Annec Green Refractories Corp - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - Annec Green Refractories Corp	Financial_Report.xls
EX-32.1 - EXHIBIT 32.1 - Annec Green Refractories Corp	v327508_ex32-1.htm
EX-31.1 - EXHIBIT 31.1 - Annec Green Refractories Corp	v327508_ex31-1.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____.

Commission File No. 0-54117

ANNEC GREEN REFRACTORIES CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation)	27-2951584 (IRS Employer Identification No.)

No. 5 West Section, Xidajie Street, Xinmi City, Henan Province, P.R. China (Address of Principal Executive Offices)	452370 (Zip Code)

86-371- 69999012

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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 x No ¨

Indicate by checkmark 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 ¨ (Do not check if smaller reporting company)	Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No x

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes x No ¨

APPLICABLE ONLY TO CORPORATE ISSUERS:

As of November 8, 2012, there were 19,995,701 shares of the registrant’s common stock issued and outstanding.

ANNEC GREEN REFRACTORIES CORPORATION

FORM 10-Q INDEX

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of September 30, 2012 (Unaudited) and December 31, 2011	3
	Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2012 and September 30,2011(Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and September 30, 2011(Unaudited)	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	31
Signature Page		32

In this Quarterly Report on Form 10-Q, references to “dollars” and “$” are to United States dollars and, unless the context otherwise requires, references to “we,” “us”, “our” and the Company refer to Annec Green Refractories Corporation and its consolidated subsidiaries.

This Quarterly Report contains certain forward-looking statements. When used in this Quarterly Report, statements which are not historical in nature, including the words “anticipate,” “estimate,” “should,” “expect,” “believe,” “intend,” “may,” “project,” “plan” or “continue,” and similar expressions are intended to identify forward-looking statements. They also include statements containing anticipated business developments, a projection of revenues, earnings or losses, capital expenditures, dividends, capital structure or other financial terms.

The forward-looking statements in this Quarterly Report are based upon management’s beliefs, assumptions and expectations of our future operations and economic performance, taking into account the information currently available to them. These statements are not statements of historical fact. Forward-looking statements involve risks and uncertainties, some of which are not currently known to us that may cause our actual results, performance or financial condition to be materially different from the expectations of future results, performance or financial condition we express or imply in any forward-looking statements. These forward-looking statements are based on our current plans and expectations and are subject to a number of uncertainties and risks that could significantly affect current plans and expectations and our future financial condition and results.

ANNEC GREEN REFRACTORIES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	September 30,		December 31,
	2012		2011
	(Unaudited)
ASSETS
Current assets:
Cash	$	942,305	$	343,028
Restricted cash		2,162,824		1,571,166
Bank notes receivable		243,535		2,026,885
Accounts receivable (net of allowance of $ 652,000 and $792,000 at September 30, 2012 and December 31, 2011, respectively)		28,414,163		34,410,920
Retentions receivable		11,948,448		11,570,262
Prepaid expenses and deposits		7,852,872		10,515,009
Other receivables		4,340,997		3,815,159
Inventories		36,552,743		34,418,964
Total current assets		92,457,887		98,671,393
Long-term retentions receivable		4,138,473		4,926,856
Deposits for capital expenditure		674,657		493,402
Plant and equipment, net		16,513,102		16,480,469
Land use rights, net		2,202,322		2,225,555
Long-term investment		158,253		157,117

Total assets	$	116,144,694	$	122,954,792
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term loans	$	18,066,150	$	15,218,314
Bank notes payable		2,136,414		1,571,166
Accounts payable and accrued expenses		16,576,887		19,315,558
Advances from customers		24,153,200		29,726,898
Salaries payable		460,621		530,219
Taxes payable		2,080,843		3,301,944
Related party payables		681,658		764,461
Loans payable to employees		1,972,693		1,619,827
Loans payable to other individuals		3,648,046		6,481,374
Other payable		3,111,623		3,680,223
Total current liabilities		72,888,135		82,209,984
Deferred income		2,700,994		2,812,556
Long-term loans		697,895		923,846

Total liabilities		76,287,024		85,946,386
Commitments and contingencies (Note 13)
Stockholders’ equity:
Series A preferred stock, $0.0001 par value; 20,000,000 shares authorized; zero shares issued and outstanding		-		-
Common stock, $0.0001 par value; 100,000,000 shares authorized; 19,995,701 issued and outstanding at September 30, 2012 and December 31, 2011		2,000		2,000
Additional paid-in capital		4,046,992		4,046,992
Retained earnings		33,897,652		31,311,752
Accumulated other comprehensive income		1,911,026		1,647,662
Total stockholders’ equity		39,857,670		37,008,406
Total liabilities and stockholders’ equity	$	116,144,694	$	122,954,792

See accompanying notes to the unaudited condensed consolidated financial statements.

ANNEC GREEN REFRACTORIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenues	$	14,924,338		$	21,284,455		$	48,712,709		$	58,613,778
Cost of revenues		7,972,971			11,415,483			28,675,880			34,780,715
Gross profit		6,951,367			9,868,972			20,036,829			23,833,063

Operating expenses:
Sales and marketing		3,297,129			4,288,462			9,689,346			10,926,396
General and administrative		1,352,386			1,289,033			4,280,005			3,970,995
Total operating expenses		4,649,515			5,577,495			13,969,351			14,897,391

Income from operations		2,301,852			4,291,477			6,067,478			8,935,672

Other income (expense):
Interest income		76,509			72,579			239,553			257,223
Interest expense		(968,587	)		(638,521	)		(3,249,458	)		(2,331,305	)
Other income, net		398,689			80,679			368,973			322,442
Total other expense		(493,389	)		(485,263	)		(2,640,932	)		(1,751,640	)

Income before provision for income taxes		1,808,463			3,806,214			3,426,546			7,184,032
Provision for income taxes		326,549			598,081			840,647			1,185,972
Net income		1,481,914			3,208,133			2,585,899			5,998,060

Other comprehensive income:
Foreign currency translation adjustment		(63,197	)		282,103			263,364			800,698

Comprehensive income	$	1,418,717		$	3,490,236		$	2,849,263		$	6,798,758

Net income per share-basic and dilutive	$	0.07		$	0.16		$	0.13		$	0.30

Shares used in computing net income per share-basic and dilutive		19,995,701			19,995,701			19,995,701			19,995,701

See accompanying notes to the unaudited condensed consolidated financial statements.

ANNEC GREEN REFRACTORIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2012			2011
Cash flows from operating activities:

Net income	$	2,585,899		$	5,998,060
Adjustments to reconcile net income to net cash (used in ) provided by operating activities:
Depreciation and amortization		1,323,358			1,048,251
(Recovery)provision for bad debt		(146,246	)		217,922
Loss on sale of plant and equipment		141,739			31,848
Change in assets and liabilities:
Accounts receivable, retentions, and long-term retentions receivable		6,384,124			(16,186,208	)
Prepaid expenses and deposits		2,742,741			(10,334,699	)
Other receivables		(499,075	)		510,638
Inventories		(1,887,993	)		(11,991,206	)
Accounts payable and accrued expenses		(2,797,460	)		12,092,207
Advances from customers		(5,798,323	)		19,839,514
Salary payable		(73,555	)		106,585
Tax payable		(1,247,054	)		(1,396,496	)
Deferred income		(132,123	)		(128,112	)
Other payable		(596,207	)		202,389
Net proceeds (payments) from bank notes receivable		1,801,001			(3,849,275	)
Net (payments) proceeds of restricted cash for issuance of bank notes		(581,261	)		1,408,896
Proceeds from notes payable		554,807			2,305,564
Net cash provided by (used in) operating activities		1,774,372			(124,122	)
Cash flows from investing activities:

Deposits for capital expenditure		(177,982	)		127,530
Purchase of plant and equipment		(828,693	)		(1,454,403	)
Proceeds from sale of plant and equipment		-			79,926

Net cash used in investing activities		(1,006,675	)		(1,246,947	)
Cash flows from financing activities:
Payments of dividends					(705,276	)
Proceeds from loans to related parties, employees, and other individuals, net of payments		(2,631,754	)		2,689,031
Proceeds from short-term borrowings		15,677,261			11,523,202
Payment of short-term borrowings		(12,934,929	)		(12,906,540	)
Proceeds from issuance of long-term borrowings, net of payments		(233,019	)		(225,945	)

Net cash (used in) provided by financing activities		(122,441	)		374,472

Net increase (decrease) in cash		645,256			(996,597	)
Effect of exchange rate changes		(45,979	)		3,007
Cash at beginning of period		343,028			1,504,971
Cash at end of period	$	942,305		$	511,381
Supplementary disclosure of cash flow information
Noncash investing activities:
Reduction of accounts payable through disposal of plant and equipment		85,695			42,576
Reduction of accounts receivable through purchase of plant and equipment		548,527

Cash paid during the period
Interest		1,143,816			1,959,534
Income taxes		462,722			622,718

See accompanying notes to the unaudited condensed consolidated financial statements.

ANNEC GREEN REFRACTORIES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Basis of Presentation and Description of the Company

The accompanying unaudited condensed consolidated financial statements of Annec Green Refractories Corporation (the Company) have been prepared in accordance with generally accepted accounting principles in the United States (U.S. GAAP) for interim financial information in pursuant to the instructions to Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the financial statements have been included. The financial information for December 31, 2011 has been derived from the consolidated audited financial statements included in our annual report filed on Form 10-K with the SEC for the year ended December 31, 2011.

The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto, together with management’s discussion and analysis of the Company’s financial condition and results of operations, contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, which was filed with the Securities and Exchange Commission (SEC) on April 25, 2012. The results of operations for the nine-month period ended September 30, 2012 are not necessarily indicative of the results for the year ending December 31, 2012 or any other interim period. The accompanying condensed consolidated financial statements include all wholly-owned subsidiaries and all subsidiaries over which the Company exercises the power and control to direct activities significantly impacting financial performance. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain prior period amounts have been reclassified in the consolidated financial statements to conform to the current period presentation.

On February 11, 2011, Annec Green Refractories Corporation, formerly E-Band Media, Inc. (“E-Band Media”) entered and closed a Share Exchange Agreement (“Share Exchange Agreement”), with certain shareholders and warrant holders, Dean Konstantine, Muzeyyen Balaban, Bernieta Masters, and Linda Masters, and with China Green Refractories Limited, a BVI corporation (“China Green”), and its shareholders, New-Source Group Limited, a BVI company, High-Sky Assets Management Limited, a BVI company, Joint Rise Investments Limited, a BVI company, Giant Harvest Investment Limited, a BVI company, and Mr. QIAN Yun Ting (collectively the “China Green Shareholders”), pursuant to which E-Band Media acquired 100% of the issued and outstanding capital stock of China Green in exchange for 19,220 shares of E-Band Media’s Series A Convertible Preferred Stock (“Series A Preferred Stock”). Pursuant to the terms of the Share Exchange Agreement, E-Band Media agreed to affect a 1-for-14.375 reverse stock split (“Reverse Split”) of its outstanding common stock. The Reverse Stock Split was affected on April 18, 2011. In addition, pursuant to the Share Exchange Agreement, the China Green shareholders acquired all 10,000,000 shares of E-Band Media’s common stock from Dean Konstantine (“Controlled Shares”) and all outstanding warrants of E-Band Media from Muzeyyen Balaban, Bernieta Masters, and Linda Masters, representing warrants to purchase up to 5,000,000 shares of our common stock (“Warrants”) for an aggregate purchase price of $250,000 and 100 shares of Series A Preferred Stock held by China Green shareholders. The Warrants were cancelled by the China Green shareholders pursuant to the Share Exchange Agreement. As a result of the Share Exchange Agreement, the China Green shareholders owned 96% of our issued and outstanding common stock on an as-converted common stock basis as of and immediately after the effectiveness of the Reverse Split as contemplated by the Share Exchange Agreement.

ANNEC GREEN REFRACTORIES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Basis of Presentation and Description of the Company, continued

The consolidated financial statements following unaudited combined condensed consolidated financial statements have been prepared with the effect of the merger of China Green and E-Band Media, Inc. as a reverse acquisition of assets and a recapitalization in accordance with accounting principles generally accepted in the United States. For accounting purposes, China Green was considered to be the acquirer of E-Band Media, Inc. in the merger and E-Band Media, Inc. did not meet the definition of a business in accordance with ASC Topic 805-10, Business Combinations, because E-Band Media, Inc. had no material assets or liabilities at the time of closing of the merger and these assets and liabilities did not constitute a business pursuant to ASC Topic 805. Consequently, all of the assets and liabilities of E-Band Media, Inc. were reflected in the financial statements at their respective fair values and no goodwill or other intangibles were recorded as part of acquisition accounting, and the cost of the merger was measured at net assets acquired.

Business Description

Zhengzhou Annec is principally engaged in the manufacture, design, development, sale, installation, and maintenance of refractory materials and products. Zhengzhou Annec’s primary products are heat shock bricks for internal, top, and external combustion hot air stoves, high alumina brick with heat shock, cordierite-mullite bricks, non-recasting, soft and high-heating andalusite brick, and silica bricks with high thermal conductivity and high density. Zhengzhou Annec produces refractory products through three factories in the Henan Province, PRC: Fuliang, Fuhua, and Fugang.

Beijing Annec’s primary business is to design and build blast furnaces and hot air stoves. Beijing Annec acts as a general contractor and has outside construction companies serve as sub-contractors. Beijing Annec also derives revenue from technology research and development, graphic design, production, engineering and technical consulting, and sales of building material.

Summary of Significant Accounting Policies

Significant Estimates

The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and the related disclosure of contingent assets and liabilities. Significant estimates and assumptions are used for, but not limited to: (1) allowance for doubtful accounts, (2) economic lives of property, plant, and equipment, (3) asset impairments, (4) percentage of completion on construction projects, and (5) contingency reserves. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. In addition, any change in these estimates or their related assumptions could have an adverse effect on our operating results.

ANNEC GREEN REFRACTORIES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Summary of Significant Accounting Policies, continued

Bank Notes Receivable

Bank notes receivable consists of bank notes from various banks in the PRC, which generally have a maturity of one to six months. The bank notes are highly liquid and are given to or received by vendors and customers instead of the local currency (“Renminbi” or “RMB”). The bank notes can generally be presented to the bank before maturity and in such case are redeemable at a slight discount.

Accounts Receivable

Accounts receivable are reported at net realizable value. The Company has established an allowance for doubtful accounts based on an estimate of the amounts that may be uncollectible. On a monthly basis, the Company examines all significant past due amounts. The Company considers the age of the receivable, the financial standing and credit rating of the customer, and the history of payments or guarantee of payment made by the customer. Many of the Company’s contracts are with large Chinese government-backed organizations with an excellent but slow payment history. Normal payment terms for custom contract sales are: (i) 30% of the contract price as advanced payment after signing of the contract which is used to buy materials and production; (ii) 30% of the contract price will be collected when production is finished and goods are inspected by the customer; (iii) 30% of the contract price will be received after the completion of refractory installation and testing by the customer; and (iv) the final installment of 10% retentions are usually due one to two years after the hot air stove is put into service to allow for quality guarantee. Such retentions are presented as retentions receivable or long-term retentions receivable on the consolidated balance sheets.

Estimated warranty costs, if material, are accrued at the time of sales. Such costs have not been material to date.

Concentration of Credit and Other Risks

Financial instruments which are potentially subject to concentrations of credit risk consist principally of cash, restricted cash, bank notes receivable, accounts receivable and other receivables. The Company holds all of its bank deposits with banks in China. In China, there is no equivalent federal deposit insurance as in the United States; as such, these amounts held in banks in China are not insured. The Company has not experienced any losses in such bank accounts through September 30, 2012. In an effort to mitigate any potential risk, the Company periodically evaluates the credit quality of the financial institutions which hold the bank deposits and the Company holds its cash in multiple banks supported by the local and Central Government of the PRC.

ANNEC GREEN REFRACTORIES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Summary of Significant Accounting Policies, continued

The Company does not require collateral or other security to support the trade receivables. The Company is exposed to credit risk in the event of nonpayment by customers to the extent of amounts recorded on the balance sheet. One customer accounted for 24% and 25% of our trade receivables balance as of September 30, 2012 and December 31, 2011 respectively. An additional customer accounted for 15% and 16% of the Company’s trade receivables balance as of September 30, 2012 and December 31, 2011 respectively.

Two customers individually accounted for 25% and 15% of our revenue for the three months ended September 30, 2012, and two customers individually accounted for 38% and 13% of our revenue for the three months ended September 30, 2011, respectively. Two customers individually accounted for 26%, and 13% of our revenue for the nine month periods ended September 30, 2012. One customer individually accounted for 30% of our revenue in the nine month periods ended September 30, 2011.

The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environment in the PRC. The Chinese Government controls its foreign currency reserves through restrictions on imports and conversion of Renminbi (RMB) into foreign currency. During January 2008 to September 2012, the exchange rate between RMB and U. S. Dollars (USD) has fluctuated from USD $1.00 to RMB 7.3141 and USD $1.00 to RMB 6.3190, respectively. There can be no assurance that the exchange rate will remain stable. The Renminbi could appreciate or depreciate against the U .S .Dollar. The Company’s financial condition and results of operations may also be affected by changes in the value of certain currencies other than the Renminbi in which its earnings and obligations are denominated.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined on an average cost basis, which approximates actual cost on a first-in, first-out (FIFO) method. Lower of cost or market is evaluated by considering obsolescence, excessive levels of inventory, deterioration, and other factors. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess or obsolescence and are charged to cost of revenues.

Plant and Equipment

Plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line basis over the estimated useful lives of the related assets as follows:

Plant and buildings	20 years
Machinery and equipment	10 years
Vehicles	4 years
Electronic equipment	3 years
Furniture and tools	5 years
Software	5 years

Repairs and maintenance costs are expensed as incurred. Gains or losses on disposals are included in other expense.

ANNEC GREEN REFRACTORIES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Summary of Significant Accounting Policies, continued

Occasionally the Company will settle outstanding accounts receivable and accounts payable balances through non-monetary exchanges such as receiving or signing over the title to vehicles. The Company accounts for these transactions in accordance with ASC 845, Nonmonetary Transactions.

Land Use Rights

In the PRC there is no land ownership, but land use rights can be obtained. Land use rights are stated at cost less accumulated amortization. Amortization expense is recorded on a straight-line basis over the term of the land use rights. Land use rights are an intangible asset. The Company reviews intangible assets for impairment periodically and at least annually.

Long-term Investment

Long-term investment represents an investment the Company has in a regional bank within China. The Company does not hold a greater than a 5% interest and has determined that the Company does not have significant control or influence in the bank. Accordingly, the Company records the investment at cost. The Company’s investment is in a private company where there is not a market to determine the value of the investment.

Impairment of Long-Lived Assets

Long-lived assets held and used by the Company, including long-term investments, are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. If the carrying amount of an asset or asset group (in use or under development) is evaluated and found not to be recoverable (carrying amount exceeds the gross, undiscounted cash flows from use and disposition), then an impairment loss is recognized. The impairment loss is measured as the excess of the carrying amount over the asset’s or asset group’s fair value. Through September 30, 2012, there were no impairments of long-lived assets.

Fair Value of Financial Instruments

Fair Value Measurements and Disclosures (ASC 820-10) include a fair value hierarchy that is intended to increase the consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entity’s pricing an asset or liability based upon their own market assumptions. The fair value hierarchy consists of the following three levels:

ANNEC GREEN REFRACTORIES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Summary of Significant Accounting Policies, continued

Level 1 –inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2– observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 –instrument valuations are obtained without observable market values and require a high-level of judgment to determine the fair value.

The Company’s financial instruments consist mainly of cash, restricted cash, bank notes receivable, other receivables, and debt obligations. Other receivable are reflected in the accompanying financial statements at historical cost, which approximates fair value due to the short-term nature of these instruments. Based on the borrowing rates currently available to the Company for loans and similar terms and average maturities, the fair value of debt obligations also approximates its carrying value due to the short-term nature of the instruments. While the Company believes its valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.

The Company had no assets or liabilities measured at fair value and subject to the disclosure requirements based on the fair value hierarchy.

Government Assistance

The Company is currently the beneficiary of government grants that are generally intended to be used towards capital technology improvement with the end goal of increased production and energy efficiency. These grants are recorded as deferred income in the liabilities section of the balance sheet when cash is received and are accreted into non-operating income over the life of the asset, to the extent that the grant is related to an asset. For grants not related to any assets in certain cases, the Company records non-operating income when earned. The government grant income included in other income amounted to approximately $178,454 and $51,040 for the three month periods ended September 30, 2012 and 2011, respectively, and approximately $266,861 and $191,246 for the nine month periods ended September 30, 2012 and 2011.

Foreign Currency Translation

The accompanying financial statements are presented in United States Dollars. The functional currency of the Company is the Renminbi, the official currency of the PRC. Capital accounts of the financial statements are translated into United States Dollars from RMB at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of the balance sheet date. Income and expenditures are translated at the average exchange rates for the periods ended September 30, 2012 and 2011. Items in the Company’s consolidated statement of cash flows are translated using a weighted average exchange rate, which approximates the exchange rate in effect at the time of the cash flows. For all periods reported, there were no transactions outside the PRC; thus, all of our transactions are in RMB, our functional currency. Currency translation adjustments from translation to U.S. Dollars for financial reporting purposes are recorded in other comprehensive income (loss) as a component of equity.

ANNEC GREEN REFRACTORIES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Summary of Significant Accounting Policies, continued

A summary of the conversion rates for the periods presented is as follows:

	Three Months Ended				December
	September 30,				31,
	2012		2011		2011

Period end RMB: U.S. Dollar exchange rate		6.3190		6.4018		6.3647

Average RMB: U.S. Dollar exchange rate		6.3200		6.4231		6.4735

Accumulated Other Comprehensive Income

The Company reports comprehensive income in accordance with the provisions of ASC Topic 220, Comprehensive Income, which establishes standards for reporting comprehensive income or loss and its components in the financial statements. The accumulated other comprehensive income represents foreign currency translation adjustments.

Revenue Recognition

The Company’s principal revenue sources are from the sale of refractory materials and products and from sales generated from the designing and building of blast furnaces and hot-air stoves.

Zhengzhou Annec primarily generates revenue from the sale of a variety of refractory bricks and the sales from kits of pre-assembled hot-air ovens. Zhengzhou Annec recognizes such revenue when: (1) there is persuasive evidence of an arrangement; (2) customers have accepted receipt of the goods in accordance with the shipping terms; (3) the amount to be paid by the customer is fixed or determinable; and (4) collectability is reasonably assured. Zhengzhou Annec recognizes revenue from the sale of a kit when the kit has been delivered and accepted by the customer.

During 2011, Zhengzhou ANNEC began entering into certain short-term contracts to build blast furnaces and hot blast stoves. These contracts have an average duration of approximately three to six months and do not exceed a period of one year. Zhengzhou ANNEC recognizes these revenues based on project completion and acceptance by the customer.

Beijing Annec enters into contracts to design and build blast furnaces and hot-air stoves and recognizes revenues during the construction period using the percentage of completion method. Most of the contracts are fixed-price contracts, which typically provide for a stated contract price and a specified scope of the work to be performed. Beijing Annec estimates the percentage of the job that is complete using variations of the cost-to-cost method. Cost is used as the primary indicator, but the Company also considers contract milestones and work in progress from subcontractor companies. If the estimate of costs left to be incurred plus actual costs already incurred exceeds the total revenue to be expected from a contract, then the full amount of the difference is recognized in the current period as a loss and presented on the consolidated balance sheet as a current liability. Beijing Annec also generates revenue from the sale of a variety of machines and equipment which the Company purchases from vendors. Beijing Annec recognized revenue from this type of sale when the machines and equipment have been delivered and accepted by the customer.

ANNEC GREEN REFRACTORIES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Summary of Significant Accounting Policies, continued

Sales Returns Allowance

The Company estimates future product returns related to current period product revenue. The Company analyzes historical returns, and changes in customer demand and acceptance of the Company’s products when evaluating the adequacy of the sales returns allowance. Significant management judgment and estimates must be made and used in connection with establishing the sales returns allowance in any accounting period. Material differences may result in the amount and timing of the Company’s revenue for any period if management made different judgments or utilized different estimates. Based on the Company’s analysis, the Company did not record any provision for sales returns as of September 30, 2012 and 2011.

Shipping and Handling Costs

Shipping and handling costs billed to customers are recorded net of the amount collected. Shipping and handling expense included in selling expenses amounted to $647,066 and $1,532,903 for the three month periods ended September 30, 2012 and 2011, respectively, and $1,420,191 and $4,642,913 for the nine month periods ended September 30, 2012 and 2011, respectively.

Income Taxes

The Company accounts for income taxes in accordance with ASC 740, Income Taxes. ASC 740 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 basis 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. The Company adopted accounting policies in accordance to U.S. GAAP as its basis for computing the current income tax provision. Therefore, there were no significant deferred tax assets or liabilities during the quarter ended September 30, 2012 and 2011.

The Company adopted the Interpretation provisions of ASC 740, Income Taxes, on January 1, 2009, that clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the Company’s financial statements. The Interpretation also provides guidance for the measurement and classification of tax positions, interest and penalties, and requires additional disclosure on an annual basis. The adoption had no effect on the Company’s financial statements. Following implementation, the ongoing recognition of changes in measurement of uncertain tax positions will be reflected as a component of income tax expense. Interest and penalties incurred associated with unresolved income tax positions will continue to be included in other income (expense).

ANNEC GREEN REFRACTORIES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Summary of Significant Accounting Policies, continued

Reclassification

Certain amounts reported in the 2011 consolidated statement of cash flows have been reclassified to conform to the 2012 presentation. The Company determined that the net change in bank notes receivable and payable should be reclassified from investing and financing activities, respectively, to operating activities, because such receivables and payables arise directly in connection with the sale of products and purchases of raw materials. The net change in restricted cash used to secure the related payables has also been reclassified from financing activities to operating activities. As a result of the reclassifications, net cash provided by operating activities decreased by $135,000, net cash used in investing activities decreased by $2,440,000, and net cash provided by financing activities decreased by $2,305,000 from the amounts previously presented in the September 30, 2011 statement of cash flows. There was no impact to the Company’s September 30, 2012 consolidated balance sheet or statement of operations and no impact to the net decrease in cash for the period ended September 30, 2012.

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-05, comprehensive income (Topic 220): Presentation of Comprehensive Income. The objective of this Update is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Under the amendments to Topic 220, Comprehensive Income, in this Update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments in this Update should be applied retrospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company adopted this standard on January 1, 2012. The adoption of this standard did not have a material impact on the Company’s financial position, results of operations, or cash flows.

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U. S. GAAP and IFRSs. The amendments in this Update are the result of the work by the FASB and the IASB to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRSs). The amendments in this Update apply to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument classified in a reporting entity’s shareholders’ equity in the financial statements. The amendments in this Update are to be applied prospectively and are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The Company adopted this standard on January 1, 2012. The adoption of this standard did not have a material impact on our financial position, results of operations, or cash flows.

ANNEC GREEN REFRACTORIES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Retentions Receivable and Long-term Retentions Receivable

The Company enters into sales contracts with customers whereas there is a retainage provision in which the customer can retain a portion of the payment, generally 10% of the contract price, until the completed stoves or refractory materials sold by the Company have been demonstrated to be of good quality. The retention period is usually one to two years from the date the stoves are placed into service. The current portion on the Balance Sheet represents amounts due within a year. The long-term portion represents the amount that are due over two years or that is already over a year old.

The following table shows the components of retentions receivable from long-term contracts:

	September 30, 2012				December 31, 2011
	Retentions receivable		Long-term retention receivable		Retentions receivables		Long-term retention receivables

Chinese government or province owned customers:
Amounts billed and due	$	401,724	$	1,089,846	$	794,088	$	3,368,750
Amounts billed and not due		6,248,626		1,365,023		6,113,772		87,671
		6,650,350		2,454,869		6,907,860		3,456,421
Commercial customers:
Amounts billed and due		345,693		872,120		178,392		1,470,435
Amounts billed and not due		4,952,405		811,484		4,484,010		-
		5,298,098		1,683,604		4,662,402		1,470,435
Total	$	11,948,448	$	4,138,473	$	11,570,262	$	4,926,856

The balances billed but not due by customers pursuant to retainage provisions in contracts will generally be due one year after the blast furnaces or hot air stoves are placed in service by the customers. Based on the Company’s historical experience with similar contracts, all such retention amounts are expected to be collectible, and accordingly, no allowance has been recorded.

Other Receivables

The components of the Company’s other receivables are as follows:

	September 30,		December 31,
	2012		2011

Other receivables–individuals and employees	$	2,284,504	$	1,713,371
Other receivables–companies		1,081,245		1,097,453
Security deposits		975,248		1,004,335
Total other receivables	$	4,340,997	$	3,815,159

ANNEC GREEN REFRACTORIES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Other Receivables, continued

Other receivables are comprised of three categories: receivables from individuals (both employees and other individuals), receivables from other companies and security deposits for large contracts and are generally unsecured. Security deposits are to be returned to the Company upon the completion of the projects. Receivables from employees include cash advanced to employees for purchased supplies and services and employees’ travel and miscellaneous business expenses.

Inventories

The components of the Company’s inventories are as follows:

	September 30,		December 31,
	2012		2011

Raw materials	$	3,452,167	$	4,100,556
Work in process		292,474		692,465
Finished goods		32,808,102		29,625,943
Total inventories	$	36,552,743	$	34,418,964

Plant and Equipment, net

The components of the Company’s plant and equipment are as follows:

	September 30,			December 31,
	2012			2011

Plant and buildings	$	14,856,236		$	14,352,338
Machinery and equipment		4,659,370			4,499,602
Vehicles		2,235,565			1,763,312
Others		535,909			462,897
		22,287,080			21,078,149
Less accumulated depreciation		(5,773,978	)		(4,597,680	)
Total plant and equipment, net	$	16,513,102		$	16,480,469

Depreciation expense related to property and equipment was $422,974 and $349,201 for the three month periods ended September 30, 2012 and 2011, respectively, and was $1,283,965 and $1,009,377 for the nine month periods ended September 30, 2012 and 2011, respectively. The Company recorded a gain on sale of property and equipment of $0 and $2,852 for the three month periods ended September 30, 2012 and 2011, respectively, and a loss of $141,739 and $31,848 for the nine month periods ended September 30, 2012 and 2011, respectively.

ANNEC GREEN REFRACTORIES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Land Use Rights, net

The components of the Company’s land use rights are as follows:

	Estimated
	Remaining	September 30,			December 31,
	Life	2012			2011
Land use rights	47.1 years	$	2,331,129		$	2,314,389
Less accumulated amortization			(128,807	)		(88,834	)
Total land use rights, net		$	2,202,322		$	2,225,555

Amortization expense related to land use rights was $11,642 and $11,455 for the three month periods ended September 30, 2012 and 2011, respectively, and $39,393 and $38,874 for the nine month periods ended September 30, 2012 and 2011, respectively. The difference between the amortization expense and accumulated amortization is due to exchange rate differences as we translate expense using an average exchange rate for the fiscal year and translate the accumulated amortization using the fiscal year end exchange rate.

Amortization of land use rights attributable to future periods is as follows:

Period ending September 30:
2013	$	46,758
2014		46,758
2015		46,758
2016		46,758
2017		46,758
Thereafter		1,968,532

	$	2,202,322

Short-Term Loans

The components of the Company’s short-term loans are as follows:

September 30,		December 31,
2012		2011

$	18,066,150	$	15,218,314

At September 30, 2012, the Company has eleven loans with six different banks that are due within one year. The weighted average interest rates are 7.668% and 7.505% for the nine month periods ended September 30, 2012 and 2011. Seven of the short-term loans (with an outstanding balance of $11,584,000 at September 30, 2012) are guaranteed by third parties, Beijing Annec or Fuchao Li, the Company’s Chairman. Four of the loans (with an outstanding balance of $6,482,000 at September 30, 2012) are collateralized by the Company’s office building, land use rights, or machinery and equipment.

ANNEC GREEN REFRACTORIES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Bank Notes Payable

The components of the Company’s bank notes payable are as follows:

September 30,		December 31,
2012		2011

$	2,136,414	$	1,571,166

Bank notes payable represent bank notes paid to the Company’s vendors for purchase of inventory. At September 30, 2012, the Company had bank notes payable with two different banks with maturity dates of nine months. All are noninterest-bearing notes. The notes payable require cash to be held in reserve of 100% of the total outstanding notes payable balance. Cash held by the bank as a collateral is included in restricted cash.

10.

Long-Term Loan

The Company’s long-term loan is as follows:

September 30,		December 31,
2012		2011

$	697,895	$	923,846

The long-term loan is due on December 13, 2015, and has an interest rate of 7.152% and is secured by one of the Company’s office buildings.

Future minimum payments for the long-term loan are as follows:

Period ending September 30:
2013	$	310,176
2014		310,176
2015		77,543

	$	697,895

11.

Related Party Transactions

At September 30, 2012, the Company had loans payable to the Chairman (Fuchao Li), and a minority shareholder (Yinling Fan) of the Company. The Company and the owners have not signed notes, there are no specific due dates, and no interest is paid on the loans. Money is transferred between the owners and the Company mainly for cash flow purposes. The amounts loaned to the Company are short-term in nature. The following amounts were payable to the owners as of September 30, 2012 and December 31, 2011:

ANNEC GREEN REFRACTORIES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

11.

Related Party Transactions, continued

	September 30,		December 31,
	2012		2011

Fuchao Li	$	488,590	$	572,779
Yinling Fan		193,068		191,682

	$	681,658	$	764,461

During nine months ended September 30, 2012, the Company repaid $84,189 to Fuchao Li. There was no other activity in these payables during the nine months ended September 30, 2012.

12.

Income Taxes

The Company is subject to applicable local tax statutes and is governed by the Income Tax Law of the PRC and local income tax laws (the “PRC Income Tax Law”).

Zhengzhou Annec qualified as a hi-tech corporation and was accorded certain tax incentives for said designation. Accordingly, Zhengzhou Annec was subject to tax at a statutory rate of 15% for the three and nine month ended September 30, 2012 and 2011. Zhengzhou Annec will become subject to a rate of 25% after 2012 unless Zhengzhou Annec applies for and receives a further tax holiday for the succeeding five years.

Beijing Annec is subject to taxes at a statutory rate of 25%.

13.

Commitments and Contingencies

Third Party Guarantees

The Company entered into agreements as a debt guarantor during 2012 for four third parties. The maximum guaranteed amount is $15,984,000. The total outstanding borrowings by these parties were approximately $12,818,000 as of September 30, 2012.

These parties also acted as debt guarantors for the Company during 2012 with a maximum guaranteed amount of $14,243,000. As of September 30, 2012, the Company’s loans guaranteed by these parties were approximately $9,495,000. The Company has not historically incurred any losses due to such debt guarantees. Additionally, the Company has determined that the difference between fair value and the carrying amount of the guarantees is immaterial.

Leases

The Company leases one factory and one office building under non-cancelable operating leases with the third parties through April 1, 2014 and May 31, 2013, respectively. Rent expense included in general and administrative expense is $67,093 and $18,259 for the three months end September 30, 2012 and 2011, and $232,694 and $77,807 for the nine months ended September 30, 2012 and 2011. A summary of future minimum lease payments as of September 30, 2012 is presented below.

ANNEC GREEN REFRACTORIES CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

13.

Commitments and Contingencies, continued

	Minimum
	Lease
	Payments
Year ending September 30:
2013	$	250,729
2014		131,086

	$	381,815

14.

Segment Reporting

The Company operates in two reportable segments: Zhengzhou Annec and Beijing Annec. The Zhengzhou Annec segment manufactures and sells a variety of refractory bricks and kits of pre-assembled hot-air ovens. The Beijing Annec segment designs and builds blast furnaces and hot-air stoves on a contract basis and uses subcontractors throughout the construction process.

All revenues are related to end customers in China.

Information on reportable segments for the three and nine months ended September 30, 2012 and 2011 is as follows:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Revenues:
Zhengzhou Annec	$	14,924,338	$	21,284,455	$	48,712,709	$	53,037,417
Beijing Annec		-				-		5,576,361
Total		14,924,338		21,284,455		48,712,709		58,613,778
Cost of revenues:
Zhengzhou Annec		7,972,971		11,415,483		28,675,880		29,945,925
Beijing Annec		-		-		-		4,834,790
Total		7,972,971		11,415,483		28,675,880		34,780,715
Operating expenses:
Zhengzhou Annec		4,532,778		5,476,900		12,917,427		14,088,156
Beijing Annec		116,737		100,595		1,051,924		809,235
Total		4,649,515		5,577,495		13,969,351		14,897,391
Income from operations	$	2,301,852	$	4,291,477	$	6,067,478	$	8,935,672

	September 30,		December 31,
	2012		2011
Plant and equipment, net:
Zhengzhou Annec	$	13,304,912	$	13,177,027
Beijing Annec		3,208,190		3,303,442
Total identifiable assets	$	16,513,102	$	16,480,469

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report. See also “Risk Factors” contained in our amended current report on Form 10-K filed on April 25, 2012.

Overview

We are a refractory and production-based company that designs, develops, produces, and markets refractory products. All of our current business operations are conducted through our wholly-foreign owned Chinese subsidiary, Zhengzhou Annec Industrial Co., Ltd. (“Zhengzhou Annec”) and our variable interest entity, Annec (Beijing) Engineering Technology Co., Ltd. (“Beijing Annec”).

Through our subsidiary, Zhengzhou Annec, we are primarily engaged in the manufacture, design, development, sale, installation, and maintenance of refractory materials and products. Zhengzhou Annec’s primary products are heat shock bricks for internal, top, and external combustion hot air stoves, high alumina brick with heat shock, cordierite-mullite bricks, non-recasting, soft and high-heating andalusite brick, and silica bricks with high thermal conductivity and high density. Zhengzhou Annec produces refractory products through three factories in the Henan Province, PRC: Fuliang, Fuhua, and Fugang. Through a contractual agreement, between Zhengzhou Annec and Beijing Annec, we design and build blast furnaces and hot air stoves, and act as a general contractor working with outside construction companies which serve as sub-contractors. Beijing Annec also derives revenue from technology research and development, graphic design, production, engineering and technical consulting, and sales of building materials.

We generate revenues from the sale of our refractory products, which consists of bricks of various size, shape, and construction material, and from services related to the design, engineering and build out of stoves.

Summary of Critical Accounting Policies and Estimates

Management’s discussion and analysis of results of operations and financial condition are based upon our financial statements. These statements have been prepared in accordance with accounting principles generally accepted in the United States of America. These principles require management to make certain estimates and assumptions that affect amounts reported and disclosed in the financial statements and related notes. See Note 2 to our financial statements, “Summary of Significant Accounting Policies.” We believe that the following paragraphs reflect our most critical accounting policies that currently affect our financial condition and results of operations.

Reclassification

Use of Estimates

Accounts Receivable

Accounts receivable are reported at net realizable value. We have established an allowance for doubtful accounts based on an estimate of the amounts that may be uncollectible. On a monthly basis, we examine all significant past due amounts. We consider the age of the receivable, the financial standing and credit rating of the customer, and the history of payments or guarantee of payment made by the customer. Many of our contracts are with large Chinese government-backed organizations with an excellent but slow payment history. Normal payment terms for custom contract sales are: (i) 30% of the contract price as advanced payment after signing of the contract which is used to buy materials and production; (ii) 30% of the contract price will be collected when production is finished and goods are inspected by the customer; (iii) 30% of the contract price will be received after the completion of refractory installation and testing by the customer; and (iv) the final installment of 10% (retentions) is usually due one or two years after the stove is put into service to allow for quality guarantee. Such retentions are presented as retentions receivable or long-term retentions receivable on the consolidated balance sheets.

Inventories

Revenue Recognition

Our principal revenue sources are from the sale of refractory materials and products and from sales generated from the designing and building of blast furnaces and hot-air stoves. Zhengzhou Annec generates revenue from the sale of a variety of refractory bricks and the sales from kits of pre-assembled hot-air ovens. Zhengzhou Annec primarily recognizes such revenue when: (1) there is persuasive evidence of an arrangement; (2) customers have accepted receipt of the goods in accordance with the shipping terms; (3) the amount to be paid by the customer is fixed or determinable; and (4) collectability is reasonably assured. Zhengzhou Annec recognizes revenue from the sale of a kit when the kit has been delivered and accepted by the customer.

During 2011, Zhengzhou ANNEC began entering into short-term contracts to build blast furnaces and hot blast stoves. These contracts have an average duration of three to six months and do not exceed a period of one year. Zhengzhou ANNEC recognizes these revenues based on project completion and acceptance by the customer.

Beijing Annec enters into contracts to design and build blast furnaces and hot-air stoves and recognizes revenues during the construction period using the percentage of completion method. Most of the contracts are fixed-price contracts, which typically provide for a stated contract price and a specified scope of the work to be performed. Beijing Annec estimates the percentage of the job that is complete using variations of the cost-to-cost method. Cost is used as the primary indicator, but we also consider contract milestones and work in progress from subcontractor companies. If the estimate of costs left to be incurred plus actual costs already incurred exceeds the total revenue to be expected from a contract, then the full amount of the difference is recognized in the current period as a loss and presented on the consolidated balance sheet as a current liability. Beijing Annec also generates revenue from the sale of a variety of machines and equipment which we purchase from vendors. Beijing Annec recognized revenue from this type of sale when the machines and equipment have been delivered and accepted by the customer.

Shipping and Handling Costs

Shipping and handling costs billed to customers are recorded net of the amount collected. Shipping and handling expense included in sales and marketing expenses amounted to $ 647,066 and $ 1,532,903 for the three months ended September 30, 2012, and 2011, respectively, and $ 1,420,191 and $ 4,642,913 for the nine months ended September 30, 2012 and 2011, respectively.

Results of Operations

Comparison for the Three Months ended September 30, 2012 and 2011

	Three Months Ended September 30
			As % of				As % of
Statements of Operations Data	2012		Revenues		2011		Revenues
Revenues	$	14,924,338		100%	$	21,284,455		100%
Cost of Revenues		7,972,971		53%		11,415,483		54%
Gross Profit		6,951,367		47%		9,868,972		46%
Operating Expenses:
Sales and marketing		3,297,129		22%		4,288,462		20%
General and administrative		1,352,386		9%		1,289,033		6%
Total other expense		493,389		4%		485,263		2%
Income before provision for income taxes		1,808,463		12%		3,806,214		18%
Provision for income taxes		326,549		2%		598,081		3%
Net income	$	1,481,914		10%	$	3,208,133		15%

Revenues

We operate in two reportable segments: Zhengzhou Annec and Beijing Annec. The Zhengzhou Annec segment manufactures and sells a variety of refractory bricks and kits of pre-assembled hot-air ovens. In 2011, Zhengzhou Annec signed several refractory turnkey projects which was under a new business model. Beijing Annec segment designs and builds blast furnaces and hot-air stoves on a contract basis and uses subcontractors throughout the construction process. In addition, Beijing Annec also sells a variety of machines and equipment which are required as part of the entire blast furnace and hot-air stove package. We purchase these machines and equipment from outside vendors and generally sell them at cost plus a small mark-up.

Segments	September 30, 2012		% of Revenue			September 30, 2011		% of Revenue
Zhengzhou Annec	$	14,924,338		100	%	$	21,284,455		100	%
Beijing Annec		-		-			-		-
Total	$	14,924,338		100	%	$	21,284,455		100	%

Revenues for the three months ended September 30, 2012 was $14,924,338 compared to $21,284,455 for the three months ended September 30, 2011. Revenues for the three months ended September 30, 2012 decreased by $6,360,117 or by 30%, primarily as a result of decrease in sales in Zhengzhou Annec and no revenues from Beijing Annec. The Company did not have any revenues from Beijing Annec because no projects were completed during the three months ended September 30, 2012 and September 30, 2011. Beijing Annec currently has one project in process. Revenues for Zhengzhou Annec for the three months ended September 30, 2012, decreased by $6,360,117 or 30% to $14,924,338 from $21,284,455 for the three months ended September 30, 2011. The decrease in sales of refractory products by Zhengzhou Annec was mainly due to a decrease in the number of orders. The following table shows product sales of Zhengzhou Annec from existing and new customers during the three months ended September 30, 2012:

Type of Customers’ Sales	Amount (US$)

Existing customers	$	11,970,434

New customers	$	2,953,904

Cost of Revenue

Cost of revenue was $7,972,971 and $11,415,483 for the three months ended September 30, 2012 and 2011, respectively. Cost of revenue for the three months ended September 30, 2012 decreased by $ 3,442,512 or by 30%. Stated as a percentage of revenues, the cost of revenue for the three months ended September 30, 2012 was 53% compared to 54% for the three months ended September 30, 2011. Cost of revenue related to Zhengzhou Annec for the three months ended September 30, 2012 decreased by $3,442,512, or 30% to $7,972,971 from $11,415,483 for the same period in 2011. The decrease in cost of revenue was primarily a result of decrease in sales in Zhengzhou Annec and no sales in Beijing Annec for the three months ended September 30, 2012.

Operating Expenses

General and Administrative. General and administrative expenses include payroll and related employee benefits, and other headcount-related costs associated with facilities, and other administrative expenses. General and administrative expenses were $1,352,386 and $1,289,033 for the three months ended September 30, 2012 and 2011, respectively. There was an increase of $63,353 or 5%, as a result of an increase in expenses associated with being a reporting Company.

Sales and Marketing Expenses. Sales and marketing expenses include payroll, employee benefits, and other headcount-related costs associated with sales and marketing personnel and travel, advertising, promotions, trade shows, seminars, and other programs. Sales and marketing expenses were $3,297,129 and $4,288,462 for the three months ended September 30, 2012 and 2011, respectively. The decrease of $991,333, or 23%, in sales and marketing expense was due to decreased revenue and variable cost like shipping expense, packaging expense and traveling expense.

Total Other Expense. The total other expense was $493,389 and $485,263 for the three months ended September 30, 2012 and 2011, respectively. The increase of $8,126, or 2%, in total other expense was primarily attributable to recognition of a government grant in the three months ended September 30, 2011 and there was a government grant in the same period as of September 30, 2012, and an decrease in other expense as detailed in the following table:

	Three Months End
	September 30,			September 30,
	2012			2011
Other income (expense):
Interest income	$	76,509		$	72,579
Interest expense		(968,587	)		(638,521	)
Other income (expense), net		398,689			80,679
Total Other expense	$	(493,389	)	$	(485,263	)

Comparison for the Nine Months ended September 30, 2012 and 2011

	Nine Months Ended September 30
			As % of				As % of
Statements of Operations Data	2012		Revenues		2011		Revenues
Revenues	$	48,712,709		100%	$	58,613,778		100%
Cost of Revenues		28,675,880		59%		34,780,715		59%
Gross Profit		20,036,829		41%		23,833,063		41%
Operating Expenses:
Sales and marketing		9,689,346		20%		10,926,396		19%
General and administrative		4,280,005		9%		3,970,995		7%
Total other expense		2,640,932		5%		1,751,640		3%
Income before provision for income taxes		3,426,546		7%		7,184,032		12%
Provision for income taxes		840,647		2%		1,185,972		2%
Net income	$	2,585,899		5%	$	5,998,060		10%

Segments	September 30, 2012		% of Revenue			September 30, 2011		% of Revenue
Zhengzhou Annec	$	48,712,709		100	%	$	53,037,417		90	%
Beijing Annec		-		-			5,576,361		10	%
Total	$	48,712,709		100	%	$	58,613,778		100	%

Revenues for the nine months ended September 30, 2012 was $48,712,709 compared to $58,613,778 for the nine months ended September 30, 2011. Revenues for the nine months ended September 30, 2012 decreased by $9,901,069, or by 17%, primarily as a result of a decrease in sales and new orders by Zhengzhou Annec and no revenues from Beijing Annec. There were no revenues generated by Beijing Annec because it did not complete any projects during the nine months ended September 30, 2012. Beijing Annec currently has one project in process. Revenues for Zhengzhou Annec for the nine month ended September 30, 2012 decreased by $4,324,708 or 8%, to $48,712,709 from $53,037,417 for the nine months ended September 30, 2011. The decrease in sales of refractory products by Zhengzhou Annec was mainly due to a decrease in number of orders in the nine months ended September 30, 2012. The following table shows product sales of Zhengzhou Annec from existing and new customers during the nine months ended September 30, 2012:

Type of Customers’ Sales	Amount (US$)

Existing customers	$	45,713,673

New customers	$	2,999,036

Cost of Revenue

Cost of revenue was $28,675,880 and $34,780,715 for the nine months ended September 30, 2012 and 2011, respectively. Cost of revenue for the nine months ended September 30, 2012 decreased by $6,104,835 or 18%. Stated as a percentage of revenues, the cost of revenue for the nine months ended September 30, 2012 was the same as 59% for the nine months ended September 30, 2011. Cost of revenue related to Zhengzhou Annec for the nine months ended September 30, 2012 decreased by $1,270,045 or 4% to $28,675,880 from $29,945,925 for the same period in 2011. The decrease in cost of revenue of Zhengzhou Annec was primarily attributable to the decrease of sales for the same proportion. The total cost of revenue decreased because there was no revenue in Beijing Annec for the nine months ended September 30, 2012.

Operating Expenses

General and Administrative. General and administrative expenses include payroll and related employee benefits, and other headcount-related costs associated with facilities, and other administrative expenses. General and administrative expenses were $4,280,005 and $3,970,995 for the nine months ended September 30, 2012 and 2011, respectively. The increase of $309,010 or 8% in general and administrative expense was primarily due to an increase in salaries of managements.

Sales and Marketing Expenses. Sales and marketing expenses include payroll, employee benefits, and other headcount-related costs associated with sales and marketing personnel and travel, advertising, promotions, trade shows, seminars, and other programs. Sales and marketing expenses were $9,689,346 and $10,926,396 for the nine months ended September 30, 2012 and 2011, respectively. The decrease of $1,237,050 or 11%, in sales and marketing expense was due to decreased revenue and variable cost like shipping expense, packaging expense and traveling expense.

Total Other Expense. The total other expense was $2,640,932 and $1,751,640 for the nine months ended September 30, 2012 and 2011, respectively. The increase of $889,292, or 51%, in total other expense was primarily due to increase in interest expense for increased loans and increase in other expense as detailed in the following table:

	September 30,			September 30,
	2012			2011
Other income (expense):
Interest income	$	239,553		$	257,223
Interest expense		(3,249,458	)		(2,331,305	)
Other income (expense), net		368,973			322,442
Total other expense	$	(2,640,932	)	$	(1,751,640	)

Liquidity and Capital Resources

We had retained earnings of $33,897,652 and $31,311,752 as of September 30, 2012 and December 31, 2011 respectively.

As of September 30, 2012, we had cash and restricted cash of $3,105,129 and total current assets of $92,457,887 compared to cash and restricted cash of $1,914,194 and total current assets of $98,671,393 as of December 31, 2011. Restricted cash is used to secure bank notes payable. The guaranteed percentage at September 30, 2012 was 100% compared to 100% at December 31, 2011.

As of September 30, 2012, we had accounts receivable $28,414,163, representing 31% of our total current assets compared to $34,410,920, representing 35% of total current assets as of December 31, 2011. Accounts receivable had decreased $5,996,751 or 17% because of the collection of accounts receivable and 18% decrease of total revenue.

Our total liabilities as of September 30, 2012 were $76,287,024 compared to $85,946,386 at December 31, 2011. The decrease of $9,659,362 or 11% was a result of decrease in advances from customers, loans payables to other individuals, accounts payables and accrued expenses, taxes payable, and other payable.

We generally require 30% of contract price as advanced payment after we sign contract which is used to buy materials and production. 30% of contract price will be collected when we finished production and inspected by customer. These two 30% pieces of the contract price are the main components of our advances from customer. 30% of contract price will be received after the refractory installation is finished and tested by client. The final installment of 10% is due one or two years after the stove is used to allow for quality guarantee. The last 30% and 10% are the main components of our accounts receivable. As our business is contract-based sale, differentiations exist between contracts signed by different customer.

As of September 30, 2012 we had working capital of $19,569,752, compared to working capital of $16,461,409 as of December 31, 2011. We believe our cash and accounts receivable are adequate to satisfy our working capital needs and sustain our ongoing operations for the next twelve months. However, to develop new product and expand our market, we need improve our cash support, we must obtain additional short-term and long term loans from bank and/or- raise additional capital by the sale of our securities in order to implement our strategic growth plans which include increasing our product line, promoting our design and engineering services, improving our products, and the potential acquisitions of mines and other refractory companies.

Although we continue to explore opportunities for raising capital, we have no funding commitments in place at this time and we can give no assurance that such capital will be available on favorable terms, or at all. Even if we are successful in raising additional funds, there is no assurance regarding the terms of any additional investment and any such investment or other strategic alternative would likely substantially dilute or eliminate the interests of our shareholders.

Below is a summary of our cash flow:

Net Cash Provided by (Used in) Operating Activities. For the nine months ended September 30, 2012, net cash provided by operating activities was $1,774,372 compared to cash used in operating activities of $124,122 for the nine months ended September 30, 2011. The increase in net cash provided by operating activities for the nine months ended September 30, 2012 was primarily due to changes in net inome, prepaid expenses and deposits, account receivable, retentions receivable and long term retentions receivable, advances from customers, inventories, account payable and accrued expenses, restricted cash for issuance of bank notes payable, net proceeds from bank notes receivable and other receivable, and proceeds from notes payable, as set forth below:

Items	2012 (US$)			2011 (US$)			Increase /(Decrease)(US$)			Percentage
Net Income		2,585,899			5,998,060			(3,412,161	)		(56.89	)%
Prepaid expenses and deposits		2,742,741			(10,334,699	)		13,077,440			126.54	%
Accounts receivable, retentions receivable, and long term retentions receivable		6,384,124			(16,186,208	)		22,570,332			139.44	%
Advances from customers		(5,798,323	)		19,839,514			(25,637,837	)		(129.23	)%
Inventories		(1,887,993	)		(11,991,206	)		10,103,213			84.26	%
Account payable and accrued expenses		(2,797,460	)		12,092,207			(14,889,667	)		(123.13	)%
Net (payments) proceeds of restricted cash for issuance of bank notes payable		(581,261	)		1,408,896			(1,990,157	)		(141.26	)%
Net proceeds (payments) from bank notes receivable		1,801,001			(3,849,275	)		5,650,276			146.79	%
Other receivables		(499,075	)		510,638			(1,009,713	)		(197.74	)%
Proceeds from notes payable		554,807			2,305,564			(1,750,757	)		(75.94	)%

New Cash Used in Investing Activities. For the nine months ended September 30, 2012, net cash used in investing activities was $1,006,675, compared to net cash used in investing activities of $1,246,947, for the nine months ended September 30, 2011. The increase of net cash used in investment activities for nine months ended September 30, 2012 was primarily due to the increase of purchase of plant and equipment, and deposits in capital expenditures.

Items	2012 (US$)			2011 (US$)			Increase/(Decrease)(US$)			Percentage
Deposits for capital expenditure		(177,982	)		127,530			(305,512	)		(239.56	)%
Purchase of plant and equipment		(828,693	)		(1,454,403	)		625,710			43.02	%

Net Cash (Used in) Provided by Financing Activities. For the nine months ended September 30, 2012, net cash used in financing activities was $122,441 compared to $374,472 in net cash provided by financing activities for the nine months ended September 30, 2011. The decrease of the net cash used in financing activities was primarily due to the changes of payments of dividends, payment of short-term borrowings, proceeds from loans to related parties, employees, and other individuals, net of payments, proceeds from short-term borrowings.

Type of Proceeds	2012 (US$)			2011(US$)			Increase/(Decrease)(US$)			Percentage
Payments of dividends		0			(705,276	)		705,276			100.00	%
Proceeds from loans to related parties, employees, and other individuals, net of payments		(2,631,754	)		2,689,031			(5,320,785	)		(197.87	)%
Proceeds from short-term borrowings		15,677,261			11,523,202			4,154,058			36.05	%
Payment of short-term borrowings		(12,934,929	)		(12,906,540	)		(28,389	)		(0.22	)%
Proceeds from issuance of long-term borrowings, net of payments		(233,019	)		(225,945	)		(7,074	)		(3.13	)%

Loan Facilities

In China, banks usually do not provide long term loans to businesses. Most loans are short term loans (12 months or less). All of our loans but one with Chinese banks are within twelve months. As such, each year we repay our loans and/or apply for new loans with our banks or with other banks for working capital needs. At September 30, 2012, we borrowed approximately $18.07 million from various short-term bank loans for the working capital needs. All of our bank borrowings are secured by our land and buildings and/or guaranteed by third parties. As of September 30, 2012, the Company and its subsidiaries have the following loan facilities with the following terms:

Lender	Secured	Duration	Outstanding as of September, 30 2012		Interest rates
Agricultural credit union	By third parties	1 year		1,582,529		8.640	%
Agricultural credit union	Machinery and equipment	1 year		1,424,276		12.312	%
Shanghai Pufa Development Bank	Office building and Land	1 year		3,165,058		6.600	%
Shanghai Pufa Development Bank	Office building and Land	6 months		1,582,529		6.600	%
Shanghai Pufa Development Bank	By Beijing Annec	6 months		1,297,674		7.216	%
Shanghai Pufa Development Bank	Office building	1 year		310,175		7.152	%
China Citic Bank	By third parties	1 year		1,582,529		6.941	%
China Citic Bank	By Fuchao Li	1 year		791,264		7.216	%
China Guangfa Bank	By third parties	1 year		1,582,529		7.200	%
China Merchants Bank	By third parties	1 year		1,582,529		7.200	%
LuoYang Bank	By third parties	1 year		3,165,058		7.872	%
			$	18,066,150

The Company also has a long-term bank loan with a balance of $697,895 as of September 30, 2012. The long-term loan is due on December 13, 2015, and has an interest rate of 7.152% and is secured by one of the Company’s office buildings.

Future minimum payments for the long-term loan are as follows:

Period ending September 30:
2013	$	310,176
2014		310,176
2015		77,543

	$	697,895

Off-Balance Sheet Arrangements

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

· Any obligation under certain guarantee contracts;

· Any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets;

· Any obligation under a contract that would be accounted for as a derivative instrument, except that it is both indexed to our stock and classified in stockholder’s equity in our statement of financial position; and

· Any obligation arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us.

In China, because the bank lending system is still relatively new, it is common practice for companies to enter into cross-guarantee arrangements in order to secure lines of credit with banks. During 2012, Zhengzhou Annec had agreements as a debt guarantor for four unaffiliated companies (“Unaffiliated Companies”). We do not consolidate the Unaffiliated Companies into our financial statements. In China, companies provide guarantees to other companies in the community to assist them in getting bank loans. The guaranteed amount is approximately $ 15,984,000 as of September 30, 2012 compared to $9,584,000 as of December 31, 2011. In exchange, the other unaffiliated companies also act as a debt guarantor for Zhengzhou Annec. As of September 30, 2012, Zhengzhou Annec’s loans guaranteed by other unaffiliated companies are approximately $ 14,243,000 compared to $9,427,000 as of December 31, 2011. Zhengzhou Annec has not historically incurred any losses due to such debt guarantees.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not Applicable.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, as of the end of the period covered by this report, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Act of 1934. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be included in our Securities and Exchange Commission (“SEC”) reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, relating to the Company, including our consolidated subsidiaries, and was made known to them by others within those entities, particularly during the period when this report was being prepared. Based on the management’s assessment and review of our financial statements and results for the quarter ended September 30, 2012 and inability to file our Form 10-Q for the quarter ended March 31, 2012 in a timely manner, we have concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report.

We discovered information that indicated deficiencies in the controls and procedures we use to ensure that information we are required to disclose in our reports to the SEC is summarized and reported within the required periods. The material weakness we have found include: (1) lack of sufficient staff with appropriate knowledge, experience, and training in the application of U.S. GAAP, and (2) lack of an appropriate level of company qualified resources to perform internal audit properly and inability to effectively communicate its accounting policies and procedures to its accounting staff resulting in inconsistent practice. As a result of these deficiencies, we determined that our internal controls over financial reporting were not effective as of the end of the period covered by this Report.

Remediation Plan

We intend to continue to devote resources to remediating, improving and documenting our disclosure controls and procedures and internal controls and procedures, including actively recruiting a new chief financial officer with US GAAP and SEC reporting experience, additional accounting and finance staff, and consultants to assist with these functions, and implementing additional financial and management controls, reporting systems and procedures. In connection with our remediation efforts, in the second quarter of this fiscal year, we engaged a consulting firm to assist the company. These measures may not ensure the adequacy of our internal controls over our financial processes and reporting in the future.

Changes in Internal Controls over Financial Reporting

There have been no material changes in our internal controls over financial reporting that occurred during the period covered by this quarterly report, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

We may be involved from time to time in ordinary litigation, negotiation and settlement matters that will not have a material effect on our operations or finances. We are not aware of any pending or threatened litigation against us or our officers and directors in their capacity as such that could have a material impact on our operations or finances.

Item 1A. Risk Factors

Not Applicable

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures.

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

Exhibit No.		Description

31.1		Certification of Officers pursuant to Rules 13a-14 and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1		Certification of Officers pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS		XBRL Instance Document ⁽¹⁾
101.SCH		XBRL Taxonomy Extension Schema ⁽¹⁾
101.CAL		XBRL Taxonomy Extension Calculation Linkbase ⁽¹⁾
101.DEF		XBRL Taxonomy Extension Definition Linkbase ⁽¹⁾
101.LAB		XBRL Taxonomy Extension Label Linkbase ⁽¹⁾
101.FRE		XBRL Taxonomy Extension Presentation Linkbase ⁽¹⁾

	*	Filed herewith.
	⁽¹⁾	*XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ANNEC GREEN REFRACTORIES CORPORATION

Dated: November 14, 2012	/s/ LI Jiantao
	By: LI Jiantao
	Its: Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

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