UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K








|X|           ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF
1934





For the fiscal year ended: September
30, 2008





or





|   |           TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF
1934





For the transition period from ______________ to _____________








Commission
file number: 0-30058





AMERICAN WENSHEN STEEL
GROUP, INC.


(Exact
name of small business issuer in its charter)










Delaware
            04-2621506(State or
      other jurisdiction of incorporation or organization)
            (IRS Employer
      Identification No.)








100
      Wall Street, 15th Floor, New York, NY
            10005(Address of
      principal executive offices)
            (Zip
  Code)




Issuer's
telephone number: (212) 232-0120





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





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




Common
Stock, $.001 par value





Check
whether the issuer is not required to file reports pursuant to Section 13 or
15(d) of the Exchange Act.  Yes |  |   No
|X|





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 contained in this form, and no disclosure will be contained, to
the  best of  registrant's  knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any  amendment to this Form
10-K.  |  |





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





The
issuer’s revenues for its most recent fiscal year were $2,253,816





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 January
13, 2009 was $ 18,031,836.





The
number of shares outstanding of the issuer’s common stock, as of January 12,
2009 was 20,487,400.





DOCUMENTS
INCORPORATED BY REFERENCE:  Portions of the Registration Statement on
Form S-1/A (Amendment No. 3) of HXT Holdings, Inc. (File No. 333-146796), filed
on December 3, 2008, have been incorporated by reference into the following
sections of this Report:  Item 1 – Description of Business, Item 2 –
Description of Property, and Item 9 – Directors and Executive Officers of the
Registrant.





Transitional
Small Business Disclosure Format (check one): Yes |  | No
|X|














TABLE
OF CONTENTS




PagePart
      IITEM
      1.
            DESCRIPTION
      OF BUSINESS
            3ITEM
      2.
            DESCRIPTION
      OF PROPERTY
            5ITEM
      3.
            LEGAL
      PROCEEDINGS
            5ITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
            5Part
      IIITEM
      5.
            MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
            6ITEM
      6.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
            6ITEM
      7.
            FINANCIAL
      STATEMENTS
            F-1ITEM
      8.
            CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
            10ITEM
      8A.
            CONTROLS
      AND PROCEDURES
            10ITEM
      8B.
            OTHER
      INFORMATION
            10Part
      IIIITEM
      9.
            DIRECTORS
      AND EXECUTIVE OFFICERS OF THE REGISTRANT
            11ITEM
      10.
            EXECUTIVE
      COMPENSATION
            12ITEM
      11.
            SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
            13ITEM
      12.
            DIRECTOR
      INDEPENDENCE
            14ITEM
      13.
            EXHIBITS
            14ITEM
      14.
            PRINCIPAL
      ACCOUNTANT FEES AND SERVICES
            15







PART
I





CAUTIONARY NOTE REGARDING
FORWARD-LOOKING STATEMENTS





This
Report contains certain forward-looking statements regarding American Wenshen
Steel Group, Inc. (“American Wenshen”), its business and its financial
prospects.  These statements represent Management’s present intentions
and its present belief regarding the Company’s future.  Nevertheless,
there are numerous risks and uncertainties that could cause our actual results
to differ from the results suggested in this Report.  A number of
those risks are set forth in the section of this report titled “Management’s
Discussion and Analysis – Risk Factors That May Affect Future
Results.”





Because
these and other risks may cause American Wenshen’s actual results to differ from
those anticipated by Management, the reader should not place undue reliance on
any forward-looking statements that appear in this Report.  Readers
should also take note that American Wenshen will not necessarily make any public
announcement of changes affecting these forward-looking statements, which should
be considered accurate on this date only.





ITEM
1.                      DESCRIPTION
OF BUSINESS





Until July 30, 2007 the Company’s
business consisted of providing software applications and system integration
services in The People’s Republic of China (“PRC”).  That business is
now conducted by our wholly-owned subsidiary, HXT Holdings, Inc.  On
July 30, 2007 we acquired all of the equity in Chaoyang Liaogang Special Steel
Co., Ltd. (“Chaoyang Liaogang”), which is engaged in the business of
manufacturing special steel in the PRC.  That business is carried on
through our wholly-owned subsidiary, AWSG Sub, Inc.




The business of HXT Holdings is managed
by Yuan Qing Li, who was the Company’s CEO prior to the acquisition of Chaoyang
Liaogang.  The management agreement provides that Mr. Li will manage
HXT Holdings within his discretion, provided that his actions or inactions do
not threaten material injury to American Wenshen.  The management
agreement further provides that Mr. Li will cause HXT Holdings to file a
registration statement with the Securities and Exchange Agreement that will,
when declared effective, permit American Wenshen to distribute all of the
outstanding shares of HXT Holdings to the holders of its common
stock.  After the registration statement is declared effective, the
Board of Directors of American Wenshen will fix a record date, and shareholders
of record on that date (other than shareholders who received their common stock
in exchange for Series a Preferred Stock) will receive the shares of HXT
Holdings in proportion to their ownership of American Wenshen common
stock.  Warner Technology & Investment Corp. has agreed that it
will surrender to HXT Holdings any shares of that company that are distributed
to it by American Wenshen.




Business of Chaoyang LiaogangSpecial Steel Co.,
Ltd.




Chaoyang
Liaogang was organized in 2004 as a joint stock limited company under the laws
of the PRC.  Its offices and manufacturing facilities are located in
the City of Chaoyang, which is in the Liaoning Province in northeast
China.  This location provides the company ready access to customers
in the industrial sector of northeast China, including the Beijing metropolitan
area.




Products




For the past eight years China has been
the world’s largest producer of steel.  However, for the same eight
years China has been the world’s largest importer of specialty
steel.  With the rapid development of China’s automobile, electronic
and machine tool industries, the demand for refined steels than can be used in
precision applications has increased dramatically.  Chaoyang Liaogang
has been organized to meet that demand.




Chaoyang Liaogang specializes in the
production of specialty steels that boast high quality and more added value than
common construction steel.  Chaoyang Liaogang produces steel in three
primary categories:




Tungsten Carbide
Steel.  This is a very high quality, super-hard steel,
possessing a fine texture and a high degree of purity.  Tungsten
carbide steel has a bending strength that exceeds 280 kg/mm2.  The
durability of tungsten carbide steel exceeds that of common die steel by more
than a factor of ten.  It is used for tools, dies and precision
measuring instruments, as well as gears and bearings.  The market
price for tungsten carbide steel ranges from 8,000 to 10,000 RMB ($1,025 -
$1,282) per ton.




Stainless
Steel.  Chaoyang Liaogang employs a patented technology to
produce stainless steel primarily for the cookware and tableware
industry.  Its products are free of toxins, and contain microelements
that are believed to provide health benefits.




Die
Steel.  Chaoyang Liaogang’s SRM-1 hot die steel and its SLM-2
cold die steel both possess a high tensile hardening layer that enables the die
cavity to resist high compressive stress and aid durability.  The
steels are used to produce precision punch dies, coining dies, cold extrusion
dies, etc.  In addition, Chaoyang Liaogang produces special steel dies
and forged pieces used for tools, dies and measuring instruments in a wide
variety of industries, including aviation, automobile, machine tool, and
defense.




We anticipate that our growth will be
driven primarily by our tungsten carbide steel technology.  Our
patented technology for the production of tungsten carbide steel provides us an
exclusive niche in the steel industry.  Carbonized tungsten steel
provides all of the benefits of carbide tungsten that make it the metal of
choice for precision products – fine texture, durability,
flexibility.  But carbonized tungsten steel, such as we produce, is
actually more durable than carbide tungsten.  In addition, carbonized
tungsten steel can be recovered and reused, whereas there is no available
technology for the recovery of tungsten carbide.  Products made with
our tungsten carbide steel, therefore, have a built-in resale value for scrap,
which the manufacturer can reflect in their market price.




3


Facilities




Chaoyang
Liaoyang has entered the steel industry with a relatively modest capital
investment due to the political capital of its Chairman and the inventive
industry of its researchers.  Most of the company’s equipment was
purchased for not much more than scrap value from failed steel enterprises owned
by the Chinese government.  Chaoyang Liaoyang has supplemented that
equipment with its own creations – for example, the electroslag melting
equipment that it uses to render scrap steel to a molten state was developed and
built by the company’s own staff.




At the
present time, Chaoyang Liaogang’s factory has the capacity to produce 20,000
tons of steel products in a year, consisting of:




200 tons
– tungsten carbide steel.




2,000
tons – stainless steel.




14,200
tons – raw die steel.




3,600
tons – die steel products.




The
quality management system in Chaoyang Liaogang’s facility has been certified as
ISO 2000 compliant.  Chaoyang Liaogang is a member of the China Die
Association.




Raw
Materials; Mining Rights




At the
present time, Chaoyang Liaogang produces most of its steel by melting scrap
steel using an electroslag remelting process, combining the molten steel with
other materials, and then utilizing the company’s patented technologies to
produce its high quality steels.  The scrap steel that is its primary
raw material is readily available on the international market.




In the
past few years, however, the growing demand for scrap steel, in large part
fueled by the expansion of Chinese industry, has caused the international price
of scrap steel to multiply several-fold.  In order to reduce its need
for scrap steel and to prepare for growth, Chaoyang Liaogang has initiated the
process of developing a captive source of iron ore, from which it will
manufacture most of its steel in the future.




During
fiscal year 2006, our Chairman, Yang Kuidong, contributed to Chaoyang Liaogang
mineral rights that he purchased for $3,846,000 in 2005.  The Tenth
Geological Prospecting Team of the Inner Mongolia Autonomous Region has
calculated that the proven reserves of iron to which Chaoyang Liaogang has
rights total 5.25 million tons, with additional reserves of 4.7 million tons
probable. In 2007, however, management determined that the transfer of the
mining rights to Chaoyang Liaogang was not permissible under Chinese law
applicable to mines.  Therefore Chaoyang Liaogang transferred the
mining rights back to Mr. Yang, and recorded a reduction in capital on its
financial statements.  Nevertheless, we expect to have priority access
to the iron production from Mr. Yang’s mines, once he obtains capital sufficient
to develop iron mining operations.




Environmental
Regulation




The
facilities of Chaoyang Liaogang are operated in full compliance with all
national and provincial regulations relating to the environment.  The
local government charges Chaoyang Liaogang 20,000 RMB (approximately $2,600) per
year for sewage processing.




Intellectual
Property




Chaoyang
Liaogang has obtained five national patents for its steel production
methods.  Its existing patents are:




·
            Production
      method for fusion cast tungsten carbide steel (Invention Patent
      ZL95-1-12012.3.




·
            Smelting
      process for paste cladding type alloy steel (Invention Patent
      ZL95-1-11885.4)




·
            Special
      stainless steel for cookware (Invention Patent
    ZL00-1-23087.5)




·
            Electronic
      smelting of compound dies (Use Patent
  ZL01-2-41258.9)




·
            Electronic
      smelting of steel structure tungsten carbide bimetal machine tool cutter
      (Use Patent ZL94-2-30512.4)




The
Government of China has named the fusion cast tungsten carbide steel patent as
the foundation for Chaoyang Liaogang’s participation in the National Spark
(Xinghuo) Program.




Chaoyang
Liaogang has developed a close working relationship with Northeastern University
in Shenyang City, the capital of Liaoning Province.  Our contract with
Northeastern University provides for joint efforts to exploit our patented
technologies.  Our engineers also consult regularly with the staffs of
the Central Iron & Steel Research Institute, the Shenyang New and High
Wear-Resistant Steel Research Institute, and the Hefei University of
Technology.




4


Employees




Chaoyang
Liaogang has over 250 employees.  Included in its staff are 25
management personnel, 9 senior engineers, 22 staff engineers, and 35 senior
skilled workers.  None of Chaoyang Liaogang’s employees is a member of
a collective bargaining unit.  Management believes that the company’s
relationship with its employees is good.




Business
of HXT Holdings, Inc.




We here incorporate by reference the
text headed “Description of Business” contained at pages 1 through 30 of
Amendment No. 3 to the Registration Statement on Form S-1 of HXT Holdings, Inc.
(File No. 333-146796) filed on December 3, 2008.







ITEM
2.                      DESCRIPTION
OF PROPERTY




Property of Chaoyang LiaogangSpecial Steel Co.,
Ltd.




Chaoyang
Liaogang’s executive offices and manufacturing facility are located on a 20,000
m2campus that is leased to Chaoyang Liaogang by its
Chairman.  The company’s several facilities total 2,000 m2in floor
space.  The Chairman acquired the land and facility from the Chinese
government for a modest payment in a distress sale situation.  He
contributed the buildings to Chaoyang Liaogang at his cost, and subleases the
land to the company free of charge.




Property
of HXT Holdings, Inc.




We here incorporate by reference the
text headed “Description of Property” contained at page 30  of
Amendment No. 3 to the Registration Statement on Form S-1 of HXT Holdings, Inc.
(File No. 333-146796) filed on December 3, 2008.







ITEM
3.                      LEGAL
PROCEEDINGS





None.





ITEM
4.                      SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS





No matter was submitted to a vote of
our shareholders during the fourth quarter of fiscal 2008.








PART
II





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





(a)  Market
Information.





Our common stock is listed for
quotation on the OTC Bulletin Board under the trading symbol
“AWSH.”  The following table sets forth the bid prices quoted for our
common stock during each quarterly period from October 2006 through September
30, 2008.  All prices have been adjusted to reflect the pro forma
effect of the 1-for-45 reverse stock split implemented on October 10,
2007.





BidPeriod:
                  
                  High
                  
                  
                  LowOct.
      1, 2006 – Dec. 31, 2006
                  
                  $
                  85.49
                  
                  
                  $
                  11.25Jan.
      1, 2007 – Mar. 31, 2007
                  
                  $
                  26.10
                  
                  
                  $
                  6.75Apr.
      1, 2007 – June 30, 2007
                  
                  $
                  11.25
                  
                  
                  $
                  3.60July
      1, 2007 – Sept. 30, 2007
                  
                  $
                  14.85
                  
                  
                  $
                  3.15Oct.
      1, 2007 – Dec. 31, 2007
                  
                  $
                  6.50
                  
                  
                  $
                  4.88Jan.
      1, 2008 – Mar. 31, 2008
                  
                  $
                  4.88
                  
                  
                  $
                  1.10Apr.
      1, 2008 – June. 30, 2008
                  
                  $
                  1.20
                  
                  
                  $
                  0.75July
      1, 2008 – Sept. 30, 2008
                  
                  $
                  2.00
                  
                  
                  $
                  0.75





(b)  Holders.  Our
shareholders list contains the names of 400 registered stockholders of record of
the Company’s Common Stock.  Based upon information from nominee
holders, the Company believes the number of owners of its Common Stock exceeds
400.





(c)  Dividend
Policy.  The Company has never paid or declared any cash
dividends on its Common Stock and does not foresee doing so in the foreseeable
future.  The Company intends to retain any future earnings for the
operation and expansion of the business.  Any decision as to future
payment of dividends will depend on the available earnings, the capital
requirements of the Company, its general financial condition and other factors
deemed pertinent by the Board of Directors





(d) Recent Sales of Unregistered
Securities.





None.





(e) Repurchase of Equity
Securities.  The Company did not repurchase any of its equity
securities that were registered under Section 12 of the Securities Act during
the 4th quarter
of fiscal 2008.







ITEM
6.                      MANAGEMENT'S
DISCUSSION AND ANALYSIS.





Classification of HXT Holdings,
Inc.




American Wenshen Steel Group owns two
operating subsidiaries:  Chaoyang Liaogang, which carries on its
specialty steel operations, and Shenzhen Hengtaifeng Technology Co., Ltd., which
carries on its computer systems operations.  Shenzhen Hengtaifeng
Technology Co., Ltd. is owned by HXT Holdings, Inc., a subsidiary of American
Wenshen Steel Group.  HXT Holdings has filed a registration statement
with the Securities and Exchange Commission in contemplation of a distribution
by American Wenshen Steel Group of its shares in HXT Holdings.  For
that reason, on the financial statements in this report, HXT Holdings and its
subsidiaries have been categorized as an “entity held for disposal;” its net
assets have been recorded on our balance sheet as “Assets of the entity held for
disposal;” and the results of its operations have been recorded as an
extraordinary item labeled “Loss from entity held for disposal.’  The
remainder of the financial statements reflects the assets and liabilities and
results of operations of Chaoyang Liaogang.




5




Results of Operations




Chaoyang Liaogang commenced substantial
production activity in the fall of 2006.  Through December 31, 2006
its revenues consisted only of sales of small amounts of steel incidental to its
development activities.  Most of the $1,162,555 in revenue that
Chaoyang Liaogang recorded for the year ended September 30, 2007 were realized
in the three months ended June 30, 2007, when it made a large sale of special
steel and one variety of die steel to one distributor, Shenyang Geshite Special
Steel Co., Ltd., which is located nearby in the capital of Liaoning Province. In
fiscal 2008, we developed other customers for our products.   For
the year ended September 30, 2008 we realized $2,253,816 in revenue, compared to
$ 1,162,555 that we realized in the year ended June 30, 2007.




Chaoyang Liaogang’s gross margin
for the year ended September 30, 2008 was 30.9%.  This ratio was
substantially improved over the 25.2% gross margin we realized in the 2007
fiscal year, and was closer to the ratios realized by our
industry.  Our gross margin remains less than optimal due to (a) our
low sales volume, which leads to inefficiencies in the allocation of overhead
expenses, and (b) the fact that we are using scrap steel for our primary raw
material.  In recent years the international market price for scrap
steel has increased several-fold, making the reworking of scrap steel less
substantially less profitable than it was at the beginning of the current
decade.  We expect our profit margins to increase significantly in the
future, due to:




·
            increased
      sales volume, which will lead to more efficient use of our
      facilities;


·
            introduction
      of tungsten carbide steel into our sales, which we will be able to market
      at a higher mark-up over cost than our other steel products;
      and


·
            acquisition
      of sources of iron ore, which will lower our cost of raw
      materials.




Our
general and administrative expenses for the year ended September 30, 2008
increased by 20.6%, compared to the year ended September 30,
2007.  The primary reason for this year-to-year increase has been our
efforts to bring our factory into full production, which involves increased
staff expenses.  The secondary reason for the increase is the fact
that we are now incurring the costs attendant to our status as a U.S. public
company, which occurred in the summer of 2007.




In the
future, we expect that our overall efficiencies will enable us to increase our
sales volume at a rate that will be substantially greater than the accompanying
increase in our general and administrative expenses.  Sales and
marketing expense, however, will increase as we expand our marketing
program   In addition, as noted below, we intend to raise money
for capital investment:  purchase of additional smelting equipment and
development of an iron mining facility.  To the extent that we obtain
those funds as loans, our general and administrative expenses will be increased
by (a) interest expense and (b) depreciation expense.




During
the year ended September 30, 2008 the operations of Shenzhen Hengtaifeng
Technology Co., Ltd. suffered certain serious negative effects.  This
caused management to review the value of the goodwill that it had recorded in
connection with the acquisition of those operating assets.  Because of
the poor financial condition and poor operating results of Shenzhen Hengtaifeng
Technology Co., Ltd., management determined that the goodwill was
impaired.  This resulted in an operating expense of
$1,176,591.




After
taking into account the impairment of goodwill, the Company’s operations during
the year ended September 30, 2008 yielded a net pre-tax loss of
$1,296,178.  Nevertheless, because Chaoyang Liaogang recorded income
under Chinese accounting principles for the fiscal 2008, we recorded income tax
of $70,861, despite our lack of income.  For the next several years,
however, we will be entitled to substantial income tax abatements that the
Chinese government affords to profitable foreign-owned
enterprises.  We can only obtain those abatements by applying for them
after we meet the necessary criteria.  As a result, our statement of
operations will not reflect the effects of the abatements until some future
date.




After
taking income tax into account, the Company had a net loss from continuing
operations of $1,367,039 for the fiscal year of 2008.  The operations
of Shenzhen Hengtaifeng Technology Co., Ltd., however, which are accounted for
as an “entity held for disposal,” realized a net loss of $2,109,483 for the 2008
fiscal year. (As a result of reverse merger accounting, the results of
operations of Shenzhen Hengtaifeng Technology Co., Ltd. prior to the reverse
merger on July 30, 2007 are not reported.)  Our company, therefore,
reported a consolidated net loss of $3,476,522 for the year ended September 30,
2008.




Our
business operates entirely in Chinese Renminbi, but we report our results in our
SEC filings in U.S. Dollars.  The conversion of our accounts from RMB
to Dollars results in translation adjustments, which are reported as a middle
step between net income/loss and net comprehensive gain/loss.  The net
income/loss is added to the retained earnings on our balance sheet; while the
translation adjustment is added to a line item on our balance sheet labeled
“other comprehensive income,” since it is more reflective of changes in the
relative values of U.S. and Chinese currencies than of the success of our
business.  During the 2008 fiscal year the unrealized gain on foreign
currency translations added $267,957 to our accumulated other comprehensive
income.





6


Liquidity and Capital
Resources




The
development and operations of Chaoyang Liaogang have been funded to date
primarily by capital contributions and loans from its shareholders, primarily
Yang Kuidong.  As a result, at September 30, 2008 Chaoyang Liaogang
had $961,666 in debt due to related party, most of which was owed to Mr.
Yang.  Until we obtain a source of outside financing, we remain
dependent on Mr. Yang as our primary source of working capital.




At September 30, 2008 Chaoyang Liaogang
had working capital totaling $246,293, representing a $1,925,885 decrease of
working capital since our last fiscal year ended on September 30, 2007. The
greater portion of our working capital consists of inventory and advances to the
suppliers that will provide us additional raw material inventory in the future,
which reflects our expectation of increased business activity during fiscal
2009.  Chaoyang Liaogang currently has sufficient capital resources to
carry on its business as it is currently constituted, particularly as we can
rely on the capital resources of our Chairman.  However, our business
plan calls for substantial capital investment over the next twelve
months.  We intend to expand the capacity of our factory by investing
approximately $4.5 million in new capital equipment, specifically:




·
            a
      30 ton arc furnace - $2.5 million


·
            a
      30 ton heavy duty electric dregs furnace - $1.3
  million


·
            a 5
      ton free-going hammer - $0.7
million




At the present time, we have received
no commitments for the funds required for our planned capital
investments.  Obtaining those funds, if we can do so, will require
that we issue substantial amounts of equity securities or incur significant
debts.  We believe that the expected return on those investments will
justify the cost.  However, our plan, if accomplished, will
significantly increase the risks to our liquidity.





Off-Balance
Sheet Arrangements





We do not have any off-balance sheet
arrangements that have or are reasonably likely to have a current or future
effect on our financial condition or results of operations.





Critical
Accounting Policies and Estimates





In preparing our financial statements
we are required to formulate working policies regarding valuation of our assets
and liabilities and to develop estimates of those values.  In our
preparation of the financial statements for fiscal year 2008, there were three
estimates made which were (a) subject to a high degree of uncertainty and (b)
material to our results.  These estimates were:





·
            Our
      decision, described in Note 2 to the Consolidated Financial Statements, to
      record a total of $383,868 in provisions for uncollectible
      accounts.  This decision was based on our knowledge of the
      accounts and the difficulty we may face in
  collecting.


·
            Our
      decision, described in Notes 2 and 5 to the Consolidated Financial
      Statements, to record a $450,141 provision for obsolete
      inventories.  This decision was based on fact that we have
      developed improvements in our manufacturing processes, which rendered
      inventory that we manufactured early in our operations as technologically
      obsolete.


·
            Our
      decision, described in Note 8 to the Consolidated Financial Statements, to
      record a complete impairment of the goodwill that arose from the reverse
      acquisition of American Wenshen Steel Group.  This decision was
      based on our inability to find substantial support for the likelihood of
      discounted future cash flow from Shenzhen Hengtaifeng Technology Co.,
      Ltd.





We have made no material changes to our
critical accounting policies in connection with the preparation of financial
statements for fiscal year 2008.





7


Risk Factors That May Affect Future Results





You should carefully consider the risks
described below before buying our common stock.  If any of the risks
described below actually occurs, that event could cause the trading price of our
common stock to decline, and you could lose all or part of your
investment.





Because our production operations have
only recently commenced, unexpected factors may hamper our efforts to implement
our business plan.




Our first significant sales volume
occurred in the three months ended March 31, 2007.  Even then, over
90% of our sales were to one customer, a local distributor of special
steel.  Since then our sales revenue has fallen short of our
administrative expenses.  Our business plan contemplates that we will
engage in much broader marketing operations, involving a lengthy menu of product
offerings.  Implementation of that business plan will also entail much
more complex production operations.  Because these are areas in which
we have limited experience, problems may occur with production or marketing that
we have not anticipated, which would interfere with our business, and prevent us
from achieving profitability.





Our profits will be limited unless we
are able to secure a source of iron ore.




We currently manufacture our special
steel by melting scrap steel.  The price of scrap steel on the
international market is much higher today than it was five years ago, and our
expectation is that the price will remain high.  Therefore, in order
to achieve efficient operations, it will be necessary for us to develop the
capacity to smelt iron ore to produce steel.  Our plan is to obtain
iron ore from our Chairman, Yang Kuidong, who owns certain undeveloped mining
rights. However, implementation of that plan will require that Mr. Yang make
significant capital investments in order to develop his mining
properties.  If he is unable to obtain the necessary funds, or if our
efforts to develop a source of iron ore are fruitless for any other reason, our
profitability will be limited.





The capital investments that we plan
for the next two years may result in dilution of the equity of our present
shareholders.




Our business plan contemplates that we
will invest approximately 35 million RMB ($4.5 million) in our manufacturing
facility during the next years and an undetermined amount in creating a working
capital reserve.  We intend to raise a portion of the necessary funds
by selling equity in our company.  At present we have no commitment
from any source for those funds.  We cannot determine, therefore, the
terms on which we will be able to raise the necessary funds.  It is
possible that we will be required to dilute the value of our current
shareholders’ equity in order to obtain the funds.  If, however, we
are unable to raise the necessary funds, our growth will be limited, as will our
ability to compete effectively.





Competition could prevent us from
achieving a significant market position.




The special steel industry is populated
by many large companies, many of which receive substantial state support and
have capital assets that dwarf our own.  Our efforts to secure a
position in the market for special steel will be met by competition from
Japanese and European producers of high quality special steels.  We
must also compete against lower grade steels that may attract customers who will
sacrifice quality for price.  Currently smelters in Russia and India
are the source of significant competition at the lower end of the
market.  If a well-capitalized company directed its financial strength
toward competition with us, it could achieve economies of scale that might
permit it to market its products at lower prices than ours.  If this
occurred before we had established a significant market awareness of our brand,
we might be unable to compete effectively, and would be unable to achieve
profitability.





A recession in China could
significantly hinder our growth.




The growing demand for special steel in
China has been swelled, in large part, by the recent dramatic increases in
industrial production in China.  The continued growth of our market
will depend on continuation of recent improvements in the Chinese
economy.  If the Chinese economy were to contract and investment
capital became limited, manufacturers will be less able to pay premium prices
for the higher quality special steels that we produce.  Many financial
commentators expect a recession to occur in China in the near
future.  The occurrence of a recession could significantly hinder our
efforts to implement our business plan.





8


Increased environmental regulation
could diminish our profits.




The production of steel involves the
production of pollutants.  At the present time our operations comply
with all applicable government regulations designed to protect the
environment.  There is increasing concern in China, however, over the
degradation of the environment that has accompanied its recent industrial
growth.  It is likely that additional government regulation will be
introduced in order to protect the environment.  Compliance with such
new regulations could impose on us substantial costs, which would reduce our
profits.





Our business and growth will suffer if
we are unable to hire and retain key personnel that are in high
demand.




Our future success depends on our
ability to attract and retain highly skilled engineers, production supervisors,
and marketing personnel.  In general, qualified individuals are in
high demand in China, and there are insufficient experienced personnel to fill
the demand.  In a specialized scientific field, such as ours, the
demand for qualified individuals is even greater.  If we are unable to
successfully attract or retain the personnel we need to succeed, we will be
unable to implement our business plan.





We may have difficulty establishing
adequate management and financial controls in China.




The People’s Republic of China has only
recently begun to adopt the management and financial reporting concepts and
practices that investors in the United States are familiar with.  We
may have difficulty in hiring and retaining employees in China who have the
experience necessary to implement the kind of management and financial controls
that are expected of a United States public company.  If we cannot
establish such controls, we may experience difficulty in collecting financial
data and preparing financial statements, books of account and corporate records
and instituting business practices that meet U.S. standards.





Government regulation may hinder our
ability to function efficiently.




The national, provincial and local
governments in the People’s Republic of China are highly
bureaucratized.  The day-to-day operations of our business require
frequent interaction with representatives of the Chinese government
institutions.  The effort to obtain the registrations, licenses and
permits necessary to carry out our business activities can be
daunting.  Significant delays can result from the need to obtain
governmental approval of our activities.  These delays can have an
adverse effect on the profitability of our operations.  In addition,
compliance with regulatory requirements applicable to steel production may
increase the cost of our operations, which would adversely affect our
profitability.







Capital outflow policies in China may
hamper our ability to pay dividends to shareholders in the United
States.




The People’s Republic of China has
adopted currency and capital transfer regulations. These regulations require
that we comply with complex regulations for the movement of capital. Although
Chinese governmental policies were introduced in 1996 to allow the
convertibility of RMB into foreign currency for current account items,
conversion of RMB into foreign exchange for capital items, such as foreign
direct investment, loans or securities, requires the approval of the State
Administration of Foreign Exchange. We may be unable to obtain all of the
required conversion approvals for our operations, and Chinese regulatory
authorities may impose greater restrictions on the convertibility of the RMB in
the future. Because most of our future revenues will be in RMB, any inability to
obtain the requisite approvals or any future restrictions on currency exchanges
will limit our ability to pay dividends to our shareholders.





Currency fluctuations may adversely
affect our operating results.




Chaoyang Liaogang generates revenues
and incurs expenses and liabilities in Renminbi, the currency of the People’s
Republic of China.  However, as a subsidiary of American Wenshen, it
will report its financial results in the United States in U.S.
Dollars.  As a result, our financial results will be subject to the
effects of exchange rate fluctuations between these currencies.  From
time to time, the government of China may take action to stimulate the Chinese
economy that will have the effect of reducing the value of
Renminbi.  In addition, international currency markets may cause
significant adjustments to occur in the value of the Renminbi.  Any
such events that result in a devaluation of the Renminbi versus the U.S. Dollar
will have an adverse effect on our reported results.  We have not
entered into agreements or purchased instruments to hedge our exchange rate
risks.




We have limited business insurance
coverage.




The insurance industry in China is
still at an early stage of development. Insurance companies in China offer
limited business insurance products, and do not, to our knowledge, offer
business liability insurance. As a result, we do not have any business liability
insurance coverage for our operations. Moreover, while business disruption
insurance is available, we have determined that the risks of disruption and cost
of the insurance are such that we do not require it at this time. Any business
disruption, litigation or natural disaster might result in substantial costs and
diversion of resources.





American Wenshen is not likely to hold
annual shareholder meetings in the next few years.




Management does not expect to hold
annual meetings of shareholders in the next few years, due to the expense
involved.  The current members of the Board of Directors were
appointed to that position by the previous directors.  If other
directors are added to the Board in the future, it is likely that the current
directors will appoint them.  As a result, the shareholders of
American Wenshen will have no effective means of exercising control over the
operations of American Wenshen.




9


ITEM
7.                      FINANCIAL
STATEMENTS




AMERICAN
WENSHEN STEEL GROUP, INC., AND SUBSIDIARIES
  CONSOLIDATED
FINANCIAL STATEMENTS
  SEPTEMBER 30,
2008 AND 2007
 
 
 INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 
 
 
 
 
 Reports
      of Independent Registered Public Accounting Firms
                F-2Consolidated
      Balance Sheets as of September 30, 2008 and
2007
                F-3Consolidated
      Statements of Operation for years ended September 30, 2008 and
      2007
                F-4Consolidated
      Statements of Cash Flows for the years ended September 30, 2008 and
      2007
                F-5Consolidated
      Statements of Stockholders' Equity for the years ended September 30, 2008
      and 2007
                F-6Notes
      to the Consolidated Financial Statements
                F7-F12
 F-1











REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM








To the
Stockholders and Board of Directors


American
Wenshen Steel Group, Inc. and Subsidiaries





We have
audited the accompanying consolidated balance sheets of the American Wenshen
Steel Group, Inc. and Subsidiaries as of September 30, 2008 and 2007 and the
related statements of operations, stockholders’ equity and cash flows for the
two years ended September 30, 2008 and 2007. These financial statements are the
responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.





We
conducted our audits of these statements 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 financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the 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 American Wenshen Steel
Group, Inc. and Subsidiaries as of September 30, 2008 and 2007 and the results
of its operations and its cash flows for the two years ended September 30, 2008
and 2007, in conformity with accounting principles generally accepted in the
United States of America.





The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company's significant operating losses
and insufficient capital raise substantial doubt about its ability to continue
as a going concern. Management's plans regarding those matters also are
described in Note 1. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.











/s/ Kabani & Company,
Inc.  KABANI
& COMPANY, INC.


CERTIFIED
PUBLIC ACCOUNTANTS





Los
Angeles, California


December
30, 2008





F-2





AMERICAN
      WENSHEN STEEL GROUP, INC. AND SUBSIDIARIES(FORMERLY
      KNOWN AS CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)CONSOLIDATED
      BALANCE SHEETSAS
      OF SEPTEMBER 30, 2008 AND 20072008
                                                              
                                                              2007ASSETSCurrent
      AssetsCash
      and cash equivalents
                                                              
                                                              $
                                                              105,719
                                                              
                                                              $
                                                              15,664Accounts
      receivable, net
                                                              
                                                              
                                                              138,056
                                                              
                                                              
                                                              172,688Other
      receivable, net
                                                              
                                                              
                                                              214,732
                                                              
                                                              
                                                              225,367Inventory,
      net of reserve for obsolescence
                                                              
                                                              
                                                              541,270
                                                              
                                                              
                                                              130,663Loan
      to related parties
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              388,136Advance
      to suppliers
                                                              
                                                              
                                                              898,426
                                                              
                                                              
                                                              -Other
      current assets
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              47,086Current
      Assets of the entity held for disposal
                                                              
                                                              
                                                              255,036
                                                              
                                                              
                                                              2,017,773Total
      Current Assets
                                                              
                                                              
                                                              2,153,239
                                                              
                                                              
                                                              2,997,377Property,
      Plant & Equipment, net
                                                              
                                                              
                                                              537,133
                                                              
                                                              
                                                              564,308Intangible
      Assets, net
                                                              
                                                              
                                                              552,291
                                                              
                                                              
                                                              580,557Goodwill
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              1,176,591Non-Current
      assets of the entity held for disposal
                                                              
                                                              
                                                              195,630
                                                              
                                                              
                                                              245,172Total
      Assets
                                                              
                                                              $
                                                              3,438,293
                                                              
                                                              $
                                                              5,564,006LIABILITIES AND STOCKHOLDERS'
      EQUITYCurrent
      LiabilitiesAccounts
      payable and accrued expense
                                                              
                                                              $
                                                              218,075
                                                              
                                                              $
                                                              42,353Other
      payable
                                                              
                                                              
                                                              85,315
                                                              
                                                              
                                                              80,390Tax
      payable
                                                              
                                                              
                                                              162,117
                                                              
                                                              
                                                              87,219Due
      to related party
                                                              
                                                              
                                                              961,666
                                                              
                                                              
                                                              323,035Liability
      of the entity held for disposal
                                                              
                                                              
                                                              479,773
                                                              
                                                              
                                                              292,202Total
      Current Liabilities
                                                              
                                                              
                                                              1,906,947
                                                              
                                                              
                                                              825,199Stockholders'
      EquityPreferred
      stockClass
      A, authorized shares 1,000,000 $0.001 par value,  0 and 434,377
      shares issued and outstanding as of September 30, 2008 and 2007
      respectively
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              434Class
      B, authorized shares 20,000,000, no par value; none
      outstanding
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              -Common
      stock$0.001
      par value, 100,000,000 shares authorized 20,487,400 and 477,835
      (post-split)shares issued and outstanding as of September 2008 and 2007
      respectively
                                                              
                                                              
                                                              20,478
                                                              
                                                              
                                                              478Additional
      paid-in capital
                                                              
                                                              
                                                              8,896,463
                                                              
                                                              
                                                              8,914,925Other
      comprehensive income
                                                              
                                                              
                                                              902,850
                                                              
                                                              
                                                              634,893Accumulated
      deficit
                                                              
                                                              
                                                              (8,288,445
                                                              
                                                              
                                                              (4,811,923
                                                              )Total
      Stockholders' Equity
                                                              
                                                              
                                                              1,531,346
                                                              
                                                              
                                                              4,738,807Total
      Liabilities and Stockholders' Equity
                                                              
                                                              $
                                                              3,438,293
                                                              
                                                              $
                                                              5,564,006The
      accompanying notes are an integral part of these consolidated financial
      statements





F-3





AMERICAN
      WENSHEN STEEL GROUP, INC. AND SUBSIDIARIES(FORMERLY
      KNOWN AS CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)CONSOLIDATED
      STATEMENTS OF OPERATIONSFOR
      THE YEARS ENDED SEPTEMBER 30, 2008 AND 20072008
                                        
                                        
                                        2007Net
      sales
                                        
                                        $
                                        2,253,816
                                        
                                        
                                        $
                                        1,162,555Cost
      of sales
                                        
                                        
                                        1,556,008
                                        
                                        
                                        
                                        868,755Gross
      profit
                                        
                                        
                                        697,808
                                        
                                        
                                        
                                        293,800Operating
      expensesSelling
      and marketing
                                        
                                        
                                        15,367
                                        
                                        
                                        
                                        -General
      and administrative
                                        
                                        
                                        801,533
                                        
                                        
                                        
                                        664,592Impairment
      of Goodwill
                                        
                                        
                                        1,176,591
                                        
                                        
                                        
                                        -Total
      operating expenses
                                        
                                        
                                        1,993,491
                                        
                                        
                                        
                                        664,592Loss
      from operations
                                        
                                        
                                        (1,295,683
                                        )
                                        
                                        
                                        (370,792
                                        )Non-operating
      expensesOther
      expenses
                                        
                                        
                                        495
                                        
                                        
                                        
                                        9,553Net
      loss from continuing operations before income tax
                                        
                                        
                                        (1,296,178
                                        )
                                        
                                        
                                        (380,345
                                        )Income
      tax
                                        
                                        
                                        70,861
                                        
                                        
                                        
                                        34,821Net
      loss from continuing operations
                                        
                                        
                                        (1,367,039
                                        )
                                        
                                        
                                        (415,166
                                        )Loss
      from entity held for disposal
                                        
                                        
                                        (2,109,483
                                        )
                                        
                                        
                                        (180,124
                                        )Net
      Loss
                                        
                                        
                                        (3,476,522
                                        )
                                        
                                        
                                        (595,290
                                        )Other
      Comprehensive Income (loss)Foreign
      currency translation gain
                                        
                                        
                                        267,957
                                        
                                        
                                        
                                        505,189Net
      comprehensive loss
                                        
                                        $
                                        (3,208,565
                                        )
                                        
                                        $
                                        (90,101
                                        )Net
      loss per share from continuing operations
                                        
                                        $
                                        (0.07
                                        )
                                        
                                        $
                                        (0.87
                                        )Net
      loss per share from entity held for disposal
                                        
                                        $
                                        (0.10
                                        )
                                        
                                        $
                                        (0.38
                                        )Basic
      & Diluted Loss per share
                                        
                                        $
                                        (0.17
                                        )
                                        
                                        $
                                        (1.25
                                        )Basic
      and dilutive weighted average shares outstanding
                                        
                                        
                                        20,477,835
                                        
                                        
                                        
                                        477,835The
      accompanying notes are an integral part of these consolidated financial
      statements





F-4





AMERICAN
      WENSHEN STEEL GROUP, INC.(FORMERLY
      KNOWN AS CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)CONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE YEARS ENDED SEPTEMBER 30, 2008 AND 20072008
                                                
                                                
                                                2007CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      Loss
                                                
                                                $
                                                (3,476,522
                                                )
                                                
                                                $
                                                (595,290
                                                )Adjustments
      to reconcile net loss from operations to net cashprovided
      by (used in) operating activities:Depreciation
      and amortization
                                                
                                                
                                                170,210
                                                
                                                
                                                
                                                151,463Bad
      debt
                                                
                                                
                                                229,216
                                                
                                                
                                                
                                                127,113Reserve
      for inventory
                                                
                                                
                                                60,555
                                                
                                                
                                                
                                                342,943Stock
      option expenses
                                                
                                                
                                                1,104
                                                
                                                
                                                
                                                -Impairment
      of goodwill
                                                
                                                
                                                1,176,591
                                                
                                                
                                                
                                                -Changes
      in assets and liabilities:(Increase)
      / decrease in assets:Accounts
      receivable
                                                
                                                
                                                47,760
                                                
                                                
                                                
                                                (140,012
                                                )Other
      receivable
                                                
                                                
                                                (149,260
                                                )
                                                
                                                
                                                (90,264
                                                )Inventories
                                                
                                                
                                                (440,637
                                                )
                                                
                                                
                                                (64,601
                                                )Other
      current assets
                                                
                                                
                                                (855,173
                                                )
                                                
                                                
                                                86,697Increase
      / (decrease) in current liabilities:Accounts
      payable and accrued expenses
                                                
                                                
                                                176,930
                                                
                                                
                                                
                                                (43,012
                                                )Other
      payable
                                                
                                                
                                                (18,521
                                                )
                                                
                                                
                                                746Tax
      payable
                                                
                                                
                                                67,345
                                                
                                                
                                                
                                                84,627Net
      cash used in operating activities from continuing
    operations
                                                
                                                
                                                (3,010,401
                                                )
                                                
                                                
                                                (139,589
                                                )Net
      cash provided by operating activities of entity held for
      disposal
                                                
                                                
                                                2,031,689
                                                
                                                
                                                
                                                249,980Net
      cash provided by (used in) operating activities
                                                
                                                
                                                (978,712
                                                )
                                                
                                                
                                                110,391CASH
      FLOWS FROM INVESTING ACTIVITIESPurchase
      of property, plant and equipment
                                                
                                                
                                                (3,698
                                                )
                                                
                                                
                                                (35,044
                                                )Net
      cash used in investing activities from continuing
    operations
                                                
                                                
                                                (3,698
                                                )
                                                
                                                
                                                (35,044
                                                )Net
      cash provided by (used in) investing activities of entity held for
      disposal
                                                
                                                
                                                77,794
                                                
                                                
                                                
                                                (69,856
                                                )Net
      cash provided by (used in) investing activities
                                                
                                                
                                                74,096
                                                
                                                
                                                
                                                (104,900
                                                )CASH
      FLOWS FROM FINANCING ACTIVITIESLoan
      advanced
                                                
                                                
                                                -
                                                
                                                
                                                
                                                (345,597
                                                )Payment
      to return loans from related parties
                                                
                                                
                                                989,264
                                                
                                                
                                                
                                                (122,763
                                                )Net
      cash provided by/(used in) financing activities from continuing
      operations
                                                
                                                
                                                989,264
                                                
                                                
                                                
                                                (468,360
                                                )Net
      cash provided by (used in) financing activities of entity held for
      disposal
                                                
                                                
                                                -
                                                
                                                
                                                
                                                -Net
      cash provided by (used in) financing activities
                                                
                                                
                                                989,264
                                                
                                                
                                                
                                                (468,360
                                                )Effect
      of exchange rate on cash & cash equivalent
                                                
                                                
                                                5,407
                                                
                                                
                                                
                                                11,836Net
      increase (decrease) in cash & cash equivalents
                                                
                                                
                                                90,055
                                                
                                                
                                                
                                                (451,035
                                                )Cash
      & cash equivalents - beginning of year
                                                
                                                
                                                15,664
                                                
                                                
                                                
                                                466,699Cash
      & cash equivalents - end of year
                                                
                                                $
                                                105,719
                                                
                                                
                                                $
                                                15,664SUPPLEMENTAL
      DISCLOSURES:Cash
      paid during the year for:Interest
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -Income
      taxes
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                -NON-CASH
      INVESTING AND FINANCING ACTIVITIES:Issuance
      of preferred stock for reverse merger
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                130,313,100Deemed
      dividend on distribution of assets before reverse
    acquisition
                                                
                                                $
                                                -
                                                
                                                
                                                $
                                                4,003,844The
      accompanying notes are an integral part of these consolidated financial
      statements





F-5







AMERICAN
      WENSHEN STEEL GROUP, INC. AND SUBSIDIARIES(FORMERLY
      KNOWN AS CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)CONSOLIDATED
      STATEMENTS OF SHAREHOLDERS' EQUITYFOR
      THE YEARS ENDED SEPTEMBER 30, 2008 AND 2007Accumulated
                                            
                                            
                                            TotalPreferred Stock
                                            
                                            
                                            Common Stock
                                            
                                            
                                            Capital
                                            
                                            
                                            Additional
                                            
                                            
                                            comprehensive
                                            
                                            
                                            Accumulated
                                            
                                            
                                            stockholders'Shares
                                            
                                            
                                            Amount
                                            
                                            
                                            Shares
                                            
                                            
                                            stock
                                            
                                            
                                            Paid
      in Capital
                                            
                                            
                                            Income
                                            
                                            
                                            deficit
                                            
                                            
                                            equityBalance
      September 30, 2006
                                            
                                            
                                            434,377
                                            
                                            
                                            $
                                            434
                                            
                                            
                                            
                                            -
                                            
                                            
                                            $
                                            847,002
                                            
                                            
                                            $
                                            4,953,770
                                            
                                            
                                            $
                                            129,704
                                            
                                            
                                            $
                                            (212,790
                                            )
                                            
                                            $
                                            5,717,686Deemed
      Dividend (before reverse acquisition)
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (4,003,844
                                            )
                                            
                                            
                                            (4,003,844
                                            )Recapitalization
      on Reverse Acquisition
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            477,835
                                            
                                            
                                            
                                            -846,524
                                            
                                            
                                            
                                            3,961,155
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            3,114,631Foreign
      currency translation gain
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            505,189
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            505,189Net
      loss
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (595,290
                                            )
                                            
                                            
                                            (595,290
                                            )Balance
      September 30, 2007
                                            
                                            
                                            434,377
                                            
                                            
                                            
                                            434
                                            
                                            
                                            
                                            477,835
                                            
                                            
                                            
                                            478
                                            
                                            
                                            
                                            8,914,925
                                            
                                            
                                            
                                            634,893
                                            
                                            
                                            
                                            (4,811,923
                                            )
                                            
                                            
                                            4,738,807Issuance
      of common stock in lieu of preferred stock
                                            
                                            
                                            (434,377
                                            )
                                            
                                            
                                            (434
                                            )
                                            
                                            
                                            20,000,000
                                            
                                            
                                            
                                            20,000
                                            
                                            
                                            
                                            (19,566
                                            )
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -Employee
      stock options
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            1,104
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            1,104Foreign
      currency translation gain
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            267,957
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            267,957Net
      loss
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            -
                                            
                                            
                                            
                                            (3,476,522
                                            )
                                            
                                            
                                            (3,476,522
                                            )Balance
      September 30, 2008
                                            
                                            
                                            -
                                            
                                            
                                            $
                                            -
                                            
                                            
                                            
                                            20,477,835
                                            
                                            
                                            $
                                            20,478
                                            
                                            
                                            $
                                            8,896,463
                                            
                                            
                                            $
                                            902,850
                                            
                                            
                                            $
                                            (8,288,445
                                            )
                                            
                                            $
                                            1,531,346The
      accompanying notes are an integral part of these consolidated financial
      statements





F-6
 AMERICAN
WENSHEN STEEL GROUP, INC.. AND SUBSIDIARIES
 (FORMERLY
CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 FOR THE YEARS
ENDED SEPTEMBER 30, 2008 AND 2007


NOTE
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
 
 American
Wenshen Steel Group, Inc. (formally known as China Software
Technology Group Co. Ltd,."we", "us", or the
"Company")  through its operating subsidiary, Chaoyang Liaogang
Special Steel Co., Ltd. ("Chaoyang Liaogang"), a corporation organized under the
laws of The People's Republic of China, is engaged in the business of
manufacturing tungsten carbide steel, stainless steel, and die steel. All of
Chaoyang Liaogang's business is currently in China. On October 9, 2007, the
Company changed its name to American Wenshen Steel Group, Inc.
 
 On Nov
14, 2006, American China Software Technology Group Co., Ltd (China Software)
re-domiciled from Canada to Delaware.
 
 American
Wenshen Steel Group, Inc., (“American Wenshen”), a wholly owned subsidiary of
the Company was incorporated on August 29, 2006 in the state of Delaware. It
currently has no operations. American Wenshen owns all of the registered capital
of Liaoning Wenshen Steel Mold Co. Ltd. (“Liaoning Wenshen”). Liaoning Wenshen
is a wholly owned foreign entity incorporated in Shenyang, Liaoning Province,
China in January, 2007.
 
 Liaoning
Wenshen owns all the registered capital of Chaoyang Liaogang Special Steel Co.,
Ltd. (“Chaoyang Liaogang Steel Co.”) which is established in Chaoyang City,
Shenyang Province, China in October 2004
 
 On July
30, 2007 China Software acquired 100% of the equity in American Wenshen pursuant
to a merger agreement dated June 29, 2007 (“American Wenshen Merger”). Pursuant
to the acquisition of American Wenshen, it became the wholly owned subsidiary of
China Software. The former shareholders of American Wenshen received 434,377
shares of Series A Preferred Stock of China software, which will be convertible
into 868,754,000 shares of common stock in exchange for all the issued and
outstanding shares of American Wenshen. The Series A Preferred stock represents
97.58% of the voting power of the Company.
 
 The
acquisition of American Wenshen is accounted for as a reverse acquisition under
the purchase method of accounting since the shareholders of American Wenshen
obtained control of the consolidated entity. Accordingly, the merger of the
two companies is recorded as a recapitalization of American Wenshen, with
American Wenshen being treated as the continuing operating entity. The
historical financial statements presented herein will be those of American
Wenshen. The continuing entity retained September 30 as its fiscal year
end.
 
 China
software is a holding company for HXT holdings, Inc. (formally China
International Enterprises Corp., “HXT”).
 
 On August
19, 2005, the China Software acquired 9,970,000 shares of common stock, par
value $0.001 per share of HXT (formally know as China International Enterprises
Inc.), representing 100% of the issued and outstanding capital stock of HXT
under a share exchange agreement dated August 15, 2005 (the “Share Exchange”).
Under the Share Exchange, China Software agreed to issue an aggregate of
638,080,000 shares of common stock of Moving Bytes to the HXT shareholders,
representing 92.87% of the issued and outstanding capital shares of Moving
Bytes, giving effect to the Share Exchange.
  On
January 31, 2005, HXT acquired 100% outstanding shares of XHT from its three
shareholders in exchange of 9,000,000 shares of common stock of HXT representing
83.33% of its issued and outstanding common stock on the date of acquisition.
The acquisition has been recorded as a recapitalization of XHT, with XHT being
treated as the continuing entity. Effective August 16, 2006, the Company changed
its name to HXT Holdings, Inc.
  Heng Xing
Technology Group Development Limited (the “XHT”) is a British Virgin Islands
Corporation, incorporated on May 28, 2004. The company is a non-operative
holding company of Shenzhen Hengtaifeng Technology Co. Ltd.
(“HTC”).
 
 On
December 14, 2004, XHT entered into an agreement with all the shareholders of
HTC to acquire all of the outstanding stock of HTC. The acquisition has been
recorded as a recapitalization of HTC, with HTC being treated as the continuing
entity.
  HTC was founded in Hi-tech Technology Industrial Park in
the city of Shenzhen, Guangdong Province of People’s Republic of China in July
1995, under the name Shenzhen Guangba Trade Development Co., Ltd. HTC amended
its name to Shenzhen Hengtaifeng Technology Co. Ltd. on May 12, 2000. HTC is
primarily engaged in developing and distributing software and hardware systems
on housing fund, guarantee information management, and home plan management in
the People’s Republic of China.
  F-7
 AMERICAN
WENSHEN STEEL GROUP, INC.. AND SUBSIDIARIES
 (FORMERLY
CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 FOR THE YEARS
ENDED SEPTEMBER 30, 2008 AND 2007
 NOTE 1. ORGANIZATION AND DESCRIPTION
OF BUSINESS (CONTINUED)
  Subsequent
to the American Wenshen Merger, the organization chart is as follows
:
 
 
 Prior to
the American Wenshen Merger, China Software assigned all of its pre-Merger
business and assets to HXT Holdings, Inc., its wholly-owned subsidiary, and HXT
Holdings assumed responsibility for all of the liabilities of China Software
that existed prior to the Merger.   It was also agreed that HXT Holdings,
Inc. will file a registration statement with the Securities and Exchange
Agreement that will, when declared effective, permit China Software to
distribute all of the outstanding shares of HXT to the holders of its common
stock.  After the registration statement is declared effective, the Board
of Directors of China Software will fix a record date, and shareholders of
record on that date will receive the shares of HXT Holdings in proportion to
their ownership of China Software common stock.
 
 On Mar
23, 2006, the Company announced a 1:32 reverse split of its outstanding common
shares. Both actions were approved by the Company's shareholders at a meeting
held on March 7, 2006.
 
 On
October 12, 2007 the Company announced a 1:45 reverse split of its outstanding
common stock . All actions were approved by the Board of Directors and the
majority shareholders of the Company during Special Meeting of Shareholders held
on October 9, 2007.
 
 GOING
CONCERN :
 
 The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of the
Company as a going concern. This basis of accounting contemplates the recovery
of the Company's assets and the satisfaction of its liabilities in the normal
course of business. Through September 30, 2008, the Company had incurred
cumulative losses of $8,288,445 including net losses from continuing operations
of $1,367,039 for the year ended September 30, 2008.
 
 In view
of the matters described in the preceding paragraph, recoverability of a major
portion of the recorded asset amounts shown in the accompanying balance sheet is
dependent upon continued operations of the Company, which in turn is dependent
upon the Company’s ability to raise additional capital, obtain financing and to
succeed in its future operations. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
 
 Management
has taken the following steps to revise its operating and financial
requirements, which it believes are sufficient to provide the Company with the
ability to continue as a going concern. Management devoted considerable effort
during the period ended September 30, 2007, towards (i) obtaining additional
equity and debt financing and (ii) evaluation of its distribution and marketing
methods.
 
 F-8
 AMERICAN
WENSHEN STEEL GROUP, INC.. AND SUBSIDIARIES
 (FORMERLY
CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 FOR THE YEARS
ENDED SEPTEMBER 30, 2008 AND 2007
 NOTE
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Basis of
presentation
 
 The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of America. All
significant inter-company transactions and accounts have been eliminated in the
consolidation.  The functional currency is the Chinese Renminbi (CNY);
however the accompanying financial statements have been translated and presented
in United States Dollars (USD).
  Principles of
consolidation
 
 The
consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiaries American Wenshen, Liaoning Wenshen and Chaoyang
Liaogang Steel Co. All significant inter-company accounts and transactions have
been eliminated.
 
 Foreign currency
translation
 The
reporting currency is the U.S. dollar. The functional currency of the Company is
the local currency, the Chinese Renminbi (“CNY”). The financial statements of
the Company are translated into United States dollars in accordance with
Statement of Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency
Translation”, using year-end rates of exchange for assets and liabilities, and
average rates of exchange for the period for revenues, costs, and expenses and
historical rates for the equity. Translation adjustments resulting from the
process of translating the local currency financial statements into U.S. dollars
are included in determining comprehensive income. At September 30, 2008 and
September 30, 2007, the cumulative translation adjustment of $902,850 and
$634,893, respectively, was classified as an item of other comprehensive income
in the stockholders’ deficit section of the consolidated balance sheet. For the
years ended September 30, 2008 and 2007, accumulated other comprehensive income
was $267,957 and $505,189, respectively.
  Use of
estimates
  The
preparation of consolidated 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 amount of revenues and
expenses during the reporting periods. Management makes these estimates using
the best information available at the time the estimates are made. However,
actual results could differ materially from those results.
  Risks and
uncertainties
  The
Company is subject to substantial risks from, among other things, intense
competition associated with the industry in general, other risks associated with
financing, liquidity requirements, rapidly changing customer requirements,
limited operating history, foreign currency exchange rates and the volatility of
public markets.
  Cash and cash
equivalents
  Cash and
cash equivalents include cash in hand and cash in time deposits, certificates of
deposit and all highly liquid debt instruments with original maturities of three
months or less.
  Accounts and other
receivable
  The
Company maintains reserves for potential credit losses on accounts receivable.
Management reviews the composition of accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit worthiness,
current economic trends and changes in customer payment patterns to evaluate the
adequacy of these reserves. Reserves are recorded primarily on a specific
identification basis. Allowance for doubtful debts amounted to $383,868 and
$93,339 as of September 30, 2008 and September 30, 2007,
respectively.
  F-9
 AMERICAN
WENSHEN STEEL GROUP, INC.. AND SUBSIDIARIES
 (FORMERLY
CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 FOR THE YEARS
ENDED SEPTEMBER 30, 2008 AND 2007
 NOTE 2. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Inventories
  Inventories
are valued at the lower of cost (first-in, first-out) or market value.
Management compares the cost of inventories with market value and an allowance
is provided for the difference between recorded and market values.  At
September 30, 2008 and 2007, management accounted an obsolescence reserve on
inventories of $450,141 and 353,039, respectively.
  Property and
Equipment
 
 Property
and equipment are stated at cost. Expenditures for maintenance and repairs are
charged to earnings as incurred; additions, renewals and betterments are
capitalized. When property and equipment are retired or otherwise disposed of,
the related cost and accumulated depreciation are removed from the respective
accounts, and any gain or loss is included in operations. Depreciation of
property and equipment is provided using the straight-line method for
substantially all assets with estimated lives of: 40 years for building, 5 years
for machinery, equipments and vehicles.
  Intangible
Assets
  The
Company evaluates intangible assets for impairment on an annual basis and
whenever events or changes in circumstances indicate that the carrying value may
not be recoverable from its estimated future cash flows. Recoverability of
intangible assets, other long-lived assets and, goodwill is measured by
comparing their net book value to the related projected undiscounted cash flows
from these assets, considering a number of factors including past operating
results, budgets, economic projections, market trends and product development
cycles. If the net book value of the asset exceeds the related undiscounted cash
flows, the asset is considered impaired, and a second test is performed to
measure the amount of impairment loss.
  Impairment of Long-Lived
Assets
  The
Company adopted Statement of Financial Accounting Standards No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144"), which
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets and supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," and the
accounting and reporting provisions of APB Opinion No. 30, "Reporting the
Results of Operations for a Disposal of a Segment of a Business." The Company
periodically evaluates the carrying value of long-lived assets to be held and
used in accordance with SFAS 144. SFAS 144 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying amounts. In that event, a loss is
recognized based on the amount by which the carrying amount exceeds the fair
market value of the long-lived assets. Loss on long-lived assets to be disposed
of is determined in a similar manner, except that fair market values are reduced
for the cost of disposal.
 
 Fair Value of Financial
Instruments
  Statement
of Financial Accounting Standard No. 107, "Disclosures about Fair Value of
Financial Instruments", requires that the Company disclose estimated fair values
of financial instruments.
  The
Company's financial instruments primarily consist of cash and cash equivalents,
accounts receivable, other receivables, advances to suppliers, accounts payable,
other payable, tax payable, and related party advances and
borrowings.
  As of the
balance sheet dates, the estimated fair values of the financial instruments were
not materially different from their carrying values as presented on the balance
sheet. This is attributed to the short maturities of the instruments and that
interest rates on the borrowings approximate those that would have been
available for loans of similar remaining maturity and risk profile at respective
balance sheet dates.
   F-10
 AMERICAN
WENSHEN STEEL GROUP, INC.. AND SUBSIDIARIES
 (FORMERLY
CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 FOR THE YEARS
ENDED SEPTEMBER 30, 2008 AND 2007
 NOTE 2. SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
  Basic and Diluted Earnings
Per Share
  Earnings
per share is calculated in accordance with the Statement of financial accounting
standards No. 128 (SFAS No. 128), “Earnings per share”. SFAS No. 128 superseded
Accounting Principles Board Opinion No.15 (APB 15). Net loss per share for all
periods presented has been restated to reflect the adoption of SFAS No. 128.
Basic net loss per share is based upon the weighted average number of common
shares outstanding. Diluted net loss per share is based on the assumption that
all dilutive convertible shares and stock options were converted or exercised.
Dilution is computed by applying the treasury stock method. Under this method,
options and warrants are assumed to be exercised at the beginning of the period
(or at the time of issuance, if later), and as if funds obtained thereby were
used to purchase common stock at the average market price during the
period.
  Revenue
Recognition
  In
accordance wit SAB 104, revenue is recognized at the date of shipment to
customers when a formal arrangement exists, the price is fixed or determinable,
the delivery is completed, no other significant obligations of the Company exist
and collectibility is reasonably assured. Payments received before all of the
relevant criteria for revenue recognition are satisfied are recorded as advances
from customers.
  Income
Taxes
  The
Company utilizes SFAS No. 109, "Accounting for Income Taxes," which requires the
recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. Under this method, deferred income taxes are recognized for the tax
consequences in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each period end based on
enacted tax laws and statutory tax rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized
  Statement of Cash
Flows
  In
accordance with Statement of Financial Accounting Standards No. 95, "Statement
of Cash Flows," cash flows from the Company's operations is calculated based
upon the local currencies. As a result, amounts related to assets and
liabilities reported on the statement of cash flows will not necessarily agree
with changes in the corresponding balances on the balance sheet.
  Segment
Reporting
  Statement
of Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosure about
Segments of an Enterprise and Related Information" requires use of the
"management approach" model for segment reporting. The management approach model
is based on the way a company's management organizes segments within the company
for making operating decisions and assessing performance. Reportable segments
are based on products and services, geography, legal structure, management
structure, or any other manner in which management disaggregates a company. SFAS
131 has no effect on the Company’s consolidated financial statements as the
Company consists of one reportable business segment. All revenue is from
customers in People’s Republic of China. All of the Company’s assets are located
in People’s Republic of China.
  Recently Issued Accounting
Standards
  In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements”, which is an amendment of Accounting Research
Bulletin (“ARB”) No. 51.  This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements.  This statement changes the way the consolidated
income statement is presented, thus requiring consolidated net income to be
reported at amounts that include the amounts attributable to both parent and the
noncontrolling interest.  This statement is effective for the fiscal
years, and interim periods within those fiscal years, beginning on or after
December 15, 2008.  Based on current conditions, the Company does not
expect the adoption of SFAS 160 to have a significant impact on its results of
operations or financial position.
 F-11
 AMERICAN
WENSHEN STEEL GROUP, INC.. AND SUBSIDIARIES
 (FORMERLY
CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 NOTE 2. SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations.”  This statement replaces FASB Statement No. 141,
“Business Combinations.” This statement retains the fundamental requirements in
SFAS 141 that the acquisition method of accounting (which SFAS 141 called
the purchase method) be used for all business combinations and for an acquirer
to be identified for each business combination. This statement defines the
acquirer as the entity that obtains control of one or more businesses in the
business combination and establishes the acquisition date as the date that the
acquirer achieves control. This statement requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement. This statement applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The Company does not expect the adoption of SFAS 141 to have
a significant impact on its results of operations or financial
position.
 
 In March,
2008, the FASB issued FASB Statement No. 161, “Disclosures about Derivative
Instruments and Hedging Activities”. The new standard is intended to improve
financial reporting about derivative instruments and hedging activities by
requiring enhanced disclosures to enable investors to better understand their
effects on an entity’s financial position, financial performance, and cash
flows. It is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with early application
encouraged. The new standard also improves transparency about the location and
amounts of derivative instruments in an entity’s financial statements; how
derivative instruments and related hedged items are accounted for under
Statement 133; and how derivative instruments and related hedged items affect
its financial position, financial performance, and cash flows.
  FASB
Statement No. 161 achieves these improvements by requiring disclosure of the
fair values of derivative instruments and their gains and losses in a tabular
format. It also provides more information about an entity’s liquidity by
requiring disclosure of derivative features that are credit risk–related.
Finally, it requires cross-referencing within footnotes to enable financial
statement users to locate important. Based on current conditions, the Company
does not expect the adoption of SFAS 161 to have a significant impact on its
results of operations or financial position.
 
 In May
2008, FSAB issued SFASB No.162, The Hierarchy of Generally Accepted Accounting
Principles.  The pronouncement mandates that the GAAP hierarchy should
reside in the accounting literature as opposed to the audit
literature.  This has the practical impact of elevating FASB
Statements of Financial Accounting Concepts in the GAAP
hierarchy.  This pronouncement will become effective 60 days following
SEC approval.  The Company does not believe this pronouncement will
impact its financial statements.
 
 In May
2008, FASB issued SFASB No. 163, Accounting for Financial Guarantee Insurance
Contracts-an interpretation of FASB Statement No. 60.  The scope of
the statement is limited to financial guarantee insurance (and reinsurance)
contracts.  The pronouncement is effective for fiscal years beginning
after December 31, 2008.  The Company does not believe this
pronouncement will impact its financial statements.
 
 F-12
 AMERICAN
WENSHEN STEEL GROUP, INC.. AND SUBSIDIARIES
 (FORMERLY
CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 FOR THE YEARS
ENDED SEPTEMBER 30, 2008 AND 2007
 NOTE
3.  CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS
  The
Company's operations are carried out in the PRC. Accordingly, the Company's
business, financial condition and results of operations may be influenced by the
political, economic and legal environments in the PRC, and by the general state
of the PRC's economy.
  The
Company's operations in the PRC are subject to specific considerations and
significant risks not typically associated with companies in the North America
and Western Europe.  These include risks associated with, among
others, the political, economic and legal environments and foreign
currency      exchange.  The Company’s
results may be adversely affected by changes in governmental
policies   with   respect   to   laws   and    regulations,
anti-inflationary measures, currency conversion and remittance abroad, and rates
and methods of taxation, among other things.
  The
Company does not maintain fire, theft or liability insurance. The Company is
exposed to various risks of loss related to torts; theft of, damage to and
destruction of assets; error and omissions and natural disasters.
  NOTE
4. INVENTORY
  Inventories
as of September 30, 2008 and 2007 consist of the following:
 
 2008
                          
                          
                          2007Raw
      Material
                          
                          $
                          603,377
                          
                          
                          $
                          436,688Finish
      Goods
                          
                          
                          7,926
                          
                          
                          
                          24,228Work
      in progress
                          
                          
                          380,108
                          
                          
                          
                          22,786991,411
                          
                          
                          
                          483,702Less:
      Reserve for obsolescence
                          
                          
                          (450,141
                          )
                          
                          
                          (353,039
                          )Total
                          
                          $
                          541,270
                          
                          
                          $
                          130,663
  NOTE 5.  OTHER RECEIVABLE
 
 Other
Receivables as of September 30, 2008 and 2007 are as summarized
below:
  2008
                          
                          
                          2007Loans
      receivable (interest free, unsecured and due on demand)
                          
                          $
                          241,535
                          
                          
                          $
                          218,877Deposits
                          
                          
                          16,951
                          
                          
                          
                          15,361Others
                          
                          
                          217,825
                          
                          
                          
                          28,645476,311
                          
                          
                          
                          262,883Less
      : Allowance for Doubtful Debts
                          
                          
                          (261,579
                          )
                          
                          
                          (37,516
                          )Total
                          
                          $
                          214,732
                          
                          
                          $
                          225,367
 
 F-13
 AMERICAN
WENSHEN STEEL GROUP, INC.. AND SUBSIDIARIES
 (FORMERLY
CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 FOR THE YEARS
ENDED SEPTEMBER 30, 2008 AND 2007
 NOTE 6. PROPERTIES AND EOUIPMENT
  The
balance of Company property and equipment as of September 30, 2008 and 2007 are
summarized as follows:
  2008
                      
                      
                      2007Office
      Equipment
                      
                      $
                      21,171
                      
                      
                      $
                      17,746Building
                      
                      
                      375,749
                      
                      
                      
                      340,500Production
      Equipment
                      
                      
                      214,359
                      
                      
                      
                      193,680Vehicles
                      
                      
                      165,283
                      
                      
                      
                      148,286776,562
                      
                      
                      
                      700,212Less:
      Accumulated depreciation
                      
                      
                      (239,429
                      )
                      
                      
                      (135,904
                      )Property
      and equipment, net
                      
                      $
                      537,133
                      
                      
                      $
                      564,308
  The
Company incurred depreciation expenses for the years ended September 30, 2008
and 2007 are $85,626 and $73,676, respectively.
  NOTE
7.  INTANGIBLE ASSETS - PATENTS
  There are
five patents that have been acquired from third parties in 2005.  The
Patents are being amortized over a 12 year period.  At September 30,
2008, the net amount of the Patents was $552,291 after considering the
accumulated amortization of $331,375.  At September 30, 2007, the net
amount of the Patents was $580,557 after considering the accumulated
amortization of $220,211.  The amortization expense was $84,584 &
$77,787 and for the years ended September 30, 2008 & 2007
respectively.
 
 Amortization
expense for the Company’s intangible assets over the next five fiscal years is
estimated to be:
    Year ended September
      30,
              Amount2009
              $70,4872010
              70,4872011
              70,4872012
              70,4872013
              70,487
   F-14
 AMERICAN
WENSHEN STEEL GROUP, INC.. AND SUBSIDIARIES
 (FORMERLY
CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 FOR THE YEARS
ENDED SEPTEMBER 30, 2008 AND 2007
 NOTE
8.  GOODWILL
  As per
SFAS 141 Business Combinations if the issuer is a public company having business
operations, consideration cost would be based on the aggregate fair value of the
issuer's stock outstanding at date of acquisition.  Such cost would be
allocated to the fair value of net assets acquired and any resultant goodwill
would be recognized.  If the fair value of stock is below book value,
noncurrent assets would be written down to eliminate an excess of net assets
acquired over the fair value of the stock.
  Based
upon SFAS 141, as China Software with its wholly owned subsidiary HXT was a
public company having business operations, goodwill was recognized as of the
date of reverse acquisition.
  The
calculation of goodwill is as follows:
 Fair
      value of the assets of China software & HXT Holdings as of the
      acquisition date :Current
      assets
                        
                        $
                        2,117,436Fixed
      Assets
                        
                        
                        125,083Intangible
      Assets
                        
                        
                        126,0482,368,567Current
      Liabilities
                        
                        
                        (319,772
                        )Fair
      value of Net Assets
                        
                        
                        2,048,796Fair
      value of the stock outstanding of China Software as of the acquisition
      date
                        
                        
                        3,225,386477,835
      post split shares of common stock @ FMV $6.75 (split
    adjusted)Goodwill
                        
                        $
                        1,176,591
 The
Company evaluates intangible assets and other long-lived assets for impairment,
at a minimum, on an annual basis and whenever events or changes in circumstances
indicate that the carrying value may not be recoverable from its estimated
future cash flows. Recoverability of intangible assets, other long-lived assets
and goodwill is measured by comparing their net book value to the related
projected undiscounted cash flows from these assets, considering a number of
factors including past operating results, budgets, economic projections, market
trends and product development cycles. If the net book value of the asset
exceeds the related undiscounted cash flows, the asset is considered impaired,
and a second test is performed to measure the amount of impairment loss. The
Company assessed the carrying value of goodwill in accordance with the
requirements of SFAS #142 "Goodwill and Other Intangible Assets".  Based on
its assessment, the Company determined that goodwill resulting from the reverse
acquisition of American Wenshen Steel Group, Inc. amounted to $1,176,591 is
fully impaired as of September 30, 2008.
  F-15
 AMERICAN
WENSHEN STEEL GROUP, INC.. AND SUBSIDIARIES
 (FORMERLY
CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 FOR THE YEARS
ENDED SEPTEMBER 30, 2008 AND 2007
  The
following is the proforma financial information of the Company assuming the
transaction had been consummated at the beginning of the fiscal year ended
September 30, 2007:
 For
      the yearEnded
      September 30,2007(Unaudited)Statement
      of Operations:Revenues
                              
                              $
                              1,162,555Cost
      of Sales
                              
                              
                              868,755Gross
      Profit
                              
                              
                              293,800Operating
      Expenses
                              
                              
                              650,101Income
      (loss) from operations
                              
                              
                              (356,301
                              )Other
      income and (expenses)
                              
                              
                              (44,374
                              )Net
      Income (loss) from continuing operations
                              
                              $
                              (400,675
                              )Net
      Income (loss) from entity held for disposal
                              
                              $
                              (263,354
                              )Net
      Income (loss)
                              
                              $
                              (664,029
                              )Earnings
      Per Share:Basic
                              
                              $
                              (1.39
                              )Diluted
                              
                              $
                              (1.39
                              )
  NOTE
9.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES
  Accounts
Payable and Accrued expenses as of September 30, 2008 and 2007 are as
follows:
  2008
                            
                            
                            2007Accounts
      payable
                            
                            $
                            198,363
                            
                            
                            $
                            16,434Accrued
      Expenses
                            
                            
                            19,712
                            
                            
                            
                            25,919Total
                            
                            $
                            218,075
                            
                            
                            $
                            42,353
  F-16
 AMERICAN
WENSHEN STEEL GROUP, INC.. AND SUBSIDIARIES
 (FORMERLY
CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 FOR THE YEARS
ENDED SEPTEMBER 30, 2008 AND 2007
 NOTE
10.  DUE TO RELATED PARTIES
  Due to
Related Parties was $961,666 and $323,035 as of September 30, 2008 and 2007
respectively.  The loan is interest free, due on demand and
unsecured.
  NOTE 11. SHAREHOLDERS’
EQUITY
  On July
30, 2007 China Software acquired 100% of the equity in American Wenshen pursuant
to a merger agreement dated June 29, 2007 (“American Wenshen Merger”). Pursuant
to the acquisition of American Wenshen, it became the wholly owned subsidiary of
China Software. The former shareholders of American Wenshen received 434,377
shares of Series A Preferred Stock of China software, which will be convertible
into 868,754,000 shares of common stock in exchange for all the issued and
outstanding shares of American Wenshen.
 
 The
acquisition of American Wenshen is accounted for as a reverse acquisition under
the purchase method of accounting since the shareholders of American Wenshen
obtained control of the consolidated entity. Accordingly, the merger of the
two companies is recorded as a recapitalization of American Wenshen, with
American Wenshen being treated as the continuing operating entity. The
historical financial statements presented herein will be those of American
Wenshen. The continuing entity retained September 30 as its fiscal year
end.
 
 Prior to
the Merger, China Software assigned all of its pre-Merger business and assets to
HXT Holdings, Inc., its wholly-owned subsidiary, and HXT Holdings assumed
responsibility for all of the liabilities of China Software that existed prior
to the Merger.
 
 On
October 12, 2007 the Company announced a 1:45 reverse split of its outstanding
common . All actions were approved by the Board of Directors and the majority
shareholders of the Company during Special Meeting of Shareholders held on
October 9, 2007.
 
 During
the year ended September 30, 2008, the Company cancelled the preferred stock of
434,377 shares issued upon the reverse acquisition. The company issued 20million
shares of common stock in exchange for the preferred stock.
  NOTE
12  STOCK OPTIONS
  The stock
options summary for the year ended September 30, 2008 is as follows (has been
stated to retroactively effect a 45:1 reverse stock split in October 2007)
:-
 
 Options
      outstanding
                      
                      
                      Weighted
      Average Exercise Price
                      
                      
                      Aggregate
      Intrinsic ValueOutstanding,
      September 30, 2007
                      
                      
                      240
                      
                      
                      $
                      43.20
                      
                      
                      $
                      -Granted
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Forfeited
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Exercised
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Outstanding,
      September 30, 2008
                      
                      
                      240
                      
                      
                      $
                      43.20
                      
                      
                      $
                      -
 
 Following
is a summary of the status of options outstanding at September 30,
2008:
 
 Outstanding
      Options
                      Exercisable
      OptionsExercise
      Price
                      Options
                      Weighted
      Average Remaining Life
                      Weighted
      Average Exercise Price
                      Exercisable
      Options
                      Weighted
      Average Exercise Price$43.20
                      240
                      1.44
                      $43.20
                      240
                      $43.20
  Primarily
as a result of adopting SFAS No. 123R, the Company recognized $1,104 in
share-based compensation expense for the year ended September 30, 2008. The
impact of this share-based compensation expense on the Company’s basic and
diluted earnings per share was $0.00 per share. The fair value of our stock
options was estimated using the Black-Scholes option pricing model.
  F-17
 AMERICAN
WENSHEN STEEL GROUP, INC.. AND SUBSIDIARIES
 (FORMERLY
CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 FOR THE YEARS
ENDED SEPTEMBER 30, 2008 AND 2007
 NOTE
13 STATUTORY RESERVES
 
 As
stipulated by the Company Law of the People's Republic of China (PRC), net
income after taxation can only be distributed as dividends after appropriation
has been made for the following:
  1.
              Making
      up cumulative prior years' losses, if
any;
   2.
              Allocations
      to the "Statutory surplus reserve" of at least 10% of income after tax, as
      determined under PRC accounting rules and regulations, until the fund
      amounts to 50% of the Company's registered
  capital;
   3.
              Allocations
      to the discretionary surplus reserve, if approved in the shareholders'
      general meeting.
   In
accordance with the Chinese Company Law, the Company reserved $0 to the
Statutory surplus reserve for years ended September 30, 2008 and 2007 on account
of net loss in the year ended September 30, 2008 and 2007.
  NOTE
14 - ENTITY HELD FOR DISPOSAL
 
 Prior to
the American Wenshen Merger, China Software assigned all of its pre-Merger
business and assets to HXT Holdings, Inc., its wholly-owned subsidiary, and HXT
Holdings assumed responsibility for all of the liabilities of China Software
that existed prior to the Merger.   It was also agreed that HXT Holdings,
Inc. will file a registration statement with the Securities and Exchange
Agreement that will, when declared effective, permit China Software to
distribute all of the outstanding shares of HXT to the holders of its common
stock.  After the registration statement is declared effective, the Board
of Directors of China Software will fix a record date, and shareholders of
record on that date will receive the shares of HXT Holdings in proportion to
their ownership of China Software common stock.
 
 As a
result, HXT is reported as an entity held for disposal in the accompanying
financials.
 
 The
acquisition of American Wenshen is accounted for as a reverse acquisition under
the purchase method of accounting since the shareholders of American Wenshen
obtained control of the consolidated entity. Accordingly, the merger of the
two companies is recorded as a recapitalization of American Wenshen, with
American Wenshen being treated as the continuing operating entity. The
historical financial statements presented herein will be those of American
Wenshen. The continuing entity retained September 30 as its fiscal year end. Due
to this, the operations of HXT are for the post acquisition period from July 30,
2007 through September 30, 2007 and no operations for HXT for the year ended
September 30, 2006.
 
 The
components of loss from operations related to the entity held for disposal for
the year ended September 30, 2008 and for the period from July 30, 2007 through
September 30, 2007 are shown below.
  2008
                        
                        
                        2007Net
      sales
                        
                        $
                        682,110
                        
                        
                        $
                        425,053Cost
      of sales
                        
                        
                        154,220
                        
                        
                        
                        275,282Gross
      profit
                        
                        
                        527,890
                        
                        
                        
                        149,771Operating
      expensesSelling
      expenses
                        
                        
                        756,141
                        
                        
                        
                        34,283Research
      & development expenses
                        
                        
                        469,527
                        
                        
                        
                        79,649General
      and administrative
                        
                        
                        1,483,425
                        
                        
                        
                        231,014Total
      operating expenses
                        
                        
                        2,709,093
                        
                        
                        
                        344,946Loss
      from operations
                        
                        
                        (2,181,203
                        )
                        
                        
                        (195,175
                        )Non-operating
      expensesOther
      income
                        
                        
                        37,596
                        
                        
                        
                        6,990Interest
      income
                        
                        
                        34,124
                        
                        
                        
                        8,060Net
      Loss before income tax
                        
                        
                        (2,109,483
                        )
                        
                        
                        (180,124
                        )Provision
      for Income tax
                        
                        
                        -
                        
                        
                        
                        -Net
      loss from entity held for disposal / spin off
                        
                        $
                        (2,109,483
                        )
                        
                        $
                        (180,124
                        )
  Assets
and liabilities for the entity held for disposal as of September 30, 2008 and
2007 are as follows:
 2008
                  
                  
                  2007AssetsCash
      and cash equivalents
                  
                  $
                  6,873
                  
                  
                  $
                  81,828Account
      receivable, net
                  
                  
                  143,400
                  
                  
                  
                  399,127Other
      receivable
                  
                  
                  30,637
                  
                  
                  
                  122,148Inventory
                  
                  
                  55,278
                  
                  
                  
                  474,944Loan
      receivable
                  
                  
                  -
                  
                  
                  
                  478,444Other
      current assets
                  
                  
                  18,848
                  
                  
                  
                  461,283Total
      Current assets
                  
                  
                  255,036
                  
                  
                  
                  2,017,774Property,
      Plant & Equipment, net
                  
                  
                  195,630
                  
                  
                  
                  245,172Total
      Non-Current Assets
                  
                  
                  195,630
                  
                  
                  
                  245,172LiabilitiesAccount
      payable and accrued expenses
                  
                  
                  92,321
                  
                  
                  
                  33,070Unearned
      revenue
                  
                  
                  30,415
                  
                  
                  
                  5,615Other
      payable
                  
                  
                  357,037
                  
                  
                  
                  253,517Total
      Liabilities
                  
                  
                  479,773
                  
                  
                  
                  292,202Net
      Asset (Liability) Held for Disposal/Spin-Off
                  
                  $
                  (29,107
                  )
                  
                  $
                  1,970,743
 F-18
 AMERICAN
WENSHEN STEEL GROUP, INC.. AND SUBSIDIARIES
 (FORMERLY
CHINA SOFTWARE TECHNOLOGY GROUP CO., LTD)
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 FOR THE YEARS
ENDED SEPTEMBER 30, 2008 AND 2007
 NOTE
15 – MAJOR CUSTOMERS
& VENDORS
 
 Four
customers provided 41%, 18%, 13% and 12% of the Company’s revenue for the year
ended September 30, 2008  for an aggregate percentage of 83%. At
September 30, 2008, the Company had $ 105,564 of accounts receivable due from
these customers.
 
 Two
customers provided 54% and 30% of the Company’s revenue for the year ended
September 30, 2007  for an aggregate percentage of 84%. At September
30, 2007, the Company had $ 146,837 of accounts receivable due from these
customers.
 
 For the
year ended September 30, 2008, two vendors provided 44% of the Company’s
inventory purchase.  As of September 30, 2008, the Company had $0 in
accounts payable to the vendor.
 
 For the
year ended September 30, 2007, one vendor which owned by an officer provided 70%
of the Company’s inventory purchase.  As of September 30, 2007, the
Company had $294,566 in accounts payable to the vendor.
 
 NOTE 16 INCOME TAXES
  The
Company through its subsidiary: Chaoyang Liaogang, is governed by the Income Tax
Laws of the PRC.  Operations in the United States of America have
incurred net accumulated operating losses for income tax
purposes.  The Company believes that it is more likely than not that
these net accumulated operating losses will not be utilized in the future and
hence the Company has not recorded any deferred assets as of September 30,
2008.
  Pursuant
to the PRC Income Tax Laws, the Enterprise Income Tax (“EIT”) is at a statutory
rate of 33%, which is comprises of 30% national income tax and 3% local income
tax.  Beginning January
1, 2008, the new Enterprise Income Tax (EIT) lawreplacedthe existing laws for Domestic
Enterprises (DES) and Foreign Invested Enterprises (FIEs). The new standard EIT rate of 25%replaced the 33% rate previouslyapplicable to both DES and
FIEs.
  The
      following is a reconciliation of income tax expense:September
      30, 2007
                                
                                U.S.
                                
                                
                                PRC
                                
                                
                                TotalCurrent
                                
                                $
                                0
                                
                                
                                $
                                34,821
                                
                                
                                $
                                34,821Deferred
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Total
                                
                                $
                                0
                                
                                
                                $
                                34,821
                                
                                
                                $
                                34,821September
      30, 2008
                                
                                U.S.
                                
                                
                                PRC
                                
                                
                                TotalCurrent
                                
                                $
                                0
                                
                                
                                $
                                70,861
                                
                                
                                $
                                70,861Deferred
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Total
                                
                                $
                                0
                                
                                
                                $
                                70,861
                                
                                
                                $
                                70,861Reconciliation
      of the differences between the statutory U.S. Federal income tax
      rateand
      the effective rate is as follows:9-30-2007
                                
                                
                                
                                9-30-2008US
      statutory tax rate
                                
                                
                                34
                                %
                                
                                
                                34
                                %Foreign
      income not recognized in US
                                
                                
                                -34
                                %
                                
                                
                                -34
                                %PRC
      income tax
                                
                                
                                33
                                %
                                
                                
                                25
                                %Permanent
      Differences according to
                                
                                
                                -24
                                %
                                
                                
                                -20
                                %the
      PRC Income Tax Rules (Bad debts)Effective
      rate
                                
                                
                                9
                                %
                                
                                
                                5
                                %
  F-19


ITEM
8.                      CHANGES
IN AND DISAGREEMENTS WITH   ACCOUNTANTS ONACCOUNTING AND
FINANCIAL DISCLOSURE.





Not applicable.





ITEM
8A.                                CONTROLS
AND PROCEDURES.





(a)           Evaluation of disclosure controls and
procedures.





The term “disclosure controls and
procedures” (defined in SEC Rule 13a-15(e)) refers to the controls and other
procedures of a company that are designed to ensure that information required to
be disclosed by a company in the reports that it files under the Securities
Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and
reported within required time periods. The Company’s management, with the
participation of the Chief Executive Officer and the Chief Financial Officer,
has evaluated the effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by this annual report (the
“Evaluation Date”). Based on that evaluation, the Company’s Chief Executive
Officer and Chief Financial Officer have concluded that, as of the Evaluation
Date, such controls and procedures were effective.





(b)           Changes in internal
controls.





The term
“internal control over financial reporting” (defined in SEC Rule 13a-15(f))
refers to the process of a company that is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles. The Company’s management, with the participation
of the Chief Executive Officer and Chief Financial Officer, has evaluated any
changes in the Company’s internal control over financial reporting that occurred
during the fourth quarter of the year covered by this annual report, and they
have concluded that there was no change to the Company’s internal control over
financial reporting that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.





(c)
            Management’s
      Report on Internal Control over Financial
  Reporting.




Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934.  We have assessed the effectiveness
of those internal controls as of December 31, 2007, using the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control –
Integrated Framework as a basis for our assessment.




Because
of inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies and procedures may deteriorate.  All internal
control systems, no matter how well designed, have inherent
limitations.  Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation.




A
material weakness in internal controls is a deficiency in internal control, or
combination of control deficiencies, that adversely affects the Company’s
ability to initiate, authorize, record, process, or report external financial
data reliably in accordance with accounting principles generally accepted in the
United States of America such that there is more than a remote likelihood that a
material misstatement of the Company’s annual or interim financial statements
that is more than inconsequential will not be prevented or detected. In the
course of making our assessment of the effectiveness of internal controls over
financial reporting, we identified three material weaknesses in our internal
control over financial reporting.  These material weaknesses consisted
of:




a.  Inadequate staffing and supervision
within the accounting operations of our company.  The
relatively small number of employees who are responsible for accounting
functions prevents us from segregating duties within our internal control
system.  The inadequate segregation of duties is a weakness because it
could lead to the untimely identification and resolution of accounting and
disclosure matters or could lead to a failure to perform timely and effective
reviews.




b.  Lack of expertise in U.S accounting
principles among the personnel in our Chinese
headquarters.  Our books are maintained and our financial
statements are prepared by the personnel employed at our executive offices in
Liaoning Province in the People’s Republic of China.  Few of our
employees have experience or familiarity with U.S accounting
principles.  The lack of personnel in our Liaoning office who are
trained in U.S. accounting principles is a weakness because it could lead to
improper classification of items and other failures to make the entries and
adjustments necessary to comply with U.S. GAAP.




c.  Lack of independent control over
related party transactions.  Yang Kuidong and his spouse, Zhang
Liwei, are two of the three members of our Board of Directors and are the Chief
Executive Officer and Chief Financial Officer, respectively, of American Wenshen
Steel Group.  The third member of our Board is an employee of our
operating subsidiary.  From time to time Mr. Yang has made loans and
capital contributions to finance the operations of Chaoyang Liaogang. The
absence of independent directors to review these transactions is a weakness
because it could lead to improper classification of such related party
transactions.




Management
is currently reviewing its staffing and their training in order to remedy the
weaknesses identified in this assessment.  To date, we are not aware
of significant accounting problems resulting from these weaknesses; so we have
to weigh the cost of improvement against the benefit of strengthened
controls.  However, because of the above conditions, management’s
assessment is that the Company’s internal controls over financial reporting were
not effective as of September 30, 2008.




This
annual report does not include an attestation report of the Company’s
independent registered public accounting firm regarding internal control over
financial reporting.  Management’s report was not subject to
attestation by the Company’s independent registered public accounting firm
pursuant to temporary rules of the Securities and Exchange Commission that
permit the Company to provide only management’s report in this annual
report.







ITEM
8B.                                OTHER
INFORMATION.





None.








PART
III





ITEM
9.                      DIRECTORS
AND EXECUTIVE OFFICERS OF THE REGISTRANT





The
following individuals are the members of American Wenshen’s Board of Directors
and its executive officers.




Name
              Age
              Position
      with the Company
              Director SinceYang
      Kuidong
              40
              Chairman,
      Chief Executive Officer
              2007Zhang
      Liwei
              34
              Chief
      Financial Officer, Director
              2007Xiao
      Zhiquan
              43
              Vice
      President - Marketing, Director
              2007




All directors hold office until the next annual meeting of our shareholders and
until their successors have been elected and qualify.  Officers serve
at the pleasure of the Board of Directors.





Yang Kuidong has over ten
years experience in the specialty steel business.  Since 2004 he has
served as Chairman of the Board of Chaoyang Liaogang.  From 1997 to
2004, Mr. Yang was a director of Shenyang Dongyu Special Steel Co., Ltd., and
Chairman of the Board for the last two years of his tenure.  From 1990
to 1997 Mr. Yang was employed by Beiman Special Steel Company in the departments
of iron and steel materials and electric cookers.  In 1990 Mr. Yang
graduated from Harbin College of Physical Education.  Mr. Yang is
married to Zhang Liwei, the Company’s Chief Financial Officer and a member of
the Board of Directors.





Zhang Liwei has been employed
as Deputy General Manager – Finance by Chaoyang Liaogang since
2004.  From 2003 to 2004, Ms. Zhang was Deputy General Manager –
Finance for Shenyang Dongyu Special Steel Co., Ltd.    Ms.
Zhang is married to Yang Kuidong, the Company’s Chief Executive Officer and a
member of the Board of Directors.





Xiao Zhiquan has been employed
as Deputy General Manager – Sales by Chaoyang Liaogang since
2004.  From 2001 to 2004 Mr. Xiao served as Chairman and Chief
Executive Officer of Dalian Zhengdao Bio-tech Engineering Co., Ltd.





Management
of HXT Holding, Inc.




We here incorporate by reference the
text headed “Directors and Executive Officers, Promoters and Control Persons”
contained at pages 40 and 41 of Amendment No. 3 to the Registration Statement on
Form S-1 of HXT Holdings, Inc. (File No. 333-146796) filed on December 3,
2008.




Nominating and Audit
Committee




The Board of Directors does not have an
audit committee or a nominating committee, due to the small size of the
Board.  The Board also does not have an “audit committee financial
expert” within the definition given by the Regulations of the Securities and
Exchange Commission.  The members of the Board expect to recruit an
audit committee financial expert to join the Board during 2009.





Code of Ethics




The Board of Directors has not adopted
a Code of Ethics applicable to management personnel, due to the small size of
management.







11


Section 16(a) Beneficial Ownership
Reporting Compliance





None of
the officers, directors or beneficial owners of more than 10% of the Company’s
common stock failed to file on a timely basis the reports required by Section
16(a) of the Exchange Act during the year ended September 30, 2008.





ITEM
10.                                EXECUTIVE
COMPENSATION





The
following table sets forth all compensation awarded to, earned by, or paid by
American Wenshen and its subsidiaries to Yang Kuidong, its Chief Executive
Officer.  There were no other executive officers whose total salary
and bonus for the fiscal year ended September 30, 2008 exceeded
$100,000.




Fiscal
                  Year
                
                Salary
                
                
                Bonus
                
                
                Stock
                  Awards
                
                
                Option
                  Awards
                
                
                Other
                  CompensationYang
      Kuidong
                2008
                
                $
                10,000
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                02007
                
                $
                10,000
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                02006
                
                $
                10,000
                
                
                
                0
                
                
                
                0
                
                
                
                0
                
                
                
                0





Equity
Awards





The
following tables set forth certain information regarding the stock options
acquired by the executive officer named in the table above during the year ended
September 30, 2008 and those options held by him on September 30,
2008.




Option Grants in the Last
Fiscal Year


Potential
      realizablevalue
      at assumedannual
      rates ofappreciationfor
      option termNumber
      of
              securities
              underlying
              option
              granted
            Percent
              of
      total
              options
              granted
      to
              employees
              in
      fiscal
              year
            Exercise
              Price
              ($/share)
            Expiration
              Date5%
            10%Yang
      Kuidong
            0
            --
            --
            --
            --
            --





The
following tables set forth certain information regarding the stock grants
received by the executive officer named in the table above during the year ended
September 30, 2008 and held by him unvested at September 30, 2008.








Unvested Stock Awards in the
Last Fiscal Year


Number
      of
                Shares
      That
                Have
      Not
                Vested
              Market
      Value
                of
      Shares That
                Have
      Not
                VestedYang
      Kuidong
              0
              --





Remuneration of Directors




None of the members of the Board of
Directors receives remuneration for service on the Board.





12


ITEM
11.                                SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT





The
following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of the date of this prospectus by
the following:





·
            each
      shareholder known by us to own beneficially more than 5% of our common
      stock;




·
            Yang
      Kuidong, our Chief Executive
Officer




·
            each
      of our directors; and




·
            all
      directors and executive officers as a
group.




Except as
otherwise indicated, we believe that the beneficial owners of the common stock
listed below have sole voting power and investment power with respect to their
shares,  subject to community property laws where
applicable.  Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission.





Name
      and Address of
                Beneficial Owner
              Amount
      and Nature of
                Beneficial Ownership
              Percentage of ClassYang
      Kuidong
              3,670,000(1)
              17.9%Zhang
      Liwei
              1,000,000(2)
              4.9%Xiao
      Zhiquan
              0
              --All
      officers and directors
                (3
      persons)
              4,670,000
              22.8%Warner
      Technology &
                Investment
      Corp.
                18
      Kimberly Court
                East
      Hanover, NJ 07936
              1,198,999
              5.9%




(1)
            Does
      not include shares owned by Zhang Liwei, his
  spouse.


(2)
            Does
      not include shares owned by Yang Kuidong, her
  spouse.





Equity Compensation Plan
Information





The information set forth in the table
below regarding equity compensation plans (which include individual compensation
arrangements) was determined as of September 30, 2008.




Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
              Weighted
      average exercise price of outstanding options, warrants and
      rights
              Number
      of securities remaining available for future issuance under equity
      compensation plansEquity
      compensation plans approved by security holders.......
              0
              
              0Equity
      compensation plans not approved by security holders......
              0
              
              0Total..............
              0
              
              0





13


ITEM
      12.
            DIRECTOR
      INDEPENDENCE




None of the members of the Board of
Directors is independent, as “independent” is defined in the rules of the NASDAQ
Stock Market.





ITEM
13.                                EXHIBITS





3-a
            Certificate
      of Incorporation - filed as an exhibit to the Company’s Registration
      Statement on Form S-4, filed on September 1, 2006, and incorporated herein
      by reference.





3-a(1)
            Certificate
      of Amendment of Certificate of Incorporation – filed as an exhibit to the
      Company’s Current Report on Form 8-K filed on October 11, 2007, and
      incorporated herein by reference.





3-b
              By-laws
      - filed as an exhibit to the Company’s Registration Statement on Form S-4,
      filed on September 1, 2006, and incorporated herein by
      reference.





3-b(1)            
      Amendment to Bylaws – filed as an exhibit to the Company’s Current Report
      on Form 8-K filed on October 11, 2007 and incorporated herein by
      reference.





10-a
            Assignment
      and Assumption and Management Agreement, dated June 29, 2007, by and among
      China Software Technology Group Co., Ltd., HXT Holdings, Inc. and Yuan
      Qing Li – filed as an exhibit to the Current Report on Form 8-K filed on
      July 6, 2007 and incorporated herein by
  reference.




10-b
            Labour
      Contract made on July 10, 2007 between Yang Kuidong and Chaoyang Liaogang
      Special Steel Co., Ltd. - filed as an exhibit to the Current Report on
      Form 8-K filed on August 6, 2007 and incorporated herein by
      reference.




10-c
            Labour
      Contract made on July 10, 2007 between Zhang Liwei and Chaoyang Liaogang
      Special Steel Co., Ltd. - filed as an exhibit to the Current Report on
      Form 8-K filed on August 6, 2007 and incorporated herein by
      reference.




10-d
            Labour
      Contract made on July 10, 2007 between Xiao Zhiquan and Chaoyang Liaogang
      Special Steel Co., Ltd. - filed as an exhibit to the Current Report on
      Form 8-K filed on August 6, 2007 and incorporated herein by
      reference.




31.1
              Rule
      13a-14(a) Certification – CEO


31.2
              Rule
      13a-14(a) Certification – CFO


32
              Rule
      13a-14(b) Certification






14





ITEM
14                      PRINCIPAL
ACCOUNTANT FEES AND SERVICES





Audit Fees





Kabani & Company,
Inc.  billed $55,000 to the Company for professional services
rendered for the audit of our fiscal 2008 financial
statements.  Kabani & Company, Inc.  billed
$50,000  to the Company for professional services rendered for the
audit of our fiscal 2007 financial statements.





Audit-Related Fees





Kabani & Company, Inc. billed $0 to
the Company during fiscal 2008 for assurance and related services that are
reasonably related to the performance of the 2008 audit or review of the
quarterly financial statements.  Kabani & Company, Inc. billed $0
to the Company during fiscal 2008 for assurance and related services that are
reasonably related to the performance of the 2008 audit or review of the
quarterly financial statements.





Tax Fees





Kabani & Company,
Inc.  billed $0 to the Company during fiscal 2008 and
$0 during fiscal 2007 for professional services rendered for tax
compliance, tax advice and tax planning.





All Other Fees





Kabani & Company, Inc.
billed $0  to the Company in fiscal 2008 and $0 in fiscal 2007
for services not described above.





It is the policy of the Company’s
Board of Directors that all services, other than audit, review or attest
services, must be pre-approved by the Board of Directors, acting in lieu of an
audit committee.  All of the services described above were approved by
the Board of Directors.




15


SIGNATURES





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




AMERICAN WENSHEN STEEL GROUP,
INC.





By:/s/ Yang
Kuidong


Yang
Kuidong, Chief Executive Officer





In
accordance with the Exchange Act, this Report has been signed below on January
13, 2009 by the following persons, on behalf of the Registrant and in the
capacities and on the dates indicated.





Name
              Title/s/
      Yang Kuidong
              Director,
      Chief Executive OfficerYang
      Kuidong/s/
      Zhang Liwei
              Director,
      Chief Financial OfficerZhang
      Leiwei/s/
      Xiao Zhiquan
              DirectorXiao
      Zhiquan










16