UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





FORM
      10-K/A





o ANNUAL
      REPORT
      PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For
      the
      fiscal year ended December 31, 2005





OR





o TRANSITION
      REPORT PURSUANT TO
      SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For
      the
      transition period from ____________ to ____________





Commission
      file number: 333-105903





GENERAL
      STEEL HOLDINGS, INC.


(Exact
      name of registrant as specified in its charter)





NEVADA
            412079252(State
                or Other Jurisdiction of Incorporation or
              Organization)
            (I.R.S.
                Employer
              Identification
                No.)Room
                2315, Kun Tai International MansionBuilding, Yi No 12, Chao Yang Men
                Wai Ave.,Chao
                Yang District, Beijing
            100020(Address
                of Principal Executive Offices)
            (Zip
                Code)





Incorp
      Services Inc.


6075
      S.
      Eastern Avenue


Suite
      1,
      Las Vegas, Nevada, 89119-3146


Tel:
      (702) 866-2500


(Name,
      address and telephone number for Agent for Service)





+86
      (10)
      68000346


(Registrant’s
      telephone number, including area code)





[None]


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




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





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





Title
                of each class
            
            Name
                of each exchange on
              which
                registeredCommon
                Stock, $ .001 par value per share
            
            Not
                applicable










Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act. Yes o No o





Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or Section 15(d) of the Exchange Act. Yes o No o





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 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 o No
o




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K is not contained herein, and will not 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. o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.


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





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




As
      of
      March 29, 2006, the aggregate market value of the registrant’s common stock held
      by non-affiliates of the registrant was $58,367,997 based on the $1.80 as
      reported on the OTC Bulletin Board.





Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date.





Class
            
            Outstanding
                at March 29, 2006Common
                Stock, $ .001 par value per share
            
            32,426,665
                shares




DOCUMENTS
      INCORPORATED BY REFERENCE





Document
            Parts
                Into Which IncorporatedNone
            Not
                applicable





2


**Amendment
      No. 1 to the Annual Report on Form 10-K**


**For
      the fiscal year ended December 31, 2005**




**EXPLANATORY
      NOTE**




General
      Steel Holdings, Inc. (the “Company”) is filing this Amendment No. 1 on
      Form 10-K/A (this “Amendment”) to its Annual Report on Form 10-K for
      the fiscal year ended December 31, 2005, which was originally filed on March
      31,
      2006 (the “Original Filing”), to amend and restate in their entirety Part II.
      Item 7, Part II Item 7.A and Part II. Item 8. of the Original Filing.




Pursuant
      to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, this
      Amendment amends and restates in its entirety Part II. Item 7 and Part II.
      Item
      8. of the Original Filing and contains new certifications pursuant to
      Section 302 and 906 of the Sarbanes-Oxley Act of 2002. This Amendment
      contains only the sections and exhibits to the Original Filing that are being
      amended and restated, and those unaffected parts or exhibits are not included
      herein. This Amendment continues to speak as of the date of the Original Filing,
      and the Company has not updated the disclosure contained herein to reflect
      events that have occurred since the filing of the Original Filing. Accordingly,
      this Amendment should be read in conjunction with the Company’s other filings,
      if any, made with the United States Securities and Exchange Commission
      subsequent to the filing of the Original Filing, including the amendments to
      those filings, if any.




3


**Part
      II.**


ITEM
        7.
        Management's Discussion and Analysis of Financial Condition and Results of
        Operation.
 
 Overview
 
 Following
            the acquisition of ownership in General Steel Investment Co., Ltd. in
            October
            2004, we have shifted our main business focus to general steel products
            and
            steel manufacturing. As our core-operating unit, Tianjin Daqiuzhuang
            Metal Sheet
            Co., Ltd. (herein referred to as "Daqiuzhuang Metal") started its operation
            in
            1988. Daqiuzhuang Metal's core business is the manufacturing of high
            quality
            hot-rolled carbon and silicon steel sheets which are mainly used in the
            production of tractors, agricultural vehicles, shipping containers and
            in other
            specialty markets.
 Daqiuzhuang
            Metal uses a traditional rolling mill production sequence, such as heating,
            rolling, cutting, annealing, and flattening to process slabs into steel
            sheets.
            The sheet sizes are approximately 2,000 mm (length) x 1,000 mm (width)
            x 0.75 to
            2.0 mm (thickness). Limited size adjustments are possible to meet order
            requirements. "Qiu Steel" is the registered name for our
            products.
 Since
            1998, Daqiuzhuang Metal has expanded its operations to six production
            lines
            processing 250,000 tons of 0.75-2.0 mm hot-rolled carbon steel sheets
            per year,
            maintaining a 40% market share of all steel sheets used in the production
            of
            agricultural vehicles in China. We are building a new plant next to the
            existing
            facility with four new production lines to increase the hot-rolled steel
            sheet
            production capacity by 150,000 tons. This new plant has already been
            put into
            full production since mid-March 2006. The Company now operates 10 steel
            production lines for the production of hot-rolled steel
            sheets.
 
 We
            have
            recently signed a joint venture agreement (the “Joint Venture Agreement”) with
            Baotou Iron and Steel Group (“Baotou Steel”) to form Baotou Steel - General
            Steel Special Steel Joint Venture Company Limited, a limited liability
            company
            formed under the laws of the People’s Republic of China (the “Joint Venture
            Company”). The Joint Venture Company has not been launched and is not
            operational yet.
 This
            contemplated transaction is not considered a business combination as
            defined
            under Article 11 of Regulation S-X. The revenue producing activity for
            the new
            entity will be different from that of the existing companies. New high-end
            special steel products will be produced and marketed to new customers.
            In order
            to produce these new products, the new entity will build new facilities
            on the
            land to be contributed by Baotou Steel. It will take some equipment to
            be
            contributed by Baotou Steel, which are to be substantially modified,
            and add a
            100-ton electric furnace and a refiner to create a new production line.
            A new
            sales force will be built to identify and target new customers. The new
            entity
            will not carry the names of either of its future owners.
 This
            contemplated transaction is not considered as a business acquisition
            through a
            non-monetary exchange under EITF 98-3 because it does not meet the relevant
            definition thereunder. The assets to be contributed do not include systems,
            standards, protocols, conventions and rules that act to define the process
            necessary for normal, self-sustaining operations, such as (i) strategic
            management processes, (ii) operational processes, and (iii) resource
            management
            processes. The assets to be contributed do not include the ability to
            obtain
            access to the customers that purchase the outputs of the assets to be
            contributed. Additionally, while the newly formed entity will receive
            certain
            tangible assets, it will be a start-up company. It will need to attract
            and
            retain talent to install/modify/acquire equipment, manage operations,
            as well as
            to manufacture, market and sell products to newly identified customers.
            The
            assets to be contributed by Baotou Steel are insignificant compared to
            the total
            assets of Baotou Steel. Baotou Steel will continue to operate at its
            historical
            levels even assuming the consummation of the contemplated transaction.
            The
            respective future owners who will contribute certain assets to the new
            entity
            will continue to operate as separate entities. They will not reduce or
            transfer
            any of their respective workforces as a result of this transaction. They
            will
            continue to operate their existing businesses at their historical
            levels.
 The
            total
            investment in the Joint Venture Company may be up to US$30,000,000, with
            an
            anticipated registered capital of approximately US$24,000,000. Pursuant
            to the
            Joint Venture Agreement, Baotou Steel will contribute land, existing
            equipment
            and materials whereas General Steel Investment and Daqiuzhuang Metal
            will each
            contribute cash capital to the Joint Venture Company. The completion
            of this
            transaction is subject to the provision of both General Steel Investment
            and
            Daqiuzhuang Metal by Baotou Steel of relevant financial statements and
            an
            independent appraisal of the assets to be contributed to the Joint Venture
            Company, which have not been produced thus far. In addition, China’s State
            Assets Supervision and Administration Committee will need to assign an
            independent appraisal firm to perform an appraisal of the assets contributed
            by
            Baotou Steel. At this time, we are still waiting for the Chinese government
            to
            appoint an appraisal firm to complete the appraisal and the evaluation
            process
            of the joint venture project. As a result, at this moment we are not
            in a
            position to determine the amount of cash capital General Steel Investment
            and
            Daqiuzhuang Metal will be required to contribute to the Joint Venture
            Company.
            We are working to encourage relevant parties to provide the requisite
            documentation and initiate the needed procedures.
 4
 %
                        OwnershipBaotou
                        Iron and Steel (Group) Co., Ltd.
                    
                    
                    49
                    %General
                        Steel Investment Co., Ltd.
                    
                    
                    31
                    %Daqiuzhuang
                        Metal Sheet Co., Ltd
                    
                    
                    20
                    %
 The
            Company also completed a private placement round in 2005 to sell a total
            of
            1,176,665 shares of common stocks at $1.50 per unit. Each unit contains
            one
            share of its common stock and two warrants. The warrants can be exercised
            on the
            second anniversary date at $2.50 per share and on the third anniversary
            date at
            $5.00 per share. At the option of the investors the Company maybe required
            to
            repurchase the 1,176,665 shares of common stock 18 months after the closing
            date
            at a per share price of $1.95.
 Under
        this private offering, the Company raised total of $1,765,000 which will
        be used
        to pay for the above mentioned joint venture.
 
 Results
        of Operations
 
 Our
            results of operations are largely dependent on the level of general economic
            activity in China. Economic forecasts indicate continued fast pace growth
            in
            China in 2006. As a result, the consumption of our steel products is
            expected to
            remain at a high level. We believe that we have successfully positioned
            ourselves within the Chinese agricultural vehicle market. As this market
            continues to demonstrate increased demand for steel, we remain focused
            on
            building our leadership position by enhancing the quality of our products
            and
            expanding our production capacity.
 The
            price
            of steel products in China reached its peak in April 2005 and took a
            slide
            throughout the rest of the year. The drop in steel price was mainly attributable
            to the overproduction by the Chinese steel companies. We have our own
            advantages
            as we operate in a special niche market which serves the agricultural
            businesses. We haven't been seriously affected by the same problem of
            overproduction as the rest of the Chinese steel market has. However,
            we do
            believe that the highly competitive market will exist throughout 2006,
            with
            pressures for shipment volumes and prices. In view of that, we will continue
            to
            focus on cost control and new market development.
 Our
            sales
            revenue mainly comes from the sale of metal sheets in different specifications
            and steel scrap generated in the cutting process. Our cost of sales includes
            the
            cost of its primary raw materials, rollers, energy cost, labor cost,
            the cost of
            warehousing and handling finished steel products and freight
            costs.
 Net
        sales
        and gross profit
 
 2005
        compared to 2004
  Net
          sales
          for the year ended December 31, 2005 were $89.7 million compared to $87.8
          million in 2004, representing a 2% increase. Shipments for year ended December
          31, 2005 climbed 7% to 203,422 tons from 190,936 tons due to overall increase
          in
          productivity and market development. Average selling price per ton including
          sale of scrap for the years ended December 30, 2005 and 2004 has increased
          to
          $479 from $460.
  5
  The
        price
        of our finished products climbed to its peak around $730 in April 2005 and
        slowly dropped throughout the rest of the year. The overall average selling
        price in 2005 was still higher than 2004 as a result of good market demand
        for
        our steel products. In summary, the main reasons for the increase in sales
        revenue are due to an increase in selling price and an increase in shipment
        volume of steel products.
 
 Gross
            profit for the years ended December 31, 2005 was $8.6 million, an increase
            of
            38% or $2.4 million from $6.2 million for the same period last year.
            Gross
            profit margin increased to 9.6% from 7.1% for the years ended December
            31, 2005
            and 2004. This increase in gross profit margin is mainly due to the increase
            in
            both sales volume and selling price outpacing the increase in raw materials
            price. Since April 2005, the price of steel products has been decreasing
            globally due to the overall increase in steel supply. We have to adjust
            our
            products' prices in order to stay competitive in this market. The management
            thinks that the pressure on the selling price will be mitigated in 2006
            as a
            result of steel industry consolidation and overall increase in
            demand.
 2004
        compared to 2003
 
 Net
        sales
        for the year 2004 was $87.8 million, exceeding the previous high of $57.3
        million by 35%. Shipments in 2004 climbed 41% to 190,936 tons, due to overall
        increase in market demand. Average selling price per ton including sale of
        scrap
        has increased to $460 from $418 as a combined result of good market demand
        and
        change in the mix of products sold with increasing sales volume of silicon
        steel. In summary, the main reasons for the increase in sales revenue in
        2004
        was due to an increase in selling price and an increase in demand for steel
        products due to the good market conditions.
 
 Gross
        profit for the year ended December 31, 2004 was $6.2 million, an increase
        of 28%
        or $1.7 million from $4.5 million for the prior year. This increase in gross
        profit was mainly due to the increase in both sales volume and selling price
        outpacing the increase in raw materials price.
  Cost
        of
        sales
  2005
        compared to 2004
 
 Overall
        cost of sales slightly decreased to $81.2 million for the years ended December
        31, 2005 from $81.6 for 2004. Cost of sales as percentage of sales decreased
        from 92.9% to 90.4%. Average cost per ton was $434 and $438, respectively
        for
        the years ended December 31, 2005 and 2004. Even though the sales volume
        went up
        by 7% in 2005 compared to 2004, the decrease in cost of sales was due primarily
        to the cheaper raw materials price and increase in work efficiency for the
        years
        ended December 31, 2005 compared to 2004.
 
 2004
        compared to 2003
 
 Overall
        cost of sales went up to $81.6 million for the year ended December 31, 2004
        from
        $52.8 million for 2003. The increase was the combined effect of both increases
        in production volume and raw materials price.
 
 However,
        cost of sales as a percentage of sales increased from 92.1% to 92.9% due
        primarily to an increase in selling price and conversion costs for the year
        ended December 31, 2004 compared to 2003.
 
 Selling,
        General and Administrative Expenses
  2005
        compared to 2004
 
 Selling,
        general and administrative expenses, such as executive compensation, office
        expenses, legal and accounting charges, travel charges, and various taxes
        were
        $2.8 million for the year ended December 31, 2005. It represented a 20% increase
        from $2.3 for the year ended December 31, 2004. A large component of the
        increase came from the legal and accounting expenses and investor and public
        relations charges for the public listed company.
  6
 
 2004
        compared to 2003
 
 Selling,
            general and administrative expenses, such as executive compensation,
            office
            expenses, legal and accounting charges, travel charges, and various taxes
            were
            $2.3 million, it represented a 34% increase from $1.5 million for the
            year ended
            December 31, 2003. A large component of the increase came from the legal
            and
            accounting charges due to our reverse merger between American Construction
            Company and General Steel Investment Co., Ltd. and our attempt to acquire
            the
            rolling mill equipment from a bankrupted Canadian steel maker, the Stelco
            Plate
            Company Ltd.
 Other
        income (expense)
 
 2005
        compared to 2004
 
 Other
        income (expense) for the year ended December 31, 2005 consisted mainly of
        finance charges and interest income. Interest expense was $1.8 million for
        the
        year ended December 31, 2005 representing a $0.2 million year over year
        increase. Outstanding bank loans increased to $27.1 million from $25.7 million
        as of December 31, 2005 and 2004, respectively. This increase in debt borrowing
        is mainly driven by management's decision to increase the working capital
        for
        the current operation.
 
 2004
        compared to 2003
 
 Other
        income (expense) for the year ended December 31, 2004 consisted mainly of
        finance and interest charges of $1.6 million, a $0.9 million increase from
        2003.
        Outstanding bank loans increased to $25.7 million from $13.8 million as of
        December 31, 2004 and 2003, respectively. The increase in debt borrowing
        is
        mainly driven by the management's decision to pay more in advance payments
        and
        deposits to suppliers to ensure stable raw materials supply and to lock in
        discounted prices.
 
 Income
        taxes
 
 We
            did
            not carry on any business and did not maintain a branch office in the
            United
            States during the years ended December 31, 2005, 2004 and 2003. Therefore,
            no
            provision for withholding or U.S. federal income taxes or tax benefits
            on the
            undistributed earnings and/or losses of the Company has been
            made.
 Pursuant
        to the relevant laws and regulations in the People's Republic of China,
        Daqiuzhuang Metal, as a foreign owned enterprise in the People's Republic
        of
        China, is entitled to an exemption from the PRC enterprise income tax for
        two
        years commencing from its first profitable year.
 
 We
            have
            applied for this tax benefit since the beginning of 2005. We have been
            accruing
            the income tax every quarter as required by the local tax administrative
            agencies. Having obtained the approval notice from local tax administrative
            agency by the end of March 2006, we have decided to reverse the accruals
            for
            2005 income taxes and add them back to the net
            income.
 Our
            effective state and local income tax rate was 33% for the years ended
            December
            31, 2004 and 2003. Income tax expense was $906,277 for the year ended
            December
            31, 2004, up from $767,431 in 2003 due to higher pretax
            income.
 Liquidity
        and capital resources
 
 Due
            to
            the good market demand for our steel products, we plan to maintain
            higher-than-average debt to equity ratio to better position ourselves
            in this
            fast growing market. The bank loans are considered short-term for the
            purpose of
            the preparation of the financial statements because they are renewable
            with the
            banks every year. Due to the recent joint venture agreement with Baotou
            Iron and
            Steel (Group) Co., Ltd., we are reserving cash for the first 30% of its
            capital
            contribution, approximately $3.7 million, which needs to be paid when
            the
            business license for the joint venture is issued. Cash balance including
            restricted cash amounted to $11.4 million, $9.1 million and $3.7 million
            for the
            years ended December 31, 2005, 2004 and 2003.
  7
  Operating
        activities
 
 2005
        compared to 2004
 
 Net
            cash
            provided by operating activities for the years ended December 31, 2005
            was $10.0
            million compared with $6.9 million used in operating activities for 2004.
            The
            Company's net income before minority interest was $4.1 million for the
            years
            ended December 31, 2005, a $2.7 million or 198% increase compared with
            last
            year. More customer deposits, less inventory and less advances on inventory
            purchases became the major factors of this increase in cash generated
            by
            operating activities.
 2004
        compared to 2003
 
 Net
            cash
            used in operating activities for the year ended December 31, 2004 was
            $6.9
            million compared with $1.6 million for 2003 primarily due to the increase
            in
            inventories and purchase deposits to suppliers. Concerned by the steady
            increase
            in raw material price, the management decided to pay suppliers more in
            advance
            payments and deposits to obtain the raw materials at discounted
            prices.
 Investing
        activities
 
 2005
        compared to 2004
 
 Net
            cash
            used in investing activities was $7.9 million for the years ended December
            31,
            2005 compared with $1.2 million provided by investing activities for
            the years
            ended December 31, 2004. This change mainly resulted from the increase
            in notes
            receivable and equipment purchases. Our customers usually pay for our
            products
            with promissory notes issued by the banks which in turn can be used like
            cash by
            us to pay for our purchases. We were also building four more production
            lines
            next to the existing facility. This construction has been completed as
            of the
            statement date. We spent $4.2 million on construction in progress.
 2004
        compared to 2003
 
 Net
            cash
            provided by investing activities was $1.2 million for the year ended
            December
            31, 2004 compared with $4.9 million used in investing activities for
            the year
            ended December 31, 2003. This change resulted from an increase in collections
            on
            notes receivable and a decrease in equipment purchases due to the completion
            of
            our plant facility construction.
 Financing
        activities
 
 2005
        compared to 2004
 
 We
            issued
            1,176,665 shares of redeemable stock in a private placement round on
            September
            18, 2005. The stock was issued at $1.50 per share with options for us
            to
            purchase the shares back at $1.95, eighteen month after the closing date.
            Under
            this private offering, we raised total of $1,765,000 which will be used
            to pay
            for the special steel joint venture with Baotou Iron and Steel Group.
            This is
            the main reason attributable to the net cash provided by financing
            activities.
 2004
        compared to 2003
 
 We
            signed
            two new agreements with Shanghai Pufa Bank and China Merchants Bank to
            borrow
            $6,050,000 from each. The proceeds were used to pay for inventory purchases
            due
            to the reason noted under "OTHER INCOME (EXPENSE)."
  Certain
          Relationships and Related
          Transactions.
  8
 We
            lent
            money to Yang Pu Automotive Investment Limited, a related party, at 7%
            interest
            for better allocation of our available cash resources. Accordingly, Yang
            Pu
            Automotive Investment Limited issued on November 15, 2005 a note to us
            in the
            amount of RMB 24,000,000, translating to $2,976,000, for one
            year
 with
            an
            interest rate at 7% and due at maturity. Yang Pu Capital Automotive is
            a company
            that invests in real estate development and a variety of other businesses
            and
            the purpose of this loan is for its working capital needs and ordinary
            course of
            investment activities. Yang Pu Automotive Investment Limited is 100%
            indirectly
            owned by Mr. YU Zuo Sheng, our Chairman and Chief Executive
            Officer.
 
 We
            received a cash advance from Golden Glister Holdings Limited and we have
            not
            entered into any loan agreement with respect to this amount. Golden Glister
            Holdings Limited is incorporated in the territory of the British Virgin
            Islands
            which our president Yu Zuo Sheng is the majority shareholder. We used
            the amount
            advanced from Golden Glister Holdings Limited to pay for professional
            fees
            including legal and accounting fees and investor relations charges. The
            Company
            had $980,000 and $990,000 outstanding balance as of December 31, 2005
            and 2004,
            respectively.
 Compliance
        with environmental laws and regulations
 
 Based
          on
          the equipment, technologies and measures adopted, we are not considered
          a
          high-pollution factory in China. The production process does not need much
          water
          and produces only a minimal amount of chemical pollution. We use gas-fired
          reheat furnaces recommended by the State Environmental Protection Agency
          to heat
          our raw materials and semi-finished products.
  In
            2005,
            the Daqiuzhuang County ordered an environmental clean-up campaign and
            required
            harmless waste water discharge. In order to meet these requirements,
            we invested
            $94,190 to remodel our industrial water recycling system to reduce new
            water
            consumption and industrial water discharge. This wastewater recycling
            system is
            able to process 350 tons of wastewater daily. We can realize approximately
            $10,000 savings per year using this system. As for the remodeling of
            gas furnace
            and desulphurization of discharged gas, the local government has not
            posted any
            control measures currently and we have no plans to proceed with this
            remodeling
            until such time regulations are mandated.
 We
            believes that future costs relating to environmental compliance will
            not have a
            material adverse effect on our financial position. There is always the
            possibility, however, that unforeseen changes, such as new laws or enforcement
            policies, could result in materially adverse costs.
 Impact
        of
        inflation
 
 We
            are
            subject to commodity price risks arising from price fluctuations in the
            market
            prices of the raw materials. We have generally been able to pass on cost
            increases through price adjustments. However, the ability to pass on
            these
            increases depends on market conditions driven by the overall economic
            conditions
            in China. We manage our price risks through productivity improvements
            and
            cost-containment measures. We do not believe that inflation risk is material
            to
            our business or our financial position, results of operations or cash
            flows.
 Off-balance
        sheet arrangements
 
 There
        are
        currently no off-balance sheet arrangements.
 
 ITEM
        7A.
        Quantitative and Qualitative Disclosures About Market Risk.
 
 Commodity
        Price Risk and Related Risks
 
 In
        the
        normal course of its business, General Steel is exposed to market risk or
        price
        fluctuations related to the purchase, production or sale of steel products
        over
        which we have little or no control. General Steel does not use any derivative
        commodity instruments to manage the price risk. General Steel's market risk
        strategy has generally been to obtain competitive prices for its products
        and
        allow operating results to reflect market price movements dictated by supply
        and
        demand. Based upon an assumed annual production capacity of 200,000 tons,
        a $1
        change in the annual average price would change annual pre-tax profits by
        approximately $200,000.
  9
  Interest
        Rate Risk
 
 At
        December 31, 2005, General Steel's outstanding debt are short-term and bear
        interest at fixed interest rates and accordingly are not sensitive to changes
        in
        interest rates. We do not use swaps or other interest rate protection agreements
        to hedge this risk.
 
 Foreign
        Currency Exchange Rate Risk
 
 General
        Steel's operating unit, Daqiuzhuang Metal, is located in China. The operation
        purchase, produce and sell all of the steel products domestically. It is
        subject
        to the foreign currency exchange rate risk due to the effects of fluctuations
        in
        the Chinese Renminbi on revenues and operating cost and existing assets or
        liabilities. General Steel has not generally used derivative instruments
        to
        manage this risk. A 10 percent decrease in the 2005 average Reminbi exchange
        rate would result in a $457,300 charge to income.
  10


**ITEM
      8. Financial Statements and Supplementary Data.**





***[Moore
      Stephens: Do you need to reissue your audit report?]***





To
      the
      Board of Directors and Stockholders of


General
      Steel Holdings, Inc.


(Formerly
      known as American Construction Company)





We
      have
      audited the accompanying consolidated balance sheets of General Steel Holdings,
      Inc. (Formerly known as American Construction Company) and subsidiaries as
      of
      December 31, 2005 and 2004, and the related consolidated statements of income,
      stockholders’ equity and comprehensive income, and cash flows for each of three
      years in the period ended December 31, 2005. These financial statements are
      the
      responsibility of the company’s management. Our responsibility is to express an
      opinion on these financial statements based on our audits.





We
      conducted our audits in accordance with 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. The company is not required to
      have, nor were we engaged to perform, an audit of its internal control over
      financial reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the company’s internal control over financial
      reporting. Accordingly, we express no such opinion. An audit also includes
      examining, on a test basis, evidence supporting the amounts and disclosures
      in
      the financial statements, 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 General Steel Holdings,
      Inc.
      and subsidiaries as of December 31, 2005 and 2004, and the results of its
      operations and its cash flows for each of the three years ended December 31,
      2005, in conformity with accounting principles generally accepted in the United
      States of America.




As discussed in note 2 to the consolidated financial
      statements, the Company has restated its consolidated financial statements
      as of
      December 31, 2005 and 2004 and for each of the years in the three-year period
      ended December 31, 2005.






/s/
      Moore
      Stephens Wurth Frazer and Torbet, LLP







Walnut,
      California


March
      24,
      2006, except as to note 2 which the date is July 26, 2006





11


GENERAL
        STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
        KNOWN AS AMERICAN CONSTRUCTION COMPANY)




CONSOLIDATED
                BALANCE SHEETSAS
                OF DECEMBER 31, 2005 AND 2004




2005
            
            2004(Restated)
            
            (Restated)ASSETSCURRENT
                ASSETS:Cash
            
            $
            8,648,373
            
            $
            5,547,810Restricted
                cash
            
            
            2,735,583
            
            
            3,597,480Accounts
                receivable, net of allowance for doubtful accounts of
                $1,371as
                of December 31, 2005 and December 31, 2004
            
            
            993,417
            
            
            523,398Notes
                receivable
            
            
            4,960
            
            
            374,955Note
                receivable - related party
            
            
            2,976,000
            
            
            -Other
                receivables
            
            
            109,769
            
            
            214,905Inventories
            
            
            10,730,941
            
            
            12,826,561Advances
                on inventory purchases
            
            
            10,716,293
            
            
            13,469,984Short-term
                investment
            
            
            37,200
            
            
            36,300Prepaid
                expenses - current
            
            
            64,647
            
            
            -Total
                current assets
            
            
            37,017,183
            
            
            36,591,393PLANT
                AND EQUIPMENT, net
            
            
            18,213,872
            
            
            14,100,324OTHER
                ASSETS:Advances
                on equipment purchases
            
            
            1,053,169
            
            
            -Prepaid
                expenses - non current
            
            
            669,460
            
            
            -Intangible
                assets - land use right, net of accumulated amortization
            
            
            2,039,532
            
            
            2,277,279Total
                other assets
            
            
            3,762,161
            
            
            2,277,279Total
                assets
            
            $
            58,993,216
            
            $
            52,968,996LIABILITIES
                AND SHAREHOLDERS’ EQUITYCURRENT
                LIABILITIES:Accounts
                payable
            
            $
            823,760
            
            $
            293,348Short
                term loans - bank
            
            
            27,118,800
            
            
            25,748,800Short
                term notes payable
            
            
            5,406,400
            
            
            6,776,000Other
                payables
            
            
            69,667
            
            
            400,110Other
                payable - related party
            
            
            980,000
            
            
            1,011,012Accrued
                liabilities
            
            
            916,957
            
            
            393,532Customer
                deposits
            
            
            1,276,536
            
            
            2,009,313Customer
                deposits - related party
            
            
            -
            
            
            -Deposits
                due to sales representatives
            
            
            1,261,080
            
            
            1,231,780




F-1
 
 GENERAL
              STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
              KNOWN AS AMERICAN CONSTRUCTION COMPANY)
  CONSOLIDATED
                      BALANCE SHEETSAS
                      OF DECEMBER 31, 2005 AND 2004
 2005
                
                2004(Restated)
                
                (Restated)ASSETS


Taxes
                payable
            
            
            1,682,330
            
            
            1,879,615Total
                current liabilities
            
            
            39,535,530
            
            
            39,743,510SHARES
                SUBJECT TO MANDATORY REDEMPTION
            
            
            1,720,875
            
            
            -Total
                liabilities
            
            
            41,256,405
            
            
            39,743,510MINORITY
                INTEREST
            
            
            5,387,026
            
            
            4,015,108SHAREHOLDERS’
                EQUITY:Common
                Stock, $.001 par value, 75,000,000 shares authorized,32,426,665
                shares issued and outstanding
            
            
            31,250
            
            
            31,250Paid-in-capital
            
            
            6,871,358
            
            
            6,871,358Retained
                earnings
            
            
            4,207,236
            
            
            2,152,976Statutory
                reserves
            
            
            840,753
            
            
            154,794Accumulated
                other comprehensive income
            
            
            399,188
            
            
            -Total
                shareholders’ equity
            
            
            12,349,785
            
            
            9,210,378Total
                liabilities and shareholders’ equity
            
            $
            58,993,216
            
            $
            52,968,996-
            
            
            -


See
      Report of Independent Registered Public Accounting Firm.




The
      Accompanying Notes are an Integral Part of this Statement.




F-2




GENERAL
      STEEL HOLDINGS, INC. AND SUBSIDIARIES


(FORMERLY
      KNOWN AS AMERICAN CONSTRUCTION COMPANY)


CONSOLIDATED
                STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOMEFOR
                THE YEARS ENDED DECEMBER 31, 2005, 2004 AND
                2003




2005
            
            2004
            
            2003(Restated)SALES
                REVENUE
            
            $
            89,739,899
            
            $
            87,831,919
            
            $
            57,305,601COST
                OF SALES
            
            
            81,165,850
            
            
            81,613,187
            
            
            52,804,197GROSS
                PROFIT
            
            
            8,574,049
            
            
            6,218,732
            
            
            4,501,404SELLING,
                GENERAL AND ADMINISTRATIVE EXPENSES
            
            
            2,781,070
            
            
            2,316,699
            
            
            1,532,033INCOME
                FROM OPERATIONS
            
            
            5,792,979
            
            
            3,902,033
            
            
            2,969,371OTHER
                (EXPENSES) INCOME , NET
            
            
            (1,680,842
            )
            
            (1,616,377
            )
            
            (643,807
            )INCOME
                BEFORE PROVISION FOR INCOME TAXESAND
                MINORITY INTEREST
            
            
            4,112,137
            
            
            2,285,656
            
            
            2,325,564PROVISION
                FOR INCOME TAXES
            
            
            -
            
            
            906,277
            
            
            767,431NET
                INCOME BEFORE MINORITY INTEREST
            
            
            4,112,137
            
            
            1,379,379
            
            
            1,558,133MINORITY
                INTEREST
            
            
            1,371,918
            
            
            464,381
            
            
            467,440NET
                INCOME
            
            
            2,740,219
            
            
            914,998
            
            
            1,090,693OTHER
                COMPREHENSIVE INCOME:Foreign
                currency translation adjustment
            
            
            399,188
            
            
            -
            
            
            -COMPREHENSIVE
                INCOME
            
            $
            3,139,407
            
            $
            914,998
            
            $
            1,090,693EARNINGS
                PER SHARE, BASIC AND DILUTED
            
            $
            0.09
            
            $
            0.03
            
            $
            0.04WEIGHTED
                AVERAGE NUMBER OF SHARES, restated
            
            
            31,250,000
            
            
            30,259,644
            
            
            30,000,000


See
          Report of Independent Registered Public Accounting Firm.
 The
        Accompanying Notes are an Integral Part of this Statement.


F-3




GENERAL
      STEEL HOLDINGS, INC. AND SUBSIDIARIES


(FORMERLY
      KNOWN AS AMERICAN CONSTRUCTION COMPANY)


CONSOLIDATED
                STATEMENTS OF SHAREHOLDERS’ EQUITYFOR
                THE YEARS ENDED DECEMBER 31, 2005, 2004 AND
                2003




Accumulated
                otherNumber
            
            Common
            
            Paid-in
            
            Statutory
            
            Retained
            
            Stock
            
            comprehensiveof
                shares
            
            stock
            
            capital
            
            reserves
            
            earnings
            
            receivable
            
            income
            
            Totals(Restated)
            
            (Restated)
            
            (Restated)
            
            
            
            (Restated)BALANCE,
                January 1, 2003
            
            
            30,000,000
            
            $
            30,000
            
            $
            6,872,433
            
            $
            -
            
            $
            302,079
            
            $
            (10,000
            )
            $
            -
            
            $
            7,194,512Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,090,693
            
            
            
            
            
            
            
            
            1,090,693BALANCE,
                December 31, 2003
            
            
            30,000,000
            
            $
            30,000
            
            $
            6,872,433
            
            $
            -
            
            $
            1,392,772
            
            $
            (10,000
            )
            $
            -
            
            $
            8,285,205Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            914,998
            
            
            
            
            
            
            
            
            914,998Adjustment
                to statutory reserve
            
            
            
            
            
            
            
            
            
            
            
            154,794
            
            
            (154,794
            )
            
            
            
            
            
            
            
            -Cash
                received
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            10,000
            
            
            
            
            
            10,000Stock
                issued for services
            
            
            35,000
            
            
            35
            
            
            140
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            175Reverse
                acquisition
            
            
            1,215,000
            
            
            1,215
            
            
            (1,215
            )BALANCE,
                December 31, 2004
            
            
            31,250,000
            
            $
            31,250
            
            $
            6,871,358
            
            $
            154,794
            
            $
            2,152,976
            
            $
            -
            
            $
            -
            
            $
            9,210,378Net
                income
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,740,219
            
            
            
            
            
            
            
            
            2,740,219Adjustment
                to statutory reserve
            
            
            
            
            
            
            
            
            
            
            
            685,959
            
            
            (685,959
            )
            
            
            
            
            
            
            
            -Foreign
                currency translation gain
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            399,188
            
            
            399,188BALANCE,
                December 31, 2005
            
            
            31,250,000
            
            $
            31,250
            
            $
            6,871,358
            
            $
            840,753
            
            $
            4,207,236
            
            $
            -
            
            $
            399,188
            
            $
            12,349,785


See
          Report of Independent Registered Public Accounting Firm.
 The
        Accompanying Notes are an Integral Part of this Statement.


F-4




GENERAL
      STEEL HOLDINGS, INC. AND SUBSIDIARIES


(FORMERLY
      KNOWN AS AMERICAN CONSTRUCTION COMPANY)


CONSOLIDATED
                STATEMENTS OF CASH FLOWSFOR
                THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003




2005
            
            2004
            
            2003(Restated)
            
            (Restated)
            
            (Restated)CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                income
            
            $
            2,740,219
            
            $
            914,998
            
            $
            1,090,693Adjustments
                to reconcile net income to cashprovided
                by (used in) operating activities:Minority
                Interest
            
            
            1,371,918
            
            
            464,381
            
            
            467,440Depreciation
            
            
            1,053,976
            
            
            968,332
            
            
            916,003Amortization
            
            
            289,938
            
            
            287,090
            
            
            96,800Loss
                on disposal of equipment
            
            
            25,992
            
            
            22,947
            
            
            -Stock
                issued for services
            
            
            -
            
            
            175
            
            
            -Interest
                expense accrued on mandatory redeemable stock
            
            
            114,724
            
            
            -
            
            
            -(Increase)
                decrease in assets:Accounts
                receivable
            
            
            (451,095
            )
            
            (67,757
            )
            
            1,100,324(Increase)
                decrease in notes receivable
            
            
            373,785
            
            
            813,899
            
            
            (1,188,854
            )Other
                receivables
            
            
            108,860
            
            
            113,366
            
            
            2,190,150Other
                receivables - related parties
            
            
            -
            
            
            459,800
            
            
            -Inventories
            
            
            2,378,597
            
            
            (8,024,646
            )
            
            (709,723
            )Advances
                on inventory purchases - related party
            
            
            -
            
            
            1,021,824
            
            
            3,237,005Advances
                on inventory purchases
            
            
            3,042,837
            
            
            (5,638,504
            )
            
            (6,321,289
            )Prepaid
                expense - current
            
            
            (63,709
            )
            
            -
            
            
            -Prepaid
                expense - non-current
            
            
            (659,742
            )
            
            -
            
            
            -Increase
                (decrease) in liabilities:Accounts
                payable
            
            
            523,624
            
            
            (1,085,137
            )
            
            943,579Other
                payables
            
            
            (364,090
            )
            
            191,802
            
            
            -Other
                payables - related party
            
            
            (10,000
            )
            
            1,011,012
            
            
            (1,414,526
            )506,214
            
            
            332,876
            
            
            (1,086,810
            )Customer
                deposits
            
            
            (771,235
            )
            
            1,095,153
            
            
            (1,700,867
            )Taxes
                payable
            
            
            (240,347
            )
            
            223,773
            
            
            765,098Net
                cash provided by (used in) operating activities
            
            
            9,970,466
            
            
            (6,894,616
            )
            
            (1,614,977
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Restricted
                cash
            
            
            861,897
            
            
            (1,501,110
            )
            
            53,230Increase
                in note receivable - related party
            
            
            (2,932,800
            )
            
            -
            
            
            -Increase
                in short term investment
            
            
            -
            
            
            (24,200
            )
            
            -Deposits
                due to sales representatives
            
            
            (1,222
            )
            
            369,050
            
            
            (364,210
            )Advances
                on equipments purchases
            
            
            (1,037,881
            )
            
            -
            
            
            -Additions
                to equipment
            
            
            (627,941
            )
            
            (253,426
            )
            
            (2,681,103
            )Additions
                to construction in progress
            
            
            (4,169,895
            )
            
            -
            
            
            -Cash
                proceeds from sale of equipment
            
            
            8,552
            
            
            226,158
            
            
            -Increase
                in land use right
            
            
            -
            
            
            -
            
            
            (1,902,902
            )Net
                cash (used in) investing activities
            
            
            (7,899,290
            )
            
            (1,183,528
            )
            
            (4,894,985
            )




F-5
 
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
  CONSOLIDATED
                    STATEMENTS OF CASH FLOWSFOR
                    THE YEARS ENDED DECEMBER 31, 2005, 2004 AND 2003
 2005
                  
                  2004
                  
                  2003(Restated)
                  
                  (Restated)
                  
                  (Restated)


CASH
                FLOWS FROM FINANCING ACTIVITIES:Borrowings
                on short term loans - bank
            
            
            31,967,520
            
            
            28,072,000
            
            
            8,845,100(Payments)
                on short term loans - bank
            
            
            (31,246,540
            )
            
            (16,129,300
            )
            
            (5,662,800
            )Borrowings
                on short term notes payable
            
            
            11,266,840
            
            
            25,071,200
            
            
            11,072,710(Payments)
                on short term notes payable
            
            
            (12,782,120
            )
            
            (25,004,650
            )
            
            (8,881,400
            )Cash
                received on stock issuance
            
            
            -
            
            
            10,000
            
            
            -Cash
                received on issuance of mandatory redeemable stock
            
            
            1,606,151
            
            
            -
            
            
            -Net
                cash provided by financing activities
            
            
            811,851
            
            
            12,019,250
            
            
            5,373,610EFFECTS
                OF EXCHANGE RATE CHANGE IN CASH
            
            
            217,536
            
            
            -
            
            
            -INCREASE
                (DECREASE) IN CASH
            
            
            3,100,563
            
            
            3,941,106
            
            
            (1,136,352
            )CASH,
                beginning of year
            
            
            5,547,810
            
            
            1,606,704
            
            
            2,743,056CASH,
                end of year
            
            $
            8,648,373
            
            $
            5,547,810
            
            $
            1,606,704


See
          Report of Independent Registered Public Accounting Firm.
 The
        Accompanying Notes are an Integral Part of this Statement.


F-6




GENERAL
        STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
        KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
        TO
        CONSOLIDATED FINANCIAL STATEMENTS
  **Note
        1 - Background**
 
 On
        March
        7, 2005, General Steel Holdings, Inc. (the Company) formally changed its
        name
        from American Construction Company to General Steel Holdings, Inc. The Company
        through its subsidiary in China principally engages in the manufacturing
        of hot
        rolled carbon and silicon steel sheets which are mainly used on tractors,
        agricultural vehicles and in other specialty markets.
 
 The
        Company was originally established on August 5, 2002 for the purpose of
        commencing the business of general construction contracting. It is the Company's
        objective to provide to its customers timely and durable construction of
        their
        residential and commercial needs. We established our subsidiary for the purpose
        of achieving our above stated objectives in Saskatchewan, Canada. We established
        our subsidiary to enter the residential and commercial construction industry
        in
        this market.
 
 To
        accomplish the above objective the founder of our company, Jeff Mabry
        established American Construction Company (a Nevada company) on August 5,
        2002.
        American Construction Company then established its subsidiary, West Dee
        Construction Ltd. (a Saskatchewan, Canada Company) on August 8, 2002 by
        purchasing 100 shares from its treasury.
 
 On
          October 14, 2004, American Construction Company and General Steel Investment
          Co., Ltd (General Steel) and Northwest Steel Company, a Nevada corporation,
          entered into an Agreement and Plan of Merger (the "Agreement") pursuant
          to which
          American Construction Company acquired General Steel, and it’s 70% ownership in
          its subsidiary Daqiuzhuang Metal Sheet Co., Ltd (Daqiuzhuang Metal) in
          exchange
          for shares of the Company’s common stock, of which 22,040,000 shares are a new
          issuance by the Company, and 7,960,000 shares are from certain shareholders
          of
          the Company, which in aggregate, constitute 96% of the total issued and
          outstanding shares of the Company.
 
 Under
        the
        terms of the Agreement, General Steel will remain a 100% owned subsidiary
        of the
        Company. The transaction contemplated by the Agreement was intended to be
        a
“tax-free" reorganization pursuant to the provisions of Section 351 and 368(a)
        (1) (A) of the Internal Revenue Code of 1986, as amended. The stockholders
        of
        General Steel, as of the closing date of the merger own approximately 96%
        of the
        Company's common stock outstanding as of October 15, 2004 (excluding any
        additional shares to be issued on outstanding options, warrants and other
        securities convertible into common stock).
 
 The
        accounting for these transactions is identical to that resulting from a
        reverse-acquisition, except that no goodwill or other intangible assets is
        recorded. Accordingly, the financial statements of General Steel Investment
        Co.,
        Ltd are the historical financial statements of the Company, formerly the
        operations of Daqiuzhuang Metal Sheet Co., Ltd.
 See
          report of independent registered public accounting firm.
  F-7
  GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
  **Note
          1 - Background, continued**
 
 Based
            on
            the Company's Plan of Merger with General Steel Investment Co., Ltd.,
            the Board
            of Directors determined to change the Registrant's fiscal year end from
            January
            31 to December 31.
  The
            Company through its subsidiary Daqiuzhuang Metal principally engages
            in the
            manufacturing of hot rolled carbon and silicon steel sheets which are
            mainly
            used on tractors, agricultural vehicles and in other specialty markets.
            The
            Company sells its products through both retailers and wholesalers.
  Daqiuzhuang
            Metal Sheet Co., Ltd. was established on August 18, 2000 in
            Jinghai county, Tianjin city, Hebei province, the People’s Republic of China
            (PRC). The Articles of Corporation provides for a 10 year operating term
            beginning on August 18, 2000 with registered capital of $ 9,583,200. The
            Company is a Chinese registered limited liability company with a legal
            structure
            similar to a limited liability company organized under state laws in
            the United
            States of America. There is no discriminatory provision for the minority
            shareholders and the 30% shareholders will receive their distribution
            of
            retained earnings according to their ownership percentage in Daqiuzhuang
            Metal.
 Tianjin
        Long Yu Trading Material Co., Ltd was the majority owner with 71% of ownership
        interest. Tianjin Long Yu Trading Material Co., Ltd was incorporated in 2000
        in
        Tianjin Municipality, Daqiuzhuang County; P.R.C. Mr. Yu Zuo Sheng has 90%
        of
        ownership interest in Tianjin Long Yu Trading Material Co., Ltd.
 
 During
        January 2004, upon the board directors’ approval, Tianjin Long Yu Trading
        Material Co., Ltd and other minority shareholders sold their interests amounting
        to 70% to Yang Pu Capital Automotive Investment Limited. Yang Pu Capital
        Automotive Investment Limited is a Chinese registered limited liability company
        which is 100% indirectly owned by Mr. Yu Zuo Sheng.
 
 On
            May
            16, 2004, General Steel agreed to purchase Yang Pu’s 70% equity interest in
            Daqiuzhuang Metal for the amount of RMB 55.45 million or approximately
            $6,709,450. The entire purchase price is to be paid within one year of
            the new
            business license being issued which is June 25, 2004. Due to the common
            ownership by Mr. Yu Zuo Sheng in both General Steel Investment Co., Ltd
            and Yang
            Pu Capital Automotive Investment Limited, General Steel's board of directors
            by
            board resolution dated May 16, 2004 has instructed Mr. Yu Zuo Sheng as
            the 99.9%
            shareholder of General Steel on behalf of General Steel to remit the
            total
            purchase price to Yang Pu from his personal funds. Mr. Yu Zuo Sheng will
            receive
            no compensation for completing this transaction nor will General Steel
            reimburse
            Mr. Yu Zuo Sheng for the $6,709,450. As of December 31, 2004, Mr. Yu
            Zuo Sheng
            has paid the entire purchase price to Yang Pu. Because the entities have
            essentially the same owner, Mr. Yu Zuo Sheng and the entities are under
            common
            control, the transfer of ownership is accounted for at historical costs
            under
            guidance of SFAS No. 141. Daqiuzhuang Metal received a new business license
            for
            20-year operating term certifying the new ownership structure as a Chinese
            Foreign Joint Venture on June 25, 2004. At the end of the operating term,
            upon
            approval of the Board of Directors, Daqiuzhuang Metal can apply for an
            operating
            term extension.
 See
          report of independent registered public accounting firm.
  F-8
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
  NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
  **Note
          2 - Restatement of financial statements**
 
 The
          Company is restating the consolidated financial statements for calendar
          years
          2005, 2004 and 2003 for corrections in accounting which include:
 
 1.
                Restating
                    the carry amount of redeemable stock issued in 2005 and amortizing
                    the
                    difference between redemption amount and fair value as interest
                    expense
                    over the 18 month period from issuance date using an implied
                    interest rate
                    in accordance with SFAS 150, The amount originally recorded as
                    liability
                    was discounted at an average market rate with the difference
                    between the
                    discounted amount and the cash received was treated as reduction
                    in
                    paid-in-capital and the difference between discounted amount
                    and
                    redemption value was to be amortized over the 18 months from
                    issuance. In
                    addition, certain disclosures in notes 3 and 18 to the consolidated
                    financial statements are being restated to reflect the correction.
                    The
                    effects of this restatement are as
                    follows:
  Consolidated
          balance sheets
  December
                    31,
                
                
                
                December
                    31,2005
                
                
                
                2005PreviouslyReported
                
                Adjustments
                
                RestatedShares
                    subject to mandatory redemption
                
                $
                2,115,906
                
                $
                (395,031
                )
                $
                1,720,875Paid-in
                    capital
                
                $
                6,395,617
                
                $
                475,741
                
                $
                6,871,358Retained
                    Earnings
                
                $
                4,287,946
                
                $
                (80,710
                )
                $
                4,207,236Consolidated
                    statements of income and other comprehensive incomeOther
                    (expenses) income, net
                
                $
                (1,600,132
                )
                $
                (80,710
                )
                $
                (1,680,842
                )Net
                    income
                
                $
                2,820,929
                
                $
                (80,710
                )
                $
                2,740,219Comprehensive
                    income
                
                $
                3,220,117
                
                $
                (80,710
                )
                $
                3,139,407Consolidated
                    statements of cash flowsInterest
                    expense accrued onmandatory
                    redeemable stock
                
                $
                34,014
                
                $
                80,710
                
                $
                114,724
 See
          report of independent registered public accounting firm.
  F-9
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
  NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 2.
                Retroactively
                    restating the consolidated statements of shareholders' equity
                    for the
                    years ended 2004 and 2003 to reflect the reverse acquisition
                    as described
                    in note 1 as if it had taken place at the beginning of 2003.
                    The effect of
                    the restatement is as
                    follows:
  Note
            2 –
Restatement of financial statements, continued
  Consolidated
          statements of shareholders' equity
  Number
                      of shares
                  
                  Commonstock
                  
                  Paid-incapitalPreviously
                      recorded
                  
                  Restated
                  
                  Previously
                      recorded
                  
                  Restated
                  
                  Previously
                      recorded
                  
                  RestatedBalance,
                      Jan 1, 2003
                  
                  
                  9,175,000
                  
                  $
                  30,000,000
                  
                  $
                  10,000
                  
                  $
                  30,000
                  
                  $
                  6,892,433
                  
                  $
                  6,872,433Balance,
                      Dec 31, 2003
                  
                  
                  9,175,000
                  
                  
                  30,000,000
                  
                  
                  10,000
                  
                  
                  30,000
                  
                  
                  6,892,433
                  
                  
                  6,872,433Reverse
                      acquisition
                  
                  
                  22,040,000
                  
                  
                  1,215,000
                  
                  
                  21,215
                  
                  
                  1,215
                  
                  
                  (21,215
                  )
                  
                  (1,215
                  )Balance,
                      Dec 31, 2004
                  
                  
                  3,125,000
                  
                  
                  31,250,000
                  
                  
                  31,250
                  
                  
                  31,250
                  
                  
                  6,871,358
                  
                  
                  6,871,358
  See
              report of independent registered public accounting firm.
 F-10
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 3.
                Retroactively
                    restating the weighted average number of shares outstanding and
                    earnings
                    per share for 2004 and 2003 to account for the reverse acquisition
                    in note
                    1 if it had taken place at the beginning of 2003 and the effects
                    of this
                    restatement are as follows:
  Consolidated
          Statements of income and other comprehensive income
  Years
                    ended December 31,2004
                
                2004
                
                2003
                
                2003Previously
                  Reported
                
                Restated
                
                Previously
                    Reported
                
                RestatedEarnings
                    per share, basic and diluted
                
                $
                0.07
                
                $
                0.03
                
                $
                0.12
                
                $
                0.04Weighted
                    average number of shares
                
                
                13,594,890
                
                
                30,259,644
                
                
                9,175,000
                
                
                30,000,000
  4.
                Reclassifying
                    Advances on equipment purchases to Other Assets - non-current
                    from current
                    assets on the 2005 balance
                    sheet
 
 5.
                Reclassifying
                    certain amounts on the statements of cash flows for 2005, 2004,
                    and 2003
                    as follows:
 
 a.
                Reclassified
                    accrued interest expense accrued on mandatory redeemable stock
                    from
                    financing activities to operating
                    activities
 
 b.
                Reclassified
                    notes receivable from investing activities to operating activities
                    since
                    it is related to inventory
                    sales
 
 c.
                Separated
                    restricted cash from cash and classified restricted cash in investing
                    activities
 
 d.
                Reclassified
                    deposits due to sales representatives and advances on equipment
                    purchases
                    from operating activities to investing
                    activities
 
 6.
                Restating
                    borrowings and payments on short term loan - bank and short term
                    notes
                    payable on a gross basis vs. net basis as previously
                    reported
 
 Further,
          we have added or revised certain disclosures in notes 1, 3, 6, 9, 11, 14,
          18,
          19, 20, and 21 to provide more detail information and explanations.
 
 **Note
            3 –
            Summary of significant accounting policies**
 
 Basis
          of presentation
 The
          consolidated financial statements of General Steel Holdings, Inc. reflect
          the
          activities of the following subsidiaries:
 Subsidiary
                
                Pecentage
                  Of
                    OwnershipGeneral
                    Steel Investment Co., Ltd.
                
                
                British
                    Virgin Islands
                
                
                100.0
                %Tianjin
                    Daqiuzhuang Metal Sheet Co., Ltd
                
                
                P.R.C.
                
                
                70.0
                %
  The
        consolidated financial statements have been presented as if the Agreement
        and
        Plan of Merger of the subsidiary occurred during the year of 2003 due to
        common
        management and ownership.
 See
          report of independent registered public accounting firm.
  F-11
  GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 The
        accompanying financial statements have been prepared in accordance with
        accounting principles generally accepted in the United States of America.
        The
        accompanying consolidated financial statements include the accounts of General
        Steel Investment Co., Ltd and Tianjin Daqiuzhuang Metal Sheet Co., Ltd
        (collectively the "Company"). All material intercompany transactions and
        balances have been eliminated in the consolidation.
 
 Revenue
        recognition
 
 The
        Company recognizes revenue when the goods are delivered and title has passed.
        Sales revenue represents the invoiced value of goods, net of a value-added
        tax
        (VAT). All of the Company’s products that are sold in the PRC are subject to a
        Chinese value-added tax at a rate of 17% of the gross sales price. This VAT
        may
        be offset by VAT paid by the Company on raw materials and other materials
        included in the cost of producing their finished product.
 
 Foreign
        currency translation
 
 The
        reporting currency of the Company is the US dollar. The Company uses their
        local
        currency, Renminbi (RMB), as their functional currency. Results of operations
        and cash flow are translated at average exchange rates during the period,
        and
        assets and liabilities are translated at the unified exchange rate as quoted
        by
        the People’s Bank of China at the end of the period. Translation adjustments
        resulting from this process are included in accumulated other comprehensive
        income in the statement of shareholders’ equity. Transaction gains and losses
        that arise from exchange rate fluctuations on transactions denominated in
        a
        currency other than the functional currency are included in the results of
        operations as incurred.
  **Note
          3 - Summary of significant accounting policies,
          continued**
 
 Foreign
        currency translation, continued
 
 Translation
        adjustments resulting from this process are included in accumulated other
        comprehensive income in the consolidated statement of shareholders' equity
        and
        amounted to $399,188, $0 and $0 as of December 31, 2005, 2004 and 2003,
        respectively. The balance sheet amounts with the exception of equity at December
        31, 2005 were translated at 8.06 RMB to $1.00 USD as compared to 8.26 RMB
        at
        December 31, 2004. The equity accounts were stated at their historical rate.
        The
        average translation rates applied to income statement accounts for the years
        ended December 31, 2005, 2004 and 2003 were 8.18 RMB, 8.26 RMB and 8.26 RMB,
        respectively.
 
 Plant
        and equipment, net
 
 Plant
        and
        equipment are stated at cost less accumulated depreciation. Depreciation
        is
        computed using the straight-line method over the estimated useful lives of
        the
        assets with 3% residual value. The depreciation expense for the years ended
        December 31, 2005, 2004 and 2003 amounted to $1,053,976, $968,332 and $916,003,
        respectively.
 See
          report of independent registered public accounting firm.
  F-12
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 Estimated
        useful lives of the assets are as follows:
  EstimatedUseful
                    LifeBuildings
                
                
                10-30
                    yearsMachinery
                    and equipment
                
                
                8-15
                    yearsOther
                    equipment
                
                
                5-8
                    yearsTransportation
                    equipment
                
                
                10-15
                    years
 Construction
        in progress represents the costs incurred in connection with the construction
        of
        buildings or new additions to the Company’s plant facilities. No depreciation is
        provided for construction in progress until such time as the assets are
        completed and are placed into service.
 
 The
        cost
        and related accumulated depreciation of assets sold or otherwise retired
        are
        eliminated from the accounts and any gain or loss is included in the statements
        of operations. Maintenance, repairs and minor renewals are charged directly
        to
        expenses as incurred. Major additions and betterment to buildings and equipment
        are capitalized.
 
 Long-term
        assets of the Company are reviewed annually as to whether their carrying
        value
        has become impaired. The Company considers assets to be impaired if the carrying
        value exceeds the future projected cash flows from related operations. The
        Company also re-evaluates the periods of amortization to determine whether
        subsequent events and circumstances warrant revised estimates of useful lives.
        As of December 31, 2005, the Company expects these assets to be fully
        recoverable.
 
 **Note
          3 - Summary of significant accounting policies,
          continued**
 
 Plant
        and equipment, net, continued
 
 Plant
        and
        equipment consist of the following at December 31:
 2005
                
                2004Buildings
                    and improvements
                
                $
                5,391,378
                
                $
                5,089,350Transportation
                    equipment
                
                
                485,699
                
                
                240,847Machinery
                
                
                12,752,995
                
                
                12,294,697Construction
                    in progress
                
                
                4,231,318
                
                
                -Totals
                
                
                22,861,390
                
                
                17,624,894Less
                    accumulated depreciation
                
                
                4,647,518
                
                
                3,524,570Totals
                
                $
                18,213,872
                
                $
                14,100,324
 See
          report of independent registered public accounting firm.
  F-13
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
  Use
        of
        estimates
 
 The
        preparation of financial statements in conformity with generally accepted
        accounting principles of the United States of America requires management
        to
        make estimates and assumptions that affect the amounts reported in the combined
        financial statements and accompanying notes. Management believes that the
        estimates utilized in preparing its financial statements are reasonable and
        prudent. Actual results could differ from these estimates.
 
 Cash
        and concentration of risk
 
 Cash
        includes cash on hand and demand deposits in accounts maintained with
        state **** owned
        banks within the People’s Republic of China and Hong Kong. Total cash (including
        restricted cash balances) in these banks at December 31, 2005 and 2004, amounted
        to $11,446,120 and $9,256,618, respectively of which no deposits are covered
        by
        insurance. The Company has not experienced any losses in such accounts and
        believes it is not exposed to any risks on its cash in bank
        accounts.
 
 Restricted
        Cash
 
 The
        Company through its bank agreements is required to keep certain amounts on
        deposit that are subject to withdrawal restrictions and these amounts are
        $2,735,583 and $3,597,480 as of December 31, 2005 and 2004,
        respectively.
 
 Inventories
 
 Inventories
        are stated at the lower of cost or market using weighted average method.
        Inventories consisted of the followings at December 31,
 Note
            3 -
            Summary of significant accounting policies, continued
  Inventories,
          continued
 2005
                
                2004Supplies
                
                $
                1,524,332
                
                $
                706,737Raw
                    materials
                
                
                1,195,022
                
                
                8,416,473Finished
                    goods
                
                
                8,011,587
                
                
                3,703,351Totals
                
                $
                10,730,941
                
                $
                12,826,561
  Inventories
        consist of supplies, raw materials and finished goods. Raw materials consist
        primarily of iron and steel used in production. The cost of finished goods
        included direct costs of raw materials as well as direct labor used in
        production. Indirect production costs such as utilities and indirect labor
        related to production such as assembling, shipping and handling costs are
        also
        included in the cost of inventory. No work in process inventory existed at
        December 31, 2005 and 2004, as all inventory in process was completed and
        transferred to finished goods prior to the physical inventory count. The
        Company
        reviews its inventory annually for possible obsolete goods or to determine
        if
        any reserves are necessary for potential obsolescence. As of December 31,
        2005
        and 2004, the Company has determined that no reserves are
        necessary.
 See
          report of independent registered public accounting firm.
  F-14
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 Financial
        instruments
 
 Statement
        of Financial Accounting Standards No. 107 (SFAS 107), “Disclosures about Fair
        Value of Financial Instruments” requires disclosure of the fair value of
        financial instruments held by the Company. SFAS 107 defines the fair value
        of
        financial instruments as the amount at which the instrument could be exchanged
        in a current transaction between willing parties. The Company considers the
        carrying amount of cash, accounts receivable, other **** receivables,
        accounts payable, accrued liabilities and other payables to approximate their
        fair values because of the short period of time between the origination of
        such
        instruments and their expected realization and their current market rate
        of
        interest.
 
 Intangible
        assets
 
 All
          land
          in the People’s Republic of China is owned by the government and cannot be sold
          to any individual or company. However, the government grants the user a
“land
          use right” (the Right) to use the land. Daqiuzhuang Metal acquired land use
          rights during the years ended 2000 and 2003 for a total amount of $2,870,902.
          The land use right is for 50 years. However, Daqiuzhuang Metal's initial
          business license had ten-year term. The management elected to amortize
          the land
          use rights over the ten-year business term. Daqiuzhuang Metal became a
          Sino
          Joint Venture in 2004 as discussed in note 1 and obtained a new business
          license
          for twenty years; however, the Company decided to coninue amortizing the
          land
          use rights over the original ten-year business term.
 
 As
        of
        December 31, 2005, 2004 and 2003, accumulated
        amortization amounted to $902,550, $593,623 and $306,533. The
        cost
        of these rights are being amortized over
        ten
        years using
        the straight-line method.
  **Note
          3 - Summary of significant accounting policies,
          continued**
 
 Intangible
        Assets, continued
 
 Intangible
        assets of the Company are reviewed annually as to whether their carrying
        value
        has become impaired. The Company considers assets to be impaired if the carrying
        value exceeds the future projected cash flows from related operations. The
        Company also re-evaluates the periods of amortization to determine whether
        subsequent events and circumstances warrant revised estimates of useful lives.
        As of December 31, 2005, the Company expects these assets to be fully
        recoverable.
 See
          report of independent registered public accounting firm.
  F-15
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 Total
        amortization expense for the years ended December 31, 2005, 2004 and 2003,
        amounted to $289,938, $287,090 and $96,800 respectively.
 
 Shares
        subject to mandatory redemption
 
 The
        Company has adopted Statement of Financial Accounting Standards No. 150, “Accounting
        for Certain Financial Instruments with Characteristics of both Liabilities
        and
        Equity”. FAS 150 establish classification and measurement standards for three
        types of freestanding financial instruments that have characteristics of
        both
        liabilities and equity. Instruments within the scope of FAS 150 must be
        classified as liabilities within the Company’s Consolidated Financial Statements
        and be reported at settlement date value. The provisions of FAS 150 are
        effective for (1) instruments entered into or modified after May 31, 2003,
        and
        (2) pre-existing instruments as of July 1, 2003. In November 2003, through
        the
        issuance of FSP 150-3, the FASB indefinitely deferred the effective date
        of
        certain provisions of FAS 150, including mandatory redeemable instruments
        as
        they relate to minority interests in consolidated finite-lived
        entities.
 
 The
          Company issued new redeemable stock during the quarter ended September
          30, 2005.
          The amount is presented as a liability on balance sheet at the fair market
          value
          on the date of issuance plus accrued interest at the balance sheet date,
          see
          note 18.
 
 Income
        taxes
 
 The
        Company has adopted Statement of Financial Accounting Standards No. 109,
        “Accounting for Income Taxes” (SFAS 109). SFAS 109 requires the recognition of
        deferred income tax liabilities and assets for the expected future tax
        consequences of temporary differences between income tax basis and financial
        reporting basis of assets and liabilities. Provision for income taxes consist
        of
        taxes currently due plus deferred taxes. There are no deferred tax amounts
        at
        December 31, 2005 and 2004.
 
 The
        charge for taxation is based on the results for the year as adjusted for
        items,
        which are non-assessable or disallowed. It is calculated using tax rates
        that
        have been enacted or substantively enacted by the balance sheet
        date.
  **Note
          3 - Summary of significant accounting policies,
          continued**
 
 Income
        taxes, continued
 
 Deferred
        tax is accounted for using the balance sheet liability method in respect
        of
        temporary differences arising from differences between the carrying amount
        of
        assets and liabilities in the financial statements and the corresponding
        tax
        basis used in the computation of assessable tax profit.
 See
          report of independent registered public accounting firm.
  F-16
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 In
        principle, deferred tax liabilities are recognized for all taxable temporary
        differences, and deferred tax assets are recognized to the extent that it
        is
        probably that taxable profit will be available against which deductible
        temporary differences can be utilized.
 
 Deferred
        tax is calculated at the tax rates that are expected to apply to the period
        when
        the asset is realized or the liability is settled. Deferred tax is charged
        or
        credited in the income statement, except when it related to items credited
        or
        charged directly to equity, in which case the deferred tax is also dealt
        with in
        equity.
 
 Deferred
        tax assets and liabilities are offset when they relate to income taxes levied
        by
        the same taxation authority and the Company intends to settle its current
        tax
        assets and liabilities on a net basis.
 
 Under
        the
        Income Tax Laws of PRC, the Company is generally subject to an income tax
        at an
        effective rate of 33% (30% state income taxes plus 3% local income taxes)
        on
        income reported in the statutory financial statements after appropriate tax
        adjustments, unless the enterprise is located in a specially designated region
        where it allows foreign enterprises a two-year income tax exemption and a
        50%
        income tax reduction for the following three years.
 
 T he
        Company’s subsidiary, Daqiuzhuang Metal Sheet Co., Ltd., became a Chinese
        Sino-foreign equity joint venture at the time of the merger on October 14,
        2004
        and it became eligible to receive tax benefit. The company has income tax
        exemption for the years ended December 2005 and 2006 and 50% income tax
        reduction for the years ended December 31, 2007, 2008 and 2009.
 
 The
        provision for income taxes for the period ended December 31 consisted of
        the
        following:
 2005
                
                2004
                
                2003Provision
                    for China Income Tax
                
                $
                -
                
                $
                823,888
                
                $
                661,914Provision
                    for China Local Tax
                
                
                -
                
                
                82,389
                
                
                105,517Total
                    provision for income taxes
                
                $
                -
                
                $
                906,277
                
                $
                767,431
  **Note
          3 - Summary of significant accounting policies,
          continued**
 
 Income
        taxes, continued
 
 The
        following table reconciles the U.S. statutory rates to the Company’s effective
        tax rate for the years ended December 31:
 2005
                
                2004
                
                2003U.S.
                    Statutory rates
                
                
                34.0
                %
                
                34.0
                %
                
                34.0
                %Foreign
                    income not recognized in USA
                
                
                (34.0
                )
                
                (34.0
                )
                
                (34.0
                )China
                    income taxes
                
                
                -
                
                
                33.0
                
                
                33.0Total
                    provision for income taxes
                
                
                -
                %
                
                33.0
                %
                
                33.0
                %
 See
          report of independent registered public accounting firm.
  F-17
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
  The
        estimated tax savings for the year ended December 31, 2005 amounted to
        $1,056,377. The net effect on earnings per share had the income tax been
        applied
        would decrease earnings per share from $0.09 to $0.06.
 
 Value
        Added Tax
 
 Enterprises
        or individuals who sell commodities, engage in repair and maintenance or
        import
        and export goods in the PRC are subject to a value added tax in accordance
        with
        Chinese laws. The value added tax standard rate is 17% of the gross sales
        price.
        A credit is available whereby VAT paid on the purchases of semi-finished
        products or raw materials used in the production of the Company’s finished
        products can be used to offset the VAT due on sales of the finished product.
 
 Taxes
        payable consisted of the followings:
 2005
                
                2004VAT
                    taxes payable
                
                $
                1,290,982
                
                $
                1,000,259Income
                    taxes payable
                
                
                385,510
                
                
                861,798Misc
                    taxes
                
                
                5,838
                
                
                17,558Total
                
                $
                1,682,330
                
                $
                1,879,615
  **Note
          3 - Summary of significant accounting policies,
          continued**
 
 Recently
        issued accounting pronouncements
 
 In
        March
        2004, the FASB issued EITF Issue No. 03-1, The Meaning of Other-Than-Temporary
        Impairment and Its Application to Certain Investments. EITF 03-1 includes
        new
        guidance for evaluating and recording impairment losses on debt and equity
        investments, as well as new disclosure requirements for investments that
        are
        deemed to be temporarily impaired. In September 2004, the FASB issued Staff
        Position EITF 03-1-1, which delays the effective date until additional guidance
        is issued for the application of the recognition and measurement provisions
        of
        EITF 03-1 to investments in securities that are impaired; however, the
        disclosure requirements are effective for annual periods ending after June
        15,
        2004. Management does not currently believe adoption will have a material
        impact
        on the Company’s financial position or results of operations .
 See
          report of independent registered public accounting firm.
  F-18
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
  In
        November 2004, the FASB issued SFAS No. 151, *Inventory
        Costs* ,
        an
        amendment of ARB No. 43, Chapter 4. This
        statement amends the guidance in ARB No. 43, Chapter 4, Inventory
        Pricing, to clarify the accounting for abnormal amounts of idle facility
        expense, freight, handling costs, and wasted material (spoilage).
        Paragraph 5 of ARB No. 43, Chapter 4, previously stated that
“...under some circumstances, items such as idle facility expense, excessive
        spoilage, double freight, and rehandling costs may be so abnormal as to require
        treatment as current period charges...” SFAS No. 151 requires that those items
        be recognized as current-period charges regardless of whether they meet the
        criterion of “so abnormal.” In addition, this requires that allocation of fixed
        production overhead to the costs of conversion be based on the normal capacity
        of the production facilities.
 
 The
        provisions of SFAS 151 shall be applied prospectively and are effective for
        inventory costs incurred during fiscal years beginning after June 15, 2005,
        with earlier application permitted for inventory costs incurred during fiscal
        years beginning after the date this Statement was issued. The Company’s adoption
        of SFAS No. 151 is not currently expected to have a material impact on the
        Company’s financial position or results of operations.
 
 In
        December 2004, the FASB issued SFAS No. 123(R) (revised 2004), “Share-Based
        Payment”, which amends FASB Statement No. 123 and will be effective for public
        companies for interim or annual periods beginning after June 15, 2005. The
        revised standard requires, among other things that compensation cost for
        employee stock options be measured at fair value on the grant date and charged
        to expense over the employee’s requisite service period for the option. Due to
        the absence of observable market prices for employee stock options, the standard
        indicates that the fair value of most stock options will be determined using
        an
        option-pricing model. The Company’s adoption of SFAS No. 123(R) is not currently
        expected to have a material impact on the Company’s financial position or
        results of operations.
  **Note
          3 - Summary of significant accounting policies,
          continued**
 
 Recently
        issued accounting pronouncements, continued
 
 In
        December 2004, the FASB issued SFAS No. 153, *Exchanges
        of Nonmonetary Assets, an amendment of APB Opinion No. 29* .
        The
        guidance in APB Opinion No. 29, *Accounting
        for Nonmonetary Transactions* ,
        is
        based on the principle that exchanges of nonmonetary assets should be measured
        based on the fair value of assets exchanged. The guidance in that Opinion,
        however, included certain exceptions to that principle.
 See
          report of independent registered public accounting firm.
  F-19
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 This
        Statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges
        of similar productive assets that do not have commercial substance. A
        nonmonetary exchange has commercial substance if the future cash flows of
        the
        entity are expected to change significantly as a result of the exchange.
        SFAS
        No. 153 is effective for nonmonetary exchanges occurring in fiscal periods
        beginning after June 15, 2005. The Company’s adoption of SFAS No. 153
        is not expected to have a material impact on the Company’s financial position or
        results of operations.
 
 In
        March
        2005, the FASB published FASB Interpretation No. 47, “Accounting for
        Conditional Asset Retirement Obligations,” which clarifies that the term,
        conditional asset retirement obligations, as used in SFAS No. 143,
“Accounting for Asset Retirement Obligations,” refers to a legal obligation to
        perform an asset retirement activity in which the timing and (or) method of
        settlement are conditional on a future event that may or may not be within
        the
        control of the entity. The uncertainty about the timing and (or) method of
        settlement of a conditional asset retirement obligation should be factored
        into
        the measurement of the liability when sufficient information exists. The
        interpretation also clarifies when an entity would have sufficient information
        to reasonably estimate the
 fair
        value of an asset retirement obligation. This interpretation is effective
        no
        later than the end of the Company’s fiscal 2006. The adoption of this
        Interpretation is not expected to have a material effect on the Company’s
        consolidated financial position or results of operations.
 
 In
        June
        2005, the FASB issued SFAS No. 154, “Accounting Changes and Error
        Corrections” (“SFAS No. 154”). SFAS No. 154 replaces APB No. 20
        (“APB 20”) and SFAS No. 3, “Reporting Accounting Changes in
        Interim Financial Statements,” and applies to all voluntary changes in
        accounting principle, and changes the requirements for accounting for and
        reporting of a change in accounting principle. APB 20 previously required
        that most voluntary changes in accounting principle be recognized by including
        in net income of the period of change a cumulative effect of changing to
        the new
        accounting principle whereas SFAS No. 154 requires retrospective
        application to prior periods’ financial statements of a voluntary change in
        accounting principle, unless it is impracticable. SFAS No. 154 enhances the
        consistency of financial information between periods. SFAS No. 154 will be
        effective beginning with the Company’s first quarter of fiscal year 2006. The
        Company does not expect that the adoption of SFAS No. 154 will have a
        material impact on its results of operations, financial position or cash
        flows.
  **Note
          3 - Summary of significant accounting policies,
          continued**
 
 Recently
        issued accounting pronouncements, continued
 
 In
        June
        2005, the EITF reached a consensus on Issue No. 05-06, "Determining the
        Amortization Period for Leasehold Improvements" (EITF 05-06). EITF 05-06
        provides guidance for determining the amortization period used for leasehold
        improvements acquired in a business combination or purchased after the inception
        of a lease, collectively referred to as subsequently acquired leasehold
        improvements). EITF 05-06 provides that the amortization period used for
        the
        subsequently acquired leasehold improvements to be the lesser of (a) the
        subsequently acquired leasehold improvements' useful lives, or (b) a period
        that
        reflects renewals that are reasonably assured upon the acquisition or the
        purchase. EITF 05-06 is effective on a prospective basis for subsequently
        acquired leasehold improvements purchased or acquired in periods beginning
        after
        the date of the FASB's ratification, which was on June 29, 2005. The Company
        does not anticipate that EITF 05-06 will have a material impact on its
        consolidated results of operations.
 See
          report of independent registered public accounting firm.
  F-20
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 In
        July
        2005, the Financial Accounting Standards Board (FASB) issued an Exposure
        Draft
        of a proposed Interpretation “Accounting for Uncertain Tax Positions—an
        interpretation of FASB Statement No. 109.” Under the proposed
        Interpretation, a company would recognize in its financial statements its
        best
        estimate of the benefit of a tax position, only if the tax position is
        considered probable of being sustained on audit based solely on the technical
        merits of the tax position. In evaluating whether the probable recognition
        threshold has been met, the proposed Interpretation would require the
        presumption that the tax position will be evaluated during an audit by taxing
        authorities. The proposed Interpretation would be effective as of the end
        of the
        first fiscal year ending after December 15, 2005, with a cumulative effect
        of a change in accounting principle to be recorded upon the initial adoption.
        The proposed Interpretation would apply to all tax positions and only benefits
        from tax positions that meet the probable recognition threshold at or after
        the
        effective date would be recognized. The Company is currently analyzing the
        proposed Interpretation and has not determined its potential impact on our
        Consolidated Financial Statements. While we cannot predict with certainty
        the
        rules in the final Interpretation, there is risk that the final Interpretation
        could result in a cumulative effect charge to earnings upon adoption, increases
        in future effective tax rates, and/or increases in future interperiod effective
        tax rate volatility.
 
 In
        October 2005, FASB Staff Position (FSB) FAS 13-1, "Accounting for Rental
        Costs
        Incurred during a Construction Period" was issued. This FSP concluded that
        rental costs associated with ground or building operating leases that are
        incurred during a construction period be expensed. The guidance in the FSP
        is
        required to be applied to the first reporting period beginning after December
        15, 2005. The adoption of this pronouncement is not expected to have a material
        impact on the Company's financial position or results of
        operations.
  **Note
          4 - Earnings Per Share**
 
 The
        Company reports earnings per share in accordance with the provisions of SFAS
        No.
        128, "Earnings Per Share." SFAS No. 128 requires presentation of basic and
        diluted earnings per share in conjunction with the disclosure of the methodology
        used in computing such earnings per share. Basic earnings per share excludes
        dilution and is computed by dividing income available to common stockholders
        by
        the weighted average common shares outstanding during the period. Diluted
        earnings per share takes into account the potential dilution that could occur
        if
        securities or other contracts to issue common stock were exercised and converted
        into common stock.
 See
          report of independent registered public accounting firm.
  F-21
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 Under
        SFAS 150 " Accounting
        for Certain Financial Instruments with Characteristics of both Liabilities
        and
        Equity", entities
        that have issued mandatory redeemable shares of common stock or entered into
        forward contracts that require physical settlement by repurchase of a fixed
        number of the issuer’s equity shares of common stock in exchange for cash shall
        exclude the common shares that are to be redeemed or repurchased in calculating
        basic and diluted earnings per share. Thus the 1,176,665 shares described
        in
        note 17 have been excluded from the earnings per share calculation.
  The
          weighted average number of shares used to calculate EPS for the years ended
          December 31, 2005 (31,250,000), 2004 (30,259,644) and 2003 (30,000,000)
          reflect
          only the shares outstanding for those periods.
  **Note
            5 - Supplemental disclosure of cash flow
            information**
 Interest
        paid amounted to $1,785,558, $1,463,385 and $748,829 for the years ended
        December 31, 2005, 2004 and 2003, respectively.
 
 Income
        tax payments amounted to $490,431, $489,800 and $428,117 for the
        years ended December 31, 2005, 2004 and 2003, respectively.
 
 **Note
          6 - Notes receivable and note receivable - related
          party**
 
 Notes
        receivable represents trade accounts receivable due from various customers
        where
        the customers’ bank has guaranteed the payment of the receivable. This amount is
        non-interest bearing and is normally paid within three to six months. The
        Company has the ability to submit their request for payment to the customer’s
        bank earlier than the scheduled payment date. However, the Company will incur
        an
        interest charge and a processing fee when they submit the payment request
        early.
        The Company had $4,960 and $374,955 outstanding as of December 31, 2005 and
        2004, respectively.
 
 The
            note
            receivable from related party represents a note fromYang Pu Automotive
            Investment Limited for business purpose on November 15, 2005. The note
            is in the
            amount of RMB 24,000,000, translated to $2,976,000, for one year with
            an
            interest rate at 7% and due at maturity. The Company periodically reviews
            the
            financial statements of Yang Pu Automotive Investment Limited to determine
            its
            ability to repay the debt.
 **Note
          7 - Prepaid Expenses**
 
 Prepaid
        expenses at December 31, 2005 consisted of the followings:
 Current
                
                Long-term
                
                TotalRent
                
                $
                44,640
                
                $
                262,136
                
                $
                306,776Land
                    Use Right
                
                
                20,007
                
                
                407,324
                
                
                427,331Total
                
                $
                64,647
                
                $
                669,460
                
                $
                734,107
 See
            report of independent registered public accounting firm.
  F-22
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 The
        Company rented a dormitory for its employees during 2005. The rent is for
        ten
        years starting on January 1, 2006 at RMB 90,000 per quarter or RMB 360,000
        per
        year. The Company's prepayment at December 31, 2005 amounted to RMB 2,474,000
        or
        $306,776.
 
 The
        Company also entered into another rental agreement on July 21, 2005 to rent
        the
        land use right for its manufacture expansion. The total amount of the rental
        is
        RMB 8,067,400 for a period of 50 years starting on September 1, 2005. The
        Company made a prepayment of RMB 3,500,000 during 2005 and prepaid balance
        remained at December 31, 2005 amounted to RMB 3,446,217 or
        $427,331.
 
 **Note
          8 - Advances on inventory purchases**
 
 Advances
        on inventory purchases are monies deposited or advanced to outside vendors
        or
        related parties on future inventory purchases. Due to the high shortage of
        steel
        in China, most of the Company’s vendors require a certain amount of money to be
        deposited with them as a guarantee that the Company will receive their purchases
        on a timely basis.
 
 This
        amount is refundable and bears no interest. The Company has a legal binding
        contract with their vendors for the guarantee deposit, which is to be returned
        to the Company at the end of the contract. The inventory is normally delivered
        within one month after the monies has been advanced. The total outstanding
        amount was $10,716,293 and $13,469,984 as of December 31, 2005 and 2004,
        respectively.
 
 **Note
          9 - Other payable - related party**
 
 The
          Company has a short term loan from Golden Glister Holdings Limited. Golden
          Glister Holdings Limited is incorporated in the territory of the British
          Virgin
          Islands which our president Yu Zuo Sheng is the majority shareholder. The
          amount
          was loaned to General Steel Investment Co., Ltd for business operations.
          The
          Company had $980,000 and $990,000 outstanding on this loan as of December
          31,
          2005 and 2004, respectively. This amount is short term bearing no interest
          and
          has no due date..
  See
          report of independent registered public accounting firm.
 F-23
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
  **Note
          10 - Short term loans - bank**
 
 Short
        term loans - bank represent amounts due to various banks which are due on
        demand
        or normally within one year. These loans can be renewed with the banks. The
        Company had a total of $27,118,800 and $25,748,800 short term bank loans
        with
        various banks as of December 31, 2005 and 2004, respectively and consisted
        of
        the following:
  2005
                
                2004Loan
                    from China Bank, JingHai Branch,
                    dueNovember
                    2006. Monthly interest only payment at6.138%
                    per annum, secured by equipmentand
                    property
                
                $
                1,116,000
                
                $
                1,185,800Loans
                    from Agriculture Bank, DaQiuZhuang Branch, duevarious
                    dates from March to October 2006.Monthly
                    interest only paymentsranging
                    from6.975%
                    to 7.533% per annum, guaranteed by anunrelated
                    third party and secured by property andequipment
                
                
                10,068,800
                
                
                10,648,000Loan
                    from Construction Bank of China, JinHai Branch, dueAugust
                    15,
                    2006.
                    Monthly interst only payment at7.4604%
                    per annum, secured by properties.
                
                
                1,004,400
                
                
                1,089,000Loans
                    from ShangHai PuFa Bank, due various dates fromMarchtoNovember2006.Monthly interest onlypayments
                    ranging from6.417%
                    to 6.696% per annum,guaranteed
                    by an unrelated thirdparty
                
                
                6,200,000
                
                
                6,050,000Loans
                    fromChina
                    MerchantsBank, due various dates fromJune2006toSeptember2006.Quarterly
                    interest onlypayments,
                    annual interest rate of 5.859%
                    to 5.86%,guaranteed
                    by an unrelated thirdparty
                
                
                8,060,000
                
                
                6,050,000Loan
                    from Construction Bank of China, dueAugust
                    21,
                    2006.Monthly
                    interest only payment at7.4604%per annum,guaranteed
                    by an unrelated third party
                
                
                669,600
                
                
                726,000Totals
                
                $
                27,118,800
                
                $
                25,748,800
 See
          report of independent registered public accounting firm.
  F-24
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 **Note
          11 - Short term notes payable**
 
 Short-term
          notes payable are lines of credit extended by the banks. When purchasing
          raw
          materials, the Company often issues a short term note payable to the vendor.
          This short term note payable is guaranteed by the bank for its complete
          face
          value. The banks usually require the Company to deposit a certain amount
          of cash
          deposit at the bank as a guarantee deposit.
  The
        Company has the following short term notes payable outstanding as for December
        31, 2005 and 2004:
  2005
                
                2004China
                    Bank, Jing Hai Branch, various amounts, dueMay
                    2006, restricted cash required of 50% of loanamount,
                    guaranteed by the Company
                
                $
                1,438,400
                
                $
                1,694,000Agricultural
                    Bank of China, various amounts, due datesranging
                    between January and June 2006,restricted
                    cash required of 50% of loan amount,guaranteed
                    by the Company and an unrelatedthird
                    party
                
                
                1,488,000
                
                
                2,057,000Daqiuzhuang
                    Industrial and Commercial Bank,restricted
                    cash required of 30% of loan amount,guaranteed
                    by the Company
                
                
                -
                
                
                605,000ShangHai
                    PuFa Bank, due May 2006, restrictedcash
                    required of 50% of loan balance, guaranteedby
                    an unrelated third party
                
                
                2,480,000
                
                
                2,420,000Totals
                
                $
                5,406,400
                
                $
                6,776,000
  Total
        interest expense for the years ended December 31, 2005, 2004 and 2003 on
        all
        debt amounted to $1,719,351, $1,463,385 and $632,957, respectively.
 
 **Note
          12 - Customer deposits**
 
 Customer
        deposits represent amounts advanced by customers on product orders. The product
        normally is shipped within six months after receipt of the advance payment
        and
        the related sale is recognized in accordance with the Company’s revenue
        recognition policy. As of December 31, 2005 and 2004, customer deposits amounted
        to $1,276,536 and $2,009,313, respectively.
 
 See
        report of independent registered public accounting firm.
   F-25
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
  NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
  **Note
          13 - Deposits due to sales representatives**
 
 The
        Company has entered into agreements with various entities to act as the
        Company’s exclusive sales agent in a specified area. These exclusive sales
        agents must meet certain criteria and are required to deposit a certain amount
        of money with the Company. In return the sales agents receive exclusive sales
        rights to a specified area and discounted prices on products they order.
        These
        deposits bear no interest and are required to be returned to the sales agent
        once the agreement has been terminated. The Company had $1,261,080 and
        $1,231,780 in deposits due to sales representatives outstanding as of December
        31, 2005 and 2004, respectively.
 **Note
        14 - Major customers and suppliers**
 
 The
          Company has 5 major customers which represent approximately 37% and 47%
          of the
          Company’s total sales for the years ended December 31, 2005 and 2004
          respectively. The Company did not have any one significant customer that
          represented more than 10% of the total sales for the year ended 2005 and
          2004.
 
 For
        the
        years ended December 31, 2005 and 2004, the Company purchases approximately
        85%
        and 86%, respectively, of their raw materials from four major suppliers.
 
 **Note
          15 - Minority interest**
 
 Minority
        interest represents the outside shareholders’ 30% interest in Tianjin
        Daqiuzhuang Metal Sheet Co., Ltd
 
 **Note
          16 - Other expenses and income, net**
 
 Other
        income and expense for the years ended December 31 consist of the
        following:
  2005
                
                2004
                
                2003Finance/interest
                    expense
                
                $
                (1,824,394
                )
                $
                (1,572,189
                )
                $
                (638,493
                )Interest
                    income
                
                
                230,103Other
                    nonoperating income
                
                
                12,494
                
                
                137,169Other
                    nonoperating expense
                
                
                (18,335
                )
                
                (181,357
                )
                
                (5,314
                )Total
                    other expense
                
                $
                (1,600,132
                )
                $
                (1,616,377
                )
                $
                (643,807
                )
 **Note
          17** **-** **Reclassifications**
 
 Certain
        amounts for the years ended December 31, 2004 and 2003 in the accompanying
        financial statements have been reclassified to conform to the 2005 presentation.
        These reclassifications have no effect on net income or cash flows.
  See
          report of independent registered public accounting firm.
 F-26
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
  NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
  **Note
          18 - Private offering of redeemable stock**
 
 The
          Company has offered an aggregate of 3,333,333 shares of Common Stock par
          value
          $0.001 in a private placement to investors at a purchase price of $1.50
          per
          share. On September 18, 2005, the Company entered into a subscription agreement
          with certain investors to sell a total of 1,176,665 shares of common stock
          at
          $1.50 per share. In addition, two warrants are attached to each share of
          common
          stock and each warrant gives the warrant holder the right to purchase an
          additional share of common stock or a total of 2,353,330 of common stock
          in the
          future. The warrants can be exercised on the second anniversary date at
          $2.50
          per share and on the third anniversary date at $5.00 per share. The number
          of
          shares attached to the warrants will be adjusted due to dividends and changes
          in
          the capital stock structure changes. At the option of the investors the
          Company
          maybe required to repurchase the 1,176,665 shares of common stock 18 months
          after the closing date at a per share price of $1.95.
  Under
            this private offering, the Company raised a total of $1,765,000 and received
            net
            proceeds of $1,606,150 net of $158,850 of commissions paid.
 
 In
            accordance with Accounting Principles Board Opinion No. 14, the Company
            determined the fair value of the detachable warrants issued with redeemable
            stock using the Black-Scholes option pricing model under the following
            assumptions: risk free interest rate of 3.85%, dividend yield of 0% and
            volatility of 11%. The estimated value of the warrants is zero
 
 In
            accordance with SFAS 150, the Company has recorded this stock issuance
            as a
            liability in the financial statements due to the mandatory redemption
            provision.
            The shares are recorded at fair market value on the date of issuance,
            which is
            the net cash proceeds, plus any accrued interest up to December 31, 2005.
            The
            difference between the net proceeds, $1,606,150, and the redemption amount,
            $2,294,497, which is $688,347, will be accrued and amortized as interest
            expense
            over an 18 month period beginning in October 2005 and ending in March
            2007. The
            following table reconciles the December 31, 2005 carrying amount as
            follows:
 Fair
                    market value on the date of issuance:
                
                $
                1,606,150Interest
                    accrued as of December 31, 2005
                
                
                114,725Balace
                    at December 31, 2005
                
                $
                1,720,875
 See
          report of independent registered public accounting firm.
  F-27
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
  As
            of
            December 31, 2005, $573,622 is the remaining amount left to be accrued
            and
            amortized through March 2007
  **Note
            19 - Retirement plan**
 
 Regulations
            in the People’s Republic of China require a foreign joint venture enterprise to
            contribute to a defined contribution retirement plan for all its employees.
            All
            Joint Venture employees are entitled to a retirement pension amount calculated
            based upon their salary at their date of retirement and their length
            of service
            in accordance with a government managed pension plan. The PRC government
            is
            responsible for the pension liability to the retired staff.
 
 **Note
            19 - Retirement plan, continued**
 
 The
            Company became a foreign joint venture entity in the year of 2004. For
            the year
            ended December 31, 2005, it was the first year the Company was required
            to make
            contributions to the state retirement plan at 20% of the employees’ monthly
            salary. Employees are required to contribute 7% of their salary to the
            plan.
            Total pension expense incurred by the Company amounted to $236,730, $0
            and $0
            for the years ended December 31, 2005, 2004 and 2003, respectively.
  **Note
            20- Statutory reserves**
 
 The
            laws
            and regulations of the People’s Republic of China require that before a
            Sino-foreign cooperative joint venture enterprise distributes profits
            to its
            partners, it must first satisfy all tax liabilities, provide for losses
            in
            previous years, and make allocations, in proportions determined at the
            discretion of the board of directors, after the statutory reserve. The
            statutory
            reserves include surplus reserve fund, common welfare fund, and the enterprise
            fund. Daqiuzhuang Metal, the Company's operating subsidiary in China,
            did not
            become a Sino Joint Venture until 2004; therefore, no reserve was made
            in
            2003.
 Surplus
        reserve fund
 
 The
        Company is required to transfer 10% of its net income, as determined in
        accordance with the PRC accounting rules and regulations, to a statutory
        surplus
        reserve fund until such reserve balance reaches 50% of the Company’s registered
        capital.
 See
          report of independent registered public accounting firm.
  F-28
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 The
            transfer to this reserve must be made before distribution of any dividend
            to
            shareholders. For the year ended December 31, 2005 and 2004, the Company
            transferred $457,306 and $154,794, representing 10% of the year’s net income
            determined in accordance with PRC accounting rules and regulations, to
            this
            reserve. The surplus reserve fund is non-distributable other than during
            liquidation and can be used to fund previous years’ losses, if any, and may be
            utilized for business expansion or converted into share capital by issuing
            new
            shares to existing shareholders in proportion to their shareholding or
            by
            increasing the par value of the shares currently held by them, provided
            that the
            remaining reserve balance after such issue is not less than 25% of the
            registered capital.
 Common
              welfare fund
 
 The
                Company could transfer 5% to 10% of its net income on a voluntary
                basis, as
                determined in accordance with the PRC accounting rules and regulations,
                to the
                statutory common welfare fund. For the year ended December 31, 2005,
                the Company
                transferred $228,653, representing 5% of the year’s net income determined in
                accordance with PRC accounting rules and regulations, to this reserve.
                This fund
                can only be utilized on capital items for the collective benefit
                of the
                Company’s employees, such as construction of dormitories, cafeteria facilities,
                and other staff welfare facilities. This fund is non-distributable
                other than
                upon liquidation. The transfer to this fund must be made before distribution
                of
                any dividend to
 shareholders. The
                new
                accounting rules and regulations have stopped all sino-foreign joint
                ventures
                from making transfers to the common welfare fund beginning January
                1,
                2006.
  **Note
          20- Statutory reserves, continued**
 
 Enterprise
        fund
 
 The
        enterprise fund may be used to acquire fixed assets or to increase the working
        capital to expend on production and operation of the business. No minimum
        contribution is required and the company did not make any contribution to
        this
        fund during 2005.
 **Note
            21 - Joint venture agreement with Baotou Steel**
 
 On
            September 28, 2005, General Steel, a wholly owned subsidiary of General
            Steel
            Holdings, Inc., entered into a certain Baotou-GSHI Special Steel Joint
            Venture
            Agreement (the "Agreement") with Daqiuzhuang Metal, and Baotou Iron and
            Steel
            (Group) Co., Ltd., a limited liability company formed under the laws
            of the
            People's Republic of China (the "Baotou Steel"). The name of the joint
            venture
            will be Baotou Steel-General Steel Special Steel Joint Venture Company
            Limited.
 See
          report of independent registered public accounting firm.
  F-29
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 The
        Joint
        Venture Company will be located at Kundulun District, Baotou City, Inner
        Mongolia, China. The stated purposes of the Joint Venture Company are, among
        others, to produce and sell special steel and to improve the product quality
        and
        the production capacity and competitiveness by adopting advanced technology
        in
        the production of steel products. The Joint Venture Company shall have a
        capacity of producing 600,000 of specialty steel products a year.
 
 The
        registered capital of the joint venture will be approximately $24,000,000.
        The
        products of the joint venture will be sold in the Chinese market and abroad.
        The
        ownership will be comprised of the following:
  %
                    OwnershipBaotou
                    Iron and Steel (Group) Co.,Ltd.
                
                
                49
                %General
                    Steel Investment Co., Ltd.
                
                
                31
                %Daqiuzhuang
                    Metal Sheet Co., Ltd
                
                
                20
                %
 Baotou
          Steel shall contribute land, existing equipment and materials at an estimated
          value of approximately $12,000,000 which will be contributed to the joint
          venture at the date of the approval of Joint Venture or issuance of the
          business
          license. The value of the assets to be contributed by Baotou Steel will
          be
          stated at fair market value. General Steel will contribute approximately
          $7,500,000 of cash and Daqiuzhuang Metal will contribute approximately
          $5,000,000 cash. These contributions will be required to be made on the
          following payment schedule 30% of their capital contribution within 30
          days of
          the date of approval of the Joint Venture; 30% of their capital contribution
          within 3 months of the date of approval of the Joint Venture; and 40% of
          their
          capital contribution within 6 months of the date of approval of the Joint
          Venture. The Company will use the consolidation method to account for the
          joint
          venture.
 
 These
          contributed assets will be used to commence a new operation. The joint
          venture
          will purchase a 100-tonne electric furnace and a refiner furnace to produce
          high
          quality specialty steel using advanced technology. This type of specialty
          steel
          has not been
  **Note
          21 - Joint venture agreement with Baotou Steel,
          continued**
 
 previously
            produced by Baotou Steel. This advanced technology has not been previously
            utilized by Baotou Steel. This new joint venture will aim to enter into
            a new
            market segment of high-end specialty steel.
 
 This
            contemplated transaction is not considered a business combination as
            defined
            under Article 11 of Regulation S-X. The revenue producing activity for
            the new
            entity will be different from that of the existing companies. New high-end
            special steel products will be produced and marketed to new customers.
            In order
            to produce these new products, the new entity will build new facilities
            on the
            land to be contributed by Baotou Steel. It will take some equipment to
            be
            contributed by Baotou Steel, which are to be substantially modified,
            and add a
            100-ton electric furnace and a refiner to create a new production line.
            A new
            sales force will be built to identify and target new customers. The new
            entity
            will not carry the names of either of its future
            owners.
 See
          report of independent registered public accounting firm.
  F-30
 GENERAL
          STEEL HOLDINGS, INC. AND SUBSIDIARIES
 (FORMERLY
          KNOWN AS AMERICAN CONSTRUCTION COMPANY)
 
 NOTES
          TO
          CONSOLIDATED FINANCIAL STATEMENTS
 This
            contemplated transaction is not considered as a business acquisition
            through a
            non-monetary exchange under EITF 98-3 because it does not meet the relevant
            definition thereunder. The assets to be contributed do not include systems,
            standards, protocols, conventions and rules that act to define the process
            necessary for normal, self-sustaining operations, such as (i) strategic
            management processes, (ii) operational processes, and (iii) resource
            management
            processes. The assets to be contributed do not include the ability to
            obtain
            access to the customers that purchase the outputs of the assets to be
            contributed. Additionally, while the newly formed entity will receive
            certain
            tangible assets, it will be a start-up company. It will need to attract
            and
            retain talent to install/modify/acquire equipment, manage operations,
            as well as
            to manufacture, market and sell products to newly identified customers.
            The
            assets to be contributed by Baotou Steel are insignificant compared to
            the total
            assets of Baotou Steel. Baotou Steel will continue to operate at its
            historical
            levels even assuming the consummation of the contemplated transactions.
            The
            respective future owners who will contribute certain assets to the new
            entity
            will continue to operate as separate entities. They will not reduce or
            transfer
            any of their respective workforces as a result of this transaction. They
            will
            continue to operate their existing businesses at their historical
            levels.
  As
            of
            December 31, 2005, the Company has not received the approval of the Baotou
            Steel
            Joint venture and it is still under government review and may be subject
            to
            further industry sector review by the relevant authorities in China in
            view of
            the sensitive nature of the steel industry. Currently none of the financials
            of
            Baotou Steel is incorporated into the Company’s financial statements as there
            does not exist any ownership or control relationship between the Company
            and
            Baotou Steel.
 See
          report of independent registered public accounting firm.
  F-31




**PART
      IV**





**ITEM
      15. Exhibits, Financial Statement Schedules.**


31.1
              
              Certification
                  of Chief Executive Officer;31.2
              
              Certification
                  of Chief Financial Officer;32.1
              
              Certification
                  of Chief Executive Officer; and32.2
              
              Certification
                  of Chief Financial Officer.




SIGNATURES





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act
      of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.


GENERAL
              STEEL
              HOLDINGS, INCBy:
            /s/
              Zuo
              Sheng YuName:
              Zuo Sheng YuTitle: Chief Executive Officer and
              PresidentDate:
              February 12, 2007  Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in
      the
      capacities and on the dates indicated.


**SIGNATURE**
              
              **TITLE**
              
              **DATE**/s/
                  Zuo Sheng Yu
              
              President
                  and Chief Executive Officer
              
              February
                  12, 2007YU,
                  Zuo Sheng/S/
                  Chen Jon
              
              Director
                  and Chief Financial Officer
              
              February
                  12, 2007CHEN,
                  John/S/
                  ZHAO Sheng Guo
              
              Director
                  and Chief Engineer
              
              February
                  12, 2007ZHAO,
                  Sheng Guo/s/
                  Tian Lian Hui
              
              Director
              
              February
                  12, 2007TIAN,
                  Lian Hui/s/
                  Warner Ross
              
              Director
              
              February
                  12, 2007WARNER,
                  Ross/s/
                  Wong John
              
              Director
              
              February
                  12, 2007WONG,
                  John