----

----

| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|--------|-----------------------------------------------------------------------------------------|

| o | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------|

| Nevada                                                              | 26-0491904                           |
|---------------------------------------------------------------------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |

| One Waters Park Drive, Suite 98, San Mateo, CA | 94403      |
|------------------------------------------------|------------|
| (Address of principal executive offices)       | (Zip Code) |

| Large accelerated filer                                          | [ ] | Accelerated filer         | [ ] |
|------------------------------------------------------------------|-----|---------------------------|-----|
| Non-accelerated filer(Do not check if smaller reporting company) | [ ] | Smaller reporting company | [X] |

----

|                                |                                                                                   | Page No.  |
|-------------------------------------|----------------------------------------------------------------------------------------|-----------|
| PART I - FINANCIAL INFORMATION |
|                                |                                                                                   |   1  |
| Item 1.                             | Financial Statements.                                                                  |   28 |
| Item 2.                             | Management's Discussion and Analysis of Financial Condition and Results of Operations. |   34 |
| Item 3.                             | Quantitative and Qualitative Disclosures About Market Risk.                            |   35 |
| Item 4T.                            | Controls and Procedures.                                                               |      |
|                                |
|   PART II - OTHER INFORMATION  |
| Item 1.                             | Legal Proceedings.                                                                     |   35 |
| Item 1A.                            | Risk Factors.                                                                          |   35 |
| Item 2.                             | Unregistered Sales of Equity Securities and Use of Proceeds.                           |   35 |
| Item 3.                             | Defaults Upon Senior Securities.                                                       |   35 |
| Item 4.                             | (Removed and Reserved).                                                                |   35 |
| Item 5.                             | Other Information.                                                                     |   35 |
| Item 6.                             | Exhibits.                                                                              |   36 |

----

|   | – |   | “China Armco Metals”, “we”, “us” or “our” refers to China Armco Metals, Inc., a Nevada corporation, and our subsidiaries,                                                     |
|--------|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |    |   |                                                                                                                                                                                                                          |
|   | – |   | “Armco” refers to Armco & Metawise (H.K), Ltd., a limited liability company established under the laws of Hong Kong.                                                                                          |
|   |    |   |                                                                                                                                                                                                                          |
|   | – |   | “Armet” refers to Armet (Lianyungang) Renewable Resources Co., Ltd. (a/k/a Armet (Lianyungang) Scraps Co., Ltd.), a limited liability company established under the laws of the People’s Republic of China. |
|   |    |   |                                                                                                                                                                                                                          |
|   | – |   | “Henan Armco” refers to Henan Armco & Metawise Trading Co., Ltd., a limited liability company established under the laws of the People’s Republic of China.                                             |
|   |    |   |                                                                                                                                                                                                                          |
|   | – |   | “Lianyungang Armco” refers to Armco (Lianyungang) Holdings, Ltd., a wholly-owned foreign enterprise and limited liability company established under the laws of the People’s Republic of China.             |

----

| Item 1. | Financial Statements. |
|---------|-----------------------|

| Contents                                                                                                                             |   | Page No. |
|--------------------------------------------------------------------------------------------------------------------------------------|--------|----------|
| Consolidated Balance Sheets at March 31, 2010 (Unaudited) and December 31, 2009                                                      |   |   2 |
|                                                                                                                                 |   |     |
| Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three Months Ended March 31, 2010 and 2009 (Unaudited) |   |   3 |
|                                                                                                                                 |   |     |
| Consolidated Statement of Stockholders’ Equity for the Three Months Ended March 31, 2010 (Unaudited)                           |   |   4 |
|                                                                                                                                 |   |     |
| Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009 (Unaudited)                                 |   |   5 |
|                                                                                                                                 |   |     |
| Notes to the Consolidated Financial Statements (Unaudited)                                                                           |   |   6 |
|                                                                                                                                 |   |     |

----

|                                                                                                                                       |   | March 31, 2010 |                                                                                                                                                                                        |    | December 31, 2009 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|-------------------|--------|
|                                                                                                                                       |   | (Unaudited)    |                                                                                                                                                                                        |    |              |   |   |
|  ASSETS                                                                                                                               |   |           |                                                                                                                                                                                        |    |              |   |   |   |
|  CURRENT ASSETS:                                                                                                                      |   |           |                                                                                                                                                                                        |    |              |   |   |   |
|    Cash                                                                                                                          |   | $              |                 4,125,091                                                                                   |    |              | $      |                    743,810 |   |
|    Pledged deposits                                                                                                              |   |           |                    214,768                                                                   |    |              |   |                    779,169 |   |
|    Accounts receivable, net                                                                                                      |   |           |               13,406,561                                                                                              |    |              |   |               28,390,528 |   |
|    Inventories                                                                                                                   |   |           |                      37,854                                                        |    |              |   |                    496,149 |   |
|    Advance on purchases                                                                                                          |   |           |                 3,481,847                                                                                   |    |              |   |                 3,903,782 |   |
|    Prepayments and other current assets                                                                                          |   |           |                 6,017,816                                                                                   |    |              |   |                 3,513,538 |   |
|      Total Current Assets                                                                                         |   |           |               27,283,937                                                                                              |    |              |   |               37,826,976 |   |
|                                                                                                                                       |   |           |                                                                                                                                                                                        |    |              |   |   |   |
|  PROPERTY, PLANT AND EQUIPMENT, net                                                                                                   |   |           |               25,157,851                                                                                              |    |              |   |               19,642,861 |   |
|                                                                                                                                       |   |           |                                                                                                                                                                                        |    |              |   |   |   |
|  LAND USE RIGHTS, net                                                                                                                 |   |           |                 2,147,100                                                                                   |    |              |   |                 2,158,234 |   |
|      Total Assets                                                                                                 |   | $              |               54,588,888                                                                                              |    |              | $      |               59,628,071 |   |
|                                                                                                                                       |   |           |                                                                                                                                                                                        |    |              |   |   |   |
|  LIABILITIES AND STOCKHOLDERS' EQUITY                                                                                                 |   |           |                                                                                                                                                                                        |    |              |   |   |   |
|  CURRENT LIABILITIES:                                                                                                                 |   |           |                                                                                                                                                                                        |    |              |   |   |   |
|    Loans payable                                                                                                                 |   | $              |                                - |    |              | $      |               17,021,558 |   |
|    Current maturities of long-term debt                                                                                          |   |           |                 2,194,234                                                                                   |    |              |   |                 2,193,881 |   |
|    Accounts payable                                                                                                              |   |           |                 7,489,100                                                                                   |    |              |   |                 6,841,584 |   |
|    Advances from stockholder                                                                                                     |   |           |                 1,870,851                                                                                   |    |              |   |                      35,475 |   |
|    Customer deposits                                                                                                             |   |           |                 2,921,101                                                                                   |    |              |   |                 2,453,098 |   |
|    Corporate income tax payable                                                                                                  |   |           |                 2,110,849                                                                                   |    |              |   |                 1,990,277 |   |
|    Value added tax and other taxes payable                                                                                       |   |           |                    345,862                                                                   |    |              |   |                 1,312,455 |   |
|    Accrued expenses and other current liabilities                                                                                |   |           |                 1,905,838                                                                                   |    |              |   |                    654,756 |   |
|      Total Current Liabilities                                                                                    |   |           |               18,837,835                                                                                              |    |              |   |               32,503,084 |   |
|                                                                                                                                       |   |           |                                                                                                                                                                                        |    |              |   |   |   |
|  LONG-TERM DEBT                                                                                                                       |   |           |                 8,045,523                                                                                   |    |              |   |                 6,581,641 |   |
|                                                                                                                                       |   |           |                                                                                                                                                                                        |    |              |   |   |   |
|  DERIVATIVE LIABILITY                                                                                                                 |   |           |                572,396                                                                                           |    |              |   |                 3,417,974 |   |
|     Total Liabilities                                                                                                  |   |           |               27,455,754                                                                                              |    |              |   |               42,502,699 |   |
|                                                                                                                                       |   |           |                                                                                                                                                                                        |    |              |   |   |   |
|  COMMITMENTS AND CONTINGENCIES                                                                                                        |   |           |                                                                                                                                                                                        |    |              |   |   |   |
|                                                                                                                                       |   |           |                                                                                                                                                                                        |    |              |   |   |   |
|  STOCKHOLDERS' EQUITY:                                                                                                                |   |           |                                                                                                                                                                                        |    |              |   |   |   |
|   Preferred stock, $0.001 par value; 1,000,000 shares authorized; none issued or outstanding                                          |   |           |                                - |    |              |   |                                - |   |
|   Common stock, $0.001 par value, 74,000,000 shares authorized, 11,793,262 and 10,310,699 shares issued and outstanding, respectively |   |           | 11,793                                                                                                                                                                                      |    |              |   | 10,310 |   |
|    Additional paid-in capital                                                                                                    |   |           |               13,017,568                                                                                              |    |              |   |                 2,556,966 |   |
|    Deferred compensation                                                                                                         |   |           |               (1,180,108                                                                                              | )  |              |   |                  (676,500 | )  |
|    Retained earnings                                                                                                             |   |           |               14,990,139                                                                                              |    |              |   |               14,936,915 |   |
|    Accumulated other comprehensive income:                                                                                       |   |           |                                                                                                                                                                                        |    |              |   |   |   |
|    Foreign currency translation gain                                                                                             |   |           |                    293,742                                                                   |    |              |   |                    297,681 |   |
|    Total Stockholders' Equity                                                                                                    |   |           |               27,133,134                                                                                              |    |              |   |               17,125,372 |   |
|    Total Liabilities and Stockholders' Equity                                                                                    |   | $              |               54,588,888                                                                                              |    |              | $      |               59,628,071 |   |

----

|                                                                                      |   | For the Three Months Ended |                                                                                                                                            |   | For the Three Months Ended |    |
|-------------------------------------------------------------------------------------------|--------|----------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|---------|
|                                                                                      |   | March 31, 2010             |                                                                                                                                            |   | March 31, 2009             |    |
|                                                                                      |   | (Unaudited)                |                                                                                                                                            |   | (Unaudited)                |    |
|                                                                                      |   |                       |                                                                                                                                            |   |                       |    |   |   |
|  NET REVENUES                                                                        |   |  $                    |               8,576,570                                                   |   |                       |  $ |               5,357,858 |   |
|  COST OF GOODS SOLD                                                                  |   |                       |               8,017,651                                                   |   |                       |    |               4,847,235 |   |
|  GROSS PROFIT                                                                        |   |                       |                  558,919                                   |   |                       |    |                  510,623 |   |
|                                                                                      |   |                       |                                                                                                                                            |   |                       |    |   |   |
|  OPERATING EXPENSES:                                                                 |   |                       |                                                                                                                                            |   |                       |    |   |   |
|      Selling expenses                                            |   |                       |                  342,705                                   |   |                       |    |                    27,293 |   |
|      General and administrative expenses                         |   |                       |                  570,872                                   |   |                       |    |                  306,641 |   |
|      Total operating expenses                                    |   |                       |                  913,577                                   |   |                       |    |                  333,934 |   |
|  INCOME (LOSS) FROM OPERATIONS                                                       |   |                       |                 (354,658)                                       |   |                       |    |                  176,689 |   |
|                                                                                      |   |                       |                                                                                                                                            |   |                       |    |   |   |
|  OTHER (INCOME) EXPENSE:                                                             |   |                       |                                                                                                                                            |   |                       |    |   |   |
|      Interest income                                             |   |                       |                        (225) |   |                       |    |                              - |   |
|      Interest expense                                            |   |                       |                    85,115                        |   |                       |    |                    18,036 |   |
|      Gain from vendor price adjustment                           |   |                       |                 (963,259)                                       |   |                       |    |                              - |   |
|      Loss (gain) on change in fair value of derivative liability |   |                       |             321,754                                                                 |   |                       |    |                 (169,826) |   |
|      Other (income) expense                                      |   |                       |                      2,400             |   |                       |    |                    30,227 |   |
|      Total other (income) expense                                |   |                       |               (554,215)                                                   |   |                       |    |                 (121,563) |   |
|                                                                                      |   |                       |                                                                                                                                            |   |                       |    |   |   |
|  INCOME (LOSS) BEFORE INCOME TAXES                                                   |   |                       |             199,557                                                                 |   |                       |    |                  298,252 |   |
|                                                                                      |   |                       |                                                                                                                                            |   |                       |    |   |   |
|  INCOME TAXES                                                                        |   |                       |                  146,333                                   |   |                       |    |                         790 |   |
|                                                                                      |   |                       |                                                                                                                                            |   |                       |    |   |   |
|  NET INCOME (LOSS)                                                                   |   |                       |         53,224                                                                                          |   |                       |    |                  297,462 |   |
|                                                                                      |   |                       |                                                                                                                                            |   |                       |    |   |   |
|  OTHER COMPREHENSIVE INCOME:                                                         |   |                       |                                                                                                                                            |   |                       |    |   |   |
|  Foreign currency translation gain (loss)                                            |   |                       |                     (3,939)                 |   |                       |    |                   (26,445) |   |
|                                                                                      |   |                       |                                                                                                                                            |   |                       |    |   |   |
|  COMPREHENSIVE INCOME (LOSS)                                                         |   |  $                    |             49,285                                                                  |   |                       |  $ |                  271,017 |   |
|                                                                                      |   |                       |                                                                                                                                            |   |                       |    |   |   |
|  NET INCOME (LOSS) PER COMMON SHARE - BASIC AND DILUTED:                             |   |                       |                                                                                                                                            |   |                       |    |   |   |
|  Basic earnings (loss) per share                                                     |   |  $                    |                      0.01              |   |                       |  $ |                        0.03 |   |
|  Diluted earnings (loss) per share                                                   |   |  $                    |                       0.00        |   |                       |  $ |                        0.03 |   |
|                                                                                      |   |                       |                                                                                                                                            |   |                       |    |   |   |
|  Weighted Average Common Shares Outstanding - basic                                  |   |                       |             10,571,611                                                              |   |                       |    |             10,095,616 |   |
|  Weighted Average Common Shares Outstanding - diluted                                |   |                       |             12,082,551                                                              |   |                       |    |             10,095,616 |   |

----

| For the Three Months Ended March 31, 2010                                                                                                                                           |                           |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|
| (Unaudited)                                                                                                                                                                         |                           |
|                                                                                                                                                                                | Common Stock, $0.001 Par Value |   |   |   |   |   |   |   | Accumulated Other Comprehensive Income |   |   |   |
|                                                                                                                                                                                | Number of Shares               |   | Amount |   | Additional Paid-in Capital |   | Deferred Compensation |   | Retained Earnings |   | Foreign Currency Translation Gain |   | Total Stockholders' Equity |   |
|  Balance, December 31, 2008                                                                                                                                                    |                           | 10,092,449 |   | $ | 10,092 |   |   | 6,942,588 |   | $ | - |   | $ | 7,967,064 |   | $ | 369,202 |   |   | 15,288,946 |   |
| The cumulative adjustment from the warrants derivative liability at January 1, 2009 upon adoption ofFASB ASC 815-40-15 (formerly "EITF 07-5")                                  |                           |   |   |   |   |   |   | (5,097,404 | ) |   |   |   |   | 1,845,455 |   |   |   |   |   | (3,251,949 | ) |
| Issuance of common stock upon exercise of warrants to purchase 5,000 shares at $5.00 per share on January 30, 2009                                                             |                           | 5,000 |   |   | 5 |   |   | 24,995 |   |   |   |   |   |   |   |   |   |   |   | 25,000 |   |
| Issuance of common stock to Hayden Communications IR serviecs at $1.50 per share on May 7, 2009                                                                                |                           | 7,000 |   |   | 7 |   |   | 10,493 |   |   |   |   |   |   |   |   |   |   |   | 10,500 |   |
| Issuance of restricted stock to CEO and Director pursuantto 2009 Stock Incentive Plan fo future services valued at $3.28 per share granted on October 26, 2009                 |                           | 206,250 |   |   | 206 |   |   | 676,294 |   |   | (676,500 | ) |   |   |   |   |   |   |   | - |   |
|  Comprehensive income                                                                                                                                                          |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Net income                                                                                                                                                                    |                           |   |   |   |   |   |   |   |   |   |   |   |   | 5,124,396 |   |   |   |   |   | 5,124,396 |   |
|  Foreign currency translation loss                                                                                                                                             |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (71,521 | ) |   | (71,521 | ) |
|  Total comprehensive income                                                                                                                                                    |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 5,052,875 |   |
|  Balance, December 31, 2009                                                                                                                                                    |                           | 10,310,699 |   |   | 10,310 |   |   | 2,556,966 |   |   | (676,500 | ) |   | 14,936,915 |   |   | 297,681 |   |   | 17,125,372 |   |
| Issuance of common stock upon exercise of warrants to purchase 1,324,346 common shares at $5.00 per share for the three-month period ending March 31, 2010                     |                           | 1,324,346 |   |   | 1,325 |   |   | 6,620,405 |   |   |   |   |   |   |   |   |   |   |   | 6,621,730 |   |
| Issuance of 78,217 common shares upon cashless exerciseof warrants to purchase 167,740 common shares at $5.00 per share for the three-month period ending March 31, 2010       |                           | 78,217 |   |   | 78 |   |   | (78 | ) |   |   |   |   |   |   |   |   |   |   | - |   |
|  Extinguishment of derivative liability associated with the exercise of warrants to purchase common stock                                                                      |                           |   |   |   |   |   |   | 1,875,026 |   |   |   |   |   |   |   |   |   |   |   | 1,875,026 |   |
|  Reclassification of derivative liability to addtional paid-in capital associated with the waiver of anti-dilution provisions of warrants to purchase 1, 031,715 common shares |                           |   |   |   |   |   |   | 1,292,227 |   |   |   |   |   |   |   |   |   |   |   | 1,292,227 |   |
| Issuance of common stock to China Direct Industries, Inc.  for consulting services                                                                                             |                           | 80,000 |   |   | 80 |   |   | 673,022 |   |   | (563,400 | ) |   |   |   |   |   |   |   | 109,702 |   |
|  Amortization of deferred compensation                                                                                                                                         |                           |   |   |   |   |   |   |   |   |   | 59,792 |   |   |   |   |   |   |   |   | 59,792 |   |
|  Comprehensive income (loss)                                                                                                                                                   |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
|  Net income                                                                                                                                                                    |                           |   |   |   |   |   |   |   |   |   |   |   |   | 53,224 |   |   |   |   |   | 53,224 |   |
|  Foreign currency translation loss                                                                                                                                             |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | (3,939 | ) |   | (3,939 | ) |
|  Total comprehensive income (loss)                                                                                                                                             |                           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   | 49,285 |   |
|  Balance, March 31, 2010                                                                                                                                                       |                           | 11,793,262 |   | $ | 11,793 |   | $ | 13,017,568 |   | $ | (1,180,108 | ) | $ | 14,990,139 |   | $ | 293,742 |   | $ | 27,133,134 |   |

----

|                                                                         |   |                       |                                                                                                                                                                                                                            |   |                       |   |                                                                                                                                                                                                                            |   |
|------------------------------------------------------------------------------|--------|----------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                         |   |                       |                                                                                                                                                                                                                            |   |                       |   |
|                                                                         |   | For the Three Months Ended |                                                                                                                                                                                                                            |   | For the Three Months Ended |   |
|                                                                         |   | March 31, 2010             |                                                                                                                                                                                                                            |   | March 31, 2009             |   |
|                                                                         |   | (Unaudited)                |                                                                                                                                                                                                                            |   | (Unaudited)                |   |
|                                                                         |   |                       |                                                                                                                                                                                                                            |   |                       |   |                                                                                                                                                                                                                            |   |
|  CASH FLOWS FROM OPERATING ACTIVITIES:                                  |   |                       |                                                                                                                                                                                                                            |   |                       |   |                                                                                                                                                                                                                            |   |
|  Net income (loss)                                                      |   | $                          |                      (1,605,631)                                                                                       |   |                       | $      |                           297,462                                                             |   |
|  Adjustments to reconcile net income (loss) to net cash                 |   |                       |                                                                                                                                                                                                                            |   |                       |   |                                                                                                                                                                                                                            |   |
|      provided by (used in) operating activities          |   |                       |                                                                                                                                                                                                                            |   |                       |   |                                                                                                                                                                                                                            |   |
|      Depreciation expense                                |   |                       |                             24,415                                                  |   |                       |   |                             18,033                                                  |   |
|      Amortization expense                                |   |                       |                             11,482                                                  |   |                       |   |                             39,648                                                  |   |
|      Change in fair value of derivative liability        |   |                       |                        1,980,609                                                                             |   |                       |   |                         (169,826)                                                                       |   |
|      Stock based compensation                       |   |                       |                           169,494                                                             |   |                       |   |                                      - |   |
|      Changes in operating assets and liabilities:   |   |                       |                                                                                                                                                                                                                            |   |                       |   |                                                                                                                                                                                                                            |   |
|      Accounts receivable                            |   |                       |                      14,986,098                                                                                        |   |                       |   |                        1,907,901                                                                             |   |
|      Inventories                                    |   |                       |                           458,375                                                             |   |                       |   |                      (1,623,282)                                                                                       |   |
|      Advance on purchases                           |   |                       |                           422,443                                                             |   |                       |   |                           352,071                                                             |   |
|      Prepayments and other current assets           |   |                       |                      (2,503,657)                                                                                       |   |                       |   |                             82,565                                                  |   |
|      Accounts payable                               |   |                       |                           640,907                                                             |   |                       |   |                        5,274,564                                                                             |   |
|      Customer deposits                              |   |                       |                           467,609                                                             |   |                       |   |                         (521,128)                                                                       |   |
|      Taxes payable                                  |   |                       |                         (846,233)                                                                       |   |                       |   |                         (263,217)                                                                       |   |
|      Accrued expenses and other current liabilities |   |                       |                        1,256,788                                                                             |   |                       |   |                         (244,474)                                                                       |   |
|  NET CASH PROVIDED BY OPERATING ACTIVITIES                              |   |                       |                      15,462,699                                                                                        |   |                       |   |                        5,150,317                                                                             |   |
|                                                                         |   |                       |                                                                                                                                                                                                                            |   |                       |   |                                                                                                                                                                                                                            |   |
|  CASH FLOWS FROM INVESTING ACTIVITIES:                                  |   |                       |                                                                                                                                                                                                                            |   |                       |   |                                                                                                                                                                                                                            |   |
|      Proceeds from release of pledged deposits           |   |                       |                           564,495                                                             |   |                       |   |                                      - |   |
|      Payment made towards pledged deposits               |   |                       |                                      - |   |                       |   |                      (2,943,372)                                                                                       |   |
|      Purchases of property and equipment                 |   |                       |                      (5,536,245)                                                                                       |   |                       |   |                      (1,065,260)                                                                                       |   |
|  NET CASH USED IN INVESTING ACTIVITIES                                  |   |                       |                      (4,971,750)                                                                                       |   |                       |   |                      (4,008,632)                                                                                       |   |
|                                                                         |   |                       |                                                                                                                                                                                                                            |   |                       |   |                                                                                                                                                                                                                            |   |
|  CASH FLOWS FROM FINANCING ACTIVITIES:                                  |   |                       |                                                                                                                                                                                                                            |   |                       |   |                                                                                                                                                                                                                            |   |
|      Repayment of loans payable                          |   |                       |                    (17,022,321)                                                                                                  |   |                       |   |                                      - |   |
|      Proceeds from long-term debt                        |   |                       |                        1,462,822                                                                             |   |                       |   |                      (2,914,345)                                                                                       |   |
|      Amounts received from (paid to) related parties     |   |                       |                        1,835,137                                                                             |   |                       |   |                         (196,973)                                                                       |   |
|      Exercise of warrants                                |   |                       |                        6,621,652                                                                             |   |                       |   |                             25,000                                                  |   |
|  NET CASH USED IN FINANCING ACTIVITIES                                  |   |                       |                      (7,102,710)                                                                                       |   |                       |   |                      (3,086,318)                                                                                       |   |
|                                                                         |   |                       |                                                                                                                                                                                                                            |   |                       |   |                                                                                                                                                                                                                            |   |
|  EFFECT OF EXCHANGE RATE CHANGES ON CASH                                |   |                       |                             (6,958)                                                 |   |                       |   |                               5,693                                       |   |
|  NET CHANGE IN CASH                                                     |   |                       |                        3,381,281                                                                             |   |                       |   |                      (1,938,940)                                                                                       |   |
|  Cash at beginning of period                                            |   |                       |                           743,810                                                             |   |                       |   |                        3,253,563                                                                             |   |
|  Cash at end of period                                                  |   | $                          |                        4,125,091                                                                             |   |                       | $      |                        1,314,623                                                                             |   |
|                                                                         |   |                       |                                                                                                                                                                                                                            |   |                       |   |                                                                                                                                                                                                                            |   |
|  SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:                     |   |                       |                                                                                                                                                                                                                            |   |                       |   |                                                                                                                                                                                                                            |   |
|      Interest paid                                       |   | $                          |                           338,133                                                             |   |                       | $      |                             18,036                                                  |   |
|      Taxes paid                                          |   | $                          |                           974,865                                                             |   |                       | $      |                                      - |   |

----

----

----

----

|    |   |                                                                                                                                                        |
|---------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Level 1 |   | Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.                                              |
|    |   |                                                                                                                                                        |
| Level 2 |   | Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. |
|    |   |                                                                                                                                                        |
| Level 3 |   | Pricing inputs that are generally observable inputs and not corroborated by market data.                                                                    |

----

----

|                        |   |          |   |   |
|-----------------------------|--------|---------------|--------|--------|
| Date of Grant               |   | June 27, 2008 |   |
| Expected option life (year) |   |          | 2.00   |   |
| Expected volatility         |   |          | 0.00%  |   |
| Risk-free interest rate     |   |          | 2.65%  |   |
| Dividend yield              |   |          | 0.00%  |   |

|  | The Company uses historical data to estimate employee termination behavior.  The expected life of options granted is derived from paragraph 718-10-S99-1 of the FASB Accounting Standards Codification and represents the period of time the options are expected to be outstanding. |
|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | The expected volatility is based on a combination of the historical volatility of the comparable companies’ stock over the contractual life of the options. |
|----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods within the contractual life of the option. |
|----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

|  | The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the contractual life of the option. |
|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|                                         |   |           |   |              |   |           |   |              |   |   |   |   |
|----------------------------------------------|--------|----------------|--------|-------------------|--------|----------------|--------|-------------------|--------|--------|--------|--------|
|                                         |   | March 31, 2010 |   | December 31, 2009 |   | March 31, 2009 |   | December 31, 2008 |   |
| Balance sheet                                |   | 6.8361         |   |              | 6.8372 |           |   | 6.8456            |   |   | 6.8225 |   |
|                                         |   |           |   |              |   |           |   |              |   |   |   |   |
| Statement of income and comprehensive income |   | 6.8360         |   |              |   |           |   | 6.8466            |   |   |   |   |

----

|                                                                            |   | Three Months ended |                                                             |
|---------------------------------------------------------------------------------|--------|--------------------|------------------------------------------------------------------|
|                                                                            |   | March 31,          |                                                             |
|                                                                            |   | 2010               |                                                             |   | 2009 |   |
| Numerator:                                                                      |   |               |                                                             |   |   |   |
| Net income (loss) applicable to common stockholders (A)                         |   | $                  | 53,224                                                           |   |   | $ | 297,462 |   |
|                                                                            |   |               |                                                             |   |   |   |   |   |
| Denominator:                                                                    |   |               |                                                             |   |   |   |   |   |
| Denominator for basic earnings per share                                        |   |               |                                                             |   |   |   |   |   |
|     Weighted average shares outstanding (B)                 |   |               |          10,571,611 |   |   |   |           10,095,616 |   |
| Denominator for diluted earnings per share                                      |   |               |                                                             |   |   |   |   |   |
| Treasury Stock method                                                           |   |               |                                                             |   |   |   |   |   |
|     Stock purchase warrants: 1,231,828 exercisable at $5.00 |   |               | 655.925                                                          |   |   |   | - |   |
|     Stock options: 2,000,000 exercisable at $5.00           |   |               | 1,064,963                                                        |   |   |   | - |   |
|                                                                            |   |               |                                                             |   |   |   |   |   |
|     Adjusted weighted average shares outstanding (C)        |   |               | 12,082,551                                                       |   |   |   | 10,095,616 |   |
|                                                                            |   |               |                                                             |   |   |   |   |   |
| Basic and Diluted (Loss) Earnings Per Common Share:                             |   |               |                                                             |   |   |   |   |   |
|     Earnings per share- basic (A)/(B)                       |   | $                  | 0.01                                                             |   |   | $ | 0.03 |   |
|     Earnings per share- diluted (A)/(C)                     |   | $                  | 0.00                                                             |   |   | $ | 0.03 |   |

|                                                                                                           |   |                                                               |   |                                        |      |   |
|----------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|--------|---------------------------------------------|-----------|--------|
|                                                                                                           |   | Weighted Average Number of Potentially Outstanding Dilutive Shares |   |
|                                                                                                           |   | For the Interim Period Ended March 31, 2010                        |   | For the Interim Period Ended March 31, 2009 |      |
| Stock options issued on June 27, 2008 in connection with the acquisition of Armco & Metawise (H.K) Limited |   | -                                                                  |   |                                        | 2,000,000 |   |
| Warrants issued on August 1, 2008 in connection with the Company’s August 1, 2008 equity financing       |   | -                                                                  |   |                                        | 2,728,913 |   |
|                                                                                                           |   |                                                               |   |                                        |      |   |
| Total potentially outstanding dilutive shares                                                                  |   | -                                                                  |   |                                        | 4,728,913 |   |

----

|   | Recently issued accounting pronouncements |
|--------|-------------------------------------------|

|  | Of management’s responsibility for establishing and maintaining adequate internal control over its financial reporting; |
|----------|-------------------------------------------------------------------------------------------------------------------------------|

|  | Of management’s assessment of the effectiveness of its internal control over financial reporting as of year end; and |
|----------|----------------------------------------------------------------------------------------------------------------------------|

|  | Of the framework used by management to evaluate the effectiveness of the Company’s internal control over financial reporting. |
|----------|-------------------------------------------------------------------------------------------------------------------------------------|

|              |   |           |    |   |              |   |    |   |
|-------------------|--------|----------------|---------|--------|-------------------|--------|---------|--------|
|              |   | March 31, 2010 |    |   | December 31, 2009 |   |
| Letters of credit |   | $              | 82,830  | *      |              | $      | 194,700 |   |
| Henan Armco       |   |           |    |   |              |   |    |   |
| Letters of credit |   |           | 131,938 |   |              |   | 584,469 |   |
|              |   |           |    |   |              |   |    |   |
|              |   | $              | 214,768 |   |              | $      | 779,169 |   |
|              |   |           |    |   |              |   |

----

|            |   |           |   |   |              |   |    |   |
|-----------------|--------|----------------|--------|--------|-------------------|--------|---------|--------|
|            |   | March 31, 2010 |   |   | December 31, 2009 |   |
| Goods purchased |   | $              | 37,854 |   |              | $      | 496,149 |   |
|            |   |           |   |   |              |   |    |   |
|            |   | $              | 37,854 |   |              | $      | 496,149 |   |

|                                 | Estimated Useful Life (Years) |   | March 31, 2010 |       |   | December 31, 2009 |   |
|--------------------------------------|-------------------------------|--------|----------------|------------|--------|-------------------|--------|
| Buildings and leasehold improvements | 20                            |   | $              | 493,840    |   |              | $      | 393,418 |   |
| Construction in progress (i)         |                          |   |           | 24,301,195 |   |              |   | 18,994,767 |   |
| Machinery and equipment              | 7                             |   |           | 46,135     |   |              |   | 18,376 |   |
| Vehicles                             | 5                             |   |           | 370,799    |   |              |   | 291,787 |   |
| Office equipment                     | 5-8                           |   |           | 105,351    |   |              |   | 80,965 |   |
|                                 |                          |   |           | 25,317,320 |   |              |   | 19,779,313 |   |
| Less accumulated depreciation (ii)   |                          |   |           | (159,469   | )      |              |   | (136,452 | ) |
|                                 |                          |   | $              | 25,157,851 |   |              | $      | 19,642,861 |   |

----

|                     |   |           |      |   |              |   |      |   |
|--------------------------|--------|----------------|-----------|--------|-------------------|--------|-----------|--------|
|                     |   | March 31, 2010 |      |   | December 31, 2009 |   |
| Land use right           |   | $              | 2,261,568 |   |              | $      | 2,261,204 |   |
| Accumulated amortization |   |           | (114,468  | )      |              |   | (102,970  | )      |
|                     |   | $              | 2,147,100 |   |              | $      | 2,158,234 |   |

|                                                                                                                                                                                                                                                                           |   | March 31, 2010 |   |   | December 31, 2009 |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|--------|--------|-------------------|--------|
| Armco & Metawise                                                                                                                                                                                                                                                           |   |           |   |   |              |   |   |   |
|                                                                                                                                                                                                                                                                           |   |           |   |   |              |   |   |   |
| Loan payable to a financial institution, collateralized by certain of the Company’s inventory, guaranteed by the Company’s Chairman and Chief Executive Officer, with interest at 3.30% per annum payable monthly, with principal due and paid on February 4, 2010 |   |           | -      |   |              |   | 12,277,218 |   |
|                                                                                                                                                                                                                                                                           |   |           |   |   |              |   |   |   |
| Henan Armco                                                                                                                                                                                                                                                                    |   |           |   |   |              |   |   |   |
|                                                                                                                                                                                                                                                                           |   |           |   |   |              |   |   |   |
| Loan payable to an individual, non-interest bearing, with principal due on demand                                                                                                                                                                                              |   |           | -      |   |              |   | 146,259 |   |
|                                                                                                                                                                                                                                                                           |   |           |   |   |              |   |   |   |
| Loan payable to a financial institution, collateralized by certain of the Company’s inventory, with interest at 6.30% per annum payable monthly, with principal due and paid as of March 24, 2010.                                                                       |   |           | -      |   |              |   | 4,598,081 |   |
|                                                                                                                                                                                                                                                                           |   |           |   |   |              |   |   |   |
|                                                                                                                                                                                                                                                                           |   | $              | -      |   |              | $      | 17,021,558 |   |

----

|                                                            |   |           |      |   |              |   |   |   |
|-----------------------------------------------------------------|--------|----------------|-----------|--------|-------------------|--------|--------|--------|
|                                                            |   | March 31, 2010 |      |   | December 31, 2009 |   |
| Advances from chairman, chief executive officer and stockholder |   | $              | 1,870,851 |   |              | $      | 35,475 |   |
|                                                            |   |           |      |   |              |   |   |   |
|                                                            |   | $              | 1,870,851 |   |              | $      | 35,475 |   |

|                                                                                                                                                                                                                                                                                                                                                          |   |           |       |   |              |   |       |   |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|------------|--------|-------------------|--------|------------|--------|
|                                                                                                                                                                                                                                                                                                                                                          |   | March 31, 2010 |       |   | December 31, 2009 |   |
| Armet                                                                                                                                                                                                                                                                                                                                                         |   |           |       |   |              |   |       |   |
|                                                                                                                                                                                                                                                                                                                                                          |   |           |       |   |              |   |       |   |
| Long-term debt due to a financial institution, collateralized by all of Armet’s building, equipment and land use right, with interest at 5.40% per annum payable monthly, with principal of RMB15,000,000 ($2,194,234), RMB30,000,000 ($4,388,467), and RMB25,000,000 ($3,657,056) due May 25, 2010, August 25, 2011 and August 25, 2012, respectively. |   | $              | 10,239,757 |   |              | $      | 8,775,522  |   |
|                                                                                                                                                                                                                                                                                                                                                          |   |           |       |   |              |   |       |   |
|                                                                                                                                                                                                                                                                                                                                                          |   |           | 10,239,757 |   |              |   | 8,775,522  |   |
|                                                                                                                                                                                                                                                                                                                                                          |   |           |       |   |              |   |       |   |
| Less current maturities                                                                                                                                                                                                                                                                                                                                       |   |           | (2,194,234 | )      |              |   | (2,193,881 | )      |
|                                                                                                                                                                                                                                                                                                                                                          |   |           |       |   |              |   |       |   |
| LONG-TERM DEBT, net of current maturities                                                                                                                                                                                                                                                                                                                     |   | $              | 8,045,523  |   |              | $      | 6,581,641  |   |

----

|                        |   |   |   |   |
|-----------------------------|--------|--------|--------|--------|
| Expected option life (year) |   |   | 5.00   |   |
| Expected volatility         |   |   | 89.00% |   |
| Risk-free interest rate     |   |   | 3.23%  |   |
| Dividend yield              |   |   | 0.00%  |   |

|                        |   |           |   |              |   |   |           |   |   |              |   |   |   |   |
|-----------------------------|--------|----------------|--------|-------------------|--------|--------|----------------|--------|--------|-------------------|--------|--------|--------|--------|
|                        |   | March 31, 2010 |   | December 31, 2009 |   |   | March 31, 2009 |   |   | December 31, 2008 |   |
| Expected option life (year) |   | 3.25           |   |              | 3.50   |   |           |   | 4.25   |              |   |   | 4.50   |   |
| Expected volatility         |   | 155%           |   |              | 169%   |   |           |   | 161%   |              |   |   | 172%   |   |
| Risk-free interest rate     |   | 1.60%          |   |              | 2.61%  |   |           |   | 1.15%  |              |   |   | 1.72%  |   |
| Dividend yield              |   | 0.00%          |   |              | 0.00%  |   |           |   | 0.00%  |              |   |   | 0.00%  |   |

----

|                                   |   | Number of Warrant Shares |       | Exercise Price Per Share |   | Weighted Average Exercise Price |   | Fair Value at Date of Issuance |   | Aggregate Intrinsic Value |
|----------------------------------------|--------|------------------------------------|------------|-----------------------------------------|--------|-------------------------------------------|--------|--------------------------------|--------|---------------------------|
| Balance, December 31, 2008             |   |                               | 2,728,913  |                                    |   | $                                         | 5.00   |                           |   | $                         | 5.00 |   |   | $ | - |   |   | $ | - |   |
|                                   |   |                               |       |                                    |   |                                      |   |                           |   |                      |   |   |   |   |   |   |   |   |   |   |
| Granted                                |   |                               | -          |                                    |   |                                      | -      |                           |   |                      | - |   |   |   | - |   |   |   | - |   |
| Canceled                               |   |                               | -          |                                    |   |                                      | -      |                           |   |                      | - |   |   |   | - |   |   |   | - |   |
| Exercised                              |   |                               | (5,000     | )                                       |   |                                      | 5.00   |                           |   |                      | 5.00 |   |   |   | - |   |   |   | - |   |
| Expired                                |   |                               | -          |                                    |   |                                      | -      |                           |   |                      | - |   |   |   | - |   |   |   | - |   |
| Balance, December 31, 2009             |   |                               | 2,723,913  |                                    |   | $                                         | 5.00   |                           |   | $                         | 5.00 |   |   | $ | - |   |   | $ | - |   |
|                                   |   |                               |       |                                    |   |                                      |   |                           |   |                      |   |   |   |   |   |   |   |   |   |   |
| Granted                                |   |                               | -          |                                    |   |                                      | -      |                           |   |                      | - |   |   |   | - |   |   |   | - |   |
| Canceled for cashless exercise         |   |                               | (89,523    | )                                       |   |                                      | -      |                           |   |                      | - |   |   |   |   |   |   |   | - |   |
|                                   |   |                               |       |                                    |   |                                      |   |                           |   |                      |   |   |   |   |   |   |   |   |   |   |
| Exercised (Cashless)                   |   |                               | (78,217    | )                                       |   |                                      | -      |                           |   |                      | - |   |   |   |   |   |   |   | - |   |
| Exercised                              |   |                               | (1,324,345 | )                                       |   |                                      | 5.00   |                           |   |                      | 5.00 |   |   |   | - |   |   |   | - |   |
| Expired                                |   |                               | -          |                                    |   |                                      | -      |                           |   |                      | - |   |   |   | - |   |   |   | - |   |
| Balance, March 31, 2010                |   |                               | 1,231,828  |                                    |   | $                                         | 5.00   |                           |   | $                         | 5.00 |   |   | $ | - |   |   | $ | - |   |
|                                   |   |                               |       |                                    |   |                                      |   |                           |   |                      |   |   |   |   |   |   |   |   |   |   |
| Earned and exercisable, March 31, 2010 |   |                               | 1,231,828  |                                    |   | $                                         | 5.00   |                           |   | $                         | 5.00 |   |   | $ | - |   |   | $ | - |   |
|                                   |   |                               |       |                                    |   |                                      |   |                           |   |                      |   |   |   |   |   |   |   |   |   |   |
| Unvested, March 31, 2010               |   |                               | -          |                                    |   | $                                         | 5.00   |                           |   | $                         | 5.00 |   |   | $ | - |   |   | $ | - |   |

|            |   |   | Warrants Outstanding |   | Warrants Exercisable                          |   |
|-----------------|--------|--------|----------------------|--------|-----------------------------------------------|--------|
| Exercise Prices |   |   | Number Outstanding   |   | Average Remaining Contractual Life (in years) |   | Weighted Average Exercise Price |   | Number Exercisable |   | Average Remaining Contractual Life (in years) |   | Weighted Average Exercise Price |   |
| $               | 5.00   |   |                 |   | 1,231,828                                     |   | 3.25 |   | $ | 5.00 |   | 1,231,828 |   | 3.25 |   | $ | 5.00 |   |
|            |   |   |                 |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $               | 5.00   |   |                 |   | 1,231,828                                     |   | 3.25 |   | $ | 5.00 |   | 1,231,828 |   | 3.25 |   | $ | 5.00 |   |

----

----

|                                   |   | Number of Option Shares |      | Exercise Price Per Share |   | Weighted Average Exercise Price |   | Fair Value at Date of Grant |   | Aggregate Intrinsic Value |
|----------------------------------------|--------|-----------------------------------|-----------|-----------------------------------------|--------|-------------------------------------------|--------|-----------------------------|--------|---------------------------|
| Balance, December 31, 2008             |   |                              | 2,000,000 |                                    |   | $                                         | 5.00   |                        |   | $                         | 5.00 |   |   |   | * |   |   | $ | - |   |
|                                   |   |                              |      |                                    |   |                                      |   |                        |   |                      |   |   |   |   |   |   |   |   |   |   |
| Granted                                |   |                              | -         |                                    |   |                                      | -      |                        |   |                      | - |   |   |   |   |   |   |   | - |   |
| Canceled                               |   |                              | -         |                                    |   |                                      | -      |                        |   |                      | - |   |   |   |   |   |   |   | - |   |
| Exercised                              |   |                              | -         |                                    |   |                                      | -      |                        |   |                      | - |   |   |   |   |   |   |   | - |   |
| Expired                                |   |                              | -         |                                    |   |                                      | -      |                        |   |                      | - |   |   |   |   |   |   |   | - |   |
| Balance, December 31, 2009             |   |                              | 2,000,000 |                                    |   | $                                         | 5.00   |                        |   | $                         | 5.00 |   |   |   | * |   |   | $ | - |   |
|                                   |   |                              |      |                                    |   |                                      |   |                        |   |                      |   |   |   |   |   |   |   |   |   |   |
| Granted                                |   |                              | -         |                                    |   |                                      | -      |                        |   |                      | - |   |   |   |   |   |   |   | - |   |
| Canceled                               |   |                              | -         |                                    |   |                                      | -      |                        |   |                      | - |   |   |   |   |   |   |   | - |   |
| Exercised                              |   |                              | -         |                                    |   |                                      | -      |                        |   |                      | - |   |   |   |   |   |   |   | - |   |
| Expired                                |   |                              | -         |                                    |   |                                      | -      |                        |   |                      | - |   |   |   |   |   |   |   | - |   |
| Balance, March 31, 2010                |   |                              | 2,000,000 |                                    |   | $                                         | 5.00   |                        |   | $                         | 5.00 |   |   |   | * |   |   | $ | - |   |
|                                   |   |                              |      |                                    |   |                                      |   |                        |   |                      |   |   |   |   |   |   |   |   |   |   |
| Vested and exercisable, March 31, 2010 |   |                              | 2,000,000 |                                    |   | $                                         | 5.00   |                        |   | $                         | 5.00 |   |   |   | * |   |   | $ | - |   |
|                                   |   |                              |      |                                    |   |                                      |   |                        |   |                      |   |   |   |   |   |   |   |   |   |   |
| Unvested, March 31, 2010               |   |                              | -         |                                    |   | $                                         | 5.00   |                        |   | $                         | 5.00 |   |   |   | * |   |   | $ | - |   |

|                     |   |   | Options Outstanding |   | Options Exercisable                           |   |
|--------------------------|--------|--------|---------------------|--------|-----------------------------------------------|--------|
| Range of Exercise Prices |   |   | Number Outstanding  |   | Average Remaining Contractual Life (in years) |   | Weighted Average Exercise Price |   | Number Exercisable |   | Average Remaining Contractual Life  (in years) |   | Weighted Average Exercise Price |   |
| $                        | 5.00   |   |                |   | 2,000,000                                     |   | 0.50 |   | $ | 5.00 |   | 2,000,000 |   | 0.50 |   | $ | 5.00 |   |
|                     |   |   |                |   |                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |
| $                        | 5.00   |   |                |   | 2,000,000                                     |   | 0.50 |   | $ | 5.00 |   | 2,000,000 |   | 0.50 |   | $ | 5.00 |   |

----

|                       |   |             |    |   |                        |   |    |   |
|----------------------------|--------|------------------|---------|--------|-----------------------------|--------|---------|--------|
|                       |   | Number of Shares |    |   | Fair Value at Date of Grant |   |
| Balance, December 31, 2008 |   |             |    |   |                        |   |    |   |
|                       |   |             |    |   |                        |   |    |   |
| Granted                    |   |             | 206,250 |   |                        | $      | 676,500 |   |
| Canceled                   |   |             | -       |   |                        |   | -       |   |
| Balance, December 31, 2009 |   |             | 206,250 |   |                        | $      | 676,500 |   |
|                       |   |             |    |   |                        |   |    |   |
| Granted                    |   |             | -       |   |                        |   | -       |   |
| Canceled                   |   |             | -       |   |                        |   | -       |   |
| Balance, March 31, 2010    |   |             | 206,250 |   |                        | $      | 676,500 |   |
|                       |   |             |    |   |                        |   |    |   |
| Vested, March 31, 2010     |   |             | 1,563   |   |                        |   | 5,127   |   |
|                       |   |             |    |   |                        |   |    |   |
| Unvested, March 31, 2010   |   |             | 204,687 |   |                        | $      | 671,373 |   |

----

----

|                                        | Date of Expiration |   | Total Facilities |       | Facilities Used |   | Facilities Available |   |
|---------------------------------------------|--------------------|--------|------------------|------------|-----------------|--------|----------------------|--------|
| Armco & Metawise                        |               |   |             |       |            |   |                 |   |   |   |   |
|                                        |               |   |             |       |            |   |                 |   |   |   |   |
| DBS (Hong Kong) Limited*                    | April 21, 2010     |   | $                | -          |            | $      | -                    |   | $ |   |   |
|                                        |               |   |             |       |            |   |                 |   |   |   |   |
| ING Bank, N.V. Hong Kong Branch             | December 7, 2010   |   |             | 15,000,000 |            |   | -                    |   |   | 15,000,000 |   |
|                                        |               |   |             |       |            |   |                 |   |   |   |   |
| RZB (Beijing) Branch                        | May 31, 2010       |   |             | 10,000,000 | *               |   | -                    |   |   | 10,000,000 |   |
|                                        |               |   |             |       |            |   |                 |   |   |   |   |
| Henan Armco                                 |               |   |             |       |            |   |                 |   |   |   |   |
|                                        |               |   |             |       |            |   |                 |   |   |   |   |
| Guangdong Development Bank Zhengzhou Branch | October 20, 2010   |   |             | 7,312,935  |            |   | 429,000              |   |   | 6,883,935 |   |
|                                        |               |   |             |       |            |   |                 |   |   |   |   |
|                                        |               |   | $                | 32,312,935 |            | $      | 429,000              |   | $ | 32,683,935 |   |

----

| Period                         |   | Total  |   |
|--------------------------------|--------|--------|--------|
| Period Ended December 31, 2010 |   | $      | 29,544 |   |
| Period Ended December 31, 2011 |   |   | 29,544 |   |
| Period Ended December 31, 2012 |   |   | 9,000  |   |
|                           |   | $      | 68,088 |   |

|                                                         | Net Sales for the Interim Periods Ended |   |   | Accounts Receivable at |   |
|--------------------------------------------------------------|-----------------------------------------|--------|--------|------------------------|--------|
|                                                         | March 31, 2010                          |   |   | March 31, 2009         |   |   | March 31, 2010 |   |   | March 31, 2009 |   |
| Customer #206010 LianYunGang Jiaxin                          |                                    | 4.0    | %      |                   |   | - | % |   |   | 36.0 | % |   |   | 49.2 | % |
| Customer #122007 QingDao HuaQing                             |                                    | -      | %      |                   |   | - | % |   |   | 7.7 | % |   |   | 27.0 | % |
| Customer #122002 ZheJiang WuChan                             |                                    | -      | %      |                   |   | 49.6 | % |   |   | - | % |   |   | - | % |
| Customer #206036 HanZhong YinLong                            |                                    | -      | %      |                   |   | 48.9 | % |   |   | - | % |   |   | - | % |
| Customer #122018 Sundial Metals and Mineral                  |                                    | -      | %      |                   |   | - | % |   |   | - | % |   |   | - | % |
| Customer #122024 Jiangsu Provincial                          |                                    | 26.8   | %      |                   |   | - | % |   |   | 17.2 | % |   |   | - | % |
| Customer #122023 Granton                                     |                                    | 31.5   | %      |                   |   | - | % |   |   | 20.2 | % |   |   | - | % |
| Customer #122004 Zhejiang Properties                         |                                    | -      | %      |                   |   | - | % |   |   | - |   |   |   | 19.3 | % |
| Customer #122003 Zhongji NingBo (Significant business party) |                                    | -      | %      |                   |   | 33.8 | % |   |   | 13.5 | % |   |   | 2.6 | % |
|                                                         |                                    | 62.3   | %      |                   |   | 98.5 | % |   |   | 94.6 | % |   |   | 98.1 | % |

----

|                                                       |         Net Purchases for the Interim Period Ended |   |   | Accounts Payable at |   |
|------------------------------------------------------------|---------------------------------------------------------------------------------------|--------|--------|---------------------|--------|
|                                                       | March 31, 2010                                                                        |   |   | March 31, 2009      |   |   | March 31, 2010 |   |   | March 31, 2009 |   |
| Vendor #126010 ZhongJi NingBo (Significant Business Party) |                                                                                  | -      | %      |                |   | - | % |   |   | 9.2 | % |   |   | 32.0 | % |
| Vendor #204006 BestonHoldings                              |                                                                                  | -      | %      |                |   | - | % |   |   | 11.5 | % |   |   | 17.3 | % |
| Vendor #204033 Oversea                                     |                                                                                  | 63.0   | %      |                |   | - | % |   |   | 64.5 | % |   |   | - | % |
| Vendor #204002 YingFuGuoWaiKuan                            |                                                                                  | -      | %      |                |   | 47.5 | % |   |   | - | % |   |   | 24.1 | % |
| Vendor #204028 DeVi                                        |                                                                                  | -      | %      |                |   | 43.9 | % |   |   | - | % |   |   | 22.3 | % |
| Vendor #202005 Venaco Commodities                          |                                                                                  | 10.4   | %      |                |   | - | % |   |   | - | % |   |   | - | % |
|                                                       |                                                                                  | 73.4   | %      |                |   | 91.4 | % |   |   | 85.2 | % |   |   | 95.7 | % |

----

----

| Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations. |
|---------|----------------------------------------------------------------------------------------|

----

----

|                        |   | For the Three Months Ended March 31, |      |   |   |   |   |     |   |
|-----------------------------|--------|--------------------------------------|-----------|--------|--------|--------|--------|----------|--------|
|                        |   | 2010                                 |      |   | 2009   |   |   | $ Change |   |   | % Change |   |
| Net revenues                |   | $                                    | 8,576,570 |   |   |   |   |     | $      | 5,357,858 |   |   |   |   |   | $ | 3,218,712 |   |   |   | 60 | % |
| Cost of goods sold          |   |                                 | 8,017,651 |   |   |   |   | %        |   |   | 4,847,235 |   |   |   |   | % |   |   | 3,170,416 |   |   |   | 65 | % |
| Gross profit                |   |                                 | 558,919   |   |   |   |   | %        |   |   | 510,623 |   |   |   |   | % |   |   | 48,296 |   |   |   | 9 | % |
|                        |   |                                 |      |   |   |   |   |     |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Total operating expenses    |   |                                 | 913,577   |   |   |   |   | %        |   |   | 333,934 |   |   |   |   | % |   |   | 579,643 |   |   |   | 174 | % |
| Operating  income |   |                                 | (354,658) |   |   |   |   | %        |   |   | 176,689 |   |   |   |   | % |   |   | (531,347) |   |   |   | -301 | % |

----

----

----

----

|  |  | Any obligation under certain guarantee contracts;                                                                                                                                                                                                            |
|----------|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | Any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets;                                                         |
|  |  | Any obligation under a contract that would be accounted for as a derivative instrument, except that it is both indexed to our stock and classified in stockholder’s equity in our statement of financial position; and                                 |
|  |  | Any obligation arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us. |

|                                                                               |   | Payments due by period |       |
|------------------------------------------------------------------------------------|--------|------------------------|------------|
| Contractual obligations                                                            |   | Total                  |       |   | Less than 1 year |   |   | 1-3 years |   |   | 3-5 years |   |   | More than 5 years |   |
| Long-Term Debt Obligations(1)                                                      |   |                   | 10,239,757 |   |   |   | 2,194,234 |   |   |   | 4,387,761 |   |   |   | 3,657,762 |   |   |   | - |   |
| Short-Term Loans Payable (2)                                                       |   |                   |       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Capital Lease Obligations                                                          |   |                   | -          |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Operating Lease Obligations                                                        |   |                   | 68,088     |   |   |   | 29,544 |   |   |   | 38,544 |   |   |   | - |   |   |   | - |   |
| Purchase Obligations                                                               |   |                   | -          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other Long-Term Liabilities Reflected on the Registrant's Balance Sheet under GAAP |   |                   | -          |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Total                                                                              |   |                   | 10,307,845 |   |   |   | 2,223,778 |   |   |   | 4,426,305 |   |   |   | 3,657,762 |   |   |   | - |   |

|   | (1) | See Note 10 – Long-Term Debt in our unaudited consolidated financial statements included in this report. |
|--------|-----|----------------------------------------------------------------------------------------------------------------|
|   | (2) | See Note 8 – Loans Payable in our unaudited consolidated financial statements included in this report.   |

| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
|---------|-------------------------------------------------------------|

----

| Item 4T. | Controls and Procedures. |
|----------|--------------------------|

| Item 1. | Legal Proceedings. |
|---------|--------------------|

| Item 1A. | Risk Factors |
|----------|--------------|

| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds. |
|---------|--------------------------------------------------------------|

| Item 3. | Defaults Upon Senior Securities. |
|---------|----------------------------------|

| Item 4. | (Removed and Reserved). |
|---------|-------------------------|

| Item 5. | Other Information. |
|---------|--------------------|

----

| Item 6. | Exhibits |
|---------|----------|

| No.    | Description                                                                                                                                                 |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 4.2    | Form of Amendment to Subscription Agreement and Common Stock Purchase Warrant*                                                                              |
| 10.19  | Scrap Metal Sales Contract between Armet (Lianyungang) Renewable Resources Co., Ltd. and Jiangsu Lihuai Iron & Steel Co., Ltd. dated February 21, 2010* |
| 31.1   | Rule 13a-14(a)/ 15d-14(a) Certification of Chief Executive Officer *                                                                                        |
| 31.2   | Rule 13a-14(a)/ 15d-14(a) Certification of Chief Financial Officer *                                                                                        |
| 32     | Section 1350 Certification of Chief Executive Officer and the Chief Financial Officer *                                                                     |
|   |                                                                                                                                                        |

----

|               | China Armco Metals, Inc. |                          |
|--------------------|--------------------------|-------------------------------|
|               |                     |                          |   |
| Date: May 17, 2010 | By:                      | /s/ Kexuan Yao           |   |
|               |                     | Kexuan Yao                    |   |
|               |                     | CEO and Chairman              |   |
|               |                     | (Principal executive officer) |   |

|               |   |                                         |
|--------------------|--------|----------------------------------------------|
|               |   |                                         |   |
| Date: May 17, 2010 | By:    | /s/ Fengtao Wen                         |   |
|               |   | Fengtao Wen                             |   |
|               |   | Chief Financial Officer                      |   |
|               |   | (Principal financial and accounting officer) |   |

----