabilities and
      could divert management's attention and resources.





***Our
      corporate actions are substantially controlled by our management and affiliated
      entities.***




Following
      the closing of the share exchange transaction under the Exchange Agreement,
      our
      officers and directors will collectively control, directly or indirectly,
      approximately 90% of our outstanding ordinary shares. Thus, our management
      stockholders could exert substantial influence over matters such as electing
      directors and approving mergers or other business combination transactions.
      While all of our stockholders are entitled to vote on matters submitted to
      our
      stockholders for approval, because of the significant percentage ownership
      and
      concentration of voting power held by our management stockholders, elections
      of
      our board of directors and other corporate decisions will generally be within
      the influence of this stockholder. There can be no assurance that matters voted
      upon by our stockholders who are also officers and directors, will be viewed
      favorably by all stockholders of the company, or that voting decisions of our
      management stockholders will be agreeable to all other
      stockholders.


-24-
 *Table
          of Contents*




***The
      elimination of monetary liability against our directors, officers and employees
      under Nevada law and the existence of indemnification rights to our directors,
      officers and employees may result in*** ***substantial
      expenditures by our company and may discourage lawsuits against our directors,
      officers and employees.***




Our
      articles of incorporation do not contain any specific provisions that eliminate
      the liability of our directors for monetary damages to our company and
      stockholders, however we are prepared to give such indemnification to our
      directors and officers to the extent provided by Nevada law. We may also have
      contractual indemnification obligations under our employment agreements with
      our
      officers. The foregoing indemnification obligations could result in our company
      incurring substantial expenditures to cover the cost of settlement or damage
      awards against directors and officers, which we may be unable to recoup. These
      provisions and resultant costs may also discourage our company from bringing
      a
      lawsuit against directors and officers for breaches of their fiduciary duties,
      and may similarly discourage the filing of derivative litigation by our
      stockholders against our directors and officers even though such actions, if
      successful, might otherwise benefit our company and stockholders.




***Legislative
      actions, higher insurance costs and potential new accounting pronouncements
      may
      impact our future financial position and results of
      operations.***





There
      have been regulatory changes, including the Sarbanes-Oxley Act of 2002, and
      there may potentially be new accounting pronouncements or additional regulatory
      rulings that will have an impact on our future financial position and results
      of
      operations. The Sarbanes-Oxley Act of 2002 and other rule changes as well as
      proposed legislative initiatives following the Enron bankruptcy are likely
      to
      increase general and administrative costs and expenses. In addition, insurers
      are likely to increase premiums as a result of high claims rates over the past
      several years, which we expect will increase our premiums for insurance
      policies. Further, there could be changes in certain accounting rules. These
      and
      other potential changes could materially increase the expenses we report under
      generally accepted accounting principles, and adversely affect our operating
      results.




***Past
      activities of the company and its affiliates may lead to future liability for
      the company.***





Prior
      to
      our entry into the Merger Agreement on April 8, 2006, our predecessor company
      has been engaged in business operations unrelated to our current operations.
      Although the major shareholders of our predecessor company will indemnify us
      against any loss, liability, claim, damage or expense arising out of or based
      on
      any breach of or inaccuracy in any of their representations and warranties
      made
      in the Merger Agreement, any liabilities relating to such prior business against
      which we are not completely indemnified may have a material adverse effect
      on
      us.




***We
      may need additional capital, and the sale of additional shares or other equity
      securities could result in additional dilution to our shareholders.***





We
      believe that our current cash and cash equivalents, anticipated cash flow from
      operations and the net proceeds from this offering will be sufficient to meet
      our anticipated cash needs for the near future. We may, however, require
      additional cash resources due to changed business conditions or other future
      developments, including any investments or acquisitions we may decide to pursue.
      If our resources are insufficient to satisfy our cash requirements, we may
      seek
      to sell additional equity or debt securities or obtain a credit facility. The
      sale of additional equity securities could result in additional dilution to
      our
      shareholders. The incurrence of indebtedness would result in increased debt
      service obligations and could result in operating and financing covenants that
      would restrict our operations. We cannot assure you that financing will be
      available in amounts or on terms acceptable to us, if at all.


-25-
 *Table
          of Contents*




***You
      may face difficulties in protecting your interests, and your ability to protect
      your rights through the U.S. federal courts may be limited, because our
      subsidiaries are incorporated in non-U.S.*** ***jurisdictions,
      we conduct substantially all of our operations in China, and all of our officers
      reside outside the United States.***




Although
      we are incorporated in Nevada, we conduct substantially all of our operations
      in
      China through our wholly owned subsidiaries in China. All of our officers reside
      outside the United States and some or all of the assets of those persons are
      located outside of the United States. As a result, it may be difficult or
      impossible for you to bring an action against us or against these individuals
      in
      China in the event that you believe that your rights have been infringed under
      the securities laws or otherwise. Even if you are successful in bringing an
      action of this kind, the laws of the PRC may render you unable to enforce a
      judgment against our assets or the assets of our directors and officers.





As
      a
      result of all of the above, our public shareholders may have more difficulty
      in
      protecting their interests through actions against our management, directors
      or
      major stockholders than would shareholders of a corporation doing business
      entirely within the United States.




***If
      we fail to maintain an effective system of internal controls, we may not be
      able
      to accurately report our financial results or prevent fraud.***




We
      will
      be subject to reporting obligations under the U.S. securities laws. The
      Securities and Exchange Commission, or the SEC, as required by Section 404
      of
      the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company
      to
      include a management report on such company’s internal controls over financial
      reporting in its annual report, which contains management’s assessment of the
      effectiveness of the company’s internal controls over financial reporting. In
      addition, an independent registered public accounting firm must attest to and
      report on management’s assessment of the effectiveness of the company’s internal
      controls over financial reporting. These requirements will first apply to our
      annual report on Form 10-KSB for the fiscal year ending December 31, 2006.
      Our
      management may conclude that our internal controls over our financial reporting
      are not effective. Moreover, even if our management concludes that our internal
      controls over financial reporting are effective, our independent registered
      public accounting firm may still decline to attest to our management’s
      assessment or may issue a report that is qualified if it is not satisfied with
      our controls or the level at which our controls are documented, designed,
      operated or reviewed, or if it interprets the relevant requirements differently
      from us. Our reporting obligations as a public company will place a significant
      strain on our management, operational and financial resources and systems for
      the foreseeable future. Effective internal controls, particularly those related
      to revenue recognition, are necessary for us to produce reliable financial
      reports and are important to help prevent fraud. As a result, our failure to
      achieve and maintain effective internal controls over financial reporting could
      result in the loss of investor confidence in the reliability of our financial
      statements, which in turn could harm our business and negatively impact the
      trading price of our stock. Furthermore, we anticipate that we will incur
      considerable costs and use significant management time and other resources
      in an
      effort to comply with Section 404 and other requirements of the Sarbanes-Oxley
      Act.





***We
      will incur increased costs as a result of being a public company.***




As
      a
      public company, we will incur significant legal, accounting and other expenses
      that we did not incur as a private company. In addition, the Sarbanes-Oxley
      Act,
      as well as new rules subsequently implemented by SEC have required changes
      in
      corporate governance practices of public companies. We expect these new rules
      and regulations to increase our legal, accounting and financial compliance
      costs
      and to make certain corporate activities more time-consuming and costly. In
      addition, we will incur additional costs associated with our public company
      reporting requirements. We are currently evaluating and monitoring developments
      with respect to these new rules, and we cannot predict or estimate the amount
      of
      additional costs we may incur, or the timing of such costs.


-26-
 *Table
            of Contents*




**Item
              7.**
            **Financial
                Statements.**





The
      information required by Item 7 and an index thereto commences on the next
      page.




-27-
 *Table
            of Contents*




BEICANG
                  IRON & STEEL, INC. AND SUBSIDIARIESCONSOLIDATED
                  FINANCIAL STATEMENTSFOR
                  THE YEARS ENDED DECEMBER 31, 2006 AND 2005




*Table
          of Contents*




BEICANG
                  IRON & STEEL, INC. AND SUBSIDIARIESINDEX
                  TO FINANCIAL STATEMENTS
  PagesReports
                  of Independent Registered Public Accounting
                  Firm
              
              
              F-2
                  - F-3Consolidated
                  Balance Sheets
              
              
              F-4
                  - F-5Consolidated
                  Statements ofOperationsand Other Comprehensive Income
              
              
              F-6Consolidated
                  Statements of Changes in Stockholders'
                  Equity
              
              
              F-7Consolidated
                  Statements of Cash Flows
              
              
              F-8Notes
                  to Financial Statements
              
              
              F-9
                  - F-29




F-1
 *Table
          of Contents*


**REPORT
          OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 To
          the
          Board of Directors and Shareholders
 Beicang
          Iron & Steel, Inc.
 (Formerly
          known as Alpha Spacecom, Inc.)
 
 I
          have
          audited the accompanying consolidated balance sheet of Beicang Iron & Steel,
          Inc. (formerly know as Alpha Spacecom, Inc.) and subsidiaries as of December
          31,
          2006, and the related consolidated statements of operations, stockholders’
equity and comprehensive income (loss), and cash flows for the year then
          ended.
          These consolidated financial statements are the responsibility of the Company’s
          management. My responsibility is to express an opinion on these consolidated
          financial statements based on my audit. The financial statements of East
          Glory
          Investments Group Limited, the accounting acquirer of Beicang Iron & Steel,
          Inc. (Formerly known as Alpha Spacecom, Inc.) as of December 31, 2005 as
          explained in Note 1 to the accompanying consolidated financial statements
          were
          audited by other auditors whose report dated July 26, 2006 expressed an
          unqualified opinion on those statements.
 
 I
          conducted my audit in accordance with standards of the Public Company Accounting
          Oversight Board (United States of America). Those standards require that
          I plan
          and perform the audit to obtain reasonable assurance about whether the
          consolidated financial statements are free of material misstatement. An
          audit
          includes examining, on a test basis, evidence supporting the amounts and
          disclosures in the consolidated financial statements. An audit also includes
          assessing the accounting principles used and significant estimates made
          by
          management, as well as evaluating the overall financial statement presentation.
          I believe that my audit provides a reasonable basis for my opinion.
 
 In
          my
          opinion, the consolidated financial statements referred to in the first
          paragraph present fairly, in all material respects, the financial position
          of
          Beicang Iron & Steel, Inc. (formerly know as Alpha Spacecom, Inc.) and
          subsidiaries as of December 31, 2006, and the results of its operations
          and its
          cash flows for the year then ended in conformity with accounting principles
          generally accepted in the United States of America.
 
 As
          discussed in Note 19, the Company is involved in legal actions which may
          result
          in invalidation of the merger with East Glory Investment Group Limited
          and
          ownership of the Company being in doubt. Proceedings on the actions are
          in
          progress and the ultimate outcome of the lawsuits cannot presently be
          determined. The consolidated financial statements were prepared in accordance
          with FASB Interpretation 46(R) - Consolidation of Variable Interest Entities
          -
          An Interpretation of ARB No. 51. In case rulings are made against the Company,
          the basis of consolidation may not be appropriate.
 
 The
          accompanying consolidated financial statements have been prepared assuming
          that
          the Company will continue as a going concern, as discussed in Note 2 to
          the
          consolidated financial statements. Management’s plans regarding those matters
          are also described in the said note. The consolidated financial statements
          do
          not include any adjustment that might result from the outcome of this
          uncertainty.
 
 As
          discussed in Note 16 to the consolidated financial statements, the Company
          has
          engaged in significant related party transactions.
 
 /s/
          Yu
          and Associates CPA Corporation
 Yu
          and
          Associates CPA Corporation
 
 El
          Monte,
          California
 May
          13,
          2007
    F-2
  **Report
        of Independent Registered Public Accounting
        Firm**
 
 
 **TO
        THE STOCK HOLDERS AND BOARD OF DIRECTORS OF**
 **EAST
        GLORY INVESTMENTS GROUP LIMITED**
 
 We
        have
        audited the accompanying consolidated balance sheets of East Glory Investments
        Group Limited (the “Company”) as of December 31, 2004 and 2005 and the related
        consolidated statements of operations and other comprehensive income, cash
        flows, and stockholders’ equity for each of the three years in the period ended
        December 31, 2005. These financial statements are the responsibility of the
        Company’s management. Our responsibility is to express an opinion on these
        financial statements based on our audits.
 
 We
        conducted our audits in accordance with standards of the Public Company
        Accounting Oversight Board (in the United States of America). Those standards
        require that we plan and perform the audit to obtain reasonable assurance
        about
        whether the financial statements are free of material misstatement. The Company
        is not required to have, nor were we engaged to perform, an audit of the
        Company’s internal controls over financial reporting. Our audit included
        consideration of internal controls over financial reporting as a basis for
        designing audit procedures that are appropriate under the circumstances,
        but not
        for the purpose of expressing an opinion on the effectiveness of the Company’s
        internal controls over financial reporting. Accordingly, we express no such
        opinion. An audit includes examining, on a test basis, evidence supporting
        the
        amounts and disclosures in the financials statements. An audit also includes
        assessing the accounting principles used and significant estimates made by
        management, as well as evaluating the overall financial statement presentation.
        We believe that our audits provide a reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial positions of East Glory Investments Group
        Limited as of December 31, 2004 and 2005 and the results of its operations
        and
        its cash flows for each of the three years in the period ended December 31,
        2005, in conformity with accounting principles generally accepted in the
        United
        States of America.
 
 As
        discussed in the notes to the consolidated financial statements, the Company
        has
        engaged in significant related party transactions.
 
 /s/
        GC
        Alliance Limited
 GC
        ALLIANCE LIMITED
 Certified
        Public Accountants
 
 Hong
        Kong
 
 July
        26,
        2006
 F-3
 *Table
            of Contents*




**BEICANG
                  IRON & STEEL, INC. AND SUBSIDIARIES****CONSOLIDATED
                  BALANCE SHEETS****(Amounts
                  expressed in U.S. Dollars)**
  December
                  31,2006
              
              2005**ASSETS****Current
                  assets**Cash
                  and cash equivalents
              
              $
              475,975
              
              $
              158,348Bills
                  receivable
              
              
              81,868
              
              
              1,622,537Trade
                  receivables, net of allowance for doubtful accountsof
                  $106,684 at Dec 31, 2006 and nil at Dec 31, 2005
              
              
              1,703,276
              
              
              2,140,172Trade
                  receivables - related parties (note 16)
              
              
              2,845,982
              
              
              1,512,155Inventories(note 5)
              
              
              1,295,334
              
              
              2,148,693Prepaymentand deposits (note 6)
              
              
              420,106
              
              
              604,054Other
                  receivables(note 7)
              
              
              62,818
              
              
              692,378Prepaid
                  land use right(note 8)
              
              
              10,073
              
              
              8,860Due
                  fromrelated
                  parties (note 16)
              
              
              3,377,370
              
              
              769,645**Total
                  current assets**
              
              
              10,272,802
              
              
              9,656,842Prepaid
                  land use right, net of current portion(note 8)
              
              
              474,232
              
              
              425,295Property,
                  plant and equipment, net(note 9)
              
              
              4,967,210
              
              
              4,872,129Construction
                  in progress
              
              
              161,580
              
              
              59,523Deposits
                  for property, plant and equipment
              
              
              —
              
              
              34,992**Total
                  assets**
              
              $
              15,875,824
              
              $
              15,048,781**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****Current
                  liabilities**Bills
                  payable
              
              $
              —
              
              $
              1,553,865Tradepayables
              
              
              2,619,526
              
              
              2,610,305Trade
                  payables - related parties (note 16)
              
              
              1,926,438
              
              
              893,181Deposits
                  received from customers
              
              
              207,408
              
              
              94,272Accrued
                  expenses(note 10)
              
              
              1,260,721
              
              
              1,113,433Other
                  payables(note 11)
              
              
              1,857,765
              
              
              1,010,554Other
                  short-term loans(note 12)
              
              
              1,855,069
              
              
              1,009,370Value-addedtax payable
              
              
              2,167,229
              
              
              1,097,128Due
                  torelated
                  parties (note 16)
              
              
              1,912,251
              
              
              8,674**Total
                  current liabilities**
              
              
              13,806,407
              
              
              9,390,782**Commitments
                  and Contingencies (notes 18 and 19)**
 The
          accompanying notes are an integral part of these financial
          statements.
 F-4
 *Table
            of Contents*
  **BEICANG
                  IRON & STEEL, INC. AND SUBSIDIARIES****CONSOLIDATED
                  BALANCE SHEETS (CONTINUED)****(Amounts
                  expressed in U.S. Dollars)**
  December
                  31,2006
              
              2005**Stockholders'
                  Equity**Preferredstock -50,000,000
                  authorized:Series
                  A, $0.001 par value; 23,000 sharesissuedand
                  outstanding, 7% cumulative,each convertibleinto40
                  shares of common stock (note 13)
              
              $
              23
              
              $
              —Series
                  B, nil issued
              
              
              —
              
              
              —Common
                  stock, $0.001 par, 1,000,000,000 sharesauthorized,999,066,260issued
                  andoutstanding
                  (note 13)
              
              
              999,066
              
              
              899,197Additional
                  paid-in capital
              
              
              3,134,607
              
              
              4,634,862Statutory
                  reserves(note 14)
              
              
              24,713
              
              
              24,713Accumulated
                  other comprehensive income
              
              
              175,491
              
              
              30,093(Accumulatedloss)
                  / retainted earnings
              
              
              (2,264,483
              )
              
              69,134**Total
                  Stockholders' Equity**
              
              
              2,069,417
              
              
              5,657,999**Total
                  Liabilities and Stockholders' Equity**
              
              $
              15,875,824
              
              $
              15,048,781


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


F-5
 *Table
          of Contents*




**BEICANG
                  IRON & STEEL, INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF
                  OPERATIONS****AND
                  OTHER COMPREHENSIVE INCOME****(Amounts
                  expressed in U.S. Dollars)**
  Year
                  ended December 31,2006
              
              2005**Revenue**
              
              $
              21,266,514
              
              $
              30,381,487**Revenue
                  - related parties (note 16)**
              
              
              17,121,961
              
              
              4,563,24538,388,475
              
              
              34,944,732Cost
                  of goods sold
              
              
              (36,299,757
              )
              
              (32,935,217
              )**Gross
                  profit**
              
              
              2,088,718
              
              
              2,009,515**Operating
                  expenses**Selling
                  expenses
              
              
              (1,664,303
              )
              
              (648,357
              )General
                  and administrative expenses
              
              
              (1,066,384
              )
              
              (644,835
              )Loss
                  on impairment of fixed assets
              
              
              —
              
              
              (262,602
              )Total
                  operating expenses
              
              
              (2,730,687
              )
              
              (1,555,794
              )**Profit
                  (loss) from operations**
              
              
              (641,969
              )
              
              453,721**Other
                  income (expenses)**Gain
                  on by-product sales
              
              
              325,781
              
              
              64,329Sundry
                  income(expenses), net
              
              
              (36,005
              )
              
              4,631Finance
                  costs
              
              
              (421,197
              )
              
              (123,231
              )Merger
                  costs
              
              
              (1,560,227
              )
              
              —Total
                  otherexpenses
              
              
              (1,691,648
              )
              
              (54,271
              )(Loss)
                  Profitbefore
                  income taxes
              
              
              (2,333,617
              )
              
              399,450Income
                  taxes(note 15)
              
              
              —
              
              
              —**Net
                  (loss) profit**
              
              
              (2,333,617
              )
              
              399,450**Other
                  comprehensive income**Foreign
                  currency translation adjustment
              
              
              145,398
              
              
              30,093**Comprehensive
                  (loss) income**
              
              $
              (2,188,219
              )
              $
              429,543**Weight
                  average number of shares**-
                  Basicand diluted
              
              
              917,802,723
              
              
              899,196,930**(Loss)
                  earnings per share**-
                  Basicand diluted
              
              $
              (0.003
              )
              $
              0.000


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


F-6
 *Table
          of Contents*


**BEICANG
                  IRON & STEEL, INC. AND SUBSIDIARIES****CONSOLIDATED
                  STATEMENTS OF CHANGES IN STOCKHOLDERS'
                  EQUITY****(Amounts
                  expressed in U.S. Dollars)**
  Statutory
                  reserves
              
              AccumulatedAdditional
              
              (Accumulated
              
              Statutory
              
              Statutory
              
              otherCommon
                  stock
              
              Preferred
              
              paid-in
              
              loss)
                  / Retained
              
              surplus
              
              common
                  welfare
              
              comprehensiveShares
              
              Amount
              
              stock
              
              capital
              
              earnings
              
              reserve
              
              reserve
              
              income
              
              TotalBalance
                  at January 1, 2005
              
              
              899,196,930
              
              
              899,197
              
              
              —
              
              
              4,634,862
              
              
              (305,603
              )
              
              —
              
              
              —
              
              
              —
              
              
              5,228,456Net
                  profit
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              399,450
              
              
              —
              
              
              —
              
              
              —
              
              
              399,450Contribution
                  by stockholder
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —Transfer
                  to statutory reserves
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (24,713
              )
              
              16,475
              
              
              8,238
              
              
              —
              
              
              —Effect
                  of foreign currency translation
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              30,093
              
              
              30,093Balance
                  at December 31, 2005
              
              
              899,196,930
              
              
              899,197
              
              
              —
              
              
              4,634,862
              
              
              69,134
              
              
              16,475
              
              
              8,238
              
              
              30,093
              
              
              5,657,999Effects
                  of merger
              
              
              99,869,330
              
              
              99,869
              
              
              23
              
              
              (1,501,117
              )
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (1,401,225
              )Contribution
                  by stockholder
              
              
              —
              
              
              —
              
              
              —
              
              
              862
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              862Net
                  loss
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              (2,333,617
              )
              
              —
              
              
              —
              
              
              —
              
              
              (2,333,617
              )Effect
                  of foreign currency translation
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              —
              
              
              145,398
              
              
              145,398Balance
                  at December 31, 2006
              
              
              999,066,260
              
              $
              999,066
              
              $
              23
              
              
              3,134,607
              
              $
              (2,264,483
              )
              $
              16,475
              
              $
              8,238
              
              $
              175,491
              
              $
              2,069,417


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


F-7
 *Table
            of Contents*
  **BEICANG
                    IRON & STEEL, INC. AND SUBSIDIARIES****CONSOLIDATED
                    STATEMENTS OF CASH
                    FLOWS****(Amounts
                    expressed in U.S. Dollars)**
  Year
                    ended December 31,2006
                
                2005**Cash
                    flows from operating activities**Net
                    (loss) profit
                
                $
                (2,333,617
                )
                $
                399,450Adjustments
                    to reconcile net income to cashprovided
                    by operating activities:Depreciation
                
                
                453,191
                
                
                343,950Amortization
                
                
                9,865
                
                
                8,860Loss
                    on disposal of property plant and equipment
                
                
                6,256Loss
                    on impairment of property plant and equipment
                
                
                —
                
                
                262,602Increase
                    (Decrease) in assetsBills
                    receivable
                
                
                1,560,307
                
                
                (1,586,392
                )Prepayment
                    and deposits
                
                
                199,284
                
                
                (501,554
                )Accounts
                    receivable, net
                
                
                (762,829
                )
                
                (3,313,839
                )Inventories
                
                
                903,809
                
                
                1,058,064Other
                    receivables
                
                
                638,514
                
                
                (642,640
                )Decrease
                    (Increase) in liabilities:Bills
                    payable
                
                
                (1,571,056
                )
                
                1,553,865Accounts
                    payable
                
                
                910,090
                
                
                1,188,280Deposits
                    received from customers
                
                
                107,821
                
                
                34,030Accrued
                    expenses
                
                
                102,294
                
                
                192,772Other
                    payables
                
                
                797,769
                
                
                474,576Value-added
                    tax payable
                
                
                1,013,328
                
                
                909,845Net
                    cash provided by operating activities
                
                
                2,035,026
                
                
                381,869**Cash
                    flows from investing activities**Advances
                    to related parties
                
                
                (4,357,293
                )
                
                (328,129
                )Purchase
                    of property, plant and equipment
                
                
                (525,362
                )
                
                (1,692,471
                )Purchase
                    of land use rights
                
                
                (38,988
                )
                
                (443,015
                )Sales
                    proceeds from disposal of property, plant and equipment
                
                
                159,161
                
                
                —Net
                    cash used in investing activities
                
                
                (4,762,482
                )
                
                (2,463,615
                )**Cash
                    flows from financing activities**Contribution
                    by stockholder
                
                
                79,798
                
                
                1,564,274Advances
                    from (repayment to) related parties
                
                
                2,136,747
                
                
                (442,166
                )Inception
                    of other loans
                
                
                1,646,728
                
                
                887,757Repayment
                    of other loans
                
                
                (850,402
                )
                
                (84,337
                )Net
                    cash provided by financing activities
                
                
                3,012,871
                
                
                1,925,528Effect
                    of foreign currency translation
                
                
                32,212
                
                
                36,645**Net
                    increase (decrease) in cash and cash equivalents**
                
                
                317,627
                
                
                (119,573
                )Cash
                    and cash equivalents, beginning of year
                
                
                158,348
                
                
                277,921Cash
                    and cash equivalents, end of year
                
                $
                475,975
                
                $
                158,348**Supplemental
                    disclosure information**Finance
                    costs paid
                
                $
                287,473
                
                $
                123,231Income
                    tax paid
                
                $
                —
                
                $
                —**Major
                    non-cash transactions**Barter
                    sales of finished goods in return of rawmaterials
                    for production.
                
                $
                4,276,800
                
                $
                6,081,069
 The
        accompanying notes are an integral part of these financial
        statements.


F-8
 *Table
          of Contents*




**BEICANG
      IRON & STEEL, INC. AND SUBSIDIARIES**


**NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE YEAR ENDED DECEMBER 31, 2006**
 
 
 1.
              DESCRIPTION
                  OF BUSINESS AND ORGANIZATION
 
 *Principal
        activities*
 
 Beicang
        Iron & Steel Inc. (the “Company” or “Beicang” or “we” or “us”), is a Nevada
        corporation engaging in the business of producing ferrochromium alloy and
        pelletized ores through its subsidiaries and variable interest entities in
        the
        People’s Republic of China (“PRC”).
 
 *Organization*
 
 We
        were
        originally incorporated in the State of Colorado in 1983 under the name "Turco
        Computer Systems, Inc." In February 2002, we changed our name to Alpha Spacecom,
        Inc. following a share exchange transaction. In June 2005, we became a Nevada
        corporation after merging with our wholly owned subsidiary, Alpha Spacecom,
        Inc., a Nevada corporation.
 
 Since
        October 2004, we have been involved in an ongoing dispute concerning control
        of
        our Company, which has resulted in two separate lawsuits which are more fully
        described in note 19.
 
 On
        April
        8, 2006, we entered into a Merger Agreement (the “Merger Agreement”) with East
        Glory Investments Group, Ltd., a Cayman Islands company (hereinafter “EGIG”).
        Under the terms of the Merger Agreement, we issued an aggregate of 899,196,930
        shares of our common stock to the shareholders of EGIG, and in exchange,
        EGIG
        merged with and into the Company (the “Merger”), with the Company as the
        surviving company. Additionally, pursuant to the Merger Agreement, our Board
        and
        the holders of a majority of the Company’s capital stock approved amendments to
        our Articles of Incorporation by written consent, including: (1) a change
        of our
        corporate name from Alpha Spacecom, Inc. to the present name, Beicang Iron
&
Steel Inc., and (2) an increase in the authorized common stock of the Company
        from 200,000,000 to 1,000,000,000 shares. The Articles of Merger to effectuate
        the Merger and the Amendment to our Articles of Incorporation to effectuate
        the
        name change and to increase in authorized shares were filed with Nevada’s
        Secretary of State on October 25, 2006. The Company’s name change and its new
        trading symbol (OTCBB: BEIC) became effective on the OTC Bulletin Board also
        on
        October 25, 2006.
 
 As
        a
        result of the Merger, the former stockholder of EGIG beneficially owns
        approximately 90% of Beicang or the combined company’s issued and outstanding
        Common Stock.
 
 As
        a
        result of the effectiveness of the Merger, our control has changed. Members
        of
        Alpha’s prior management tendered their resignation effective upon the
        effectiveness of the Merger. Prior to their resignation, they appointed Mr.
        Beicang Hou (former shareholder and director of EGIG) as our sole officer
        and
        director.
 
 In
        accordance with the Accounting and Financial Reporting Interpretations and
        Guidance prepared by the staff of the U.S. Securities and Exchange Commission,
        the Merger has been accounted for as a reverse acquisition where Beicang
        (the
        legal acquirer) has been considered the accounting acquiree and the consolidated
        financial statements of the combined company are in substance those of EGIG,
        with the assets and liabilities, and revenues and expenses, of Beicang being
        included effective from the date of consummation of the Merger. Beicang has
        been
        deemed to be a continuation of the business of EGIG. The outstanding stock
        of
        Beicang prior to the Merger has been accounted for at their net book value
        and
        no goodwill has been recognized.
 F-9
 *Table
            of Contents*
  1.
              DESCRIPTION
                  OF BUSINESS AND ORGANIZATION(Continued)
 
 *Subsidiaries
        and Variable Interest Entities (VIEs)*
 
 Pursuant
        to and concurrent with the Merger, we have acquired all the issued and
        outstanding common stock of Trinity Link Holdings Limited (“Trinity Link”),
        which was in turn wholly owned by EGIG before the Merger. Trinity Link was
        incorporated under the laws of the British Virgin Islands on August 18, 2005
        and
        holds all of the issued and outstanding share capital of Shanxi Bestlink
        Management Consulting Co. Ltd. (“Bestlink”), which is a wholly foreign owned
        enterprise incorporated under the laws of the People’s Republic of China (“PRC”
or “China”) on December 30, 2005.
 
 Through
        a
        series of contractual arrangements, Bestlink operates, controls and beneficially
        owns the businesses of two companies in China that refine the raw materials
        for
        iron and steel: ***Pinglu
        County Changhong Ferroalloy Co., Ltd.*** (“PL”)
        and ***Fanshi
        County Xinyu Iron Resources Co., Ltd.*** (“FS”).
        These contractual arrangements include an Operating and Service Agreement,
        an
        Option Agreement, and a Loan Agreement. Through the Operation and Service
        Agreement, Bestlink has the exclusive right to advise, consult, manage and
        operate each of PL and FS, and to collect and own 95% of each company’s revenues
        less operating costs. In addition, these companies and their shareholders
        have
        granted Bestlink the exclusive right and option to acquire, to the extent
        permitted under PRC laws, all of the shares of PL and FS, or alternatively,
        all
        of the assets of PL and FS (“Option Agreement”). In order to further reinforce
        the rights of Bestlink to control and operate PL and FS, the Option Agreement
        contains provisions under which voting control over the outstanding shares
        of PL
        and FS are vested in Bestlink and the board of directors of the Bestlink.
        Bestlink has also agreed to provide loans to each of PL and FS (“Loan
        Agreement”). The shareholders of PL and FS are not only guaranteeing the loans,
        but have pledged all right, title and interest in their shares of PL and
        FS to
        Bestlink. Collectively, the Operating and Service Agreement, Option Agreement,
        and Loan Agreement are referred to herein as the “Restructuring
        Agreements”.
 
 PL,
        incorporated under the laws of the PRC on March 3, 2003, is located in Pinglu
        County in the Southern part of Shanxi Province and produces ferrochromium
        alloy,
        the core furnace material in making stainless steel.
 
 FS,
        incorporated under the laws of the PRC on January 17, 2004, is located in
        Fanshi
        County in the Northern part of Shanxi Province and produces pelletized ore,
        a
        key component of iron manufacturing.
 
 As
        a
        result of the Restructuring Agreements, which obligates Bestlink to absorb
        a
        majority of the risk of loss from PL and FS’s activities and enable Bestlink to
        receive a majority of its expected residual returns, the Company believes
        that
        PL and FS should be considered its variable interest entities (“VIE”) under FASB
        Interpretation No. 46(R) (“FIN 46R”), “Consolidation of Variable Interest
        Entities - An Interpretation of ARB No. 51”, because the equity investors in PL
        and FS do not have the characteristics of a controlling financial interest
        and
        the Company, through Bestlink, should be considered the primary beneficiary
        of
        PL and FS. Accordingly, the Company believes that PL and FS’s results of
        operations, assets and liabilities should be consolidated.
 
 The
        Company’s consolidated assets do not include any collateral for PL or FS’s
        obligations. The carrying value of the total assets of PL and FS as of December
        31, 2006 was $14,575,127 and there was no pledge or collateral of its assets.
        Furthermore, PL or FS’s creditors do not have recourse to the general credit of
        the Company.
 F-10
 *Table
            of Contents*
  1.
              DESCRIPTION
                  OF BUSINESS AND ORGANIZATION(Continued)
 
 The
        entering into of those exclusive agreements by Bestlink, PL
        and FS
        and their shareholders on
        January 5, 2006 has been accounted for as recapitalization of PL and FS with
        no
        adjustment to the historical basis of the assets and liabilities of PL and
        FS
        and the operations were consolidated as though the transaction occurred as
        of
        the beginning of the first accounting period presented in these financial
        statements. For the purpose of presenting the financial statements on a
        consistent basis, the consolidated financial statements have been prepared
        as if
        Trinity Link and Bestlink had been in existence since the beginning of the
        earliest period and throughout the whole periods covered by these financial
        statements.
  2.
              GOING
                  CONCERN AND MANAGEMENT PLAN
 
 The
        financial statements have been prepared on a going concern basis, which
        contemplates the realization of assets and satisfaction of liabilities in
        the
        normal course of business. As of December 31, 2006, the Company had a net
        working capital deficiency of $3,533,605 that indicates the Company may need
        additional financing to meet cash requirements for its operations to continue
        as
        a going concern.
 
 The
        financial statements do not include any adjustments relating to the
        recoverability or classification of recorded amounts of assets or amounts
        or
        classification of liabilities that may be necessary should the Company be
        unable
        to continue as a going concern. The Company is considering different ways
        to
        raise additional capital including through the sale of its equity securities,
        through offerings of debt securities, or through borrowings from financial
        institutions. Management is in negotiations with investment bankers to raise
        funds in the capital market and believes that actions presently being taken
        to
        obtain additional funding provide the opportunity for the Company to continue
        as
        a going concern.
  3.
              SUMMARY
                  OF SIGNIFICANT ACCOUNTING
                  POLICIES
 
 a.
              Basis
                  of presentation and
                  consolidation
 
 The
        accompanying consolidated financial statements have been prepared by the
        Company
        in accordance with accounting principles generally accepted in the United
        States
        of America (“US GAAP”).
 
 The
        consolidated financial statements include the accounts of the Company and
        its
        subsidiaries and variable interest entities (collectively the “Group”).
        Significant intercompany transactions have been eliminated on
        consolidation.
 
 b.
              Use
                  of estimates
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles requires management to make estimates and assumptions
        that
        affect the reported amounts of assets and liabilities, disclosure of contingent
        assets and liabilities at the date of the financial statements, and the reported
        amounts of revenues and expenses during the reporting year. Because of the
        use
        of estimates inherent in the financial reporting process, actual results
        could
        differ from those estimates.
 F-11
 *Table
            of Contents*
  3.
              SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
 
 c.
              Fair
                  values of financial instruments
 
 The
        Group
        values its financial instruments as required by Statement of Financial
        Accounting Standard (SFAS) No. 107, “Disclosures about Fair Value of Financial
        Instruments”. The estimated fair value amounts have been determined by the
        Group, using available market information and appropriate valuation
        methodologies. The estimates presented herein are not necessarily indicative
        of
        amounts that the Group could realize in a current market exchange.
 
 The
        Group’s financial instruments primarily consist of cash, accounts receivable,
        other receivables, notes receivable, accounts payable, receipt in advance,
        accrued expenses, other payables, bank loans, short term loans, government
        loans, and short-term related party loans.
 
 As
        of the
        balance sheet dates, the estimated fair values of the financial instruments
        were
        not materially different from their carrying values as presented due to the
        short maturities of these instruments and that the interest rates on the
        borrowings approximate those that would have been available for loans of
        similar
        remaining maturity and risk profile at respective year ends.
  d.
              Cash
                  and cash equivalents
 
 Cash
        and
        cash equivalents include cash on hand, demand deposits with banks and liquid
        investments with an original maturity of three months or less.
 
 e.
              Accounts
                  and other receivables
 
 Accounts
        receivable are recognized and carried at original invoiced amount less an
        allowance for any doubtful amounts. An estimate for doubtful debts is made
        when
        collection of the full amount is no longer probable. Bad debts are written
        off
        as incurred. The Company generally does not require collateral from its
        customers.
 
 The
        Group
        maintains allowances for doubtful accounts for estimated losses resulting
        from
        the failure of customers to make required payments. The Company reviews the
        accounts receivable on a periodic basis and makes allowances where there
        is
        doubt as to the collectibility of individual balances. In evaluating the
        collectibility of individual receivable balances, the Company considers many
        factors, including the age of the balance, the customer’s payment history, its
        current credit-worthiness and current economic trends.
  f.
              Inventories
 
 Inventories
        are stated at the lower of cost, as determined on a first-in, first-out basis,
        or market. Costs of inventories include purchase and related costs incurred
        in
        bringing the products to their present location and condition. Market value
        is
        determined by reference to the selling prices after the balance sheet date
        or to
        management estimates based on prevailing market conditions. As of December
        31,
        2006 and 2005 inventories stated at market which is lower than cost amounted
        to
        $nil and $293,790 respectively.
 F-12
 *Table
            of Contents*
  3.
              SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
 
 g.
              Property,
                  plant and equipment
 
 Property,
        plant and equipment are recorded at cost. Gains or losses on disposals are
        reflected as gain or loss in the year of disposal. The cost of improvements
        that
        extend the life of plant, property and equipment are capitalized. These
        capitalized costs may include structural improvements, equipment and fixtures.
        All ordinary repair and maintenance costs are expensed as incurred.
 
 Depreciation
        for financial reporting purposes is provided using the straight-line method
        over
        the estimated useful lives of the assets: 10 years for plant and machinery;
        20
        years for buildings; 10 years for leasehold improvements; 10 years for office
        equipment; and 10 years for motor vehicles.
 
 h.
              Construction
                  in progress
 
 Construction
        in progress includes direct costs of construction of factory building. Interest
        incurred during the period of construction has not been capitalized as such
        interest is not specifically paid for construction of factory building.
        Construction in progress is not depreciated until such time as the assets
        are
        completed and put into operational use.
 
 i.
              Prepaid
                  land use rights
 
 The
        Group
        has recorded as prepaid land use rights the costs paid to acquire a long-term
        interest to utilize the land underlying the property facility. This type
        of
        arrangement is common for the use of land in the PRC. The prepaid land use
        rights are amortized on the straight-line method over the term of the land
        use
        rights of 50 years.
 
 j.
              Impairment
                  of long-lived assets
 
 The
        Group
        accounts for impairment of plant and equipment and amortizable intangible
        assets
        in accordance with SFAS No. 144, “Accounting for Impairment of Long-Lived Assets
        and Long-Lived Assets to be Disposed Of”, which requires the Group to evaluate a
        long-lived asset for recoverability when there is event or circumstance that
        indicate the carrying value of the asset may not be recoverable. An impairment
        loss is recognized when the carrying amount of a long-lived asset or asset
        group
        is not recoverable (when carrying amount exceeds the gross, undiscounted
        cash
        flows from use and disposition) and is measured as the excess of the carrying
        amount over the asset’s (or asset group’s) fair value.
 
 k.
              Comprehensive
                  income
 
 SFAS
        No.
        130, “Reporting Comprehensive Income”, requires disclosure of all components of
        comprehensive income and loss on an annual and interim basis. Comprehensive
        income and loss is defined as the change in equity of a business enterprise
        during a period from transactions and other events and circumstances from
        non-owner sources. The Company had other comprehensive income of $145,398
        and
        $30,093 for the years ended December 31, 2006 and 2005, respectively. The
        other
        comprehensive income for 2006 and 2005 arose from the changes in foreign
        currency exchange rates.
 F-13
 *Table
            of Contents*
  3.
              SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
 
 l.
              Segment
                  information
 
 SFAS
        No.
        131, “Disclosures about Segments of an Enterprise and Related Information”,
        requires certain financial and supplementary information to be disclosed
        on an
        annual and interim basis for each reportable segment of an enterprise. The
        Group
        believes that it operates in one business segment - refinery of iron ores,
        and
        in one geographical segment - China, as all of the Group’s current operations
        are carried out in China.
 
 m.
              Revenue
                  recognition
 
 Revenues
        of the Group include sales of products in China. Sales are recognized when
        the
        following four revenue criteria are met: persuasive evidence of an arrangement
        exists, delivery has occurred, the selling price is fixed or determinable,
        and
        collectibility is reasonably assured. Sales are presented net of value added
        tax
        (VAT). No return allowance is made as products delivered are not returnable
        upon
        delivery and acceptance by the customer.
 
 n.
              Barter
                  transaction
 
 Periodically,
        the Group engages in barter transactions and adopted the provisions of APB
        29 -
        Accounting for Nonmonetary Transactions and SFAS No. 153, “Exchanges of
        Nonmonetary Assets - An Amendment to APB Opinion No. 29”, in respect of barter
        transactions after June 15, 2005. Non-monetary transactions are generally
        recorded at fair value. If such value is not determinable within reasonable
        limits, the transaction is recognized based on the carrying value of the
        product
        or services provided. The amount of revenues recognized for the exchanges
        of
        finished goods in return of raw materials for production amounted to $4,276,800
        and $6,081,069 for the years ended December 31, 2006 and 2005,
        respectively.
 
 o.
              Income
                  taxes
 
 The
        Group
        accounts for income taxes in accordance with SFAS No. 109, "Accounting for
        Income Taxes". SFAS No. 109 requires an asset and liability approach for
        financial accounting and reporting for income taxes and allows recognition
        and
        measurement of deferred tax assets based upon the likelihood of realization
        of
        tax benefits in future years. Under the asset and liability approach, deferred
        taxes are provided for the net tax effects of temporary differences between
        the
        carrying amounts of assets and liabilities for financial reporting purposes
        and
        the amounts used for income tax purposes. A valuation allowance is provided
        for
        deferred tax assets if it is more likely than not these items will either
        expire
        before the Group is able to realize their benefits, or that future deductibility
        is uncertain.
 
 p.
              Loss
                  / earnings per share
 
 Loss
        /
        earnings per share is computed by dividing income available to common
        shareholders by the weighted-average number of common shares outstanding
        for the
        period. Diluted earnings per share reflects the potential dilution that could
        occur if securities or other contracts to issue common stock were exercised
        or
        converted into common stock. For the years ended December 31, 2006 and 2005,
        the
        diluted share base excludes incremental shares relating to convertible preferred
        stock since their effect was anti-dilutive.
 F-14
 *Table
            of Contents*
  3.
              SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
 
 q.
              Foreign
                  currency translation
 
 The
        Company uses the United States dollars (“U.S. dollars” or “US$”) for financial
        reporting purposes. The Company’s subsidiaries maintain their books and records
        in their functional currency, Chinese Renminbi (“RMB”), being the primary
        currency of the economic environment in which their operations are conducted.
        In
        general, the Group translates its assets and liabilities into U.S. dollars
        using
        the applicable exchange rates prevailing at the balance sheet date, and the
        statement of income is translated at average exchange rates during the reporting
        period. Adjustments resulting from the translation of the Group’s financial
        statements are recorded as accumulated other comprehensive income.
 
 Until
        July 21, 2005, RMB had been pegged to US$ at the rate of RMB8.30: US$1.00.
        On
        July 21, 2005, the PRC government reformed the exchange rate system into
        a
        managed floating exchange rate system based on market supply and demand with
        reference to a basket of currencies. In addition, the exchange rate of RMB
        to
        US$ was adjusted to RMB8.11: US$1.00 as of July 21, 2005. The People’s Bank of
        China announces the closing price of a foreign currency such as US$ traded
        against RMB in the inter-bank foreign exchange market after the closing of
        the
        market on each working day, which will become the unified exchange rate for
        the
        trading against RMB on the following working day. The daily trading price
        of US$
        against RMB in the inter-bank foreign exchange market is allowed to float
        within
        a band of ± 0.3%
        around the unified exchange rate published by the People’s Bank of China. This
        quotation of exchange rates does not imply free convertibility of RMB to
        other
        foreign currencies. All foreign exchange transactions continue to take place
        either through the Bank of China or other banks authorized to buy and sell
        foreign currencies at the exchange rates quoted by the People’s Bank of China.
        Approval of foreign currency payments by the Bank of China or other institutions
        requires submitting a payment application form together with invoices, shipping
        documents and signed contracts.
 
 The
        exchange rates used to translate amounts in RMB into US$ for the purposes
        of
        preparing the consolidated financial statements were as follows:
  December
                  31, 2006
              
              December
                  31, 2005Balance
                  sheet items, except for the registered and paid-up capital, as of year
                  end
              
              US$1:RMB7.8175
              
              US$1:RMB8.0702Amounts
                  included in the statements of operations, statements of changes in
                  stockholders’ equity and statements of cash flows for the year
              
              US$1:RMB7.98189
              
              US$1:RMB8.1851
 
 No
        representation is made that RMB amounts have been, or would be, converted
        into
        US$ at the above rates.
 F-15
 *Table
            of Contents*
  3.
              SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
 
 r.
              Related
                  parties
 
 Parties
        are considered to be related to the Group if the parties that, directly or
        indirectly, through one or more intermediaries, control, are controlled by,
        or
        are under common control with the Group. Related parties also include principal
        owners of the Group, its management, members of the immediate families of
        principal owners of the Group and its management and other parties with which
        the Group may deal if one party controls or can significantly influence the
        management or operating policies of the other to an extent that one of the
        transacting parties might be prevented from fully pursuing its own separate
        interests. A party which can significantly influence the management or operating
        policies of the transacting parties or if it has an ownership interest in
        one of
        the transacting parties and can significantly influence the other to an extent
        that one or more of the transacting parties might be prevented from fully
        pursuing its own separate interests is also a related party.
 
 s.
              Recently
                  issued accounting standards
 
 On
        January 1, 2006 we adopted Statement of Financial Accounting Standard (SFAS)
        No.
        123(R), “Share-Based Payments - Revised 2004”, using the modified prospective
        transition method.
 
 In
        June
        2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation
        No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB
        Statement No. 109” (FIN 48). This interpretation prescribes a minimum
        recognition threshold and measurement attribute for the financial statement
        recognition and measurement of a tax position taken or expected to be taken
        in a
        tax return. This interpretation also provides guidance on recognition,
        measurement, classification, interest and penalties, accounting in interim
        periods, disclosure and transition. The interpretation is effective for fiscal
        years beginning after December 15, 2006 (i.e., the beginning of our fiscal
        year
        2007). We do not expect that the adoption of FIN 48 will have a material
        impact
        on our consolidated financial statements.
 
 In
        September 2006, the FASB issued Statement of Financial Accounting Standards
        No.
        157, “Fair Value Measurements” (SFAS 157). SFAS 157 defines fair value,
        establishes a framework for measuring fair value, and expands disclosures
        about
        fair value instruments. SFAS 157 does not require any new fair value
        measurements, but applies under other accounting pronouncements that require
        or
        permit fair value measurements. SFAS 157 is effective for financial statements
        issued for fiscal years beginning after November 15, 2007 (our fiscal 2008).
        We
        believe that implementation of SFAS 157 will have little or no impact on
        our
        consolidated financial statements.
 
 In
        September 2006, the FASB issued Statement of Financial Accounting Standards
        No.
        158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
        Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (SFAS 158).
        SFAS 158 requires plan sponsors of defined benefit pension and other
        postretirement benefit plans (collectively, “postretirement benefit plans”) to
        fully recognize the funded status of their postretirement benefit plans in
        the
        statement of financial position, measure the fair value of plan assets and
        benefit obligations as of the date of the fiscal year-end statement of financial
        position and provide additional disclosures. We believe that implementation
        of
        SFAS 157 will have little or no impact on our consolidated financial statements
        since we have no applicable plans.
 F-16
 *Table
            of Contents*
  3.
              SUMMARY
                  OF SIGNIFICANT ACCOUNTING POLICIES(Continued)
 
 s.
              Recently
                  issued accounting standards(Continued)
 
 In
        September 2006, the SEC issued Staff Accounting Bulletin No. 108, Considering
        the Effects of Prior Year Misstatements when Quantifying Misstatements in
        Current Year Financial Statements (SAB 108), to address diversity in practice
        in
        quantifying financial statement misstatements. SAB 108 requires that we quantify
        misstatements based on their impact on each of our financial statements and
        related disclosures. On December 30, 2006, we adopted SAB 108. Our adoption
        of
        SAB 108 did not impact our consolidated financial statements.
 
 
 4.
              CONCENTRATIONS
                  OF CREDIT RISK AND MAJOR
                  CUSTOMERS
 
 Financial
        instruments which potentially expose the Group to concentrations of credit
        risk,
        consist of cash and accounts receivable as of December 31, 2006 and 2005.
        The
        Group performs ongoing evaluations of its cash position and credit evaluations
        to ensure collections and minimize losses.
 
 As
        of
        December 31, 2005 and 2006, the Group’s bank deposits were all placed with banks
        in the PRC where there is currently no rule or regulation in place for
        obligatory insurance of bank accounts.
 
 For
        the
        years ended December 31, 2006 and 2005, all of the Group’s sales arose in the
        PRC. In addition, all accounts receivable as of December 31, 2006 and 2005
        also
        arose in the PRC.
 
 The
        maximum amount of loss due to credit risk that the Company would incur if
        the
        counter parties to the financial instruments failed to perform is represented
        the carrying amount of each financial asset in the balance sheet.
 
 Normally
        the Company does not obtain collateral from customers or debtors.
 
 Details
        of the customers accounting for 10% or more of the Company’s revenue are as
        follows:
 
 Year
                  ended December 31,2006
              
              2005Company
                  A
              
              $
              8,320,923
              
              $
              8,040,551Company
                  B
              
              
              10,392,583
              
              
              4,541,396Company
                  C
              
              
              —
              
              
              5,648,843Company
                  D
              
              
              —
              
              
              3,804,351Company
                  E
              
              
              5,025,546
              
              
              —
 
 Details
        of customers accounting for 10% or more of the Company’s accounts receivable are
        as follows:
 
 December
                  31,2006
              
              2005Company
                  A
              
              $
              —
              
              $
              1,084,975Company
                  B
              
              
              —
              
              
              1,491,283Company
                  E
              
              
              2,795,985
              
              
              —
  F-17
 *Table
            of Contents*
  5.
              INVENTORIES
 
 Inventories
        consist of the following:
 
 December
                  31,2006
              
              2005Raw
                  materials
              
              $
              832,692
              
              $
              1,710,158Finished
                  goods
              
              
              356,199
              
              
              315,721Goods
                  in transit
              
              
              —
              
              
              29,571Consumables
              
              
              106,443
              
              
              93,243$
              1,295,334
              
              $
              2,148,693
 
 
 6.
              PREPAYMENT
                  AND DEPOSITS
 
 Prepayment
        and deposits consist of the following:
 
 December
                  31,2006
              
              2005Utility
                  deposits
              
              $
              —
              
              $
              13,914Purchase
                  deposits for raw materials
              
              
              409,504
              
              
              588,405Other
              
              
              10,602
              
              
              1,735$
              420,106
              
              $
              604,054
  7.
              OTHER
                  RECEIVABLES
 
 Other
        receivables consist of the following:
 
 December
                  31,2006
              
              2005Non-interest
                  bearing, unsecured receivables
              
              $
              55,439
              
              $
              520,853Cash
                  advances to staff and salespersons for normal business
                  purposes
              
              
              6,253
              
              
              166,966Others
              
              
              1,126
              
              
              4,559$
              62,818
              
              $
              692,378
  F-18
 *Table
            of Contents*
  8.
                  PREPAID
                      LAND USE RIGHTS
 
 The
        Group
        has recorded as prepaid land use rights the costs paid to acquire a long-term
        interest to utilize the land underlying the property facility. This type
        of
        arrangement is common for the use of land in the PRC. The prepaid land use
        rights are being amortized on the straight-line method over the term of the
        land
        use rights of 50 years.
 
 The
        expected amortization of the prepaid land use rights over each of the next
        five
        years and thereafter are summarized as follows:
 
 Year
                  ending December 31,2007
              
              $
              10,0732008
              
              
              10,0732009
              
              
              10,0732010
              
              
              10,0732011
              
              
              10,073Thereafter
              
              
              433,940Total
                  prepaid land use rights as of December 31, 2006
              
              
              484,305Less:
                  Current portion
              
              
              (10,073
              )Long-term
                  portion
              
              $
              474,232
 
 Amortization
        expense was $9,865 and $8,860 for the years ended December 31, 2006 and 2005,
        respectively.
 
 
 9.
              PROPERTY,
                  PLANT AND EQUIPMENT
 
 Property,
        plant and equipment consist of the following:
 
 December
                  31,2006
              
              2005Plant
                  and machinery
              
              $
              1,718,761
              
              $
              1,925,459Building
              
              
              3,836,333
              
              
              3,495,054Motor
                  vehicles
              
              
              161,965
              
              
              155,002Office
                  equipment
              
              
              192,154
              
              
              25,7265,909,213
              
              
              5,601,241Less:
                  Accumulated depreciation and impairment losses
              
              
              (942,003
              )
              
              (729,112
              )$
              4,967,210
              
              $
              4,872,129
 
 During
        the year ended December 31, 2006, PL disposed of property, plant and equipment,
        with an aggregate net book value of $165,417, to a related company for a
        total
        consideration of $159,161. As a result, a loss on disposal of $6,256 was
        recognized for 2006.
 
 The
        depreciation expenses on property, plant and equipment were $453,191 and
        $343,950 for the years ended December 31, 2006 and 2005, respectively. The
        impairment loss of plant and machinery was $nil and $262,602 for the years
        ended
        December 31, 2006 and 2005 respectively.
 F-19
 *Table
            of Contents*
  10.
                  ACCRUED
                      EXPENSES
  Accrued
        expenses consist of the following:
 
 December
                  31,2006
              
              2005Social
                  securities insurance (see note 18)
              
              $
              334,218
              
              $
              179,692Accrued
                  welfare
              
              
              168,254
              
              
              117,557Loan
                  interest expenses
              
              
              210,016
              
              
              76,292Other
                  operating expenses
              
              
              548,233
              
              
              739,892$
              1,260,721
              
              $
              1,113,433
 
 The
        Company accrued staff welfare based on 14% of its payroll, for the purposes
        of
        expenditures for the employee facilities and collective welfare of the Company’s
        employees in accordance with the accounting practice generally accepted in
        the
        PRC.
 
 The
        Company has not accrued compensated absences because the amount is
        immaterial.
  11.
              OTHER
                  PAYABLES
 
 Other
        payables consist of the following:
 
 December
                  31,2006
              
              2005Payables
                  for construction and machinery
              
              $
              132,928
              
              $
              142,808Non-interest
                  bearing, unsecured borrowings without fixed repayment date
              
              
              1,724,837
              
              
              867,746$
              1,857,765
              
              $
              1,010,554
  F-20
 *Table
            of Contents*
  12.
              OTHER
                  LOANS
 
 Other
        loans consist of the following:
 December
                  31,2006
              
              200524%
                  loans, without fixed repayment date
              
              $
              473,297
              
              $
              282,62218%
                  loans, without fixed repayment date
              
              
              789,511
              
              
              432,08315%
                  loans, without fixed repayment date
              
              
              208,507
              
              
              65,6748%
                  loans, without fixed repayment date
              
              
              38,375
              
              
              37,174Interest-free
                  loans, without fixed repayment date
              
              
              345,379
              
              
              191,817Total
                  other loans
              
              
              1,855,069
              
              
              1,009,370Less
                  current maturities
              
              
              (1,855,069
              )
              
              (1,009,370
              )Total
                  long-term loans
              
              $
              —
              
              $
              —
 
 All
        of
        the above other loans are unsecured and denominated in Renminbi.
 
 The
        maturities of other loans for each of the next five years are as
        follows:
 
 Year
                  ending December 31, 2007
              
              $
              1,855,069After
                  December 31, 2007
              
              
              —$
              1,855,069
 
 13.
              SHARE
                  CAPITAL
 
 (a)
              Preferred
                  stock
 
 The
        Company as of December 31, 2006 had 20,000,000 shares of authorized preferred
        stock, out of which 23,000 shares remain designated as Series A, $.001 par
        value, 7% cumulative convertible preferred stock ("Series A").
 
 Each
        Series A share has a par value of $0.001, is convertible into 40 shares of
        the
        Company's common stock with no further consideration, and yields dividends
        at
        7.0% per annum. Due to misplacement of records during management changes,
        the
        Company currently cannot verify the preferential rights, if any, of the Series
        A
        with regard to dividends or liquidation. Also due to lost records, although
        the
        amount cannot currently be verified absolutely, the Company may have as much
        as
        $271,000 in cumulative dividends in arrears. These dividends have not been
        declared by the Board of Directors. Voting rights of the Series A, if any,
        cannot currently be verified.
 
 (b)
              Common
                  stock
 
 Pursuant
        to the Merger Agreement as more fully described in note 1, the Company amended
        its Articles of Incorporation to increase the number of authorized common
        shares
        from 200,000,000 to 1,000,000,000, par value $0.001 per share. In connection
        with the Merger, the Company issued an aggregate of 899,196,930 shares of
        our
        common stock 899,196,930 shares of our Common Stock (representing 90% of
        all
        shares outstanding after this Merger) to the shareholders of EGIG and, in
        exchange, EGIG merged with and into the Company (the “Merger”), with the Company
        being the surviving company.
 F-21
 *Table
            of Contents*
  14.
              STATUTORY
                  RESERVES
 
 As
        stipulated by the PRC’s Company Law and as provided in the Company’s VIEs’ PL
        and FS’s Articles of Association, PL and FS’s net income after taxation can only
        be distributed as dividends after appropriation has been made for the
        following:
 
 (i)
              Making
                  up cumulative prior years’ losses, if
                  any;
 (ii)
              Allocations
                  to the “Statutory surplus reserve” of at least 10% of income after tax, as
                  determined under PRC accounting rules and regulations, until the
                  fund
                  amounts to 50% of the Company's registered capital, which is restricted
                  for set off against losses, expansion of production and operation
                  or
                  increase in registered capital;
 (iii)
              Allocations
                  of 5-10% of income after tax, as determined under PRC accounting
                  rules and
                  regulations, to the Company's “Statutory common welfare fund”, which is
                  restricted for capital expenditure for the collective benefits
                  of the
                  Company's employees; and
 (iv)
              Allocations
                  to the discretionary surplus reserve, if approved in the shareholders’
                  general meeting.
 
 On
        December 31, 2003, PL and FS established a statutory surplus reserve as well
        as
        a statutory common welfare fund and commenced to appropriate 10% and 5%,
        respectively of the PRC net income after taxation to these reserves. The
        amounts
        included in the statutory reserves consisted of surplus reserve of $16,475
        and
        common welfare fund of $8,238 as of both December 31, 2005 and
        2006.
  15.
              INCOME
                  TAXES
 
 The
        Company is registered in the State of Nevada whereas its subsidiary, Trinity
        Link being incorporated in the British Virgin Islands is not subject to any
        income tax and conducts all of its business through its PRC subsidiary, Bestlink
        and VIEs, PL and FS (see note 1) .
 
 Bestlink,
        PL and FS, being registered in the PRC, are subject to PRC’s Enterprise Income
        Tax. Pursuant to the PRC Income Tax Laws, Enterprise Income Taxes (“EIT”) is
        generally imposed at a statutory rate of 33%, which comprises 30% national
        income tax and 3% local income tax.
 
 However,
        PL has been approved as a new enterprise in an underdeveloped area and granted
        a
        tax holiday for the years up to 2006.
 
 A
        reconciliation between the income tax computed at the U.S. statutory rate
        and
        the Group’s provision for income tax is as follows:
 2006
              
              2005U.S.
                  statutory rate
              
              
              34
              %
              
              34
              %Foreign
                  income not recognized in the U.S.
              
              
              (34
              %)
              
              (34
              %)PRC
                  Enterprise Income Tax
              
              
              33
              %
              
              33
              %Tax
                  holiday
              
              
              (33
              %)
              
              (33
              %)Provision
                  for income tax
              
              
              —
              
              
              —
 
 Bestlink
        and FS had accumulated losses of $1,685,293 and $772,762 as of December 31,
        2006, respectively. A full valuation allowance has been provided for the
        deferred tax assets in respect of such losses, as it is more likely than
        not
        that such deferred tax assets will not be realized by sufficient future taxable
        profits.
  F-22
 *Table
            of Contents*
  15.
              INCOME
                  TAX(Continued)
 
 The
        net
        deferred tax amounts included in the Company’s balance sheets as of December 31,
        2006 and 2005 are as follows:
 
 December
                  31,2006
              
              2005Deferred
                  tax assets arising from net operating losses
              
              $
              811,000
              
              $
              24,000Less:
                  Valuation allowance
              
              
              (811,000
              )
              
              (24,000
              )—
              
              
              —
  16.
              RELATED
                  PARTY TRANSACTIONS AND
                  ARRANGEMENTS
 
 (a)
              Related
                  party trade receivables and
                  payables
 
 Included
        in accounts receivable and payables at the balance sheet dates were trade
        receivables and trade payables to the following related parties:
 
 December
                  31,2006
              
              2005Trade
                  receivables:Pinglu
                  Changlong Tegang Lu Liao Co. Ltd., under control by Mr. Zhengguan Li,
                  a director of the PL
              
              $
              49,997
              
              $
              —Shanxi
                  RongChang Trade Co. Ltd., under control of Mr. Beicang Hou, a director
                  of the Company
              
              
              2,795,985
              
              
              —Shanxi
                  Changchi Enterprise Co. Ltd., under control of Mr. Beicang Hou, a
                  director of the Company
              
              
              —
              
              
              1,512,155$
              2,845,982
              
              $
              1,512,155
 
 Trade
                  payables:Shanxi
                  Changchi Enterprise Co. Ltd., under control of Mr. Beicang Hou, a
                  director of the Company
              
              $
              1,765,223
              
              $
              737,014Shanxi
                  Haixin Material Trading Co. Ltd., under control of Mr. Beicang Hou, a
                  director of the Company
              
              
              161,215
              
              
              156,167$
              1,926,438
              
              $
              893,181
 
 Trade
        accounts receivable from and payable to related parties arose from sales
        to and
        purchases from those related companies in the ordinary course of the Company’s
        business.
 F-23
 *Table
            of Contents*
  16.
              RELATED
                  PARTY TRANSACTIONS AND ARRANGEMENTS(Continued)
 
 (b)
              Related
                  party receivables and payables
 
 December
                  31,2006
              
              2005Amounts
                  due from related parties:Shanxi
                  Changchi Enterprise Co. Ltd., under control of Mr. Beicang Hou, a
                  director of the Company
              
              $
              —
              
              $
              12,391Pinglu
                  Changsheng Stainless Steel Material Co. Ltd., under control of Mr.
                  Yaoting Ren, a director of PL
              
              
              3,033,603
              
              
              34,718Mr.
                  Junsheng Wang, a director of FS
              
              
              —
              
              
              39,535Mr.
                  Yaoting Ren, a director of PL
              
              
              343,767
              
              
              224,028Mr.
                  Beicang Hou, a director of the Company
              
              
              —
              
              
              458,973$
              3,377,370
              
              $
              769,645
 
 Amount
                  due to related parties:Shanxi
                  Changchi Enterprise Co. Ltd., under common control of Mr. Beicang Hou,
                  a director of the Company
              
              $
              476,404
              
              $
              —Mr.
                  Beicang Hou, CEO and director of the Company
              
              
              1,435,847
              
              
              —Mr.
                  Zhengguan Li, a director of PL
              
              
              —
              
              
              8,674$
              1,912,251
              
              $
              8,674
 
 Balances
        with related parties represent advances to or loans from the respective related
        parties, are interest free, unsecured, and have no fixed repayment date.
        It is
        expected that the balances will be received or repaid within one
        year.
 
 (c)
              Other
                  transactions
 
 Year
                  ended December 31,2006
              
              2005Sales
                  to related parties:Shanxi
                  Changchi Enterprise Co. Ltd., under control of Mr. Beicang Hou, a
                  director of the Company
              
              $
              10,392,583
              
              $
              4,563,245Shanxi
                  RongChang Trade Co. Ltd., under control of Mr. Beicang Hou, a director
                  of the Company
              
              
              5,025,546
              
              
              —Pinglu
                  Changlong Tegang Lu Liao Co. Ltd., under control of Mr. Zhengguan Li,
                  a director of PL
              
              
              196,564
              
              
              —Pinglu
                  Changsheng Stainless Steel Material Co. Ltd., under control of Mr.
                  Yaoting Ren, a director of PL
              
              
              1,507,268
              
              
              —$
              17,121,961
              
              $
              4,563,245
 F-24
 *Table
              of Contents*
  16.
              RELATED
                  PARTY TRANSACTIONS AND ARRANGEMENTS(Continued)
 
 Year
                  ended December 31,2006
              
              2005Purchases
                  from related parties:Shanxi
                  Changchi Enterprise Co. Ltd., under control of Mr. Beicang Hou,
                  a director
                  of the Company
              
              $
              13,607,939
              
              $
              604,546Pinglu
                  Changsheng Stainless Steel Material Co. Ltd., under control of
                  Mr. Yaoting
                  Ren, a director of PL
              
              
              2,470,276
              
              
              —Shanxi
                  Haixin Material Co. Ltd.,
                  under control of Mr. Beicang Hou, a director of the
                  Company
              
              
              —
              
              
              599,129$
              16,078,215
              
              $
              1,203,675
  17.
              CURRENT
                  VULNERABILITY DUE TO CERTAIN
                  CONCENTRATIONS
 
 The
        Company’s operations are all carried out in the PRC. Accordingly, the Company’s
        business, financial condition and results of operations may be influenced
        by the
        political, economic and legal environments in the PRC, and by the general
        state
        of the PRC’s economy.
 
 The
        Company’s operations in the PRC are subject to specific considerations and
        significant risks not typically associated with companies in the North America
        and Western Europe. These include risks associated with, among others, the
        political, economic and legal environments and foreign currency exchange.
        The
        Company’s results may be adversely affected by changes in governmental policies
        with respect to laws and regulations, anti-inflationary measures, currency
        conversion and remittance abroad, and rates and methods of taxation, among
        other
        things.
  18.
              COMMITMENTS
                  AND CONTINGENCIES
  *Employee
        social insurance*
 
 According
        to the prevailing laws and regulations of the PRC the Company’s PRC VIEs, PL and
        FS are required to cover its employees with medical, retirement and unemployment
        insurance programs. Management believes that due to the transient nature
        of its
        employees, PL and FS do not need to provide all employees with such social
        insurance.
 
 In
        the
        event that any current or former employee files a complaint with the PRC
        government, PL and FS may be subject to making up the social insurance as
        well
        as administrative fines. As the Company believes that these fines would not
        be
        material, no provision has been made in this regard.
 F-25
 *Table
            of Contents*
  19.
                  LEGAL
                      PROCEEDINGS
 
 The
        Company is involved in two legal proceedings, one in U.S. District Court
        for the
        Central District of California (the "California case"), located in Los Angeles,
        California, the other in Colorado State Court (the "Colorado case"). In both
        cases, the Company is a Plaintiff entity. The Company became a Plaintiff
        in each
        matter at the direction of two former members of the Company’s board of
        directors, Terrence Sien and Brian Brick. One of the Company’s former directors,
        Xuedong Hu (“Mr. Hu”) is a defendant in the California litigation and two of the
        Company’s former directors, Mr. Hu and Jian Wang were defendants in the Colorado
        litigation.
 
 Tridon
        Trust is also a Plaintiff in both the California case and the Colorado case.
        Tridon is one of the Company’s shareholders and Mr. Paul Ebeling, a former
        officer and director, may occupy a position of management with Tridon
        Trust.
 
 These
        matters arose in 2003 when the Company entered into a cooperation agreement
        with
        the China Film Group. As part of that cooperation agreement, the parties
        were
        looking at forming a joint venture that would require us to provide capital.
        The
        cooperation agreement is described in more detail in the Company’s SEC filings
        made in 2003 and 2004, including the Company’s Form 10-QSB for the six-month
        period ended June 30, 2004. The cooperation agreement was set to expire July
        28,
        2004 if no joint venture had been negotiated and no funding was available.
        The
        agreement expired pursuant to its terms.
 
 On
        or
        about September 28, 2004, Messrs. Brian Brick and Terrence Sien, two of the
        Company’s then directors, allege they gave notice to the remaining two
        directors, Messrs. Wang and Hu, that the board would hold a special meeting
        October 1, 2004. Hu and Wang deny they received any such notice.
 
 On
        October 1, 2004, a special meeting of the Company’s Board of Directors was
        purported to have been convened by Messrs. Brick and Sien. They were the
        only
        directors who attended and they declared a quorum, despite the fact that
        only 2
        of the 4 directors were in attendance. At this alleged meeting the attending
        directors voted in favor of resolutions "accepting" the resignations of Hu
        and
        Wang from their positions as directors. Messrs. Wang and Hu deny that they
        ever
        tendered such resignations and to date, no letters of resignation from them
        have
        been produced. The attending directors then proposed and voted in favor of
        resolutions removing Mr. Hu as our CEO and authorizing the Colorado suit
        filed
        November 29, 2004, and to adjourn and reconvene the board meeting October
        15,
        2004.
 
 The
        California and Colorado cases are more fully explained below.
 
 ***Alpha
        Spacecom, Inc. and Tridon Trust v. Xuedong Hu, Jian Wang, and Alpha Sky
        Investment LTD., Case Number 04 CV 9819, District Court, City and County
        of
        Denver, Colorado***
 
 This
        case
        was originally filed on November 29, 2004, by Tridon Trust and the Company.
        At
        that time, Messrs. Brick and Sien claimed to be our only board members and
        directed the filing of the suit. The Company’s then current management believes
        that this suit was not properly authorized, as this action was taken by only
        two
        of our then four directors.
 
 The
        complaint filed in that case had four basic claims: (1) a request to have
        the
        judge declare that Xuedong Hu and Jian Wang resigned their positions as
        directors by their conduct effective October 15, 2004; (2) a request to have
        the
        judge declare that the remaining directors lawfully removed Xuedong Hu as
        our
        Chief Executive Officer, effective October 15, 2004; (3) a request to have
        the
        judge order the removal of Hu and Wang under the guidelines contained in
        Colorado law for alleged dishonest and fraudulent conduct; and (4) asking
        the
        judge to rescind the December 2001 Share Exchange Agreement (more fully
        described in prior SEC filings on and after
 F-26
 *Table
            of Contents*
  December
        9, 2001). Through Brick and Sien, it has been alleged that the 2001 Share
        Exchange Agreement, pursuant to which Hu obtained a beneficial interest in
        our
        shares of Series B Preferred convertible stock and a majority interest in
        the
        Company was invalid and the stock should be returned.
 
 The
        defendants named in this Colorado case, Xuedong Hu, Jian Wang and Alpha Sky
        Investment Company, Ltd filed a motion asking the Court to dismiss all four
        claims asserted. Mr. Hu also filed a motion asking the Court to order the
        Company to hold a special shareholder meeting and determine his right to
        vote at
        that meeting.
 
 The
        Court
        held a hearing on March 18, 2005 and the attorneys for each side presented
        arguments and evidence on the issues before the Court. At the close of the
        hearing, the trial court judge entered orders dismissing the first two claims
        referenced above, stating that they could not validly remove Mr. Hu and Mr.
        Wang
        from the Board of Directors of our Company. The Court also ruled that we
        had to
        hold a shareholder meeting to address three issues, and had to cooperate
        with
        Mr. Hu to properly notice and hold that meeting. The Judge in the case also
        found that Mr. Hu was entitled to vote all of his approximate 82% ownership
        interest in the Company at that meeting.
 
 On
        March
        25, 2005, Alpha and Tridon filed a voluntary notice of dismissal of their
        claims
        with the Colorado District Court. Based upon the Court's order on March 18,
        2005, the first two of the four claims were no longer pending. On March 25,
        2005, the third and fourth claims were therefore voluntarily dismissed and
        are
        no longer pending. As of that date, Alpha and Tridon no longer had any claims
        against the defendants pending in the Court. On March 30, 2005, the Judge
        signed
        the written form of the orders he entered March 18, 2005.
 Alpha
        and
        Tridon filed a motion in the trial court under Colorado procedural rules
        asking
        the Court to decide that it did not have jurisdiction to sign the written
        order
        of March 30, 2005. They did not contest the Court's substantive order of
        March
        18, 2005 itself, including the order that we hold a shareholder meeting and
        that
        Mr. Hu was entitled to vote the shares he beneficially owned. The Judge denied
        that motion.
 
 Tridon
        filed a Notice of Appeal with the Colorado Court of Appeals on June 15, 2005,
        Case No. 05 CA 1244. Tridon also filed a Petition for Rule To Show Cause
        with
        the Colorado Supreme Court on June 15, 2005, Case No. 05SA180. On June 22,
        2005,
        the Colorado Supreme Court denied the Petition.
  As
        a
        result of the Notice of Appeal filed by Tridon, the caption of the case before
        the Colorado Court of Appeals became ***Alpha
        Spacecom, Inc. and Tridon Trust, Appellants; Xuedong Hu, Jian Wang, Alpha
        Sky
        Investment Company Limited, Appellees; Case Number 05 CA 1244, Colorado Court
        of
        Appeals.***
 
 Tridon
        filed its brief with the Court, arguing that the trial court lacked any
        jurisdiction to sign the written order of March 30, 2005. A response brief
        was
        filed on behalf of the Appellees, asking the appellate court to affirm the
        trial
        court’s order. Tridon also asked the Court to hear oral argument on the
        matter.
 
 Tridon
        did not request any stay of the existing orders, so while the appeal was
        pending, the Colorado District Court's Orders of March 18, 2005 and May 11,
        2005
        remained in effect. Those Orders provide that the Board meeting removing
        Mr. Hu
        and Mr. Wang was not valid. As a result Mr. Hu was not properly or lawfully
        removed as our CEO or a member of the Board. Similarly, Mr. Wang was not
        properly or lawfully removed from our Board of Directors. In reliance upon
        these
        Court Orders, Messrs. Hu and Wang continued to perform their respective duties
        owed to the Company.
 F-27
 *Table
            of Contents*
  Decision
        of Colorado Court of Appeals
 
 On
        February 22, 2007, the Colorado Court of Appeals announced its decision in
        Alpha
        Spacecom, Inc. and Tridon Trust v. Xuedong Hu, Jian Wang, and Alpha Sky
        Investment Company Ltd., Case No. 05CA1244.
 
 The
        Appellate Court determined that the portions of the District Court’s order
        relating to the special meeting of shareholders was a valid order, and affirmed
        the District Court’s ruling. The Company interprets this ruling to mean that the
        actions the Company has taken since issuance of the order, including engaging
        in
        the shareholder meeting and subsequently, the merger between the Company
        and
        East Glory Investments Group, were validly undertaken.
 
 However,
        the Appellate Court decided that the portion of the District Court’s ruling
        dismissing two of Tridon’s claims was not valid and that portion of the order
        was vacated by the Appellate Court.
 
 *Tridon
        Trust v. Xuedong Hu, Alpha Sky Investment Limited, Alpha Spacecom Company
        Limited, and Does 1-10, Case No. CV05 3295DT(RCx), U.S. District Court, Central
        District of California*
 
 On
        May 3,
        2005, Tridon Trust filed a suit in the Federal District Court located in
        Los
        Angeles, California. Tridon Trust is a shareholder of the Company, and Alpha
        Spacecom Company Limited is a subsidiary of the Company as a result of the
        prior
        Share Exchange Agreement of December 9, 2001. This suit originally sought
        damages based upon alleged fraud and misrepresentations leading up to the
        Share
        Exchange Agreement closing. The suit also sought to rescind the Share Exchange
        Agreement.
 
 Mr.
        Hu
        and Alpha Sky Investment Limited filed a motion to dismiss all of the claims
        in
        the original case. Prior to the date set for hearing, the attorney representing
        Tridon Trust filed a First Amended Complaint on behalf of both Tridon and
        Alpha
        Spacecom. This new complaint changed all of the claims. It also dropped Alpha
        Sky Investment Limited and Alpha Spacecom Company Limited as defendants.
        Alpha
        Spacecom, Inc. was added as a plaintiff, and the Securities and Exchange
        Commission as a defendant. We did not authorize this action. The caption
        for
        this case is now: Alpha Spacecom, Inc. and Tridon Trust v. Xuedong Hu, the
        United States Securities and Exchange Commission and Does 1-10, United States
        District Court for the Central District Of California, Case No. CV05
        3295DT(RCx), but the SEC was subsequently dropped as a defendant.
 
 The
        First
        Amended Complaint seeks to have the Court declare that the actions taken
        at the
        June 13, 2005 special shareholder meeting were invalid based upon alleged
        violations of federal securities laws relating to the information required
        for a
        valid proxy statement. Alpha and Tridon allege that under Section 14a of
        the
        Securities and Exchange Act of 1934 the Notice of Meeting & Proxy Statements
        issued by us for our Special Meeting of Shareholders held June 13, 2005 violated
        federal regulations because they were allegedly not sent to all shareholders
        of
        record and failed to contain a copy of our annual report. The new Complaint
        does
        not ask the federal court to determine any issues of stock ownership, even
        though it contains some allegations about the ownership rights in approximately
        9,555,553 shares of our Series B preferred convertible stock previously issued
        under the 2001 share exchange agreement. Those allegations assert that Paul
        Ebeling, a former officer and director of our Company when it was known as
        Tridon Enterprises, obtained ownership interest in those shares. Mr. Ebeling
        is
        not a party to the California case and has not filed any action in any court
        seeking to declare ownership in the stock.
 F-28
 *Table
            of Contents*
 Attorneys
        for Xuedong Hu have filed a motion seeking a judgment based upon the pleadings
        in the case, and asking the Court to dismiss the case based upon federal
        legal
        doctrines. A hearing on that motion was scheduled for September 18, 2006
        in Los
        Angeles, California. The judge moved the hearing to October 2, 2008, then
        took
        the motion under advisement. Essentially the judge stayed the case instead
        of
        dismissing, but allowed the discovery portion to continue. As of the date
        of the
        issuance of these financial statements the stay is in effect until the Colorado
        Court of Appeals rules on the case described above. If successful, the claims
        asserted by Alpha Spacecom and Tridon would be dismissed.
 
 If
        the
        Plaintiffs in the case are ultimately successful, the Court may impose a
        range
        of remedies under equitable (fairness) theories. At the present time the
        director of the Company does not know what relief might be imposed in that
        event, but it could include voiding the actions taken at the shareholder
        meeting
        of June 15, 2005.
 
 The
        allegations have not been fully litigated at this time and the stock ownership
        allegations directly conflict with the Colorado District Court Orders that
        are
        in place. The Company believes that shareholders and potential investors
        should
        not rely on the lawsuit allegations, including those related to the ownership
        of
        the majority of the Series B Convertible Preferred shares.
 
 Mr.
        Ebeling claims to have acquired ownership of 9,555,553 shares of Series B
        Preferred Convertible Stock through stock powers effective May 31, 2005.
        Prior
        to that time, two press releases were issued on March 18, 2005 and April
        12,
        2005, both without proper authorization from us. The first stated that 9.55
        million shares of the Series B Convertible Preferred stock had been returned
        by
        an individual to us and cancelled. The April release stated that the shares
        in
        question had been returned to us on June 21, 2004. The Company believes that
        shareholders and potential investors should not to rely on the Schedule 13D
        filed by Paul A. Ebeling or upon prior press releases issued through PR Newswire
        or the Company’s web site which is not controlled by current
        management.
 
 The
        Company has also recently received a request to convert additional Series
        B
        Preferred shares of stock from a representative associated with the Plaintiffs.
        These shares do not appear to have been lawfully issued and the Company has
        declined to convert them to Common Stock and have asked the requesting parties
        to provide information about the issuance of these shares. The Company has
        not
        received any response to its request.
 
 Except
        for the above, there are no other legal proceedings pending or threatened
        against the Company as of the date of the issuance of these financial
        statements.
 F-29
 *Table
            of Contents*




**Item
              8.**
            **Changes
                in and Disagreements with Accountants on Accounting and Financial
                Disclosure.**





As
      reported in our current report on Form 8-K filed with the Commission on February
      2, 2007 and as amended in a Form 8-K/A filed on February 20, 2007, the Company
      changed its independent accountants from Ronald R. Chadwick, P.C. (“Chadwick”)
      to Schwartz Levitsky Feldman LLP , effective
      February 2, 2007. This change in independent accountants was approved by our
      Board of Directors. In connection with the audit of our financial statements
      as
      of and for the fiscal years ended December 31, 2004 and 2005, and the interim
      periods of March 31, June 30 and September 30, 2006, there were no disagreements
      with Chadwick on any matter of accounting principles or practices, financial
      statement disclosure, or auditing scope of procedures, which disagreements,
      if
      not resolved to the satisfaction of Chadwick, would have caused them to make
      reference in connection with its reports to the subject matter of the
      disagreements.





Additionally,
      as reported in our current report on Form 8-K filed with the Commission on
      May
      8, 2007, the Company changed its independent accountants from Schwarz Levitsky
      Feldman LLP (“SLF”) to Yu
      and
      Associates CPA Corporation ,
      effective May 5, 2007. This change in independent accountants was approved
      by
      our Board of Directors. In connection with the audit of our financial statements
      as of and for the fiscal year ended December 31, 2006, there were no
      disagreements with SLF on any matter of accounting principles or practices,
      financial statement disclosure, or auditing scope of procedures, which
      disagreements, if not resolved to the satisfaction of SLF, would have caused
      them to make reference in connection with its reports to the subject matter
      of
      the disagreements.




**Item
              8A.**
            **Controls
                and Procedures.**





As
      of the
      end of the period covered by this report, we carried out an evaluation of the
      effectiveness of the design and operation of our disclosure controls and
      procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange
      Act).
      This evaluation was carried out under the supervision and with the participation
      of our management, principally our Chief Executive Officer, who is also our
      Chief Financial Officer. Based upon this evaluation, our Chief Executive Officer
      has concluded that our disclosure controls and procedures were effective as
      of
      the end of the period covered by this report to ensure that information required
      to be disclosed by us in reports that we file or submit under the Exchange
      Act
      is recorded, processed, summarized and reported within the time periods
      specified in Securities and Exchange Commission rules and forms, and that such
      information is accumulated and communicated to our management, including our
      Chief Executive Officer who is also our Chief Financial Officer.





Our
      disclosure controls and procedures provide our Chief Executive Officer, who
      is
      also our Chief Financial Officer, reasonable assurances that our disclosures
      are
      appropriate. However, company management, including our Chief Executive Officer,
      does not expect that our disclosure controls and procedures or our internal
      controls will prevent all human error. A control system, no matter how well
      designed and implemented, can provide only reasonable, not absolute, assurance
      the objectives of the control system are met. Furthermore, the design of a
      control system must reflect the fact there are internal resource constraints,
      and the benefit of controls must be weighed relative to their corresponding
      costs. Because of the limitations in all control systems, no evaluation of
      controls can provide complete assurance all control issues and instances of
      error, if any, within our company are detected. These inherent limitations
      include the realities that judgments in decision-making can be faulty, and
      that
      breakdowns can occur due to human error or mistake. Additionally, controls,
      no
      matter how well designed, could be circumvented by the individual acts of
      specific persons within the organization. The design of any system of controls
      is also based in part upon certain assumptions about the likelihood of future
      events, and there can be no assurance any design will succeed in achieving
      its
      stated objectives under all potential future conditions.


-28-
 *Table
            of Contents*




During
      the last fiscal quarter to which this report relates, there were no changes
      in
      the Company's internal controls or other factors that could significantly affect
      these controls subsequent to the date of their evaluation and there were no
      corrective actions with regard to deficiencies and material weaknesses.




**Item
              8B.**
            **Other
                Information.**




None.




**PART
      III**





**Item
              9.**
            **Directors,
                Executive Officers, Promoters, Control Persons and Corporate Governance;
                Compliance with Section 16(A) of the Exchange
                Act.**




As
      of
      December 31, 2006 and as of the date of the filing of this report, the directors
      and executive officers of the Company, their ages, positions in the Company,
      the
      dates of their initial election or appointment as director or executive officer,
      and the expiration of the terms as directors (if applicable) were as
      follows:





Name
            
            Age
            
            Position
            
            Director
                SinceBeicang
                Hou
            
            44
            
            Chief
                Executive Officer, Chief Financial Officer, Secretary and sole
                Director
            
            October
                2006




The
      Company's directors hold office until their successors are elected and
      qualified. The Company's officers are appointed annually by the Board of
      Directors and serve at the pleasure of the Board.





Mr.
      Beicang Hou serves
      as our Chief Executive Officer, Chief Financial Officer, Secretary and sole
      Director. Mr. Hou has extensive experience in our industry. From 1997 to the
      present, Mr. Hou serves as the Chairman of the Board and General Manager of
      Shanxi Changchi Enterprise Co., Ltd. Mr. Hou is the Chairman of the Board of
      Pinglu Changhong Ferroalloy Co., Ltd. from March 2003 to the present, and of
      Fanshi Xingyu Iron & Resource Co., Ltd. from January 2004 to the present.
      From December 2005 to the present, Mr. Hou is the Chief Executive Officer and
      Chairman of the Board of Bestlink Management Consulting Co., Ltd.





**Audit
      Committee and Audit Committee Financial Expert Disclosure**





The
      Company does not have a separately designated audit committee of our Board,
      as
      it is not required to, and the functions customarily delegated to this committee
      are performed by the full Board. As the Company does not maintain an audit
      committee, it does not have an audit committee “financial expert” within the
      meaning of Item 407(d)(5) of Regulation SB.





**Code
      of Ethics**





For
      the
      year ended December 31, 2006, we did not have a formal written code of
      ethics applicable to our principal executive officer and principal financial
      officer, because the board of directors has not determined it to be immediately
      necessary from a management perspective to adopt a formal code at this time.
      However, we plan to adopt and approve a formal written code of ethics in the
      near future.


-29-
 *Table
          of Contents*




**Compliance
      with Section 16(a) of the Securities Exchange Act of 1934**




Section
      16(a) of the Securities Exchange Act of 1934 requires the Company's officers
      and
      directors, and persons who own more than 10% of a registered class of the
      Company's equity securities, to file reports of ownership and changes in
      ownership with the Securities and Exchange Commission (“SEC”). Officers,
      directors, and greater than 10% shareholders are required by SEC regulation
      to
      furnish the Company with copies of all Section 16(a) forms they file. Based
      solely on its review of copies of such reports received or written
      representations from certain reporting persons, the Company believes that,
      during the year ended December 31, 2006, all Section 16(a) filing requirements
      applicable to its officers, directors and ten percent shareholders were in
      compliance with SEC regulations.





**Involvement
      in Certain Legal Proceedings**





There
      are
      no orders, judgments, or decrees of any governmental agency or administrator,
      or
      of any court of competent jurisdiction, revoking or suspending for cause any
      license, permit or other authority to engage in the securities business or
      in
      the sale of a particular security or temporarily or permanently restraining
      any
      of our officers or directors from engaging in or continuing any conduct,
      practice or employment in connection with the purchase or sale of securities,
      or
      convicting such person of any felony or misdemeanor involving a security, or
      any
      aspect of the securities business or of theft or of any felony. Nor are any
      of
      the officers or directors of any corporation or entity affiliated with us so
      enjoined.




**Item
              10.**
            **Executive
                Compensation.**





The
      following summary compensation table sets forth the aggregate compensation
      awarded to, earned by, or paid to the chief executive officer, and other
      executive officers whose annual compensation exceeded $100,000, for the fiscal
      year ended December 31, 2006 and 2005:




**SUMMARY
                  COMPENSATION TABLE**Name
                and Principal Position
              
              
              Year
              
              
              Salary
                ($)
              
              
              Bonus
                ($)
              
              
              Stock
                  Awards
                ($)
              
              
              Option
                  Awards
                ($)
              
              
              Non-Equity
                  Incentive Plan Compensation
                ($)
              
              
              Nonqualified
                  Deferred Compensation Earnings
                ($)
              
              
              All
                  Other Compensation
                ($)
              
              
              Total
                ($)Beicang
                  Hou, current CEO, CFO, Secretary and Sole Director (1)
              
              
              2006
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-2005
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/A
              
              
              N/AXuedong
                  Hu, former CEO, CFO and Director (2)
              
              
              2006
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-2005
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-
              
              
              -0-


(1)
            In
                connection with the Merger (described in Item 1 above under “Company
                History”), Mr. Beicang Hou became the Company’s CEO, CFO, Secretary and
                sole Director on October 25, 2006. For 2006, Mr. Hou did not receive
                any
                compensation for his services as the Company’s CEO, CFO and sole Director.


(2)
            In
                connection with the Merger, Mr. Xuedong Hu resigned as the Company’s CEO,
                CFO and a Director on October 25, 2006. For 2006, Mr. Hu did not
                receive
                any compensation for his services as the CEO, CFO and a director
                of the
                Company.


-30-
 *Table
          of Contents*


The
      following table sets forth information concerning unexercised options, stock
      that has not vested, and equity incentive plan awards for our chief executive
      officer as of the end of the fiscal year ended December 31, 2006:





**OUTSTANDING
                EQUITY AWARDS AT FISCAL YEAR-END TABLE****OPTION
                AWARD**
            
            **STOCK
                AWARD**Name
            
            Number
                of Securities Underlying Unexercised Options
              (Exercisable)
              (#)
            
            Number
                of Securities Underlying Unexercised Options
              (Unexercisable)
              (#)
            
            Equity
                Incentive Plan Awards:Number
                of Securities Underlying Unexercised Unearned Options
              (#)
            
            Option
                Exercise Price
              ($)
            
            Option
                Exercise Date
            
            Number
                of Shares or Units of Stock That Have Not Vested(#)
            
            Market
                Value of Shares or Units of Stock That Have Not Vested($)
            
            Equity
                Incentive Plan AwardsNumber
                of Unearned Shares, Units or Other Rights That Have Not
                Vested
              (#)
            
            Equity
                Incentive Plan Awards: Market or Payout Value of Unearned Shares,
                Units or
                Other Rights That Have Not Vested
              ($)Beicang
                Hou
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-






**Employment
      Agreements, Termination of Employment and Change-in-Control Arrangements**





We
      currently have no employment agreements with any of our executive officers,
      nor
      any compensatory plans or arrangements resulting from the resignation,
      retirement or any other termination of any of our executive officers, from
      a
      change-in-control, or from a change in any executive officer’s responsibilities
      following a change-in-control.


-31-
 *Table
          of Contents*




**Compensation
      of Directors**





For
      the
      fiscal year ended December 31, 2006, our directors were compensated as
      follows :





**DIRECTOR
                COMPENSATION TABLE**Name
            
            Fees
                Earned or Paid in Cash
              ($)
            
            Stock
                Awards
              ($)
            
            Option
                Awards ($)
            
            Non-Equity
                Incentive Plan Compensation
              ($)
            
            Nonqualified
                Deferred Compensation Earnings
              ($)
            
            All
                Other Compensation
              ($)
            
            Total
              ($)Beicang
                Hou, sole Director (1), (2)
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-Xuedong
                Hu, former Director(1),
                (2)
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-Jian
                Wang, former Director(1),
                (2)
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-Rain
                Zhang,
                former Director(1),
                (2)
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-
            
            
            -0-





(1)
            In
                connection with the Merger, Messrs. Xuedong Hu, Jian Wang and Rain
                Zhang
                resigned as Directors of the Company on October 25, 2006. From the
                date of
                their resignations, Mr. Beicang Hou has been our sole
                Director.


(2)
            There
                are no other formal or informal understandings or arrangements relating
                to
                compensation; however, the Directors may be reimbursed for all reasonable
                expenses incurred by them in conducting the Company’s business. These
                expenses would include out-of-pocket expenses for such items as travel,
                telephone, and postage. For the fiscal year 2006, none of the Directors
                received reimbursement payments from the Company.




-32-
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          of Contents*




**Item
              11.**
            **Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters.**





The
      following table sets forth certain information with respect to the beneficial
      ownership of our common stock
      as
      of March
      15,
      2007, by:
      (i)
      each person known to beneficially own more than five percent of our common
      stock; (ii) each of our officers, directors and nominees for election as
      director; and (iii) all of our directors and executive officers as a
      group.





The
      number of shares beneficially owned by each director or executive officer is
      determined under rules of the SEC, and the information is not necessarily
      indicative of beneficial ownership for any other purpose. Under the SEC rules,
      beneficial ownership includes any shares as to which the individual has the
      sole
      or shared voting power or investment power. In addition, beneficial ownership
      includes any shares that the individual has the right to acquire within 60
      days.
      Unless otherwise indicated, each person listed below has sole investment and
      voting power (or shares such powers with his or her spouse). In certain
      instances, the number of shares listed includes (in addition to shares owned
      directly), shares held by the spouse or children of the person, or by a trust
      or
      estate of which the person is a trustee or an executor or in which the person
      may have a beneficial interest.





**Name
                and Address of**
              **Beneficial
                Owner**
            
            **Amount
                and Nature of Beneficial Ownership (2)**
            
            **Percentage
                Owned**
              **Beneficially
                (3)**Beicang
                Hou(1)
            
            
            899,196,930
            
            
            90
            %All
                officers and directors of the Company as a group
            
            
            899,196,930
            
            
            90
            %





(1)
            CEO,
                CFO, Secretary and the sole Director of the Company. The address
                for Mr.
                Hou is in care of the Company at 8/F Beicang Building, Taiyuan City,
                Shanxi Province, China 030013.


(2)
            Unless
                otherwise indicated, all shares are directly owned and investing
                power is
                held by the persons named in the
                table.


(3)
            Based
                upon999,066,260shares of Common Stock outstanding as of May 15, 2007.




**Equity
      Compensation Plan Information**





In
      the
      future, we may award stock options to key employees, members of management,
      directors and consultants under stock option programs as performance-based
      bonuses. As of the date of this report, however, we have not adopted any such
      plans.


-33-
 *Table
          of Contents*
  **Item
                12.**
              **Certain
                  Relationships and Related Transactions, and Director
                  Independence.**




**Transactions
      with Related Person**




Prior
      to
      the closing of the Merger on October 25, 2006, we financed our general and
      administrative expenses primarily through advances from a former officer and
      director, who is also a shareholder. Our present management is currently
      verifying these related party advances outstanding. As of the date of this
      report we are in negotiations with this former officer and director for the
      repayment of these obligations, but no definitive agreement has been
      reached.





After
      the
      closing of the Merger, we have assumed the following related-party
      transactions:




Trade
      accounts receivable from and payable :
      (1)


December
                31,2006
            
            2005Trade
                receivables:Pinglu
                Changlong Tegang Lu Liao Co., Ltd. (2)
            
            $
            49,997
            
            $
            —Shanxi
                Rongchang Trading Co. Ltd. (3)
            
            
            2,795,985
            
            
            —Shanxi
                Changchi Enterprise Co, Ltd. (4)
            
            
            —
            
            
            1,512,155$
            2,845,982
            
            $
            1,512,155





Trade
                payables:Shanxi
                Changchi Enterprise Co., Ltd. (4)
            
            $
            1,765,223
            
            $
            737,014Shanxi
                Haixin Material Trading Co., Ltd. (5)
            
            
            161,215
            
            
            156,167$
            1,926,438
            
            $
            893,181




Related
      party receivables and payables :
      (6)


December
                31,2006
            
            2005Amounts
                due from related parties:Shanxi
                Changchi Enterprise Co., Ltd. (4)
            
            $
            —
            
            $
            12,391Pinglu
                Changsheng Stainless Steel Material Co., Ltd. (7)
            
            
            3,033,603
            
            
            34,718Mr.
                Junsheng Wang (8)
            
            
            —
            
            
            39,535Mr.
                Yaoting Ren (9)
            
            
            343,767
            
            
            224,028Mr.
                Beicang Hou (10)
            
            
            —
            
            
            458,973$
            3,377,370
            
            $
            769,645





Amount
                due to related parties:Shanxi
                Changchi Enterprise Co., Ltd. (4)
            
            $
            476,404
            
            $
            —Mr.
                Beicang Hou (10)
            
            
            1,435,847
            
            
            —Mr.
                Zhenguan Li (11)
            
            
            —
            
            
            8,674$
            1,912,251
            
            $
            8,674





-34-
 *Table
            of Contents*




Other
      transactions :


Year
                ended December 31,2006
            
            2005Sales
                to related parties:Shanxi
                Changchi Enterprise Co., Ltd. (4)
            
            $
            10,392,583
            
            $
            4,563,245Shanxi
                Rongchang Trade Co., Ltd. (3)
            
            
            5,025,546Pinglu
                Changlong Tegang Lu Liao Co., Ltd. (2)
            
            
            196,564Pinglu
                Changsheng Stainless Steel Material Co., Ltd. (7)
            
            
            1,507,268
            
            
            —$
            17,121,961
            
            $
            4,563,245






Year
                ended December 31,2006
            
            2005Purchases
                from related parties:Shanxi
                Changchi Enterprise Co., Ltd. (4)
            
            $
            13,607,939
            
            $
            604,546Pinglu
                Changsheng Stainless Steel Material Co., Ltd. (7)
            
            
            2,470,276
            
            
            —Shanxi
                Haixin Material Trading Co., Ltd. (5)
            
            
            —
            
            
            599,129$
            16,078,215
            
            $
            1,203,675





(1)
            Trade
                accounts receivable from and payable to related parties arose from
                sales
                to and purchases from those related companies in the ordinary course
                of
                the Company’s business.


(2)
            Under
                the control by Mr. Zhengguan Li, a director of the
                PL


(3)
              Under
                  the control of Mr. Beicang Hou, the CEO and sole director of the
                  Company


(4)
            Under
                the control of Mr. Beicang Hou, the CEO and sole director of the
                Company


(5)
            Under
                the control of Mr. Beicang Hou, the CEO and sole director of the
                Company


(6)
            Balances
                with related parties represent advances to or loans from the respective
                related parties, are interest free, unsecured, and have no fixed
                repayment
                date. It is expected that the balances will be received or repaid
                within
                one year.


(7)
            Under
                the control of Mr. Yaoting Ren, a director of PL


(8)
            A
                director of FS


(9)
            A
                director of PL


(10)
            Our
                CEO and sole director


(11)
            A
                director of FS




**Director
      Independence**





The
      Company has determined that its sole Director is not independent under the
      independence standards of NASDAQ Marketplace Rule 4200(a)(15). In determining
      independence, the Company reviews and seeks to determine whether the sole
      Director has any material relationship with the Company, direct or indirect,
      which would interfere with the exercise of independent judgment in carrying
      out
      the responsibilities of a director. The Company also reviews business,
      professional, charitable and familial relationships of the sole Director in
      determining independence.


-35-
 *Table
            of Contents*




**Item
              13.**
            **Exhibits.**




Exhibit Number
            Description





2.1
            Share
                Exchange Agreement dated as of December 10, 2001. (Incorporated by
                reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed
                on December 21, 2001)





2.2
            Agreement
                and Plan of Merger between the Company and Alpha Spacecom, Inc.,
                a Nevada
                corporation, dated as of June 16, 2005. (Incorporated by reference
                to
                Exhibit 2.2 of the Form 10-KSB for the fiscal year ended December
                31, 2004
                filed on July 26, 2005)





2.3
            Merger
                Agreement between the Company and East Glory Investment Group, Ltd.
                dated
                April 8, 2006. (Incorporated by reference to Exhibit 2.3 of the Company’s
                Current Report on Form 8-K filed on April 12,
                2006)





3.1
            Articles
                of Incorporation, as amended and currently in effect. (Incorporated
                by
                reference to Exhibit No. 3.1 of the Form 10-KSB for the fiscal year
                ended
                December 31, 2004 filed on July 26,
                2005)





3.2
            Bylaws.
                (Incorporated by reference to Exhibit No. 3.2 of the Form 10-KSB
                for the
                fiscal year ended December 31, 2004 filed on July 26,
                2005)





3.3
            Articles
                of Merger as filed with the Nevada Secretary of State. (Incorporated
                by
                reference to Exhibit No. 3.1 of the Form 10-KSB for the fiscal year
                ended
                December 31, 2004 filed on July 26,
                2005)





10.1
            Operating
                and Service Agreement forFanshi
                County Xinyu Iron Resource Co., Ltd.dated January 5, 2006 (Filed
                herewith)





10.2
            Option
                Agreement forFanshi
                County Xinyu Iron Resource Co., Ltd.dated January 5, 2006 (Filed
                herewith)





10.3
            Loan
                Agreement forFanshi
                County Xinyu Iron Resource Co., Ltd.dated January 5, 2006 (Filed
                herewith)





10.4
            Operating
                and Service Agreement forPinglu
                County Changhong Ferroalloy Co., Ltd. dated January 5, 2006(Filed
                herewith)





10.5
            Option
                Agreement forPinglu
                County Changhong Ferroalloy Co., Ltd.dated January 5, 2006 (Filed
                herewith)





10.6
            Loan
                Agreement forPinglu
                County Changhong Ferroalloy Co., Ltd. dated January 5, 2006(Filed
                herewith)





16.1
              Letter
                  from Ronald R. Chadwick P.C. (Incorporated by reference to the
                  Company’sCurrent
                  Report on Form 8-K/A filed on February 20,
                  2007)





16.2
            Letter
                fromSchwartz
                Levitsky Feldman LLP, Chartered Accountants (Incorporated by reference
                to
                the Company’s Current Report on Form 8-K filed on May 8,
                2007)




21.1
            List
                of Subsidiaries. (Filed herewith)





31.1
            Section
                302 Certification by the Corporation’s Chief Executive Officer and Chief
                Financial Officer. (Filed
                herewith.)




32.1
            Section
                906 Certification by the Corporation’s Chief Executive Officer and Chief
                Financial Officer. (Filed
                herewith.)




-36-
 *Table
          of Contents*




**Item
              14.**
            **Principal
                Accountant Fees and
                Services.**




**Change
      of Auditor**





The
      Company’s preceding principal independent auditors were Ronald R. Chadwick P.C.
      (“Chadwick”), and Schwartz Levitsky Feldman LLP, Chartered Accountants ("SLF").
      Chadwick performed the audit for the fiscal years ended December 31, 2004 and
      2005, and it reviewed the Company’s unaudited financial statements through the
      quarter ended September 30, 2006. On February 2, 2007, we engaged SLF to audit
      the Company’s financial statements for the fiscal year ended December 31, 2006.
      On May 5, 2007, we terminated the services of SLF and engaged Yu and Associates
      CPA Corporation (“Yu and Associates”) to audit the Company’s financial
      statements for the fiscal year ended December 31, 2006. The following are the
      services provided and the amount billed:





**Audit
      Fees**





The
      aggregate fees billed for professional services rendered by Chadwick for the
      audit of our annual financial statements for the fiscal year 2005 and the
      reviews of the financial statements included in our quarterly reports on
      Form 10-QSB through the quarter ended September 30, 2006 were $46,500.





The
      aggregate fees billed for professional services rendered by GC Alliance Limited,
      Certified Public Accountants, for the audit of East
      Glory Investments Group, Ltd.’s annual
      financial statements for the fiscal years ended December 31, 2004 and
      2005 in connection with the merger were $250,000.





The
      aggregate fees billed for professional services rendered by SLF for the reviews
      of the financial statements included in our quarterly reports on
      Form 10-QSB through the quarter ended September 30, 2006 were $272,623.





The
      aggregate fees billed for professional services rendered by Yu and Associates
      for the audit of our annual financial statements for the fiscal year 2006 were
      $80,000.





**Audit-Related
      Fees**





There
      were no fees billed for services reasonably related to the performance of the
      audit or review of the financial statements outside of those fees disclosed
      above under “Audit Fees” for the year ended December 31, 2006.





**Tax
      Fees**





For
      the
      years ended December 31, 2006 and December 31, 2005, there were no fees billed
      for services for tax compliance, tax advice and tax planning work to the
      Company.





**All
      Other Fees**





There
      were no other fees billed to the Company by Chadwick, SLF or Yu and Associates
      during the last two fiscal years for products and services provided by Chadwick,
      SLF or Yu and Associates.


-37-
 *Table
            of Contents*




**Pre-Approval
      Policies and Procedures**





Prior
      to
      engaging its accountants to perform particular services, our Board of Directors
      obtains an estimate for the service to be performed. All of the services
      described above were approved by the Board of Directors in accordance with
      its
      procedure.


-38-
 *Table
            of Contents*




**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused
      this report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




**BEICANG
                IRON & STEEL, INC.**
              (Registrant)Date: May
              18,
              2007
            By:
            /s/
              Beicang HouName: 
                Beicang Hou
              Title:   
                Chief Executive Officer, Chief Financial Officer
              and Sole Director




-39-