UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549

                                   FORM 10-KSB

(Mark One)

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

                                   For the fiscal year ended September 30, 2006

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                                   For the transition period from ____ to ____

                                   Commission File Number 000-32875

                         ALLOY STEEL INTERNATIONAL, INC.
                 (Name of small business issuer in its charter)

                Delaware                                    98-0233941
     (State or other jurisdiction of                     (I.R.S. Employer
      incorporation or organization)                    Identification No.)

           42 Mercantile Way
      P.O. Box 3087 Malaga D C 6945
           Western Australia
 (Address of principal executive offices)

Issuer's telephone number:  +61 (8) 9248 3188

Securities registered under Section 12(b) of the Exchange Act:       None

Securities registered under Section 12(g) of the Exchange Act:    Common stock,
                                                                 $0.01 par value

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

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 for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.  Yes:  [X]   No:  [ ]

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

The issuer's revenues for the fiscal year ended September 30, 2006 was
$3,386,083.

The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
sold, or the average bid and asked price of such common equity, as of November
30, 2006 was $4,576,500.

As of November 30, 2006, the issuer had a total of 16,950,000 shares of common
stock outstanding.

Transitional Small Business Disclosure Format (check one):

Yes  [ ]  No  [X]

Indicate by check mark whether the registrant is a shell company (as defined by
Rule 12b-2 of the Exchange Act).
Yes: [ ]  No: [X]


<PAGE>
                                     PART I

FORWARD-LOOKING STATEMENTS

     Information included or incorporated by reference in this filing may
contain forward-looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act.  This information may
involve known and unknown risks, uncertainties and other factors which may cause
our actual results, performance or achievements to be materially different from
the future results, performance or achievements expressed or implied by any
forward-looking statements.  Forward-looking statements, which involve
assumptions and describe our future plans, strategies and expectations, are
generally identifiable by use of the words "may," "will," "should," "expect,"
"anticipate," "estimate," "believe," "intend" or "project" or the negative of
these words or other variations on these words or comparable terminology.

     This filing contains forward-looking statements, including statements
regarding, among other things, (a) Alloy Steel's projected sales and
profitability, (b) Alloy Steel's growth strategies, (c) anticipated trends in
Alloy Steel's industry, (d) Alloy Steel's future financing plans and (e) Alloy
Steel's anticipated needs for working capital. These statements may be found
under "Management's Discussion and Analysis or Plan of Operation" and
"Description of Business," as well as in this filing generally.  Actual events
or results may differ materially from those discussed in forward-looking
statements as a result of various factors.  In light of these risks and
uncertainties, there can be no assurance that the forward-looking statements
contained in this filing will in fact occur.  In addition to the information
expressly required to be included in this filing, Alloy Steel will provide such
further material information, if any, as may be necessary to make the required
statements, in light of the circumstances under which they are made not
misleading.

ITEM 1. DESCRIPTION OF BUSINESS.

     Alloy Steel International, Inc. was incorporated in Delaware in May 2000.
Our principal executive office is located at 42 Mercantile Way, Malaga, Western
Australia 6945.  Our telephone number is +61 (8) 9248 3188, our facsimile is +61
(8) 9248 3166.  Our Email is info@alloysteel.net and our Internet address is
www.alloysteel.net.

     OVERVIEW OF BUSINESS

     We manufacture and distribute Arcoplate, a wear-resistant alloy overlay
wear plate produced through a patented process.  We believe that wear is the
largest single factor leading to production losses in the mining,
mineral-processing, and steel manufacturing industries. Consequently, wear
solutions are indispensable for these businesses.  The wearing of metal parts is
generally defined as a gradual decay or breakdown of the metal.  This wear of
equipment may be due to many causes and accordingly, the selection of wear plate
solutions can be a relatively complex process.

     In order to minimize the effects of wear, businesses have traditionally
employed such wear-combating materials as rubber compounds, ceramics, alloy
castings, welded overlay wear plates, and quenched and tempered carbon steel
plates.  We believe that each of these materials offer a limited solution to the
problem of wear.  While tungsten carbide is generally recognized by the mining,
mineral-processing and steel manufacturing industries as the most wear-resistant
material suitable for industrial use, because of its high carbide content, we
believe that the high costs associated with tungsten carbide make it impractical
for most businesses.  We believe that Arcoplate provides industry with solutions
to most wear-related problems at a cost which is competitive with conventional
welded overlay wear plates and substantially lower than tungsten carbide.

     Arcoplate

     The patented process by which we manufacture Arcoplate enables us to
smoothly and evenly apply an alloy overlay to a sheet of steel, creating a
metallurgical bond between the alloy and the steel backing plate that is
resistant to wear caused by impact and/or abrasion.    We believe that our
Arcoplate product line will substantially lower down time and the lost
production resulting from this down time.

     Conventional welded wear plates have been used in the manufacturing, mining
and construction industries for more than half a century and they are
characterized by several functional limitations:

     -    the tendency to separate into chips or fragments when subjected
          to high impact;


                                        1
<PAGE>
     -    uneven base metal dilution resulting in uneven alloy content; and

     -    rough surfaces which result in poor material flow.

     We believe Arcoplate has properties that allow it to overcome the
limitations of conventional welded wear plates.  Independent laboratory and
field tests, have shown that Arcoplate provides a wear-resistant barrier
superior to that provided by conventional single or multiple-layer wear plates.
This is because of its higher carbide content and smoother surface layer.
Arcoplate wear plate sheets also can withstand rolling and pressing, within
specified fabrication guidelines.

     The claims with respect to the properties of Arcoplate, such as bond
strength, specific hardness, density, hardness, resonance and wear resistance,
have been subjected to studies and testing, by independent laboratories,
universities and other recognized testing facilities, including Aust-Amet Pty
Ltd and Central Power Research Institute of Bangalore India. Commercial fees
were paid to Aust-Amet Pty Ltd while no fees were paid to the Power Research
Institute of Bangalore and the National Research Council of Canada.

     Arcoplate is designed for installation and use where structures and
machinery suffer wear and "hangup" problems. Common situations are:

     -    the mining of iron, gold, nickel, coal, copper and other ores;

     -    brick and cement works;

     -    power stations;

     -    the manufacture of ore feed bins, transfer chutes, dredging
          systems and conveyor side skirts;

     -    bulldozer arms and blades; and

     -    truck tray liners and bucket loader liners.

     Arcoplate is manufactured in a range of grades designed for specific
applications.  Our products are designed for ease of handling and can be
fabricated to suit our customers' specific requirements of shape, size and
weight.  Sheets of Arcoplate can be welded together to cover large surface
areas.  We also provide technical consultation services to customers and their
design engineers.

     We believe that our proprietary method of manufacturing Arcoplate results
in a product that has many technical advantages over conventional welded wear
plates.  Conventional welded wear plates are generally characterized by
structural weaknesses and limited wear resistance resulting from inefficient
production methods.  In order to achieve a wear-resistant, flat surface, a
conventional wear plate must be rolled and pressed after its layers of
hardfacing have been welded together.  This post-production rolling and pressing
can result in a weakened surface structure that cannot withstand high impact
conditions.  The Arcoplate process does not require post-production rolling and
pressing.  During the Arcoplate process, the plate is coated with the desired
alloy thickness in one application, resulting in a uniform and, therefore,
structurally sound surface.  The Arcoplate process maintains a high carbide
content in the overlay, which makes the plate more wear resistant than
conventional welded wear plate.

     Arcoplate products are currently distributed to customers in the United
States, South America, India, Indonesia, Singapore, South Africa, Japan, China,
Canada, Malaysia and other countries as well as being extensively used in the
mining industry in Australia.

     3-D PIPEFITTING CLADDER PROCESS

     We have recommenced the development of  the 3-D Pipefitting Cladder
process. This has been badly delayed however due to the shortage of suitable
engineering staff in Australia who would be able to work on the project. This is
a computer-driven and software-based mechanical system for depositing a profiled
layer of wear resistant alloy onto interior surfaces of pipefittings, used in
the dredging, mining, mineral processing, coal-fired power generation, cement
manufacturing, and oil refinery industries.  Due to their angled and/or curved
structures, material does not flow uniformly


                                        2
<PAGE>
through pipefittings, meaning pipefittings generally have higher wear, resulting
in a much shorter working life, than ordinary straight pipe.

     The 3-D Pipefitting Cladder process under development will be based upon
the patented production process we use to make Arcoplate and will enable a wear
resistant alloy coating to be applied to interior surfaces of pipefittings at
the point where wear is most likely to occur. We believe that the 3-D
Pipefitting Cladder process will overcome many of the problems associated with
pipefitting wear and greatly reduce production losses due to down time and pipe
replacement.

     With the new Arcoplate production machine now completed and operational
engineering time is now being spent on development of the 3-D Pipefitting
Cladder process.

     SALES AND MARKETING STRATEGY

     The company's objective is to become an international market leader in
wear-resistant alloy steel products and to establish significant market share
and brand awareness for Arcoplate within the mining, mineral-processing and
steel industries. We believe that we can capitalize on our existing patented
process for producing Arcoplate through the direct manufacture and sale of
Arcoplate-based products to original equipment manufacturers and distributors
worldwide.  We are establishing market presence by visiting international and
domestic trade shows, presenting technical papers at industry conferences, and
appointing distributors who will be trained to present and promote Arcoplate
products as a solution for wear-related problems.

     In the year ended September 30, 2006, one customer accounted individually
for at least 10% of our annual sales.

     We anticipate incurring increased expenditures in connection with our
marketing activities.  Our marketing activities are also expected to include
substantial engineering support to assist in the development of products for
specific customer requirements and certain markets.

     We are marketing Arcoplate products to consultant engineering companies
both internationally and in Australia in order that they may ultimately
incorporate Arcoplate materials into their equipment and plant designs.  We will
offer the services of our own engineering department to assist these engineers
with design planning to optimize solutions for wear and material flow
situations.

     INTELLECTUAL PROPERTY

     We believe that protection of our licensed proprietary technology and
know-how is critical to the development of our business.  We have obtained
patents for process in United States, Mexico, Brazil, Canada, Japan, Burma,
South Korea, Australia, France, Germany, Great Britain, Greece, Italy, Belgium,
Netherlands and Sweden.  We do not yet have intellectual property protection for
the 3-D Pipefitting Cladder process.  We cannot assure you that our existing
patent rights, or any other patent rights that may be granted, will be valid and
enforceable or provide us with meaningful protection from competitors.  We
cannot assure you that any pending patent application will issue as a patent, or
that any claim thereof will provide protection against infringement.  If our
present or future patent rights are ineffective in protecting us against
infringement, our marketing efforts and future revenues could be materially and
adversely affected.  In addition, if a competitor were to infringe our patent
rights, the costs of enforcing our patent rights may be substantial or even
prohibitive.

     RESEARCH AND DEVELOPMENT

     We are continually engaged in the development of new products and
improvements to our existing products.

     MANUFACTURING AND SUPPLY

     The raw materials we employ are principally steel and a proprietary alloy
compound.  We presently purchase steel plate and alloy materials from various
suppliers.  Four of our suppliers, Cometals, Intersteel Pty Ltd, A & C Trading
(WA) Pty Ltd and Bisley & Company Pty Ltd, account for more than 55% of the raw
material we require.  We also rely heavily on the use of fluxes, compounds
designed to remove impurities, during the manufacturing process.  We purchase
our


                                        3
<PAGE>
requirements for fluxes from various suppliers.  We cannot assure you that we
will be able to continue to obtain desired quantities of steel, alloy materials
and fluxes on a timely basis at reasonable prices and upon favorable terms.  We
monitor the quality of our products by frequent tests and material
certification, and maintain a strict internal quality control system to monitor
the quality of production.

     GOVERNMENT REGULATION

     The Arcoplate manufacturing plant is subject to many laws and regulations
relating to the protection of the environment.  These laws and regulations
impose requirements concerning, among other matters, the treatment, acceptance,
identification, storage, handling, transportation and disposal of industrial
by-products, hazardous and solid waste materials, waste water, air emissions,
noise emissions, soil contamination, electromagnetic radiation, surface and
groundwater pollution, employee health and safety, operating permit standards,
monitoring and spill containment requirements, zoning, and land use.  We
frequently examine ways to minimize any impact on the environment and to effect
cost savings relating to environmental compliance.  Our management believes that
we are in material compliance with all applicable environmental laws and that
our products and processes do not present any unusual environmental concerns.

     Our operations are also governed by laws and regulations relating to
workplace safety and health, principally under the Australian Occupational
Safety and Health Act -- 1984 (WA), which, among other requirements, establish
employee training, supervision and general safety standards.  Our management
believes that we are in material compliance with all applicable workplace safety
and health laws and that our products and processes do not present any unusual
safety concerns.

     We require, and must comply with, various authorizations, permits and
licenses to conduct our operations.  Government agencies continually monitor our
compliance with authorization, permits and licenses and our facilities are
subject to periodic unannounced inspection by local, state and federal
authorities.  Violations of any permit or license, if not remedied, could result
in our incurring substantial fines, or suspension of our operations.

     COMPETITION

     The wear plate solutions industry is highly competitive.  We compete in
markets against larger multi-national companies, all of which are
well-established and may have substantially greater financial and other
resources than us.  Competitive market conditions could adversely affect our
results of operations if we were required to reduce product prices to remain
competitive. In the United States and Canada, major manufacturers of wear plates
include Triton Inc. and Trimay Ltd.  In Australia, major manufacturers of wear
plates include Australian National Industries Ltd. and Australian Overseas Ltd.
Other major manufacturers in the European Union and Asia include Vautid (Gmd.)
and Duraweld.

     EMPLOYEES

     We employed 25 persons on a full-time basis and one contract employee as of
November 30, 2006, including two executive officers, five administrative
personnel, four marketing personnel and 15 manufacturing personnel.  None of our
employees are members of a labor union.  We consider our relationship with our
employees to be good.

ITEM 2. DESCRIPTION OF PROPERTY.

     Our business is conducted from leased premises located at 42 Mercantile Way
Malaga Western Australia.

     This lease has been extended for a further five years at the current rental
of $7,083 per calendar month until June 2010.

ITEM 3. LEGAL PROCEEDINGS.

     There are no material legal proceedings pending or, to our best knowledge,
threatened against us.


                                        4
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     We held our Annual Meeting of Stockholders on June 4, 2006.


                                        5
<PAGE>
PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS AND SMALL
        BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES

     Our common stock is traded on the Over the Counter Bulletin Board. The
following table sets forth the range of high and low bid quotations for our
common stock for each calendar quarter within the last two years.

<TABLE>
<CAPTION>
                                          Bid Price Per Share
                                         ----------------------
          Year ended September 30, 2006     High        Low
          -----------------------------  ----------  ----------
<S>                                      <C>         <C>
          October 1 - December 31, 2005  $     0.52  $     0.38

          January 1 - March 31, 2006     $     0.48  $     0.18

          April 1 - June 30, 2006        $     0.24  $     0.31

          July 1 - September 30, 2006    $     0.20  $     0.20


          Year ended September 30, 2005     High        Low
          -----------------------------  ----------  ----------

          October 1 - December 31, 2004  $     0.40  $     0.20

          January 1 - March 31, 2005     $     0.84  $     0.28

          April 1 - June 30, 2005        $     0.50  $     0.20

          July 1 - September 30, 2005    $     0.19  $     0.18
</TABLE>

     The above prices were obtained from Nasdaq, Inc.  The quotations represent
inter-dealer quotations, without retail mark-up, markdown or commission, and may
not necessarily represent actual transactions.

     As of November 30, 2006, there were approximately 133 holders of record of
our common stock.

     Our Board of Directors may from time to time declare, and we may pay,
dividends on our outstanding shares in the manner and upon the terms and
conditions provided by law.  To date, we have not declared or paid any dividend.


                                        6
<PAGE>
<TABLE>
<CAPTION>
     EQUITY COMPENSATION PLANS

------------------------------------------------------------------------------------------------------
                                                                               Number of securities
                                                                             remaining available for
                        Number of securities to be     Weighted-average       future issuance under
                          issued upon exercise of      exercise price of    equity compensation plans
                           outstanding options,      outstanding options,     (excluding securities
                            warrants and rights       warrants and rights    reflected in column (a))
------------------------------------------------------------------------------------------------------
                                    (a)                       (b)                      (c)
------------------------------------------------------------------------------------------------------
<S>                     <C>                          <C>                    <C>
Equity compensation
plans approved by                   None                     None                    2,000,000
security holders (1)
------------------------------------------------------------------------------------------------------
Equity compensation
plans not approved by                -                        -                           -
security holders
------------------------------------------------------------------------------------------------------

Total                               None                     None                    2,000,000

------------------------------------------------------------------------------------------------------
</TABLE>

     (1)  Includes our 2000 Stock Option Plan.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our financial
statements, the notes to our financial statements and the other financial
information contained elsewhere in this filing.

     OVERVIEW

     We manufacture and distribute Arcoplate, a wear-resistant alloy overlay
wear plate, through a patented production process. This patented process by
which we manufacture Arcoplate enables us to smoothly and evenly apply an alloy
overlay to a sheet of mild steel, creating a metallurgical bond between the
alloy and the steel backing plate that is resistant to wear caused by impact
and/or abrasion.  We believe that in the mining processing industries, wear is
the primary cause of down time, the period of time where machinery is not in
operation because of the necessity of repairs or refurbishment. We believe that
our Arcoplate product line will substantially lower down time and the resulting
lost production.

     PLAN OF OPERATION

     We intend to achieve market penetration through a multi-step process. In
Australia, we intend to combine targeted marketing with advertising in trade
journals and magazines. At the international level, we intend to establish
market presence by visiting international trade shows, presenting technical
papers at industry conferences, and appointing distributors who will be trained
to present and promote Arcoplate products as a solution for wear-related
problems. We are presently looking at the feasibility of licensing the
production of Arcoplate in certain countries and market areas.

     RESULTS OF OPERATIONS

     SALES

     Alloy Steel had sales of $3,386,083 for the year ended September 30, 2006,
compared to sales of $3,620,457 for the year ended September 30, 2005. These
sales consist solely of the sale of our Arcoplate product.  Substantially all of
our sales during the periods were denominated in US dollars.  Sales denominated
in Australian dollars were converted into U.S. dollars at the conversion rate of
$0.74705 and $0.76618, representing the average foreign exchange rate for the
years ended September 30, 2006 and 2005 respectively.  The decrease was due
primarily to the timing of orders being received in September and this position
will reflect in the December quarter.


                                        7
<PAGE>
     COSTS OF SALES

     Alloy Steel had cost of sales of $2,057,385 for the year ended September
30, 2006, compared to cost of sales of $2,323,100 for the year ended September
30, 2005. The gross profit amounted to $1,328,698 compared to $1,297,357 for the
year ended September 30, 2005. The gross profit percentage increased due to a
higher selling price being achieved on Australian sales to 39.2% in 2006 from
35.8% in 2005.

     SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

     Alloy Steel had selling, general and administrative expenses of $1,763,517
for the year ended September 30, 2006, compared to $1,382,548 in the year ended
September 30, 2005. The increase was primarily due to the increased marketing
and promotional activity of the company and the impost of a full year's
depreciation of the developed manufacturing mill being charged in the accounts
in the year ending September 30, 2006.

     LOSS BEFORE INCOME TAX EXPENSE (BENEFIT)

     Our loss before tax expense (benefit) was $408,721 for the year ended
September 30, 2006, compared to a loss before income tax expense (benefit) of
$74,518 for the year ended September 30, 2005.

     INCOME TAX EXPENSE (BENEFIT)

     Alloy Steel had income tax benefit of ($134,695) for the year ended
September 30, 2006 compared to an income tax benefit of ($313,676) for the year
ended September 30, 2005. The prior year's income tax expense relates to taxes
payable in Australia.

     NET INCOME (LOSS)

     We had a net loss of ($274,026) or ($0.02) per share, for the year ended
September 30, 2006, compared to a net income of $239,158 or $0.01 per share for
the year ended September 30, 2005.

     LIQUIDITY

     For the year ended September 30, 2006, net cash provided by operating
activities was $112,700 despite a net loss of $274,026. This was primarily due
to an adjustment for depreciation and amortization of $175,631 to reconcile net
income (loss) to net cash provided by operating activities and an increase in
cash and cash equivalents attributable to changes in operating asses and
liabilities of $217,071, which consisted primarily of an increase in accounts
receivable of $61,400 and an income tax receivable of $160,792, and was offset
by an increase in accounts payable and other current liabilities of $200,364.

     The positive cash result has been generated by the allowance of research
and development concessions to the company by the relevant Australian government
authorities. Future cash flows from sales are anticipated to be sufficient to
sustain the Company's operations. The Company is also reviewing available
options to raise capital in alternative markets, although it currently has no
commitments to do so.

     As of September 30, 2006, we had a working capital deficit of $153,786.


                                        8
<PAGE>
     The Company is obligated under various contractual commitments over the
next five years. The following is a summary of the five-year commitments of the
Company as of September 30, 2006:

<TABLE>
<CAPTION>
                                          LESS THAN                           AFTER
                                 TOTAL      1 YEAR   1-3 YEARS   4-5 YEARS   5 YEARS
CONTRACTUAL OBLIGATIONS
<S>                            <C>         <C>       <C>         <C>         <C>
Long term debt                    282,725    65,966     119,852      96,907        -
Operating leases                  318,750    85,000     170,000      63,750        -
                               -----------------------------------------------------

Total contractual obligations  $  601,475  $150,966  $  289,852  $  160,657        -
</TABLE>

     We anticipate that the funding of our working capital needs will come
primarily from the cash generated from our operations.  To the extent that the
cash generated from our operations is insufficient to meet our working capital
needs or the purchase of machinery or equipment, then we will need to raise
capital from the sale of securities in private offerings or loans.  We have no
commitments for capital.  The sale of additional equity or convertible debt
securities could result in dilution to our stockholders.  There can be no
assurance that financing will be available in amounts or on terms acceptable to
us, if at all.

     SIGNIFICANT CHANGES IN NUMBERS OF EMPLOYEES

     We anticipate hiring 3 additional manufacturing employees in the next 12
months.

     CRITICAL ACCOUNTING POLICIES

     We have prepared our financial statements and related disclosures in
conformity with accounting principles generally accepted in the United States of
America. This has required us to make estimates, judgments, and assumptions that
affected the amounts we reported. Note 1 of the notes to consolidated financial
statements contains the significant principles that we used to prepare our
consolidated financial statements.

     We have identified several critical accounting policies that require us to
make assumptions that were uncertain at the time of our estimates. Had we used
different estimates and assumptions, the amounts we recorded could have been
significantly different. Additionally, actual results that would have material
effect on our financial condition or results of operation could be based on
different assumptions or conditions. The critical accounting policies that were
affected by the estimates, assumptions, and judgments used in the preparation of
financial statements are listed below.

     ALLOWANCE FOR DOUBTFUL ACCOUNTS

     We do not believe there is a need for a provision for doubtful accounts as
of September 30, 2006.

     INVENTORIES

     Our inventories are recorded at the lower of cost or net realizable market,
with cost based on an average cost method, which approximates the first-in,
first-out basis. We periodically assess this inventory for obsolescence and
potential excess by reducing the difference between our cost and the estimated
market value of the inventory based on assumptions about future demand and
historical sales patterns. Our inventories consist of materials and products
that are subject to technological obsolescence and competitive market
conditions. If market conditions or future demand are less favorable than our
current expectations, additional inventory write downs or reserves may be
required, and that could have an adverse effect on our reported results in the
period the adjustment are made.


                                        9
<PAGE>
     LONG-LIVED ASSETS

     We review our long-lived assets for potential impairment based on a review
of projected undiscounted cash flows associated with these assets. Long-lived
assets are included in impairment evaluations when events and circumstances
exist that indicate the carrying amount of these assets may not be recoverable.
Measurement of impairment losses for long-lived assets that we expect to hold
and use is based on the estimated fair value of the assets. We have recorded
asset impairment charges when the carrying value of certain assets was in excess
of their fair value. Should market conditions or the assumptions used by us in
determining the fair value of these assets change, or management change plans
for usage of certain assets, additional charges to operations may be required in
the period in which such conditions occur.


                                  RISK FACTORS

     Alloy Steel is subject to various risks that may materially harm our
business, financial condition and results of operations.  YOU SHOULD CAREFULLY
CONSIDER THE RISKS AND UNCERTAINTIES DESCRIBED BELOW AND THE OTHER INFORMATION
IN THIS FILING BEFORE DECIDING TO PURCHASE OUR COMMON STOCK.  THESE ARE NOT THE
ONLY RISKS AND UNCERTAINTIES THAT WE FACE.  IF ANY OF THESE RISKS OR
UNCERTAINTIES ACTUALLY OCCURS, OUR BUSINESS, FINANCIAL CONDITION OR OPERATING
RESULTS COULD BE MATERIALLY HARMED.

     WE HAVE A LIMITED OPERATING HISTORY AND WE MAY NOT BE ABLE TO ACHIEVE OR
     MAINTAIN PROFITABILITY.

     We have a limited operating history.  We may incur significant operating
losses as we attempt to develop and grow our business.  We cannot assure you
that we will achieve or maintain profitability.  Until we achieve the
manufacturing capacity sufficient to sustain continuous production of Arcoplate
or Arcoplate-based products, we will have substantial production under-capacity,
and we may be unable to fill customer orders.  Such events could cause us to
incur substantial operating losses.

     IF WE ARE UNABLE TO EFFECTIVELY MANAGE OUR PLAN OF EXPANSION, WE WILL NOT
     ACHIEVE PROFITABILITY.

     We plan to expand all aspects of our operations.  As a result, we need to
expand our financial and management controls, reporting systems and procedures.
We will also have to expand, train and manage our work force for marketing,
sales, engineering and technical support, product development, and manage
multiple relationships with various customers, vendors, strategic partners and
other third parties.  We will need to continually expand and upgrade our
technology and develop new products.  If we are unable to manage our growth
effectively, we may be unable to handle our operations, control costs or
otherwise function in a profitable manner, or at all.

     IF WE ARE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY, WE COULD LOSE OUR
     COMPETITIVE ADVANTAGE.

     We currently have only limited patent protection for our technology, and
may be unable to obtain even limited protection for our proprietary technology
in certain foreign countries.  Currently, we have patents in various countries.
We cannot assure you that any granted patent or pending patent application will
provide protection against infringement.


                                       10
<PAGE>
     IF WE DO NOT CORRECTLY ANTICIPATE THE MAGNITUDE AND DIRECTION OF CURRENCY
     EXPOSURE, THERE COULD BE A MATERIAL ADVERSE IMPACT ON OUR PROSPECTS FOR
     PROFITABILITY.

     All of our production will take place overseas, and many of the raw
materials and supplies for our products will be purchased in foreign currencies.
In addition, international sales will likely be denominated in local currencies.
These factors may combine to expose us to currency gains and losses in addition
to gains and losses from our basic operations.  The magnitude and direction of
future currency exposure cannot be predicted, nor can we assure you that we will
be able to manage such exposure to our benefit or to a neutral effect.

     OUR BUSINESS WOULD BE MATERIALLY AND ADVERSELY AFFECTED IF WE WERE UNABLE
     TO RECEIVE MATERIALS AT PRICES AND ON TERMS PRESENTLY MADE AVAILABLE TO US
     BY OUR PRINCIPAL SUPPLIERS.

     We presently purchase our principal raw materials, steel and alloy compound
components, from a limited number of suppliers.  There are no written contracts
between us and our suppliers, and requirements are purchased using individual
purchase orders, with customary terms regarding payment, quality and delivery.
Although we believe that alternatives are readily available from other
suppliers, we cannot assure you that we will be able to continue to obtain
desired quantities of materials on a timely basis at prices and on terms deemed
reasonable by us.  Our business would be materially and adversely affected if we
are unable to continue to receive materials at prices and on terms comparable to
those presently made available to us by our principal suppliers.

     SINCE WE DEPEND HEAVILY UPON ELECTRICAL POWER FOR OUR OPERATIONS, ANY
     INCREASE IN PRICES WOULD ADVERSELY AFFECT OUR BUSINESS AND PROFITABILITY.

     We consume a large amount of electrical power during production.  The
amount of electrical power consumed during the Arcoplate process represents
approximately 5% of our overall production costs.  There may be fluctuations in
the price of electricity due to changes in the regulation of utility companies
in Australia, and in other jurisdictions where we may engage in production.  We
cannot assure you that we will be able to continue to obtain our energy supplies
at current prices, and any material increase in prices of electricity would
adversely affect our business and profitability.

     OUR COMMON STOCK MAY BE AFFECTED BY LIMITED TRADING VOLUME AND MAY
     FLUCTUATE SIGNIFICANTLY.

     There has been a limited public market for our common stock and there can
be no assurance that an active trading market for our common stock will develop.
As a result, this could adversely affect our shareholders' ability to sell our
common stock in short time periods, or possibly at all.  Our common stock has
experienced, and is likely to experience in the future, significant price and
volume fluctuations, which could adversely affect the market price of our common
stock without regard to our operating performance.  In addition, we believe that
factors such as quarterly fluctuations in our financial results and changes in
the overall economy or the condition of the financial markets could cause the
price of our common stock to fluctuate substantially.

     WE MAY NEED TO RAISE ADDITIONAL CAPITAL TO FINANCE OPERATIONS OR EXPANSION.

     We have relied on significant external financing to fund our operations.
Such financing has historically come from a combination of borrowings from and
sale of common stock to third parties and funds provided by certain officers and
directors.  We cannot assure you that financing whether from external sources or
related parties will be available if needed or on favorable terms.  The sale of
our common stock to raise capital may cause dilution to our existing
shareholders.  Our inability to obtain adequate financing will result in the
need to reduce or curtail our business operations.  Any of these events would be
materially harmful to our business and may result in a lower stock price.

     WE HAVE A LIMITED CUSTOMER BASE.

     At present, our customer base consists primarily of companies involved in
the mining and dredging industries.  Our ability to operate depends on
increasing our customer base and achieving sufficient gross profit margins.  We
cannot assure you that we will be able to increase our customer base or to
operate profitably.  If any of our major customers stop or delay


                                       11
<PAGE>
its purchases of our products, our revenue and profitability would be adversely
affected. For the year ended September 30, 2006, three customers accounted for
28.4% of our sales. We anticipate that sales of our products to relatively few
customers will continue to account for a significant portion of our revenue. If
these customers cancel or delay their purchase orders, our revenue may decline.
We cannot assure you that our current customers will continue to place orders
with us, that orders by existing customers will continue at the levels of
previous periods or that we will be able to obtain orders from new customers.
Although our financial performance depends on large orders from key customers
and resellers, we do not have binding commitments from any of them.

     OUR COMMON STOCK IS DEEMED TO BE "PENNY STOCK", WHICH MAY MAKE IT MORE
     DIFFICULT FOR SHAREHOLDERS TO SELL THEIR SHARES DUE TO SUITABILITY
     REQUIREMENTS.

     Our common stock is deemed to be "penny stock" as that term is defined in
Rule 3a51-1 promulgated under the Securities Exchange Act of 1934.  Penny stocks
are stock:

     -    With a price of less than $5.00 per share;

     -    That are not traded on a "recognized" national exchange;

     -    Whose prices are not quoted on the Nasdaq automated quotation
          system (Nasdaq listed stock must still have a price of not less than
          $5.00 per share); or

     -    In issuers with net tangible assets less than $2.0 million (if
          the issuer has been in continuous operation for at least three years)
          or $5.0 million (if in continuous operation for less than three
          years), or with average revenues of less than $6.0 million for the
          last three years.

     Broker/dealers dealing in penny stocks are required to provide potential
investors with a document disclosing the risks of penny stocks.  Moreover,
broker/dealers are required to determine whether an investment in a penny stock
is a suitable investment for a prospective investor.  These requirements may
reduce the potential market for our common stock by reducing the number of
potential investors.  This may make it more difficult for our shareholders to
resell shares to third parties or to otherwise dispose of them.  This could
cause our stock price to decline.

     WE FACE SIGNIFICANT COMPETITION WITHIN OUR MARKET.

     We expect competition to persist and intensify in the future. The wear
plate solutions industry is highly competitive.  We have numerous competitors
worldwide, including Triton, Inc., Trimay, Ltd., Australian National Industries,
Ltd., Australian Overseas, Ltd., Abresist Corporation and Duraweld, Ltd.
Competitive market conditions could adversely affect our results of operations
if we are required to reduce product prices to remain competitive or if we are
unable to achieve significant sales of our products.

     Many of our competitors (including those identified above) are
substantially larger than Alloy Steel and have significantly greater financial,
marketing, technical and manufacturing resources with more established
distribution channels. These competitors may be able to respond more quickly to
new or emerging technologies and changes in customer requirements or devote
greater resources to the development, promotion and sale of their products than
we can. Furthermore, some of our competitors may make strategic acquisitions or
establish cooperative relationships to increase their ability to rapidly gain
market share by addressing the needs of our prospective customers. These
competitors may enter our existing or future markets with solutions that may be
less expensive, provide higher performance or additional features or be
introduced earlier than our solutions. If any technology is more reliable,
resistant, and less expensive or has other advantages over our technology, then
the demand for our products and services would decrease, which would seriously
harm our business.

     We expect our competitors to continue to improve the performance of their
current products and introduce new products and technologies as industry
standards and customer requirements evolve.  These new products and technologies
could supplant or provide lower cost alternatives to our products.  To be
competitive, we must continue to invest resources in research and development,
sales and marketing, and customer support.

     Increased competition is likely to result in price reductions, reduced
gross margins, longer sales cycles, and loss of market share, any of which would
seriously harm our business and results of operations.


                                       12
<PAGE>
     WE HAVE LIMITED MARKETING AND SALES CAPABILITY.

     Because of our previous limited working capital, we have not had the
resources to fully implement our marketing and sales strategy.  In order to
increase our revenues, we are in the process of further implementing a marketing
and sales force with technical expertise and marketing capability.  There can be
no assurance that we will be able to:

     -    Establish and develop such a sales force;

     -    Gain market acceptance for our products;

     -    Obtain and retain qualified sales personnel on acceptable terms; and

     -    Meet our proposed marketing schedules or plans.

     To the extent that we arrange with third parties to market our products,
the success of such marketing will depend on the efforts of these third parties.

ITEM 7. FINANCIAL STATEMENTS.

     Our audited consolidated financial statements for the year ended September
30, 2006 appear following Item 14 of this report and are incorporated herein by
reference.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

     None.

ITEM 8A. CONTROLS AND PROCEDURES

(a)  Evaluation of disclosure controls and procedures

     Based on their evaluation of our disclosure controls and procedures (as
defined in Rule 13a-15 (e) under the Securities Exchange Act of 1934 (the
"Exchange Act")), our principal executive officer and principal financial
officer have concluded  that as of the end of the period covered by this Annual
Report on Form 10-KSB such disclosure controls and procedures are effective to
ensure that information required to be disclosed in reports that we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time periods specified in Securities and Exchange Commission rules
and forms.

(b)  Changes in internal control over financial reporting.

     During the last quarter of the year under report, there was no change in
our internal control over financial reporting that has materially affected, or
is reasonably likely to materially affect, our internal control over financial
reporting.

ITEM 8B. OTHER INFORMATION

     None.


                                       13
<PAGE>
                                    PART III

ITEM. 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

     Our present directors and executive officers are as follows:

<TABLE>
<CAPTION>
NAME             AGE  POSITION
---------------  ---  ----------------------------------------
<S>              <C>  <C>
Gene Kostecki     61  President, Chief Executive Officer and a
                      Director

Alan C. Winduss   65  Chief Financial Officer, Secretary and a
                      Director
</TABLE>

     The following is a brief summary of the background of each executive
officer and director:

     Gene Kostecki has served as a director and as our President and Chief
Executive Officer since June 2000. From July 1995 to July 1997, Mr. Kostecki
served as Managing Director of the Collier Unit Trust, an engineering business
and distributor based in Western Australia.  He acts as our President and Chief
Executive Officer on a full-time basis.

     Alan C. Winduss has served as a director and as our Chief Financial Officer
and Secretary since June 2000. From July 1979 to the present, Mr. Winduss has
served as director of Winduss & Associates Pty Ltd, an accounting firm in
Western Australia, which specializes in commercial accounting, corporate finance
and management.  He intends to devote approximately 70% of his time to his
duties as one of our executive officers.

     BOARD COMPOSITION

     Our Board of Directors currently consists of two directors.  At each annual
meeting of our stockholders, all of our directors are elected to serve from the
time of election and qualification until the next annual meeting following
election.  In addition, our bylaws provide that the maximum authorized number of
directors may be changed by resolution of the stockholders or by resolution of
the board of directors.

     Each officer is elected by, and serves at the discretion of, our board of
directors.  There are no family relationships among any of our directors,
officers or key employees.

     CONTROL BY OFFICERS AND DIRECTORS

     Our directors and executive officers own approximately 74.0% of the
outstanding shares of our common stock.  Accordingly, these stockholders possess
substantial control over our operations.  This control may allow them to amend
corporate filings, elect all of our board of directors, and substantially
control all matters requiring approval by our stockholders, including approval
of significant corporate transactions.

     COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

     Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires our directors and executive officers, and persons who
beneficially own more than ten percent of a registered class of our equity
securities, to file with the Securities and Exchange Commission (the
"Commission") initial reports of ownership and reports of changes in ownership
of our common stock and other equity securities.  Officers, directors, and
persons who beneficially own more than ten percent of a registered class of our
equity securities are required by the regulations of the Commission to furnish
us with copies of all Section 16(a) forms they file.  To our knowledge, based
solely on review of the copies of such reports furnished to us, during the
fiscal year ended September 30, 2006, our officers, directors, and greater than
ten percent beneficial owners complied with all Sections 16(a) filing
requirements applicable to them.


                                       14
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION.

     The following table sets forth the annual cash compensation for services
rendered by our Chief Executive Officer for the fiscal year ended September 30,
2006. No other executive officer earned or secured more than $100,000 in salary
and bonus for services rendered during the fiscal year ended September 30, 2006:

<TABLE>
<CAPTION>
                                SUMMARY COMPENSATION TABLE

                                    ANNUAL COMPENSATION
                                 ------------------------
                                                            LONG-TERM     ALL OTHER
NAME AND POSITION       YEAR       SALARY        BONUS     COMPENSATION  COMPENSATION
-------------------  ----------  -----------  -----------  ------------  ------------
<S>                  <C>         <C>          <C>          <C>           <C>
Gene Kostecki              2006  $   150,000  $         0             -             -
President and Chief        2005  $   150,000  $         0             -             -
Executive Officer          2004  $   150,000  $         0             -             -
</TABLE>

     STOCK OPTION PLAN

     In May 2000, we adopted the 2000 Stock Option Plan.  The purpose of the
plan is to enable us to attract, retain and motivate key employees, directors,
and consultants, by providing them with stock options.  Options granted under
the plan may be either incentive stock options, as defined in Section 422A of
the Internal Revenue Code of 1986, or non-qualified stock options.  We have
reserved 2,000,000 shares of common stock for issuance under the plan.  As of
November 30 2006, no options had been granted pursuant to the plan.

     Our Board of Directors will administer the plan.  Our Board has the power
to determine the terms of any options granted under the plan, including the
exercise price, the number of shares subject to the option, and conditions of
exercise.  Options granted under the plan are generally not transferable, and
each option is generally exercisable during the lifetime of the holder only by
the holder.  The exercise price of all incentive stock options granted under the
plan must be at least equal to the fair market value of the shares of common
stock on the date of the grant.  With respect to any participant who owns stock
possessing more than 10% of the voting power of all classes of our stock, the
exercise price of any incentive stock option granted must be equal to at least
110% of the fair market value on the grant date.  Our Board of Directors
approves the terms of each option.  These terms are reflected in a written stock
option agreement.

     EMPLOYMENT AGREEMENTS

     There are currently no employment agreements in place with either Mr. Gene
Kostecki, our President and Chief Executive Officer, or Mr. Alan Winduss, our
Chief Financial Officer and Secretary. New agreements are expected to be
finalized by December 31, 2006.

     LIMITATIONS OF LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

     Our certificate of incorporation and bylaws limit the liability of
directors and officers to the maximum extent permitted by Delaware law.  We will
indemnify any person who was or is a party, or is threatened to be made a party
to, an action, suit or proceeding, whether civil, criminal, administrative or
investigative, if that person is or was a director, officer, employee or agent
of ours or serves or served any other enterprise at our request.

     In addition, our certificate of incorporation provides that, generally, a
director shall not be personally liable to us or our stockholders for monetary
damages for breach of the director's fiduciary duty.  However, in accordance
with Delaware law, a director will not be indemnified for a breach of its duty
of loyalty, acts or omissions not in good faith or involving intentional
misconduct or a knowing violation or any transaction from which the director
derived improper personal benefit.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The following table sets forth, as of November 30 2006, the number and
percentage of outstanding shares of common stock beneficially owned by:


                                       15
<PAGE>
     -    each person who we know beneficially owns more than 5% of the
          outstanding shares of our common stock;

     -    each of our executive officers and directors; and

     -    all of our officers and directors as a group.

     Except as otherwise noted, the persons named in this table, based upon
information provided by these persons, have sole voting and investment power
with respect to all shares of common stock owned by them.  The number of shares
of common stock outstanding used in calculating the percentage for each listed
person includes the shares of common stock underlying options or warrants held
by such person that are exercisable within 60 days of November 30, 2006, but
excludes shares of common stock underlying options or warrants held by any other
person.  Unless otherwise indicated, the address of each beneficial owner is c/o
Alloy Steel, 42 Mercantile Way Malaga, P.O. Box 3087 Malaga D C 6945, Western
Australia.

<TABLE>
<CAPTION>
                                                                  PERCENTAGE
                                                                      OF
                                                                    COMMON
                                                                     STOCK
                                                       NUMBER    BENEFICIALLY
NAME OF BENEFICIAL OWNER                             OF SHARES       OWNED
---------------------------------------------------  ----------  -------------
<S>                                                  <C>         <C>
Gene Kostecki                                        10,598,000          62.5%

Alan C. Winduss                                       1,893,250          11.2%

All officers and directors as a group (two persons)  12,491,250          74.0%
</TABLE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Messrs. Gene Kostecki and Alan Winduss are both directors of Alloy Steel
International, Inc. and its subsidiary, Alloy Steel Australia (Int) Pty Ltd.

     Mr. Winduss is a director of a public accounting firm Winduss & Associates
Pty Ltd, which provides accounting and secretarial services to Alloy Steel's
subsidiary, Alloy Steel Australia (Int.) Pty Ltd.  These services are provided
at normal commercial rates and conditions.  The cost of these services are
recovered under the fees paid by Mr. Winduss' consulting agreement.

     Alloy Steel Australia (Int.) Pty Ltd. paid rent of $85,000, for commercial
premises it occupied during the year, to Raglan Securities Pty Ltd., a company
controlled by Gene Kostecki.

     The license granted to use the Alloy process provides for royalty payments
to Kenside Investments, Ltd., in an amount equal to 2% of our net sales of
Arcoplate products.  Our Chief Executive Officer, director and principal
shareholder, Gene Kostecki controls Kenside Investments, Ltd.

     At September 30, 2006 we had a non-interest bearing loan of approximately
$147,000 payable to an entity controlled by Mr Gene Kostecki. The loan has no
stated repayment terms and is unsecured.

ITEM 13. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO.  DESCRIPTION
-----------  --------------------------------------------------------------------------------------------------------------
<S>          <C>
3.1          Certificate of Incorporation*

3.2          By-laws*

4.1          Specimen Certificate*

10.1         2000 Stock Option Plan*

10.2         License Agreement, dated May 4, 2000, between Alloy Steel and Kenside Investments, Ltd.*


                                       16
<PAGE>
EXHIBIT NO.  DESCRIPTION
-----------  --------------------------------------------------------------------------------------------------------------

10.3         Employment Agreement, dated October 2, 2000, between Alloy Steel and Gene Kostecki*

10.4         Employment Agreement, dated October 2, 2000, between Alloy Steel and Alan Winduss*

10.5         Consulting Agreement, dated October 2, 2000, between Alloy Steel and Berryhill Investments, Ltd.*

10.6         Consulting Agreement, dated October 2, 2000, between Alloy Steel and Chartreuse Nominees Pty. Ltd.*

10.7         Amended and Restated Consulting Agreement, dated October 2, 2000, between Alloy Steel and Persia
             Consulting Group, Inc.*

10.8         Consulting Agreement, dated October 2, 2000, between Alloy Steel and Ragstar Investments, Ltd.*

10.9         Consulting Agreement, dated October 2, 2000, between Alloy Steel and Alan Winduss Pty. Ltd.*

10.10        Consulting Agreement, dated October 2, 2000, between Alloy Steel and Ames Nominees Pty. Ltd.*

10.11        Lease Agreement, dated July 1, 2000, between Alloy Steel and Raglan Securities Pty. Ltd.*

10.12        Asset Purchase Agreement, dated October 2, 2000 between Alloy Steel and Collier Unit Trust*

10.13        Equipment Purchase Agreement, dated October 2, 2000, between Alloy Steel and Collier Unit Trust*

10.14        Asset Purchase Agreement, dated October 2, 2000, by and among Alloy Steel and Gene Kostecki and Alan
             Winduss*

10.15        Amendment dated July 1, 2004, to Employment Agreement between Alloy Steel and Gene Kostecki*

10.16        Amendment dated July 1, 2004, to Employment Agreement between Alloy Steel and Alan Winduss*

31.1         Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)**

31.2         Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)**

32.1         Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C.
             1350**

32.2         Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350**
</TABLE>

      *   Previously filed. See Exhibit Index.
     **   Filed herewith.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

     The Board of Directors reviewed all services performed for the company by
Rothstein Kass & Company, P.C and Bentleys MRI Brisbane Partnership, our
independent auditors, for the fiscal year ended September 30, 2006, within and
outside the scope of their quarterly and annual auditing function. The company
replaced Messrs Rothstein Kass & Company PC as independent auditors with
Bentleys MRI in September 2006. The aggregate fees billed by our independent
auditors for each of the last two fiscal years are as follows:

<TABLE>
<CAPTION>
                     2006    2005
                    ------  ------
<S>                 <C>     <C>
Audit Fees          53,103  48,212

Audit-Related Fees       -       -

Tax Fees                 -       -

All Other Fees           -       -
</TABLE>

The fees labeled Audit-Related Fees above principally involved the auditing of
the annual financial statements of the company and the economic entity and
review of the audit of the overseas operating entity, together with the review
of quarterly financial statements as lodged with regulatory authorities.


                                       17
<PAGE>
SIGNATURES

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


Dated: December 22, 2006                ALLOY STEEL INTERNATIONAL, INC.
                                        (Registrant)


                                        By:     /s/ Gene Kostecki
                                           -------------------------------------
                                           Gene Kostecki
                                           President and Chief Executive Officer

     In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

/s/ Gene Kosetcki               Director and
-----------------       President and Chief Executive      December 22, 2006
Gene Kostecki      Officer (Principal Executive Officer)

/s/ Alan Winduss                Director and
-----------------      Chief Financial Officer and         December 22, 2006
Alan C. Winduss    Secretary (Principal Financial and
                             Accounting Officer)



                                       18
<PAGE>
<TABLE>
<CAPTION>
                         Alloy Steel International, Inc.

                      Annual Report on Form 10-KSB for the
                          Year Ended September 30, 2005

                                  EXHIBIT INDEX

EXHIBIT NO.  DESCRIPTION
-----------  --------------------------------------------------------------------------------------------------------------
<S>          <C>
3.1          Certificate of Incorporation [Incorporated by reference to Exhibit 3.1 to our Registration Statement on Form
             SB-2, SEC File No. 333-49146, filed on November 2, 2000, as amended (the "Registration Statement").]

3.2          By-laws [Incorporated by reference to Exhibit 3.2 to the Registration Statement.]

4.1          Specimen Certificate [Incorporated by reference to Exhibit 4.1 to the Registration Statement.]

10.1         2000 Stock Option Plan [Incorporated by reference to Exhibit 10.1 to the Registration Statement.]

10.2         License Agreement, dated May 4, 2000, between Alloy Steel and Kenside Investments, Ltd. [Incorporated by
             reference to Exhibit 10.2 to the Registration Statement.]

10.3         Employment Agreement, dated October 2, 2000, between Alloy Steel and Gene Kostecki [Incorporated by
             reference to Exhibit 10.3 to the Registration Statement.]

10.4         Employment Agreement, dated October 2, 2000, between Alloy Steel and Alan Winduss [Incorporated by
             reference to Exhibit 10.4 to the Registration Statement.]

10.5         Consulting Agreement, dated October 2, 2000, between Alloy Steel and Berryhill Investments, Ltd.
             [Incorporated by reference to Exhibit 10.5 to the Registration Statement.]

10.6         Consulting Agreement, dated October 2, 2000, between Alloy Steel and Chartreuse Nominees Pty. Ltd.
             [Incorporated by reference to Exhibit 10.6 to the Registration Statement.]

10.7         Amended and Restated Consulting Agreement, dated October 2, 2000, between Alloy Steel and Persia
             Consulting Group, Inc. [Incorporated by reference to Exhibit 10.7 to the Registration Statement.]

10.8         Consulting Agreement, dated October 2, 2000, between Alloy Steel and Ragstar Investments, Ltd.
             [Incorporated by reference to Exhibit 10.8 to the Registration Statement.]

10.9         Consulting Agreement, dated October 2, 2000, between Alloy Steel and Alan Winduss Pty. Ltd. [Incorporated
             by reference to Exhibit 10.9 to the Registration Statement.]

10.10        Consulting Agreement, dated October 2, 2000, between Alloy Steel and Ames Nominees Pty. Ltd.
             [Incorporated by reference to Exhibit 10.10 to the Registration Statement.]

10.11        Lease Agreement, dated July 1, 2000, between Alloy Steel and Raglan Securities Pty. Ltd. [Incorporated by
             reference to Exhibit 10.11 to the Registration Statement.]

10.12        Asset Purchase Agreement, dated October 2, 2000 between Alloy Steel and Collier Unit Trust [Incorporated
             by reference to Exhibit 10.12 to the Registration Statement.]

10.13        Equipment Purchase Agreement, dated October 2, 2000, between Alloy Steel and Collier Unit Trust
             [Incorporated by reference to Exhibit 10.13 to the Registration Statement.]

10.14        Asset Purchase Agreement, dated October 2, 2000, by and among Alloy Steel and Gene Kostecki and Alan
             Winduss [Incorporated by reference to Exhibit 10.14 to the Registration Statement.]

10.15        Amendment dated July 1, 2004, to Employment Agreement between Alloy Steel and Gene Kostecki.
             [Incorporated by reference to Exhibit 10.4 to the Registration Statement.]

10.16        Amendment dated July 1, 2004, to Employment Agreement between Alloy Steel and Alan Winduss.
             [Incorporated by reference to Exhibit 10.5 to the Registration Statement.]

31.1         Certification of the Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a)

31.2         Certification of the Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a)

32.1         Certification of the Chief Executive Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350

32.2         Certification of the Chief Financial Officer required by Rule 13a-14(b) or Rule 15d-14(b) and 18 U.S.C. 1350
</TABLE>


                                       19
<PAGE>
                         ALLOY STEEL INTERNATIONAL, INC.
                                 AND SUBSIDIARY

                        CONSOLIDATED FINANCIAL STATEMENTS
                                       AND
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

                               SEPTEMBER 30, 2006


<PAGE>
<TABLE>
<CAPTION>
ALLOY STEEL INTERNATIONAL, INC. AND SUBSIDIARY

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(ITEM 7)



<S>                                                       <C>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM       F-2


CONSOLIDATED FINANCIAL STATEMENTS

  Consolidated Balance Sheet
    September 30, 2006                                        F-3

  Consolidated Statements of Operations
    Years ended September 30, 2006 and 2005                   F-4

  Consolidated Statements of Stockholders' Equity
    Years ended September 30, 2006 and 2005                   F-5

  Consolidated Statements of Cash Flows
    Years ended September 30, 2006 and 2005                   F-6

  Notes to Consolidated Financial Statements             F-7 - 15
</TABLE>


                                     F-1
<PAGE>
             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors and Stockholders of
Alloy Steel International, Inc.

We  have  audited  the  accompanying  consolidated  balance sheet of Alloy Steel
International, Inc. and Subsidiary (the "Company") as of September 30, 2006, and
the related consolidated statements of operations, stockholders' equity and cash
flows  for  each  of  the years ended in the two year period September 30, 2006.
These  consolidated financial statements are the responsibility of the Company's
management.  Our  responsibility  is to express an opinion on these consolidated
financial statements based on our audits.

We  conducted  our audits in accordance with the standards of the Public Company
Accounting  Oversight  Board  (United  States).  Those standards require that we
plan  and  perform  the  audit  to obtain reasonable assurance about whether the
consolidated  financial  statements are free of material misstatement.  An audit
includes  examining,  on  a  test  basis,  evidence  supporting  the amounts and
disclosures  in  the  consolidated financial statements.  An audit also includes
assessing  the  accounting  principles  used  and  significant estimates made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In  our opinion, the consolidated financial statements referred to above present
fairly,  in  all  material respects, the financial position of the Company as of
September  30,  2006,  and  the results of its operations and its cash flows for
each of the years ended in the two year period September 30, 2006, in conformity
with  accounting  principles generally accepted in the United States of America.


                                    /s/Bentleys  MRI  Brisbane  Partnership


Brisbane,  Australia
December  22,  2006


                                     F-2
<PAGE>
<TABLE>
<CAPTION>
                 ALLOY STEEL INTERNATIONAL, INC. AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET
                               September 30, 2006


                                ASSETS

CURRENT ASSETS
<S>                                                      <C>
  Cash and cash equivalents                              $   18,955
  Accounts receivable                                       519,894
  Inventories                                               530,530
  Prepaid expenses and other current assets                  70,786
                                                         -----------
    Total current assets                                  1,140,165
                                                         -----------

PROPERTY AND EQUIPMENT, net                               1,888,228
                                                         -----------

OTHER ASSETS
  Other                                                      10,034
  Deferred tax assets                                       135,326
  Intangibles                                                90,512
                                                         -----------
    Total other assets                                      235,872
                                                         -----------

                                                         $3,264,265
                                                         ===========

                 LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Notes payable, current portion                         $   65,966
  Notes payable, officers, current portion                   51,958
  Accrued officers' salaries                                309,398
  Royalties payable, related party                          327,134
  Accounts payable and other current liabilities            539,495
                                                         -----------
    Total current liabilities                             1,293,951
                                                         -----------
LONG-TERM LIABILITIES
  Notes payable, less current portion                       216,759
  Notes payable, officers, less current portion              96,799
  Employee entitlement provisions                             6,379
  Loan payable, related party                               147,674
                                                         -----------
    Total long-term liabilities                             467,611
                                                         -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY
  Preferred stock, $.01 par value, authorized 3,000,000
  shares; issued and outstanding - none                           -
  Common stock, $.01 par value, authorized  50,000,000
  shares; issued and outstanding 16,950,000 shares          169,500
  Capital in excess of par value                          1,773,382
  Accumulated deficit                                      (978,368)
  Accumulated other comprehensive income                    538,189
                                                         -----------
    Total stockholders' equity                            1,502,703
                                                         -----------

                                                         $3,264,265
                                                         ===========
</TABLE>

          See accompanying notes to consolidated financial statements


                                     F-3
<PAGE>
<TABLE>
<CAPTION>
                 ALLOY STEEL INTERNATIONAL, INC. AND SUBSIDIARY

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                     Years Ended September 30, 2006 and 2005

                                                         2006          2005
                                                     ------------  ------------
<S>                                                  <C>           <C>
SALES                                                $ 3,386,083   $ 3,620,457

COST OF SALES                                          2,057,385     2,323,100
                                                     ------------  ------------

GROSS PROFIT                                           1,328,698     1,297,357

SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES                                               1,763,517     1,382,548
                                                     ------------  ------------

LOSS FROM OPERATIONS                                    (434,819)      (85,191)
                                                     ------------  ------------

OTHER INCOME (EXPENSE)
  Interest income                                         31,887        14,402
  Interest expense                                       (22,218)      (10,728)
  Insurance recovery                                      10,409         6,974
  Commission received                                         44            25
  Profit on disposal of property and equipment             5,976             -
                                                     ------------  ------------
                                                          26,098        10,673
                                                     ------------  ------------

INCOME (LOSS) BEFORE INCOME TAX (EXPENSE) BENEFIT       (408,721)      (74,518)

INCOME TAX (EXPENSE) BENEFIT                             134,695       313,676
                                                     ------------  ------------

NET INCOME (LOSS)                                    $  (274,026)  $   239,158
                                                     ============  ============

BASIC AND DILUTED INCOME (LOSS) PER COMMON SHARE     $     (0.02)  $      0.01
                                                     ============  ============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES
  USED IN COMPUTING BASIC AND DILUTED INCOME (LOSS)
  PER COMMON SHARE                                    16,950,000    16,950,000
                                                     ============  ============
</TABLE>


          See accompanying notes to consolidated financial statements

                                     F-4
<PAGE>
<TABLE>
<CAPTION>
                                         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                             Years Ended September 30, 2006 and 2005

                                                                                                   Accumulated
                                Common Stock         Capital                                          Other            Total
                            --------------------    in excess     Accumulated    Comprehensive    Comprehensive    Stockholders'
                              Shares     Amount    of par value     Deficit          Income           Income           Equity
                            ----------  --------  -------------  -------------  ---------------  ---------------  ---------------
<S>                         <C>         <C>       <C>            <C>            <C>              <C>              <C>
Balances, September 30,
  2004                      16,950,000  $169,500  $   1,773,382  $   (943,500)                   $      474,541   $    1,473,923

Net Income                                                            239,158   $      239,158                           239,158

Other comprehensive
  income, foreign currency
  translation adjustment                                                               103,004          103,004          103,004
                                                                                ---------------

Total comprehensive
  income - Year ended
  September 30, 2005                                                                   342,162
                                                                                ===============
                            ----------  --------  -------------  -------------                   ---------------  ---------------
Balances, September 30,
  2005                      16,950,000   169,500      1,773,382      (704,342)                          577,545        1,816,085

Net Loss                                                             (274,026)        (274,026)                         (274,026)

Other comprehensive
  Income, foreign currency
  translation adjustment                                                               (39,356)         (39,356)         (39,356)
                                                                                ---------------

Total comprehensive
  income - Year ended
  September 30, 2006                                                            $     (313,382)
                                                                                ===============
                            ----------  --------  -------------  -------------                   ---------------  ---------------

Balances, September 30,
  2006                      16,950,000  $169,500  $   1,773,382  $   (978,368)                   $      538,189   $    1,502,703
                            ==========  ========  =============  =============                   ===============  ===============
</TABLE>

          See accompanying notes to consolidated financial statements


                                     F-5
<PAGE>
<TABLE>
<CAPTION>
                        ALLOY STEEL INTERNATIONAL, INC. AND SUBSIDIARY

                            CONSOLIDATED STATEMENTS OF CASH FLOWS
                           Years ended September 30, 2006 and 2005

                                                                          2006        2005
                                                                       ----------  ----------
<S>                                                                    <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income (loss)                                                    $(274,026)  $ 239,158
  Adjustments to reconcile net income (loss) to net cash provided by
    (used in) operating activities:
    Depreciation                                                         175,631     149,381
    Deferred income taxes                                                      -        (209)
    Profit on disposal of property and equipment                          (5,976)          -
    Increase (decrease) in cash and cash equivalents
      attributable to changes in operating assets and liabilities:
        Accounts receivable                                               61,400     279,004
        Inventories                                                      114,287    (234,594)
        Income taxes receivable                                          160,792    (327,960)
        Prepaid expenses and other current assets                         (4,346)      2,176
        Accrued officer's salaries                                        85,302      35,801
        Accounts payable and other current liabilities                  (200,364)    248,537
        Income taxes payable                                                   -     (11,830)
                                                                       ----------  ----------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                      112,700     379,464
                                                                       ----------  ----------
CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of property and equipment                                  (121,476)   (167,437)
    Payment on deposit for investment                                          -      (6,847)
    Proceeds on disposal of property and equipment                         6,574           -
                                                                       ----------  ----------
NET CASH USED IN INVESTING ACTIVITIES                                   (114,902)   (174,284)
                                                                       ----------  ----------
NET CASH USED IN FINANCING ACTIVITIES, repayment on
notes and loan payables                                                 (345,473)   (239,358)
                                                                       ----------  ----------
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH
  AND CASH EQUIVALENTS                                                   238,710     120,060
                                                                       ----------  ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                    (108,965)     85,882

CASH AND CASH EQUIVALENTS, beginning of year                             127,920      42,038
                                                                       ----------  ----------
CASH AND CASH EQUIVALENTS, end of year                                 $  18,955   $ 127,920
                                                                       ==========  ==========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION,
  cash paid during the years for:

  Income taxes                                                         $       -   $  26,325
                                                                       ==========  ==========
  Interest                                                             $  22,218   $  10,728
                                                                       ==========  ==========
SUPPLEMENTAL DISCLOSURES OF NON-CASH
  INVESTING AND FINANCING ACTIVITIES,
    Equipment acquired under notes payable                             $ 244,203   $  21,095
                                                                       ==========  ==========
</TABLE>


          See accompanying notes to consolidated financial statements


                                     F-6
<PAGE>
ALLOY STEEL INTERNATIONAL, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.     NATURE OF OPERATIONS

Alloy  Steel  International,  Inc. (ASII) and its wholly-owned subsidiary, Alloy
Steel  Australia  (Int.)  Pty  Limited  (ASAI)  (collectively  the  "Company")
manufacture  and distribute Arcoplate, a wear-resistant fused-alloy steel plate,
to  customers  throughout  the  world.

2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis  of  Presentation

The  Company  adheres  to accounting principles generally accepted in the United
States  of  America.  The  Company's  consolidated  financial  statements  are
denominated  in  United  States  dollars.

Principles  of  Consolidation

The  consolidated  financial  statements  include the accounts of ASII and ASAI.
All  material  intercompany  balances  and  transactions have been eliminated in
consolidation.

Revenue  Recognition

The  Company  recognizes  revenues when products are shipped and title passes to
customers.  Provisions  are  established,  as  appropriate,  for  uncollectible
accounts,  returns  and  allowances  and  warranties  in  connection with sales.

Cash  and  Cash  Equivalents

The  Company  considers  all  highly-liquid  debt  instruments  purchased  with
maturities  of  three  months  or  less  to  be  cash  equivalents.

Accounts Receivable

The  Company  carries  its  accounts  receivable  at  cost less an allowance for
doubtful  accounts.  On  a periodic basis, the Company evaluates its receivables
and establishes an allowance for doubtful accounts, based on the history of past
write-offs  and collections and current credit conditions.  Accounts are written
off  as  uncollectible  once  the  Company has exhausted its collection efforts.

Fair  Value  of  Financial  Instruments

The  fair  value  of  the  Company's  assets  and  liabilities  which qualify as
financial instruments under Statement of Financial Accounting Standards ("SFAS")
No.  107,  "Disclosures About Fair Value of Financial Instruments," approximates
the  carrying  amounts presented in the accompanying consolidated balance sheet.

Inventories

Inventories  are  valued  at the lower of cost or net realizable value.  Cost is
determined  principally  on  the  average  cost  method,  which approximates the
first-in,  first-out  method.


                                     F-7
<PAGE>
ALLOY STEEL INTERNATIONAL, INC. AND SUBSIDIARY


NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS


2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Impairment  of  Long-Lived  Assets

The  Company periodically assesses the recoverability of the carrying amounts of
long-lived  assets,  including  intangible  assets.  A  loss  is recognized when
expected undiscounted future cash flows are less than the carrying amount of the
asset.  The  impairment  loss  is the difference by which the carrying amount of
the  asset  exceeds  its  fair  value.

Property  and  Equipment

Property  and  equipment  are  stated  at  cost  less  accumulated depreciation.
Depreciation  is  computed  using  the  straight-line  method over the estimated
useful  lives  of  the  assets  as  follows:

<TABLE>
<CAPTION>
                                       ESTIMATED
         ASSET                       USEFUL LIVES
<S>                                 <C>
     Plant and equipment              5-20 years
     Furniture and fixtures            5-7 years
     Vehicles                          3-5 years
     Office and computer equipment     3-5 years
</TABLE>

Maintenance  and  repairs  are  charged  to  operations,  while  betterments and
improvements  are  capitalized.

Intangibles

Intangibles  include  intellectual  property  rights  of  $90,512, which will be
amortized  over  the  lesser  of  the estimated useful or economic life, or five
years,  commencing  from  the  time  the  property rights are first commercially
exploited  by  the  Company.

Advertising

Advertising  costs  are charged to operations as incurred and were approximately
$26,000  and  $12,000  for  the  years  ended  September  30,  2006  and  2005,
respectively.

Income  Taxes

The  Company  complies  with  SFAS No. 109, "Accounting for Income Taxes", which
requires  an  asset  and  liability  approach  to financial reporting for income
taxes.  Deferred  income tax assets and liabilities are computed for differences
between  the  financial  statement  and tax bases of assets and liabilities that
will  result  in future taxable or deductible amounts, based on enacted tax laws
and  rates  applicable  to  the periods in which the differences are expected to
affect taxable income.  Valuation allowances are established, when necessary, to
reduce deferred income tax assets to the amount expected to be realized.


                                     F-8
<PAGE>
ALLOY STEEL INTERNATIONAL, INC. AND SUBSIDIARY


NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS


2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income  (Loss)  Per  Common  Share

SFAS  No.  128,  "Earnings  Per  Share", requires dual presentation of basic and
diluted  income (loss) per share for all periods presented.  Basic income (loss)
per  share  excludes  dilution  and  is  computed  by dividing net income (loss)
available to common stockholders by the weighted-average number of common shares
outstanding  during  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 or resulted in the
issuance  of  common  stock  that  then  shared  in the earnings of the Company.
Diluted  income  (loss) per common share was the same as basic income (loss) per
common  share  since there were no common stock equivalents outstanding for both
years  presented.

Use  of  Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted  in the United States of America requires management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and  disclosure of contingent assets and liabilities at the date of
the  consolidated  financial statements and the reported amounts of revenues and
expenses  during  the  reporting period.  Actual results could differ from those
estimates.

New  Accounting  Pronouncements

In  May 2005, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial  Accounting  Standards  ("SFAS")  No. 154, "Accounting Changes and
Error  Corrections." This statement generally requires retrospective application
to  prior  periods'  financial  statements  of  voluntary  changes in accounting
principles  unless  it  is impracticable to determine either the period-specific
effects  or  the cumulative effect of the change. Under the prior rules, changes
in accounting principles were generally recognized by including in net income of
the  period of the previous guidance for reporting the correction of an error in
previously  issued  financial  statements,  change  in  accounting  estimate  or
justification of a change in accounting principle on the basis of preferability.
This  statement  is  effective  for  accounting changes made in the fiscal years
beginning  after  December 15, 2005. Adoption of the provisions of the Statement
is  not  expected  to  have  a  material  effect  on the operations or financial
position  of  the  Company.

In  December  2004, the FASB issued SFAS No. 123(R), "Accounting for Stock-Based
Compensation  (Revised)".  SFAS No. 123(R) supersedes APB No. 25 and its related
implementation  guidance.  SFAS  No.  123(R)  establishes  standards  for  the
accounting  for transactions in which an entity exchanges its equity instruments
for  goods or services. It also addresses transactions in which an entity incurs
liabilities  in  exchange for goods or services that are based on the fair value
of  the  entity's  instruments  or  that may be settled by the issuance of those
equity  instruments.  SFAS  No.  123(R)  focuses  primarily  on  accounting  for
transactions in which an entity obtains employee services in share-based payment
transactions.  SFAS  No.  123(R) requires a public entity to measure the cost of
employee  services received in exchange for an award of equity instruments based
on  the  grant-date fair value of the award (with limited exceptions). That cost
will  be  recognized  over  the  period  during which an employee is required to
provide  service  in  exchange for the award during the requisite service period
(usually  the  vesting  period). No compensation costs are recognized for equity
instruments  for  which  employees  do  not  render  the  requisite service. The
grant-date  fair value of employee share options and similar instruments will be
estimated using option-pricing models adjusted for the unique characteristics of
those  instruments  (unless  observable  market  prices  for the same or similar
instruments are available). If an equity award is modified after the grant date,
incremental  compensation  cost  will  be  recognized  in an amount equal to the
excess  of  the  fair  value  of  the  modified award over the fair value of the
original  award immediately before the modification. This statement is effective
for  accounting  changes  made  in the fiscal years beginning after December 15,
2005.  Adoption  of  the  provisions  of the Statement is not expected to have a
material  effect  on  the  operations  or  financial  position  of  the Company.


                                     F-9
<PAGE>
ALLOY STEEL INTERNATIONAL, INC. AND SUBSIDIARY


NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS


2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Foreign  Currency  Translation

Assets  and  liabilities of the Company's wholly-owned subsidiary are translated
into  U.S.  dollars  at  year-end exchange rates, revenues and expenses and cash
flows  are  translated  at  average rates prevailing during the year.  Resulting
translation  adjustments  are  recorded  as  a  component  of  accumulated other
comprehensive  income.

3.     INVENTORIES

Inventories consist of the following at September 30, 2006:

<TABLE>
<CAPTION>
<S>                    <C>
     Raw materials     $284,814
     Work in progress    49,990
     Finished goods     195,726
                       --------
                       $530,530
                       ========
</TABLE>

4.     PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid  expenses and other current assets consist of the following at September
30,  2006:

<TABLE>
<CAPTION>
<S>                         <C>
     Prepaid expenses       $26,352
     Income tax receivable   44,434
                            -------
                            $70,786
                            =======
</TABLE>

5.     PROPERTY AND EQUIPMENT

Property and equipment consists of the following at September 30, 2006:

<TABLE>
<CAPTION>
<S>                                 <C>
     Plant and equipment            $2,334,219
     Furniture and fixtures             28,726
     Vehicles                          106,236
     Leasehold Improvements             14,747
     Office and computer equipment     107,674
                                    ----------
                                     2,591,602
     Less accumulated depreciation     703,374
                                    ----------
                                    $1,888,228
                                    ==========
</TABLE>

Depreciation  expense  for  the  years  ended  September  30,  2006 and 2005 was
approximately  $175,000  and  $149,000,  respectively.  At  September  30, 2006,
property  and  equipment  included  approximately  $413,000  and  accumulated
depreciation  included  approximately  $150,000 related to assets acquired under
notes  payable.


                                      F-10
<PAGE>
ALLOY STEEL INTERNATIONAL, INC. AND SUBSIDIARY


NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS


6.     NOTES PAYABLE

Notes payable at September 30, 2006 consists of the following:

<TABLE>
<CAPTION>
<S>                         <C>
     Note payable (a)       $  7,803
     Note payable (b)         10,442
     Note payable (c)         16,868
     Note payable (d)        187,468
     Note payable (e)         34,663
     Note payable (f)         25,481
                            --------
                             282,725
     Less current portion     65,966
                            --------
                            $216,759
                            ========
</TABLE>

(a)  The note is payable in monthly installments of $628 including interest at a
     rate  of  7.75%  per annum, with a final payment in April 2007. The note is
     collateralized  by  the  underlying  equipment  and  is  guaranteed  by the
     officers  of  the  Company.

(b)  The note is payable in monthly installments of $410 including interest at a
     rate  of  7.9% per annum, with a final payment in January 2009. The note is
     collateralized  by  the  underlying  equipment  and  is  guaranteed  by the
     officers  of  the  Company.

(c)  The note is payable in monthly installments of $321 including interest at a
     rate  of  7.61%  per annum, with a final payment in March 2010. The note is
     collateralized  by  the  underlying  equipment  and  is  guaranteed  by the
     officers  of  the  Company.

(d)  The note is payable in monthly installments of $3,782 including interest at
     a  rate  of 7.25% per annum, with a final balloon payment in November 2010.
     The note is collateralized by the underlying equipment and is guaranteed by
     the  officers  of  the  Company.

(e)  The note is payable in monthly installments of $1,316 including interest at
     a rate of 9.1% per annum, with a final payment in January 2009. The note is
     collateralized  by  the  underlying  equipment  and  is  guaranteed  by the
     officers  of  the  Company.

(f)  The note is payable in monthly installments of $582 including interest at a
     rate of 7.61% per annum, with a final balloon payment in February 2010. The
     note is collateralized by the underlying equipment and is guaranteed by the
     officers  of  the  Company.

Aggregate  annual  principal  payments  for  each  of the following years are as
follows:

<TABLE>
<CAPTION>
<S>                             <C>
     YEAR ENDING SEPTEMBER 30,
     2007                       $ 65,966
     2008                         64,144
     2009                         55,708
     2010                         57,727
     2011                         39,180
                                --------

                                $282,725
                                ========
</TABLE>


                                      F-11
<PAGE>
ALLOY STEEL INTERNATIONAL, INC. AND SUBSIDIARY


NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS


7.     NOTES PAYABLE, OFFICERS

Notes payable, officers at September 30, 2006 consists of the following:

<TABLE>
<CAPTION>
<S>                         <C>
     Note payable (a)       $ 50,252
     Note payable (b)         98,505
                            --------
                             148,757
     Less current portion     51,958
                            --------
                            $ 96,799
                            ========
</TABLE>


(a)  The note is payable in monthly installments of $1,498 including interest at
     a  rate  of  1%  per  annum, with a final payment in June 2009. The note is
     unsecured  and  is  due  to  an  officer  of  the  Company.

(b)  The note is payable in monthly installments of $2,936 including interest at
     a  rate  of  1%  per  annum, with a final payment in June 2009. The note is
     unsecured  and  is  due  to  an  officer  of  the  Company.

Aggregate  annual  principal  payments  for  each  of the following years are as
follows:

<TABLE>
<CAPTION>
<S>                             <C>
     YEAR ENDING SEPTEMBER 30,
     2007                       $ 51,958
     2008                         52,479
     2009                         44,320
                                --------

                                $148,757
                                ========
</TABLE>

8.     LOAN PAYABLE, RELATED PARTY

As of September 30, 2006, the Company has a non-interest bearing loan payable to
a  related  party with no stated repayment terms of approximately $147,674.  The
loan  payable  is  not  expected  to  be  repaid  before  October  1,  2007.

9.     INCOME TAXES

Income  (loss) before income tax expense (benefit) for the years ended September
30,  2006  and  2005  were  derived  in  the  following  jurisdictions:

<TABLE>
<CAPTION>
                  2006       2005
<S>             <C>        <C>
     Australia  (293,266)  (66,515)
     US         (115,455)   (8,003)
                -------------------

                (408,721)  (74,518)
                ===================
</TABLE>


                                      F-12
<PAGE>
ALLOY STEEL INTERNATIONAL, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.     INCOME TAXES (CONTINUED)

The  components  of  income  tax  expense (benefit) are as follows for the years
ended  September  30,  2006  and  2005:

<TABLE>
<CAPTION>
                  2006       2005
<S>             <C>        <C>
     CURRENT
       Foreign   (46,725)  (312,267)

     DEFERRED
       Foreign   (87,970)    (1,409)
                --------------------

                (134,695)  (313,676)
                ====================
</TABLE>

As of September 30, 2006, the Company had US net operating loss carryforwards of
approximately  $1,614,515  expiring  through  2025.

The  components  of  the  deferred  tax  assets  and  liabilities consist of the
following  at  September  30,  2006  and  2005:

<TABLE>
<CAPTION>
                                           2006      2005
<S>                                      <C>       <C>
     Deferred tax assets
       Net operating loss carryforwards  710,534   509,680
       Other                              29,663    28,564
                                         ------------------
                                         740,197   538,244
     Less valuation allowance            565,080   509,680
                                         ------------------
                                         175,117    28,564
                                         ==================
     Deferred tax liabilities
       Other                             (39,791)   (7,355)
                                         ==================
     Deferred tax assets, net            135,326    21,209
                                         ==================
</TABLE>

SFAS  No. 109, requires that the Company record a valuation allowance when it is
more  likely  than not that some portion or all of the deferred income tax asset
will  not  be  realized.  The  change  in  the  valuation  allowance amounted to
approximately  $40,000  and  $3,000  for  the years ended September 30, 2006 and
2005,  respectively.  The ultimate realization of this deferred income tax asset
depends on the Company's ability to generate sufficient taxable income in future
years

The Company also has certain foreign tax credits available for future use.

The  effective tax rate in 2006 and 2005 differs from the U.S. federal statutory
rate  as  follows:

<TABLE>
<CAPTION>
                                        2006    2005
<S>                                     <C>    <C>
     U.S. federal statutory rate        (35%)   (34%)
     Change in valuation allowance        10%      -
     Change in estimated research
       and development credit              -       -
     Refund related to prior years
       research and development credit     -   (312%)
     Over accrual from prior year       (11%)   (83%)
     Other                                 3%      8%
                                        -------------
     Effective tax rate                 (33%)  (421%)
                                        =============
</TABLE>


                                      F-13
<PAGE>
ALLOY STEEL INTERNATIONAL, INC. AND SUBSIDIARY


NOTES  TO  CONSOLIDATED  FINANCIAL  STATEMENTS


10.     STOCK OPTIONS

During  2000,  the Company's Board of Directors (the Committee) adopted, and the
stockholders  approved,  the 2000 stock option plan (the Plan) pursuant to which
500,000  shares  of common stock were reserved for issuance upon the exercise of
options  granted  to  key employees, members of the Committee and consultants of
the  Company.  Options  under  the  Plan  may  be  incentive  stock  options,
nonqualified  stock  options,  or any combination thereof, and the Committee may
grant  options at an exercise price which is not less than the fair market value
on the date such options are granted. The Plan further provides that the maximum
period  in  which  stock  options  may  be  exercised  will be determined by the
Committee, except that they may not be exercisable after ten years from the date
of  grant  or  five years from the date of grant for any person owning more than
ten  percent of the voting power of all classes of the Company's stock.  For the
years ending September 30, 2006 and 2005, there were no stock options granted or
outstanding  stock  options.

11.     COMMITMENTS AND CONTINGENCIES

Operating Lease

The  Company  leases its office and manufacturing space from a related party for
approximately  $85,000  per  annum  plus  certain  expenses  (as  defined in the
agreement).  The  lease  expires  on  June  30,  2010.

Rent  expense  for the years ended September 30, 2006 and 2005 was approximately
$85,000  in  each  year.

Royalty  Agreements

The  Company  has a licensing agreement with a related party of which relates to
the  sale  of all products sold in the United States of America. Under the terms
of  the  agreement,  the  Company  is required to pay royalties of 2% on the net
sales  of  these  products, calculated at the end of each quarter. The agreement
expires  in 2025 and has three ten-year renewal options to extend unless written
notice  of  non-renewal  is  given  by either party within 120 days prior to its
expiration. At September 30, 2006, approximately $327,000 was payable under this
agreement and is included in accounts payable and other current liabilities.

Royalty  expense  was  approximately  $65,000  and  $69,000  for the years ended
September  30,  2006  and  2005,  respectively.

Employment  Agreements

The  Company  has  employment  agreements  with  two  of its executives, who are
principal  stockholders,  requiring  the  payment  of  a  minimum  annual  base
compensation  of  approximately $80,000 and $150,000, adjusted semi-annually for
increases  approved  by  the Board of Directors, but not less than the base year
amount,  plus incentive compensation based on the executives performance and the
Company's  success.  The agreements were automatically renewed for an additional
year  starting  on June 13, 2005, since neither party gave notice of non-renewal
within  180  days  prior to their expiration. New agreements are currently being
negotiated with these executives. Approximately $170,000 has been expensed under
these agreements in the years ended September 30, 2006 and 2005, and is included
in  selling,  general  and  administrative  expenses.


                                      F-14
<PAGE>
ALLOY STEEL INTERNATIONAL, INC. AND SUBSIDIARY


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


12.     MAJOR  CUSTOMERS,  SUPPLIERS  AND  GEOGRAPHIC  INFORMATION

The  Company  had revenues from three customers and one customer for each of the
years ended September 30, 2006 and 2005, of approximately $960,000 and $721,000,
respectively.  Accounts  receivable  due  from  the  respective  customers  were
approximately  $nil  at  September  30,  2006  and  2005.

For  the  years  ended  September  30,  2006  and  2005,  the  Company purchased
approximately  47%  and  41%  of  its  inventories from three and two suppliers,
respectively.


For  the years ended September 30, 2006 and 2005, revenues were derived from the
following:

<TABLE>
<CAPTION>
-------------------------
            2006    2005
-------------------------
<S>        <C>     <C>
-------------------------
Australia   64  %   50  %
-------------------------
Americas    23  %   26  %
-------------------------
Other       13  %   24  %
-------------------------

-------------------------
           100  %  100  %
-----------==============
</TABLE>


                                      F-15