NOTE 1 - ORGANIZATION AND NATURE OF
Sutor Technology Group Limited and subsidiaries
(the “Company”) includes its wholly owned subsidiaries Sutor Steel Technology Co., Ltd. (“Sutor Steel”), Changshu
Huaye Steel Strip Co., Ltd. (“Changshu Huaye”), Jiangsu Cold-Rolled Technology Co., Ltd. (“Jiangsu
Cold-Rolled”), Ningbo Zhehua Heavy Steel Pipe Manufacturing Co., Ltd. (“Ningbo Zhehua”) and Sutor Technology
Co., Ltd (“Sutor Technology”) as of March 31, 2012.
Ningbo Zhehua was organized under the laws
of the People’s Republic of China (the “PRC”) on April 5, 2004. On November 10, 2009, pursuant to the Equity
Transfer Agreement (the “Agreement”), Changshu Huaye acquired 100% of the equity interests of Ningbo Zhehua from Shanghai
Huaye Iron & Steel Co., Ltd., (an entity under common control with the Company) (“Shanghai Huaye”) for approximately
$6,615,825 in cash. The acquisition was a transfer of equity interests between entities under common control and was recognized
as a recapitalization of Ningbo Zhehua into the Company in a manner similar to the pooling-of-interests method of accounting, with
the assets and liabilities of Ningbo Zhehua recognized at their historical carrying amounts.
Nature of Operations - The
Company’s operations are located in the PRC. For the three months ended March 31, 2012 and 2011, approximately 94.2% and
87.4%, respectively, of the Company’s revenue was derived from sales of steel products within PRC. For the nine months ended
March 31, 2012 and 2011, approximately 86.9% and 91.0%, respectively, of the Company’s revenue was derived from sales of
steel products within PRC. Changshu Huaye manufactures hot-dip galvanized steel and pre-painted galvanized steel. Jiangsu Cold-Rolled
operates several production lines that refine products such as cold-rolled steel, acid pickled steel and hot-dip galvanized steel.
Ningbo Zhehua primarily manufactures heavy steel pipe. Sutor Technology engages in trading of steel products.