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 ~~June~~September 30, 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 ¨ Smaller reporting company x (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 ~~August~~November 15, 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 June 30, 2013 (Unaudited) and December 31, 2012	2
	Condensed Consolidated Balance Sheets as of September 30, 2013 (Unaudited) and December 31, 2012	2
	Condensed Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2013 and 2012 (Unaudited)	3
	Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2013 and 2012 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2013 and 2012 (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	56
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1721
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2528
Item 4.	Controls and Procedures	2528
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	2629
Item 1A.	Risk Factors	2629
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2629
Item 3.	Defaults Upon Senior Securities	2629
Item 4.	Mine Safety Disclosures	2629
Item 5.	Other Information	2629
Item 6.	Exhibits	2629
Signature Page		2730

ANNEC GREEN REFRACTORIES CORPORATION

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ANNEC GREEN REFRACTORIES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	September 30,		December 31,
	2013		2012	~~2012~~
	(Unaudited)
ASSETS
Current assets:
Cash	$	13,~~727~~432,~~096~~612	$	$380,579	~~380,579~~
Restricted cash		6,~~793~~892,~~948~~797		6,469,826	~~6,469,826~~
Bank notes receivable		174,~~083,717~~963		1,695,771	~~1,695,771~~
Accounts receivable (net of allowance of $1,512,000 and $1,481,000 at June 30, 2013 and December 31, 2012, respectively)		36,873,270			42,214,102
Accounts receivable (net of allowance of $1,369,805 and $1,481,000 at September 30, 2013 and December 31, 2012, respectively)		31,460,386		42,214,102
Retentions receivable (net of allowance of $542,000 and $531,000 at June 30, 2013 and December 31, 2012, respectively)		11,965,979			13,237,473
Retentions receivable (net of allowance of $543,256 and $531,000 at September 30, 2013 and December 31, 2012, respectively)		11,697,741		13,237,473
Prepaid expenses and deposits		78,~~356~~516,~~754~~289		7,613,579	~~7,613,579~~
Other receivables		910,~~154~~346,~~618~~341		3,005,423	~~3,005,423~~
Inventories		3129,~~657~~373,~~942~~651		25,555,534	~~25,555,534~~
Total current assets		106,613,324			100,172,287
Non-current assets within 1 year		331,471		-
Long-term retentions receivable (net of allowance of $1,125,000 and $1,173,000 at June 30, 2013 and December 31, 2012, respectively)		1,931,148			2,495,618
Total current assets		102,126,251		100,172,287
Plant and equipment, net		16,351,900			16,505,421
Long-term retentions receivable (net of allowance of $1,023,506and $1,172,860 at September 30, 2013 and December 31, 2012, respectively)		1,994,268		2,495,618
Construction in progress		676,271			690,655
Plant and equipment, net		16,082,192		16,505,421
Land use rights, net		2,373,134			2,258,796
Construction in progress		-		690,655
Long-term investment		-			158,702
Land use rights, net		2,391,691		2,258,796
Total assets	$	127,945,777		$	122,281,479
Long-term investment		-		158,702
LIABILITIES AND STOCKHOLDERS' EQUITY
Long-term assets		11,664		-
Current liabilities:
Total assets	$	122,606,066	$	122,281,479
Short-term loans	$	29,394,803		$	24,037,073
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank notes payable		2,267,868			2,221,834
Current liabilities:
Accounts payable and accrued expenses		20,657,430			19,662,185
Short-term loans	$	27,941,464	$	24,037,073
Advances from customers		8,980,231			14,535,685
Bank notes payable		2,281,468		2,221,834
Salaries payable		834,526			401,536
Accounts payable and accrued expenses		20,514,877		18,895,273
Taxes payable		3,494,421			5,215,355
Advances from customers		6,903,426		14,535,685
Related party payables		197,628			407,767
Salaries payable		370,876		401,536
Loans payable to employees		1,210,690			2,027,032
Taxes payable		3,274,956		5,215,355
Loans payable to other individuals		6,107,043			4,372,570
Related party payables		4,778,046		407,767
Other payable		8,282,960			3,582,618
Loans payable to employees		-		2,027,032
Total current liabilities		81,427,600			76,463,655
Loans payable to other individuals		-		4,372,570
Deferred income		2,772,701			2,776,599
Other payable		9,824,755		3,582,618
Long-term loans		476,252			622,114
Other current liabilities		2,513,502		766,912
Total liabilities		84,676,553			79,862,368
Total current liabilities		78,403,371		76,463,655
Commitments and contingencies (Note 14)
Deferred income		2,715,295		2,776,599
Stockholders' equity:
Long-term payable		654,583		-
Series A preferred stock, $0.0001 par value; 20,000,000 shares authorized; zero shares issued and outstanding		-			-
Long-term loans		399,257		622,114
Common stock, $0.0001 par value; 100,000,000 shares authorized; 19,995,701 issued and outstanding at June 30, 2013 and December 31, 2012		2,000			2,000
Total liabilities		82,172,506		79,862,368
Additional paid-in capital		2,661,026			2,661,026
Commitments and contingencies (Note 20)
Statutory reserve		1,385,966			1,385,966
Stockholders' equity:
Retained earnings		36,344,210			36,346,896
Series A preferred stock, $0.0001 par value; 20,000,000 shares authorized; zero shares issued and outstanding		-		-
Accumulated other comprehensive income		2,876,022			2,023,223
Common stock, $0.0001 par value; 100,000,000 shares authorized; 19,995,701 issued and outstanding at September 30, 2013 and December 31, 2012		2,000		2,000
Total stockholders' equity		43,269,224			42,419,111
Additional paid-in capital		2,661,026		2,661,026
Total liabilities and stockholders' equity	$	127,945,777		$	122,281,479
Statutory reserve		1,385,966		1,385,966
Retained earnings		33,235,448		36,346,896
Accumulated other comprehensive income		3,149,120		2,023,223
Total stockholders' equity		40,433,560		42,419,111
Total liabilities and stockholders' equity	$	122,606,066	$	122,281,479

~~See~~The accompanying notes toare ~~the~~an ~~condensed~~ integral part of these consolidated financial statements.

ANNEC GREEN REFRACTORIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)

		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2013			2012			2013			2012
		(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Revenues	$	11,026,510		$	14,924,338		$	31,707,484		$	48,712,709
Cost of revenues		7,290,217			7,972,971			20,190,809			28,675,880
Gross profit		3,736,293			6,951,367			11,516,675			20,036,829

Operating expenses:
Sales and marketing		4,208,901			3,297,129			7,463,581			9,689,346
General and administrative		1,476,933			1,352,386			4,153,020			4,280,005
Total operating expenses		5,685,834			4,649,515			11,616,601			13,969,351

(Loss)income from operations		(1,949,541	)		2,301,852			(99,926	)		6,067,478

Other income (expense):
Interest income		(155,685	)		76,509			150,037			239,553
Interest expense		(1,132,558	)		(968,587	)		(3,313,955	)		(3,249,458	)
Non-operating income		296,913			398,689			375,640			368,973
Non-operating expenditure		(142,285	)		-			(142,285	)		-
Total other income(expense)		(1,133,615	)		(493,389	)		(2,930,563	)		(2,640,932	)

(Loss)income before provision for income taxes		(3,083,156	)		1,808,463			(3,030,489	)		3,426,546
Provision for income taxes		(17,608	)		326,549			80,959			840,647
Net income(loss)		(3,065,548	)		1,481,914			(3,111,448	)		2,585,899

Other comprehensive income(loss):
Foreign currency translation adjustment		1,125,897			63,197			1,125,897			263,364
Comprehensive (loss)income	$	(1,939,651	)	$	1,418,717		$	(1,985,551	)	$	2,849,263

Net (loss)income per share-basic and dilutive	$	(0.10	)	$	0.07		$	(0.10	)	$	0.13

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

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2013			2012			2013			2012
Revenues	$	17,061,559		$	17,884,034		$	20,680,974		$	33,734,005
Cost of revenues		10,606,480			10,393,274			12,900,591			20,670,630
Gross profit		6,455,079			7,490,760			7,780,383			13,063,375
Operating expenses:
Sales and marketing		2,151,424			3,219,462			3,254,680			6,380,751
General and administrative		1,086,016			1,328,102			2,658,364			2,922,369
Total operating expenses		3,237,440			4,547,564			5,913,044			9,303,120
Income from operations		3,217,639			2,943,196			1,867,339			3,760,255
Other income (expense):
Interest income		176,304			65,545			305,722			162,733
Interest expense		(1,176,211	)		(996,960	)		(2,181,397	)		(2,276,862	)
Other (expense) income, net		33,369			(29,101	)		104,217			(30,444	)
Total other income (expense)		(966,538	)		(960,516	)		(1,771,458	)		(2,144,573	)
Income before provision for income taxes		2,251,101			1,982,680			95,881			1,615,682
Provision for income taxes		92,150			487,598			98,568			513,510
Net income (loss)		2,158,951			1,495,082			(2,687	)		1,102,172
Other comprehensive income:
Foreign currency translation adjustment		622,819			92,209			852,799			326,564
Comprehensive income	$	2,781,770		$	1,587,291		$	850,112		$	1,428,736
Net income (loss) per share-basic and dilutive	$	0.11		$	0.07		$	*		$	0.06
Shares used in computing net loss per share-basic and dilutive		19,995,701			19,995,701			19,995,701			19,995,701

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

~~See accompanying notes to the condensed consolidated financial statements.~~ 3

*ANNEC ~~Less~~GREEN ~~than~~REFRACTORIES ~~($0.01) per share.~~CORPORATION

3CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

ANNEC GREEN REFRACTORIES CORPORATION

	Nine Months Ended
	September 30,
	2013			2012
	(Unaudited)			(Audited)
Cash flows from operating activities:
Net income (loss)	$	(3,111,448	)	$	2,585,899
Adjustments to reconcile net loss to net cash used in operating activities:
Non cash interest expense, discount on bank notes receivable		675,891			-
Depreciation and amortization		1,344,678			1,323,358
Provision (recovery) for bad debt		(332,947	)		(146,246	)
(Gain) loss on sale of plant and equipment		42,347			141,739
Change in assets and liabilities:
Restricted cash		(248,314	)		(581,261	)
Bank notes receivable		983,698
Accounts receivable, retentions receivable and long-term retentions receivable		14,488,004			6,384,124
Prepaid expenses and deposits		(695,541	)		2,742,741
Other receivables		(1,446,183	)		(499,075	)
Inventories		(3,119,552	)		(1,887,993	)
Bank notes payable		-			1,801,001
Non-current assets within 1 year		(330,131	)		-
Accounts payable and accrued expenses		502,994			(2,797,460	)
Advances from customers		(7,989,973	)		(5,798,323	)
Salaries payable		(41,270	)		(73,555)
Taxes payable		(2,071,971	)		(1,247,054	)
Deferred income		(135,279	)		(132,123	)
Other payables		(572,738	)		(596,207	)
Other current liabilities		2,503,344			-
Long-term payable		651,937			-
Proceeds from notes payable		-			554,807
Deferred expenses		(11,617	)		-
Net cash provided by operating activities		1,085,928			1,774,372

Cash flows from investing activities:
Deposits for capital expenditure		-			(177,982	)
Proceeds received from withdrawal of long-term investment		162,303			-
Purchase of plant and equipment		(272,555	)		(828,693	)
Purchase of land use rights		(118,949	)		-
Proceeds from sale of plant and equipment		572,225			-
Net cash provided by (used in) investing activities		343,023			(1,006,675	)

Cash flows from financing activities:
Payment of deposit for bank loan		(4,869,102	)		-
Proceeds from other payables		4,576,956			-
Proceeds from loans to related parties, employees, and other Individuals		(1,332,645	)		(2,631,754	)
Payment of loans to related parties, employees, and other individuals		330,851			-
Proceeds from short-term borrowings		25,108,338			15,677,261
Payment of short-term borrowings		(21,862,269	)		(12,934,929	)
Payment of long-term borrowings		(238,586	)		-
Proceeds from issuance of long-term borrowings, net of payments		-			(233,019	)
Net cash provided by (used in) financing activities		1,713,543			(122,441	)

Net increase in cash		3,142,494			645,256

Effect of exchange rate changes		(90,460	)		(45,979	)

Cash at beginning of period		380,579			343,028

Cash at end of period	$	3,432,612		$	942,305

Noncash financing and investing activities:
Reduction of accounts payable through disposal of plant and equipment	$	224,427		$	85,695
Reduction of accounts receivable through addition of plant and equipment	$	137,958		$	548,527

Supplemental disclosure of cash flow information:
Interest paid	$	2,658,188		$	1,143,816
Income taxes paid	$	191,373		$	462,722

~~CONDENSED~~The ~~CONSOLIDATED~~accompanying ~~STATEMENTS~~notes ~~OF CASH~~are ~~FLOWS~~an integral part of these condensed consolidated financial statements.

~~(UNAUDITED)~~4

	Six Months Ended
	June 30
	2013			2012
Cash flows from operating activities:
Net (loss) income	$	(2,687	)	$	1,102,172
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Non cash interest expense, discount on bank notes receivable		361,923			864,774
Depreciation and amortization		915,977			862,424
Recovery for bad debt		(70,871	)		(132,211	)
Loss on disposal of plant and equipment		41,557			144,909
Change in operating assets and liabilities:
Restricted cash		(184,056	)		(5,603,010	)
Bank notes receivable		268,286			931,675
Accounts receivable, retentions receivable and long-term retentions receivable		8,291,111			7,570,001
Prepaid expenses and deposits		423,173			3,197,484
Other receivables		(1,208,739	)		(1,193,542	)
Inventories		(5,484,326	)		(1,256,072	)
Bank notes payable		0			4,428,767
Accounts payable and accrued expenses		475,752			(2,992,392	)
Advances from customers		(5,835,626	)		(4,234,505	)
Salaries payable		416,384			146,622
Taxes payable		(1,704,309	)		(921,295	)
Deferred income		(60,773	)		(88,006	)
Other payables		60,562			(1,279,733	)
Net cash (used in) provided by operating activities		(3,296,662	)		1,548,062
Cash flows from investing activities:
Deposits for capital expenditure		(36,650	)		(179,336	)
Proceeds received from withdrawal of long-term investment		159,314			-
Purchase of plant and equipment		(230,410	)		(457,334	)
Purchase of land use rights		(89,809	)		-
Proceeds (payments) from disposal of plant and equipment		24			(3,171	)
Net cash used in investing activities		(197,531	)		(639,841	)
Cash flows from financing activities:
Payment of other receivables		(4,779,429	)		-
Proceeds from other payables		4,492,664			-
Payment of loans to related parties, employees, and other individuals		(9,841,457	)		(1,671,639	)
Proceeds from loans to related parties, employees, and other individuals		10,429,225			-
Proceeds from short-term borrowings		13,114,778			9,496,179
Payment of short-term borrowings		(8,335,349	)		(8,386,442	)
Payment of long-term borrowings		(157,064	)		(155,212	)
Net cash provided by (used in) financing activities		4,923,368			(717,114	)
Net increase in cash		1,429,175			191,107
Effect of exchange rate changes		(82,658	)		(38,401	)
Cash at beginning of period		380,579			343,028
Cash at end of period	$	1,727,096		$	495,734
Noncash financing and investing activities:
Reduction of accounts payable through disposal of plant and equipment	$	184,983		$	85,695
Reduction of accounts receivable through addition of plant and equipment	$	135,417		$	548,527
Supplemental disclosure of cash flow information:
Interest paid	$	1,011,897		$	677,148
Income taxes paid	$	344,414		$	356,811

Annec Green refractories corporation and subsidiaries

~~See~~Notes ~~accompanying notes~~ to ~~the~~Condensed ~~condensed consolidated~~Consolidated ~~financial~~Financial ~~statements.~~Statements

4September 30, 2013 & 2012

~~Annec Green Refractories Corporation~~(Unaudited)

~~Notes to~~1. ~~Condensed~~Basis ~~Consolidated~~of ~~Financial~~Presentation ~~Statements~~and Description of the Company

The accompanying unaudited condensed consolidated financial statements of Annec Green Refractories Corporation (~~Unaudited~~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 Rule 8-03 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.

1The 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. ~~Basis~~The results of ~~Presentation~~operations for the three and ~~Description~~nine months period ended September 30, 2013 are not necessarily indicative of the results for the year ending December 31, 2013 or any 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.

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, 2012.5

~~The~~Annec ~~accompanying~~Green ~~unaudited~~refractories ~~condensed~~corporation ~~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 and six-month periods ended June 30, 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.

~~Business~~Notes ~~Description~~to Condensed Consolidated Financial Statements

~~Zhengzhou~~September ~~Annec is principally engaged in the manufacture~~30, ~~design,~~2013 ~~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.2012

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.(Unaudited)

51. Basis of Presentation and Description of the Company, continued

~~Annec Green~~Business ~~refractories corporation and subsidiaries~~Description

~~Notes to~~Zhengzhou ~~Condensed~~Annec ~~Consolidated~~is ~~Financial~~principally ~~Statements~~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.

~~(Unaudited)~~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.

~~2. Summary of Significant Accounting Policies~~6

~~Use~~Annec ofGreen ~~Estimates~~refractories corporation and subsidiaries

~~The~~Notes ~~preparation of financial statements in conformity with U .S. GAAP requires us~~ to ~~make~~Condensed ~~estimates~~Consolidated ~~and~~Financial 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. The Company bases 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.Statements

~~Concentration~~September of30, ~~Credit~~2013 ~~and~~& ~~Other Risks~~2012

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 June 30, 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.(Unaudited)

~~The Company does not require collateral or other security to support the trade receivables~~2. ~~The~~Summary ~~Company is exposed to credit risk in the event~~ of ~~nonpayment~~Significant byAccounting customers to the extent of amounts recorded on the balance sheet. One customer accounted for 23% and 21% of the trade receivable balance as of June 30, 2013 and December 31, 2012, respectively. An additional customer accounted for 14% and 19% of the trade receivables balance as of June 30, 2013 and December 31, 2012, respectively.Policies

~~Two~~Use ~~customers individually accounted for 25% and16%~~ of the total revenue in three months ended June 30, 2013 and two customers individually accounted for 39% and 21% of the total revenue in three months ended June 30, 2012, respectively. Two customers individually accounted for 19% and 12% of our revenue in the six month periods ended June 30, 2013. Two customers individually accounted for 26% and 14% of our revenue in the six month periods ended June 30, 2012.Estimates

The ~~operations~~preparation of ~~the~~financial ~~Company~~statements ~~are~~in ~~located~~conformity inwith ~~the~~U ~~PRC~~.S. ~~Accordingly,~~GAAP ~~the~~requires ~~Company’s~~us ~~business,~~to ~~financial~~make ~~condition,~~estimates and ~~results~~judgments ofthat ~~operations~~affect ~~may~~the bereported ~~influenced~~amounts byof ~~the~~assets, ~~political~~liabilities, ~~economical~~revenues, and ~~legal~~expenses, ~~environment~~and in the ~~PRC.~~related ~~The~~disclosure ~~Chinese~~of ~~Government~~contingent ~~controls~~assets ~~its~~and ~~foreign~~liabilities. ~~currency~~Significant ~~reserves~~estimates ~~through~~and ~~restrictions~~assumptions onare ~~imports~~used ~~and~~for, ~~conversion~~but ofnot ~~Renminbi~~limited to: (~~RMB~~1) ~~into~~allowance ~~foreign~~for ~~currency.~~doubtful ~~In July 2005~~accounts, ~~the~~(2) ~~Chinese~~economic ~~Government~~lives ~~adjusted~~of ~~its~~property, ~~exchange~~plant, ~~rate~~and ~~policy~~equipment, ~~from~~(3) ~~“Fixed~~asset ~~Rate”~~impairments, to(4) ~~“Floating~~percentage ~~Rate.”~~of ~~During~~completion ~~January~~on ~~2008~~construction ~~to June 2013~~projects, ~~the~~and ~~exchange~~(5) ~~rate~~contingency ~~between RMB and U~~reserves. S.We ~~Dollars~~base ~~(USD)~~our ~~has~~estimates ~~fluctuated~~on ~~from~~historical ~~USD~~experience ~~$1.00~~and toon ~~RMB~~various ~~7.3141~~other ~~and~~assumptions ~~USD~~that ~~$1.00~~we believe to ~~RMB~~be ~~6.1732,~~reasonable ~~respectively.~~under ~~There~~the ~~can~~circumstances, bethe noresults ~~assurance~~of ~~that~~which form the ~~exchange~~basis ~~rate~~for ~~will~~making ~~remain~~judgments ~~stable.~~about ~~The~~the ~~Renminbi~~carrying ~~could~~values ~~appreciate~~of orassets ~~depreciate~~and ~~against~~liabilities ~~the~~that ~~U.S.~~are ~~Dollar.~~not ~~The~~readily ~~Company’s~~apparent ~~financial~~from ~~condition~~other ~~and~~sources. Actual results ~~of operations~~ may ~~also~~differ befrom ~~affected~~these byestimates. ~~changes~~In inaddition, ~~the~~any ~~value~~change ofin ~~certain~~these ~~currencies~~estimates ~~other~~or ~~than~~their ~~the~~related ~~Renminbi~~assumptions incould ~~which~~have ~~its~~an ~~earnings~~adverse ~~and~~effect ~~obligations~~on ~~are~~our ~~denominated~~operating results.

6Concentration of Credit and Other Risks

~~Annec Green~~Financial ~~refractories~~instruments ~~corporation~~which potentially subject the Company to concentrations of credit risk consist principally of cash, restricted cash, bank notes receivable, accounts receivable and ~~subsidiaries~~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 September 30, 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.

~~Notes~~ The Company does not require collateral or other security to ~~Condensed~~support ~~Consolidated~~the ~~Financial~~trade ~~Statements~~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 28% and 28% of the trade receivable balance as of September 30, 2013 and December 31, 2012, respectively. An additional customer accounted for 17% and 19% of the trade receivables balance as of September 30, 2013 and December 31, 2012, respectively.

~~(Unaudited)~~Two customers individually accounted for 35% and 14% of the total revenue in three months ended September 30, 2013 and two customers individually accounted for 25% and 15% of the total revenue in three months ended September 30, 2012, respectively. Two customers individually accounted for 14% and 12% of our revenue in the nine month periods ended September 30, 2013. Two customers individually accounted for 26% and 13% of our revenue in the nine month periods ended September 30, 2012.

~~2. Summary of Significant Accounting Policies, continued~~7

~~Long-term~~Annec ~~Investment~~Green refractories corporation and subsidiaries

~~Long-term~~Notes investment represents an investment the Company had in a regional bank within China. The Company did not hold a greater than 5% interest, and we determined that the Company did not have significant control or influence in the bank. Accordingly, the Company recorded the investment at cost. The investment was in a private company where there is no market to ~~determine~~Condensed ~~the~~Consolidated ~~value~~Financial ~~of the investment. The Company withdrew the investment in March 2013 and received proceeds of $159,314.~~Statements

~~Fair~~September ~~Value~~30, of2013 ~~Financial~~& ~~Instruments~~2012

~~Fair Value Measurements and Disclosures~~ (~~ASC 820-10~~Unaudited) 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~~2. ~~1–inputs~~Summary 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~~Significant ~~assets~~Accounting orPolicies, ~~liabilities.~~continued

~~Level~~The ~~2–observable~~operations ~~inputs~~of ~~other~~the ~~than~~Company ~~Level~~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. In July 2005, the Chinese Government adjusted its exchange rate policy from “Fixed Rate” to “Floating Rate.” During January 2008 to September 2013, the exchange rate between RMB and U. S. Dollars (USD) has fluctuated from USD $1.00 ~~prices~~to RMB 7.3141 and USD $1.00 to RMB 6.1613, ~~such~~respectively. asThere ~~quoted~~can ~~prices~~be ~~for~~no ~~similar~~assurance ~~assets~~that the exchange rate will remain stable. The Renminbi could appreciate or ~~liabilities;~~depreciate ~~quoted~~against ~~prices~~the U.S. Dollar. The Company’s financial condition and results of operations may also be affected by changes in ~~markets~~the ~~that~~value ~~are~~of ~~not~~certain ~~active~~currencies other than the Renminbi in which its earnings and obligations are denominated.

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

~~The~~Long-term ~~Company’s~~investment ~~financial~~represents ~~instruments~~an ~~consist~~investment ~~mainly~~the ofCompany ~~cash,~~has ~~restricted~~in ~~cash,~~a regional bank ~~notes~~within ~~receivable, other receivables, and debt obligations~~China. ~~Other~~We ~~receivable~~do ~~are~~not ~~reflected~~hold ina ~~the~~greater ~~accompanying~~than ~~financial~~5% ~~statements at historical cost~~interest, ~~which~~and ~~approximates~~we ~~fair~~have ~~value~~determined ~~due~~that towe ~~the~~do ~~short-term~~not ~~nature~~have ofsignificant ~~these~~control ~~instruments.~~or ~~Based~~influence onin the ~~borrowing~~bank. ~~rates currently available to the Company for loans and similar terms and average maturities~~Accordingly, ~~the~~we ~~fair~~record ~~value of debt obligations also approximates its carrying value due to~~ the ~~short-term~~investment ~~nature~~at ~~of the instruments~~cost. ~~While~~Our ~~the~~investment ~~Company~~is ~~believes~~in ~~its~~a ~~valuation~~private ~~methodologies~~company ~~are~~where ~~appropriate~~there ~~and~~is ~~consistent~~no ~~with other~~ market ~~participants, the use of different methodologies or assumptions~~ to determine the ~~fair~~ value of ~~certain~~the ~~financial~~investment. ~~instruments~~We ~~could~~withdrew ~~result~~the investment in aMarch ~~different~~2013 ~~estimate~~and ofreceived ~~fair~~proceeds ~~value~~of ~~at the reporting date~~$159,314.

~~The~~Fair ~~Company~~Value ~~had~~of noFinancial ~~assets or liabilities measured at fair value and subject to the disclosure requirements based on the fair value hierarchy.~~Instruments

7Fair 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~~Level ~~refractories~~1–inputs ~~corporation~~are ~~and~~unadjusted ~~subsidiaries~~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.

~~Notes to~~Level ~~Condensed~~2–observable ~~Consolidated~~inputs ~~Financial~~other ~~Statements~~than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active.

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

2The Company’s financial instruments consist mainly of cash, restricted cash, bank notes receivable, other receivables, and debt obligations. ~~Summary~~Other receivable are reflected in the accompanying financial statements at historical cost, which approximates fair value due to the short-term nature of ~~Significant~~these ~~Accounting~~instruments. ~~Policies~~Based on the borrowing rates currently available to the Company for loans and similar terms and average maturities, ~~continued~~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.

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

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 periods ended June 30, 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.8

AAnnec ~~summary~~Green ofrefractories ~~the~~corporation ~~conversion~~and ~~rates for the periods presented is as follows:~~subsidiaries

	Three Months Ended				December
	June 30,				31
	2013		2012		2012
Year end RMB: U.S. Dollar exchange rate		6.1732		6.3089		6.3011
Average RMB: U.S. Dollar exchange rate		6.2025		6.3078		6.3034

Notes to Condensed Consolidated Financial Statements

8September 30, 2013 & 2012

~~Annec Green refractories corporation and subsidiaries~~(Unaudited)

~~Notes to~~2. ~~Unaudited~~Summary ~~Condensed~~of ~~Consolidated~~Significant ~~Financial~~Accounting ~~Statements~~Policies, continued

~~(Unaudited)~~Foreign Currency Translation

2The accompanying financial statements are presented in United States Dollars. ~~Summary~~The functional currency of ~~Significant~~our ~~Accounting~~Company ~~Policies~~is the Renminbi, ~~continued~~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 September 30, 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.

~~Revenue Recognition~~9

~~The~~Annec ~~Company’s~~Green ~~principal~~refractories ~~revenue~~corporation ~~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.~~subsidiaries

~~Zhengzhou~~Notes 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 beCondensed ~~paid~~Consolidated byFinancial 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.Statements

~~Beijing~~September 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 contracts30, ~~which~~2013 ~~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 recognizes revenue from this type of sale when the machines and equipments have been delivered and accepted by the customer.2012

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.(Unaudited)

~~Shipping~~2. ~~and~~Summary ~~Handling~~of ~~Costs~~Significant Accounting Policies, continued

~~Shipping~~A ~~and~~summary ~~handling costs billed to customers are recorded net~~ of the ~~amount~~conversion ~~collected.~~rates ~~Shipping and handling expense included in selling expenses amounted to $816,312 and $279,796~~ for the ~~quarter ended June 30, 2013 and 2012, respectively, and $1,031,922 and $771,074 for the six month~~ periods ~~ended~~presented ~~June~~is ~~30,~~as ~~2013 and 2012, respectively.~~follows:

Recent Accounting Pronouncements

	Nine Months Ended
	September 30,				December 31,
	2013		2012		2012

Period end RMB: U.S. Dollar exchange rate		6.1364		6.3190		6.3011
Average RMB: U.S. Dollar exchange rate		6.2115		6.3084		6.3034

~~The~~Revenue 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.Recognition

9The 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 ~~Green~~ ~~refractories~~primarily ~~corporation~~generates revenue from the sale of a variety of refractory bricks and ~~subsidiaries~~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.

~~Notes~~ Beijing Annec enters into contracts to ~~Condensed~~design ~~Consolidated~~and ~~Financial~~build ~~Statements~~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.

~~(Unaudited)~~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.

3.Shipping ~~Accounts~~and ~~Receivable~~Handling Costs

~~The~~Shipping ~~components~~and handling costs billed to customers are recorded net of the ~~Company’s net~~amount ~~accounts~~collected. ~~receivable~~Shipping ~~are~~and ashandling ~~follows:~~expense included in selling expenses amounted to $1,287,287 and $647,066 for the quarter ended September 30, 2013 and 2012, respectively, and $2,326,108 and $1,420,191 for the nine month periods ended September 30, 2013 and 2012, respectively.

	June 30		December 31
	2013		2012
Amounts billed	$	31,222,915	$	31,619,504
Amounts unbilled		5,650,355		10,594,598
Total	$	36,873,270	$	42,214,102

4.Annec ~~Retentions~~Green ~~Receivable~~refractories corporation and ~~Long-term Retentions Receivable~~subsidiaries

~~The~~Notes Company enters into sales contracts with customers that provide for a retention provision in that the customers can retain 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 beCondensed ofConsolidated ~~good~~Financial 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.Statements

~~The~~September ~~following table shows the components of retentions receivable from long-term contracts as of June~~ 30, 2013 ~~and~~& ~~December 31,~~ 2012:

	June 30, 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	$	2,482,133	$	818,638	$	585,832	$	342,871
Amounts billed and not due		3,258,942		87,673		7,218,256		1,098,770
		5,741,075		906,311		7,804,088		1,441,641
Commercial customers:
Amount billed and due		2,249,287		312,257		512,115		319,021
Amount billed and not due		3,975,617		712,580		4,921,270		734,956
		6,224,904		1,024,837		5,433,385		1,053,977
Total	$	11,965,979	$	1,931,148	$	13,237,473	$	2,495,618

(Unaudited)

52. ~~Other~~Summary ~~Receivables~~of Significant Accounting Policies, continued

~~The~~Recent ~~components~~Accounting ~~of the Company’s other receivables are as follows:~~Pronouncements

	June 30,		December 31,
	2013		2012
Other receivables–individuals and employees	$	2,627,905	$	1,214,957
Other receivables–companies		531,817		678,423
Security deposits		5,994,896		1,112,043
Total other receivables	$	9,154,618	$	3,005,423

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.

1011

Annec Green refractories corporation and subsidiaries

Notes to Condensed Consolidated Financial Statements

~~(UNAUDITED)~~September 30, 2013 & 2012

~~6. Inventories~~(Unaudited)

~~The~~3. ~~components~~Accounts ~~of the Company’s inventories are as follows:~~Receivable

	June 30,		December 31,
	2013		2012
Raw materials	$	3,939,331	$	3,839,230
Work in process		189,859		191,781
Finished goods		27,528,752		21,524,523
Total inventories	$	31,657,942	$	25,555,534

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

7. Plant and Equipment, net

	September 30		December 31
	2013		2012

Amounts billed	$	26,753,918	$	31,619,504
Amounts unbilled		4,706,468		10,594,598

Total	$	31,460,386	$	42,214,102

~~The~~4. ~~components~~Retentions ofReceivable ~~the Company’s plant~~ and ~~equipment~~Long-term ~~are~~Retentions ~~as follows:~~Receivable

	June 30,			December 31,
	2013			2012
Plants and buildings	$	15,819,268		$	15,180,863
Machinery and equipment		4,874,418			4,703,072
Vehicles		2,152,584			2,321,267
Others		545,579			541,106
		23,391,849			22,746,308
Less accumulated depreciation		(7,039,949	)		(6,240,887	)
Total plant and equipment, net	$	16,351,900		$	16,505,421

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.

~~Depreciation~~The ~~expense~~following ~~related~~table toshows ~~property~~the ~~and~~components ~~equipment was~~of ~~$439,453~~retentions ~~and~~receivable ~~$436,838~~from ~~for~~long-term ~~the~~contracts ~~three~~as ~~month~~of ~~periods ended June~~September 30, 2013 and ~~2012,~~December ~~respectively~~31, ~~and was $892,393 and $834,713 for the six-month periods ended June 30, 2013 and~~ 2012~~, respectively.~~:

8. Land Use Rights, net

	September 30, 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	$	2,392,071	$	762,912	$	585,832	$	342,871
Amounts billed and not due		3,290,185				7,218,256		1,098,770
		5,682,256		841,395		7,804,088		1,441,641
Commercial customers:
Amount billed and due		2,636,789		278,416		512,115		319,021
Amount billed and not due		3,378,696		874,457		4,921,270		734,956
		6,015,485		1,152,873		5,433,385		1,053,977
Total	$	11,697,741	$	1,994,268	$	13,237,473	$	2,495,618

~~The~~5. ~~components~~Prepaid ofexpenses ~~the~~and ~~Company’s land use rights are as follows:~~deposits

	Estimated
	Remaining	June 30,			December 31,
	Life	2013			2012
Land use rights	46.3 years	$	2,540,737		$	2,399,645
Less accumulated amortization			(167,603	)		(140,849	)
Total land use rights, net		$	2,373,134		$	2,258,796

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

~~The~~Prepaid ~~Company~~expenses ~~purchased~~and andeposits ~~additional land~~refers ~~use~~to ~~right~~payments ofprepaid ~~$89,809 during the six months ended June 30, 2013. Amortization expense related~~ to ~~land use rights was $11,862 and $11,825 for~~ the ~~three-month~~supplier ~~periods~~in ~~ended~~accordance ~~June 30,~~with ~~2013~~purchase ~~and 2012, respectively, and $23,584 and $27,711 for the six-month periods ended June 30, 2013 and 2012, respectively~~contract. ~~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:

	September 30,		December 31,
Prepaid expenses and deposits	2013		2012

Prepaid expenses and deposits	$	8,516,289	$	7,613,579

Period ending June 30:
2014	$	51,256
2015		51,256
2016		51,256
2017		51,256
2018		51,256
Thereafter		2,116,854
	$	2,373,134

6. Other Receivables

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

Annec Green refractories corporation and subsidiaries

	September 30,		December 31,
	2013		2012
Other receivables	$	9,850,701	$	3,005,423
Advance to management		415,659		-
Advance to related party		79,981		-
Total other receivables	$	10,346,341	$	3,005,423

~~Notes to Condensed Consolidated Financial Statements~~7. Inventories

9. Short-Term Loans

	September 30,		December 31,
	2013		2012

Raw materials	$	3,973,899	$	3,839,230
Work in process		48,790		191,781
Finished goods		25,350,962		21,524,523
Total inventories	$	29,373,651	$	25,555,534

~~The components of the Company’s short-term loans are as follows:~~12

	June 30,		December 31,
	2013		2012
Loans due to financial institutions	$	29,394,803	$	24,037,073

Annec Green refractories corporation and subsidiaries

AtNotes June 30, 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 June 30, 2013 and 2012, respectively. Eight of the short-term loans (with an outstanding balance of $17,009,007 at June 30, 2013) are guaranteed by third parties, Beijing Annec, or Fuchao Li, chairman of the Company’s board of directors (the chairman). One of these eight loans is $4,859,716 due to ~~Bank~~Condensed ofConsolidated ~~Zhengzhou.~~Financial Four of the loans (with an outstanding balance of $6,635,132 at June 30, 2013) are collateralized by the Company’s office building, land, or machinery and equipment. Two of the loans (with an outstanding balance of approximately $5,750,664 at June 30, 2013) are secured by cash deposits of the Company.Statements

InSeptember ~~2013, the Company borrowed $4,859,716 (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~~2013 ~~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 $4,568,133 (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 $4,859,716 (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 $4,568,133 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.2012

~~10. Bank Notes Payable~~(Unaudited)

~~The~~8. ~~components~~Plant ofand ~~the~~Equipment, ~~Company’s bank notes payable are as follows:~~net

	June 30,		December 31,
	2013		2012
Loans due to financial institutions	$	2,267,868	$	2,221,834

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

Bank notes payable represent bank notes paid to the Company’s vendors for purchase of inventory. At June 30, 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.

	September 30,		December 31,
	2013		2012

Plants and buildings	$	15,756,587	$	15,180,863
Machinery and equipment		4,818,320		4,703,072
Vehicles		2,153,271		2,321,267
Others		493,449		541,106
		23,221,627		22,746,308
Less accumulated depreciation		(7,139,435)		(6,240,887	)
Total plant and equipment, net	$	16,082,192	$	16,505,421

11Depreciation expense related to property and equipment was $433,539 and $422,974 for the three month periods ended September 30, 2013 and 2012, respectively, and was $1,297,706 and $1,283,965 for the nine month periods ended September 30, 2013 and 2012, respectively. ~~Long-Term~~The ~~Loans~~Company recorded a loss on sale of property and equipment of $12,071 and $0 for the three month periods ended September 30, 2013 and 2012, respectively, and $32,865 and $141,739 for the nine month periods ended September 30, 2013 and 2012, respectively.

~~The~~9. ~~components~~Land ofUse ~~the~~Rights, ~~Company’s long-term loans are as follows:~~net

	June 30,		December 31,
	2013		2012
Loan due to financial institution	$	476,252	$	622,114

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

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

	Estimated Remaining	September 30,			December 31,
	Life	2013			2012

Land use rights	46 years	$	2,555,974		$	2,399,645
Software			52,934			-
Less accumulated amortization			(217,217	)		(140,849	)
Total land use rights, net		$	2,391,691		$	2,258,796

~~Future~~Amortization ~~minimum~~expense ~~payments~~related to land use rights was $11,941 and $11,642 for the ~~long-term~~three ~~loans~~month ~~are~~periods asended ~~follows:~~September 30, 2013 and 2012, respectively, and $35,824 and $39,393 for the nine month periods ended September 30, 2013 and 2012, respectively. The difference between the amortization expense and accumulated amortization is due to exchange rate differences.

Period ending June 30:
2014	$	317,501
2015		158,751
	$	476,252

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

Period ending September 30:
2014	$	51,639
2015		51,639
2016		51,639
2017		51,639
2018		51,639
Thereafter		2,117,180
	$	$2,375,375

~~Annec Green refractories corporation and subsidiaries~~13

~~Notes to~~Annec ~~Condensed~~Green ~~Consolidated~~refractories ~~Financial~~corporation ~~Statements~~and subsidiaries

~~(Unaudited)~~Notes to Condensed Consolidated Financial Statements

~~12.~~September ~~Related~~30, ~~Party~~2013 ~~Transactions~~& 2012

~~At June 30, 2013 and December 31, 2012, the Company had loans payable to the chairman~~ (~~Fuchao Li~~Unaudited), 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 June 30, 2013 and December 31, 2012:

	June 30,		December 31,
	2013		2012
Fuchao Li	$	-	$	214,150
Yinling Fan		197,628		193,617
	$	197,628	$	407,767

10. Short-Term Loans

~~During~~The ~~the~~components ~~three~~of ~~months ended March 31, 2013,~~ the Company’s ~~repaid~~short-term ~~$214,150~~loans toare ~~Fuchao~~as ~~Li. There was no other activity in these payables during the three months ended June 30, 2013.~~follows:

	September 30,		December 31,
	2013		2012
Short-term loans:
Loans due to financial institutions	$	27,941,464	$	24,037,073

At September 30, 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 September 30, 2013 and 2012, respectively. Eight of the short-term loans (with an outstanding balance of approximately $17,111,010 at September 30, 2013) are guaranteed by third parties, Beijing Annec ~~Green~~, ~~refractories~~Alex ~~corporation~~Industrial Investment Limited Company, or Fuchao Li, chairman of the Company’s board of directors (the chairman). One of these eight loans is $4,888,860 due to Bank of Zhengzhou. Four of the loans (with an outstanding balance of approximately $5,045,303 at September 30, 2013) are collateralized by the Company’s office building, land, or machinery and ~~subsidiaries~~equipment. Two of the loans (with an outstanding balance of approximately $5,785,151 at September 30, 2013) are secured by cash deposits of the Company.

~~Notes~~ In 2013, the Company borrowed $4,859,716 (RMB 30 million) from the Bank of Zhengzhou. This loan was guaranteed by a third party (Note 20) similar to ~~Condensed~~the ~~Consolidated~~other ~~Financial~~short ~~Statements~~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 $4,568,133 (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 $4,859,716 (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”. 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 $4,568,133 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.

~~(Unaudited)~~11. Bank Notes Payable

~~13.~~The ~~Income~~components ~~Taxes~~of the Company’s bank notes payable are as follows:

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”).

	September 30,		December 31,
	2013		2012
Notes payable:
Loans due to financial institutions	$	2,281,468	$	2,221,834

~~Zhengzhou~~Bank ~~Annec~~notes ~~qualified~~payable ~~as a~~represent ~~hi-tech~~bank ~~corporation~~notes ~~and~~paid ~~was~~to ~~accorded~~the ~~certain~~Company’s ~~tax~~vendors ~~incentives~~ for ~~said~~purchase ~~designation. Accordingly, Zhengzhou Annec was subject to tax at a statutory rate~~ of ~~15%~~inventory. ~~for~~At ~~the quarter ended June~~ September 30, 2013 ~~and December 31~~, ~~2012.~~the ~~Zhengzhou~~Company ~~Annec~~had ~~will~~bank ~~continue~~notes topayable bewith ~~subject to~~two adifferent ~~15%~~banks ~~tax~~with ~~rate~~maturity ~~until~~dates ~~October~~of ~~28,~~six ~~2014,~~months. ~~and~~All ~~expects~~are ~~that~~noninterest-bearing ~~thereafter~~notes, ~~will~~but ~~become~~generally ~~subject~~require tofees ~~a rate~~ of ~~25%~~approximately ~~unless Zhengzhou Annec applies for and receives a further tax holiday~~0.05%. ~~There~~The ~~was~~notes nopayable ~~tax~~require ~~savings~~cash ~~due~~ to ~~this~~be ~~tax~~held ~~holiday~~in ~~because~~reserve ~~Zhengzhou~~of ~~Annec~~100% ~~had~~of ~~a loss for~~ the ~~three~~total ~~and~~outstanding ~~six~~notes ~~months~~payable ~~ended June 30, 2013~~balance. ~~The~~Cash ~~tax~~held ~~savings~~by ~~due~~the tobank ~~this~~as ~~tax~~collateral ~~holiday~~ is ~~approximately~~included ~~$264,000~~in ~~and~~restricted ~~$264,000 for the three and six-month periods ended June 30, 2012, respectively~~cash.

~~Beijing Annec is subject to taxes at a statutory rate of 25%.~~ 14

~~14.~~Annec ~~Commitments~~Green refractories corporation and ~~Contingencies~~subsidiaries

~~Third~~Notes ~~Party~~to ~~Guarantees~~Condensed Consolidated Financial Statements

~~During~~September ~~three and six months ended June~~ 30, 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 June 30, 2013 and December 31, 2012, the Company was a debt guarantor to three third-party entities. The maximum guaranteed amount is approximately $24,299,000 as of June 30, 2013. The total guaranteed outstanding borrowings by these parties are approximately $19,925,000 as of June 30, 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 $27,376,000 as of June 30, 2013. The Company’s loans guaranteed by these parties are approximately $17,009,000 as of June 30, 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. (Unaudited)

~~Leases~~12. Advances from customers

~~The~~Advances ~~Company~~from ~~has~~customers ~~non-cancelable operating~~refer ~~lease~~to ~~agreements~~the ~~principally~~money ~~for~~from ~~its~~customers ~~office~~before ~~and factory facilities~~shipment. ~~These~~The ~~leases~~earnings ~~have~~will ~~terms~~be ~~expiring~~written indown ~~May~~after ~~2015~~it ~~and April~~meet ~~2014,~~the ~~and~~revenue ~~are~~recognition ~~renewable subject to negotiation~~conditions.

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 $53,753 per year.

	September 30,		December 31,
	2013		2012
Advances from customers
Balance of advances from customers	$	6,903,426	$	14,535,685

Total rent expense for the leases as mentioned above was $84,912 and $84,430 for the three months ended June 30, 2013 and 2012, and $168,817 and $177,282 for the six months ended June 30, 2013 and 201213. ~~respectively.~~Other ~~A summary of future minimum lease payments as of June 30, 2013 is presented below:~~payable

	Minimum
	Lease
	Payments
Year ending June 30:
2014	$	306,070
2015		120,930
2016		53,753
2017		53,753
2018		53,753
Thereafter		2,201,463
	$	2,789,722

Other payable refers to payables in addition to normal transaction.

	September 30,		December 31,
	2013		2012

Other payable	$	9,824,755	$	3,582,618

~~Annec Green~~14. ~~refractories~~Deferred ~~corporation and subsidiaries~~ income

~~Notes~~ Deferred income refers to ~~Condensed~~revenue ~~Consolidated~~or ~~Financial~~income ~~Statements~~that are not recognized. It includes three parts: return from government, energy saving and emission reduction, and government allowance.

~~(Unaudited)~~The components of the Company’s deferred income are as follows:

15. Segment Reporting

	September 30,		December 31,
	2013		2012

Return from government	$	1,696,842	$	1,679,191
Energy saving and emission reduction		903,421		985,383
Government allowance		115,032		112,025
Total	$	2,715,295	$	2,776,599

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.15

15Annec Green refractories corporation and subsidiaries

~~Annec Green~~Notes ~~refractories~~to ~~corporation~~Condensed ~~and~~Consolidated ~~subsidiaries~~Financial Statements

~~Notes to~~September ~~Condensed~~30, ~~Consolidated~~2013 ~~Financial~~& ~~Statements~~2012

(Unaudited)

1615. ~~Segment~~Other ~~Reporting,~~current ~~continued~~liabilities

~~Information~~Other oncurrent ~~reportable~~liabilities ~~segments~~are ~~for~~mainly ~~the~~withholding ~~three~~ expenses, and ~~six~~refers ~~months~~to ~~ended~~accrued ~~June~~expenses ~~30,~~that ~~2013~~are ~~and~~not ~~2012 is as follows:~~paid.

	Three Months Ended				Six Months Ended
	September 30,		December 31,
	June 30,				June 30,
	2013		2012
	2013		2012		2013		2012
Other current liabilities
Revenues:
Other current liabilities	$	2,513,502	$	766,912
Zhengzhou Annec	$	17,061,559	$	17,884,034	$	20,680,974	$	33,734,005
Beijing Annec		-		-		-		-
Total		17,061,559		17,884,034		20,680,974		33,734,005
Cost of revenues:
Zhengzhou Annec		10,606,480		10,393,274		12,900,591		20,670,630
Beijing Annec		-		-		-		-
Total		10,606,480		10,393,274		12,900,591		20,670,630
Operating expenses:
Zhengzhou Annec		3,108,976		3,738,430		5,668,231		8,368,075
Beijing Annec		128,464		809,134		244,813		935,045
Total		3,237,440		4,547,564		5,913,044		9,303,120
Income from operations	$	3,217,639	$	2,943,196	$	1,867,339	$	3,760,255

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
Depreciation expenses:
Zhengzhou Annec	$	388,628	$	383,811	$	793,446	$	743,262
Beijing Annec		50,825		53,027		98,947		91,451
Total	$	439,453	$	436,838	$	892,393	$	834,713

16. Long-Term Loans

	June 30, 2013		December 31,2012
Plant and equipment, net:
Zhengzhou Annec	$	12,899,872	$	13,336,054
Beijing Annec		3,452,028		3,169,367
Total identifiable assets	$	16,351,900	$	16,505,421

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

	September 30,		December 31,
	2013		2012
Long-term loans:
Loan due to financial institution	$	399,257	$	622,114

~~Item~~The 2.long-term ~~Management’s~~loan ~~Discussion~~is due in 2015 and ~~Analysis~~has ofan ~~Financial~~interest ~~Condition~~rate of 7.152% and ~~Results~~is secured by one of ~~Operations~~the Company’s office buildings.

~~The~~Future ~~following~~minimum ~~discussion and~~payments ~~analysis~~for of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report. In addition to historical financial information, the ~~following discussion contains forward~~long-~~looking~~term ~~statements~~loans ~~that~~are ~~reflect~~as 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 on April 1, 2013.follows:

Overview

Period ending September 30:
2014	$	319,406
2015		319,406
	$	638,812

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 are also engaged in integrated stove design, turnkey contracting, refractory production and sales.16

~~Through our subsidiary, Zhengzhou~~ Annec, weGreen ~~are~~refractories ~~primarily~~corporation ~~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. 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. Pursuant to a contractual agreement between Zhengzhou Annec and Beijing Annec, Zhengzhou Annec has been supplying Beijing Annec with construction materials. Beijing Annec is also engaged in technology research and development, graphic design, production, engineering and technical consulting, and sales of building materials.subsidiaries

WeNotes ~~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~~Condensed ~~design,~~Consolidated ~~engineering~~Financial ~~and build out of stoves.~~Statements

~~Summary~~September of30, ~~Critical~~2013 ~~Accounting~~& ~~Policies and Estimates~~2012

~~Use of Estimates~~(Unaudited)

~~The preparation of financial statements in conformity with U~~17.S. ~~GAAP~~Related ~~requires~~Party 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.Transactions

~~There~~At ~~are~~September 30, ~~several~~2013 ~~accounting~~and ~~policies~~December ~~that involve~~31, ~~management’s~~2012, ~~judgments~~the ~~and~~Company ~~estimates~~had loans payable to the chairman (Fuchao Li), and ~~are~~a ~~critical~~minority toshareholder ~~understanding~~(Yin ~~our~~ling ~~historical~~Fan) of the Company. The Company and ~~future~~these ~~performance~~parties have not signed notes, ~~as these~~there ~~policies~~are no specific due dates, and ~~estimates~~no ~~affect~~interest is paid on the ~~reported~~loans. ~~amounts~~Money ofis ~~revenue~~transferred between these parties and ~~other~~the ~~significant~~Company ~~areas~~mainly for cash flow purposes. The amounts loaned and borrowed are short-term in ~~our~~nature ~~reported~~and ~~financial~~the ~~statements~~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 September 30, 2013 and December 31, 2012:

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.”

	September 30,		December 31,
	2013		2012

Fuchao Li	$	4,595,528	$	214,150
Yinling Fan		182,517		193,617
	$	4,778,045	$	407,767

17During the three months ended March 31, 2013, the Company repaid $214,150 to Fuchao Li, and during the three months ended September 30, 2013, the Company repaid $11,100 to Yinling Fan.

~~Results~~In 2013, the Company borrowed $4,595,716 (RMB 30 million) from the Bank of ~~Operations~~Zhengzhou. This loan was guaranteed by a third party (Note 20) 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 $4,595,528 (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 $4,888,860 (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”. 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 $4,568,133 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.

~~For~~18. ~~the~~Income ~~Three Months Ended June 30, 2013 and 2012~~Taxes

	Three Months Ended June 30
	2013			2012
Revenues	$	17,061,559		$	17,884,034
Cost of revenues		10,606,480			10,393,274
Gross profit		6,455,079			7,490,760
Operating expenses
Sales and marketing		2,151,424			3,219,462
General and administrative		1,086,016			1,328,102
Total operating expenses		3,237,440			4,547,564
Income from operations		3,217,639			2,943,196
Other expense		(966,538	)		(960,516	)
Income before provision for income taxes		2,251,101			1,982,680
Provision for income taxes		92,150			487,598
Net income	$	2,158,951		$	1,495,082

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”).

~~Revenues~~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 months ended September 30, 2013 and December 31, 2012. Zhengzhou Annec will continue to be subject to a 15% tax rate for the quarter ended September 30, 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 $65,396 and $23,790 for the three month periods ended September 30, 2013 and 2012, respectively.

~~We operate in two reportable segments: Zhengzhou Annec and~~ Beijing Annec. ~~The~~is ~~Zhengzhou~~subject ~~Annec segment manufactures and sells a variety of refractory bricks and kits of pre-assembled hot-air ovens. Since 2011, Zhengzhou Annec began entering into certain short-term contracts~~ to ~~build~~taxes ~~blast~~at ~~furnaces and hot blast stoves. The Beijing Annec segment designs and builds blast furnaces and hot-air stoves on~~ a ~~contract~~statutory ~~basis~~rate ~~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~~25%. ~~We purchase these machines and equipment from outside vendors and generally sell them at cost plus a small mark-up.~~

Segments	Three Months Ended June 30, 2013		% of Revenue			Three Months Ended June 30, 2012		% of Revenue
Zhengzhou Annec	$	17,061,599		100	%	$	17,884,034		100	%
Beijing Annec		-		-			-		-
Total	$	17,061,599		100	%	$	17,884,034		100	%

Revenues for the three months ended June 30, 2013 were $17,061,599 compared to $17,884,034 for the three months ended June 30, 2012. Revenues for the three months ended June 30, 2013 decreased by $ 822,435 or 4.6%, primarily as a result of a decrease in sales and new orders for Zhengzhou Annec ~~and~~Green norefractories ~~revenues~~corporation from Beijing Annec. The decrease in sales of refractory products by Zhengzhou Annec was mainly due to a decrease in number of orders during the three months ended June 30, 2013. Zhengzhou Annec experienced a decrease in orders because of decline in demand for iron and steel industry products in 2013. In the first quarter of 2013, the Company decided to develop new product 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 June 30, 2013, and 2012:subsidiaries

18Notes to Condensed Consolidated Financial Statements

Type of Customers’ Sales	Amount (US$) 2013	Amount (US$) 2012
Existing customers	4,876,628	17,858,879
New customers	12,184,931	25,155

September 30, 2013 & 2012

~~Cost of Revenue~~(Unaudited)

~~Cost of revenue was $10,606,480 and $10,393,274 for the three months ended June 30, 2013 and 2012, respectively~~19. ~~Cost~~Commitments ~~of revenue for the three months ended June 30, 2013 increased by $213,206, or 2.1%. Stated as a percentage of revenues, the cost of revenue for the three months ended June 30, 2013 was 62%~~ and ~~for the corresponding period of 2012 was 58%. The increase in cost of revenue of Zhengzhou Annec was primarily attributable to the change of the structure of the product.~~Contingencies

~~Operating~~Third ~~Expenses~~Party Guarantees

~~General~~During ~~and~~three ~~Administrative. General~~months ~~and~~ended ~~administrative~~September 30, ~~expenses~~2013 ~~include~~and ~~payroll~~the ~~and~~year ~~related~~ended ~~employee~~December ~~benefits~~31, ~~and~~2012, ~~other~~the ~~headcount-related~~Company ~~costs~~had ~~associated~~ agreements with ~~facilities,~~third-party ~~and~~entities ~~other~~in ~~administrative~~which ~~expenses.~~the ~~General~~Company ~~and~~has ~~administrative~~guaranteed ~~expenses~~certain ~~were~~debt $1of these entities,~~086,016~~ and ~~$1,328,102~~these ~~for~~entities have guaranteed certain debt of the ~~three~~ ~~months~~Company. ~~ended~~As ~~June~~of September 30, 2013 and December 31, 2012, ~~respectively~~the Company was a debt guarantor to three third-party entities. The ~~decrease~~maximum ofguaranteed amount is approximately $~~242~~24,~~086~~444,300 oras ~~18%~~of September 30, in2013. ~~general~~The ~~and~~total ~~administrative~~guaranteed ~~expense was~~outstanding ~~primarily~~borrowings ~~attributable~~by tothese parties are approximately $20,044,326 as of September 30, 2013. All of the ~~decrease~~guarantee agreements are for debt with maturities of ~~consulting~~one ~~fees~~year or less, and mature through September 30, 2014.

~~Sales~~These ~~and~~same ~~Marketing Expenses.~~parties ~~Sales~~disclosed ~~and~~above ~~marketing~~also ~~expenses~~act ~~include~~as ~~payroll,~~debt ~~employee~~guarantors ~~benefits,~~on ~~and~~certain ~~other~~of ~~headcount-related~~the ~~costs~~Company’s ~~associated~~debt with ~~sales~~ ~~and~~a ~~marketing~~maximum ~~personnel~~guaranteed ~~and~~amount ~~travel,~~of ~~advertising,~~approximately ~~promotions~~$28,192,426 ~~trade~~as ~~shows,~~of ~~seminars~~September 30, ~~and~~2013. ~~other~~The ~~programs.~~Company’s ~~Sales~~loans ~~and~~guaranteed ~~marketing expenses~~by ~~were~~these ~~$2,151,424~~parties ~~and~~are approximately $317,~~219~~111,~~462~~010 ~~for~~as ~~the~~of ~~three months ended June~~ September 30, 2013 ~~and 2012, respectively~~. The ~~decrease~~Company ofhas ~~$1,068,038, or~~not ~~33%,~~historically inincurred ~~sales~~any ~~and~~losses ~~marketing~~due ~~expense~~to ~~was~~such ~~corresponding~~debt toguarantees, ~~decrease~~and inthe ~~revenues~~Company ~~and~~has ~~variable~~determined ~~cost~~that ~~like~~the ~~commission,~~fair ~~shipping~~value ~~expense, packaging~~of ~~expense~~the ~~and~~guarantees ~~traveling~~is ~~expense~~not material.

Other Expense, net. The total other expense was $966,538 and $960,516 for the three months ended June 30, 2013 and 2012, respectively. The increase of $6,022, or 1%, in total other expense was primarily due to increase in bank loan interest.Leases

Items	2013 (US$)			2012 (US$)			Change
Other income (expense)
Interest income		176,304			65,545			169	%
Interest expense		(1,176,211	)		(996,960	)		18	%
Other income (expense), net		33,369			(29,101	)		215	%
Total Other (Expense)		(966,538	)		(960,516	)		1	%

The Company has non-cancelable operating lease agreements principally for its office and factory facilities. These leases have terms expiring in 2015 and April 2014, and are renewable subject to negotiation.

~~For~~During 2010, the ~~Six~~Company ~~Months~~entered ~~Ended~~into ~~June~~operating ~~30,~~lease ~~2013~~agreements ~~and~~with ~~2012~~ 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 $54,332 per year.

	Six Months Ended June 30
	2013			2012
Revenues	$	20,680,974		$	33,734,005
Cost of revenues		12,900,591			20,670,630
Gross profit		7,780,383			13,063,375
Operating expenses
Sales and marketing		3,254,680			6,380,751
General and administrative		2,658,364			2,922,369
Total operating expenses		5,913,044			9,303,120
Income from operations		1,867,339			3,760,255
Other expense		(1,771,458	)		(2,144,573	)
Income before provision for income taxes		95,881			1,615,682
Provision for income taxes		98,568			513,510
Net (loss)income	$	(2,687	)	$	1,102,172

Total rent expense for the leases as mentioned above was $98,195 and $84,430 for the three months ended September 30, 2013 and 2012, and $257,613 and $177,282 for the nine months ended September 30, 2013 and 2012,respectively. A summary of future minimum lease payments as of September 30, 2013 is presented below.

	Minimum
	Lease
	Payments
Year ending September 30:
2014			237,053
2015			109,535
2016			61,122
2017			54,332
Thereafter			2,272,868
		$	2,734,910

~~Revenues~~18

~~We operate in two reportable segments: Zhengzhou~~ Annec ~~and~~Green ~~Beijing~~refractories ~~Annec.~~corporation ~~The Zhengzhou Annec segment manufactures~~ and sells a variety of refractory bricks and kits of pre-assembled hot-air ovens. Since 2011, Zhengzhou Annec began entering into certain short-term contracts to build blast furnaces and hot blast stoves. 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. subsidiaries

Segments	Six Months Ended June 30, 2013		% of Revenue			Six Months Ended June 30, 2012		% of Revenue
Zhengzhou Annec	$	20,680,974		100	%	$	33,734,005		100	%
Beijing Annec		-		-			-		-
Total	$	20,680,974		100	%	$	33,734,005		100	%

Notes to Condensed Consolidated Financial Statements

~~Revenues~~September ~~for the six months ended June~~ 30, 2013 ~~were~~& ~~$20,680,974 compared to $33,734,005 for the six months ended June 30,~~ 2012. Revenues for the six months ended June 30, 2013 decreased by $13,053,031, or 39%, 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 number of orders during the six months ended June 30, 2013. Zhengzhou Annec experienced a decrease in orders because of decline in demand for iron and steel products in 2013. In the first quarter of 2013, the Company decided to develop new product 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 six months ended June 30, 2013, and 2012:

Type of Customers’ Sales	Amount (US$) 2013		Amount (US$) 2012
Existing customers		6,225,434		33,694,282
New customers		14,455,540		39,723

(Unaudited)

~~Cost~~20. ofSegment ~~Revenue~~Reporting

~~Cost~~The ofCompany ~~revenue~~has ~~was $12,900,591~~two reportable segments: Zhengzhou Annec and ~~$20,670,630~~Beijing ~~for~~Annec. ~~the~~These ~~six~~segments ~~months~~operate ~~ended~~in ~~June~~different ~~30,~~geographical ~~2013~~areas of China and ~~2012,~~employ ~~respectively~~separate management and sales teams. ~~Cost~~The Zhengzhou Annec segment primarily manufactures and sells a variety of ~~revenue~~refractory ~~for~~bricks ~~the~~and ~~six~~kits ~~months~~of ~~ended June~~pre-assembled 30hot-air ovens. In 2011, ~~2013~~Zhengzhou ~~decreased~~Annec bybegan ~~$7,770,039,~~to orenter ~~38%~~into contracts to design and build furnaces and stoves. ~~Stated~~These asprojects are generally for a ~~percentage~~term of ~~revenues,~~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 ~~cost~~construction ofprocess. ~~revenue~~Beijing Annec’s contracts are generally for ~~the~~projects ~~six~~with ~~months~~a ~~ended~~term ~~June~~of ~~30,~~one ~~2013~~year ~~was~~or ~~62%~~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 isare ~~consistent~~required ~~with~~as ~~61%~~part ~~for~~of the ~~corresponding~~ ~~period~~entire ofblast ~~2012~~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.

20All revenues are related to end customers in China.

~~Operating~~Information ~~Expenses~~on reportable segments for the three and nine months ended September 30, 2013 and 2012 is as follows:

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 $2,658,364 and $2,922,369 for the six months ended June 30, 2013 and 2012, respectively. The decrease of $264,005, or 9%, in general and administrative expense was primarily attributable to the decrease of patent fees.

		Three Months Ended					Nine Months Ended
		September 30,					September 30,
		2013			2012		2013			2012
Revenues:
Zhengzhou Annec	$	11,026,510		$	14,924,338	$	31,707,484		$	48,712,709
Beijing Annec		-			-		-			-
Total		11,026,510			14,924,338		31,707,484			48,712,709
Cost of revenues:
Zhengzhou Annec		7,290,217			7,972,971		20,190,809			28,675,880
Beijing Annec		-			-		-			-
Total		7,290,217			7,972,971		20,190,809			28,675,880
Operating expenses:
Zhengzhou Annec		5,549,911			4,532,778		11,234,228			12,917,427
Beijing Annec		135,923			116,737		382,373			1,051,924
Total		5,685,834			4,649,515		11,616,601			13,969,351
(Loss)income from operations	$	(1,949,541	)	$	2,301,852	$	(99,926	)	$	6,067,478

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 $3,254,680 and $6,380,751 for the six months ended June 30, 2013 and 2012, respectively. The decrease of $3,126,071, or 49%, in sales and marketing expense was corresponding to decrease in revenues and variable cost like commission, shipping expense, packaging expense and traveling expense.

	Nine Months Ended September 30
		2013		2012
Depreciation expense
Zhengzhou Annec	$	1,145,292	$	1,061,272
Beijing Annec		152,414		142,612

Total	$	1,297,706	$	1,203,884

Other Expense, net. The total other expense was $1,771,458 and $2,144,573 for the six months ended June 30, 2013 and 2012, respectively. The decrease of $373,115, or 17%, in total other expense was primarily due to decrease in notes receivable discounted of interest expense.19

Items	2013 (US$)			2012 (US$)			Change
Other income (expense)
Interest income		305,722			162,733			88	%
Interest expense		(2,181,397	)		(2,276,862	)		4	%
Other income (expense), net		104,217			(30,444	)		442	%
Total Other (Expense)		(1,771,458	)		(2,144,573	)		(17	)%

Annec Green refractories corporation and subsidiaries

~~Liquidity~~Notes ~~and~~to ~~Capital~~Condensed ~~Resources~~Consolidated Financial Statements

AsSeptember ~~of June~~ 30, 2013~~, we~~ ~~had~~& ~~cash and restricted cash of $8,521,044 and total current assets of $106,613,324. 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 June 30, 2013, we had accounts receivable of $36,873,270 representing 35% 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 decreased by $5,340,832 or 13% due to decrease in revenues and collection of accounts receivable.(Unaudited)

~~Our total liabilities as of June 30, 2013 were $84,676,553 compared to $79,862,368 as of December 31, 2012~~20. ~~The~~Segment ~~increase of $4~~Reporting,~~814,185~~ ~~or 6% was a result of increase in short-term loan.~~continued

We generally require 30% of contract price as advanced payment after we sign a contract. Such advance is used to buy materials and cover initial cost for production. 30% of the contract price will be collected when we finish production and the product is inspected by customer. These two 30% installments of the contract price payments constitute a majority portion of the advances from our customer. Another 30% of contract price will be received after the refractory installation is finished and has been tested by client. The final installment of 10% is due one or two years after the stove is in use to allow for quality guarantee. The last 30% and 10% are the main components of our accounts receivable. As our business is contract-based sales, differentiations in contract terms exist among contracts signed by different customer.

	September 30, 2013		December 31, 2012
Identifiable assets
Zhengzhou Annec	$	106,006,866	$	103,640,624
Beijing Annec		16,599,200		18,640,855

Total Identical assets	$	122,606,066	$	122,281,479

As of June 30, 2013, we had working capital of $25,185,724 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 to improve our cash support, we may need to 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 the number of our product lines, promoting our design and engineering services, improving our products, and potential acquisitions of mines and other refractory companies.

	Nine Months Ended September 30
(Loss)income from operations:
Zhengzhou Annec	$	(2,704.187	)	$	3,896,477
Beijing Annec		(407,261	)		(1,310,578	)

(Loss)income from operations	$	(3,111,448	)	$	2,585,899

2120

~~Although~~Item we2. Management’s ~~continue to~~Discussion ~~explore opportunities for raising capital, we have no funding commitments in place at this time~~ and weAnalysis ~~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~~Financial ~~additional~~Condition ~~investment~~ and ~~any~~Results ~~such investment or other strategic alternative would likely substantially dilute or eliminate the interests~~ of ~~our shareholders.~~ Operations

~~Management~~The ~~Plans~~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.

In the first half year of 2013, global economy is in depression, overcapacity and weak demand in China’s steel industry results in insufficient payment collection and decreased orders of the company. Notwithstanding the negative market conditions, the company’s position in the industry was improved. For example, the Company became a refractory supplier of the world’s biggest 5800m3 hot blast stove (Jiangsu Shagang Huasheng project of ironmaking), and is expected to enter into the world’s biggest EPC system integration contract of Taisu (two 4350m3 NIPPON STEEL of Japan external-combustion stove, with shipments of approximately 40 thousand Tons). The management believes that environmental reform and industrial upgrade will be the key for steel industry to improve profitability and for refractory industry to improve competitiveness. In the second half year of 2013 the management intends to implement the following measures related to technological innovation, human resource and marketing strategy to increase the company's operating capacity:Overview

1.We ~~Adjust~~are ~~employee~~a ~~compensation~~refractory ~~structure~~and production-based company that designs, ~~reinforce~~ develops, produces, and markets refractory products in the ~~elimination~~PRC. ~~system~~In toaddition, ~~improve~~through ~~employee’s~~our ~~productivity~~VIE, Beijing Annec, we provide integrated stove design, turnkey contracting, refractory production and sales.

2 Through our subsidiary, Zhengzhou Annec, we are primarily engaged in the manufacture, design, development, sale, installation, and maintenance of refractory materials and products. ~~Strengthen~~Zhengzhou ~~payment~~Annec’s ~~collection~~primary products are heat shock bricks for internal, top, and ~~optimize financing~~external ~~structure~~combustion tohot ~~mitigate~~air ~~financial~~stoves, ~~risks~~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.

3.We ~~Focus~~generate onrevenues ~~R&D~~from ~~and~~the ~~development~~sale of ~~existing technologies~~our torefractory ~~provide~~products, which consists of bricks of various size, shape, and construction material, and from services related to the ~~Company~~design, ~~with~~engineering ~~competitive~~and ~~edge~~build out of stoves.

4.Summary ~~Continue~~of ~~marketing~~Critical ~~efforts~~Accounting ~~for~~Policies ~~functional refractory product~~ and ~~expand overseas market.~~Estimates

~~Below~~Use ~~is a summary~~ of ~~our cash flow:~~Estimates

~~Net~~The ~~Cash~~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 ~~Operating~~these ~~Activities~~estimates or their related assumptions could have an adverse effect on our operating results.

~~For~~There ~~the~~are ~~six~~several ~~months ended~~accounting ~~June~~policies ~~30,~~that ~~2013,~~involve ~~net~~management’s ~~cash~~judgments ~~used~~and inestimates ~~operating~~and ~~activities~~are ~~was~~critical ~~$3,296,662 compared~~ to ~~cash~~understanding ~~provided~~our byhistorical ~~operating~~and ~~activities~~future ~~of $1~~performance,~~548,062~~ ~~for~~as ~~the~~these ~~six~~policies ~~months~~and ~~ended~~estimates ~~June~~affect ~~30, 2012. The increase in net cash used in operating activities for~~ the ~~six~~reported ~~months~~amounts ~~ended June~~of ~~30,~~revenue ~~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,~~significant ~~inventories,~~areas ~~bank~~in ~~notes~~our ~~payable, account~~reported ~~payable~~financial ~~and accrued expenses, and other payable as set forth below:~~statements.

22Please 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.”

Items	2013 (US$)			2012 (US$)			Increase /(Decrease)(US$)			Percentage
Net (loss)income		(2,687	)		1,102,172			(1,104,859	)		(100	)%
Restricted cash		(184,056	)		(5,603,010	)		5,418,954			(97	)%
Bank notes receivable		268,286			931,675			(1,516,327	)		84	%
Accounts receivable, retentions receivable, and long term retentions receivable		8,291,111			7,570,001			721,110			10	%
Prepaid expenses and deposits		423,173			3,197,484			(2,774,311	)		(89	)%
Other receivables		(1,208,739	)		(1,193,542	)		(15,197	)		2	%
Inventories		(5,484,326	)		(1,256,072	)		(4,228,254	)		337	%
Bank notes payable		0			4,428,767			(4,428,767	)		(100	)%
Accounts payable and accrued expenses		475,752			(2,992,392	)		3,468,144			(116	)%
Other payables		60,562			(1,279,733	)		1,340,295			(105	)%

~~Net~~Results ~~Cash~~of ~~Used In Investing Activities.~~ Operations

For the ~~six~~Three ~~months ended~~Months ~~June~~Ended September 30, 2013, net cash used in investing activities was $197,531, compared to net cash used in investing activities of $639,841 for the six months ended June 30, 2012. The decrease of net cash used in investment activities for six months ended June 30, 2013 was primarily due to the decrease in purchase payments for plant and ~~equipment, and deposits in capital expenditures.~~2012

Items	2013 (US$)			2012 (US$)			Increase/(Decrease)(US$)		Percentage
	Three Months Ended September 30
Purchase of plant and equipment		(230,410	)		(457,334	)		226,924		50	%
	2013			2012
Deposits for capital expenditure		(36,650	)		(179,336	)		142,686		80	%
Revenues	$	11,026,510		$	14,924,338
Cost of revenues		7,290,217			7,972,971
Gross profit		3,736,293			6,951,367
Operating expenses
Sales and marketing		4,208,901			3,297,129
General and administrative		1,476,933			1,352,386
Total operating expenses		5,685,834			4,649,515
(Loss)income from operations		(1,949,541	)		2,301,852
Other expense		1,133,615			493,389
(Loss)income before provision for income taxes		(3,083,156	)		1,808,463
Provision for income taxes		(17,608	)		326,549
Net (loss)income	$	(3,065,548	)	$	1,481,914

~~Net Cash Provided by Financing Activities.~~ Revenues

~~For~~We ~~the~~operate ~~six~~in ~~months ended~~two ~~June~~reportable ~~30,~~segments: ~~2013,~~Zhengzhou ~~net~~Annec ~~cash~~and ~~provided~~Beijing byAnnec. ~~financing~~The ~~activities~~Zhengzhou ~~was~~Annec ~~$4,923,368~~segment ~~compared~~manufactures toand ~~$717,114~~sells ina ~~net~~variety ~~cash~~of ~~used~~refractory inbricks ~~financing activities~~and ~~for~~kits ~~the~~of ~~six~~pre-assembled ~~months~~hot-air ~~ended~~ovens. ~~June~~In 302011, ~~2012~~Zhengzhou Annec signed several refractory turnkey projects which was under a new business model. The ~~increase~~Beijing ofAnnec segment designs and builds blast furnaces and hot-air stoves on a contract basis and uses subcontractors throughout the ~~net~~construction ~~cash~~process. ~~provided~~In byaddition, ~~financing~~Beijing ~~activities~~Annec ~~was~~also ~~primarily due~~sells toa variety of machines and equipment which are required as part of the ~~changes~~entire inblast ~~short~~furnace and hot-~~term~~air ~~borrowings~~stove ~~and~~package. ~~loans~~We topurchase ~~related~~these ~~parties,~~machines ~~employees,~~and equipment from outside vendors and ~~other~~generally ~~individual~~sell them at cost plus a small mark-up.

Type of Proceeds	2013 (US$)			2012 (US$)			Increase/(Decrease)(US$)			Percentage
Segments	Three Months Ended September 30, 2013			% of Revenue			Three Months Ended September 30, 2012			% of Revenue
Payments of loans to related parties, employees, and other individuals		(9,841,457	)		(1,671,639	)		(8,169,818	)		489	%
Zhengzhou Annec	$	11,026,510			100%		$	14,924,338			100	%
Payment of short-term borrowings		(8,335,349	)		(8,386,442	)		51,093			(1	)%
Beijing Annec		-			-			-			-
Proceeds from loans to related parties, employees, and other individuals		10,429,225			-			10,429,225			100	%
Total	$	11,026,510			100%		$	14,924,338			100	%
Proceeds from short-term borrowings		13,114,778			9,496,179			3,618,599			38	%

~~Loan~~Revenues ~~Facilities~~for the three months ended September 30, 2013 were $11,026,510 compared to $ 14,924,338 for the three months ended September 30, 2012. Revenues for the three months ended September 30, 2013 decreased by $3,897,828 or 26%, primarily as a result of a decrease in sales and new orders for Zhengzhou Annec and no revenues from Beijing Annec. Beijing Annec did not generate any revenue for the three months ended September 30, 2012 as there was no order for its technology services or product from iron and steel manufacturers. The decrease in sales of refractory products by Zhengzhou Annec was mainly due to a decrease in number of orders during the three months ended September 30, 2013. Zhengzhou Annec experienced a decrease in orders because of the decline in the demand from the iron and steel industry in 2013. The Company decided to develop new product 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 September 30, 2013, and 2012:

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 June 30, 2013, we borrowed approximately $29,394,803 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 June 30, 2013, the Company and its subsidiaries have the following short-term loan facilities with the following terms:

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

Existing customers		6,621,788		11,970,434

New customers		4,404,722		2,953,904

2322

InCost ~~2013, the Company borrowed $4,859,716(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 the Bank of Zhengzhou. The Company’s chairman borrowed $4,568,133 (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 $4,859,716 (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 will be fulfilled. 2). The Company is obligated to repay the $4,568,133 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 will be fulfilled.Revenue

Lender	Secured	Duration	Outstanding as of June 30, 2013		Interest rates
Agricultural credit union	By third parties	1 year	$	1,619,905		9.720	%
Agricultural credit union	Machinery and equipment	1 year		1,457,915		12.312	%
Shanghai Pudong Development Bank	Office building and land	1 year		3,239,811		6.600	%
Shanghai Pudong Development Bank	Office building and land and Fuchao Li	1 year		1,619,905		6.600	%
Shanghai Pudong Development Bank	By third parties and Fuchao Li	6 months		1,619,905		6.600	%
Shanghai Pudong Development Bank	By Deposit	6 months		2,705,242		5.309	%
Shanghai Pudong Development Bank	Office building	1 year		317,501		7.152	%
China Citic Bank	By third parties, Beijing Annec and Alex Industrial	1 year		1,619,905		6.941	%
China Citic Bank	By Third parties, Beijing Annec and Alex Industrial	1 year		809,953		7.216	%
China Guangfa Bank	By third parties	1 year		1,619,905		7.200	%
China Merchants Bank	By third parties	1 year		1,619,905		7.200	%
LuoYang Bank	By deposit	1 year		3,045,422		6.000	%
LuoYang Bank	By third parties	1 year		3,239,811		7.200	%
Bank of Zhengzhou	By third parties	1 year		4,859,718		7.200	%
	Total current (2013)		$	29,394,803

Cost of revenue was $7,290,217 and $7,972,971 for the three months ended September 30, 2013 and 2012, respectively. Cost of revenue for the three months ended September 30, 2013 decreased by $682,754, or 9%. Stated as a percentage of revenues, the cost of revenue for the three months ended September 30, 2013 was 66% and for the corresponding period of 2012 was 53%. The increase in cost of revenue of Zhengzhou Annec was primarily attributable to the change of the structure of the product.

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

Period ending June 30:
2014	$	317,501
2015		158,751
	$	476,252

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 $1,476,933 and $1,352,386 for the three months ended September 30, 2013 and 2012, respectively. The increase of $124,547, or 9%, in general and administrative expense was primarily attributable to the increase of consulting fees.

24Sales 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 $4,208,901 and $3,297,129 for the three months ended September 30, 2013 and 2012, respectively. The increase of $911,772, or 28%, in sales and marketing expense was due to decrease in revenues and variable cost like commission, shipping expense, packaging expense and traveling expense.

~~Off-Balance~~Other ~~Sheet~~Expense, ~~Arrangements~~net. The total other expense was $1,133,615 and $493,389 for the three months ended September 30, 2013 and 2012, respectively. The increase of $640,226, or 130%, in total other expense was primarily due to increase in bank loan interest.

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:

Items	2013 (US$)		2012 (US$)		Change
Other income (expense)
Interest income		(155,685)		76,509		303%
Interest expense		(1,132,558)		(968,587)		17%
Non-operating income		296,913		398,689		26%
Non-operating expenditure		(142,285)		-		100%
Total Other Expense		(1,133,615)		(493,389)		130%

~~· Any obligation under certain guarantee contracts;~~23

·For ~~Any~~the ~~retained~~Nine orMonths ~~contingent~~Ended ~~interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit~~September 30, ~~liquidity~~2013 orand ~~market risk support to that entity for such assets;~~2012

· 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

	Nine Months Ended September 30
	2013		2012
Revenues	$	31,707,484	$	48,712,709
Cost of revenues		20,190,809		28,675,880
Gross profit		11,516,675		20,036,829
Operating expenses
Sales and marketing		7,463,581		9,689,346
General and administrative		4,153,020		4,280,005
Total operating expenses		11,616,601		13,969,351
(Loss)income from operations		(99,926)		6,067,478
Other expense		2,930,563		2,640,932
(Loss)income before provision for income taxes		(3,030,489)		3,426,546
Provision for income taxes		80,959		840,647
Net (loss)income	$	(3,111,448)	$	2,585,899

· 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.Revenues

InWe ~~China,~~operate ~~because~~in ~~the bank~~two ~~lending~~reportable ~~system~~segments: isZhengzhou ~~still~~Annec ~~developing,~~and itBeijing isAnnec. ~~common~~The ~~practice~~Zhengzhou ~~for~~Annec ~~companies~~segment tomanufactures ~~enter~~and ~~into~~sells ~~cross-guarantee~~a ~~arrangements~~variety inof ~~order to~~refractory ~~secure~~bricks ~~lines~~and kits of ~~credit~~pre-assembled ~~with~~hot-air ~~banks~~ovens. ~~During~~In ~~three months ended June 30~~2011, ~~2013~~Zhengzhou ~~and~~Annec ~~the~~signed ~~year~~several ~~ended~~refractory ~~December~~turnkey ~~31,~~projects ~~2012,~~which ~~the~~was ~~Company had~~under ~~agreements~~a ~~with~~new ~~third-party~~business ~~entities~~model. inThe ~~which~~Beijing ~~the~~Annec ~~Company~~segment ~~has~~designs ~~guaranteed~~and ~~certain~~builds ~~debt~~blast offurnaces ~~these entities,~~ and ~~these~~hot-air ~~entities have~~stoves ~~guaranteed~~on ~~certain~~a ~~debt~~contract ofbasis ~~the Company. As of June 30, 2013~~ and ~~December~~uses ~~31,~~subcontractors ~~2012,~~throughout the ~~Company~~construction ~~was a debt guarantor to three third-party entities~~process. ~~The~~In ~~maximum~~addition, ~~guaranteed~~Beijing ~~amount~~Annec isalso ~~approximately~~sells ~~$24,298,000~~a asvariety of ~~June~~machines ~~30,~~and ~~2013.~~equipment ~~The~~which ~~total~~are ~~guaranteed~~required ~~outstanding borrowings~~as bypart ~~these~~of ~~parties~~the ~~are~~entire ~~approximately~~blast ~~$19,924,000~~furnace asand ofhot-air ~~June~~stove ~~30, 2013~~package. ~~All~~We ofpurchase ~~the~~these ~~guarantee~~machines ~~agreements~~and ~~are~~equipment ~~for~~from ~~debt~~outside ~~with a~~vendors ~~maturity~~and ofgenerally ~~one~~sell ~~year~~them orat ~~less~~cost ~~due~~plus bya ~~March~~small ~~31, 2014~~mark-up.

These same parties disclosed above also act as debt guarantors on certain of the Company’s debt with a maximum guaranteed amount of approximately $27,376,401 as of June 30, 2013. The Company’s loans guaranteed by these parties are approximately $17,009,000 as of June 30, 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.

Segments	Nine Months Ended September 30, 2013		% of Revenue		Nine Months Ended September 30, 2012		% of Revenue
Zhengzhou Annec	$	31,707,484		100%	$	48,712,709		100	%
Beijing Annec		-		-		-		-
Total	$	31,707,484		100%	$	48,712,709		100	%

~~Item~~Revenues 3for the nine months ended September 30, 2013 were $31,707,484 compared to $48,712,709 for the nine months ended September 30, 2012. Revenues ~~Quantitative~~for the three months ended September 30, 2013 decreased by $17,005,225 or 35%, primarily as a result of a decrease in sales and ~~Qualitative~~new ~~Disclosures~~orders ~~about~~for ~~Market~~Zhengzhou ~~Risk~~Annec and no revenues from Beijing Annec. Beijing Annec did not generate any revenue for the nine months ended September 30, 2012 as there was no order for its technology services or products from the iron and steel manufacturers. The decrease in sales of refractory products by Zhengzhou Annec was mainly due to a decrease in number of orders during the nine months ended September 30, 2013. Zhengzhou Annec experienced a decrease in orders because of decline in demand for Iron and steel industry production capacity in 20 13. The Company decided to develop new product 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 nine months ended September 30, 2013, and 2012:

Not Applicable.

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

Existing customers		12,663,980		45,713,673

New customers		19,043,504		2,999,036

~~Item~~Cost 4.of ~~Controls and Procedures~~Revenue

~~Evaluation~~Cost of ~~Disclosure~~revenue ~~Controls~~was $20,190,809 and ~~Procedures~~ $28,675,880 for the nine months ended September 30, 2013 and 2012, respectively. Cost of revenue for the nine months ended September 30, 2013decreased by $8,485,071, or 30%. Stated as a percentage of revenues, the cost of revenue for the nine months ended September 30, 2013 was 64% and for the corresponding period of 2012 was 59%. The decrease in cost of revenue of Zhengzhou Annec was primarily attributable to the change of the structure of the product.

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 June 30, 2013 we have concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report.24

~~Changes~~Operating ~~in Internal Controls over Financial Reporting~~Expenses

~~There have~~General ~~been~~and noAdministrative. ~~material~~General ~~changes~~and inadministrative ~~our~~expenses ~~internal~~include ~~controls~~payroll ~~over~~and ~~financial~~related ~~reporting~~employee ~~that occurred during the period covered by this quarterly report~~benefits, ~~that~~and ~~have~~other ~~materially~~headcount-related ~~affected,~~costs orassociated ~~are~~with ~~reasonably likely to materially affect~~facilities, ~~our~~and ~~internal~~other ~~control~~administrative ~~over financial reporting~~expenses. WeGeneral ~~intend~~and toadministrative ~~continue~~expenses towere ~~devote resources to remediating~~$4, ~~improving~~153,020 and ~~documenting~~$4,280,005 ~~our~~for ~~internal~~the ~~controls~~nine ~~over~~months ~~financial~~ended ~~reporting~~September 30, ~~including~~2013 ~~recruiting~~and a2012, ~~new~~respectively. ~~chief~~The ~~financial~~decrease ~~officer~~of ~~with US~~$126,985, ~~GAAP~~or ~~and SEC reporting experience~~3%, ~~additional~~in ~~accounting~~general and ~~finance~~administrative ~~staff,~~expense ~~and/or~~was ~~consultants~~primarily attributable to ~~assist~~the ~~with~~decrease ~~these~~of ~~functions~~patent fees.

25 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 $7,463,581 and $9,689,346for the nine months ended September 30, 2013 and 2012, respectively. The decrease of $2,225,765, or 23%, in sales and marketing expense was due to decrease in revenues and variable cost like commission, shipping expense, packaging expense and traveling expense.

~~PART~~Other IIExpense, -net. ~~OTHER~~The ~~INFORMATION~~total other expense was $2,930,563 and $2,640,932 for the nine months ended September 30, 2013 and 2012, respectively. The increase of $289,631, or 11%, in total other expense was primarily due to increase in notes receivable discounted of interest expense.

Item 1. Legal Proceedings

Items	2013 (US$)		2012 (US$)		Change
Other income (expense)
Interest income		150,037		239,553		37%
Interest expense		(3,313,955)		(3,249,458)		2%
Non-operating income		375,640		368,973		2%
Non-operating expenditure		(142,285)		-		100%
Total Other Expense		(2,930,563)		(2,640,932)		11%

WeLiquidity ~~may be involved from time to time in ordinary litigation, negotiation~~ and ~~settlement~~Capital 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.Resources

~~Item~~As 1Aof September 30, 2013, we had cash and restricted cash of $10,325,409 and total current assets of $102,126,251. ~~Risk~~As ~~Factors~~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.

~~Not~~ As ~~Applicable~~of September 30, 2013, we had accounts receivable of $31,460,386 representing 31% 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 $10,753,716 or 25% because of faster collection of accounts receivable.

~~Item~~Our 2total liabilities as of September 30, 2013 were $82,172,506 compared to $79,862,368 as of December 31, 2012. ~~Unregistered~~The ~~Sales~~increase of ~~Equity~~$2,310,138 ~~Securities~~or3% ~~and~~was ~~Use~~a result of ~~Proceeds~~increase in short-term loans.

~~None~~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 finish 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 sales, differentiations exist between contracts signed by different customer.

~~Item~~As 3of September 30, 2013, we had working capital of $23,722,880 compared to $23,708,632 as of December 31, 2012. ~~Defaults~~We ~~Upon~~believe ~~Senior~~our ~~Securities~~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.

~~None.~~25

~~Item~~Although 4we 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. ~~Mine~~Even ~~Safety~~if ~~Disclosures~~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.

~~None.~~Below is a summary of our cash flow:

~~Item~~Net 5.Cash ~~Other~~used ~~Information~~in Operating Activities.

~~None~~For the nine months ended September 30, 2012, net cash provided by operating activities was $1,774,372 compared to cash provided by operating activities of $1,085,928 for the nine months ended September 30, 2013. The decrease in net cash provided by operating activities for the nine months ended September 30, 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:

Item 6. Exhibits

Items	2013 (US$)			2012 (US$)			Increase /(Decrease)(US$)			Percentage
Net (Loss)Income		(3,111,448	)		2,585,899			(5,697,347	)		220	%
Restricted cash		(248,314	)		(581,261	)		332,947			57	%
Bank notes receivable		983,698			0			983,698			100	%
Accounts receivable, retentions receivable, and long term retentions receivable		14,488,004			6,384,124			8,103,880			127	%
Prepaid expenses and deposits		(695,541	)		2,742,741			(3,438,282	)		125	%
Other receivables		(1,446,183	)		(499,075	)		(947,108	)		190	%
Inventories		(3,119,552	)		(1,887,993	)		(1,231,559	)		65	%
Bank notes payable		0			1,801,001			(1,801,001	)		100	%
Accounts payable and accrued expenses		502,994			(2,797,460	)		3,300,454			118	%
Other payables		(572,738	)		(596,207	)		23,469			4	%

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)

Net Cash Used In (Provided By) Investing Activities.

*For ~~Filed~~the ~~here~~nine ~~with~~months ended September 30, 2013, net cash provided by investing activities was $343,023, compared to net cash used in investing activities of $1,006,675, for the nine months ended September 30, 2012. The decrease of net cash used in investment activities for the nine months ended September 30, 2012 was primarily due to the decrease of purchase of plant and equipment.

(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.

Items		2013 (US$)				2012 (US$)				Increase/(Decrease) (US$)				Percentage
Purchase of plant and equipment			(272,555	)			(828,693)				556,138				67	%

26Net Cash Provided by(Used In) Financing Activities.

~~SIGNATURES~~For the nine months ended September 30, 2013, net cash provided by financing activities was $1,713,543 compared to $122,441 in net cash used in financing activities for the nine months ended September 30, 2012. The increase of the net cash used in financing activities was primarily due to the changes of other payables, and short-term borrowings.

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.

Type of Proceeds	2013 (US$)		2012 (US$)		Increase/(Decrease) (US$)		Percentage
Proceeds from shareholder		4,576,956		0		4,576,956		100	%
Proceeds from short-term borrowings		25,108,338		15,677,261		9,431,077		60	%

	ANNEC GREEN REFRACTORIES CORPORATION
Date: August 19, 2013	/s/ LI Jiantao
	By: LI Jiantao
	Its: Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Accounting Officer)

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 September 30, 2013, we borrowed approximately $27,941,464 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, 2013, the Company and its subsidiaries have the following short-term loan facilities with the following terms:

In 2013, the Company borrowed $4,888,860(RMB 30 million) from the Bank of Zhengzhou. This loan was guaranteed by a third party (Note 20) 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 $4,595,528 (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 $4,888,860 (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 6). 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 $4,595,528 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.

Lender	Secured	Duration	Outstanding as of September 30, 2013		Interest rates
Agricultural credit union	By third parties	1 year	$	1,629,620		9.720	%
Agricultural credit union	Machinery and equipment	1 year		1,466,658		12.312	%
Shanghai Pudong Development Bank	Office building and land	1 year		3,259,240		6.600	%
Shanghai Pudong Development Bank	By third parties and Fuchao Li	6 months		1,629,620		6.600	%
Shanghai Pudong Development Bank	By Deposit	6 months		2,721,465		5.280	%
Shanghai Pudong Development Bank	Office building	1 year		319,405		7.152	%
China Citic Bank	By third parties, Beijing Annec and Alex Industrial	1 year		1,629,620		6.941	%
China Citic Bank	By Third parties, Beijing Annec and Alex Industrial	1 year		814,810		6.440	%
China Guangfa Bank	By third parties	1 year		1,629,620		7.200	%
China Merchants Bank	By third parties	1 year		1,629,620		7.200	%
LuoYang Bank	By deposit	1 year		3,063,686		6.000	%
LuoYang Bank	By third parties	1 year		3,259,240		7.200	%
Bank of Zhengzhou	By third parties	1 year		4,888,860		7.200	%
	Total current (2013)		$	27,941,464

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

Period ending September 30:
2014	$	319,406
2015		319,406
	$	638,812

Off-Balance Sheet Arrangements

●	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 September 30,2013 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 September 30, 2013 and December 31, 2012, the Company was a debt guarantor to three third-party entities. The maximum guaranteed amount is approximately $24,444,300 as of September 30, 2013. The total guaranteed outstanding borrowings by these parties are approximately $20,044,326 as of September 30, 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 $28,192,426 as of September 30, 2013. The Company’s loans guaranteed by these parties are approximately $17,111,010 as of September 30, 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.

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, 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

	ANNEC GREEN REFRACTORIES CORPORATION

Dated: November 20, 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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