The following discussion should be read in conjunction with the information contained in our unaudited consolidated financial statements and the notes thereto appearing elsewhere herein and in conjunction with the Management's Discussion and Analysis set forth in our Annual Report on Form 10-K for the year ended December 31, 2008.

We are on a calendar year; as such the three months period ending June 30, is our second quarter. The year ended December 31, 2008 is referred to as "2008" and the coming year ending December 31, 2009 is referred to as "2009".

Our Business

We import, sell and distribute metal ores and non-ferrous metals to the metal refinery industry in China. We obtain raw materials from global suppliers in Brazil, India, South America, Oman, Turkey, Libya, Nigeria, Indonesia, and the Philippines. We distribute these raw materials to the metal refinery industry within China including but not limited to iron ore, coal, chrome ore, nickel ore, copper ore, scrap metal, and manganese ore.

We are in the process of constructing a scrap metal recycling facility in the Banqiao Industrial Zone of Lianyungang Economic Development Zone in the Jiangsu province of the PRC. Upon completion of our planned metal recycling facility, we will seek to recycle automobiles, machinery, building materials, dismantled ships and various other scrap metals and will sell and distribute recycled scrap metal to the metal refinery industry utilizing our existing network of metal ore customers in the PRC. We expect to commence recycling operations in the fourth quarter of 2009.

China is the largest developing country in the world, and the demand for steel has been growing steadily over the past decade as the country continues to experience an industrial revolution. Management estimates domestic steel production should continue to witness significant growth as China continues to grow. The steel industry is an important basic industry of the national economy of China, and plays a vital role in the recent industrialization efforts of the country. As witnessed over the last decade, the production of steel has increased dramatically throughout the world, and particular in China. According to the www.worldsteel.org, in 2008 worldwide crude steel production amounted to 1,330 million metric ton ("mmt"). This is a decrease of 1.2% compared to 2007. 2008 is the second consecutive year that world steel production has been over 1,300 mmt. China's crude steel production in 2008 reached 502 mmt, an increase of 2.6% from 2007. Production volume in China has more than doubled within five years, from 222 mmt in 2002. China's share of world steel production continued to grow in 2008 producing 38% of world total crude steel.

We believe recycling operations will become strong growth drivers worldwide as natural resources continue to be depleted and the amount of unprocessed scrap metal becomes available as a result of increases in consumer demand for products made from steel that eventually are recycled. We intend to invest substantially all of the $6.6 million in net proceeds we raised in our private offering of our common stock and warrants we closed in August 2008 to fund the construction of our planned scrap metal recycling facility beginning in the third quarter of 2008. This planned investment is in addition to the approximately $3 million of investment capital we have expended on this project in 2007 and 2008. Further on August 1, 2009 we received approval for a $13.2 million loan from the Bank of China for the purpose of financing the construction of this recycling facility.

Our Performance

For the three and six months ended June 30, 2009, our net revenues increased approximately 73% and 22%, respectively, over the comparable periods in 2008. Our gross profit margin increased for the three and six months ended June 30, 2009 to approximately 18% and 17%, respectively compared to 6.7% and 9.2% during the three and six months ended June 30, 2008, respectively. Our performance during this quarter is not sustainable due to the nature of one transaction with a gross profit margin of 43% as discussed later in this section. Our net income increased approximately 82% and 19% for the three and six months ended June 30, 2009, respectively over the comparable periods in 2008. Our total assets increased 32% in comparison to December 31, 2008, which was mainly due to the construction of our scrap metal recycling facility.

Our Outlook

Our performance for the quarter was an improvement in comparison to our first quarter of 2009 and was mainly due to a one time sales transaction during the current quarter. We cannot guarantee that this increase to be sustainable in the future. We have witnessed a decrease in our net revenues prior to this quarter due to the current economic slowdown; therefore, we continue our efforts to improve our performance and operate more efficiently to be in the position to capitalize when a global economic recovery occurs.

In November 2008, the Chinese government announced a $586 billion domestic economic stimulus program aimed at bolstering domestic economic activity. The two-year program includes tax rebates, spending in housing, infrastructure, agriculture, health care and social welfare, and a tax deduction for capital spending by companies. We expect to see a benefit to the Chinese economy from this stimulus program. The Chinese government has been very supportive and a series of economically beneficial policies have recently been implemented. Based on these newly implemented policies we are beginning to see some signs of economic recovery. However, in the short-term, it remains to be seen whether domestic consumption can compensate for slower export growth, and the impact this will have on our revenues through the balance of this year. Various types of minerals have witnessed a significant rebound in pricing, such as iron ore which has risen by approximately 60%, chromium ore which has risen by approximately 50%, and nickel ore has also benefitted by the recent increase in mineral prices. We have also recognized a rapid increase in trading volumes and the trading business has been more active as the year has gone on. In our other business segment, renewable resources, we have witnessed a relatively large increase in iron ore prices as we have seen iron ore prices at the beginning of 2009 at approximately $280USD per ton, and during the quarter ending June 30, 2009 reach as high as $411USD per ton. Our company anticipates that we will being recycling scrap in September 2009.

Presentation of Financial Statements

The presentation of the statements of operations included in Part 1, Item 1 in this Form 10-Q have been modified to allow for the reporting of deductions from net income to arrive at income (loss) applicable to common stockholders. Items reflected in our comprehensive income for the periods reported are now included in our financial notes to the unaudited financial statements included in this Form 10-Q.

RESULTS OF OPERATIONS

The table below summarizes the consolidated operating results for the three and
six months ended June 30, 2009 and 2008.

                                        For the Three Months                                 For the Six Months
                                           Ended June 30,                                      Ended June 30,
                                   2009                      2008                      2009                      2008


Revenues                   $ 22,537,814              $ 13,014,476              $ 27,895,672              $ 22,789,813
Cost of revenues             18,415,683       82 %     12,137,404       93 %     23,262,918       83 %     20,683,123       91 %
Gross profit                  4,122,131       18 %        877,072        7 %      4,632,754       17 %      2,106,690        9 %

Total operating expenses        671,063        3 %        145,432        1 %      1,004,997        4 %        372,954        2 %
Operating (loss) income       3,451,068       15 %        731,640        6 %      3,627,757       13 %      1,733,736        8 %

Net Revenues

Net revenues for the three and six months ended June 30, 2009, were $22.5 million and $27.1 million, respectively, this represents an increase of $9.5 million and $5.1 million over the three and six months ended June 30, 2008, respectively. Net revenues for the quarter increased due to a one time transaction that was in the amount of approximately $10.6 million. Excluding this transaction, our net revenues would have decreased for the three and six months periods in comparison to the prior year.

Cost of Revenues

Cost of revenues for the three and six months ended June 30, 2009 were $18.4 million and $23.3 million, respectively, compared to $12.1 million and $20.7 million during the three and six months ended June 30, 2008, respectively. Our cost of revenues as a percentage of revenues during the three and six months ended June 30, 2009 were approximately 82% and 83%, respectively, compared to 93.3% and 90.8% for the comparable periods in 2008. Our gross profit margin increased for the three and six months ended June 30, 2009 by 11% and 8%, respectively over the comparable periods in 2008. The gross profit margin increase during the current quarter may not be sustainable due to the nature of one transaction with a gross profit margin of 43%.

Total Operating Expenses

Operating expenses for the three and six months ended June 30, 2009 were $671,063 and $1,004,997, respectively, compared to $145,432 and $372,954 for the three and six months ended June 30, 2008, respectively. Operating expenses as a percentage of revenues were 3.1% and 3.7% for the three and six months ended June 30, 2009, respectively compared to 1.1% and 1.6% for the three and six months ended June 30, 2008, respectively. The increase in our operating expense was primarily attributable to higher selling expenses and an increase in our general and administration costs due to increased sales. Our selling expenses increased by $364,204 and $380,883 over the prior three and six months, respectively. Our general and administrative cost increased by $161,427 and $251,160 over the prior three and six months, respectively.

Other Income (expense)

Total other expense for the three and six months ended June 30, 2009 were $81,724 and $129,987, respectively. During the three and six months ended June 30, 2008, we had other income of $1,245,218 and $1,239,388, respectively. During the three months ended June 30, 2008, we received a one time gain of $1.2 million related to a contract termination.

Interest expense was $119,120 and $137,156 for the three and six months ended June 30, 2009, respectively, compared to $97,336 for the three and six months ended June 30, 2008. Other expenses amounted to $66,945 and $97,172 for the three and six months ended June 30, 2009, respectively. These expenses were partially offset by interest income of $45,018 and income from import and export agency of $47,244 for the three months ended June 30, 2009. During the three and six months ended June 30, 2008, we recorded other income of $115,612 and $122,712, respectively.

Income tax benefit (expense)

Income tax benefit for the three months ended June 30, 2009 was $716 resulting in a year to date income tax expense of $74, compared to our income tax expense of $127,312 and $385,965 for the three and six months ended June 30, 2008, respectively. Armco is exempt from Hong Kong income taxes since none of its income was from Hong Kong sources and no provision for income taxes has been made. Armco's statutory tax rate is 17.5% and is subject to Hong Kong SAR income taxes as of January 1, 2008.

Net income (loss)

For the three and six months ended June 30, 2009 our net income amounted to $3,370,060 and $3,497,696, respectively, representing an increase of approximately 68% and 19% over the comparable periods in 2008. Excluding the one time sales transaction discussed above, our decrease in net income is attributable to the reduced revenues as a result of the global economic slowdown mentioned herein.

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. At June 30, 2009 and December 31, 2008 we had cash and cash equivalents of $801,120 and $3,253,533, respectively. At June 30, 2009 our working capital was $6.2 million as compared to $10.7 million at December 31, 2008. We have historically met our liquidity requirements utilizing internally generated cash derived from our operations.

We have invested approximately $9.0 million for construction and deposits on equipments for our scrap metal recycling facility. The source of funds for this project is the use of all net proceeds from our 2008 offering and the $13.2 million loan from the Bank of China to fund the construction of our planned scrap metal recycling facility which began during the first quarter of 2009. We used the balance of the net offering proceeds for working capital to expand our metal ore distribution business. We will need, however, to secure additional investment capital and/or bank and vendor financing to provide sufficient funds to complete this project. There is no assurance, however, that we will be successful in obtaining the additional financing that we require or that such financing may not be on terms deemed to be desirable to our management. In the event we are successful, there is no assurance that such investment will result in enhanced operating performance. Unless we can obtain additional financing, we will be unable to complete construction of our planned scrap steel recycling project. Any inability on our part to secure additional financing during 2009, as needed, will have a material adverse effect on our growth plans.

                                                                      Increase /
                                       2009             2008          (Decrease)            %

Cash                               $    801,120     $  3,253,533     $  (2,452,413 )         -75.4 %
Pledged deposits                      1,723,980                -                nm              nm
Accounts receivable, net             15,568,549       16,722,307        (1,153,758 )          -6.9 %
Inventories, net                      1,968,646          197,402         1,771,244           897.3 %
Advance on purchases                  2,563,809        3,680,872        (1,117,063 )         -30.3 %
Deposits on future construction       2,210,493                0         2,210,493              nm
Total current assets                 25,520,837       24,233,566         1,287,271             5.3 %
Property and equipment, net          10,510,443        2,377,816         8,132,627           342.0 %
Land use rights, net                  2,102,691        2,208,902          (106,211 )          -4.8 %
Total assets                         38,133,971       28,820,284         9,313,687            32.3 %

Loans Payable                                 -        2,914,345                nm              nm
Accounts payable                     15,604,831        6,694,534         8,910,297           133.1 %
Customer deposits                     2,306,681        2,613,653          (306,972 )         -11.7 %
Total current liabilities            19,531,034       13,531,338         5,999,696            44.3 %
Total liabilities                    19,531,034       13,531,338         5,999,696            44.3 %

A majority of our cash reserves, $786,549 or approximately 98% at June 30, 2009, is held in the form of RMB held in bank accounts at financial institutions located in the PRC. Cash held in banks in the PRC is not insured. The value of cash on deposit in China at June 30, 2009 has been translated based on the exchange rate as of June 30, 2009. In 1996, the Chinese government introduced regulations which relaxed restrictions on the conversion of the RMB; however restrictions still remain, including but not limited to restrictions on foreign invested entities. Foreign invested entities may only buy, sell or remit foreign currencies after providing valid commercial documents at only those banks authorized to conduct foreign exchanges. Furthermore, the conversion of RMB for capital account items, including direct investments and loans, is subject to PRC government approval. Chinese entities are required to establish and maintain separate foreign exchange accounts for capital account items. We cannot be certain Chinese regulatory authorities will not impose more stringent restrictions on the convertibility of the RMB, especially with respect to foreign exchange transactions. Accordingly, cash on deposit in banks in the PRC is not readily deployable by us for purposes outside of China.

Our current assets at June 30, 2009 increased $1.3 million, or approximately 5.3%, from December 31, 2008; this reflects increases in current asset items including pledged deposits, inventories, prepayments and other current assets. These increases were partially offset by a decrease in cash, accounts receivable and advance on purchases.

Our total and current liabilities increased by approximately $6.0 million, or 44%, at June 30, 2009 from December 31, 2008; this reflects an increase in accounts payable and accrued expenses which was partially offset by a decrease in loans payable, customer deposits, and taxes payable.

Our accounts receivable decreased to $15.6 million compared to $16.7 million as of our prior year end. This 7% decrease is mainly due to efficient collection efforts.

Inventories increased $975,288 at June 30, 2009 from the prior year end. This occurred due to timing differences between our receipt of product and shipment to our customers.

Our prepayment and other current assets increased $304,788 as of June 30, 2009 over our prior year end these were due to purchases of supplies and materials for operations.

Advances on purchases decreased $1.1 million, or approximately 30%, and consisted of prepayments to vendors for merchandise, security and deposits. These advances on purchases is customary in our business and helps us secure raw materials at lower than prevailing market prices, thereby increasing our gross profit margins.

Our accounts payable increased $8.9 million or approximately 133% over the prior year end, and accrued expenses increased $0.8 million over the prior year end. These increases were partially offset by the decrease in customer deposits and taxes payable of approximately 12% and 54%, respectively. Additionally, we had no loans payable as of June 30, 2009 as compared to the balance of $2,914,345 as of December 31, 2008.

Statement of Cash Flows

As of June 30, 2009, our cash totaled $801,120 and consisted of $17.1 million provided by operating activities, $12.0 million used in investing activities, and $7.5 million used in financing activities. Cash at June 30, 2008 of $442,360 consisted of $555,914 used in operating activities, $171,740 provided by investing activities, and $567,933 provided by financing activities.

Cash (Used in) Provided by Operating Activities

For the six months ended June 30, 2009 cash provided by operations of $17.1 million was mainly comprised of our net income of $3.5 million, an increase in accounts payable of $8.9 million, a decrease in inventories of $3.2 million, and a decrease on advanced on purchases of $1.1 million. These were partially offset by a decrease in taxes payable of $555,156, an increase on prepayments and other assets of $318,882, and a decrease in customer deposits of $298,422.

For the six months ended June 30, 2008 cash used in operations of $555,914 included an increase in inventories of approximately $6.4 million, prepayments of other assets of $463,238, and an increase in advances on purchases of $2.2 million. These decreases in cash funds were partially offset by an increase in accounts payables of approximately $3.3 million, deposits from customers of $1.1 million, decrease in accounts receivables of approximately $772,000, and an increase in net income of $2.6 million compared to the six months ended June 30, 2007.

Cash used in Investing Activities

For the six months ended June 30, 2009 cash used in investing activities of $12.0 million was due to purchases of property and equipments and construction projects during the period of $8.2 million, deposits for future construction of $2.2 million, and payments made towards pledged deposits of $1.7 million.

For the six months ended June 30, 2008 cash provided by investing activities of $171,740 was mainly due to proceeds from released pledged deposits of $164,572, and cash received from reverse acquisition of $11,506, partially offset by purchases of property and equipments of $4,338.

Cash provided by Financing Activities

For the six months ended June 30, 2009 cash used in financing activities of $7.5 million, which was mainly due to repayments of loan payable of $2.9 million, and payments to related parties of $5.1 million, these were partially offset by proceeds from the exercise of warrants of $435,000, and proceeds from forward foreign exchange contracts of $103,071.

For the six months ended June 30, 2008 cash provided by financing activities of $567,933 was due to proceeds from loans of approximately $1,487,265, offset by payments of $919,332 to decrease due to Mr. Kexan Yao, our Chief Executive Officer.

Off Balance Sheet Arrangements

Under SEC regulations, we are required to disclose our off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. An off-balance sheet arrangement means a transaction, agreement or contractual arrangement to which any entity that is not consolidated with us is a party, under which we have:

- 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.

We do not have any off-balance sheet arrangements that we are required to disclose pursuant to these regulations. In the ordinary course of business, we enter into operating lease commitments, purchase commitments and other contractual obligations. These transactions are recognized in our financial statements in accordance with generally accepted accounting principles in the United States.

Critical Accounting Policies

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

A summary of significant accounting policies is included in Note 2 to the unaudited consolidated financial statements included in this quarterly report. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our Company's operating results and financial condition.

Recently Issued Accounting Pronouncements

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

A summary of significant accounting policies is included in Note 2 to the unaudited consolidated financial statements included in this quarterly report. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our Company's operating results and financial condition.

Recently issued accounting pronouncements

On June 5, 2003, the United States Securities and Exchange Commission ("SEC") adopted final rules under Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404"), as amended by SEC Release No. 33-8934 on June 26, 2008. Commencing with its annual report for the year ending December 31, 2009, the Company will be required to include a report of management on its internal control over financial reporting. The internal control report must include a statement

· 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.

Furthermore, in the following fiscal year, it is required to file the auditor's attestation report separately on the Company's internal control over financial reporting on whether it believes that the Company has maintained, in all material respects, effective internal control over financial reporting.

In March 2008, the FASB issued FASB Statement No. 161 "Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133" ("SFAS No. 161"), which changes the disclosure requirements for derivative instruments and hedging activities. Pursuant to SFAS No.161, Entities are required to provide enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items . . .