Results of Operations
Chaoyang Liaogang commenced substantial production activity in the fall of 2006. Through March 31, 2007 its revenues consisted
only of sales of small amounts of steel incidental to its development activities. Most of the $1,162,555 in revenue that Chaoyang Liaogang recorded for the year ended September 30, 2007 were realized from one large sale of special steel and one variety of die steel to one distributor, Shenyang Geshite Special Steel Co., Ltd., which is located nearby in the capital of Liaoning Province. In fiscal 2008, we developed several other customers for our products. For the year ended September 30, 2008 we realized $2,253,816 in revenue, compared to $ 1,162,555 that we realized in the year ended September 30, 2007.
Our growth was reversed during the year ended September 30, 2009. As a result of the global recession, construction activities in
China diminished, and so demand for our products waned. In addition we have negative working capital, which prevents us from financing large orders for our products. As a result, during the year ended September 30, 2009 we realized only $264,924 in revenue, an 88% reduction from the prior fiscal year. This situation continued in our 2010 fiscal year. For the nine months ended June 30, 2010, our net sales have totaled only $74,619, compared to $496,957 in the nine months ended June 30, 2009. On those fiscal 2010 sales we realized a gross margin of only 18%, since we were reselling steel acquired from other manufacturers. In the third quarter we recorded no sales due to interrupted production as we were testing on our machinery.
