1239188--3/31/2008--GENERAL_STEEL_HOLDINGS

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Risks Related to Our Business We face substantial competition which, among other things, may lead to price pressure and adversely affect our sales. Our limited operating history may not serve as an adequate basis to judge our future prospects and results of operations. Our inability to fund our capital expenditure requirements may adversely affect our growth and profitability. We may not be able to effectively control and manage our growth. Our business, revenues and profitability are dependent on a limited number of large customers. Steel consumption is cyclical and worldwide overcapacity in the steel industry and the availability of alternative products have resulted in intense competition, which may have an adverse effect on profitability and cash flow. We may not be able to pass on to customers the increases in the costs of our raw materials, particularly iron-ore and steel. The price of steel may decline due to an overproduction by Chinese steel companies. Disruptions to our manufacturing processes could adversely affect our operations, customer service levels and financial results. Because we are a holding company with substantially all of our operations conducted through our subsidiaries, our performance will be affected by the performance of our subsidiaries. We depend on acquiring companies to fulfill our growth plan. We depend on bank financing for our working capital needs. We rely on Mr. Zuosheng Yu for important business leadership. There have been historical deficiencies with our internal controls and these remain areas of our internal and disclosure controls that require improvements, and we are exposed to potential risks from legislation requiring companies to evaluate controls under Section 404 of the Sarbanes-Oxley Act of 2002. We do not presently maintain product liability insurance in the PRC, and our property and equipment insurance does not cover the full value of our property and equipment, which leaves us with exposure in the event of loss or damage to our properties or claims filed against us. Risks Related to Operating Our Business in China We face the risk that changes in the policies of the Chinese government could have significant impact upon the business we may be able to conduct in China and the profitability of such business. The PRC laws and regulations governing our current business operations and contractual arrangements are uncertain, and if we are found to be in violation, we could be subject to sanctions. In addition, any changes in such PRC laws and regulations may have a material and adverse effect on our business. A slowdown or other adverse developments in the PRC economy may materially and adversely affect our customers, demand for our services and our business. Inflation in China could negatively affect our profitability and growth. If relations between the United States and China deteriorate, our stock price may decrease and we may experience difficulties accessing the U.S. capital markets. The Chinese Government could change its policies toward private enterprises, which could result in the total loss of our investments in China. The PRC State Administration of Foreign Exchange, or SAFE, requires PRC residents to register with, or obtain approval from SAFE regarding their direct or indirect offshore investment activities. Our business, results of operations and overall profitability are linked to the economic, political and social conditions in China. Governmental control of currency conversion may cause the value of your investment in our common stock to decrease. The fluctuation of the Renminbi may cause the value of your investment in our common stock to decrease. We are subject to environmental and safety regulations, which may increase our compliance costs and reduce our overall profitability. Our operating subsidiary must comply with environmental protection laws that could adversely affect our profitability. Because the Chinese legal system is not fully developed, our legal protections may be limited. Risks Related to Our Common Stock Our officers, directors and affiliates control us through their positions and stock ownership and their interests may differ from other stockholders. We have never paid cash dividends and are not likely to do so in the foreseeable future. Our common stock is subject to price volatility unrelated to our operations. Investors may experience dilution from any conversion of the senior convertible notes and the exercise of warrants we issued in December 2007.

Full 10-K form ▸

1239188--3/31/2008--GENERAL_STEEL_HOLDINGS_INC