Annec Green Refractories Corp - FORM 10-Q

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EXCEL - IDEA: XBRL DOCUMENT - Annec Green Refractories Corp	Financial_Report.xls
EX-31.1 - EXHIBIT 31.1 - Annec Green Refractories Corp	v344806_ex31-1.htm
EX-32.1 - EXHIBIT 32.1 - Annec Green Refractories Corp	v344806_ex32-1.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 March 31, 2013

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

No.5 West Section, Xidajie Street, Xinmi City,
Henan Province, P.R. China	452370
(Address of Principal Executive Offices)	(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-3 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 May 1, 2013, 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	2
	Condensed Consolidated Balance Sheets as of March 31, 2013 (Unaudited) and December 31, 2012	2
	Condensed Consolidated Statements of Loss and Comprehensive Loss for the Three Months Ended March 31, 2013 and 2012 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2013 and 2012 (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26

PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	27
Signature Page		28

ANNEC GREEN REFRACTORIES CORPORATION

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ANNEC GREEN REFRACTORIES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,		December 31,
	2013		2012
	(Unaudited)
ASSETS
Current assets:
Cash	$	312,448	$	380,579
Restricted cash		6,933,120		6,469,826
Bank notes receivable		542,559		1,695,771
Accounts receivable (net of allowance of $1,489,462 and $1,481,307 at March 31, 2013 and December 31, 2012, respectively)		33,030,935		42,214,102
Retentions receivable (net of allowance of $534,128 and $531,203 at March 31, 2013 and December 31, 2012, respectively)		13,949,688		13,237,473
Prepaid expenses and deposits		5,477,175		7,613,579
Other receivables		8,867,697		3,005,423
Inventories		30,896,916		25,555,534
Total current assets		100,010,538		100,172,287
Long-term retentions receivable (net of allowance of $1,179,317 and $1,172,860 at March 31, 2013 and December 31, 2012, respectively)		1,468,441		2,495,618
Plant and equipment, net		16,140,827		16,505,421
Construction in progress		1,001,242		690,655
Land use rights, net		2,349,448		2,258,796
Long-term investment		-		158,702
Total assets	$	120,970,496	$	122,281,479
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term loans	$	28,956,691	$	24,037,073
Bank notes payable		2,473,431		2,221,834
Accounts payable and accrued expenses		13,566,480		19,662,185
Advances from customers		15,173,431		14,535,685
Salaries payable		928,221		401,536
Taxes payable		3,328,582		5,215,355
Related party payables		194,683		407,767
Loans payable to employees		1,177,794		2,027,032
Loans payable to other individuals		3,510,676		4,372,570
Other payable		7,864,076		3,582,618
Total current liabilities		77,174,065		76,463,655
Deferred income		2,761,630		2,776,599
Long-term loans		547,346		622,114
Total liabilities		80,483,041		79,862,368
Commitments and contingencies (Note 14)
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 March 31, 2013 and December 31, 2012		2,000		2,000
Additional paid-in capital		2,661,026		2,661,026
Statutory reserve		1,385,966		1,385,966
Retained earnings		34,185,260		36,346,896
Accumulated other comprehensive income		2,253,203		2,023,223
Total stockholders' equity		40,487,455		42,419,111
Total liabilities and stockholders' equity	$	120,970,496	$	122,281,479

ANNEC GREEN REFRACTORIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS

	Three Months Ended
	March 31
	2013			2012
	(Unaudited)			(Unaudited)
Revenues	$	3,619,415		$	15,849,971
Cost of revenues		2,294,112			10,277,356
Gross profit		1,325,303			5,572,615
Operating expenses:
Sales and marketing		1,103,256			3,161,289
General and administrative		1,572,347			1,594,267
Total operating expenses		2,675,603			4,755,556
(Loss) income from operations		(1,350,300	)		817,059
Other income (expense):
Interest income		129,418			97,188
Interest expense		(1,005,185	)		(1,279,902	)
Other income (expense), net		70,849			(1,343	)
Total other income (expense)		(804,918	)		(1,184,057	)
Loss before provision for income taxes		(2,155,218	)		(366,998	)
Provision for income taxes		6,418			25,912
Net loss	$	(2,161,636	)	$	(392,910	)
Other comprehensive income (loss)
Foreign currency translation adjustment		229,980			234,353
Comprehensive loss	$	(1,931,656	)	$	(158,558	)
Net loss per share-basic and dilutive	$	(0.11	)	$	(0.02	)
Shares used in computing net loss per share-basic and dilutive		19,995,701			19,995,701

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

ANNEC GREEN REFRACTORIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended
	March 31
	2013			2012
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net loss	$	(2,161,636	)	$	(392,910	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non cash interest expense, discount on bank notes receivable		162,365			529,953
Depreciation and amortization		464,662			383,034
(Gain) loss on sale of plant and equipment		(40,888	)		4,910
Change in assets and liabilities:
Restricted cash		(426,973	)		(6,395,578	)
Bank notes receivable		998,276			(1,685,425	)
Accounts receivable, retentions receivable and long-term retentions receivable		9,665,625			8,684,972
Prepaid expenses and deposits		2,174,744			3,388,342
Other receivables		(1,056,707	)		(3,282,932	)
Inventories		(5,192,155	)		(1,973,509	)
Bank notes payable		238,971			5,221,436
Accounts payable and accrued expenses		(5,973,479	)		(2,676,867	)
Advances from customers		556,806			691,149
Salaries payable		523,614			(25,132	)
Taxes payable		(1,912,343	)		(1,606,056	)
Deferred income		(30,205	)		(43,960	)
Other payables		(237,923	)		(1,145,943	)
Net cash used in operating activities		(2,247,246	)		(324,516	)

Cash flows from investing activities:
Deposits for capital expenditure		-			77,246
Proceeds received from withdrawal of long-term investment		159,314			-
Purchase of plant and equipment		(539,320	)		(21,922	)
Purchase of land use rights		(89,809	)		-
Proceeds from sale of plant and equipment		176,042			-
Net cash (used in) provided by investing activities		(293,773	)		55,324

Cash flows from financing activities:
Payment of other receivables		(4,779,429	)		-
Proceeds from other payables		4,492,664			-
Proceeds from loans to related parties, employees, and other individuals		-			458,178
Payment of loans to related parties, employees, and other individuals		(1,958,474	)		(402,773	)
Proceeds from short-term borrowings		6,372,572			5,806,870
Payment of short-term borrowings		(1,593,143	)		(5,063,210	)
Payment of long-term borrowings		(78,064	)		(77,530	)
Net cash provided by financing activities		2,456,126			721,535

Net (decrease) increase in cash		(84,893	)		452,343

Effect of exchange rate changes		16,762			1,851

Cash at beginning of period		380,579			343,028

Cash at end of period	$	312,448		$	797,222

Noncash financing and investing activities:
Reduction of accounts payable through disposal of plant and equipment	$	220,294		$	46,048
Reduction of accounts receivable through addition of plant and equipment	$	135,417		$	-

Supplemental disclosure of cash flow information:
Interest paid	$	951,635		$	357,799
Income taxes paid	$	41,159		$	211,449

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

Annec Green Refractories Corporation

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 for interim financial information 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, 2012 has been derived from the consolidated audited financial statements included in the Company’s annual report on Form 10-K with the Security and Exchange Commission (“SEC”) for the year ended December 31, 2012.

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 the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012. The results of operations for the three-month period ended March 31, 2013 are not necessarily indicative of the results for the year ending December 31, 2013 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.

Annec Green Refractories Corporation

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Basis of Presentation and Description of the Company, continued

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 materials.

Annec Green refractories corporation and subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Summary of Significant Accounting Policies

Use of 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.

Concentration of Credit and Other Risks

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash, restricted cash, bank notes receivable, accounts receivable and other receivables. The Company holds all 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 March 31, 2013. 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.

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 28% of the trade receivable balance as of March 31, 2013 and December 31, 2012, respectively. An additional customer accounted for 15% and 19% of the trade receivables balance as of March 31, 2013 and December 31, 2012, respectively.

Three customers individually accounted for 24%, 19%, and 12% of the total revenue in the quarter ended March 31, 2013 and three customers individually accounted for 36%, 15%, and 13% of the total revenue in the quarter ended March 31, 2012, respectively.

Annec Green refractories corporation and subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Summary of Significant Accounting Policies, continued

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, economical, 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. In July 2005, the Chinese Government adjusted its exchange rate policy from “Fixed Rate” to “Floating Rate.” During January 2008 to March 2013, 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 6.2666, 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.

Long-term Investment

Long-term investment represents an investment the Company has in a regional bank within China. We do not hold a greater than 5% interest, and we have determined that we do not have significant control or influence in the bank. Accordingly, we record the investment at cost. Our investment is in a private company where there is no market to determine the value of the investment. We withdrew the investment in March 2013 and received proceeds of $159,314.

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:

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 or other inputs that is observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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

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.

Annec Green refractories corporation and subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Summary of Significant Accounting Policies, continued

Foreign Currency Translation

The accompanying financial statements are presented in United States Dollars. The functional currency of our 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 quarter ended March 31, 2013 and 2012. 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 Unaudited Condensed Consolidated Financial Statements

(Unaudited)

Summary of Significant Accounting Policies, continued

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

	March 31,				December 31
	2013		2012		2012

Year end RMB: U.S. Dollar exchange rate		6.2666		6.3247		6.3011
Average RMB: U.S. Dollar exchange rate		6.2769		6.3201		6.3034

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.

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 equipments have 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.

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 $213,054 and $491,278 for the quarter ended March 31, 2013 and 2012, respectively.

Reclassification

Certain amounts reported in the 2012 consolidated statement of cash flows have been reclassified to conform to the 2013 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, for the three months ended March 31, 2012 net cash provided by operating activities decreased by $2,329,614, net cash used in investing activities decreased by $7,551,050, and net cash provided by financing activities decreased by $5,221,436 from the amounts previously presented in the March 31, 2012 statement of cash flows. There was no impact to the Company’s March 31, 2012 consolidated balance sheet or statement of loss and comprehensive loss and no impact to the net increase in cash for the period ended March 31, 2012.

Annec Green refractories corporation and subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Summary of Significant Accounting Policies, continued

Recent Accounting Pronouncements

The Company reviews new accounting standards as issued. Some of the accounting standards issued are effective after the end of the Company’s previous fiscal years, and therefore may be applicable to the Company. Management has not identified any standards that it believes will have a significant impact on the Company’s consolidated financial statements.

Annec Green refractories corporation and subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Accounts Receivable

The components of the Company’s net accounts receivable are as follows:

	March 31		December 31
	2013		2012

Amounts billed	$	27,382,357	$	31,619,504
Amounts unbilled		5,648,578		10,594,598

Total	$	33,030,935	$	42,214,102

Retentions Receivable and Long-term Retentions Receivable

The Company enters into sales contracts with customers that provide for a retention provision in that the customers can keep a portion of the payment, generally 10% of the contract price, until the stoves the Company built or supplied refractory materials for were proven to be of good quality. The retention period is usually one to two years from the day 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 amounts that are due over a year or are already over a year old.

The following table shows the components of retentions receivable from long-term contracts as of March 31, 2013 and December 31, 2012:

	March 31, 2013				December 31, 2012
	Retentions receivable		Long-term retentions receivable		Retentions receivable		Long-term retentions receivable
Chinese government or province owned customers:
Amounts billed and due	$	288,021	$	510,766	$	585,832	$	342,871
Amounts billed and not due		7,045,360		349,423		7,218,256		1,098,770
		7,333,381		860,189		7,804,088		1,441,641
Commercial customers:
Amount billed and due		2,291,323		244,218		512,115		319,021
Amount billed and not due		4,324,984		364,034		4,921,270		734,956
		6,616,307		608,252		5,433,385		1,053,977
Total	$	13,949,688	$	1,468,441	$	13,237,473	$	2,495,618

Other Receivables

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

	March 31,		December 31,
	2013		2012
Other receivables–individuals and employees	$	7,184,423	$	1,214,957
Other receivables–companies		527,560		678,423
Security deposits		1,155,714		1,112,043
Total other receivables	$	8,867,697	$	3,005,423

Inventories

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

	March 31,		December 31,
	2013		2012

Raw materials	$	3,718,539	$	3,839,230
Work in process		135,430		191,781
Finished goods		27,042,947		21,524,523
Total inventories	$	30,896,916	$	25,555,534

Plant and Equipment, net

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

	March 31,			December 31,
	2013			2012

Plants and buildings	$	15,236,553		$	15,180,863
Machinery and equipment		4,723,927			4,703,072
Vehicles		2,118,735			2,321,267
Others		574,733			541,106
		22,653,948			22,746,308
Less accumulated depreciation		(6,513,121	)		(6,240,887	)
Total plant and equipment, net	$	16,140,827		$	16,505,421

Depreciation expense related to property and equipment was $452,941 and $371,392 for the quarter ended March 31, 2013 and 2012, respectively. The Company has recorded a gain (loss) on sale of property and equipment of $40,888 and $(4,910) for the three months ended March 31, 2013 and 2012, respectively.

Land Use Rights, net

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

	Estimated
	Remaining		March 31,
	Life		2013

Land use rights		46.6 years	$	2,502,813
Less accumulated amortization				(153,365	)
Total land use rights, net			$	2,349,448

The Company purchased an additional land use right of $89,809 during the three months ended March 31, 2013. Amortization expense related to land use rights was $11,721 and $11,794 for the three months ended March 31, 2013 and 2012, respectively. The difference between the amortization expense and accumulated amortization is due to exchange rate differences.

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

Period ending March 31:
2014	$	46,963
2015		46,963
2016		46,963
2017		46,963
2018		46,963
Thereafter		2,114,633
	$	2,349,448

Annec Green refractories corporation and subsidiaries

Notes to Condensed Consolidated Financial Statements

Short-Term Loans

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

	March 31,		December 31,
	2013		2012
Short-term loans:
Loans due to financial institutions	$	28,956,691	$	24,037,073

At March 31, 2013, the Company has fourteen loans with seven different banks that are due within one year. The weighted average interest rates are 7.147% and 7.571% for the three month periods ended March 31, 2013 and 2012, respectively. Eight of the short-term loans (with an outstanding balance of approximately $16,755,000 at March 31, 2013) are guaranteed by third parties, Beijing Annec, Alex Industrial Investment Limited Company, or Fuchao Li, chairman of the Company’s board of directors (the chairman). One of these eight loans is $4,787,285 due to Bank of Zhengzhou. Four of the loans (with an outstanding balance of approximately $6,536,000 at March 31, 2013) are collateralized by the Company’s office building, land, or machinery and equipment. Two of the loans (with an outstanding balance of approximately $5,665,000 at March 31, 2013) are secured by cash deposits of the Company.

In 2013, the Company borrowed $4,787,285 (RMB 30 million) from the Bank of Zhengzhou. This loan was guaranteed by a third party (Note 14) similar to the other short term bank loans of the Company. Additionally, consistent with local Chinese banking practices, the Bank of Zhengzhou requested that the chairman also borrow funds from the bank in a separate transaction and that such borrowings be collateralized by a cash security deposit to be held in Bank of Zhengzhou. The Company’s chairman borrowed $4,492,662 (RMB 28.2 million) from the Bank of Zhengzhou under a one year loan agreement with interest at 5.4%. The chairman loaned this amount to the Company. This amount is included in “Other payable” on the balance sheet. In order to provide the cash security deposit required by the chairman’s loan from the Bank of Zhengzhou, the Company loaned an employee $4,787,285 (RMB 30 million) and the employee established the cash security deposit with the Bank of Zhengzhou. The receivable from the employee is due in one year. The Bank of Zhengzhou pays interest on the security deposit at 3.3%. This receivable is classified as a component of “Other Receivables – individuals and employees” (Note 5). The Company, the chairman and the employee have agreed that: 1). The Company has the rights to the cash security deposit and any interest earnings on such deposit. Upon the Company receiving the security deposit, all obligations of the employee to the Company are fulfilled. 2). The Company is obligated to repay the $4,492,662 loan and interest expense on behalf of the chairman. Upon repayment of the chairman’s loan to the Bank of Zhengzhou, all of the Company’s obligations to the chairman are fulfilled.

10.

Bank Notes Payable

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

	March 31,		December 31,
	2013		2012
Notes payable:
Loans due to financial institutions	$	2,473,431	$	2,221,834

Bank notes payable represent bank notes paid to the Company’s vendors for purchase of inventory. At March 31, 2013, the Company had bank notes payable with three different banks with maturity dates of nine months. All are noninterest-bearing notes, but generally require fees of approximately 0.05%. 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 collateral is included in restricted cash.

11.

Long-Term Loans

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

	March 31,		December 31,
	2013		2012
Long-term loans:
Loan due to financial institution	$	547,346	$	622,114

The long-term loan is due in 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 loans are as follows:

Period ending March 31:
2014	$	312,769
2015		234,577
	$	547,346

Annec Green refractories corporation and subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

12.

Related Party Transactions

At March 31, 2013 and December 31, 2012, the Company had loans payable to the chairman (Fuchao Li), and a minority shareholder (Yinling Fan) of the Company. The Company and these parties have not signed notes, there are no specific due dates, and no interest is paid on the loans. Money is transferred between these parties and the Company mainly for cash flow purposes. The amounts loaned and borrowed are short-term in nature and the balances at both year-ends are considered at the fair market value of the amounts owed. The following amounts were payable to the owners as of March 31, 2013 and December 31, 2012:

	March 31,		December 31,
	2013		2012
Fuchao Li	$	-	$	214,150
Yinling Fan		194,683		193,617

	$	194,683	$	407,767

During the three months ended March 31, 2013, the Company repaid $214,150 to Fuchao Li. There was no other activity in these payables during the three months ended March 31, 2013.

Annec Green refractories corporation and subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

13.

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 quarter ended March 31, 2013 and December 31, 2012. Zhengzhou Annec will continue to be subject to a 15% tax rate for the quarter ended March, 2013, and expects that thereafter will become subject to a rate of 25% unless Zhengzhou Annec applies for and receives a further tax holiday for the succeeding five years. The tax savings due to this tax holiday is approximately $0 and $154,000 for the three month periods ended March 31, 2013 and 2012, respectively.

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

14.

Commitments and Contingencies

Third Party Guarantees

During three months ended March 31, 2013 and the year ended December 31, 2012, the Company had agreements with third-party entities in which the Company has guaranteed certain debt of these entities, and these entities have guaranteed certain debt of the Company. As of March 31, 2013 and December 31, 2012, the Company was a debt guarantor to three third-party entities. The maximum guaranteed amount is approximately $26,490,000 as of March 31, 2013. The total guaranteed outstanding borrowings by these parties are approximately $22,181,000 as of March 31, 2013. All of the guarantee agreements are for debt with maturities of one year or less, and mature through March 31, 2014.

These same parties disclosed above also act as debt guarantors on certain of the Company’s debt with a maximum guaranteed amount of approximately $27,607,000 as of March 31, 2013. The Company’s loans guaranteed by these parties are approximately $16,755,000 as of March 31, 2013. The Company has not historically incurred any losses due to such debt guarantees, and the Company has determined that the fair value of the guarantees is not material.

Leases

The Company has non-cancelable operating lease agreements principally for its office and factory facilities. These leases have terms expiring in 2013 and April 2014, and are renewable subject to negotiation.

During 2010, the Company entered into operating lease agreements with several county governments of Xinmi City to lease three parcels of land where the Company’s factories are located. These lease terms are for fifty years through August 2059. The rent for the land is approximately $53,115 per year.

Total rent expense for the leases as mentioned above was $67,533 and $92,852 for the three months ended March 31, 2013 and 2012, respectively. A summary of future minimum lease payments as of March 31, 2013 is presented below.

	Minimum
	Lease
	Payments
Year ending March 31:
2013	$	283,607
2014		109,672
2015		53,115
2016		53,115
2017		53,115
Thereafter		2,119,862
	$	2,672,486

Annec Green refractories corporation and subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

15.

Segment Reporting

The Company has two reportable segments: Zhengzhou Annec and Beijing Annec. These segments operate in different geographical areas of China and employ separate management and sales teams. The Zhengzhou Annec segment primarily manufactures and sells a variety of refractory bricks and kits of pre-assembled hot-air ovens. In 2011, Zhengzhou Annec began to enter into contracts to design and build furnaces and stoves. These projects are generally for a term of one year or less. The Beijing Annec segment designs and builds blast furnaces and hot-air stoves on a contract basis and uses subcontractors throughout the construction process. Beijing Annec’s contracts are generally for projects with a term of one year or longer. The Beijing Annec segment purchases substantially all of its bricks and related products from Zhengzhou Annec. 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. The Company purchases these machines and equipment from outside vendors and generally sells them at cost plus a small mark-up.

All revenues are related to end customers in China.

Annec Green refractories corporation and subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

15.

Segment Reporting, continued

Information on reportable segments for the three months ended March 31, 2013 and 2012 is as follows:

	Three Months Ended March 31
	2013			2012
Revenues:
Zhengzhou Annec	$	3,619,415		$	15,849,971
Beijing Annec		-			-
Total		3,619,415			15,849,971

Cost of revenues:
Zhengzhou Annec		2,294,112			10,277,356
Beijing Annec		-			-

Total		2,294,112			10,277,356
Operating expenses:
Zhengzhou Annec		2,560,633			4,629,645
Beijing Annec		114,970			125,910

Total		2,675,603			4,755,556

(Loss) income from operations	$	(1,350,300	)	$	817,059

	Three Months Ended March 31
	2013		2012
Depreciation expense
Zhengzhou Annec	$	404,819	$	333,042
Beijing Annec		48,122		38,350

Total	$	452,941	$	371,392

	March 31, 2013		December 31,2012
Plant and equipment, net:
Zhengzhou Annec	$	13,006,224	$	13,336,054
Beijing Annec		3,134,603		3,169,367

Total identifiable assets	$	16,140,827	$	16,505,421

16.

Management Plans

The Company experienced a net loss in the three months ended March 31, 2013. The Company provides integrated stove design, turnkey contracting, refractory production and sales. This quarter, sales were substantially low because of a decrease in orders stemming from the decline in demand for iron and steel industry production capacity.

During the three months ended March 31, 2013, the Company raised an additional short-term bank loan of $9.3 million, and the Company is negotiating with banks to obtain another $3.2 million of short-term bank loans in 2013. These funds are expected to be used to fund capital expenditures. This financing is expected to improve the Company’s capital position, which management believes will increase the Company’s cash flows to fund operations. As of March 31, 2013, the Company has unfinished sales contracts that are expected to be completed through December 2013. Once completed, these contracts are expected to generate revenue of approximately $47 million. In addition, subsequent to March 31, 2013, the Company entered into new sales contracts with a total amount of approximately $2 million as of May 2013. These new sales contracts are for projects expected to be completed through June 2013. The Company has also begun initiatives to develop new products and markets, which are expected to improve results of operations. This includes such initiatives as tracking and developing environment-friendly materials and products, and development of international markets. Management believes that these plans will lead to a greater amount of current and future sales contracts, and will also increase the Company’s cash flows from operating activities.

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 Form 10-K filed led on April 1, 2013.

Overview

We are a refractory and production-based company that designs, develops, produces, and markets refractory products in the PRC. In addition, through our VIE, Beijing Annec, we provide integrated stove design, turnkey contracting, refractory production and sales.

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, no 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 subcontractors.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

Reclassification

Use of Estimates

There are several accounting policies that involve management’s judgments and estimates and are critical to understanding our historical and future performance, as these policies and estimates affect the reported amounts of revenue and other significant areas in our reported financial statements.

Please refer to the “Management’s Discussion and Analysis of Financial Condition and Results of Operation” located within our Annual Report on Form 10-K for the year ended December 31, 2012 filed with the Securities and Exchange Commission on April 1, 2013 for further discussion of our “Critical Accounting Policies.”

Results of Operations

For the Three Months Ended March 31, 2013 and 2012

Results of Operations

	Three Months Ended March 31
	2013			2012
Revenues	$	3,619,415		$	15,849,971
Cost of revenues		2,294,112			10,277,356
Gross profit		1,325,303			5,572,615
Operating expenses
Sales and marketing		1,103,256			3,161,289
General and administrative		1,572,347			1,594,267
Total operating expenses		2,675,603			4,755,556
(Loss) income from operations		(1,350,300	)		817,059
Other expense		(804,918	)		(1,184,057	)
Loss before provision for income taxes		(2,155,218	)		(366,998	)
Provision for income taxes		6,418			25,912
Net loss	$	(2,161,636	)	$	(392,910	)

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. The 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	Three Months Ended March 31, 2013		% of Revenue			Three Months Ended March 31, 2012		% of Revenue
Zhengzhou Annec	$	3,619,415		100	%	$	15,849,971		100	%
Beijing Annec		-		-			-		-
Total	$	3,619,415		100	%	$	15,849,971		100	%

Revenues for the three months ended March 31, 2013 were $3,619,415 compared to $15,849,971 for the three months ended March 31, 2012. Revenues for the three months ended March 31, 2013 decreased by $12,230,556 or 77%, primarily as a result of a decrease in sales and new orders for Zhengzhou Annec and no revenues from Beijing Annec. The decrease in sales of refractory products by Zhengzhou Annec was mainly due to a decrease in the number of orders during the three months ended March 31, 2013. Zhengzhou Annec experienced a decrease in orders because of decline in demand for Iron and steel industry production capacity in 2013. The Company decided to develop new products and markets to improve results of operation, such as tracking and developing markets of functional materials and environment-friendly products, development of the international market. In addition, the Company also intends to maintain contact with current customers, and improve quantity of shipment according to the customer’s payment ability. The following table shows product sales of Zhengzhou Annec from existing and new customers during the three months ended March 31, 2013, and 2012:

Type of Customers’ Sales	Amount (US$) 2013		Amount (US$) 2012

Existing customers		2,270,609		8,357,673

New customers		1,348,806		7,474,298

Cost of Revenue

Cost of revenue was $2,294,112 and $10,277,356 for the three months ended March 31, 2013 and 2012, respectively. Cost of revenue for the three months ended March 31, 2013 decreased by $7,983,244, or 78%. Stated as a percentage of revenues, the cost of revenue for the three months ended March 31, 2013 was 63% and for the corresponding period of 2012 was 65%. The decrease in cost of revenue of Zhengzhou Annec was primarily attributable to the decrease of sales for the lower proportion.

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 $1,572,347 and $1,594,267 for the three months ended March 31, 2013 and 2012, respectively. The decrease of $21,920, or 1%, in general and administrative expense was primarily attributable to the decrease of patent fees.

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 $1,103,256 and $3,161,289 for the three months ended March 31, 2013 and 2012, respectively. The decrease of $2,058,033, or 65%, in sales and marketing expense was due to decrease in revenues and variable cost like commission, shipping expense, packaging expense and traveling expense.

Other Expense, net. The total other expense was $804,918 and $1,184,057 for the three months ended March 31, 2013 and 2012, respectively. The decrease of $379,139, or 32%, in total other expense was primarily due to decrease in notes receivable discounted of interest expense.

Items	2013 (US$)			2012 (US$)			Change
Other income (expense)
Interest income		129,418			97,188			33	%
Interest expense		(1,005,185	)		(1,279,902	)		21	%
Other income (expense), net		70,849			(1,343	)		5375	%

Total Other (Expense)		(804,918	)		(1,184,057	)		32	%

Liquidity and Capital Resources

As of March 31, 2013, we had cash and restricted cash of $7,245,568 and total current assets of $100,010,538. As of December 31, 2012, we had cash and restricted cash of $6,850,405 and total current assets of $100,172,287. Restricted cash is used to secure bank notes payable and short-term loans.

As of March 31, 2013, we had accounts receivable of $33,030,935 representing 33% of our total current assets compared to accounts receivable of $42,214,102, representing 42% of our total current assets as of December 31, 2012. Accounts receivable had decreased by $9,183,167 or 22% because of faster collection of accounts receivable.

Our total liabilities as of March 31, 2013 were $80,483,041 compared to $79,862,368 as of December 31, 2012. The increase of $620,673 or 0.8% was a result of increase in short-term loan.

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 March 31, 2013, we had working capital of $22,836,473 compared to $23,708,632 as of December 31, 2012. 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.

Management Plans

Below is a summary of our cash flow:

Net Cash used in Operating Activities.

For the three months ended March 31, 2013, net cash used in operating activities was $2,247,246 compared to net cash used in operating activities of $324,516 for the three months ended March 31, 2012. The increase in net cash used in operating activities for the three months ended March 31, 2013 was primarily due to changes in net income, restricted cash, bank notes receivable, prepaid expenses and deposits, account receivable, retentions receivable and long term retentions receivable, other receivable, inventories, bank notes payable, account payable and accrued expenses, and other payable as set forth below:

Items	2013 (US$)			2012 (US$)			Increase /(Decrease)(US$)			Percentage
Net loss		(2,161,637	)		(392,910	)		(1,768,727	)		450	%
Restricted cash		(426,973	)		(6,395,578	)		5,968,605			93	%
Bank notes receivable		998,276			(1,685,425	)		2,683,701			159	%
Accounts receivable, retentions receivable, and long term retentions receivable		9,665,625			8,684,972			980,653			11	%
Prepaid expenses and deposits		2,174,744			3,388,342			(1,213,598	)		36	%
Other receivables		(1,056,707	)		(3,282,932	)		(2,226,225	)		68	%
Inventories		(5,192,155	)		(1,973,509	)		(3,218,646	)		163	%
Bank notes payable		238,971			5,221,436			(4,982,465	)		95	%
Accounts payable and accrued expenses		(5,973,479	)		(2,676,867	)		(3,296,612	)		123	%
Other payables		(237,923	)		(1,145,943	)		908,020			79	%

Net Cash Used In (Provided By)Investing Activities.

For the three months ended March 31, 2013, net cash used in investing activities was $293,773, compared to net cash provided by investing activities of $55,324, for the three months ended March 31, 2012. The increase of net cash used in investment activities for year ended December 31, 2012 was primarily due to the purchase of land use right and proceeds from plant and equipment,

Items	2013 (US$)			2012 (US$)			Increase/(Decrease)(US$)			Percentage
Purchase of plant and equipment		(539,320	)		(21,922	)		(517,398	)		2360	%
Proceeds from sale of plant and equipment		176,042			-			176,042			100	%

Net Cash Provided by Financing Activities.

For the three months ended March 31, 2013, net cash provided by financing activities was $2,456,126 compared to $721,535 in net cash provided by financing activities for the three months ended March 31, 2012. The increase of the net cash provided by financing activities was primarily due to the changes of short-term borrowings, and loans to related parties, employees, and other individual.

Type of Proceeds	2013 (US$)			2012 (US$)			Increase/(Decrease)(US$)			Percentage
Payments of loans to related parties, employees, and other individuals		(1,958,474	)		(402,773	)		(1,555,701	)		386	%
Payment of short-term borrowings		(1,593,143	)		(5,063,210	)		3,470,067			69	%

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 is 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 March 31, 2013, we borrowed approximately $28,956,691 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 March 31, 2013, the Company and its subsidiaries have the following short-term loan facilities with the following terms:

Lender	Secured	Duration	Outstanding as of March 31, 2013		Interest rates
Agricultural credit union	By third parties	1 year	$	1,595,762		9.720	%
Agricultural credit union	Machinery and equipment	1 year		1,436,185		12.312	%
Shanghai Pudong Development Bank	Office building and land	1 year		3,191,523		6.600	%
Shanghai Pudong Development Bank	Office building and land and Fuchao Li	1 year		1,595,762		6.600	%
Shanghai Pudong Development Bank	By third parties and Fuchao Li	6 months		1,595,762		6.600	%
Shanghai Pudong Development Bank	By Deposit	6 months		2,664,922		5.309	%
Shanghai Pudong Development Bank	Office building	1 year		312,769		7.152	%
China Citic Bank	By third parties, Beijing Annec and Alex Industrial	1 year		1,595,762		6.941	%
China Citic Bank	By Third parties, Beijing Annec and Alex Industrial	1 year		797,880		7.216	%
China Guangfa Bank	By third parties	1 year		1,595,762		7.200	%
China Merchants Bank	By third parties	1 year		1,595,762		7.200	%
LuoYang Bank	By deposit	1 year		3,000,032		6.000	%
LuoYang Bank	By third parties	1 year		3,191,523		7.200	%
Bank of Zhengzhou	By third parties	1 year		4,787,285		7.200	%
	Total current (2013)		$	28,956,691

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

Period ending March 31:
2014	$	312,769
2015		234,577
	$	547,346

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 three months ended March 31, 2013 and the year ended December 31, 2012, the Company had agreements with third-party entities in which the Company has guaranteed certain debt of these entities, and these entities have guaranteed certain debt of the Company. As of March 31, 2013 and December 31, 2012, the Company was a debt guarantor to three third-party entities. The maximum guaranteed amount is approximately $26,490,000 as of March 31, 2013. The total guaranteed outstanding borrowings by these parties are approximately $22,181,000 as of March 31, 2013. All of the guarantee agreements are for debt with maturities of one year or less, and mature through March 31, 2014.

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 March 31, 2013 we have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Report.

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. We intend to continue to devote resources to remediating, improving and documenting our internal controls over financial reporting, including 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.

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

None.

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 here with.
	⁽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: May 15, 2013	/s/ LI Jiantao
	By: LI Jiantao
	Its: Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Accounting Officer)

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