---






SECURITIES AND EXCHANGE COMMISSION


WASHINGTON, D.C. 20549


FORM 10-Q








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





For the quarterly period September 30, 2009





or





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





For the transition period from _____________ to ___________





Commission File Number 33-19048-NY





AMERICAN METAL & TECHNOLOGY, INC.





(Exact Name of Small Business Issuer as specified in its charter)





Delaware
22-2856171(State or other jurisdiction of incorporation or organization)
(I.R.S. employer identification no.)





633 W. 5th Street, 28th Floor
Los Angeles, CA 90071(Address of principal executive offices) (Zip Code)Registrant's telephone number, including area code: (213) 223-2321








Indicate by check mark whether the Issuer:





(1) Has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports):





Yes  xNo o








Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such
files).





Yes oNo o








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





Large Accelerated Filer
o
Accelerated Filer
oNon-Accelerated Filer
o
Smaller Reporting Company
x








(2) Has been subject to such filing requirements for the past 90 days.





Yes xNo o





10,720,268  shares of the registrant's Common Stock, $.0001 per share, were outstanding as of November 16, 2009.








1





AMERICAN METAL & TECHNOLOGY, INC.


TABLE OF CONTENTS


FORM 10-Q





PART I FINANCIAL INFORMATIONItem Number

PageItem 1.
Financial Statements
3Consolidated Balance Sheet as of September 30, 2009 (Unaudited) and December 31, 2008 (Audited)
3Consolidated Statements of Income for the Three Months Ended September 30, 2009 and 2008 and for the Nine Months Ended September  30, 2009 and 2008 (Unaudited)
4Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2009 and 2008 (Unaudited)
5Notes to Financial Statements
6 - 18Item 2.
Management’s Discussion and Analysis of Financial Condition or Plan of Operation
19 - 24Item 3.
Qualitative and Quantitative Disclosures About Market Risk
25Item 4T.
Controls and Procedures
25PART II OTHER INFORMATION
25Item 1.
Legal Proceedings
25Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
25Item 3.
Defaults upon Senior Securities
26Item 4.
Submission of Matters to a Vote of Security Holders
26Item 5.
Other Information
26Item 6.
Exhibits and Reports on Form 8-K
26Signatures
26


2




AMERICAN METAL & TECHNOLOGY, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETSSeptember 30,
2009


December 31,
2008(Unaudited)


(Audited)ASSETSCurrent AssetsCash and cash equivalents

$
6,956,295


$
7,569,046Accounts receivable - net


398,929



442,238Accounts receivable - related parties


28,242



1,981,919Investment in marketable securities


123,934



93,906Other receivables


663,679



352,250Other receivables - related parties


2,046



-Advances to suppliers


45,997



390,368Inventories


2,056,832



1,079,741Prepaid expense


647



-Current assets of the entity held for disposal


-



69,476Total Current Assets


10,276,601



11,978,944Property, Plant And Equipment, net


7,507,313



4,160,737Construction in Progress


-



2,884,437Intangible Assets, net


645,984



684,639Total Assets

$
18,429,898


$
19,708,757LIABILITIES AND SHAREHOLDERS' EQUITYCurrent LiabilitiesAccounts payable

$
839,590


$
1,544,995Accrued liabilities and other payables


113,607



95,039Accrued bonuses


668,038



351,913Construction payable


395,534



-Amount due to related parties


600



813,082Unearned revenue


17,847



8,645Liability of the entity held for disposal


-



645Total Current Liabilities


2,035,215



2,814,319Commitments


-



-Shareholders' EquityCommon stocks; $0.0001 par value, 30,000,000 shares authorized,
10,720,268 shares issued and outstanding


1,072



1,072Additional paid in capital


7,786,114



7,786,114Deferred expense-warrants


-



(20,435
)Statutory reserve


1,425,287



1,412,586Accumulated other comprehensive income


1,964,987



1,865,844Retained earnings


5,217,222



5,849,257Total Stockholders' Equity


16,394,682



16,894,438Total Liabilities and Shareholders' Equity

$
18,429,898


$
19,708,757
 The accompanying notes are an integral part of the consolidated financial statements.






3
 
  AMERICAN METAL & TECHNOLOGY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(UNAUDITED)For The Three Months


For The Nine MonthsEnded September 30,


Ended September 30,2009


2008


2009


2008Net sales

$
972,996


$
4,353,422


$
3,438,920


$
14,336,775Cost of goods sold


(773,409
)


(3,027,594
)


(2,548,476
)


(9,772,407
)Gross profit


199,587



1,325,829



890,444



4,564,369Operating expensesSelling expenses


(4,868
)


(9,887
)


(12,905
)


(40,604
)Impairment of goodwill


-



(120,128
)


-



(120,128
)Operating and administrative expenses


(517,640
)


(512,989
)


(1,412,636
)


(1,354,247
)Total operating expenses


(522,508
)


(643,004
)


(1,425,542
)


(1,514,979
)Income (Loss) from operations


(322,921
)


682,825



(535,098
)


3,049,390Other income (expense)Interest income


195,300



206,021



308,198



206,021Unrealized gain on marketable securities


85



-



85



-Gain (Loss) on sale of marketable securities


12,016



45,416



(6,635
)


45,416Other income (expense)


4,000



(28,349
)


(317,054
)


(28,349
)Total other income (expense)


211,401



223,087



(15,405
)


223,087Income (Loss) before minority interest


(111,520
)


905,912



(550,503
)


3,272,477Minority interests


-



(9,693
)


-



(9,693
)Net income (loss) from continuing operations


(111,520
)


915,605



(550,503
)


3,282,170Loss from entity held for disposal


(68,831
)


-



(68,831
)


-Net Income (Loss)

$
(180,351
)

$
915,605


$
(619,334
)

$
3,282,170Basic and diluted weighted average shares outstanding


10,720,268



10,430,606



10,720,268



10,411,993Net earnings (loss) per share from continuing operations

$
(0.01
)

$
0.09


$
(0.05
)

$
0.32Net loss per share from entity held for disposal


(0.01
)


-



(0.01
)


-Basic and diluted net earnings (loss) per share

$
(0.02
)

$
0.09


$
(0.06
)

$
0.32The accompanying notes are an integral part of the consolidated financial statements.
   
 4


AMERICAN METAL & TECHNOLOGY, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)For The Nine MonthsEnded September 30,2009


2008Cash flows from operating activities:Net (Loss) Income

$
(619,334
)

$
3,282,170Adjustments to reconcile net (loss) income tonet cash provided by operating activities:Depreciation and amortization


450,833



298,230Share-based compensation


316,125Loss (gain) on disposal of marketable securities


6,635



(45,416
)Amortization of deferred expense-warrants


20,435



-Unrealized gain on marketable securities


(85
)


-Bad debt expenses


(7,614
)


(40,444
)Minority interest


-



(9,693
)Impairment of goodwill


-



120,128Issuance of warrants for services


-



54,955(Increase)/decrease in assets:Accounts receivable


2,001,609



(2,096,776
)Note receivable


108,315



-Other receivables


25,472



34,359Other receivable-related party


1,461



-Inventory


(976,852
)


(140,659
)Advance to suppliers


343,871



83,070Prepaid expenses


(1,779
)


-Increase/(decrease) in liabilities:Accounts payable


(703,978
)


357,393Other payable and accrued expenses


413,782



(40,597
)Unearned revenue


9,199



10,871Net cash provided by operating activities from continuing operations


1,388,095



1,867,589Net cash provided by operating activities of entity held for disposal


67,006



-Net cash provided by operating activities


1,455,101



1,867,589Cash flows from investing activities:Net purchase of marketable securities


21,698



(44,621
)Additions to construction in progress


-



(1,306,389
)Cash paid for acquisition of minority interest


-



(92,566
)Purchase of equipment and leasehold improvements


(875,189
)


(1,384,585
)Net cash used in investing activities


(853,492
)


(2,828,161
)Cash flows from financing activities:Net repayments of loans


(1,209,532
)


-Net proceeds from loans


-



908,665Net cash (used in) provided by Financing Activities


(1,209,532
)


908,665Net Increase (decrease) in Cash and Cash Equivalents


(607,923
)


(51,907
)Effects of Exchange Rate Change in Cash


(4,829
)


447,903Cash and Cash Equivalents-Beginning Balance


7,569,046



6,037,193Cash and Cash Equivalents-Ending Balance

$
6,956,295


$
6,433,189Supplement disclosure of cash flow information:Income taxes paid

$
-


$
-Interest expenses paid

$
-


$
-Non Cash Transaction:Shares due to acquisition of minority interest

$
-


$
383,555The accompanying notes are an integral part of the consolidated financial statements.





5
 
 AMERICAN METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





1. Organization and description of business





On June 1, 2007, American Metal & Technology, Inc. (AMTI, "We, "Us, "Our"or the "Company") formally changed its name from Murray United Development Corporation to American Metal & Technology, Inc.





The Company entered into a Stock Purchase Agreement on November 6, 2006 (the "Agreement") with American Metal Technology Group, a Nevada corporation (“AMTG"), pursuant to which the Company acquired one hundred (100%) percent of AMTG's outstanding common stock from the AMTG Stockholders and AMTG became a wholly-owned subsidiary
of the company in a two step reverse takeover transaction on May 22, 2007.  In connection with this transaction, and in addition to the 173,253,434 shares of common stock outstanding immediately prior to closing, the Company issued 1,213,295,563 shares to the stockholders and consultants of AMTG (1,142,388,273 shares to AMTG's former shareholders, including 20,000,000 shares of common stock issues to AMTG as investment upon completion of the due diligence period to the Agreement, and
redistributed proportionally to AMTG's shareholders as of May 22, 2007, and 70,907,300 shares to AMTG's consultants).  These shares represent more than eighty five (85%) of the Company's issued and outstanding shares of voting capital stock on a fully diluted basis, and therefore the former shareholders of AMTG and its consultants effectively have control of the Company.  In addition, as a condition of the closing of the Agreement, the Company issued an additional 10,000,000 shares of common stock
to a former officer and director of the Company in connection with the cancellation of all indebtedness to him, and his assumption of all liabilities and the assignment all assets of the Company immediately prior to closing.   AMTG is now a wholly owned subsidiary of the Company.





The exchange of shares with AMTG has been accounted for as a reverse acquisition under the purchase method of accounting since the shareholders of AMTG obtained control of the consolidated entity. Accordingly, the merger of the two companies has been recorded as a recapitalization of AMTG, with AMTG being treated as the continuing entity. 
The historical financial statements presented herein are those of AMTG. The continuing company has retained December 31 as its fiscal year end.





Reflecting the change of ownership, the Company filed a Certificate of Amendment to its Certificate of Incorporation to change its name to American Metal & Technology, Inc., which became effective June 1, 2007.





The Company now through AMTG via its subsidiaries, Beijing Tong Yuan Heng Feng Technology Co., Ltd. and American Metal Technology (Lang Fang) Co., Ltd., is mainly in the business of manufacturing and sales of high-precision investment casting and metal fabrication products in the People's Republic of China (“China”).
The Company's production involves high-precision investment casting and machined products, including valves, pipe fittings, etc.





AMTG was incorporated on January 13, 2004 under the laws of the state of Nevada. On June 1, 2004, AMTG entered into an equity purchase agreement with Beijing Sande Technology (Holding) Co., Ltd. (“BST”) to acquire 80% ownership of Beijing Tong Yuan Heng Feng Technology
Co., Ltd. (“BJTY”). As a result, AMTG issued 7,200 shares of his pre-split common stock to BST in exchange for 80% ownership of BJTY. On August 2, 2004, AMTG incorporated American Metal Technology (Lang Fang) Co., Ltd. (“AMLF”) in Hebei, China, for the purpose of expanding the production facility of BJTY. On August   8, 2004, AMTG and AMLF together entered into an equity
purchase agreement with Beijing Sande Shang Mao Co., Ltd. (BSS)for the remaining 20% of BJTY. As a result, AMTG which issued 1,800 shares of pre-split common stock to BSS and AMLF becomes the owner of 20% shareholder of BJTY. AMTG later acquired the 20% ownership of BJTY from AMLF and owns 100% of BJTY. On November 12, 2004, AMTG effectuated a forward split of all the outstanding shares of common stock on a 1,000 for 1 basis. On November 2005, AMTG sold
5% of BJTY to an unrelated party for $240,000. As set forth below, the Company repurchased such shares pursuant to an Equity Purchase Agreement Executed on September 22, 2008.












6
 
 AMERICAN METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





1. Organization and description of business -continued





On September 22, 2008, the Company entered in an Equity Purchase Agreement ("the Agreement") with Wen Ge Ren (the "Seller"), a shareholder owning a 5% stock interest in Beijing Tong Yuan Heng Feng Technology Co., Ltd ("BJTY"), which was 95% owned through the Company's wholly owned subsidiary American Metal Technology Group. Pursuant to
the Agreement, the Company paid to the Seller US $390,299. The Seller has agreed to accept from the Company the equivalent of US $92,566.46 or RMB 629,451.91 and balance of US $297,732.57 pursuant to the issuance of such number of shares of restricted Common Stock based upon the amount equal to 75% of the average of the closing bid price of the Company's Common Stock for the five-day trading period commencing on September 18, 2008. The Company agreed to deliver to the Seller the cash consideration and duly
executed share certificates representing the underlying shares registered in the name of the Seller within 60 days from the date of signature. The Company delivered the cash consideration and issued 317,581 shares to the Seller prior to September 30, 2008.





On March 18, 2009, the Board of Directors authorized the Company to transfer and resell the Company’s ownership of fifty thousand (50,000) shares of common stock, representing 100% of the issued and outstanding shares of Lighting Power Global Limited, a British Virgin Island company, to the Chairman and the President of Company, resulting
in the President becoming the sole shareholder of Lighting Power Global Limited.  The Board of Directors also authorized the Company to cancel any funds due to the President for any loans made and /or expenses incurred with respect to the original acquisition and ownership of the shares of common stock of Lighting Power Global Limited.





On April 29, 2009, the Board of Directors of AMTG adopted a resolution authorizing the creation of a new Hong Kong corporation.  A Certificate of Incorporation was filed in Hong Kong on April 30, 2009 organizing American Metal Technology Group Limited (“AMTL”).  In June 2009, the Board of Directors of AMTG
adopted a resolution which authorized AMTG’s utilization of AMTL as the operating entity with respect to overseeing AMTG’s operations in Asia and authorized AMTG’s wholly owned subsidiaries in the People’s Republic of China to become wholly owned subsidiaries of AMTL effective immediately.













7
 
 AMERICAN METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





2. Summary of significant accounting policies





The accompanying unaudited financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information.  Accordingly, they do not include all of the information required by generally accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the interim periods are not necessarily indicative of the results for any future period. These statements should be read in conjunction with the Company's audited financial statements and notes thereto for the fiscal year ended December 31, 2008. The results of the nine month period ended September 30, 2009 are not necessarily indicative of
the results to be expected for the full fiscal year ending December 31, 2009.





Principal of consolidation





The consolidated financial statements of American Metal Technology, Inc. reflect the activities of the following subsidiaries:





Subsidiaries

Percentage
Of OwnershipAmerican Metal & Technology Group, (“AMTG")  Co., Ltd.
U.S.


100
%American Metal Technology (Lang Fang) Co., Ltd.
P.R.C.


100
%Beijing Tong Yuan Heng Feng (Technology) Co., Ltd.
P.R.C.


100
%American Metal Technology Group Limited
H.K.


100
%





The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. All significant inter-company transactions and accounts have been eliminated in the consolidation.





Use of estimates





The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.





Cash and cash equivalents





For Statement of Cash Flows purposes, the Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. As of September 30, 2009 and December 31, 2008, cash
and cash equivalent amounted to $6,956,295 and $7,569,046, respectively. The cash is deposited with four banks in China and is not insured.







8
 AMERICAN METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





2. Summary of significant accounting policies - continued





Accounts receivable





The Company's policy is to maintain reserves for potential credit losses for accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these
reserves. As of September 30, 2009 and December 31, 2008, the Company had accounts receivable of $427,171 and $2,424,157, net of allowance of $55,062 and $62,716 respectively.





Advances to suppliers





The company advances to certain vendors for the purchase of material. As of September 30, 2009 and December 31, 2008, the advances to suppliers amounted to $45,997 and $390,368 respectively.





Revenue recognition





The Company recognizes sales revenue at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured.  Payments received before all of the relevant criteria for revenue
recognition are satisfied are recorded as unearned revenue. Unearned revenue as of September 30, 2009 and December 31, 2008 amounted to $17,847 and $8,645 respectively.





The Company's revenue consists of invoiced value of goods, net of a value-added tax (VAT). No product return or sales discount allowance is made as products delivered and accepted by customers are normally not returnable and sales discount is normally not granted after products are delivered.





Foreign currency translation





The reporting currency of the Company is the US dollar. The Company uses their local currency, Renminbi (RMB), as their functional currency. Results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate at the end of the period. Translation
adjustments resulting from this process are included in accumulated other comprehensive income in the statement of shareholders' equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.





Accumulated other comprehensive income amounted to $1,964,987 and $1,865,844 as of September 30, 2009 and December 31, 2008, respectively.  Accumulated other comprehensive income was mainly foreign currency translation gain as of September 30, 2009.





Income taxes





Recognition of deferred tax assets and liabilities is required for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and
liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. At September 30, 2009 and December 31, 2008, there was no significant book to tax differences.





Local PRC Income Tax





The Company is governed by the Income Tax Law of the PRC concerning subsidiaries located in PRC. Under the Income Tax Laws of the PRC, Chinese enterprises are generally subject to an income tax at an effective rate of 33% (30% state income taxes plus 3% local income taxes) on income reported in the statutory financial statements after appropriate
tax adjustments.







9
 AMERICAN METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





2. Summary of significant accounting policies - continued





The Company does not have any significant deferred tax asset or liabilities in the PRC tax jurisdiction.





Beginning January 1, 2008, the new Enterprise Income Tax (EIT) law replaced the existing laws for Domestic Enterprises (DES) and Foreign Invested Enterprises (FIEs). The new standard EIT rate of 25% replaced the 33% rate previously applicable to both DES and FIEs. The Company evaluated the effect of the new EIT law on its financial position,
and the two years tax exemption, three years 50% tax reduction tax holiday for production-oriented FIEs will be continued.  The Company is exempted from income tax in Peoples Republic of China, for the nine month ended September 30, 2009 and 2008.





Segment reporting





The use of the "management approach" model for segment reporting is required.  The management approach model is based on the way a company's management organizes segments within the company for making operating decisions and assessing performance.  Reportable segments are based on products and services, geography, legal
structure, management structure, or any other manner in which management disaggregates a company.





There was no effect on the Company's consolidated financial statements as the Company operates in one reportable business segment - manufacture and marketing high-precision investment casting and metal fabrication products in China.





Recent accounting pronouncements





In June 2009, the Financial Accounting Standards Board (FASB) Accounting Standards Codification (Codification) became the single source of authoritative US GAAP.  The Codification did not create any new GAAP standards but incorporated existing accounting and reporting standards into a new topical structure with a new referencing
system to identify authoritative accounting standards, replacing the prior references to Statement of Financial Accounting Standards (SFAS), Emerging Issues Task Force (EITF), FASB Staff Position (FSP), etc.  Authoritative standards included in the Codification are designated by their Accounting Standards Codification (ASC) topical reference, and new standards will be designated as Accounting Standards Updates (ASU), with a year and assigned sequence number.  Beginning with this interim report
for the third quarter of 2009, references to prior standards have been removed.





3. Marketable Securities




The Company’s securities are classified as available-for-sale and, as such, are carried at fair value. The securities comprised of shares of common stock of third party customers and securities purchased. Securities classified as available-for-sale may be sold in response to changes in interest rates, liquidity needs, and for other
purposes. The Company does not currently have any held-to-maturity or trading securities.





Unrealized holding gains and losses for available-for-sale securities are excluded from earnings and reported as a separate component of stockholder’s equity. Realized gains and losses for securities classified as available-for-sale are reported in earnings based upon the adjusted cost of the specific security sold.





Marketable securities classified as available for sale consisted of the following as of September 30, 2009 and December 31, 2008:





September 30, 2009


December 31, 2008Marketable Securities

Various


VariousCost

$
123,850


$
164,689Market Value


123,934



93,906Unrealized Gain (Loss) for the period ended


85



(70,783
)Accumulated Unrealized Gain (Loss)


-



(58,382
)








10
 
 AMERICAN METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





3. Marketable Securities - continued





The Company adopted new accounting guidance on fair value measurements effective January 1, 2008 and applied to marketable securities.





The new accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.  In determining fair value of certificates of deposit, the Company uses the market approach.  The new accounting
guidance establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value.  This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available.  Observable inputs are inputs that reflect the assumptions market participants would use in pricing the assets or liabilities
based on market data obtained from sources independent of the Company.  Unobservable inputs are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.  The hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:





·
Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.  Valuation of these instruments does not require a high degree of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available.  The Company does not currently have any financial instruments
utilizing Level 1 inputs.





·
Level 2 – Inputs other than quoted prices in active markets that are either directly or indirectly observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.  The certificates
of deposit, which were the only component of long-term investments, utilized Level 2 inputs.  These financial instruments are valued by quoted prices that are less frequent than those in active markets or by models that use various assumptions that are derived from or supported by data that is generally observable in the marketplace.  Valuations in this category are inherently less reliable than quoted market prices due to the degree of subjectivity involved in determining appropriate methodologies
and the applicable underlying assumptions.





·
Level 3 – Valuations based on inputs that are unobservable and not corroborated by market data.  The Company does not currently have any financial instruments utilizing Level 3 inputs.  These financial instruments have significant inputs that cannot be validated by readily determinable data and generally involve considerable judgment by management.





The following table summarizes by level within the fair value hierarchy of marketable securities as of September 30, 2009 and December 31, 2008:





September 30, 2009Level 1


TotalMarketable SecuritiesTrading securities

$
123,934


$
123,934$
123,934


$
123,934





December 31, 2008Level 1


TotalMarketable SecuritiesAvailable-for-sale securities

$
93,906


$
93,906$
93,906


$
93,906











11
 AMERICAN METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





4. Other receivables





Other receivables consisted of the following at September 30, 2009 and December 31, 2008.  The receivables are due from unrelated parties, interest free, unsecured, and due on demand.





September 30, 2009


December 31, 2008Note receivable

$
8,790


$
117,259Tax receivable


70,399



194,638Interest receivable


37,787Others


546,703



40,353Less: allowance for doubtful accounts


-



-Totals

$
663,679


$
352,250





5. Inventories





Inventories consisted of the following at September 30, 2009 and December 31, 2008:





September 30, 2009


December 31, 2008Supplies and raw materials

$
1,391,878


$
522,008Work in process


452,306



539,386Finished goods


212,648



18,347Totals

$
2,056,832


$
1,079,741





6. Property, Plant and Equipment





Property, Plant and Equipment consist of the following at September 30, 2009 and December 31, 2008:


September 30, 2009


December 31, 2008Building and improvements

$
4,018,882


$
981,311Vehicle


112,869



112,930Machinery and equipments


4,893,346



4,174,913Totals


9,025,097



5,269,154Less: accumulated depreciation


(1,517,784
)


(1,108,417
)$
7,507,313


$
4,160,737





Depreciation expenses for the nine month ended September 30, 2009 and 2008 were $411,448 and $256,925, respectively.





7. Construction in Progress:





As of September 30, 2009 and December 31, 2008, construction in progress, representing construction for additional facilities at its Langfang manufacturing center, amounted to $0 and $2,884,437, respectively.  The construction was completed and placed in service in March, 2009.





8. Intangible assets





The intangible assets comprised of following at September 30, 2009 and December 31, 2008:





September 30, 2009


December 31, 2008Land use right, net

$
599,064


$
609,378Permits, net


46,921



75,261Total

$
645,985


$
684,639





12
 
 AMERICAN METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





8. Intangible assets -continued





Land use right:





Per the People's Republic of China's governmental regulations, the Government owns all land. However, the government grants the user a “land use right” (the Right) to use the land. The Company has recognized the amounts paid for the acquisition of rights to use land as intangible asset and amortizing over a period of fifty years.





American Metal Technology (Lang Fang) Co., Ltd. acquired land use rights during the year ended 2004 for a total amount of $663,740. The land use right is for fifty years. The land use rights consist of the followings as of September 30, 2009 and December 31, 2008:





September 30, 2009


December 31, 2008Land use rights

$
665,627


$
665,987Less: accumulated amortization


(66,563
)


(56,609
)$
599,064


$
609,378





Permits:




Permits amounted to $46,921 and $75,261 as of September 30, 2009 and December 31, 2008 respectively and are amortized over 5 years:





September 30, 2009


December 31, 2008Prepaid expenses

$
196,226


$
196,333Less: accumulated amortization


(149,305
)


(121,072
)$
46,921


$
75,261





Intangible assets of the Company are reviewed annually as to whether their carrying value has become impaired. The Company considers assets to be impaired if the carrying value exceeds the future projected cash flows from related operations. The Company also re-evaluates the periods of amortization to determine whether subsequent events
and circumstances warrant revised estimates of useful lives. As of September 30, 2008 the Company expects these assets to be fully recoverable.





Total amortization expenses for the nine month period ended September 30, 2009 and 2008 amounted to $39,347 and $41,305 respectively. Amortization expenses for next five years after September 30, 2009 are as follows:




1 year after September 30, 2009

$
52,5202 year after September 30, 2009


20,9703 year after September 30, 2009


13,3014 year after September 30, 2009


13,3015 year after September 30, 2009


13,301Total

$
113,393













13
 AMERICAN METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





9. Accrued liabilities and other payables





Accrued liabilities and other payables consisted of the following at September 30, 2009 and December 31, 2008:





September 30, 2009


December 31, 2008Accrued expenses

$
102,527


$
82,308Others


11,080



12,731Totals

$
113,607


$
95,039





10. Related party transactions





Our President and Chief Executive Officer and a Director, and the Secretary of the Company and a Director own 35% and 21.6%, respectively of a company now known as Beijing Sande Technology (Holding) Co., Ltd. (“Beijing Sande”) which is a Chinese Corporation which, in turn, owns approximately 20% of Beijing Micro Matic Machinery,
Ltd (“Beijing Micro”).  The controlling interest of approximately 80% of Beijing Micro Matic Machinery, Ltd. is owned by Denmark Micro Matic International SA, (“Denmark Micro”) an entity registered in Denmark.





Net revenue from Beijing Micro amounted to $2,038,186 for the nine months period ended September 30, 2009.  At September 30, 2009 and December 31, 2008, accounts receivable from Beijing Micro were $28,242 and $1,947,738, respectively.





Net revenue from Beijing Sande amounted to $295,919 for the nine months ended September 30, 2009.  At September 30, 2009 and December 31, 2008, accounts receivable from Beijing Sande were $0 and $34,181, respectively.  Net long-term loan payable to Beijing Sande was $0 and $762,482 as of September 30, 2009 and December
31, 2008, respectively.





Due to the President and CEO of the Company amounted to $600 and $50,600 as of September 30, 2009 and December 31, 2008, respectively, which were due on demand, interest free, and unsecured.





11. Stockholders’ equity





Additional paid in capital





The local government in Lang Fang required the Company’s subsidiary American Metal Technology (Lang Fang) Co., Ltd, to increase its investments in Lang Fang with respect to its 2nd phase construction. On May 8, 2008, the Board of Directors authorized the
transfer of $2,245,981 from the Company’s Retained Earnings to Paid in Capital.





Statutory reserve





As stipulated by the Company Law of the People's Republic of China (PRC), net income after taxation can only be distributed as dividends after appropriation has been made for the following:





i) Making up cumulative prior years' losses, if any;





ii) Allocations to the "Statutory surplus reserve" of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital;





iii) Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's "Statutory common welfare fund", which is established for the purpose of providing employee facilities and other collective benefits to the Company's employees; and Statutory common welfare fund is no longer required
per the new cooperation law executed in 2006.





iv) Allocations to the discretionary surplus reserve, if approved in the shareholders' general meeting.





In accordance with the Chinese Company Law, the Company has allocated 10% of its net income to surplus. The amount allocated to the statutory reserve amounted to $12,700 and $368,529 for the nine month ended September 30, 2009 and 2008, respectively.









14
 AMERICAN METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





11. Stockholders’ equity - continued





Deemed dividend





On July 11, 2008, the Company acquired from the Chairman and the President of Company, fifty thousand (50,000) shares of common stock, representing 100% of the issued and outstanding shares, of Lighting Power Global Limited, a British Virgin Island company, incorporated on May 29, 2008, pursuant to the BVI Business Company Act, 2004, resulting
in the Company becoming the sole shareholder of Lighting Power Global Limited.  The Company agreed to reimburse the Chairman and the President for any loans made and/or expenses incurred with respect to the acquisition and ownership of the shares of common stock of Lighting Power Global Limited, which amounted to $50,000.  The Company recorded deemed dividend and related party payable in the amount of $50,000 at December 31, 2008.





Incentive compensation

On October 31, 2008, the Board of Directors adopted resolutions, authorizing incentive compensation to key members of its management if the Company has four million ($4,000,000) dollars or more in net income for the fiscal year of 2008 excluding expenses relating
to the incentive compensation, as reflected in the audited Financial Statements of the Company as filed with the Securities and Exchange Commission. The incentive compensation was to be paid by the issuance of shares of common stock by the Company as follows: (A) 533,333 shares of common stock determined by multiplying the initial four million ($4,000,000) dollars of net income by ten (10%) percent and dividing the product by an agreed value of $0.75 per share and (B) such number of additional shares of common
stock determined by multiplying the amount of net profit in excess of four million ($4,000,000) dollars by twenty (20%) percent and dividing such product by an agreed value of $0.75 per share.  As of September 30, 2009, such shares have not been issued. On September 29, 2009, the Board of Directors adopted resolutions which broaden the scope of the Board of Directors’ resolution dated October 31, 2008 to authorize the Company to provide incentive compensation to key members of its
management and also key employees as well as outside consultants who have provided services to the Company, selected and determined by the Board of Directors.  As set forth in the Board of Directors’ resolution dated September 29, 2009, the incentive compensation shall be paid by the issuance of an aggregate of 596,462 shares of common stock of the Company to the individuals and in the amounts as selected and determined by the Board of Directors.  Compensation cost of $316,125 was recognized
for the three months and nine months ended September 30, 2009 at $0.53 per share, the market price of the Company’s common stock on September 29, 2009, the grant date.  As of September 30, 2009, such shares had not been issued.


Protocol of Cooperation
 
 On September 29, 2009, the Board of Directors adopted resolutions approving the Company entering into the Protocol of Cooperation dated April 21, 2009 (the “Protocol”) with Kova Cabride Tools Co. Ltd (“Kova”) and Shih Kung Ho, who introduced
Kova to the Company, pursuant to which the Company intends to issue 567,100 shares and 128,400 shares of the Company’s common stock to Kova and Shih Kung Ho, respectively.  According to the Protocol, AMLF have engaged Kevin Kao, general manager of Kova, as Chief Technical Director with decision-making authority to take charge of production, technology, and quality control of AMLF.  Kova will be responsible for training technicians and inspectors of AMLF, and assist AMLF in obtaining
the certificate of aeronautic products.  Kova will also assist AMLF in finding new customers.  Shares will be issued as restricted shares for which sale or transfer is contractually prohibited and subject to being returned to the Company based on performance condition, 40% of which will become unrestricted two years after issuance, and 20% for each year thereafter.  The term of the Protocol is two years which will extend every two years until both AMLF and Kova agree to cease the
Protocol.  As of September 30, 2009 such shares had not been issued.
  12. Options and warrants





Stock Options





In April 2002 the Company issued options to purchase 40,000 shares of common stock at $3.00 per share. The options were issued to an employee under a non qualified option plan. As of April, 2007, all options have expired. No options were issued during the nine month ended September 30, 2009.





Warrants





As a result of the exercises and expiration of warrants, the Company has no Class A and Class B warrants as of December 31, 2007.  99,320 Class B warrants, and 3,333 underwriter's B warrants expired on March 12, 2007.





On March 15, 2008, the Company issued to CCG Investor Relations Partners LLC warrants to purchase 50,000 shares to assist the Company in the execution of its investor relations strategy.





The assumptions used in calculating the fair value of warrants granted using the Black-Scholes option pricing model are as follows:





Risk-free interest rate


4.12
%Expected life of the warrants

4 yearExpected volatility


70
%Expected dividend yield


0
%








15
 
 AMERICAN METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





12. Options and warrants - continued




These warrants were recorded at the fair value of $100,796.  The Company has been expensing the fair value of these warrants over the term of the agreement.
 
 During the nine month ended September 30, 2009, the Company expensed $20,435 and deferred $0 in the consolidated financial statements.
 
 The following table summarizes the warrants outstanding as of September 30, 2009:




Warrants
outstanding


Weighted Average Exercise Price


Aggregate
Intrinsic ValueOutstanding, December 31, 2008


50,000


$
5


$
-Granted


-


$
-


$
-Forfeited/Canceled


-


$
-



-Exercised


-



-



-Outstanding, September 30, 2009


50,000


$
5


$
-





The weighted average remaining contractual life of warrants outstanding is 3 years as of September 30, 2009.





13. Current vulnerability due to certain concentrations





BJTY and AMLF’s operations are all carried out in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC's economy.





The Company’s operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in the North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company's results may
be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.





Major customers





Two major customers accounted for 68% of the net revenue for the nine month ended September 30, 2009.  These two customers were related parties of the Company, including Beijing Micro and Beijing Sande (see Note 10).  Net revenue from Beijing Micro accounted for 59% of net revenue for the nine months ended September
30, 2009.  It sells our products to users in Europe which subjects us to a substantial risk of an economic downturn to Europe.  Net revenue from Beijing Sande accounted for 9% of net revenue for the nine months ended September 30, 2009.





The Company extends credit to its customers based upon its assessment of their credit worthiness and generally does not require collateral. Credit losses have not been significant.













16
 AMERICAN METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





14. Minority interest




On September 22, 2008, the Company entered in an Equity Purchase Agreement ("the Agreement") with Wen Ge Ren (the "Seller"), a shareholder owning a 5% stock interest in Beijing Tong Yuan Heng Feng Technology Co., Ltd ("BJTY"), which was at such time 95% owned through the Company's wholly owned subsidiary American Metal Technology Group.
Pursuant to the Agreement, the Company agreed to pay to the Seller US $390,299. The Seller agreed to accept from the Company the equivalent of US $92,566.46 or RMB 629,451.91 and balance of US $297,732.57 pursuant to the issuance of such number of shares of restricted Common Stock based upon the amount equal to 75% of the average of the closing bid price of the Company's Common Stock for the five-day trading period commencing on September 18, 2008. The Company was to deliver to the Seller the cash consideration
and duly executed share certificates representing the underlying shares registered in the name of the Seller within 60 days from the date of signature. The Company delivered the cash consideration and issued 317,581 shares to the Seller prior to September 30, 2008.





15. Entity held for Disposal





On March 18, 2009, the Board of Directors authorized the Company to transfer and resell the Company’s ownership of fifty thousand (50,000) shares of common stock, representing 100% of the issued and outstanding shares of Lighting Power Global Limited, a British Virgin Island company, to the Chairman and the President of Company, resulting
in the President becoming the sole shareholder of Lighting Power Global Limited.  The Board of Directors also authorized the Company to cancel any funds due to the President for any loans made and /or expenses incurred with respect to the original acquisition and ownership of the shares of common stock of Lighting Power Global Limited.





As a result, Lighting Power Global Limited is reported as an entity held for disposal in the accompanying financials.





The components of loss from operations related to the entity held for disposal for the nine months ended September 30, 2009 is shown below:





2009Net sales

$
-Cost of sales


-Gross profit


-Operating expensesOperating and administrative expenses


68,682Total operating expenses


68,682Loss from operations


(68,682
)Non-operating expensesOther expense


149Net Loss before income tax


(68,831
)Provision for Income taxNet loss from entity held for disposal

$
(68,831
)





17
 AMERICAN METAL & TECHNOLOGY, INC. AND SUBSIDIARIES
 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





15. Entity held for Disposal - continued




Assets and liabilities for the entity held for disposal as of September 30, 2009 and December 31, 2008 are as follows:





September 30, 2009


December 31, 2008AssetsCash and cash equivalents

$
-


$
22,901Account receivable, net


-



46,575Total Current assets


-



69,476LiabilitiesOther payable


-



645Total Liabilities


-



645Net Asset Held for Disposal

$
-


$
68,831



















18





ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION.





The following discussion and analysis provides information which we believe is relevant to an assessment and understanding of our results of operations and financial condition. This discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Form 10-Q.





Statements in this Form 10-Q which are not statements of historical or current fact constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other unknown factors that could cause our actual
results to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements that explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with the terms "believes," "belief," "intends," "anticipates" or "plans" to be uncertain and forward-looking.  The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are
described from time to time in our reports filed with the Securities and Exchange Commission.





Critical Accounting Policies and Estimates





The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles and the Company's discussion and analysis of its financial condition and operating results require the Company's management to make judgments, assumptions, and estimates that affect the amounts reported in
its consolidated financial statements and accompanying notes.  Note 2 "Summary of Significant Accounting Policies" of Notes to Consolidated Financial Statements in this Form 10-Q describes the significant accounting policies and methods used in the preparation of the Company's consolidated financial statements.  Management bases its estimates on historical experience and on various other assumptions it believes to be reasonable under the circumstances, the results of which form the basis
for making judgments about the carrying values of assets and liabilities.  Actual results may differ from these estimates and such differences may be material.





Management believes the Company's critical accounting policies and estimates are those related to revenue recognition, allowance for doubtful accounts, inventory valuation, impairment of long-lived assets, foreign currency translation and income taxes. Management considers these critical policies because they are both important to
the portrayal of the Company's financial condition and operating results, and they require management to make judgments and estimates about inherently uncertain matters. The Company's senior management has reviewed these critical accounting policies and related disclosures with the Company's Board of Directors.





19





ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION - continued





Revenue recognition





The Company recognizes sales revenue at the date of shipment to customers when a formal arrangement exists, the price is fixed or determinable, the delivery is completed, no other significant obligations of the Company exist and collectability is reasonably assured.  Payments received before all of the relevant criteria for
revenue recognition are satisfied are recorded as unearned revenue.  Unearned revenue as of September 30, 2009 and December 31, 2008 amounted to $17,847 and $8,645 respectively.


The Company's revenue consists of invoiced value of goods, net of a value-added tax (VAT). No product return or sales discount allowance is made as products delivered and accepted by customers are normally not returnable and sales discount is normally not granted after products are delivered.





Allowance for doubtful accounts





The Company's policy is to maintain reserves for potential credit losses for accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy
of these reserves.  As of September 30, 2009, the Company had net accounts receivable of $427,171, net of allowance of $55,062.





Inventory valuation





Inventories are valued at the lower of cost or market value using weighted average method.  Management compares the cost of inventory with the market value and an allowance is made for writing down the inventory to its market value, if lower.





Impairment of long-lived assets





The accounting guidance provided by the Financial Accounting Standards Board ("FASB") requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated
undiscounted cash flows expected to result from the use and eventual disposition of the assets.  Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.





The Company tests long-lived assets, including property, plant and equipment and intangible assets subject to periodic amortization, for recoverability at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value.  Assets are
grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets.  The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset.  If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows,
the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value.  The estimation of fair value is generally measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments.  The Company estimates fair value based on the information available in making whatever estimates, judgments and projections are considered necessary.  There was no impairment of long-lived assets for the three
months and nine months ended September 30, 2009 and 2008.





Foreign currency translation





The reporting currency of the Company is the US dollar.  The Company uses their local currency, Renminbi (RMB), as their functional currency.  Results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate at
the end of the period.  Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of shareholders' equity.  Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.





20





ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION - continued




Accumulated other comprehensive income amounted to $1,964,987 and $1,865,844 as of September 30, 2009 and December 31, 2008, respectively.  Accumulated other comprehensive income was mainly foreign currency translation gain as of September 30, 2009.





Income taxes





Recognition of deferred tax assets and liabilities is required for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets
and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.  Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.  At September 30, 2009 and December 31, 2008, there was no significant book to tax differences.





RESULTS OF OPERATIONS





We design and manufacture high-precision casting and machined parts based on blueprints supplied by our customers. To set us apart from competition, we streamlined production cycle by providing a one stop solution to include all three integral processes in making high precision parts, which are molding design and fabrication, high
precision investment casting and CNC machining process. Our products are almost exclusively component parts for use in final products, which are either assembled or manufactured outside China or are manufactured and assembled in China and exported to foreign markets.   Our primary focus during 2008 and 2009 has been to increase demand for our castings and machined parts outside China, and we experienced significant growth in existing and new markets with existing and new customers.  During
the nine months ended September 30, 2009, as further set forth below, due to the worldwide economic slowdown, we recognized that we would experience a reduction in revenue and have been working towards reducing our operating expenses.





To capitalize on the increased demand for our products, we commenced significant capital expansion and capital improvement efforts, utilizing most of the net proceeds received from our equity financing in 2007 to expand and enhance our manufacturing capabilities. By the end of first quarter ended March 31, 2008, we completed the first
phase of the expansion plan. Phase one entails a 53,819 square foot manufacturing space, 5 turning centers and 60 CNC Mazak Lathe, 19 of which were delivered and became operational in the three months ended December 31, 2007 and the three months ended March 31, 2008 and the last of which became operational on or about April 7, 2008.  All of the new high-precision lathe machines are equal in size and capacity to the Company's existing machines.





In February 2008, we announced that we were planning to invest $3 million to build additional facilities at our Langfang manufacturing center. The new facilities marked the second phase of a multiphase plan to transform the Company’s capacity and capabilities for the foreseeable future. This second phase of our multiphase expansion
plan will add two buildings totaling approximately 10,916 square meters, increasing annual capacity for casting products by 50% to 3,600 tons from 2,400 tons.





During the first quarter of fiscal year 2009, we completed construction of the first building, which is a factory with a workspace of 6,654.84 square meters.  The factory entails  a 4,500 square meter metal casting shop, a 1,000 square meter electronic shop, a 500 square meter mould shop, and a 600 square meter
inventory and assorted sets shop.  The second building will be a 4,260.84 square meter four level staff dormitory which will accommodate 600 staff members.  We have completed the construction of the second building during the second quarter of fiscal year 2009.





As of December 31, 2008, we had 323 employees working at our factories compared to 256 at the same time in the prior year.  Prior to December 2008, the Company operated with three shifts per day for seven days each week.  Due to the global economic downturn, in December 2008, the Company reduced shifts to one shift
per day.  From January 2009 through the date of this Quarterly Report, the Company has been operating one shift per day.  As of September 30, 2009, we had 281 full time employees.





21





ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION - continued





For the three months and nine months ended September 30, 2009, the Company’s net sales dropped approximately 78% and 76% as compared to the three months and nine months ended September 30, 2008, respectively.  We experienced more than 70%
decline in our orders from our European customers.  We anticipate that during 2009 we will achieve approximately 40% of the sales which we received during the fiscal year ended December 31, 2008.  Depending upon the condition of the economy, we may experience a net loss for 2009.





On September 22, 2008, the Company entered in an Equity Purchase Agreement ("the Agreement") with Wen Ge Ren (the "Seller"), a shareholder owning a 5% stock interest in Beijing Tong Yuan Heng Feng Technology Co., Ltd ("BJTY"), which is 95% owned through the Company's wholly owned subsidiary American Metal Technology Group. Pursuant
to the Agreement, the Company paid to the Seller US $390,299. The Seller has agreed to accept from the Company the equivalent of US $92,566.46 or RMB 629,451.91 and balance of US $297,732.57 pursuant to the issuance of such number of shares of restricted Common Stock based upon the amount equal to 75% of the average of the closing bid price of the Company's Common Stock for the five-day trading period commencing on September 18, 2008. The Company delivered the cash consideration and issued 317,581 shares to the
Seller prior to September 30, 2008.





On October 31, 2008, the Board of Directors adopted resolutions, authorizing incentive compensation to key members of its management if the Company has four million ($4,000,000) dollars or more in net income for the fiscal year of 2008 excluding expenses relating to the incentive compensation, as reflected in the audited Financial Statements
of the Company as filed with the Securities and Exchange Commission. The incentive compensation shall be paid by the issuance of shares of common stock by the Company as follows: (A) 533,333 shares of common stock determined by multiplying the initial four million ($4,000,000) dollars of net income by ten (10%) percent and dividing the product by an agreed value of $0.75 per share and (B) such number of additional shares of common stock determined by multiplying the amount of net profit in excess of four million
($4,000,000) dollars by twenty (20%) percent and dividing such product by an agreed value of $0.75 per share.  As of September 30, 2009, such shares have not been issued.





On March 18, 2009, the Board of Directors authorized the Company to transfer and resell the Company’s ownership of fifty thousand (50,000) shares of common stock, representing 100% of the issued and outstanding shares of Lighting Power Global Limited, a British Virgin Island company, to the Chairman and the President of Company, resulting
in the President becoming the sole shareholder of Lighting Power Global Limited.  The Board of Directors also authorized the Company to cancel any funds due to the President for any loans made and /or expenses incurred with respect to the original acquisition and ownership of the shares of common stock of Lighting Power Global Limited.





On April 29, 2009, the Board of Directors of AMTG adopted a resolution authorizing the creation of a new Hong Kong corporation.  A Certificate of Incorporation was filed in Hong Kong on April 30, 2009 organizing American Metal Technology Group Limited (“AMTL”).  In June 2009, the Board of Directors of AMTG
adopted a resolution which authorized AMTG’s utilization of AMTL as the operating entity with respect to overseeing AMTG’s operations in Asia and authorized AMTG’s wholly owned subsidiaries in the People’s Republic of China to become wholly owned subsidiaries of AMTL effective immediately.





On July 1, 2009, AMTG entered into an amended loan agreement with an entity, 33% of which is owned by the President and CEO of the Company regarding the $1,213,536 due to the related party (see Note 10 – Due to related party).  In view of the depreciation in the U.S. dollar, AMTG shall pay to the related party the agreed
upon sum of $317,565, to compensate the related party for the loss in the value of the loan based upon the difference between the exchange rate at the time of the loan and the current exchange rate.  Such agreement was authorized and approved by our Board of Directors.  The total principal balance of $1,213,536 had been fully repaid on July 13, 2009, whereas the additional charge of $317,565 had been fully paid on August 5, 2009.




On September 29, 2009, the Board of Directors adopted resolutions which broaden the scope of the Board of Directors’ resolution dated October 31, 2008 to authorize the Company
to provide incentive compensation to key members of its management and also key employees as well as outside consultants who have provided services to the Company, selected and determined by the Board of Directors.  As set forth in the Board of Directors’ resolution dated September 29, 2009, the incentive compensation shall be paid by the issuance of an aggregate of 596,462 shares of common stock of the Company to the individuals and in the amounts as selected and determined by the Board of Directors.  Compensation
cost of $316,125 was recognized for the three months and nine months ended September 30, 2009 at $0.53 per share, the market price of the Company’s common stock on September 29, 2009, the grant date.  As of September 30, 2009, such shares had not been issued.






22





ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION - continued





On September 29, 2009, the Board of Directors adopted resolutions approving the Company entering into the Protocol of Cooperation dated April 21, 2009 (the “Protocol”) with Kova Cabride Tools Co. Ltd (“Kova”) and Shih Kung Ho, who introduced Kova to the Company, pursuant to which the Company intends to issue
567,100 shares and 128,400 shares of the Company’s common stock to Kova and Shih Kung Ho, respectively.  According to the Protocol, AMLF have engaged Kevin Kao, general manager of Kova, as Chief Technical Director with decision-making authority to take charge of production, technology, and quality control of AMLF.  Kova will be responsible for training technicians and inspectors of AMLF, and assist AMLF in obtaining
the certificate of aeronautic products.  Kova will also assist AMLF in finding new customers.  Shares will be issued as restricted shares for which sale or transfer is contractually prohibited and subject to being returned to the Company based on the performance condition of Kova under the Protocol, 40% of which will become unrestricted two years after issuance, and 20% for each year thereafter.  The term of the Protocol is two years which will extend every two years until both AMLF
and Kova agree to cease the Protocol.  As of September 30, 2009 such shares had not been issued.





Revenue




Net sales for the three months ended September 30, 2009 was $972,996, a decrease of 78% as compared to $4,353,422 for the three months ended September 30, 2008.  Gross profit for the three months ended September 30 2009, was $199,587, or approximately
20.5% of revenues, compared to $1,325,829, or 30.5% of revenues, for the same period in 2008.

Net sales for the nine months ended September 30, 2009 was $3,438,920, a decrease of 76% as compared to $14,336,775 for the nine months ended September 30, 2008.  Gross profit for the nine months ended September 30, 2009, was $890,444, or approximately
26% of revenues, compared to $4,564,369, or 32% of revenues, for the same period in 2008.

The decrease was primarily due to the more than 70% decline in orders from our European customers.  The decline in gross margin was resulted from higher fixed costs per unit allocated to cost of goods sold due to decline in sale orders during
the current period as compared to the same period prior year.


Expenses from Operations





Total expenses, comprised mostly of general and administrative expenses were $522,508 for the three-month period ended September 30, 2009, a decrease of $4,651 or 1% as compared to $643,004 for the three month period ended September 30, 2008.

Total expenses, comprised mostly of general and administrative expenses were $1,412,636 for the nine-month period ended September 30, 2009, a decrease of $58,389 or 4% as compared to $1,514,979 for the nine-month period ended September 30, 2008.

The decrease was mainly a result of decreased salaries and wages, welfare expenses, and retirement insurance premium due to lower headcount for the current period, partially offset by compensation cost of $316,125 recognized in the current quarter for 596,462 shares
granted to key members of management, key employees, as well as outside consultants who have provided services to the Company as selected and determined by the Board of Directors, as well as increases in depreciation expense resulting from the completion of the two new buildings.
 
 Interest Income and Expense





Net interest income for the three months ended September 30, 2009 was $195,300 as compared to net interest income of $206,021 for the three months ended September 30, 2008.





Net interest income for the nine months ended September 30, 2009 was $308,198 as compared to net interest income of $206,021 for the nine months ended September 30, 2008.  This increase in interest income was primarily driven by the increased balance of time deposits during fiscal year 2009.






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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION - continued





Other Expense





Other income for the three months ended September 30, 2009 was $4,000 as compared to other expense of $28,349 for the three months ended September 30, 2008.  The increase in other income was attributable to higher investment income on short-term investments for the current quarter.





Other expense for the nine months ended September 30, 2009 was $317,054 as compared to $28,349 for the nine months ended September 30, 2008.  The increase during the current periods was mainly due to incurring an additional charge for compensating a related party for its loss in the value of a loan to the
Company, based upon the difference between the exchange rate at the time of the loan was borrowed and the current exchange rate upon repaying the loan.  The total principal balance and interest of the loan had been fully repaid in July and August 2009.





Net (Loss) Income





We had net loss of $180,351 for the three months ended September 30, 2009 as compared to net income of $915,605 for the three months ended September 30, 2008.  We incurred net loss of $619,334 for the nine months ended September 30, 2009 as compared
to net income of $3,282,170 for the nine months ended September 30, 2008.  The losses observed during the current period were mainly derived from the decreases in net sales and the increase in other expense.





LIQUIDITY AND CAPITAL RESOURCES





Our cash and cash equivalents were $6,956,295 on September 30, 2009.  Through the fiscal year ended December 31, 2008, we met our liquidity needs through the revenue derived pursuant to the sale of our precision metal castings and electronic circuit boards manufactured at facilities controlled by our subsidiary corporations
in the People’s Republic of China.





Ultimately, our success is dependent upon our ability to generate revenues from the sale of precision metal casting and electronic circuit boards manufactured in facilities located in the People’s Republic of China.





During the nine-month period ended September 30, 2009, net cash provided by operating activities was $1,455,101 as compared to $1,867,589 for the nine-month period ended September 30, 2008.  Net cash used in financing activities was $1,209,532 for the nine-month period ended September 30, 2009 as compared to $908,665 net
cash provided by financing activities for the nine-month period ended September 30, 2008.





Off-Balance Sheet Arrangements





We have no off-balance sheet arrangements.





Material Commitments





None.





Purchase of Significant Equipment





None.








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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.





As of September  30, 2009 we have investments of $123,934 in marketable securities.  During the three months and nine months ended September 30, 2009, we recorded a net gain of $12,016 and a net loss of $6,635 on the disposal of such securities, respectively.  Although these investments represent less than
one (1%) percent of our total assets, and, accordingly, do not represent a significant component of our assets, there can be no assurance that there will not be significant fluctuations in the equity markets that reduce the value of these investments including, but not limited to, a total loss of the value of these investments.





We require substantial amounts of raw materials in our operations, including metals and energy. We purchase all of our raw materials from outside sources, and our metals purchases are from a select group of suppliers.  As a result, our purchases of metals are concentrated with a few suppliers and any interruptions in their ability
to supply these materials could have a material adverse effect on our financial position, results of operations and/or cash flows. The availability and price of raw materials may also be subject to shortages in supply, suppliers’ allocations to other purchasers, and interruptions in production by suppliers (including by reason of labor strikes or work stoppages at our suppliers’ plants).  In addition, although we are subject to changes in exchange rates and worldwide price levels of raw
materials, our contracts with our suppliers provide that we are not responsible for any 3-5% increase in commodity prices, including price increases resulting from currency fluctuations.  Our management has in the past and intends in the future to pass any additional increases in price to our customers.





Our subsidiary corporations in the People’s Republic of China conduct business in the local currency and therefore, we are exposed to foreign currency exchange risk resulting from fluctuations in foreign currencies. This risk could adversely impact our results and financial condition. We believe our current exposure to fluctuations
in foreign currency exchange rates is immaterial, based upon the aforementioned provisions with respect to price increases found in our contracts with our suppliers. We have not entered into any foreign currency exchange and option contracts to reduce our exposure to foreign currency exchange risk and the corresponding variability in operating results as a result of fluctuations in foreign currency exchange rates.








ITEM 4T. CONTROLS AND PROCEDURES





Our principal executive and financial officer, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)), has concluded that as of the fiscal quarter ended September 30, 2009 our disclosure controls and procedures were effective
to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is accumulated and communicated to our management, including, our Chief Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure, and (ii) is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.





There have been no changes in our internal control over financial reporting identified during the period covered by this report which have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.










PART II - OTHER INFORMATION





ITEM 1. LEGAL PROCEEDINGS.





We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest
adverse to our interest.








ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.





None.








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ITEM 3. DEFAULTS UPON SENIOR SECURITIES





None.








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





None.








ITEM 5. OTHER INFORMATION





None.








ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.





(A) Exhibits





Exhibit Number
Description





31
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002





32
Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002








(B) Reports on Form 8-K





None.











SIGNATURES





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





AMERICAN METAL & TECHNOLOGY, INC.(Registrant)Date: November 16, 2009
By:
/s/ Chen GaoChen GaoTitle: President and Chief Executive Officer














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