U. S. 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 ended ~~June~~December 3031, 2009

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

For the transition period from _____ to _____

Commission File No. 0-30058

AMERICAN WENSHEN STEEL GROUP, INC.

(Name of ~~Small~~Registrant ~~Business~~as ~~Issuer~~Specified in its Charter)

Delaware	04-2621506
(State or Other Jurisdiction of incorporation or organization)	(I.R.S. Employer I.D. No.)

c/o ~~American~~Warner ~~Union~~Technology ~~Securities,~~& ~~Inc~~Investment Corp., 100 Wall Street, 15 th Floor, New York, NY 10005

(Address of Principal Executive Offices)

Issuer's Telephone Number: (212) 232-0120

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __

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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) Yes ___ No _____

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

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 ___ Accelerated filer ___Non-accelerated filer ___ Smaller reporting company X

Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date:

~~August~~February 1211, ~~2009~~2010

Common Stock: 20,478,400 shares

~~TABLE~~ITEM ~~OF CONTENTS Page PART I~~1. FINANCIAL ~~INFORMATION~~STATEMENTS

Item 1. Financial Statements	3
AMERICAN WENSHEN STEEL GROUP, INC. AND SUBSIDIARIES
Consolidated Balance Sheets as of June 30, 2009 (Unaudited) and September 30, 2008	3
CONSOLIDATED BALANCE SHEETS
Consolidated Statements of Operations for the three and nine months ended June 30, 2009 and 2008 (Unaudited)	4
(Unaudited)
Consolidated Statements of Cash Flows for the nine months ended June 30, 2009 and 2008 (Unaudited)	5
		December 31, 2009			September 30, 2009
Notes to Consolidated Financial Statements	6-18
ASSETS
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation	19
Current Assets
Item 3. Quantitative and Qualitative Disclosures About Market Risks	25
Cash and cash equivalents		$	34,932		$	39,480
Item 4. Evaluation of Controls and Procedures	25
Accounts receivable, net			26,214			43,476
PART II. OTHER INFORMATION
Other receivable, net			230,313			231,757
Item 1. Legal Proceedings	26
Inventory, net of reserve for obsolescence			223,247			222,381
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	26
Total Current Assets			514,706			537,094
Item 3. Defaults Upon Senior Securities	26
Property, Plant & Equipment, net			425,886			447,792
Item 4. Submission of Matters to a Vote of Security Holders	26
Intangible Assets, net			438,776			460,688
Total Assets		$	1,379,368		$	1,445,574
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable and accrued expense		$	249,562		$	246,212
Other payable			85,940			79,487
Tax payable			151,071			152,341
Due to related party			977,063			989,086
Total Current Liabilities			1,463,636			1,467,126
Stockholders' Equity / (Defiicit)
Preferred stock
Class A, authorized shares 1,000,000 $0.001 par value; none outstanding			-			-
Class B, authorized shares 20,000,000, no par value; none outstanding			-			-
Common stock
$0.001 par value, 100,000,000 shares authorized 20,478,400 shares issued and outstanding			20,478			20,478
Additional paid-in capital			9,029,886			9,029,610
Other comprehensive income			890,262			890,252
Accumulated deficit			(10,024,894	)		(9,961,892	)
Total Stockholders' deficit			(84,268	)		(21,552	)
Total Liabilities and Stockholders' Deficit		$	1,379,368		$	1,445,574
The accompanying notes are an integral part of these consolidated financial statements

Item 5. Other Information 26 Item 6. Exhibits 26 Signatures 26

AMERICAN WENSHEN STEEL GROUP, INC. AND SUBSIDIARIES
AMERIAN WENSHEN STEEL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
	June 30, 2009			September 30, 2008
	For the three months ended
ASSETS
	December 31,
Current Assets
	2009			2008
Cash and cash equivalents	$	126,661		$	105,719
Net sales	$	3,511		$	73,022
Accounts receivable, net		166,785			138,056
Cost of sales		2,809			82,007
Other receivable, net		210,655			214,732
Gross profit (loss)		702			(8,985	)
Inventory, net of reserve for obsolescence		646,527			541,270
Operating expenses
Advance to suppliers		1,769			898,426
Selling and marketing		13			6,848
Current assets of the entity spun off		-			255,036
General and administrative		63,687			611,645
Total Current Assets		1,152,397			2,153,239
Total operating expenses		63,701			618,493
Property, Plant & Equipment, net		470,173			537,133
Loss from operations		(62,998	)		(627,478	)
Intangible Assets, net		482,118			552,291
Non-operating expenses
Non-Current assets of the entity spun off		-			195,630
Other expenses		3			27
Total Assets	$	2,104,688		$	3,438,293
Net loss from continuing operations before income tax		(63,002	)		(627,505	)
LIABILITIES AND STOCKHOLDERS' EQUITY
Income tax		-			-
Current Liabilities
Net loss from continuing operations		(63,002	)		(627,505	)
Accounts payable and accrued expense	$	337,680		$	218,075
Loss from the opertaion of the entity spun off		-			(153,381	)
Other payable		67,565			85,315
Net Loss		(63,002	)		(780,886	)
Tax payable		59,578			162,117
Other Comprehensive Income (loss)
Due to related party		1,026,901			961,666
Foreign currency translation gain (loss)		10			(9,409	)
Current liability of the entity spun off		-			479,773
Net comprehensive loss	$	(62,992	)	$	(790,295	)
Total Current Liabilities		1,491,724			1,906,947
Net loss per share from continuing operations	$	(0.00	)	$	(0.03	)
Stockholders' Equity
Net loss per share from entity spun off	$	0.00		$	(0.01	)
Preferred stock
Basic & Diluted Loss per share*	$	(0.00	)	$	(0.04	)
Class A, authorized shares 1,000,000 $0.001 par value, 434,377 shares issued and outstanding		-			-
Basic and dilutive weighted average shares outstanding*		20,478,400			20,477,835
Class B, authorized shares 20,000,000, no par value; none outstanding		-			-
*Basic and diluted shares are the same because there are no anti dilutive effect
Common stock
The accompanying notes are an integral part of these unaudited consolidated financial statements
($0.001 par value, 100,000,000 shares authorized 20,487,400 (post-split) shares issued and outstanding		20,478			20,478
Additional paid-in capital		9,029,334			8,896,463
Other comprehensive income		890,102			902,850
Accumulated deficit		(9,326,950	)		(8,288,445	)
Total Stockholders' Equity		612,964			1,531,346
Total Liabilities and Stockholders' Equity	$	2,104,688		$	3,438,293
The accompanying notes are an integral part of these consolidated financial statements

AMERIAN WENSHEN STEEL GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the three month periods ended For the nine month periods ended June 30, June 30, 2009 2008 2009 2008 Net sales $ 395,583 $ 1,684,584 $ 496,957 $ 2,294,834 Cost of sales 296,005 1,123,354 414,900 1,473,137 Gross profit 99,578 561,230 82,057 821,697 Operating expenses Selling and marketing 3,941 19,491 16,086 22,128 General and administrative 333,893 74,992 1,001,320 949,480 Impairment of Goodwill 1,176,591 - 1,176,591.00 Total operating expenses 337,834 1,271,074 1,017,406 2,148,199 Loss from operations (238,256 ) (709,844 ) (935,349 ) (1,326,502 ) Non-operating expenses Other expenses 18 84 49 127 Net loss from continuing operations before income tax (238,274 ) (709,760 ) (935,398 ) (1,326,629 ) Income tax - 125,185 - 161,271 Net loss from continuing operations (238,274 ) (834,945 ) (935,398 ) (1,487,900 ) Income (Loss) from the entity spun off 0 (1,540,357 ) (103,107 ) (1,950,268 ) Net Loss (238,274 ) (2,375,302 ) (1,038,505 ) (3,438,168 ) Other Comprehensive Income (loss) Foreign currency translation gain (loss) 379 26,957 (12,748 ) 224,849 Net comprehensive loss $ (237,895 ) $ (2,348,345 ) $ (1,051,253 ) $ (3,213,319 ) Net loss per share from continuing operations $ (0.012 ) $ (0.041 ) $ (0.046 ) $ (0.073 ) Net loss per share from entity spun off $ 0.000 $ (0.075 ) $ (0.005 ) $ (0.095 ) Basic & Diluted Loss per share* $ (0.012 ) $ (0.116 ) $ (0.051 ) $ (0.168 ) Basic and dilutive weighted average shares outstanding* 20,477,835 20,477,835 20,477,835 20,477,835 *Basic and diluted shares are the same because there are no anti dilutive effect The accompanying notes are an integral part of these consolidated financial statements 4 AMERICAN WENSHEN STEEL GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTH ENDED JUNE 30, 2009 AND 2008 (UNAUDITED) 2009 2008 CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $ (1,038,505 ) $ (3,438,168 ) Adjustments to reconcile net loss from operations to net cash provided by operating activities: Depreciation and amortization 128,362 126,037 Bad debt 888,110 794,845 Stock option expenses 829 552 Impairment of goodwill - 1,176,591 Changes in assets and liabilities: (Increase) / decrease in assets: Accounts receivable (38,638 ) (405,280 ) Other receivable (533 ) (298,760 ) Inventories (109,570 ) (474,366 ) Other current assets 1,116 (870,655 ) Increase / (decrease) in current liabilities: Accounts payable and accrued expenses 121,165 1,112,818 Other payable (7,738 ) 63,439 Tax payable (101,213 ) 490,868 Net cash provided by (used in) operating activities from continuing operations (156,613 ) (1,722,079 ) Net cash provided by operating activities of the entity spun off 137,665 1,869,144 Net cash provided by operating activities (18,948 ) 147,065 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment - (2,724 ) Net cash used in investing activities from continuing operations - (2,724 ) Net cash provided by (used in) investing activities of the entity spun off (34,558 ) 81,124 Net cash provided by (used in) investing activities (34,558 ) 78,400 CASH FLOWS FROM FINANCING ACTIVITIES Payment to return loans from related parties 75,292 (127,013 ) Net cash used in financing activities from continuing operations 75,292 (127,013 ) Net cash provided by (used in) financing activities of entity spun off - - Net cash used in financing activities 75,292 (127,013 ) Effect of exchange rate on cash & cash equivalent (843 ) 6,064 Net increase (decrease) in cash & cash equivalents 20,942 104,516 Cash & cash equivalents - beginning of year 105,719 15,664 Cash & cash equivalents - end of year $ 126,661 $ 120,180 SUPPLEMENTAL DISCLOSURES: Cash paid during the year for: Interest $ - $ - Income taxes $ - $ - The accompanying notes are an integral part of these unaudited consolidated financial statements 5 AMERICAN WENSHEN STEEL GROUP, INC. AND SUBSIDIARIES

AMERICAN WENSHEN STEEL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31, 2009 AND 2008
(UNAUDITED)

	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss	$	(63,002	)	$	(780,886	)
Adjustments to reconcile net loss from operations to net cash
provided by (used in) operating activities:
Depreciation and amortization		44,503			44,221
Bad debt		-			567,735
Reserve for inventory		-			-
Stock option expenses		276			276
Impairment of goodwill		-			-
Changes in assets and liabilities:
(Increase) / decrease in assets:
Accounts receivable		17,268			47,130
Other receivable		1,458			(816	)
Inventories		(853	)		(34,366	)
Other current assets		-			2,771
Increase / (decrease) in current liabilities:
Accounts payable and accrued expenses		3,337			2,880
Other payable		6,449			(1,342	)
Tax payable		(1,279	)		(3,059	)
Net cash provided by (used in) operating activities from continuing operations		8,157			(155,456	)
Net cash provided by operating activities of the entity spun off		-			272,781
Net cash provided by operating activities		8,157			117,324

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(625	)		-
Net cash used in investing activities from continuing operations		(625	)		-
Net cash provided by (used in) investing activities of the entity spun off		-			(119,400	)
Net cash used in investing activities		(625	)		(119,400	)

CASH FLOWS FROM FINANCING ACTIVITIES
Payment (to) / Proceed (from) return loans from related parties		(12,083	)		19,470
Net cash provided by financing activities from continuing operations		(12,083	)		19,470

Effect of exchange rate on cash & cash equivalent		3			(460	)

Net increase/(decrease) in cash & cash equivalents		(4,548	)		16,934

Cash & cash equivalents - beginning of year		39,480			105,719

Cash & cash equivalents - end of year	$	34,932		$	122,653

SUPPLEMENTAL DISCLOSURES:
Cash paid during the year for:
Interest	$	-		$	-
Income taxes	$	-		$	-

The accompanying notes are an integral part of these consolidated financial statements

AMERICAN WENSHEN STEEL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. ORGANIZATION AND DESCRIPTION OF BUSINESS

American Wenshen Steel Group, Inc. (formally known as China Software Technology Group Co. Ltd.) ("we", "us", or the "Company") through its operating subsidiary, Chaoyang Liaogang Special Steel Co., Ltd. ("Chaoyang Liaogang"), a corporation organized under the laws of The People's Republic of China, is engaged in the business of manufacturing tungsten carbide steel, stainless steel, and die steel. All of Chaoyang Liaogang's business is currently in China. On October 9, 2007, the Company changed its name to American Wenshen Steel Group, Inc.

On Nov 14, 2006, American China Software Technology Group Co., Ltd (China Software) re-domiciled from Canada to Delaware.

American Wenshen Steel Group, Inc., (“American Wenshen”), a wholly owned subsidiary of the Company was incorporated on August 29, 2006 in the state of Delaware. It currently has no operations. American Wenshen owns all of the registered capital of Liaoning Wenshen Steel Mold Co. Ltd. (“Liaoning Wenshen”). Liaoning Wenshen is a wholly owned foreign entity incorporated in Shenyang, Liaoning Province, China in January, 2007.

Liaoning Wenshen owns all the registered capital of Chaoyang Liaogang Special Steel Co., Ltd. (“Chaoyang Liaogang Steel Co.”) which is established in Chaoyang City, Shenyang Province, China in October 2004

On July 30, 2007 China Software acquired 100% of the equity in American Wenshen pursuant to a merger agreement dated June 29, 2007 (“American Wenshen Merger”). Pursuant to the acquisition of American Wenshen, it became the wholly owned subsidiary of China Software. The former shareholders of American Wenshen received 434,377 shares of Series A Preferred Stock of China software, which were convertible into 19,305,645 shares of common stock in exchange for all the issued and outstanding shares of American Wenshen. The Series A Preferred stock represented 97.58% of the voting power of the Company.

The acquisition of American Wenshen iswas accounted for as a reverse acquisition under the purchase method of accounting since the shareholders of American Wenshen obtained control of the consolidated entity. Accordingly, the merger of the two companies iswas recorded as a recapitalization of American Wenshen, with American Wenshen being treated as the continuing operating entity. The ~~historical financial statements presented herein will be those of American Wenshen. The~~ continuing entity retained September 30 as its fiscal year end.

Subsequent to the American Wenshen Merger, the organization chart is as follows:

Prior to the American Wenshen Merger, China Software assigned all of its pre-Merger business and assets to HXT Holdings, Inc., its wholly-owned subsidiary, and HXT Holdings assumed responsibility for all of the liabilities of China Software that existed prior to the Merger. It was also agreed that HXT Holdings, Inc. would file a registration statement with the Securities and Exchange Agreement that would, when declared effective, permit China Software to distribute all of the outstanding shares of HXT to the holders of its common stock.

On May 10, 2007, the Company approved a plan to spin-off HXT Holdings to the shareholders as a tax-free distribution. The spin-off became effective in March 2009 and all shares of HXT Holdings were distributed to the Company’s shareholders on March 31, 2009. As part of this plan, the advances the Company made to HXT Holdings were offset against the amounts due to the Company, the net amount was converted to additional paid-in-capital of the Company (note 13).

6GOING CONCERN

~~GOING~~The ~~CONCERN:~~accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of its liabilities in the normal course of business. Through December 31, 2009, the Company had incurred cumulative losses of $10,024,894 including net losses from continuing operations of $63,002 for the three months ended December 31, 2009.

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. This basis of accounting contemplates the recovery of the Company's assets and the satisfaction of its liabilities in the normal course of business. Through June 30, 2009, the Company had incurred cumulative losses of $9,326,950 including net losses from continuing operations of $935,398 for the nine months ended June 30, 2009.

In view of the matters described in the preceding paragraph, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to raise additional capital, obtain financing and to succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Management has taken the following steps to revise its operating and financial requirements, ~~which~~(i) itThe ~~believes~~Company ~~are~~plans ~~sufficient~~ to ~~provide~~raise ~~the~~additional ~~Company~~capital ~~with~~by ~~the~~selling ~~ability~~more shares to ~~continue~~current asshareholders and potential investors with a ~~going~~discount ~~concern.~~price ~~Management~~(ii) ~~devoted~~The ~~considerable~~Company ~~effort~~also ~~during~~plans ~~the~~to ~~period~~borrow ~~ended~~money ~~June~~from ~~30,~~current ~~2009,~~shareholders ~~towards~~and potential investors with and attractive interest rate (iiii) ~~obtaining~~The ~~additional~~Company ~~equity~~plans to reduce overhead and ~~debt~~expenses ~~financing~~by reducing unnecessary marketing and ~~(ii)~~ ~~evaluation~~advertisement ofexpenses, ~~its~~improving efficiency on distribution channel, freezing salary increase and ~~marketing~~laying ~~methods~~off administrative staffs.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. All significant inter-company transactions and accounts have been eliminated in the consolidation. The functional currency is the Chinese Renminbi (CNY); however the accompanying financial statements have been translated and presented in United States Dollars (USD).

The consolidated condensed interim financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these consolidated condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s annual report on Form 10-KSB for the year ended September 30, ~~2008~~2009. The Company follows the same accounting policies in preparation of interim reports. Results of operations for the interim periods are not indicative of annual results.

Principles of consolidation

The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries American Wenshen, Liaoning Wenshen and Chaoyang Liaogang Steel Co. All significant inter-company accounts and transactions have been eliminated.

Foreign currency translation

The reporting currency is the U.S. dollar. The functional currency of the Company is the local currency, the Chinese Renminbi (“CNY”). The financial statements of the Company are translated into United States dollars in accordance with Statement of Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency Translation”, using year-end rates of exchange for assets and liabilities, and average rates of exchange for the period for revenues, costs, and expenses and historical rates for the equity. Translation adjustments resulting from the process of translating the local currency financial statements into U.S. dollars are included in determining comprehensive income. At ~~June~~December 3031, 2009 and September 30, ~~2008~~2009, the cumulative translation adjustment of $890,~~102~~ 262 and $~~902~~890,~~850~~252, respectively, was classified as an ~~item~~ item of other comprehensive income in the stockholders’ deficit section of the consolidated balance sheet. For the ~~nine~~three months ended ~~June~~December 3031, 2009 and 2008, accumulated other comprehensive income (loss) was $~~(12,748)~~10 and $~~224~~(9,~~849~~409), respectively.

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.

Risks and uncertainties

The Company is subject to substantial risks from, among other things, intense competition associated with the industry in general, other risks associated with financing, liquidity requirements, rapidly changing customer requirements, limited operating history, foreign currency exchange rates and the volatility of public markets.

Cash and cash equivalents

Cash and cash equivalents include cash in hand and cash in time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.

Accounts and other receivable

The Company maintains reserves for potential credit losses on 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. Reserves are recorded primarily on a specific identification basis. Allowance for doubtful debts of Accounts and other receivable amounted to $~~373~~354,~~060~~821 and $~~383~~354,~~868~~801 as of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009, respectively.

On ~~June~~September 30, 2009, the company evaluated the adequacy of reserve for advance to suppliers, and the allowance for doubtful debts of advance to suppliers amounted to ~~891~~892,~~221~~329.

Inventories

Inventories are valued at the lower of cost (first-in, first-out) or market value. Management compares the cost of inventories with market value and an allowance is provided for the difference between recorded and market values. At ~~June~~December 3031, 2009 and September 30, ~~2008~~2009, management accounted an obsolescence reserve on inventories of $~~556,744~~0 and ~~450~~985,~~141~~556, respectively.

Property and Equipment

Property and equipment are stated at cost. Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and betterments are capitalized. When property and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives of: 40 years for building, 5 years for machinery, equipments and vehicles.

Intangible Assets

The Company evaluates intangible assets for impairment on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows. Recoverability of intangible assets, other long-lived assets and, goodwill is measured by comparing their net book value to the related projected undiscounted cash flows from these assets, considering a number of factors including past operating results, budgets, economic projections, market trends and product development cycles. If the net book value of the asset exceeds the related undiscounted cash flows, the asset is considered impaired, and a second test is performed to measure the amount of impairment loss.

Impairment of Long-Lived Assets

The Company adopted Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" (~~"SFAS~~ASC ~~144"~~360), which addresses financial accounting and reporting for the impairment or disposal of long-lived assets and supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and ~~for~~ for Long-Lived Assets to be Disposed Of," and the accounting and reporting provisions of APB Opinion No. 30, "Reporting the Results of Operations for a Disposal of a Segment of a Business." The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with SFAS 144. SFAS 144 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those ~~assets~~ assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.

Fair Value of Financial Instruments

Statement of Financial Accounting Standard No. 107 (ASC 825), "Disclosures about Fair Value of Financial Instruments", requires that the Company disclose estimated fair values of financial instruments.

The Company's financial instruments primarily consist of cash and cash equivalents, accounts receivable, other receivables, advances to suppliers, accounts payable, other payable, tax payable, and related party advances and borrowings.

As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheet. This is attributed to the short maturities of the instruments and that interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profile at respective balance sheet dates.

Basic and Diluted Earnings Per Share

Earnings per share is calculated in accordance with the Statement of financial accounting standards No. 128 (~~SFAS~~ASC ~~No. 128~~260), “Earnings per share”. SFAS No. 128 superseded Accounting Principles Board Opinion No.15 (APB 15). Net loss per share for all periods presented has been restated to reflect the adoption of SFAS No. 128. Basic net loss per share is based upon the weighted average number of common shares outstanding. Diluted net loss per share is based on the assumption that all dilutive convertible shares and stock options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.

Revenue Recognition

In accordance ~~wit~~with SAB 104(ASC 605), revenue is recognized 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 collectibility is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as advances from customers.

Income Taxes

The Company utilizes SFAS No. 109(ASC 740), "Accounting for Income Taxes," which requires the recognition of deferred tax assets and liabilities 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

Statement of Cash Flows

In accordance with Statement of Financial Accounting Standards No. 95(ASC 230), "Statement of Cash Flows," cash flows from the Company's operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

Segment Reporting

Statement of Financial Accounting Standards No. 131 (~~"SFAS~~ASC ~~131~~280"), "Disclosure about Segments of an Enterprise and Related Information" requires use of the "management approach" model for segment reporting. The management approach model is based on the way a company's management organizes segments within the company for making operating ~~decisions~~ 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. SFAS 131(ASC 280) has no effect on the Company’s consolidated financial statements as the Company consists of one reportable business segment. All revenue is from customers in People’s Republic of China. All of the Company’s assets are located in People’s Republic of China.

Recently Issued Accounting Standards

In ~~December~~June ~~2007~~2009, the FASB issued ASC 105 (previously SFAS No. ~~160~~168, ~~“Noncontrolling~~The ~~Interests~~FASB inAccounting ~~Consolidated~~Standards ~~Financial~~Codification ~~Statements”,~~and ~~which~~the isHierarchy anof ~~amendment~~Generally ofAccepted Accounting ~~Research~~Principles ~~Bulletin~~ (~~“ARB”~~"GAAP") ~~No.~~- ~~51. This statement clarifies that~~ a ~~noncontrolling~~replacement ~~interest~~of inFASB aStatement ~~subsidiary~~No. is162), anwhich ~~ownership~~will ~~interest~~become in the ~~consolidated~~source ~~entity that~~of ~~should~~authoritative beaccounting ~~reported~~principles asgenerally ~~equity~~accepted in the ~~consolidated~~United ~~financial~~States ~~statements. This~~recognized by ~~statement changes~~ the ~~way~~FASB ~~the~~to ~~consolidated~~be ~~income~~applied ~~statement~~to isnongovernmental ~~presented,~~entities. ~~thus~~The ~~requiring~~Codification ~~consolidated~~is ~~net~~effective ~~income~~in tothe bethird ~~reported~~quarter atof ~~amounts~~2009, ~~that~~and ~~include~~accordingly, the Quarterly ~~amounts~~Report ~~attributable~~on toForm ~~both~~10-Q ~~parent~~for ~~and~~ the ~~noncontrolling~~quarter ~~interest. This~~ending ~~statement~~September is30, ~~effective~~2009 ~~for~~and ~~the~~all ~~fiscal~~subsequent ~~years,~~public ~~and~~filings ~~interim~~will ~~periods~~reference ~~within~~the ~~those~~Codification ~~fiscal~~as ~~years,~~the ~~beginning~~sole onsource orof ~~after~~authoritative ~~December 15, 2008~~literature. ~~Based~~ onThe ~~current conditions, the~~ Company does not ~~expect~~believe ~~the~~that ~~adoption~~this ofwill ~~SFAS 160 to~~ have a ~~significant~~material ~~impact~~effect on its ~~results~~consolidated ~~of operations or~~ financial ~~position~~statements.

In ~~March~~June ~~2008~~2009, the FASB issued ~~FASB~~ASC ~~Statement~~855 (previously SFAS No. ~~161~~165, ~~Disclosures~~Subsequent ~~about~~Events), ~~Derivative~~which ~~Instruments~~establishes ~~and~~general ~~Hedging~~standards ~~Activities.~~of ~~The~~accounting ~~new~~for ~~standard~~and isdisclosures ~~intended~~of toevents ~~improve~~that ~~financial~~occur ~~reporting~~after ~~about~~the ~~derivative~~balance ~~instruments~~sheet ~~and~~date ~~hedging~~but ~~activities~~before bythe ~~requiring~~financial ~~enhanced~~statements ~~disclosures~~are toissued ~~enable~~or ~~investors~~available to ~~better~~be ~~understand their effects on an entity’s financial position, financial performance, and cash flows~~issued. It is effective for ~~financial~~interim ~~statements issued for fiscal years~~ and ~~interim~~annual periods ~~beginning~~ending after June ~~November~~ 15, ~~2008, with early application encouraged~~2009. ~~The~~There ~~new~~was ~~standard~~no ~~also~~material ~~improves~~impact ~~transparency~~upon ~~about~~ the ~~location~~adoption ~~and amounts~~ of ~~derivative~~this ~~instruments~~standard inon anthe ~~entity~~Company’s ~~financial~~consolidated ~~statements; how derivative instruments and related hedged items are accounted for under Statement 133; and how derivative instruments and related hedged items affect its~~ financial ~~position, financial performance, and cash flows. Management does not believe the effect of this pronouncement on financial~~ statements ~~will have a material effect~~.

In ~~May of 2008~~June 2009, the FASB issued ~~SFASB~~ASC 860 (previously SFAS No.~~162~~ 166, “~~The~~Accounting ~~Hierarchy~~for Transfers of ~~Generally~~Financial ~~Accepted~~Assets”) ~~Accounting~~, ~~Principles”.~~which ~~The~~requires ~~pronouncement~~additional ~~mandates~~information ~~the~~regarding ~~GAAP~~transfers ~~hierarchy~~of ~~reside~~financial inassets, ~~the~~including ~~accounting~~securitization ~~literature~~transactions, asand ~~opposed~~where companies have continuing exposure to the ~~audit~~risks ~~literature~~related to transferred financial assets. ~~This~~SFAS ~~has~~166 eliminates the ~~practical~~concept ~~impact~~ of ~~elevating~~a ~~FASB~~“qualifying ~~Statements~~special-purpose ofentity,” ~~Financial~~changes ~~Accounting~~the ~~Concepts~~requirements infor ~~the~~derecognizing ~~GAAP~~financial ~~hierarchy~~assets, and requires additional disclosures. ~~This~~ ~~pronouncement~~SFAS ~~will~~166 ~~become~~is effective 60for ~~days~~fiscal ~~following~~years ~~SEC~~beginning ~~approval~~after November 15, 2009. The Company does not believe this pronouncement will impact its financial statements.

In ~~May 2008~~June 2009, the FASB issued ~~SFASB~~ASC 810 (previously SFAS No. ~~163,~~167) ~~Accounting~~ for ~~Financial~~determining ~~Guarantee~~whether ~~Insurance~~to ~~Contracts-an~~consolidate ~~interpretation~~a ofvariable ~~FASB~~interest ~~Statement No~~entity. ~~60. The~~These ~~scope~~amended ofstandards ~~the~~eliminate ~~statement~~a ismandatory ~~limited~~quantitative approach to determine whether a variable interest gives the entity a controlling financial ~~guarantee~~interest ~~insurance~~in (a variable interest entity in favor of a qualitatively focused analysis, and ~~reinsurance)~~require ~~contracts. The~~an ~~pronouncement~~ongoing reassessment of whether an entity is the primary beneficiary. These amended standards are effective for us beginning in the first quarter of fiscal ~~years~~year ~~beginning~~2010 ~~after~~and ~~December~~we ~~31, 2008. The~~are ~~company~~currently ~~does~~evaluating ~~not~~the ~~believe~~impact ~~this~~that ~~pronouncement~~adoption will ~~impact~~have ~~its~~on our consolidated financial statements.

11In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends ASC Topic 820, Measuring Liabilities at Fair Value, which provides additional guidance on the measurement of liabilities at fair value. These amended standards clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, we are required to use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, we are required to use another valuation technique, such as an income approach or a market approach. These amended standards are effective for us beginning in the fourth quarter of fiscal year 2009 and did not have a significant impact on our consolidated financial statements.

In ~~December~~October ~~2007~~2009, the FASB issued ~~SFAS~~ASU No. ~~141(R)~~ 2009-13, ~~“Business~~Revenue ~~Combinations”.~~Recognition ~~This~~– ~~Statement~~Multiple ~~replaces~~Deliverable ~~SFAS~~Revenue ~~No.~~Arrangements ~~141,~~(“ASU ~~Business Combinations~~2009-13”). ~~This~~ASU ~~Statement~~2009-13 ~~retains~~updates the ~~fundamental~~existing ~~requirements~~multiple-element inrevenue ~~Statement~~arrangements ~~141~~guidance ~~that~~currently ~~the~~included ~~acquisition~~in ~~method~~FASB ofASC ~~accounting~~605-25. ~~(which~~The ~~Statement~~revised ~~141~~guidance ~~called~~provides ~~the purchase method) be used~~ for ~~all~~two ~~business~~significant ~~combinations and~~changes ~~for an acquirer~~ to bethe existing ~~identified~~multiple-element ~~for~~revenue ~~each~~arrangements ~~business combination~~guidance. ~~This~~The ~~Statement~~first ~~also~~change ~~establishes~~relates ~~principles~~to ~~and~~the ~~requirements~~determination ~~for~~of ~~how~~when the ~~acquirer:~~individual a)deliverables ~~recognizes~~included ~~and measures~~ in ~~its~~a ~~financial~~multiple-element ~~statements~~arrangement ~~the~~may ~~identifiable~~be ~~assets~~treated ~~acquired,~~as ~~the~~separate ~~liabilities~~units ~~assumed,~~of ~~and~~accounting. ~~any~~This ~~non-controlling~~change ~~interest~~will inresult ~~the acquiree; b) recognizes and measures the goodwill acquired~~ in the ~~business~~requirement ~~combination~~to orseparate amore ~~gain~~deliverables ~~from~~within aan ~~bargain~~arrangement, ~~purchase~~ultimately ~~and~~leading c)to ~~determines~~less ~~what~~revenue ~~information~~deferral. toThe ~~disclose~~second tochange ~~enable~~modifies ~~users of~~ the ~~financial~~manner ~~statements to~~in ~~evaluate~~which the ~~nature~~transaction ~~and~~consideration ~~financial~~is ~~effects~~allocated ofacross the ~~business~~separately ~~combination.~~identified ~~SFAS No~~deliverables. ~~141(R)~~Together, these changes will ~~apply~~result ~~prospectively~~in toearlier ~~business~~recognition ~~combinations~~of ~~for~~revenue ~~which~~and ~~the~~related ~~acquisition~~costs ~~date~~for ismultiple-element onarrangements orthan ~~after~~under ~~Company’s~~previous ~~fiscal~~guidance. ~~year~~This ~~beginning~~guidance ~~January~~also 1,expands ~~2009. While~~ the ~~Company~~disclosures ~~has~~required ~~not~~for ~~yet~~multiple-element ~~evaluated~~revenue ~~this~~arrangements. ~~statement~~The ~~for~~Company ~~the~~does ~~impact,~~not ifbelieve ~~any,~~ that ~~SFAS~~this ~~No. 141(R)~~ will have a material effect on its consolidated financial statements~~, the Company will be required to expense costs related to any acquisitions after January 1, 2009~~.

On December 30, 2008 FASB issued FIN 48-3, “Effective Date of FASB Interpretation No. 48 for Certain Nonpublic Enterprises”. This FSP defers the effective date of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, for certain non-public enterprises as defined in paragraph 289, as amended, of FASB Statement No. 109, Accounting for Income Taxes, including non-public not-for-profit organizations. However, non-public consolidated entities of public enterprises that apply U. S. GAAP are not eligible for the deferral. Nonpublic enterprises that have applied the recognition, measurement, and disclosure provisions of Interpretation 48 in a full set of annual financial statements issued prior to the issuance of this FSP also are not eligible for the deferral. This FSP shall be effective upon issuance. The Company does not believe this pronouncement will impact its financial statements.10

On January 12, 2009 FASB issued FSP EITF 99-20-01, “Amendment to the Impairment Guidance of EITF Issue No. 99-20”. This FSP amends the impairment guidance in EITF Issue No. 99-20, “Recognition of Interest Income and Impairment on Purchased Beneficial Interests and Beneficial Interests That Continue to be Held by a Transferor in Securitized Financial Assets,” to achieve more consistent determination of whether an other-than-temporary impairment has occurred. The FSP also retains and emphasizes the objective of an other-than-temporary impairment assessment and the related disclosure requirements in FASB Statement No. 115, Accounting for Certain Investments in Debt and Equity Securities, and other related guidance. The FSP is shall be effective for interim and annual reporting periods ending after December 15, 2008, and shall be applied prospectively. Retrospective application to a prior interim or annual reporting period is not permitted. The Company does not believe this pronouncement will impact its financial statements.

NOTE 3. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

The Company's operations are 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.

The Company does not maintain fire, theft or liability insurance. The Company is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; error and omissions and natural disasters.

NOTE 4. INVENTORY

Inventories as of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009 consist of the following:

	June 30, 2009			September 30, 2008
	December 31, 2009			September 30, 2009
Raw Material	$	~~595~~215,~~491~~600		$	~~603~~514,~~377~~057
Finished Goods		87,~~505~~674			7349,~~926~~260
Work in progress		~~599,275~~-			~~380~~344,~~108~~620
		1,203,271			991,411
		223,247			1,207,938
Less: Reserve for obsolescence		~~(556,744~~-	)		(~~450~~985,~~141~~556	)
Total	$	~~646~~223,~~527~~247		$	~~541~~222,~~270~~381

NOTE 5.OTHER RECEIVABLE

Other Receivables as of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009 are as summarized below:

	June 30, 2009			September 30, 2008
	December 31,2009			September 30, 2009
Loans receivable (interest free, unsecured and due on demand)	$	239,~~597~~864		$	~~241~~254,~~535~~088
Deposits		1016,~~773~~834			16,~~951~~833
Others		~~219~~233,~~766~~385			~~217~~220,~~825~~590
		470,136			476,311
		490,083			491,511
Less : Allowance for Doubtful Debts		(259,~~481~~770	)		(~~261~~259,~~579~~754	)
Total	$	~~210~~230,~~655~~313		$	~~214~~231,~~732~~757

1311

NOTE 6. PROPERTY AND EOUIPMENT

The balance of Company property and equipment as of ~~June~~December 3031, 2009 and September 30, ~~2008~~ 2009 is summarized as follows:

	June 30, 2009			September 30, 2008
	December 31, 2009			September 30, 2009
Office Equipment	$	21,~~001~~025		$	21,~~171~~023
Building		~~372~~373,~~735~~150			~~375~~373,~~749~~128
Production Equipment		~~212~~217,~~640~~001			~~214~~216,~~359~~363
Vehicles		~~163~~164,~~958~~140			~~165~~164,~~283~~131
		770,334			776,562
		775,316			774,645
Less: Accumulated depreciation		(~~300~~349,~~161~~430	)		(~~239~~326,~~429~~854	)
Property and equipment, net	$	~~470~~425,~~173~~886		$	~~537~~447,~~133~~791

The Company incurred depreciation expenses for the ~~nine~~three months ended ~~June~~December 3031, 2009 and 2008 of $6222,~~636~~561 and $6322,~~369~~291, respectively.

NOTE 7. INTANGIBLE ASSETS - PATENTS

There are five patents that have been acquired from third parties in 2005. The Patents are being amortized over a 12 year period. At ~~June~~December 3031, 2009, the net amount of the Patents was $~~482~~438,~~118~~776 after considering the accumulated amortization of $~~394~~438,~~460~~776. At September 30, ~~2008~~2009, the net amount of the Patents was $~~552~~460,~~291~~688 after considering the accumulated amortization of $~~331~~416,~~375~~813. The amortization expense was $6521,~~726~~943 & $6221,~~668~~930 and for the ~~nine~~three months ended ~~June~~December 3031, 2009 &and 2008 respectively.

Amortization expense for the Company’s intangible assets over the next five years after ~~June~~December 3031, 2009 is estimated to be:

	Amount
2010	$	87, ~~658~~755
2011		87, ~~658~~755
2012		87, ~~658~~755
2013		87, ~~658~~755
2014		87, ~~658~~755

1412

NOTE 8. ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts Payable and Accrued expenses as of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009 are as follows:

	June 30, 2009		September 30, 2008
	December 31, 2009		September 30, 2009
Accounts payable	$	~~317~~229,~~968~~850	$	~~198~~226,~~363~~500
Accrued Expenses		19,712		19,712
Total	$	~~337~~249,~~680~~562	$	~~218~~246,~~075~~212

NOTE 9. DUE TO RELATED PARTIES

Due to Related Parties was $1977,~~026,901~~063 and $~~961~~989,~~666~~086 as of ~~June~~December 3031, 2009 and September 30, ~~2008~~2009, respectively. The loan is interest free, due on demand and unsecured.

NOTE 10. SHAREHOLDERS’ EQUITY

The acquisition of American Wenshen is accounted for as a reverse acquisition under the purchase method of accounting since the shareholders of American Wenshen obtained control of the consolidated entity. Accordingly, the merger of the two companies is recorded as a recapitalization of American Wenshen, with American Wenshen being treated as the continuing operating entity. The historical financial statements presented herein will be those of American Wenshen. The continuing entity retained September 30 as its fiscal year end.

Prior to the Merger, China Software assigned all of its pre-Merger business and assets to HXT Holdings, Inc., its wholly-owned subsidiary, and HXT Holdings assumed responsibility for all of the liabilities of China Software that existed prior to the Merger.

On October 12, 2007 the Company announced a 1:45 reverse split of its outstanding common . All actions were approved by the Board of Directors and the majority shareholders of the Company during Special Meeting of Shareholders held on October 9, 2007.13

On October 12, 2007 the Company announced a 1:45 reverse split of its outstanding common stocks. All actions were approved by the Board of Directors and the majority shareholders of the Company during Special Meeting of Shareholders held on October 9, 2007.

During the year ended September 30, 2008, the Company cancelled the preferred stock of 434,377 shares issued upon the reverse acquisition. The company issued 20 million shares of common stock in exchange for the preferred stock.

On May 10, 2007, the Company approved a plan to spin-off HXT Holdings to the shareholders as a tax-free distribution. The spin-off became effective in March 2009 and all shares were distributed to the above parties on March 31, 2009. As part of this plan, the advances the Company made to HXT Holdings were offset against the amounts due to the Company, the net amount was converted to additional paid-in-capital of the Company (Note 13).

15NOTE 11. STOCK OPTIONS

~~NOTE~~The ~~11 STOCK~~stock ~~OPTIONS~~options summary for the three months ended December 31, 2009 is as follows (has been stated to retroactively effect a 45:1 reverse stock split in October 2007) :

The stock options summary for the nine months period ended June 30, 2009 is as follows (has been stated to retroactively effect a 45:1 reverse stock split in October 2007) :-

	Options outstanding		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding, September 30, 2009		240	$	43.20	$	-
Granted		-		-		-
Forfeited		-		-		-
Exercised		-		-		-
Outstanding, December 31, 2009		240	$	43.20	$	-

	Options outstanding		Weighted Average Exercise Price		Aggregate Intrinsic Value
Outstanding, September 30, 2008		240	$	43.20	$	-
Granted		-		-		-
Forfeited		-		-		-
Exercised		-		-		-
Outstanding, June 30, 2009		240	$	43.20	$	-

Following is a summary of the status of options outstanding at December 31, 2009:

Following is a summary of the status of options outstanding at June 30, 2009:

Outstanding Options				Exercisable Options
Exercise Price	Options	Weighted Average Remaining Life	Weighted Average Exercise Price	Exercisable Options	Weighted Average Exercise Price
$43.20	240	0.44	$43.20	240	$43.20

Outstanding Options				Exercisable Options
Exercise Price	Options	Weighted Average Remaining Life	Weighted Average Exercise Price	Exercisable Options	Weighted Average Exercise Price
$43.20	240	0.69	$43.20	240	$43.20

The Company recognized $276 in share-based compensation expense for the three months ended December 31, 2009 in accordance with SFAS No. 123R(ASC 505),. The impact of this share-based compensation expense on the Company’s basic and diluted earnings per share was $0.00 per share. The fair value of our stock options was estimated using the Black-Scholes option pricing model.

Primarily as a result of adopting SFAS No. 123R, the Company recognized $829 in share-based compensation expense for the nine month ended June 30, 2009. The impact of this share-based compensation expense on the Company’s basic and diluted earnings per share was $0.00 per share. The fair value of our stock options was estimated using the Black-Scholes option pricing model.14

16NOTE 12. STATUTORY RESERVES

NOTE 12 STATUTORY RESERVES

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:

1.	Making up cumulative prior years' losses, if any;

2.	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;

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

In accordance with the Chinese Company Law, the Company reserved $0 to the Statutory surplus reserve for ~~nine~~the three months ended ~~June~~December 3031, 2009 and 2008 on account of net loss in the ~~nine~~three months ended ~~June~~December 3031, 2009 and 2008.

NOTE 13 - . ENTITY SPUN OFF

On May 10, 2007, the Company approved a plan to spin-off HXT Holdings to the shareholders as a tax-free distribution. Under the plan, each stockholder of the Company received one share of HXT Holdings common stock for every 2.157 shares of common stock held as of the record date of March 31, 2009.

On March 31, 2009, the Company completed the spin-off of HXT Holdings.

As a part of the spin off transaction of HXT Holdings, the net assets of HXT Holdings amounting $132,043 were adjusted to Additional paid in capital.

The components of loss from operations related to the entity spun off for the ~~nine~~three months ended ~~June~~December 3031, 2009 and 2008 are shown below.

	2009			2008
Net sales	$	~~515,178~~-		$	~~433~~154,~~618~~232
Cost of sales		~~250,374~~-			~~132,891~~275
Gross profit		~~264,804~~-			~~300~~153,~~727~~957
Operating expenses
Selling expenses		~~176,667~~-			~~204~~77,~~680~~253
Research & development expenses		~~296,502~~-			~~269~~115,~~454~~862
General and administrative		~~204,137~~-			~~290~~114,~~124~~689
Total operating expenses		~~677,306~~-			~~764~~307,~~258~~804
Loss from operations		~~(412,502~~-	)		(~~463~~153,~~531~~847	)
Non-operating expenses
Other income(loss)		~~309,303~~-			~~38,264~~323
Interest income		92-			~~15,357~~144
Net Loss before income tax		~~(103,107~~-	)		(~~409~~153,~~911~~381	)
Provision for Income tax		-			-
Net loss from entity spun off	$	~~(103,107~~-	)	$	(~~409~~153,~~911~~381	)

1715

~~Assets~~NOTE ~~and~~14. ~~liabilities~~INCOME ~~for the entity spun off as of June 30, 2009 and September 30, 2008 are as follows:~~ TAXES

	June 30, 2009		September 30, 2008
Assets
Cash and cash equivalents	$	-	$	6,873
Account receivable, net		-		143,400
Other receivable		-		30,637
Inventory		-		55,278
Other current assets		-		18,848
Total Current Assets		-		255,036
Property, Plant and Equipment, net		-		195,630
Total Non-Current Assets		-		195,630
Liabilities
Account payable and accrued expenses		-		92,321
Unearned revenue		-		30,415
Other payable		-		357,037
Total Liabilities		-		479,773
Net Liability of the entity spun off	$	-	$	(29,107	)

The Company through its subsidiary: Chaoyang Liaogang, is governed by the Income Tax Laws of the PRC. Operations in the United States of America have incurred net accumulated operating losses for income tax purposes. The Company believes that it is more likely than not that these net accumulated operating losses will not be utilized in the future and hence the Company has not recorded any deferred assets as of December 31, 2009.

~~NOTE~~Pursuant 14to ~~INCOME~~the ~~TAXES~~PRC Income Tax Laws, the Enterprise Income Tax (“EIT”) is at a statutory rate of 33%, which is comprises of 30% national income tax and 3% local income tax. Beginning January 1, 2008, the new Enterprise Income Tax (EIT) law replace d 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 following is a reconciliation of income tax expense:

September 30, 2009	U.S.			PRC			Total
Current	$	-		$	-		$	-
Deferred		-			-			-
Total	$	-		$	-		$	-

December 31, 2009	U.S.			PRC			Total
Current	$	-		$	-		$	-
Deferred		-			-			-
Total	$	-		$	-		$	-

Reconciliation of the differences between the statutory U.S. Federal income tax rate
and the effective rate is as follows:
		12-31-2009			09-30-2009

US statutory tax rate		34	%		34	%
Foreign income not recognized in US		(34	%)		(34	%)
PRC income tax		25	%		25	%
Effects of Temporary Differences (Bad debts)		-	%		-	%
Income tax exemption due to loss		(25	%)		(25	%)
Effective rate		-	%		-	%

Pursuant to the PRC Income Tax Laws, the Enterprise Income Tax (“EIT”) is at a statutory rate of 33%, which is comprises of 30% national income tax and 3% local income tax. Beginning January 1, 2008, the new Ent erprise Income Tax (EIT) law replace d the existing laws for Domestic Enterprises (DES) and Foreign Invested Enterprises (FIEs). The new standard EIT rate of 25% replace d the 33% rate previously applicable to both DES and FIEs.16

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking Statements

This ~~Quarterly~~ Report ~~on Form 10-Q~~ contains “certain forward-looking” statements asregarding ~~such~~American ~~term~~Wenshen isSteel ~~defined~~Group, inInc. ~~the~~, ~~Private~~its ~~Securities~~business ~~Litigation Reform Act of 1995~~ and ~~information~~its ~~relating~~financial toprospects. These ~~the~~statements ~~Company~~represent ~~that is based on the beliefs of the Company~~Management’s ~~management~~present asintentions ~~well as assumptions made by~~ and ~~information~~its ~~currently~~present ~~available~~belief to regarding the Company’s ~~management~~future. ~~When used in this report~~ Nevertheless, ~~the~~there ~~words~~are ~~“anticipate,”~~numerous ~~“believe,”~~risks ~~“estimate,” “expect”~~ and ~~“intend”~~uncertainties that ~~and~~could ~~words~~cause orour ~~phrases~~actual ofresults ~~similar~~to ~~import,~~differ asfrom ~~they relate to~~ the ~~Company~~results orsuggested ~~Company~~in ~~management,~~this ~~are intended to identify forward-looking statements~~Report. A ~~Such~~number ~~statements~~of ~~reflect~~those ~~the current~~ risks, ~~uncertainties~~are ~~and~~set ~~assumptions~~forth related to certain factors including, without limitations, competitive factors, general economic conditions, customer relations, relationships with vendors, the interest rate environment, governmental regulation and supervision, seasonality, distribution networks, product introductions and acceptance, technological change, changes in ~~industry~~Section ~~practices,~~1A ~~onetime~~: ~~events~~“Risk ~~and~~Factors” ~~other factors described herein and~~ in ~~other filings made by~~ the ~~company~~Company’s ~~with~~Annual ~~the~~Report ~~Securities~~on ~~and~~Form ~~Exchange~~10-Q ~~Commission.~~for ~~Based~~the ~~upon~~year ~~changing~~ended ~~conditions,~~September ~~should any one or more of these risks or uncertainties materialize~~30, ~~or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended~~2009. ~~The Company does not intend to update these forward-looking statements.~~

Because these and other risks may cause American Wenshen’s actual results to differ from those anticipated by Management, the reader should not place undue reliance on any forward-looking statements that appear in this Report. Readers should also take note that American Wenshen will not necessarily make any public announcement of changes affecting these forward-looking statements, which should be considered accurate on this date only.

Entity Spun Off

~~As of March 31, 2009,~~ American Wenshen Steel Group ~~owned~~currently owns only one operating subsidiary: Chaoyang Liaogang, which carries on its specialty steel operations. Until OnMarch 31, 2009, the Company also owned HXT Holdings, Inc. However, on May 10, 2007, the Company approved a plan to spin-off HXT Holdings, Inc. to the shareholders as a tax-free distribution. The spin-off became effective in March 2009 and all shares were distributed to the ~~above~~shareholders ~~parties~~ on March 31, 2009. As part of this plan, the advances the Company made to HXT Holdings were offset against the amounts due to the Company; and the net amount was converted to additional paid-in-capital of the Company. For that reason, on the ~~financial~~Statements ~~statements~~of inOperations ~~this report, HXT Holdings~~ and ~~its~~Statements ~~subsidiaries~~of ~~have~~Cash ~~been~~Flows ~~categorized~~for ~~as an “entity spun off;” its net assets have been recorded on our balance sheet as “Assets of~~ the ~~entity~~period ~~spun~~ended ~~off;”~~December ~~and~~31, ~~the~~2008, ~~results~~HXT ofHoldings and its ~~operations~~subsidiaries have been ~~recorded~~categorized as an ~~extraordinary item labeled~~ “~~loss from~~ entity spun off.’ ” The remainder of the financial statements reflects the assets and liabilities and results of operations of Chaoyang Liaogang.

Results of Operations

~~The~~Chaoyang ~~Nine~~Liaogang ~~Months~~commenced ~~Ended~~substantial ~~June~~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, ~~2009~~2007 ~~Compared~~were realized from one large sale of special steel and one variety of die steel to ~~Nine~~one ~~Months~~distributor, ~~Ended~~Shenyang ~~June~~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 June 30, 2007.

~~Net~~Our ~~Sales~~growth was reversed during the year ended September 30, 2009. As a result of the global recession, construction activities in China have 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 the quarter ended December 31, 2009, when our net sales totaled only $3,511, compared to $73,022 in the quarter ended December 31, 2008. At present we cannot predict when our revenues will begin to grow again.

The steel industry has been severely hit by the credit crunch and global economic downturn during the past quarter. As a result, the Company experienced an uncommon decrease in customers' orders which negatively impacted our sales. The Company recorded sales of $496,957 for the nine months ended June 30, 2009 as compared to $2,294,834 for the nine months ended September 30, 2008. The sales substantially decreased by 78% because the global economic slowdown has hindered our effects to establish a position in the special steel market.17

~~Cost~~ Since our sales for the past quarter were insignificant, our gross profit was negligible. The gross profit surpassed the first quarter of ~~Sales~~the prior fiscal year, however, when we lost money on our sales. Our negative gross margin in the earlier period was primarily attributable to (a) our low sales volume, which leads to inefficiencies in the allocation of overhead expenses, and (b) the fact that we are using scrap steel for our primary raw material. In recent years the international market price for scrap steel has increased several-fold, making the reworking of scrap steel less substantially less profitable than it was at the beginning of the current decade.

~~Cost~~If ofwe ~~sales~~are ~~decreased~~able ~~by $827,349, or 73%,~~ to ~~$296,005~~obtain ~~for~~ the ~~three~~ ~~months~~financing ~~ended~~necessary ~~June~~to ~~30,~~support ~~2009,~~an ~~from~~expansion ~~$1,123,354 for the three months ended June 30, 2008. Cost~~ of sales, ~~represented~~we ~~74%~~expect ofour ~~sales~~profit ~~revenues~~margins ~~for the three months ended June 30, 2009 compared~~ to ~~67% for the three months ended June 30, 2008, which indicates the~~ increase significantly in the ~~cost~~future, ofdue ~~our raw materials.~~to:

19· increased sales volume, which will lead to more efficient use of our facilities;

~~Gross~~· ~~Profit~~introduction of tungsten carbide steel into our sales, which we will be able to market at a higher mark-up over cost than our other steel products; and

~~The~~· ~~Company’s~~acquisition ~~gross~~of ~~profit~~sources ~~was~~of ~~$82,057~~iron ~~for nine months ended June 30~~ore, ~~2009~~which aswill ~~compared~~lower toour ~~$823,697~~cost ~~for nine months ended June 30, 2008. As the percentage~~ of ~~revenue,~~raw ~~the gross profit margins was 17% for the nine months ended June 30, 2009 as compared 36% for the nine ended June 30, 2008~~materials. ~~The gross profit margin ratio was decreased due to:~~

~~(a)~~Due ~~The~~to ~~low~~the ~~sales~~reduction in our operations, our general and administrative expenses for the quarter ended December 31, 2009 were only $63,687, compared to $611,645 in the first quarter of fiscal year 2009. In the future, if we are properly funded, we expect that our overall efficiencies will enable us to increase our sales volume at a rate that will be substantially greater than the accompanying increase in our general and administrative expenses. Sales and marketing expense, ~~which~~however, ~~led~~will increase as we expand our marketing program In addition, as noted below, we intend to ~~less~~raise ~~efficient~~money ~~use~~for capital investment: purchase of additional smelting equipment and development of an iron mining facility. To the extent that we obtain those funds as loans, our ~~facilities;~~general and administrative expenses will be increased by (a) interest expense and (b) depreciation expense.

~~(b)~~The ~~Increased~~Company’s ~~market~~net ~~price~~loss from continuing operations for the first quarter of fiscal year 2010 was $63,002. In the first quarter of fiscal year 2009 we lost $627,505 in our ~~raw~~continuing ~~materials~~operations. The operations of HXT Holdings, Inc., which are accounted for as an “entity spun off,” realized a net loss of $153,381 during the first quarter of the 2009 fiscal year. Our company, therefore, reported a consolidated net loss of $780,886 for the quarter ended December 31, 2008.

~~Operating~~Our ~~Expenses~~business operates entirely in Chinese Renminbi, but we report our results in our SEC filings in U.S. Dollars. The conversion of our accounts from RMB to Dollars results in translation adjustments, which are reported as a middle step between net income/loss and net comprehensive gain/loss. The net income/loss is added to the retained earnings on our balance sheet; while the translation adjustment is added to a line item on our balance sheet labeled “other comprehensive income,” since it is more reflective of changes in the relative values of U.S. and Chinese currencies than of the success of our business. During the first quarter of the2010 fiscal year the unrealized loss on foreign currency translations increased our accumulated other comprehensive income by $10. In the first quarter of the prior fiscal year, when the exchange rate was more volatile, our accumulated other comprehensive income was reduced by $9,409.

Operating expense were $1,017,406 for the nine months ended June 30, 2009 compared to $2,148,199 for the nine months ended June 30, 2008. The 53% decrease was mainly because the Company’s management decided that goodwill of $1,176,591should be fully impaired during the nine months ended June 30, 2008. But for that impairment in the earlier period, operating expenses would have increased by 5% during the nine months ended June 30, 2009 and 258% during the three months ended June 30, 2009.

Loss from Entity Held for Spun Off: Loss from entity spun off was $103,107 for the nine months ended June 30, 2009 compared to $1,950,268 for the same period of prior year. The loss was decreased because the entity was spun off on March 31, 2009.

Net Loss

As a result, the Company had a consolidated net loss of $1,038,505 for the nine months ended June 30, 2009 compared to a consolidated net loss of $3,438,168 for the same period of the prior year.

The Three Months Ended June 30, 2009 Compared to the Three Months Ended June 30, 2008

Net Sales

Our net sales volume decreased by $1,289,001 or 76%, to 395,583 for the three months ended June 30, 2009 from $1,684,584 for the nine months ended June 30, 2008. The decreases in sales revenues are a result of reduced orders from customers due to the slower economy.

Cost of Sales Cost of sales decreased by $827,349, or 73%, to $296,005 for the three months ended June 30, 2009, from $1,123,354 for the three months ended June 30, 2008. Cost of sales represented 74% of sales revenues for the three months ended June 30, 2009 compared to 67% for the three months ended June 30, 2008, which indicates the increase in the cost of our raw materials. 20 Gross Profit Gross profit in absolute terms decreased by $461,652, or 82%, to $99,578 for the three months ended June 30, 2009 from $561,230 for the three months ended June 30, 2008, while gross profit margin decreased to 25% for the three months ended June 30, 2009 from 33% for the three months ended June 30, 2008, as a result of lower sales revenues due to slower demand and increased cost of sales across all cost components period-on-period. The significantly lower gross profit and gross margin for the three months ended June 30, 2009 was primarily caused by weak performance as a result of downturn of the global economy during the period. Operating Expenses Operating expense were $337,834 for the three months ended June 30, 2009 compared to $1,271,074 for the three months ended June 30, 2008. The $933,240 or 73% decrease was mainly because the Company’s management decided that goodwill of $1,176,591should be fully impaired during the nine months ended June 30, 2008. But for that impairment in the earlier period, operating expenses would have increased by 5% during the nine months ended June 30, 2009 and 258% during the three months ended June 30, 2009. Net Loss As a result, the Company had a consolidated net loss of $238,274 for the three months ended June 30, 2009 compared to a consolidated net loss of $2,375,302 for the same period of the prior year, representing a decrease in net loss of $2,137,028 or 90%. The significant decrease in net loss is a result of the decrease in operating expenses during the quarter ended June 30, 2009 as compared to that of the same period of a year earlier.

Liquidity and Capital Resources

~~Our~~The ~~material~~development ~~sources~~and operations of Chaoyang Liaogang have been funded to date primarily by capital contributions and ~~(uses)~~loans from its shareholders, primarily Yang Kuidong. As a result, at December 31, 2010 Chaoyang Liaogang had $977,063 in debt, most of ~~cash~~which ~~during~~was ~~the~~owed ~~nine~~to ~~month~~Mr. ~~period~~Yang. Until ~~ended~~we ~~June~~obtain 30a source of outside financing, we ~~2009~~remain ~~and~~dependent ~~2008~~on ~~were~~Mr. Yang as ~~follows:~~our primary source of working capital.

	2009			2008
Cash provided(used) by operations	$	(18,949	)	$	147,065
Cash provided (used) by investing activities		(34,558	)		78,400
Advance(to)from related parties		75,292			(127,013	)
Effect of exchange rate on cash		(843	)		6,064
Net increase in cash	$	20,942		$	104,516

21At December 31, 2009 the Company had a working capital deficit of $948,930, representing a $18,897 decrease of working capital since our last fiscal year ended on September 30, 2009. Since our current obligation to our Chairman exceeds our working capital deficit, the deficit does not imperil our existence. The deficit does, however, prevent us from aggressively marketing our products, resulting in our recent low level of operations.

~~The~~Chaoyang ~~Company’s~~Liaogang ~~cash~~currently onhas ~~hand~~sufficient ~~increased~~capital byresources ~~$20,942~~to ~~for~~carry ~~the~~on ~~nine~~its ~~months~~business ~~ended June 30, 2009~~ as ~~compared~~it tois ~~$104,516~~currently ~~for the nine months ended June 30~~constituted, ~~2008.~~particularly ~~The~~as ~~Company’s~~we ~~net~~can ~~cash~~rely inon ~~operating activities was adversely impacted by~~ the ~~net~~capital ~~loss~~resources of ~~$1,038,505~~our ~~for the nine months ended June 30~~Chairman. However, ~~2009~~our asbusiness ~~compared~~plan tocalls ~~$3,438,168~~ for ~~the nine~~substantial ~~months~~capital ~~ended~~investment ~~June~~over ~~30, 2008.Affected by~~ the ~~economy~~next ~~downturn,~~twelve ~~the Company put more effort on the collection of its accounts receivable~~months. We intend ~~The accounts receivable increased $38,638 for the nine months ended June 30, as compared~~ to ~~$405,280~~expand ~~for~~ the ~~same~~capacity ~~period~~ of ~~prior~~our ~~year.~~factory ~~The~~by ~~account~~investing ~~payable~~approximately ~~and accrued expenses increased~~ $~~121,165~~4.5 ~~for~~million ~~nine~~in ~~months~~new ~~ended~~capital ~~June 30~~equipment, ~~2009 as compared to the increase of $1,112,818 for nine months ended June 30, 2008.,which partially mitigated the negative factors in operational cash flows~~specifically:

At· ~~June 30, 2009, the Company had~~ a ~~working capital deficit of $339,327, representing a depletion of working capital by $585,619 since the end of the 2008 fiscal year on September~~ 30, ~~2008. The~~ton ~~poor~~arc ~~working~~furnace ~~capital level resulted primarily from the write off of a $891,221 advance to supplier and the fact of increased cost of goods sold during the nine~~-~~month~~ ~~period~~$2.5 Because our selling price is under significant pressure due to the current economic slowdown, most of the revenue we realized for the period ended June 30, 2009 was from the sales of our inventories that were manufactured at a higher cost level.million

At· the present time, we have received no commitments for the funds required for our planned capital investments. Obtaining those funds, if we can do so, will require that we issue substantial amounts of equity securities or incur significant debts. We believe that the expected return on those investments will justify the cost. However, our plan, if accomplished, will significantly increase the risks to our liquidity. Until we obtain a ~~source~~30 ofton ~~outside~~heavy ~~financing,~~duty weelectric ~~remain~~dregs ~~dependent~~furnace on- Mr$1.3 ~~Yang as our primary source of working capital.~~million

~~Off~~· a 5 ton free-~~Balance~~going ~~Sheet~~hammer ~~Arrangements~~- $0.7 million

WeAt dothe ~~not~~present time, we have ~~any~~received ~~off-balance~~no ~~sheet~~commitments ~~arrangements~~for ~~that~~the ~~have~~funds orrequired ~~are~~to ~~reasonably~~increase ~~likely~~our tomarketing ~~have~~efforts aand ~~current~~for our planned capital investments. Obtaining those funds, if we can do so, will require that we issue substantial amounts of equity securities or ~~future~~incur ~~effect~~significant debts. We believe that the expected return on those investments will justify the cost. However, our ~~financial~~plan, ~~condition~~if oraccomplished, ~~results~~will ofsignificantly ~~operations~~increase the risks to our liquidity.

Risk Factors That May Affect Future Results

You should carefully consider the risks described below before buying our common stock. If any of the risks described below actually occurs, that event could cause the trading price of our common stock to decline, and you could lose all or part of your investment.

Because our production operations have only recently commenced, unexpected factors may hamper our efforts to implement our business plan.

Our first significant sales volume occurred in the three months ended March 31, 2007. Even then, over 90% of our sales were to one customer, a local distributor of special steel. Since then our sales revenue has fallen short of our administrative expenses. Our business plan contemplates that we will engage in much broader marketing operations, involving a lengthy menu of product offerings. Implementation of that business plan will also entail much more complex production operations. Because these are areas in which we have limited experience, problems may occur with production or marketing that we have not anticipated, which would interfere with our business, and prevent us from achieving profitability.

Our profits will be limited unless we are able to secure a source of iron ore.

We currently manufacture our special steel by melting scrap steel. The price of scrap steel on the international market is much higher today than it was five years ago, and our expectation is that the price will remain high. Therefore, in order to achieve efficient operations, it will be necessary for us to develop the capacity to smelt iron ore to produce steel. Our plan is to obtain iron ore from our Chairman, Yang Kuidong, who owns certain undeveloped mining rights. However, implementation of that plan will require that Mr. Yang make significant capital investments in order to develop his mining properties. If he is unable to obtain the necessary funds, or if our efforts to develop a source of iron ore are fruitless for any other reason, our profitability will be limited.

The capital investments that we plan for the next two years may result in dilution of the equity of our present shareholders.

Our business plan contemplates that we will invest approximately 35 million RMB ($4.5 million) in our manufacturing facility during the next years and an undetermined amount in creating a working capital reserve. We intend to raise a portion of the necessary funds by selling equity in our company. At present we have no commitment from any source for those funds. We cannot determine, therefore, the terms on which we will be able to raise the necessary funds. It is possible that we will be required to dilute the value of our current shareholders’ equity in order to obtain the funds. If, however, we are unable to raise the necessary funds, our growth will be limited, as will our ability to compete effectively.

Competition could prevent us from achieving a significant market position.

The special steel industry is populated by many large companies, many of which receive substantial state support and have capital assets that dwarf our own. Our efforts to secure a position in the market for special steel will be met by competition from Japanese and European producers of high quality special steels. We must also compete against lower grade steels that may attract customers who will sacrifice quality for price. Currently smelters in Russia and India are the source of significant competition at the lower end of the market. If a well-capitalized company directed its financial strength toward competition with us, it could achieve economies of scale that might permit it to market its products at lower prices than ours. If this occurred before we had established a significant market awareness of our brand, we might be unable to compete effectively, and would be unable to achieve profitability.

A recession in China could significantly hinder our growth.

The growing demand for special steel in China has been swelled, in large part, by the recent dramatic increases in industrial production in China. The continued growth of our market will depend on continuation of recent improvements in the Chinese economy. If the Chinese economy were to contract and investment capital became limited, manufacturers will be less able to pay premium prices for the higher quality special steels that we produce. Many financial commentators expect a recession to occur in China in the near future. The occurrence of a recession could significantly hinder our efforts to implement our business plan.

Increased environmental regulation could diminish our profits.

The production of steel involves the production of pollutants. At the present time our operations comply with all applicable government regulations designed to protect the environment. There is increasing concern in China, however, over the degradation of the environment that has accompanied its recent industrial growth. It is likely that additional government regulation will be introduced in order to protect the environment. Compliance with such new regulations could impose on us substantial costs, which would reduce our profits.

Our business and growth will suffer if we are unable to hire and retain key personnel that are in high demand.

Our future success depends on our ability to attract and retain highly skilled engineers, production supervisors, and marketing personnel. In general, qualified individuals are in high demand in China, and there are insufficient experienced personnel to fill the demand. In a specialized scientific field, such as ours, the demand for qualified individuals is even greater. If we are unable to successfully attract or retain the personnel we need to succeed, we will be unable to implement our business plan.

We may have difficulty establishing adequate management and financial controls in China.

The People’s Republic of China has only recently begun to adopt the management and financial reporting concepts and practices that investors in the United States are familiar with. We may have difficulty in hiring and retaining employees in China who have the experience necessary to implement the kind of management and financial controls that are expected of a United States public company. If we cannot establish such controls, we may experience difficulty in collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet U.S. standards.

Government regulation may hinder our ability to function efficiently.

The national, provincial and local governments in the People’s Republic of China are highly bureaucratized. The day-to-day operations of our business require frequent interaction with representatives of the Chinese government institutions. The effort to obtain the registrations, licenses and permits necessary to carry out our business activities can be daunting. Significant delays can result from the need to obtain governmental approval of our activities. These delays can have an adverse effect on the profitability of our operations. In addition, compliance with regulatory requirements applicable to steel production may increase the cost of our operations, which would adversely affect our profitability.

Capital outflow policies in China may hamper our ability to pay dividends to shareholders in the United States.

The People’s Republic of China has adopted currency and capital transfer regulations. These regulations require that we comply with complex regulations for the movement of capital. Although Chinese governmental policies were introduced in 1996 to allow the convertibility of RMB into foreign currency for current account items, conversion of RMB into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration of Foreign Exchange. We may be unable to obtain all of the required conversion approvals for our operations, and Chinese regulatory authorities may impose greater restrictions on the convertibility of the RMB in the future. Because most of our future revenues will be in RMB, any inability to obtain the requisite approvals or any future restrictions on currency exchanges will limit our ability to pay dividends to our shareholders.

Currency fluctuations may adversely affect our operating results.

Chaoyang Liaogang generates revenues and incurs expenses and liabilities in Renminbi, the currency of the People’s Republic of China. However, as a subsidiary of American Wenshen, it will report its financial results in the United States in U.S. Dollars. As a result, our financial results will be subject to the effects of exchange rate fluctuations between these currencies. From time to time, the government of China may take action to stimulate the Chinese economy that will have the effect of reducing the value of Renminbi. In addition, international currency markets may cause significant adjustments to occur in the value of the Renminbi. Any such events that result in a devaluation of the Renminbi versus the U.S. Dollar will have an adverse effect on our reported results. We have not entered into agreements or purchased instruments to hedge our exchange rate risks.

We have limited business insurance coverage.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products, and do not, to our knowledge, offer business liability insurance. As a result, we do not have any business liability insurance coverage for our operations. Moreover, while business disruption insurance is available, we have determined that the risks of disruption and cost of the insurance are such that we do not require it at this time. Any business disruption, litigation or natural disaster might result in substantial costs and diversion of resources.

American Wenshen is not likely to hold annual shareholder meetings in the next few years.

Management does not expect to hold annual meetings of shareholders in the next few years, due to the expense involved. The current members of the Board of Directors were appointed to that position by the previous directors. If other directors are added to the Board in the future, it is likely that the current directors will appoint them. As a result, the shareholders of American Wenshen will have no effective means of exercising control over the operations of American Wenshen.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures .

Our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of our disclosure controls and procedures as of ~~June~~December 3031, 2009. Pursuant to Rule13a-15(e) promulgated by the Securities and Exchange Commission pursuant to to the Securities Exchange Act of 1934, “disclosure controls and procedures” means controls and other procedures that are designed to insure that information required to be disclosed by American Wenshen Steel Group, Inc. in the reports that it files with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time limits specified in the Commission’s rules. “Disclosure controls and procedures” include, without limitation, controls and procedures designed to insure that information American Wenshen Steel Group is required to disclose in the reports it files with the Commission is accumulated and communicated to our Chief Executive Officer and Chief Financial Officer as appropriate to allow timely decisions regarding required disclosure. Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that American Wenshen Steel Group’s system of disclosure controls and procedures was effective as of ~~June~~December 3031, 2009 for the purposes described in this paragraph.

Changes in Internal Controls . There was no change in internal controls over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act or 1934) identified in connection with the evaluation described in the preceding paragraph that occurred during American Wenshen Steel Group’s ~~second~~first fiscal quarter that has materially affected or is reasonably likely to materially affect American Wenshen Group’s internal control over financial reporting.

2519

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The company is not party to any material legal proceeding.

ITEM 21A. RISK ~~CHANGES IN SECURIT IES AND SMALL BUSINESS ISSUER PURCHASE OF EQUITY SECURITIES~~ FACTORS

During the period addressed in this Report, there were no material changes in the risk factors set forth in Item 1A: “Risk Factors” in the Annual Report on Form 10-K for the year ended September 30, 2009.

ITEM 2.

CHANGES IN SECURIT IES AND REGISTRANT PURCHASE OF EQUITY SECURITIES

None.

(e) Purchases of equity securities

The Company did not repurchase any of its equity securities that were registered under Section 12 of the Securities Exchange Act during the ~~3rdt~~ 1st quarter of fiscal ~~2009~~2010.

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

31.1	Rule 13a-14(a) Certification – CEO
31.2	Rule 13a-14(a) Certification – CFO

32	Rule 13a-14(b) Certification

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

AMERICAN WEHNSHEN STEEL GROUP, INC.

Date: August 14, 2009 By: /s/ Yang Kuidong Yang Kuidong, Chief Executive Officer

Date: February 11, 2010	By: /s/ Yang Kuidong
	Yang Kuidong, Chief Executive Officer

	By: /s/ Zhang Liwei
	Zhang Liwei, Chief Financial Officer

~~By: /s/ Zhang Liwei Zhang Liwei, Chief Financial Officer~~21

Filing Compare · American Wenshen Steel Group, Inc.