**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**Form
      10-Q**





(Mark
      One)





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





For
      the
      quarterly period ended **March
      31, 2007**





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 registrant as specified in it
                charter)








**Nevada**
            
            **13-3183646**(State
                or other jurisdiction of incorporation or organization)
            
            (IRS
                Employer Identification 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)





(Former
                name, former address and former fiscal year, if changed since last
                report)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or such shorter period
      that
      the issuer was required to file such reports), and (2) has been subject to
      such
      filing requirements for the past 90 days. Yes x No
      o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer.





Large
      accelerated  filer o     Accelerated
      filer o    Non-accelerated
      filer x





The
      registrant is a shell company (Check one): Yes o No x





**APPLICABLE
      ONLY TO CORPORATE ISSUERS**





State
      the
      number of shares outstanding of each of the issuer’s classes of common stock, as
      of the latest practicable date: As of May 15, 2007, the issuer had 999,066,260
      shares of common stock, $.001 par value, outstanding.









**INDEX**




**Page****PART
                  I - FINANCIAL INFORMATION****Item
                  1. Financial Statements.**Unaudited
                  Consolidated Condensed Financial StatementsAs
                  of and For the Three Months ended March 31, 2007 and 2006Consolidated
                  Balance Sheets
              F-2Consolidated
                  Statements of Operations
              F-4Consolidated
                  Statements of Changes in Stockholders' Equity
              F-5Consolidated
                  Statements of Cash Flows
              F-6Notes
                  to Consolidated Financial Statements (unaudited)
              F-7**Item
                  2. Management’s Discussion and Analysis of Financial
                  Conditions****and
                  Results of Operation.**
              4**Item
                  3. Quantitative and Qualitative Disclosures About Market
                  Risk.**
              9**Item
                  4. Controls and Procedures.**
              10**PART
                  II - OTHER INFORMATION****Item
                  1. Legal Proceedings.**
              10**Item
                  1A. Risk Factors.**
              10**Item
                  2. Unregistered Sales of Equity Securities and Use of Proceeds.**
              10**Item
                  3. Defaults upon Senior Securities.**
              10**Item
                  4. Submission of Matters to a Vote of Securities
                  Holders.**
              10**Item
                  5. Other Information.**
              11**Item
                  6. Exhibits**
              11**Signatures**
              12







**CAUTION
          REGARDING FORWARD-LOOKING INFORMATION**
 
 All
          statements contained in this Quarterly Report on Form 10-Q (“Form 10-Q”) for
          Beicang Iron & Steel, Inc., other than statements of historical facts, that
          address future activities, events or developments are forward-looking
          statements, including, but not limited to, statements containing the words
          “believe,” “anticipate,” “expect” and words of similar import. These statements
          are based on certain assumptions and analyses made by us in light of our
          experience and our assessment of historical trends, current conditions
          and
          expected future developments as well as other factors we believe are appropriate
          under the circumstances. However, whether actual results will conform to
          the
          expectations and predictions of management is subject to a number of risks
          and
          uncertainties that may cause actual results to differ materially.
 
 Such
          risks include, among others, the following: international, national and
          local
          general economic and market conditions: our ability to sustain, manage
          or
          forecast our growth; raw material costs and availability; new product
          development and introduction; existing government regulations and changes
          in, or
          the failure to comply with, government regulations; adverse publicity;
          competition; the loss of significant customers or suppliers; fluctuations
          and
          difficulty in forecasting operating results; changes in business strategy
          or
          development plans; business disruptions; the ability to attract and retain
          qualified personnel; the ability to protect technology; and other factors
          referenced in this and previous filings.
 
 Consequently,
          all of the forward-looking statements made in this Form 10-Q are qualified
          by
          these cautionary statements and there can be no assurance that the actual
          results anticipated by management will be realized or, even if substantially
          realized, that they will have the expected consequences to or effects on
          our
          business operations. As used in this Form 10-Q, unless the context requires
          otherwise, “we” or “us” or “Beicang” or the “Company” means Beicang Iron &
Steel, Inc. and its subsidiaries.
 
 3
  BEICANG
        IRON & STEEL, INC. AND SUBSIDIARIES
 CONSOLIDATED
        FINANCIAL STATEMENTS
 FOR
        THE
        THREE MONTHS ENDED MARCH 31, 2007 AND 2006


**PART
      I - FINANCIAL INFORMATION**





**Item
      1.**  **Financial
      Statements**




**BEICANG
        IRON & STEEL, INC.**
 **CONSOLIDATED
        BALANCE SHEETS**
 **AT
        OF MARCH 31, 2007 AND DECEMBER 31, 2006**
 **(Amounts
        expressed in U.S. Dollars)**
  March
                  31
              
              December2007
              
              31,2006(Unaudited)
              
              (Audited)**ASSETS****Current
                  assets**Cash
                  and cash equivalents
              
              $
              548,772
              
              $
              475,975Bills
                  receivable
              
              
              1,768,610
              
              
              81,868Trade
                  receivables, net of allowance for doubtful accounts of $106,684
                  and
                  $106,684 at March 31, 2007 and December 31, 2006
                  respectively
              
              
              1,327,476
              
              
              1,703,276Trade
                  receivables - related parties (note 16)
              
              
              2,194,154
              
              
              2,845,982Inventories(note 5)
              
              
              903,554
              
              
              1,295,334Prepaymentand deposits (note 6)
              
              
              322,656
              
              
              420,106Other
                  receivables(note 7)
              
              
              155,217
              
              
              62,818Prepaid
                  land use right(note 8)
              
              
              10,073
              
              
              10,073Due
                  fromrelated
                  parties (note 16)
              
              
              2,300,348
              
              
              3,377,370**Total
                  current assets**
              
              
              9,530,860
              
              
              10,272,802Prepaid
                  land use right, net of current portion(note 8)
              
              
              471,646
              
              
              474,232Property,
                  plant and equipment, net(note 9)
              
              
              4,987,760
              
              
              4,967,210Construction
                  in progress
              
              
              345,321
              
              
              161,580**Total
                  assets**
              
              $
              15,335,587
              
              $
              15,875,824**LIABILITIES
                  AND STOCKHOLDERS' EQUITY****Current
                  liabilities**Tradepayables
              
              $
              1,980,811
              
              $
              2,619,526Trade
                  payables - related parties (note 16)
              
              
              3,705,457
              
              
              1,926,438Deposits
                  received from customers
              
              
              302,938
              
              
              207,408Accrued
                  expenses(note 10)
              
              
              1,484,744
              
              
              1,260,721Other
                  payables(note 11)
              
              
              1,649,291
              
              
              1,857,765Other
                  short-term loans(note 12)
              
              
              1,893,815
              
              
              1,855,069Value-addedtax payable
              
              
              1,013,745
              
              
              2,167,229Due
                  torelated
                  parties (note 16)
              
              
              1,629,852
              
              
              1,912,251**Total
                  current liabilities**
              
              
              13,660,653
              
              
              13,806,407**Commitments
                  and Contingencies (Note 18 and 19)**


The
          accompanying notes are an integral part of these financial
          statements.
  F-2




**BEICANG
        IRON & STEEL, INC.**
 **CONSOLIDATED
        BALANCE SHEETS**
 **AS
        OF MARCH 31, 2007 AND DECEMBER 31, 2006 (CONTINUED)**
 **(Amounts
        expressed in U.S. Dollars)**
  March
                  31
              
              December2007
              
              31,2006(Unaudited)
              
              (Audited)**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
              
              $
              23Series
                  B, nil issued
              
              
              -
              
              
              -Common
                  stock, $0.001 par, 1,000,000,000 sharesauthorized,999,066,260issued
                  andoutstanding
                  (note 13)
              
              
              999,066
              
              
              999,066Additional
                  paid-in capital
              
              
              3,134,607
              
              
              3,134,607Statutory
                  reserves(note 14)
              
              
              24,713
              
              
              24,713Accumulated
                  other comprehensive income
              
              
              177,435
              
              
              175,491Accumulatedloss
              
              
              (2,660,910
              )
              
              (2,264,483
              )**Total
                  Stockholders' Equity**
              
              
              1,674,934
              
              
              2,069,417**Total
                  Liabilities and Stockholders' Equity**
              
              $
              15,335,587
              
              $
              15,875,824




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




F-3




**BEICANG
        IRON & STEEL, INC.**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **AND
        OTHER COMPREHENSIVE INCOME**
 **FOR
        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**
 **(Amounts
        expressed in U.S. Dollars)**
  Three
                  monthsended March 31,2007
              
              2006(Unaudited)
              
              (Audited)**Revenue**
              
              $
              4,210,874
              
              $
              6,182,353**Revenue
                  - related parties**
              
              
              6,542,751
              
              
              4,536,338**Total
                  revenue**
              
              
              10,753,625
              
              
              10,718,691Cost
                  of goods sold
              
              
              (10,360,292
              )
              
              (8,940,346
              )**Gross
                  profit**
              
              
              393,333
              
              
              1,778,345**Operating
                  expenses**Selling
                  expenses
              
              
              (246,768
              )
              
              (201,390
              )General
                  and administrative expenses
              
              
              (307,084
              )
              
              (793,178
              )Total
                  operating expenses
              
              
              (553,852
              )
              
              (994,568
              )**Profit
                  (loss) from operations**
              
              
              (160,519
              )
              
              783,777**Other
                  income (expenses)**Sundry
                  income(expenses), net
              
              
              (90,274
              )
              
              165,381Finance
                  costs
              
              
              (145,634
              )
              
              (68,469
              )Total
                  other income (expenses)
              
              
              (235,908
              )
              
              96,912(Loss)
                  Profit before income taxes
              
              
              (396,427
              )
              
              880,689Provision
                  for income taxes(note 15)
              
              
              -
              
              
              -**Net
                  (loss) profit**
              
              
              (396,427
              )
              
              880,689**Other
                  comprehensive income**Foreign
                  currency translation adjustment
              
              
              1,944
              
              
              6,820**Comprehensive
                  (loss) income**
              
              $
              (394,483
              )
              $
              887,509**Weight
                  average number of shares**-
                  Basicand diluted
              
              
              999,066,260
              
              
              899,196,930**(Loss)
                  earnings per share**-
                  Basicand diluted
              
              $
              (0.000
              )
              $
              0.001




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




F-4




**BEICANG
        IRON & STEEL, INC.**
 **CONSOLIDATED
        STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY**
 **(Amounts
        expressed in U.S. Dollars)**


Statutory
                  reserves(Accumulated
              
              
              
              Statutory
              
              AccumulatedCommon
                  stock
              
              Preferred
              
              Additional
                    paid-in
              
              loss)
                  / Retained
              
              Statutory
                    surplus
              
              common
                  welfare
              
              other
                  comprehensiveShares
              
              Amount
              
              stock
              
              capital
              
              earnings
              
              reserve
              
              reserve
              
              income
              
              TotalBalance
                  at January 1, 2006 (Audited)
              
              
              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 (Audited)
              
              
              999,066,260
              
              
              999,066
              
              
              23
              
              
              3,134,607
              
              
              (2,264,483
              )
              
              16,475
              
              
              8,238
              
              
              175,491
              
              
              2,069,417Net
                  loss
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (396,427
              )
              
              -
              
              
              -
              
              
              -
              
              
              (396,427
              )Effect
                  of foreign currency translation
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              1,944
              
              
              1,944Balance
                  at March 31, 2007 (Unaudited)
              
              
              999,066,260
              
              $
              999,066
              
              $
              23
              
              $
              3,134,607
              
              $
              (2,660,910
              )
              $
              16,475
              
              $
              8,238
              
              $
              177,435
              
              $
              1,674,934




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




F-5


**BEICANG
        IRON & STEEL, INC.**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**


**FOR
        THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006**
 **(Amounts
        expressed in U.S. Dollars)**
  Three
                  months ended March 31,2007
              
              
              2006**Cash
                  flows from operating activities**Net
                  (loss) profit
              
              $
              (396,427
              )
              $
              880,689Adjustments
                  to reconcile net income to cashprovided
                  by operating activities:Depreciation
              
              
              112,263
              
              
              105,413Amortization
              
              
              2,586
              
              
              2,215(Increase)
                  Decrease in assetsBills
                  receivable
              
              
              (1,686,742
              )
              
              1,491,497Prepayment
                  and deposits
              
              
              97,450
              
              
              (519,832
              )Trade
                  receivable, net
              
              
              1,027,628
              
              
              4,304Inventories
              
              
              391,780
              
              
              12,914Other
                  receivables
              
              
              (92,399
              )
              
              (53,148
              )Increase
                  (Decrease) in liabilitiesBills
                  payable
              
              
              -
              
              
              (1,491,465
              )Trade
                  payable
              
              
              1,140,304
              
              
              (1,297,476
              )Deposits
                  received from customers
              
              
              95,530
              
              
              486,405Accrued
                  expenses
              
              
              224,023
              
              
              915,239Other
                  payables
              
              
              (208,474
              )
              
              254,227Value-added
                  tax payable
              
              
              (1,153,484
              )
              
              529,604Net
                  cash (used in) provided by operating activities
              
              
              (445,962
              )
              
              1,320,586**Cash
                  flows from investing activities**(Advances
                  to) repayment from related parties
              
              
              1,077,022
              
              
              (2,078,101
              )Purchase
                  of property, plant and equipment
              
              
              (132,813
              )
              
              (45,444
              )Additions
                  to construction in progress
              
              
              (183,741
              )
              
              -Payment
                  of deposits for property, plant and equipment
              
              
              -
              
              
              (204,168
              )Net
                  cash provided by (used in) investing activities
              
              
              760,468
              
              
              (2,327,713
              )**Cash
                  flows from financing activities**Contribution
                  by stockholder
              
              
              -
              
              
              221,430Advances
                  from (repayment to) related parties
              
              
              (282,399
              )
              
              1,606,702Inception
                  of other loans
              
              
              38,746
              
              
              -Repayment
                  of other loans
              
              
              -
              
              
              (114,338
              )Net
                  cash (used in) provided by financing activities
              
              
              (243,653
              )
              
              1,713,794Effect
                  of foreign currency translation
              
              
              1,944
              
              
              6,867**Net
                  increase in cash and cash equivalents**
              
              
              72,797
              
              
              713,534Cash
                  and cash equivalents, beginning of year
              
              
              475,975
              
              
              158,348Cash
                  and cash equivalents, end of year
              
              $
              548,772
              
              $
              871,882**Supplemental
                  disclosure information**Finance
                  costs paid
              
              $
              145,634
              
              $
              68,469




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




F-6




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


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THREE MONTHS ENDED MARCH 31, 2007 AND 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, and
      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-7





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 March
      31,
      2007 was $18,787,193 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-8





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 March 31, 2007, the Company had a net working
      capital deficiency of $4,129,793 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-9




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 period 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.
            Trade
                and other receivables





Trade
      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.




F-10





3.  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES  ( Continued)





g.
            Property,
                plant and equipment





Property,
      plant and equipment are recorded at cost. 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 $1,944 and
      $6,820 for the period ended March 31, 2007 and 2006, respectively which mainly
      arose from the changes in foreign currency exchange rates.




F-11





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.
            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.





o.
            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 period ended March 31, 2007 and 2006,
      the
      diluted share base excludes incremental shares relating to convertible preferred
      stock since their effect was anti-dilutive.




F-12





3.  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES  ( Continued)





p.
            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:




March
                31, 2007
            
            December
                31, 2006
            
            March
                31, 2006Balance
                sheet items, except for the registered and paid-up capital, as of
                period/
                year end
            
            
            USD0.1279:RMB1
            
            
            USD0.1279:RMB1
            
            
            USD0.1248:RMB1Amounts
                included in the statements of operations, statements of changes in
                stockholders’ equity and statements of cash flows for the period/ year
            
            
            USD0.1287:RMB1
            
            
            USD0.1252:RMB1
            
            
            USD0.12428:RMB1





No
      representation is made that RMB amounts have been, or would be, converted into
      US$ at the above rates.




F-13




3.  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES  ( Continued)





q.
            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.





r.
            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-14




3.
            SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES(Continued)





r.
            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 RISKAND MAJOR CUSTOMERS
  Financial
        instruments which potentially expose the Company to concentrations of credit
        risk, consist of cash and accounts receivable as of March 31, 2007 and December
        31, 2006. The Company performs ongoing evaluations of its cash position and
        credit evaluations to ensure collections and minimize losses.
 
 As
        of
        March 31, 2007 and December 31, 2006, the Company’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
        periods ended March 31, 2007 and 2006, all of the Company’s sales arose in the
        PRC. In addition, all accounts receivable as of March 31, 2007 and December
        31,
        2006 also arose in the PRC.
 
 Details
        of the customers accounting for 10% or more of the Company’s revenue are as
        follows:
 
 March
                  31,
              
              March
                  31,2007
              
              2006(unaudited)
              
              (unaudited)Company
                  A
              
              $
              5,551,055
              
              $
              4,536,338Company
                  B
              
              
              497,114
              
              
              1,549,043Company
                  C
              
              
              1,374,005
              
              
              -
 
 Details
        of customers accounting for 10% or more of the Company’s accounts receivable are
        as follows:
 
 March
                  31,
              
              December
                  31,2007
              
              2006(unaudited)
              
              (audited)Company
                  A
              
              $
              1,485,865
              
              $
              -Company
                  B
              
              
              429,649
              
              
              -Company
                  D
              
              
              597,006
              
              
              -Company
                  E
              
              
              533,457Company
                  F
              
              
              -
              
              
              2,795,985


5.
            INVENTORIES





Inventories
      consist of the following:




March
                31,2007
            
            December
                31,2006(unaudited)
            
            (audited)Raw
                materials
            
            $
            448,137
            
            $
            832,692Finished
                goods
            
            
            340,868
            
            
            356,199Consumables
            
            
            114,549
            
            
            106,443$
            903,554
            
            $
            1,295,334




6.
            PREPAYMENT
                AND DEPOSITS





Prepayment
      and deposits consist of the following:




March
                31,2007
            
            December
                31,2006(unaudited)
            
            (audited)Purchase
                deposits for raw materials
            
            $
            230,196
            
            $
            409,504Other
            
            
            92,460
            
            
            10,602$
            322,656
            
            $
            420,106




F-15




7.
              OTHER
                  RECEIVABLES
 
 Other
        receivables consist of the following:
 March
                  31,2007
              
              December
                  31,2006(unaudited)
              
              (audited)Non-interest
                  bearing, unsecured receivables
              
              $
              46,471
              
              $
              55,439Tax
                  recoverable
              
              
              53,229
              
              
              -Cash
                  advances to staff and salespersons for normal business
                  purposes
              
              
              55,253
              
              
              6,253Others
              
              
              264
              
              
              1,126$
              155,217
              
              $
              62,818


8.
            PREPAID
                LAND USE RIGHT





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:





Total
                prepaid land use rights as of March 31, 2007
            
            $
            481,719Less:
                Current portion
            
            
            (10,073
            )Long-term
                portion
            
            $
            471,646





Amortization
      expense was $2,586 and $2,215 for the period ended March 31, 2007 and 2006,
      respectively.




9.
            PROPERTY,
                PLANT AND EQUIPMENT





Property,
      plant and equipment consist of the following:




March
                31,2007
            
            December
                31,2006(unaudited)
            
            (audited)Plant
                and machinery
            
            $
            1,727,294
            
            $
            1,718,761Building
            
            
            3,907,528
            
            
            3,836,333Motor
                vehicles
            
            
            208,403
            
            
            161,965Office
                equipment
            
            
            198,801
            
            
            192,1546,042,026
            
            
            5,909,213Less:
                Accumulated depreciation and impairment losses
            
            
            (1,054,266
            )
            
            (942,003
            )$
            4,987,760
            
            $
            4,967,210





The
      depreciation expenses on property, plant and equipment were $112,263 and
      $105,413 for the periods ended March 31, 2007 and 2006,
      respectively.




F-16




10.
            ACCRUED
                EXPENSES




Accrued
      expenses consist of the following:




March
                31,2007
            
            December
                31,2006(unaudited)
            
            (audited)Social
                securities insurance
            
            $
            185,475
            
            $
            334,218Accrued
                welfare
            
            
            168,725
            
            
            168,254Loan
                interest expenses
            
            
            547,505
            
            
            210,016Other
                operating expenses
            
            
            583,039
            
            
            548,233$
            1,484,744
            
            $
            1,260,721





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:




March
                31,2007
            
            December
                31,2006(unaudited)
            
            (audited)Payables
                for construction and machinery
            
            $
            74,666
            
            $
            132,928Non-interest
                bearing, unsecured borrowings without fixed repayment date
            
            
            1,574,625
            
            
            1,724,837$
            1,649,291
            
            $
            1,857,765




F-17





12.
            OTHER
                LOANS





Other
      loans consist of the following:




March
                31,2007
            
            December
                31,2006(unaudited)
            
            (audited)24%
                loans, without fixed repayment date
            
            $
            383,700
            
            $
            473,29718%
                loans, without fixed repayment date
            
            
            789,399
            
            
            789,51115%
                loans, without fixed repayment date
            
            
            208,477
            
            
            208,5078%
                loans, without fixed repayment date
            
            
            38,370
            
            
            38,375Interest-free
                loans, without fixed repayment date
            
            
            473,869
            
            
            345,379Total
                other loans
            
            
            1,893,815
            
            
            1,855,069Less
                current maturities
            
            
            (1,893,815
            )
            
            (1,855,069
            )Total
                long-term loans
            
            $
            -
            
            $
            -





All
      of
      the above other loans are unsecured and denominated in Renminbi.




13.
            SHARE
                CAPITAL





(a)
            Preferred
                stock





The
      Company as of March 31, 2007 and December 31, 2006 had 20,000,000 shares of
      authorized preferred stock, out of which 23,000 shares remain designated as
      Series A, $0.001 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-18





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 March 31, 2007 and December 31,
      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:




2007
            
            2006U.S.
                statutory rate
            
            
            34
            %
            
            34
            %Foreign
                income not recognized in the U.S.
            
            
            (34
            %)
            
            (34
            %)PRC
                Enterprise Income Tax
            
            
            33
            %
            
            33
            %Tax
                holiday
            
            
            -
            
            
            (33
            %)Tax
                holiday not recognized
            
            
            (33
            %)
            
            -Provision
                for income tax
            
            
            -
            
            
            -





Bestlink
      and FS had accumulated losses of $1,899,927 and $945,617 as of March 31, 2007,
      and 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-19




15.
            INCOME
                TAXES(Continued)





The
      net
      deferred tax amounts included in the Company’s balance sheets as of March 31,
      2007 and December 31, 2006 are as follows:




March
                31,2007
            
            December
                31,2006(unaudited)
            
            (audited)Deferred
                tax assets arising from net operating losses
            
            $
            939,000
            
            $
            811,000Less:
                Valuation allowance
            
            
            (939,000
            )
            
            (811,000
            )$
            -
            
            $
            -




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:




March
                31,2007
            
            December
                31,2006(unaudited)
            
            (audited)Trade
                receivables:Pinglu
                Changlong Tegang Lu Liao Co. Ltd., under control by Mr. Li Zhenguan,
                a
                director of PL
            
            $
            138,283
            
            $
            49,997Shanxi
                RongChang Trade Co. Ltd., under control of Mr. Beicang Hou, a director
                of
                the Company
            
            
            -
            
            
            2,795,985Pinglu
                Changsheng Stainless Steel Material Co. Ltd., under control of Mr.
                Ren
                Yaoting, a director of PL
            
            
            597,006
            
            
            -Shanxi
                Changchi Enterprise Co. Ltd., under control of Mr. Beicang Hou, a
                director
                of the Company
            
            
            1,458,865
            
            
            -$
            2,194,154
            
            $
            2,845,982


Trade
                payables:Shanxi
                Changchi Enterprise Co. Ltd., under control of Mr. Beicang Hou, a
                director
                of the Company
            
            $
            1,717,986
            
            $
            1,765,223Pinglu
                Changsheng Stainless Steel Material Co. Ltd., under control of Mr.
                Ren
                Yaoting, a director of PL
            
            
            1,826,279
            
            
            -Shanxi
                Haixin Material Trading Co. Ltd., under control of Mr. Beicang Hou,
                a
                director of the Company
            
            
            161,192
            
            
            161,215$
            3,705,457
            
            $
            1,926,438





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-20





16.
            RELATED
                PARTY TRANSACTIONS AND ARRANGEMENTS(Continued)





(b)
            Related
                party receivables and payables




March
                31,
              2007
            
            December
                31, 2006(unaudited)
            
            (audited)Amounts
                due from related parties:Pinglu
                Changsheng Stainless Steel Material Co. Ltd., under control of Mr.
                Ren
                Yaoting, a director of PL
            
            $
            1,957,629
            
            $
            3,033,603Mr.
                Ren Yaoting, a director of PL
            
            
            343,719
            
            
            343,767$
            2,301,348
            
            $
            3,377,370


Amount
                due to related parties:Shanxi
                Changchi Enterprise Co. Ltd., under common control of Mr. Beicang
                Hou, a
                director of the Company
            
            $
            -
            
            $
            476,404Mr.
                Beicang Hou, CEO and director of the Company
            
            
            1,629,852
            
            
            1,435,847Mr.
                Li Zhenguan, a director of PL
            
            
            -
            
            
            -$
            1,629,852
            
            $
            1,912,251





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





Three
                months ended
              March
                31,2007
            
            2006(unaudited)
            
            (unaudited)Sales
                to related parties:Shanxi
                Changchi Enterprise Co. Ltd., under control of Mr. Beicang Hou, a
                director
                of the Company
            
            $
            5,551,055
            
            $
            4,536,338Pinglu
                Changlong Tegang Lu Liao Co. Ltd., under control of Mr. Li Zhenguan,
                a
                director of PL
            
            
            47,346
            
            
            -Pinglu
                Changsheng Stainless Steel Material Co. Ltd., under control of Mr.
                Ren
                Yaoting, a director of PL
            
            
            944,350
            
            
            -$
            6,542,751
            
            $
            4,536,338





F-21





16.
            RELATED
                PARTY TRANSACTIONS AND ARRANGEMENTS(Continued)





Three
                months ended
              March
                31,2007
            
            2006Purchases
                from related parties:
            
            
            (unaudited
            )
            
            (unaudited
            )Shanxi
                Changchi Enterprise Co. Ltd., under control of Mr. Beicang Hou, a
                director
                of the Company
            
            $
            5,290,016
            
            $
            3,566,641Pinglu
                Changsheng Stainless Steel Material Co. Ltd., under control of Mr.
                Ren
                Yaoting, a director of PL
            
            
            3,499,289
            
            
            -$
            8,789,305
            
            $
            3,566,641








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-22





19.
            LEGAL
                PROCEEDINGS





We
      are presently a party 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, Terrence Sien and Brian Brick. Both
      lawsuits concern events related to or that transpired from a share exchange
      transaction we entered into with Alpha Sky Investment Limited (“ASI”), a
      British Virgin Islands company in 2001 (the “ASI Share Exchange
      Transaction”).





Tridon
      Trust (“Tridon”), a shareholder of the Company, is a plaintiff in both the
      Colorado Lawsuit and the California Lawsuit,, and Paul Ebeling, a former officer
      and director of the Company, may occupy a position of management with Tridon.
      Two of the Company’s former directors, Xuedong Hu and Jian Wang, are defendants
      in the Colorado Lawsuit, and Mr. Hu is also a defendant in the California
      Lawsuit.




On
      or
      about September 28, 2004, Messrs. Brick and Sien, two of the Company’s then
      directors, allegedly gave notice to the remaining two directors, Messrs. Wang
      and Hu, that the board would hold a special meeting October 1, 2004. Messrs.
      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 Mesrs.
      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 filing
      of
      the Colorado Lawsuit on November 29, 2004, and adjourning and reconvening the
      board meeting to October 15, 2004.





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.





**The
      Colorado Lawsuit.**





On
      March
      18, 2005, the Colorado District Court Judge entered an order in open court
      (the
“Order”), the substance of which is attached to our Form 8-K filed with the SEC
      on or about April 7, 2005. In summary, the Order directed that a special meeting
      of the shareholders be held and affirmed Mr. Hu’s right to vote at the meeting
      as a shareholder. The Order also dismissed two of the claims asserted in
      Tridon’s complaint. The Order was reduced to writing (the “Written Order”), and
      the Judge signed the Written Order on March 30, 2005. On March 25, 2005, Tridon
      filed a voluntary notice of dismissal of its claims in the Colorado Lawsuit.
      Subsequent to the Written Order on March 30, 2005, Tridon filed a motion asking
      the Court to vacate its Order and declare that it lacked jurisdiction as a
      result of the notice of dismissal. In the filings, Tridon claimed that its
      voluntary notice of dismissal removes the Court's authority to sign the Written
      Order, and that the Order was not valid until it was reduced to writing and
      signed. Mr. Hu, Mr. Wang, and ASI filed responses to the Tridon filings, arguing
      that the Written Order entered by the Court remains valid. On May 11, 2005,
      the
      Court issued a second order (the “Second Order”) stating that the Order was
      entered March 18, 2005, prior to Tridon’s voluntary dismissal, and that the
      Court retained jurisdiction to sign and enforce the Written Order.




F-23




Tridon
      filed a Notice of Appeal with the Colorado Court of Appeals (the “Appellate
      Court”) on June 15, 2005. 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. In its brief to the Appellate
      Court, Tridon argues that the lower court lacked any jurisdiction to sign the
      Written Order. In response, Mr. Hu, Mr. Wang and ASI submitted a brief asking
      the Appellate Court to affirm the lower court’s orders.





On
      February 22, 2007, the Appellate Court partially affirmed the Order, agreeing
      with the lower court with respect to the special meeting of the shareholders.
      We
      interpret this ruling to mean that the actions we have taken since the issuance
      of the Order, including the special meeting of the shareholders and the
      subsequent Merger with EGIG, were validly undertaken. However, the Appellate
      Court invalidated and vacated the portion of the Order dismissing Tridon’s two
      causes of action. A copy of the Appellate Court’s ruling is attached as an
      exhibit to our Current Report on Form 8-K filed with the Securities &
Exchange Commission (“Commission”) on March 16, 2007.




On
      or
      about March 8, 2007, Tridon filed a Petition for Rehearing with the Appellate
      Court. As of the date of this report, the Petition for Rehearing is still
      pending. 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 Tridon’s petition.





**The
      California Lawsuit**





The
      California Lawsuit was filed by Tridon on May 3, 2005 with the Federal District
      Court located in Los Angeles, California, and originally sought damages for
      alleged fraud and misrepresentations leading up to the closing of the ASI Share
      Exchange Transaction and sought to rescind the agreement underlying the ASI
      Share Exchange Transaction. Alpha Spacecom Company Limited (“ASCL”), which was a
      subsidiary of the Company as a result of the ASI Share Exchange Transaction,
      was
      also named as a defendant.





In
      response, Mr. Hu and ASCL filed a motion to dismiss Tridon’s complaint in its
      entirety. Prior to the date set for hearing, the attorney representing Tridon
      filed a First Amended Complaint on behalf of Tridon and purportedly on behalf
      of
      the Company. The First Amended Complaint changed all of the claims alleged
      in
      the complaint, dismissed ASI and ASCL as defendants, and added the Company
      as a
      plaintiff and the Securities and Exchange Commission (“SEC”) as a defendant
      (although the SEC has since been dismissed as a defendant). We did not, however,
      authorize the California Lawsuit.





The
      First
      Amended Complaint seeks to have the Court declare invalid the actions that
      were
      taken at a special meeting of our shareholders on June 13, 2005, based upon
      allegations that the Notice of Meeting & Proxy Statements issued by us for
      the special meeting was not properly sent to all shareholders of record and
      failed to contain a copy of our annual report. Additionally, while the First
      Amended Complaint does not ask the Court to make any determination of stock
      ownership, it nevertheless contains allegations regarding the ownership rights
      in approximately 9,555,553 shares of our Series B preferred convertible stock
      (the “Series B Preferred Shares”) previously issued pursuant to the ASI Share
      Exchange Transaction. Specifically, the First Amended Complaint asserts that
      Mr.
      Ebeling, a former officer and director of the Company when it was known as
      Tridon Enterprises, obtained ownership of the Series B Preferred Shares. Mr.
      Ebeling is not a party to the California Lawsuit and has not filed any action
      in
      any court seeking to declare ownership in the Series B Preferred
      Shares.




F-24




In
      response to the First Amended Complaint, Mr. Hu 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. The Court has continued the hearing
      for this motion, originally scheduled for September 18, 2006, to October 2,
      2008, and has taken Mr. Hu’s motion under advisement. Essentially, the Court is
      staying the California Lawsuit pending the final decision of the Appellate
      Court
      in the Colorado Lawsuit, and as of the date of the issuance of these financial
      statements, the stay is in effect. If the outcome of the Colorado Lawsuit favors
      the defendants, the California Lawsuit can be dismissed.





If
      the
      Court in either of the Colorado Lawsuit or the California Lawsuit ultimately
      finds for the plaintiffs, a range of remedies, including those under equitable
      (fairness) theories, may be imposed. At the present time, we do not know what
      relief might be imposed in that event, but it could include voiding the actions
      taken at the special meeting of the shareholders on June 15, 2005 as well as
      the
      Merger. As neither matter has been fully litigated at this time, however, the
      Company believes that shareholders and potential investors should not rely
      on
      Tridon’s allegations, including those relating to the Series B Preferred
      Shares.





**The
      Series B Preferred Shares**





Mr.
      Ebeling’s ownership claim over the Series B Preferred Shares is in direct
      conflict with the Court’s orders that are in place in the Colorado Lawsuit. Mr.
      Ebeling claims to have acquired ownership of the Series B Preferred Shares
      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 the Company. The March 2005 press release states that 9.55
      million shares of the Series B Convertible Preferred Stock were returned by
      an
      individual to the Company and cancelled. The April 2005 press release states
      that the Series B Preferred Shares were 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 Mr. Ebeling with the SEC, prior press releases issued
      through PR Newswire or information contained the Company’s web site, as it is
      not under the control of our current management.





The
      Company has recently received a request to convert some shares of Series B
      Convertible Preferred stock from a representative associated with Tridon. As
      these shares do not appear to have been lawfully issued, the Company has
      declined to convert them to common stock and has requested these purported
      shareholders to provide information concerning the issuance of these shares.
      As
      of the date of the issuance of these financial statements, 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-25




**Item
      2.**  **Management’s
      Discussion and Analysis of Financial Conditions and Results of
      Operation**





**General** **Forward Looking Statements**





Certain
      statements in the Management’s Discussion and Analysis (“MD&A”), other than
      purely historical information, including estimates, projections, statements
      relating to our business plans, objectives and expected operating results,
      and
      the assumptions upon which those statements are based, are “forward-looking
      statements” within the meaning of the Private Securities Litigation Reform Act
      of 1995, Section 27A of the Securities Act of 1933 and Section 21E of
      the Securities Exchange Act of 1934. These forward-looking statements generally
      are identified by the words “believe,” “project,” “expect,” “anticipate,”
“estimate,” “intend,” “strategy,” “plan,” “may,” “should,” “will,” “would,”
“will be,” “will continue,” “will likely result,” and similar expressions.
      Forward-looking statements are based on current expectations and assumptions
      that are subject to risks and uncertainties which may cause actual results
      to
      differ materially from the forward-looking statements. A detailed discussion
      of
      risks and uncertainties that could cause actual results and events to differ
      materially from such forward-looking statements is included in the section
      entitled “Risk Factors” (refer to Part II, Item 1A). We undertake no
      obligation to update or revise publicly any forward-looking statements, whether
      as a result of new information, future events, or otherwise.




As
      used
      in this Form 10-Q, unless the context requires otherwise, “we” or “us” or
“Beicang” or the “Company” means Beicang Iron & Steel, Inc. and its
      subsidiaries.





**Overview**





Beicang
      Iron & Steel, Inc. (“Beicang” or the “Company”), was incorporated in
      Colorado under the name “Turco Computer Systems, Inc.” 1993. In February 2002,
      the Company changed its name to “Alpha Spacecom, Inc.” In June 2005, the Company
      reincorporated as a Nevada corporation after merging with our wholly owned
      subsidiary, Alpha Spacecom, Inc., a Nevada corporation. In October 2006, the
      Company further changed its name to “Beicang Iron & Steel, Inc.” to reflect
      its current business operations. We are in the refinery business, producing
      ferrochromium alloy and pelletized ores, which are raw materials for making
      steel and iron.





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. Upon the closing of the Merger, and the former sole shareholder of
      EGIG
      beneficially own approximately 90% of the issued and outstanding shares of
      our
      common stock.





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”), which produces
      ferrochromium alloy, and Fanshi County Xinyu Iron Resources Co., Ltd. (“FS”),
      which produces pelletized ores. Accordingly, the Company consolidates the
      results, assets and liabilities of PL and FS in the accompanying financial
      statements.






4


**Recent
      Developments**





During
      the first quarter of fiscal year 2007 and continuing through May 18, 2007,
      we
      have experienced fluctuation in our operations at FS and PL. Due to the steep
      rise in the price of iron ore (the source material for our primary raw material)
      beginning in February 2007, FS experienced high production costs and operative
      losses for the three months ended March 31, 2007, despite increased volume
      in
      production and sales of pelletized ores. As a result, FS stopped producing
      pelletized ores beginning April 1, 2007 to avoid further operative losses,
      and
      is instead undergoing a technique innovation program and undertaking equipment
      repairs and maintenance. As of May 18, 2007, FS has not restarted its production
      of pelletized ores. However, we expect the price of iron ores to normalize
      after
      June 2007, and plan to start production at FS immediately thereafter. At such
      time, we expect that our production results will benefit from the technique
      innovation program and the repairs and maintenance that we are currently
      implementing.





During
      the first quarter of fiscal year 2007, PL produced ferrochromium alloy from
      the
      two 6,300 kilo volt-amp (KVA) ore-heating furnaces that we own, but not from
      the
      12,500 KVA ore-heating furnace that we were leasing while we were negotiating
      with its owner, Yuncheng Yunneng Electric-power Industrial Co., Ltd.
      (“Yunneng”), to renew the lease. As of May 18, 2007, we continued to negotiate
      with Yunneng. Prices of raw materials for ferrochromium alloy also saw sharp
      rises during January and February of 2007, resulting in increased production
      costs for and operative losses by PL during these two months. PL’s revenue in
      March 2007, however, made up for the earlier losses, and we expect PL’s revenue
      to continue improving in the second quarter of 2007. We also anticipate on
      renewing the lease with Yunneng sometime during the second quarter of 2007,
      after which time PL’s production of ferrochromium alloy can be expected to
      increase 1,200 tons monthly, which will greatly increase PL’s
      profitability.




**Currency
      Conversion and Exchange**




The
      value
      of Renminbi (“RMB”) against the U.S. dollar and other currencies may fluctuate
      and is affected by, among other things, changes in political and economic
      conditions. Since 1994, the conversion of RMB into foreign currencies, including
      U.S. dollars, has been based on rates set by the People’s Bank of China, or
      PBOC, which are set daily based on the previous day’s PRC interbank foreign
      exchange market rate and current exchange rates on the world financial markets.
      Since 1994, the official exchange rate for the conversion of RMB to U.S. dollars
      has generally been stable.




On
      July 21, 2005, however, PBOC announced a reform of its exchange rate
      system. Under the reform, RMB is no longer effectively linked to US dollars
      but
      instead is allowed to trade in a tight 0.3% band against a basket of foreign
      currencies. If the RMB were to increase in value against the U.S. dollar, for
      example, mainland Chinese consumers would experience a reduction in the relative
      prices of goods and services, which may translate into a positive increase
      in
      sales. On the other hand, a decrease in the value of the RMB against the dollar
      would have the opposite effect and may adversely affect our results of
      operations. Any significant revaluation of RMB may materially and adversely
      affect our cash flows, revenues, earnings and financial position, and the value
      of, and any dividends payments. For example, an appreciation of RMB against
      the
      U.S. dollars 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.





**Critical
      Accounting Policies and Estimates**





See
      Note
      3 of the Notes to Condensed Consolidated Financial Statements
      (unaudited).






5


**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.





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 - Three Months ended March 31, 2007 as Compared to Three Months
      Ended March 31, 2007**





Three
                Months EndedMarch
                31,
            
            2007
            
            2006
            
            ChangeRevenues
            
            $
            10,753,625
            
            $
            10,718,691
            
            
            0.32
            %Cost
                of goods sold
            
            
            (10,360,292
            )
            
            (8,940,346
            )
            
            15.88
            %Gross
                profit
            
            
            393,333
            
            
            1,778,345
            
            
            (77.88
            )%Selling
                expenses
            
            
            (246,768
            )
            
            (201,390
            )
            
            22.53
            %Research
                and development expenses
            
            
            25,836
            
            
            0
            
            
            100
            %General
                and Administrative Expenses
            
            
            (307,084
            )
            
            (793,178
            )
            
            (61.28
            )%Net
                Income
            
            
            (396,427
            )
            
            880,689
            
            
            (145
            )%






6





***Sales*** *.* During
      the first quarter of 2007, sales increased from $10.72 million to $10.75
      million, representing an increase of 0.32% compared to the first quarter of
      2006. The increase in sales was primarily attributable to our business operation
      at FS. As the result of improved efficiency both in our pelletized ore
      production and cash flow management, we produced, and sold, more pelletized
      ores
      during the first quarter of 2007 as compared to the same period last year.
      On
      the other hand, we produced less ferrochromium alloy in the first quarter of
      2007 as compared to the same period in 2006, as PL operated the two 6,300 kilo
      volt-amp (KVA) ore furnaces that we own while production from the leased 12,500
      KVA ore furnace ceased pending negotiations for the continuation of the lease
      of
      this furnace. Consequently, our sales of ferrochromium alloy decreased as we
      had
      less of this product to sell in the first quarter of 2007 as compared to the
      first quarter of 2006.





***Cost
      of Sales*** *.* Cost
      of
      sales increased from $8.94 million to $10.36 million in the first quarter of
      2007 as compared to the same period in 2006, primarily due to the dramatic
      price
      increases for some of our raw materials, specifically refined iron mine powder,
      a key component of pelletized ores, and chromium ores, the principle ingredient
      of ferrochromium alloy. Cost of sales as a percentage of net sales, increased
      from 83.41% in the first quarter of 2006 to 96.34% in the first quarter of
      2007
      because we maintained the pricing of our products despite the increase in our
      cost of goods.





***Operating
      Expenses*** *.*  Total
      operating expenses decreased 44.31% to $553,852 in the first quarter of 2007,
      from $994,568 in the first quarter of 2006, as our increases in selling expenses
      and in research and development expenses were offset by a significant decrease
      in general and administrative expenses.





Selling
      expenses increased 22.53% to $246,768 in the first quarter of 2007, from
      $201,390 in the first quarter of 2006, in order to maintain our competitiveness
      in the marketplace. We produced and shipped more pelletized ores during the
      period ended March 31, 2007 than during the same period in 2006, thereby
      incurring more transportation and related costs.





Research
      and development expenses increased 100% to $25,836 in the first quarter of
      2007,
      from $0 in the first quarter of 2006, as we acquired equipments and materials
      to
      work on improving our production techniques and efficiency.





General
      and administrative expenses decreased 61.28% to $307,084 in the first quarter
      of
      2007, from $793,178 in the first quarter of 2006 because of reduced spending
      in
      certain office expenses including travel and communication. In addition,
      expenses associated with being a public company and related professional
      expenses were less for the first quarter of 2007 as compared to the same period
      in 2006.




***Net
      (*** ***Loss*** ***)
      /Profit*** ***.*** ****** We
      recorded a net loss
      of $396,427
      in the first quarter of 2007, or basic and diluted loss of $0.00039 per share,
      as compared to net profit
      of $880,689
      in the same period of 2006, or basic and diluted profit
      of $0.001
      per share.






7




**Liquidity
      and Capital Resources**





***Cash
      Flows*** *.* We have
      funded our operations through the first quarter of 2007 primarily through
      shareholder’s paid in capital and raw materials provided by related parties,
      Shanxi Changchi Enterprise Limited (“Changchi”), which is under the control of
      Mr. Beicang Hou, our CEO and Chairman,, and Pinglu Changsheng Stainless Steel
      Material Co., Ltd. (“Changsheng”), which is under the control of Mr. Yaoting
      Ren, a director of PL, Net cash flow used in operations was $445,962 in the
      first quarter of 2007, as compared to net cash flow of $1,320,586 provided
      by
      operations in the first quarter of 2006. Use of cash flow was primarily related
      to purchase of raw materials.





Net
      cash
      flow provided by investing activities was $760,468 for the first quarter of
      2007
      as compared to $2,327,713 used in investing activities for the first quarter
      of
      2006. Net cash flow provided by investing activities related to repayment from
      related parties.





For
      the
      first three months of 2007, net cash flow used in financing activities was
      approximately $243,653, as compared to $1,713,794 in net cash flow provided
      by
      financing activities during the same period of 2006 Net cash flow used in
      financing activities relate to _repayment to related parties.





***Working
      Capital Requirements*** .
      Current
      liabilities exceed current assets at March 31, 2007 by approximately $4,129,793,
      an increase of $596,188 from December 31, 2006. The ratio of our current assets
      to our current liabilities was 69.779% at March 31, 2007 and it was 74.41%
      at
      December 31, 2006. At March 31, 2007, our current assets of approximately
      $9,530,860 included approximately $903,554 in inventory that was funded by
      advance from related parties and paid-in capital from shareholders.




***Off-Balance
      Sheet Arrangements*** .
      We do
      not have any off-balance sheet arrangements that have or are reasonably likely
      to have a material current or future effect on our financial condition, changes
      in financial condition, revenues or expenses, results of operations, liquidity,
      capital expenditures or capital resources.




8




**Effect
      of Fluctuation in Foreign Exchange Rates**





Our
      operating subsidiaries are located in China, and our Company buys all raw
      materials in China and sells all our products in China using Chinese Renminbi
      as
      the functional currency. The Company had other comprehensive income of $1,944
      and $6,820 for the periods ended March 31, 2007 and 2006, respectively, as
      a
      result of changes in foreign currency exchange rates.





**Inflation**





Although
      management expects that our operations are influenced by general economic
      conditions, we do not believe that inflation had a material effect on the
      results of operations during the three month period ended March 31,
      2007.





**ITEM
      3.**  **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, 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 March 31, 2007, we had approximately $548,772 million in cash
      and
      cash equivalents. A hypothetical 6,39%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 (“RMB”). The translation of RMB amounts into
      US dollars are for reference purposes only. The People’s Bank of China, or PBOC,
      sets and publishes daily a base exchange rate with reference primarily to the
      supply and demand of RMB against the US dollar in the market during the prior
      day. PBOC 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 RMB into foreign currency for current amount items, conversion
      of RMB 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. RMB 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. PBOC also announced that the RMB
      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 RMB amounts
      in
      this report on Form 10-Q is not a representation that the RMB amounts could
      actually be converted into US 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 PBOC or other banks authorized to buy and sell foreign
      currencies at the exchange rates quoted by PBOC. Approval of foreign currency
      payments by PBOC 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.”






9


**Item
      4. Controls and Procedures.**





***Disclosure
      Controls and Procedures***





As
      of the
      end of the period covered by this quarterly report, we carried out an
      evaluation, under the supervision of, and with the participation of our
      management, including our Chief Executive Officer who is also our Chief
      Financial Officer, of the effectiveness of the Company’s disclosure controls and
      procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
      Securities Exchange Act of 1934, as amended) as of the end of the period covered
      by this report. Based on that evaluation, our Chief Executive Officer, who
      is
      also our Chief Financial Officer, has concluded that, as of the end of the
      period covered by this report, our disclosure controls and procedures were
      effective to enable us to record, process, summarize and report information
      required to be included in our reports that we file or submit under the Exchange
      Act within the time periods required.





***Changes
      in Internal Control over Financial Reporting***





There
      were no changes in our internal control over financial reporting (as defined
      in
      Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as
      amended) during the quarter ended March 31, 2007 that have materially
      affected, or are reasonably likely to materially affect our internal control
      over financial reporting.





**PART
      II - OTHER INFORMATION**





**Item
      1. Legal Proceedings**





There
      have been no material changes to the Legal Proceedings described in Form 10-KSB
      filed May 18, 2007 except as noted in Footnote 18 to the financial statements
      in
      this document.




**Item
      1A. Risk Factors**





There
      have been no material changes in our business, operations or prospects that
      would require a change to the Risk Factor disclosure included in our most recent
      Annual Report on Form 10-KSB that have not already been disclosed.





**Item
      2. Unregistered Sales of Equity Securities and Use of Proceeds.**





None.





**Item
      3. Defaults upon Senior Securities.**





None.





**Item
      4. Submission of Matters to a Vote of Securities Holders.**





None.




10




**Item
      5. Other Information** .





None.





**Item
      6. Exhibits**




ExhibitNumber
              
              Description2.1
              
              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 for Fanshi County Xinyu Iron Resource Co.,
                  Ltd.
                  dated January 5, 2006 (Filed herewith)10.2
              
              Option
                  Agreement for Fanshi County Xinyu Iron Resource Co., Ltd. dated
                  January 5,
                  2006 (Filed herewith)10.3
              
              Loan
                  Agreement for Fanshi County Xinyu Iron Resource Co., Ltd. dated
                  January 5,
                  2006 (Filed herewith)10.4
              
              Operating
                  and Service Agreement for Pinglu County Changhong Ferroalloy Co.,
                  Ltd.
                  dated January 5, 2006 (Filed herewith)10.5
              
              Option
                  Agreement for Pinglu County Changhong Ferroalloy Co., Ltd. dated
                  January
                  5, 2006 (Filed herewith)10.6
              
              Loan
                  Agreement for Pinglu County Changhong Ferroalloy Co., Ltd. dated
                  January
                  5, 2006 (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.)




11


**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the Company caused this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




**BEICANG
              IRON & STEEL, INC.**(Registrant)Date: May
              21,
              2007
            By:
            /s/ Beicang
              HouBeicang
                Hou
              Chief
                Executive Officer,
              Chief
                Financial Officer,
              and
                sole Director




12