10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2012

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

For the transition period from _____ to _____.

Commission File No. 0-54117

ANNEC GREEN REFRACTORIES CORPORATION

  (Exact Name of Registrant as Specified in Its Charter)

Delaware	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  x  (Do not check if smaller reporting company)	Smaller reporting company    ¨

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 April 29, 2012, there were 19,995,701 shares of the registrant’s common stock issued and outstanding.

ANNEC GREEN REFRACTORIES CORPORATION

FORM 10-Q INDEX

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Consolidated Balance Sheets as of March 31, 2012 (Unaudited) and December 31, 2011	3
	Condensed Consolidated Statements of Operations and Comprehensive loss for the Three Months Ended March 31, 2012 and 2011 (Unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011 (Unaudited)	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	25
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	(Removed and Reserved).	26
Item 5.	Other Information	26
Item 6.	Exhibits	26
Signature Page		27

1

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

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

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

2

ANNEC GREEN REFRACTORIES CORPORATION

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

ANNEC GREEN REFRACTORIES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31,		December 31,
	2012		2011(1)
	(Unaudited)
ASSETS
Current assets:
Cash	$	797,222	$	343,028
Restricted cash		7,972,029		1,571,166
Bank notes receivable		3,194,335		2,026,885
Accounts receivable (net of allowance of $781,567 and $792,367 at March 31, 2012 and December 31, 2011, respectively)		28,318,488		34,410,920
Retentions receivable		9,299,939		11,570,262
Prepaid expenses and deposits		7,005,900		10,515,009
Other receivables		7,119,833		3,815,159
Inventories		36,608,718		34,418,964
Total current assets		100,316,464		98,671,393
Long-term retentions receivable		4,932,919		4,926,856
Deposits for capital expenditure		419,333		493,402
Plant and equipment, net		16,374,292		16,480,469
Land use rights, net		2,227,997		2,225,555
Long-term investment		158,110		157,117
Total assets	$	124,429,115	$	122,954,792
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term loans	$	16,057,679	$	15,218,314
Bank notes payable		6,798,741		1,571,166
Accounts payable and accrued expenses		16,716,782		19,315,558
Advances from customers		30,605,550		29,726,898
Salaries payable		508,459		530,219
Taxes payable		1,717,939		3,301,944
Related party payables		683,036		764,461
Loans payable to employees		2,087,916		1,619,827
Loans payable to other individuals		6,206,144		6,481,374
Other payable		2,558,391		3,680,223
Total current liabilities		83,940,637		82,209,984
Deferred income		2,786,416		2,812,556
Long-term loans		852,214		923,846
Total liabilities		87,579,267		85,946,386
Commitments and contingencies (Note 15)
Stockholders' equity:
Series A preferred stock, $0.0001 par value; 20,000,000 shares authorized; zero shares issued and outstanding		-		-
Common stock, $0.0001 par value; 100,000,000 shares authorized; 19,995,701 issued and outstanding		2,000		2,000
Additional paid-in capital		4,046,992		4,046,992
Retained earnings		30,918,841		31,311,752
Accumulated other comprehensive income		1,882,015		1,647,662
Total stockholders' equity		36,849,848		37,008,406
Total liabilities and stockholders' equity	$	124,429,115	$	122,954,792

As of April 29, 2012, there were 19,995,701 shares of the registrant’s common stock issued and outstanding. 

(1) Derived from the consolidated audited financial statements included in our annual report filed on Form 10-K with the SEC for the year ended December 31, 2011.

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

3

ANNEC GREEN REFRACTORIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

	Three Months Ended
	March 31,
	2012			2011
	(Unaudited)			(Unaudited)
Revenues	$	15,849,971		$	13,058,029
Cost of revenues		10,277,356			7,573,416
Gross profit		5,572,615			5,484,613
Operating expenses:
Sales and marketing		3,161,289			2,097,887
General and administrative		1,594,267			1,352,130
Total operating expenses		4,755,556			3,450,017
Income from operations		817,059			2,034,596
Other income (expense):
Interest income		97,188			98,835
Interest expense		(1,279,902	)		(603,775	)
Other income (expense), net		(1,343	)		135,066
Total other income (expense)		(1,184,057	)		(369,874	)
Income (loss) before provision for income taxes		(366,998	)		1,664,722
Provision for income taxes		25,912			261,871
Net income (loss)	$	(392,910	)	$	1,402,851
Other comprehensive income (loss)
Foreign currency translation adjustment		234,353			160,416
Comprehensive income (loss)	$	(158,558	)	$	1,563,267
Net income (loss) per share-basic and dilutive	$	(0.02	)	$	0.07
Shares used in computing net income (loss) per share-basic and dilutive		19,995,701			19,995,701

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

4

ANNEC GREEN REFRACTORIES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended
	March 31
	2012			2011
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net (loss) income	$	(392,910	)	$	1,402,851
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization		383,034			335,100
Loss on sale of plant and equipment		4,910			28,582
Change in assets and liabilities:
Accounts receivable, retentions receivable and long-term retentions receivable		8,684,972			(1,607,296	)
Prepaid expenses and deposits		3,388,342			(6,719,772	)
Other receivables		(3,282,932	)		(37,151	)
Inventories		(1,973,509	)		(3,285,805	)
Accounts payable and accrued expenses		(2,676,867	)		6,516,302
Advances from customers		691,149			4,006,641
Salary payable		(25,132	)		(137,767	)
Taxes payable		(1,606,056	)		(492,199	)
Deferred income		(43,960	)		(42,280	)
Other payable		(1,145,943	)		658,033
Net cash provided by operating activities		2,005,098			625,239
Cash flows from investing activities:
Net (payments) proceeds from bank notes receivable		(1,155,472	)		337,657
Restricted cash for issuance of bank notes payable		(6,395,578	)		1,521,769
Deposits for capital expenditure		77,246			126,262
Purchase of plant and equipment		(21,922	)		(462,366	)
Proceeds from sale of plant and equipment		-			51,059
Net cash (used in) provided by investing activities		(7,495,726	)		1,574,381
Cash flows from financing activities:
Payments of dividends		-			(698,267	)
Proceeds (payments) from loans to related parties, employees, and other individuals, net of payments		55,406			(674,860	)
Proceeds (payments) from issuance of short-term borrowings, net		5,965,095			(1,978,300	)
Payments from issuance of long-term borrowings, net		(77,530	)		(74,567	)
Net cash provided (used in) by financing activities		5,942,971			(3,425,994	)
Net increase (decrease) in cash		452,343			(1,226,374	)
Effect of exchange rate changes		1,851			5,429
Cash at beginning of period		343,028			1,504,971
Cash at end of period	$	797,222		$	284,026
Noncash financing and investing activities:
Reduction of accounts payable through disposal of plant and equipment	$	46,048		$	-
Supplemental disclosure of cash flow information:
Interest paid	$	357,799		$	245,691
Income taxes paid	$	211,449		$	124,458

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

5

Annec Green Refractories Corporation

Notes to Unaudited Condensed Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation and Description of the Company

The accompanying unaudited condensed consolidated financial statements of Annec Green Refractories Corporation (the Company) have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information in pursuant to the instructions to Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the financial statements have been included.

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

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

 History of E-Band Media, Inc.

E-Band Media was organized under the laws of the State of Delaware on April 29, 2010 as part of the implementation of the Chapter 11 plan of reorganization of AP Corporate Services, Inc. (“AP”). AP was incorporated in the State of Nevada in 1997 and was formed to provide a variety of services to small, entrepreneurial businesses. These services included business planning, market research, accounting advice, incorporation, and resident agent services. Between 1997 and 1999 AP’s business focus changed. In addition to providing business services, AP began to own and develop businesses related to the medical professions. In 1999 AP organized E-Band Media.com with the intent of offering live “chat” consultations via the internet with nurses and physicians. A website was developed but it was unable to generate significant revenues and the site was terminated prior to AP’s bankruptcy filing in 2008.

AP filed for Chapter 11 Bankruptcy in September 2008 in the U.S. Bankruptcy Court for the Central District of California. AP’s plan of reorganization was confirmed by the Court on December 24, 2009 and became effective on January 4, 2009. This plan of reorganization provided, among other things, for the incorporation of E-Band Media and the distribution of 1,085,000 shares in it to AP’s bankruptcy creditors. The shares were distributed pursuant to section 1145 of the U.S. Bankruptcy Code. The plan also provided for the transfer to E-Band Media of any interest which AP and/or E-Band Media.com had in the development of a medical “chat” website.

6

Annec Green refractories corporation and subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(Unaudited)

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

History of E-Band Media, Inc., continued

As stated in the plan of reorganization ordered by the Court, these shares were issued “to enhance the distribution to creditors,” i.e. to enhance their opportunity to recover the losses they sustained in the AP bankruptcy. To this end, AP, by and through its President, agreed “to use its best efforts to have the shares publicly traded on the Over-The-Counter market in order to provide an opportunity for liquidity to the creditors” (from the Court approved “Disclosure Statement” describing the Plan of Reorganization). Subsequent to the effectiveness of the plan of reorganization the Company issued 10,000,000 restricted shares of common stock to its President, Dean Konstantine, at par value ($0.0001) for services rendered and costs advanced totaling $1,000.

On September 14, 2010, E-Band Media filed a Registration Statement on Form 10SB (File No.: 000-54117) with the SEC to register its common stock under Section 12(g) of the Exchange Act. The Registration Statement went effective by operation of law on November 13, 2010, at which point E-Band became a reporting company under the Exchange Act.

On April 18, 2011, E-Band Media changed its name to Annec Green Refractories Corporation.

History of China Green Refractories Limited

China Green and its wholly-owned subsidiary Alex Industrial Investment Limited (“Alex Industrial”) were created for the sole purpose of conducting a reverse merger transaction with a U.S. public shell company. China Green was incorporated in the British Virgin Islands as a BVI Business Company on March 12, 2010. Under China Green’s Memorandum of Association, it is authorized to issue up to 50,000 shares of one class of stock with a par value of $1.00. Prior to the Share Exchange, there were a total of 102 shares of China Green stock, which were held by five shareholders. Each share was purchased for $1.00.

Alex Industrial was incorporated in Hong Kong on April 1, 2010 by China Green to acquire Zhengzhou Annec Industrial Co., Ltd. (“Zhengzhou Annec”) and Zhengzhou Annec’s subsidiary Annec (Beijing) Engineering Technology Co., Ltd. (Beijing Annec). Under Alex Industrial’s Memorandum of Association, the capital of Alex Industrial is divided into 10,000 shares at $1.00 each. On March 26, 2010 , China Green purchased 100 founder shares in the amount of $100. On January 14, 2011, China Green purchased all of the outstanding shares of Zhengzhou Annec for the total consideration of $2,980,998. As a result of this transaction, the controlling equity holders of Zhengzhou Annec continued to hold 98% of the outstanding equity of Zhengzhou Annec through their direct or beneficial ownership of China Green. Accordingly, this transaction was accounted for as an exchange among related parties and all assets and liabilities were transferred at their net book value.

Zhengzhou Annec was established in 2003, a Company Limited registered in Xinmi city Henan province in the People’s Republic of China (“PRC” or “China”) with initial registered capital of $730 thousand. On October 8, 2003, the shareholders of Zhengzhou Annec reached a resolution to increase the registered capital of Zhengzhou Annec from $730 thousand to $3.0 million. On January 14, 2011, Zhengzhou Annec became the wholly owned subsidiary of Alex Industrial and, accordingly became a wholly-foreign owned enterprise (WFOE) under Chinese law.

Beijing Annec was established in January 2008 in Xuanwu district Beijing as a Company Limited, registered in Beijing, PRC, with approximately $900 thousand as its initial registered capital. In 2010, Beijing Annec’s registered capital was increased from $900 thousand to approximately $2.8 million. 100% of Beijing Annec’s equity is owned or controlled through assignment by Fuchao Li. On January 16, 2011, Beijing Annec entered into a contractual agreement, or the VIE agreement, with Zhengzhou Annec. The VIE Agreement includes the following arrangements:

(1) Exclusive Business Cooperation Agreement (“Cooperation Agreement”), where Zhengzhou Annec, in general, becomes Beijing Annec’s exclusive service provider to provide Beijing Annec with business support and technical and consulting services in exchange for an annual service fee equal to Beijing Annec’s net income for such year;

(2) Equity Interest Pledge Agreement (“Pledge Agreement”) under which Fuchao Li the 100% owner of all of the equity interest in Beijing Annec, has pledged all of his equity interest in Beijing Annec to Zhengzhou Annec as a guarantee of Beijing Annec’s performance of its obligations under the Cooperation Agreement;

7

Annec Green refractories corporation and subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(Unaudited)

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

History of China Green Refractories Limited, continued

(3) Exclusive Option Agreement (“Option Agreement”) under which Fuchao Li grants Zhengzhou Annec an irrevocable right and option to acquire any and all of Mr. Li’s equity interest in Beijing Annec, as and when permitted by PRC laws, for an exercise price equal to the actual capital contributions paid in the registered capital of Beijing Annec by Mr. Li unless an appraisal is required by applicable PRC laws; and

(4) Power of Attorney (POA) under which Mr. Li grants Zhengzhou Annec the right to (i) attend shareholders meetings of Beijing Annec, (ii) exercise all of Mr. Li shareholder’s rights and shareholder’s voting rights in Beijing Annec, including, but not limited to the sale or transfer or pledge or disposition of his stock in whole or in part, and (iii) designate and appoint on Mr. Li’s behalf the legal representative, the executive director and/or director, supervisor, the chief executive officer and other senior management of Beijing Annec.

As a result of the foregoing structure, we control 100% of Beijing Annec. In addition to the VIE agreement, 96.3% of the equity ownership, as of December 31, 2010, of Beijing Annec is controlled by shareholders nominated by Zhengzhou Annec and Mr. Li. The remaining 3.7% of the equity is owned by Mr. Li. Thus, Beijing Annec is treated as a 100% owned subsidiary for accounting purposes.

Business Description

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

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

2. Summary of Significant Accounting Policies

Basis of Presentation

The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U .S .GAAP). The consolidated financial statements include the balances and results of Zhengzhou Annec and Beijing Annec (collectively, the “Company”). 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.

Use of Estimates

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

Cash

Cash consists primarily of cash on hand or cash deposits in banks that are available for withdrawal without restriction.

8

Annec Green refractories corporation and subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(Unaudited)

2. Summary of Significant Accounting Policies, continued

Restricted Cash

Restricted cash represents cash that is held by the banks as collateral for notes payable. The banks generally have collateral requirements ranging from 70% to 110% of the outstanding notes payable. At March 31, 2012 and December 31, 2011, the Company has about 117% and 100%, respectively, in outstanding notes payable balances held by the banks as collateral. The collateral requirements are based on bank financial policy adjustment and improved the reserve proportion. Collateral requirements are increased when December, 2011.

Bank Notes Receivable

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

Accounts Receivable

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

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

Concentration of Credit and Other Risks

Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash, restricted cash, bank notes receivable, accounts receivable and other receivables. The Company holds all its bank deposits with banks in China. In China, there is no equivalent federal deposit insurance as in the United States; as such, these amounts held in banks in China are not insured. The Company has not experienced any losses in such bank accounts through March 31, 2012. In an effort to mitigate any potential risk, the Company periodically evaluates the credit quality of the financial institutions which hold the bank deposits and the Company holds its cash in multiple banks supported by the local and Central Government of the PRC.

The Company does not require collateral or other security to support the trade receivables. We are 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 25% of our trade receivables balance as of March 31, 2012 and December 31, 2011, respectively. An additional customer accounted for 19% and 16% of trade receivables balance as of March 31, 2012 and December 31, 2011, respectively.

Three customers individually accounted for 36%, 15%, and 13% of our revenue in the quarter ended March 31, 2012 and three customers individually accounted for 30%, 16%, and 10% of our revenue in the quarter ended March 31, 2011, respectively.

The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economical, and legal environment in the PRC. The Chinese Government controls its foreign currency reserves through restrictions on imports and conversion of Renminbi (RMB) into foreign currency. In July 2005, the Chinese Government adjusted its exchange rate policy from “Fixed Rate” to “Floating Rate.” During January 2008 to March 2012, the exchange rate between RMB and U. S. Dollars (USD) has fluctuated from USD $1.00 to RMB 7.3141 and USD $1.00 to RMB 6.3247, respectively. There can be no assurance that the exchange rate will remain stable. The Renminbi could appreciate or depreciate against the U.S. Dollar. The Company’s financial condition and results of operations may also be affected by changes in the value of certain currencies other than the Renminbiin which its earnings and obligations are denominated.

9

Annec Green refractories corporation and subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(Unaudited)

2. Summary of Significant Accounting Policies, continued

Fair Value of Financial Instruments

On December 31, 2008, the Company adopted SFAS 157 , Fair Value Measurements, now known as the provisions of ASC Subtopic 820-10, Fair Value Measurements and Disclosures (ASC 820-10), which defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosures about fair value measurements. ASC 820-10 applies whenever other statements require or permit assets or liabilities to be measured at fair value.

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

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

Government Assistance

The Company is currently the beneficiary of government grants that are generally intended to be used towards capital technology improvement with the end goal of increased production and energy efficiency. These grants are recorded as deferred income in the liabilities section of the balance sheet when cash is received and are accreted into non-operating income over the life of the asset, to the extent that the grant is related to an asset. For grants not related to any assets in certain cases, the Company records non-operating income when earned. The government grant income included in other income amounted to approximately $126,237 and $51,410 for the three month periods ended March 31, 2012 and 2011 respectively.

Foreign Currency Translation

The accompanying financial statements are presented in United States Dollars. The functional currency of our Company is the Renminbi, the official currency of the PRC. Capital accounts of the financial statements are translated into United States Dollars from RMB at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of the balance sheet date. Income and expenditures are translated at the average exchange rates for the quarter ended March 31, 2012 and 2011. Items in the Company’s consolidated statement of cash flows are translated using a weighted average exchange rate, which approximates the exchange rate in effect at the time of the cash flows. For all periods reported, there were no transactions outside the PRC; thus, all of our transactions are in RMB, our functional currency. Currency translation adjustments from translation to U.S. Dollars for financial reporting purposes are recorded in other comprehensive income (loss) as a component of equity.

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

	March 31,				December 31
	2012		2011		2011
Year end RMB: U.S. Dollar exchange rate		6.3247		6.5501		6.3647
Average RMB: U.S. Dollar exchange rate		6.3201		6.5713		6.4735

Revenue Recognition

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

10

Annec Green refractories corporation and subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(Unaudited)

2. Summary of Significant Accounting Policies, continued

Revenue Recognition, continued

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

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

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

Shipping and Handling Costs

Shipping and handling costs billed to customers are recorded net of the amount collected. Shipping and handling expense included in selling expenses amounted to $491,278 and $802,616 for the quarter ended March 31, 2012 and 2011, respectively.

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-05, comprehensive income (Topic 220): Presentation of Comprehensive Income. The objective of this Update is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Under the amendments to Topic 220, Comprehensive Income, in this Update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. We adopted this standard in the current quarter.

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

3. Retentions Receivable and Long-term Retentions Receivable

The Company enters into sales contracts with customers whereas there is a retention provision 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 year 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.

11

Annec Green refractories corporation and subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(Unaudited)

3. Retentions Receivable and Long-term Retentions Receivable, continued

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

	Retention receivable		Long-term retention receivable
Chinese government or province owned customers:
Amounts billed and due	$	543,120	$	2,699,273
Amounts billed and not due		5,247,505		-
		5,790,625		2,699,273
Commercial customers:
Amount billed and due		159,870		2,233,646
amount billed and not due		3,349,444		-
		3,509,314		2,233,646
Total	$	9,299,939	$	4,932,919

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

4. Other Receivables

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

	March 31,		December 31,
	2012		2011
Other receivables–individuals and employees	$	5,190,450	$	1,713,371
Other receivables–companies		1,129,076		1,097,453
Security deposits		800,307		1,004,335
Total other receivables	$	7,119,833	$	3,815,159

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

5. Inventories

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

	March 31,		December 31,
	2012		2011
Raw materials	$	3,805,981	$	4,100,556
Work in process		327,933		692,465
Finished goods		32,474,804		29,625,943
Total inventories	$	36,608,718	$	34,418,964

12

Annec Green refractories corporation and subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(Unaudited)

6. Plant and Equipment, net

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

	March 31,			December 31,
	2012			2011
Plants and buildings	$	14,443,108		$	14,352,338
Machinery and equipment		4,575,408			4,499,602
Vehicles		1,660,623			1,763,312
Others		448,786			462,897
Construction in progress		189,732			-
		21,317,657			21,078,149
Less accumulated depreciation		(4,943,365	)		(4,597,680	)
Total plant and equipment, net	$	16,374,292		$	16,480,469

Depreciation expense related to property and equipment was $371,392 and $322,386 for the quarter ended March 31, 2012 and 2011, respectively. The Company has recorded a loss on sale of property and equipment of $4,910 and $28,582 for the three months ended March 31, 2012 and 2011, respectively. 

7. Land Use Rights, net

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

	Estimated
	Remaining		March 31,
	Life		2012
Land use rights		47.65 years	$	2,329,028
Less accumulated amortization				(101,031	)
Total land use rights, net			$	2,227,997

Amortization expense related to land use rights was $11,794 and $12,714 for the three months ended March 31, 2012 and 2011, respectively. The difference between the amortization expense and accumulated amortization is due to exchange rate differences as we translate expense using an average exchange rate for the fiscal year and translate the accumulated amortization using the fiscal year end exchange rate.

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

Period ending March 31:
2013	$	47,175
2014		47,175
2015		47,175
2016		47,175
2017		47,175
Thereafter		1,992,122
	$	2,227,997

13

Annec Green refractories corporation and subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(Unaudited)

8. Short-Term Loans

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

	March 31,		December 31,
	2012		2011
Short-term loans:
Loans due to financial institutions	$	16,057,679	$	15,218,314

All short-term loans are due within one year and have interest rates ranging from 7.15% to 11.47% during three months ended March 31, 2012 and during 2011. As of March 31, 2012, we have a total of $16,057,679 short-term loans. All of the short-term loans, with the exception of one, are secured by the Company’s movable property or equipment mortgages. Four loans are secured by multiple guarantors with one loan secured by Zhendong company and Yunbao company. Three loans are secured by an office building and land, one loan is secured by letter of credit and one loan is secured by Fuchao Li’s guarantee.

9. Bank Notes Payable

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

	March 31,		December 31,
	2012		2011
Notes payable:
Loans due to financial institutions	$	6,798,741	$	1,571,166

Bank notes payable are due to financial institutions with maturity dates of six months. All notes are noninterest bearing notes. The notes payable are not secured, but do require cash to be held in reserve ranging from 70% to 110% of the total outstanding notes payable. At March 31, 2012 and December 31, 2011, the Company had approximately 117% and 100%, respectively, of the loan amounts due held in reserve as restricted cash. The collateral requirements are based on bank financial policy adjustment and improved the reserve proportion.  

10. Advances from Customers

The Company’s customer deposits consists of amounts payable to various customers for deposits received and prepayments received from customers for products to be delivered or services to be performed.

11. Long-Term Loans

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

	March 31,		December 31,
	2012		2011
Long-term loans:
Loan due to financial institution	$	852,214	$	923,846

The long-term loan is due after one year and has interest rate of 7.15% and is secured by one of the Company’s office buildings.

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

Period ending March 31:
2014	$	309,896
2015		309,896
2016		232,422
	$	852,214

14

Annec Green refractories corporation and subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(Unaudited)

12. Stockholders’ Equity

Reverse Merger

These consolidated financial statements have been prepared with the effect of the merger of Annec Green Refractories Corporation, formerly E-Band Media and China Green as a reverse acquisition and a recapitalization; therefore, China Green, its wholly owned subsidiaries, and the consolidated VIE are deemed to be acquiring company for accounting purposes. Stockholders’ equity and earnings per share of the Company has been retroactively restated to reflect the number of shares of common stock issued and outstanding retroactively as if the merger had taken place at the earliest period presented. The offset was applied to additional paid in capital.

Earnings per share

Basis and diluted net income per share is computed by dividing net income for the period by the weighted average number of shares outstanding during the period which includes the effect of the 1-for-14,375 reverse stock split stipulated it in the Share Exchange Agreement and the automatic conversion of the 19,220 Series A preferred shares into common stock at a 1-for 1,000 conversion rate. A reconciliation of the numerator and denominator of basic and diluted net income per common share is provided as follows:

	Three months ended March 31,
	2012			2011
Net income (loss)	$	(392,910	)	$	1,402,851
Denominator:
Common shares issued and outstanding		11,150,000			11,150,000
Effect of reverse stock split		(10,374,299	)		(10,374,299	)
Conversion of Series A Prefered stock		19,220,000			19,220,000
Weighted-average common stock outstanding		19,995,701			19,995,701

13. Related Party Transactions

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

	March 31,		December 31,
	2012		2011
Fuchao Li	$	490,141	$	572,779
Yinling Fan		192,895		191,682
	$	683,036	$	764,461

15

Annec Green refractories corporation and subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(Unaudited)

14. Income Taxes

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

Zhengzhou Annec qualified as a hi-tech corporation and was accorded certain tax incentives for said designation. Accordingly, Zhengzhou Annec was subject to tax at a statutory rate of 15% for the quarter ended March 31, 2012 and 2011. Zhengzhou Annec will continue to be subject to a 15% tax rate for the quarter ended March, 2012, and expects that thereafter will become subject to a rate of 25% unless Zhengzhou Annec applies for and receives a further tax holiday for the succeeding five years. The tax savings due to this tax holiday is approximately $0 and $154,000 for the three month periods ended March 31, 2012 and 2011, respectively.

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

15. Commitments and Contingencies

Third Party Guarantees

The Company entered into agreements as a debt guarantor during 2011 for six parties. The guaranteed amount is approximately $9,644,726 as of March 31, 2012, and $9,584,144 as of December 31, 2011.On April 12, 2012, Zhengzhou Annec company obtained a short-term bank loan of $790,551 from China Citic Bank for operating purposes which was guaranteed by the Zhendong company . On April 28, 2012, Zhengzhou Annec obtained a short-term bank loan of $1,296,504 from SPD Bank for operating purposes. The SPD Bank loan was secured by the Company’s land and office building. Other parties also acted as a debt guarantor for the Company starting in 2011. As of March 31, 2012, the Company’s loans guaranteed by other parties are approximately $9,486,616 and $9,426,996 as of December 31, 2012. The Company has not historically incurred any losses due to such debt guarantees. Additionally, the Company has determined that the fair value of the guarantees is immaterial.

Leases

The Company leases one of the factories under a non-cancelable operating lease with a third party through April 1, 2014. Rent expense included in general and administrative expense, manufacturing expense are $92,852 and $71,873 for the three months end March 31, 2012 and 2011, respectively. A summary of future minimum lease payments as of March 31, 2012 is presented below.

	Minimum
	Lease
	Payments
Year ending March 31:
2012	$	168,387
2013		224,517
2014		56,129
	$	449,033

16. Segment Reporting

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

All revenues are related to end customers in China.

16

Annec Green refractories corporation and subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

(Unaudited)

16. Segment Reporting, continued

Information on reportable segments for the three months ended March 31, 2012 and 2011, and as of March 31, 2012 and December 31, 2011 are as follows:

	March 31,
	2012		2011
Revenues:
Zhengzhou Annec	$	15,849,971	$	13,058,029
Beijing Annec		-		-
Total		15,849,971		13,058,029
Cost of revenues:
Zhengzhou Annec		10,277,356		7,573,416
Beijing Annec		-		-
Total		10,277,356		7,573,416
Operating expenses:
Zhengzhou Annec		4,629,645		3,004,410
Beijing Annec		125,910		445,607
Total		4,755,556		3,450,017
Income from operations	$	817,059	$	2,034,596

	2012		2011
Plant and equipment, net:
Zhengzhou Annec	$	12,898,547	$	13,177,027
Beijing Annec		3,475,745		3,303,442
Total identifiable assets	$	16,374,292	$	16,480,469

17. Subsequent Events

The Company has evaluated all events occurring subsequent to March 31, 2012 through the date which these financial statements were filed with the SEC during which time nothing has occurred outside the normal course of business operations that require additional disclosure in the condensed consolidated financial statements, except for the following:

On April 12, 2012, Zhengzhou Annec company obtained a short-term bank loan of $790,551 from China Citic Bank for operating purposes. The loan has a duration of one year with an annual interest rate of 7.2%. On April 28, 2012, Zhengzhou Annec obtained a short-term bank loan of $1,296,504 from SPD Bank for operating purposes. The loan has a duration of six months with an annual interest rate of 7.2%. The loan of $790,551 from China Citic Bank is guaranteed by the Zhendong company, and the loan of $1,296,504 from SPD Bank is secured by Zhengzhou Anne’s office building and land.

On May 14, 2012, Zhengzhou Annec entered into an Amendment to Supplemental Agreement to Exclusive Business Cooperation (“Amendment”) with Annec (Beijing) Engineering Technology Co., Ltd, a PRC limited company and a variable interest entity of Zhengzhou Annec (“Annec Beijing”), pursuant to which certain provisions of the Supplement Agreement to Exclusive Business Cooperation Agreement dated January 16, 2011 (the “Original Agreement”) was amended. Under the Original Agreement, Zhengzhou Annec agreed to provide Annec Beijing with exclusive technical, consulting and other services in connection with Annec Beijing’s principal business utilizing its own advantages in human resources, technology and information in exchange for an annual service fee. Under the Amendment, Article 2.2 and 2.3 of the Original Agreement were amended to specify that the payment of the annual service fee will be made upon request of Zhengzhou Annec.

17

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

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

Overview

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

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

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

Recent Developments

On April 12, 2012, Zhengzhou Annec obtained a short-term bank loan of $790,551 from China Citic Bank for operating purposes. The loan has duration of one year with an annual interest rate of 7.2%. On April 28, 2012, Zhengzhou Annec obtained a short-term bank loan of $1,296,504 from SPD Bank for operating purposes. The loan has duration of six months with an annual interest rate of 7.2%. The loan of $790,551 from China Citic Bank is guaranteed by the Zhendong company, and the loan of $1,296,504 from SPD Bank is mortagage by the Zhengzhou Annec’s office building and land mortgage.

On May 14, 2012, Zhengzhou Annec entered into an Amendment to Supplemental Agreement to Exclusive Business Cooperation (“Amendment”) with Annec (Beijing) Engineering Technology Co., Ltd, a PRC limited company and a variable interest entity of Zhengzhou Annec (“Annec Beijing”), pursuant to which certain provisions of the Supplement Agreement to Exclusive Business Cooperation Agreement dated January 16, 2011 (the “Original Agreement”) was amended. Under the Original Agreement, Zhengzhou Annec agreed to provide Annec Beijing with exclusive technical, consulting and other services in connection with Annec Beijing’s principal business utilizing its own advantages in human resources, technology and information in exchange for an annual service fee. Under the Amendment, Article 2.2 and 2.3 of the Original Agreement were amended to specify that the payment of the annual service fee will be made upon request of Zhengzhou Annec.

18

Summary of Critical Accounting Policies and Estimates

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

Use of Estimates

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

Accounts Receivable 

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

Inventories

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

Revenue Recognition 

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

19

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

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

Shipping and Handling Costs

Shipping and handling costs billed to customers are recorded net of the amount collected. Shipping and handling expense included in sales and marketing expenses amounted to $491,278 and $802,616 for the three months ended March 31, 2012, and 2011, respectively.

Results of Operations

Comparison for the Three Months ended March 31, 2012 and 2011 

	Three Months Ended March 31
				As % of						As % of
Statements of Operations Data	2012			Revenues			2011			Revenues
Revenues	$	15,849,971			100	%	$	13,058,029			100	%
Cost of Revenues		10,277,356			65	%		7,573,416			58	%
Gross Profit		5,572,615			35	%		5,484,613			42	%
Operating Expenses:
Selling		3,161,289			20	%		2,097,887			16	%
General and administrative		1,594,267			10	%		1,352,130			10	%
Total other income (expense), net		(1,184,057	)		(7.50	)%		(369,874	)		3	%
Income ( loss) before provision for income taxes		(366,998	)		(2.30	)%		1,664,722			13	%
Provision for income taxes		25,912			0.16	%		261,871			2	%
Net income (loss)		(392,910	)		(2.50	)%		1,402,851			11	%

Revenues

The Company operates in two reportable segments: Zhengzhou Annec and Beijing Annec. The Zhengzhou Annec segment manufactures and sells a variety of refractory bricks and kits of pre-assembled hot-air ovens. In 2011, Zhengzhou Annec signed several refractory turnkey projects which are a new business model for them. 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. The Company purchases these machines and equipment from outside vendors and generally sells them at cost plus a small mark-up.

Segments	Mar. 31,  2012		% of Revenue			Mar. 31,  2011		% of Revenue
Zhengzhou Annec	$	15,849,971		100	%	$	13,058,029		100	%
Beijing Annec		-		-			-		-
Total	$	15,849,971		100	%	$	13,058,029		100	%

20

Revenues for the three months ended March 31, 2012 was $15,849,971 compared to $13,058,029 for the three months ended March 31, 2011.  Revenues for the three months ended March 31, 2012 increased by $2,791,942, or by 21%.  We had no revenues from Beijing Annec for the three months ended March 31, 2012 and 2011 because no new contract were entered into and no project was completed during the respective periods. In June Beijing Annec will receive revenue. Revenues for Zhengzhou Annec for the three month ended March 31, 2012, increased by $2,791,942 or 21%, to $15,849,971 from $13,058,029 for the three months ended March 31, 2011. Beijing Annec had no revenue. The increase in sales of refractory products by Zhengzhou Annec was mainly due increased in number of orders. The existing customers increased their demand and Zhengzhou Annec obtained new customers in first three months of ended March 31, 2012 compared to March 31, 2011, as set forth below: 

Type of Customers’ Sales	Amount (US$)
Existing customer	$	8,357,002
New customer	$	7,474,298

Cost of Revenue

Cost of revenue was $10,277,356 and $7,573,416. for the three months ended March 31, 2012 and 2011, respectively.  Cost of revenue for the three months ended March 31, 2012 increased by $2,703,940 or by 36%.  Stated as a percentage of revenues, the cost of revenue for the three months ended March 31, 2012, was 65% compared to 58% for the three months ended March 31, 2011. Cost of revenue related to Zhengzhou Annec for the three months ended March 31, 2012 increased by $2,703,940, or 36% to $10,277,356 from $7,573,416 for the same period in 2011.  The increase in cost of revenue was primarily attributable to increase of sales for the same proportion.

Operating Expenses

General and Administrative. General and administrative expenses include payroll and related employee benefits, and other headcount-related costs associated with facilities, and other administrative expenses.  General and administrative expenses were $1,594,267 and $1,352,130 for the three months ended March 31, 2012 and 2011, respectively. The increase of $242,137, or 18%, in general and administrative expense was primarily attributable to a decrease in consulting fees paid to third party designers as a result of improved in-house design capabilities. 

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 $3,161,289 and $2,097,887 for the three months ended March 31, 2012 and 2011, respectively. The increase of $1,063,402, or 51%, in sales and marketing expense was due to increased variable cost like commission paid to sellers, shipping expense, packaging expense and traveling expense which activities in direct sales and marketing.

Other Income (Expense), net.   The total other income (expense), net was $(1,184,057) and $(369,874) for the three months ended March 31, 2012 and 2011, respectively.  The increaseof $814,183, or 220%, in total other expense was primarily attributable to recognition of a government grant subsidy in 2011, and an increase in interest expense as detailed in the following table:

21

	Three Months End
	March 31,			March 31,
	2012			2012
Other income (expense):
Interest income	$	97,188		$	98,835
Interest expense		(1,279,902	)		(603,775	)
Other income (expense), net		(1,343	)		135,066
	$	(1,184,057	)	$	(369,874	)

Liquidity and Capital Resources

We had retained earnings of $30,918,841 and $31,311,752 as of March 31, 2012, and December 31, 2011 respectively.

As of March 31, 2012, we had cash and restricted cash of $8,769,251 and total current assets of $100,316,464 compared to cash and restricted cash of $1,914,194 and total current assets of $98,671,393 as of December 31, 2011. Restricted cash is used to secure bank notes; the guaranteed percentage at March 31, 2012 was 117% compared to December 31, 2011 of 100%. The increase in restricted cash was a result of bank financial policy adjustment and improved the reserve proportion.

As of March 31, 2012, we had accounts receivable of $28,318,488, representing 28% of our total current assets, compared to $34,410,920, representing 35% of total current assets as of December 31, 2011. Also, accounts receivable decreased of $6,092,432 or 18%. At the same time, we had a 21.38% increase in total revenue.

Our total liabilities as of March 31, 2012 was $87,579,267 compared to $85,946,386 at December 31, 2011. The increase of $1,632,881 or 1.9%, was a result of increase in loans payables, short terms loans, and advances from customer. On April 12, 2012, Zhengzhou Annec company obtained a short-term bank loan of $790,551 from China Citic Bank for operating purposes. The loan has a duration of one year with an annual interest rate of 7.2%. On April 28, 2012, Zhengzhou Annec obtained a short-term bank loan of $1,296,504 from SPD Bank for operating purposes. The loan has a duration of six months with an annual interest rate of 7.2%. The loan of $790,551 from China Citic Bank is guaranteed by the Zhendong company, and the loan of $1,296,504 from SPD Bank is secured by Zhengzhou Anne’s office building and land. The funds were used or allocated to raise salaries and improve the market development. Advances from customer have increased $878,652 or 3 % compared to December 31, 2011.

Since most of our contracts are for custom made refractory material, in most cases we generally require 30% of contract price as advanced payment after we sign contract which is used to buy materials and production. 30% of contract price will be collected when we finished production and checked by client. 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 year after the stove is used to allow for quality guarantee. The last 30% and 10% are the main components of our accounts receivable. As our business is contract-based sale, differentiations exist between contracts signed by different clients.

As of March 31, 2012 we had working capital of $16,375,827, compared to working capital of $16,461,409 as of December 31, 2011.  We believe our cash and accounts receivable are adequate to satisfy our working capital needs and sustain our ongoing operations for the remainder of our fiscal year. 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.

22

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

Below is a summary of our cash flow:

Net Cash Provided by Operating Activities. For the three months ended March 31, 2012, net cash provided in operating activities was $2,005,098compared to cash provided by operating activities of $625,239, for the three months ended March 31, 2011. The increase in net cash provided by operating activities for the three months ended March 31, 2012 was primarily due to changes in prepaid expenses and deposits, Accounts receivable and other receivable as set forth below:

Items	2012 (US$)			2011(US$)
Prepaid expenses and deposits (ending balances)		3,388,342			(6,719,772	)
Accounts receivable (ending balances)		8,684,972			(1,607,296	)
Other receivable (ending balances)		(3,282,932	)		(37,151	)

New Cash Used in Investing Activities.   For the three months ended March 31, 2012, net cash used in investing activities was $(7,495,726), compared to net cash provided in investing activities of $1,574,381, for the three months ended March 31, 2011. The net cash used in investment activities for three months ended March 31, 2012 was primarily due to the net proceeds from bank notes receivable, restricted cash for issuance of bank notes payable and the deposits for capital expenditure.

Items	2012 (US$)			2011(US$)		Increase/(Decrease)(US$)		Percentage
Deposits for capital expenditure		77,246			126,262		49,016		39	%
Restricted cash for issuance of bank notes payable		(6,395,578	)		1,521,769		7,917,347		520	%
Net (payments) proceeds from bank notes receivable		(1,155,472	)		337,657		1,493,129		-442	%

Net Cash Provided by Financing Activities.   For the three months ended March 31, 2012, net cash provided by financing activities was $5,942,971 compared to $(3,425,994) for the three months ended March 31, 2011. The net cash provided by financing activities consisted primarily of proceeds from the issuance of short-term borrowings and proceeds from loans to other individuals.

Type of Proceeds	2012 (US$)			2011(US$)			Increase/(Decrease)(US$)			Percentage
Proceeds (payments) from issuance of short-term borrowings, net		5,965,095			(1,978,300	)		7,943,395			-401	%
(Payments) from issuance of long-term borrowings, net		(77,530	)		(74,567	)		(2,963	)		4	%
Proceeds (payments) from loans to related parties, employees, and other individuals, net of payments		55,406			(674,860	)		730,266			-108	%

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 with Chinese banks are for a period of twelve months. As such, each year we repay our loans and/or apply for new loans with our banks or with other banks for working capital needs. At March 31, 2012, we borrowed approximately $16.06 million from various short-term bank loans for the working capital needs. All of our bank borrowings are secured by our land and buildings and/or guaranteed by third parties. As of March 31, 2012, the Company and its subsidiaries have the following loan facilities with the following terms:

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Lender	Secured	Duration	Outstanding as of March,31 2012		Interest rates
Agricultural credit union	By third parties	1 year		1,581,103		8.928	%
Agricultural credit union	Machinery and equipment	1 year		316,221		11.470	%
Agricultural credit union	owner guarnteen	1 year		142,299		8.556	%
Guangdong Development Bank	By third parties	1 year		1,581,103		7.32	%
Shanghai Pufa Development Bank	Office building and Land	1 year		3,162,205		6.975	%
Shanghai Pufa Development Bank	Office building and Land	6 months		1,581,103		7.216	%
Shanghai Pufa Development Bank	L/C	6 months		2,640,441		7.216	%
Shanghai Pufa Development Bank	Office building	1 year		309,896		7.15	%
Zhongxin Bank	By third parties	1 year		1,581,103		7.216	%
LuoYang Bank	By third parties	1 year		3,162,205		7.87	%
			$	16,057,679

Off-Balance Sheet Arrangements

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

· Any obligation under certain guarantee contracts;

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

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

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

In China, because the bank lending system is still relatively new, it is common practice for companies to enter into cross-guarantee arrangements in order to secure lines of credit with banks. During 2011, Zhengzhou Annec entered into agreements as a debt guarantor for seven unaffiliated companies (“Unaffiliated Companies”). We do not consolidate the Unaffiliated Companies into our financial statements. In China, companies provide guarantees to other companies in the community to assist them in getting bank loans. The guaranteed amount is approximately $9,644,726 as of March 31, 2012 compared to $9,584,112 as of December 31, 2011. In exchange, the other unaffiliated companies also act as a debt guarantor for Zhengzhou Annec. As of March 31, 2012, Zhengzhou Annec's loans guaranteed by other unaffiliated companies are approximately $9,486,616 compared to $9,426,996 as of December 31, 2011. Zhengzhou Annec has not historically incurred any losses due to such debt guarantees. Additionally, Zhengzhou Annec has determined that the fair value of the guarantees is immaterial.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Not Applicable.

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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 three months ended March 31, 2012, we have concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this Report.

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

Remediation Plan

We intend to devote resources to remediating, improving and documenting our disclosure controls and procedures and internal controls and procedures, including actively recruiting a new chief financial officer with US GAAP and SEC reporting experience, additional accounting, and finance staff, and consultants to assist with these functions, and implementing additional financial and management controls, reporting systems and procedures. These measures may not ensure the adequacy of our internal controls over our financial processes and reporting in the future.

Changes in Internal Controls Over Financial Reporting

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

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

Not Applicable

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved).

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.

26

SIGNATURES

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

	ANNEC GREEN REFRACTORIES CORPORATION
Dated: June 12, 2012	/s/ LI Jiantao
	By: LI Jiantao
	Its: Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Accounting Officer)

27

EX-31.1

Exhibit 31.1

CERTIFICATIONS OF OFFICERS

PURSUANT TO SECTION 302

I, LI Jiantao, certify that:

1.	I have reviewed this Report on Form 10-Q of Annec Green Refractories Corporation.
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this report;
4.	The Registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	Evaluated the effectiveness of the Registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
d.	Disclosed in this report any change in the Registrant’s internal control over financial reporting that occurred during the Registrant’s most recent fiscal quarter (the Registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting; and

5. The Registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Registrant’s auditors and the audit committee of the Registrant’s board of directors (or persons performing the equivalent functions):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal control over financial reporting.

Date: June 12, 2012
By:	/s/ LI Jiantao
	Name:  LI Jiantao
	Title:  Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Chief Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Report of Annec Green Refractories Corporation (the “Company”) on Form 10-Q for the period ended March 31, 2012, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, in the capacities and on the date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his knowledge:

1.           The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2.           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: June 12, 2012
By:	/s/ LI Jiantao
	Name:  LI Jiantao
	Title:  Chief Executive Officer and Chief Financial Officer (Principal Executive Officer and Principal Financial Officer)

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Other Receivables

3 Months Ended

Mar. 31, 2012

Other Receivables

4. Other Receivables

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

	March 31,		December 31,
	2012		2011
Other receivables–individuals and employees	$	5,190,450	$	1,713,371
Other receivables–companies		1,129,076		1,097,453
Security deposits		800,307		1,004,335
Total other receivables	$	7,119,833	$	3,815,159

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

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Retentions Receivable and Long-term Retentions Receivable

3 Months Ended

Mar. 31, 2012

Retentions Receivable and Long-term Retentions Receivable

3. Retentions Receivable and Long-term Retentions Receivable

The Company enters into sales contracts with customers whereas there is a retention provision 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 year from the day the stoves are placed into service. The current portion on the Balance Sheet represents amounts due within a year. The long-term portion represents the amounts that are due over a year or are already over a year old.

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

	Retention receivable		Long-term retention receivable
Chinese government or province owned customers:
Amounts billed and due	$	543,120	$	2,699,273
Amounts billed and not due		5,247,505		-
		5,790,625		2,699,273
Commercial customers:
Amount billed and due		159,870		2,233,646
amount billed and not due		3,349,444		-
		3,509,314		2,233,646
Total	$	9,299,939	$	4,932,919

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

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $)	Mar. 31, 2012	Dec. 31, 2011
Current assets:
Cash	$ 797,222	$ 343,028	[1]
Restricted cash	7,972,029	1,571,166	[1]
Bank notes receivable	3,194,335	2,026,885	[1]
Accounts receivable (net of allowance of $781,567 and $792,367 at March 31, 2012 and December 31, 2011, respectively)	28,318,488	34,410,920	[1]
Retentions receivable	9,299,939	11,570,262	[1]
Prepaid expenses and deposits	7,005,900	10,515,009	[1]
Other receivables	7,119,833	3,815,159	[1]
Inventories	36,608,718	34,418,964	[1]
Total current assets	100,316,464	98,671,393	[1]
Long-term retentions receivable	4,932,919	4,926,856	[1]
Deposits for capital expenditure	419,333	493,402	[1]
Plant and equipment, net	16,374,292	16,480,469	[1]
Land use rights, net	2,227,997	2,225,555	[1]
Long-term investment	158,110	157,117	[1]
Total assets	124,429,115	122,954,792	[1]
Current liabilities:
Short-term loans	16,057,679	15,218,314	[1]
Bank notes payable	6,798,741	1,571,166	[1]
Accounts payable and accrued expenses	16,716,782	19,315,558	[1]
Advances from customers	30,605,550	29,726,898	[1]
Salaries payable	508,459	530,219	[1]
Taxes payable	1,717,939	3,301,944	[1]
Related party payables	683,036	764,461	[1]
Loans payable to employees	2,087,916	1,619,827	[1]
Loans payable to other individuals	6,206,144	6,481,374	[1]
Other payable	2,558,391	3,680,223	[1]
Total current liabilities	83,940,637	82,209,984	[1]
Deferred income	2,786,416	2,812,556	[1]
Long-term loans	852,214	923,846	[1]
Total liabilities	87,579,267	85,946,386	[1]
Commitments and contingencies (Note 15)			[1]
Stockholders' equity:
Series A preferred stock, $0.0001 par value; 20,000,000 shares authorized; zero shares issued and outstanding			[1]
Common stock, $0.0001 par value; 100,000,000 shares authorized; 19,995,701 issued and outstanding	2,000	2,000	[1]
Additional paid-in capital	4,046,992	4,046,992	[1]
Retained earnings	30,918,841	31,311,752	[1]
Accumulated other comprehensive income	1,882,015	1,647,662	[1]
Total stockholders' equity	36,849,848	37,008,406	[1]
Total liabilities and stockholders' equity	$ 124,429,115	$ 122,954,792	[1]

[1] Derived from the consolidated audited financial statements included in our annual report filed on Form 10-K with the SEC for the year ended December 31, 2011.

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Basis of Presentation and Description of the Company

3 Months Ended

Mar. 31, 2012

Basis of Presentation and Description of the Company

1. Basis of Presentation and Description of the Company

The accompanying unaudited condensed consolidated financial statements of Annec Green Refractories Corporation (the Company) have been prepared in accordance with generally accepted accounting principles in the United States for interim financial information in pursuant to the instructions to Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the financial statements have been included.

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

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

 History of E-Band Media, Inc.

E-Band Media was organized under the laws of the State of Delaware on April 29, 2010 as part of the implementation of the Chapter 11 plan of reorganization of AP Corporate Services, Inc. (“AP”). AP was incorporated in the State of Nevada in 1997 and was formed to provide a variety of services to small, entrepreneurial businesses. These services included business planning, market research, accounting advice, incorporation, and resident agent services. Between 1997 and 1999 AP’s business focus changed. In addition to providing business services, AP began to own and develop businesses related to the medical professions. In 1999 AP organized E-Band Media.com with the intent of offering live “chat” consultations via the internet with nurses and physicians. A website was developed but it was unable to generate significant revenues and the site was terminated prior to AP’s bankruptcy filing in 2008.

AP filed for Chapter 11 Bankruptcy in September 2008 in the U.S. Bankruptcy Court for the Central District of California. AP’s plan of reorganization was confirmed by the Court on December 24, 2009 and became effective on January 4, 2009. This plan of reorganization provided, among other things, for the incorporation of E-Band Media and the distribution of 1,085,000 shares in it to AP’s bankruptcy creditors. The shares were distributed pursuant to section 1145 of the U.S. Bankruptcy Code. The plan also provided for the transfer to E-Band Media of any interest which AP and/or E-Band Media.com had in the development of a medical “chat” website.

As stated in the plan of reorganization ordered by the Court, these shares were issued “to enhance the distribution to creditors,” i.e. to enhance their opportunity to recover the losses they sustained in the AP bankruptcy. To this end, AP, by and through its President, agreed “to use its best efforts to have the shares publicly traded on the Over-The-Counter market in order to provide an opportunity for liquidity to the creditors” (from the Court approved “Disclosure Statement” describing the Plan of Reorganization). Subsequent to the effectiveness of the plan of reorganization the Company issued 10,000,000 restricted shares of common stock to its President, Dean Konstantine, at par value ($0.0001) for services rendered and costs advanced totaling $1,000.

On September 14, 2010, E-Band Media filed a Registration Statement on Form 10SB (File No.: 000-54117) with the SEC to register its common stock under Section 12(g) of the Exchange Act. The Registration Statement went effective by operation of law on November 13, 2010, at which point E-Band became a reporting company under the Exchange Act.

On April 18, 2011, E-Band Media changed its name to Annec Green Refractories Corporation.

History of China Green Refractories Limited

China Green and its wholly-owned subsidiary Alex Industrial Investment Limited (“Alex Industrial”) were created for the sole purpose of conducting a reverse merger transaction with a U.S. public shell company. China Green was incorporated in the British Virgin Islands as a BVI Business Company on March 12, 2010. Under China Green’s Memorandum of Association, it is authorized to issue up to 50,000 shares of one class of stock with a par value of $1.00. Prior to the Share Exchange, there were a total of 102 shares of China Green stock, which were held by five shareholders. Each share was purchased for $1.00.

Alex Industrial was incorporated in Hong Kong on April 1, 2010 by China Green to acquire Zhengzhou Annec Industrial Co., Ltd. (“Zhengzhou Annec”) and Zhengzhou Annec’s subsidiary Annec (Beijing) Engineering Technology Co., Ltd. (Beijing Annec). Under Alex Industrial’s Memorandum of Association, the capital of Alex Industrial is divided into 10,000 shares at $1.00 each. On March 26, 2010 , China Green purchased 100 founder shares in the amount of $100. On January 14, 2011, China Green purchased all of the outstanding shares of Zhengzhou Annec for the total consideration of $2,980,998. As a result of this transaction, the controlling equity holders of Zhengzhou Annec continued to hold 98% of the outstanding equity of Zhengzhou Annec through their direct or beneficial ownership of China Green. Accordingly, this transaction was accounted for as an exchange among related parties and all assets and liabilities were transferred at their net book value.

Zhengzhou Annec was established in 2003, a Company Limited registered in Xinmi city Henan province in the People’s Republic of China (“PRC” or “China”) with initial registered capital of $730 thousand. On October 8, 2003, the shareholders of Zhengzhou Annec reached a resolution to increase the registered capital of Zhengzhou Annec from $730 thousand to $3.0 million. On January 14, 2011, Zhengzhou Annec became the wholly owned subsidiary of Alex Industrial and, accordingly became a wholly-foreign owned enterprise (WFOE) under Chinese law.

Beijing Annec was established in January 2008 in Xuanwu district Beijing as a Company Limited, registered in Beijing, PRC, with approximately $900 thousand as its initial registered capital. In 2010, Beijing Annec’s registered capital was increased from $900 thousand to approximately $2.8 million. 100% of Beijing Annec’s equity is owned or controlled through assignment by Fuchao Li. On January 16, 2011, Beijing Annec entered into a contractual agreement, or the VIE agreement, with Zhengzhou Annec. The VIE Agreement includes the following arrangements:

(1) Exclusive Business Cooperation Agreement (“Cooperation Agreement”), where Zhengzhou Annec, in general, becomes Beijing Annec’s exclusive service provider to provide Beijing Annec with business support and technical and consulting services in exchange for an annual service fee equal to Beijing Annec’s net income for such year;

(2) Equity Interest Pledge Agreement (“Pledge Agreement”) under which Fuchao Li the 100% owner of all of the equity interest in Beijing Annec, has pledged all of his equity interest in Beijing Annec to Zhengzhou Annec as a guarantee of Beijing Annec’s performance of its obligations under the Cooperation Agreement;

(3) Exclusive Option Agreement (“Option Agreement”) under which Fuchao Li grants Zhengzhou Annec an irrevocable right and option to acquire any and all of Mr. Li’s equity interest in Beijing Annec, as and when permitted by PRC laws, for an exercise price equal to the actual capital contributions paid in the registered capital of Beijing Annec by Mr. Li unless an appraisal is required by applicable PRC laws; and

(4) Power of Attorney (POA) under which Mr. Li grants Zhengzhou Annec the right to (i) attend shareholders meetings of Beijing Annec, (ii) exercise all of Mr. Li shareholder’s rights and shareholder’s voting rights in Beijing Annec, including, but not limited to the sale or transfer or pledge or disposition of his stock in whole or in part, and (iii) designate and appoint on Mr. Li’s behalf the legal representative, the executive director and/or director, supervisor, the chief executive officer and other senior management of Beijing Annec.

As a result of the foregoing structure, we control 100% of Beijing Annec. In addition to the VIE agreement, 96.3% of the equity ownership, as of December 31, 2010, of Beijing Annec is controlled by shareholders nominated by Zhengzhou Annec and Mr. Li. The remaining 3.7% of the equity is owned by Mr. Li. Thus, Beijing Annec is treated as a 100% owned subsidiary for accounting purposes.

Business Description

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

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

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Subsequent Events

3 Months Ended

Mar. 31, 2012

Subsequent Events

17. Subsequent Events

The Company has evaluated all events occurring subsequent to March 31, 2012 through the date which these financial statements were filed with the SEC during which time nothing has occurred outside the normal course of business operations that require additional disclosure in the condensed consolidated financial statements, except for the following:

On April 12, 2012, Zhengzhou Annec company obtained a short-term bank loan of $790,551 from China Citic Bank for operating purposes. The loan has a duration of one year with an annual interest rate of 7.2%. On April 28, 2012, Zhengzhou Annec obtained a short-term bank loan of $1,296,504 from SPD Bank for operating purposes. The loan has a duration of six months with an annual interest rate of 7.2%. The loan of $790,551 from China Citic Bank is guaranteed by the Zhendong company, and the loan of $1,296,504 from SPD Bank is secured by Zhengzhou Anne’s office building and land.

On May 14, 2012, Zhengzhou Annec entered into an Amendment to Supplemental Agreement to Exclusive Business Cooperation (“Amendment”) with Annec (Beijing) Engineering Technology Co., Ltd, a PRC limited company and a variable interest entity of Zhengzhou Annec (“Annec Beijing”), pursuant to which certain provisions of the Supplement Agreement to Exclusive Business Cooperation Agreement dated January 16, 2011 (the “Original Agreement”) was amended. Under the Original Agreement, Zhengzhou Annec agreed to provide Annec Beijing with exclusive technical, consulting and other services in connection with Annec Beijing’s principal business utilizing its own advantages in human resources, technology and information in exchange for an annual service fee. Under the Amendment, Article 2.2 and 2.3 of the Original Agreement were amended to specify that the payment of the annual service fee will be made upon request of Zhengzhou Annec.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2012

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (U .S ..GAAP). The consolidated financial statements include the balances and results of Zhengzhou Annec and Beijing Annec (collectively, the “Company”). 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.

Use of Estimates

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

Cash

Cash consists primarily of cash on hand or cash deposits in banks that are available for withdrawal without restriction.

Restricted Cash

Restricted cash represents cash that is held by the banks as collateral for notes payable. The banks generally have collateral requirements ranging from 70% to 110% of the outstanding notes payable. At March 31, 2012 and December 31, 2011, the Company has about 117% and 100%, respectively, in outstanding notes payable balances held by the banks as collateral. The collateral requirements are based on bank financial policy adjustment and improved the reserve proportion. Collateral requirements are increased when December, 2011.

Bank Notes Receivable

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

Accounts Receivable

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

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

Concentration of Credit and Other Risks

Financial instruments which potentially subject us to concentrations of credit risk consist principally of cash, restricted cash, bank notes receivable, accounts receivable and other receivables. The Company holds all its bank deposits with banks in China. In China, there is no equivalent federal deposit insurance as in the United States; as such, these amounts held in banks in China are not insured. The Company has not experienced any losses in such bank accounts through March 31, 2012. In an effort to mitigate any potential risk, the Company periodically evaluates the credit quality of the financial institutions which hold the bank deposits and the Company holds its cash in multiple banks supported by the local and Central Government of the PRC.

The Company does not require collateral or other security to support the trade receivables. We are 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 25% of our trade receivables balance as of March 31, 2012 and December 31, 2011, respectively. An additional customer accounted for 19% and 16% of trade receivables balance as of March 31, 2012 and December 31, 2011, respectively.

Three customers individually accounted for 36%, 15%, and 13% of our revenue in the quarter ended March 31, 2012 and three customers individually accounted for 30%, 16%, and 10% of our revenue in the quarter ended March 31, 2011, respectively.

The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economical, and legal environment in the PRC. The Chinese Government controls its foreign currency reserves through restrictions on imports and conversion of Renminbi (RMB) into foreign currency. In July 2005, the Chinese Government adjusted its exchange rate policy from “Fixed Rate” to “Floating Rate.” During January 2008 to March 2012, the exchange rate between RMB and U. S. Dollars (USD) has fluctuated from USD $1.00 to RMB 7.3141 and USD $1.00 to RMB 6.3247, respectively. There can be no assurance that the exchange rate will remain stable. The Renminbi could appreciate or depreciate against the U.S. Dollar. The Company’s financial condition and results of operations may also be affected by changes in the value of certain currencies other than the Renminbiin which its earnings and obligations are denominated.

Fair Value of Financial Instruments

On December 31, 2008, the Company adopted SFAS 157 , Fair Value Measurements, now known as the provisions of ASC Subtopic 820-10, Fair Value Measurements and Disclosures (ASC 820-10), which defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosures about fair value measurements. ASC 820-10 applies whenever other statements require or permit assets or liabilities to be measured at fair value.

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

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

Government Assistance

The Company is currently the beneficiary of government grants that are generally intended to be used towards capital technology improvement with the end goal of increased production and energy efficiency. These grants are recorded as deferred income in the liabilities section of the balance sheet when cash is received and are accreted into non-operating income over the life of the asset, to the extent that the grant is related to an asset. For grants not related to any assets in certain cases, the Company records non-operating income when earned. The government grant income included in other income amounted to approximately $126,237 and $51,410 for the three month periods ended March 31, 2012 and 2011 respectively.

Foreign Currency Translation

The accompanying financial statements are presented in United States Dollars. The functional currency of our Company is the Renminbi, the official currency of the PRC. Capital accounts of the financial statements are translated into United States Dollars from RMB at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of the balance sheet date. Income and expenditures are translated at the average exchange rates for the quarter ended March 31, 2012 and 2011. Items in the Company’s consolidated statement of cash flows are translated using a weighted average exchange rate, which approximates the exchange rate in effect at the time of the cash flows. For all periods reported, there were no transactions outside the PRC; thus, all of our transactions are in RMB, our functional currency. Currency translation adjustments from translation to U.S. Dollars for financial reporting purposes are recorded in other comprehensive income (loss) as a component of equity.

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

	March 31,				December 31
	2012		2011		2011
Year end RMB: U.S. Dollar exchange rate		6.3247		6.5501		6.3647
Average RMB: U.S. Dollar exchange rate		6.3201		6.5713		6.4735

Revenue Recognition

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

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

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

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

Shipping and Handling Costs

Shipping and handling costs billed to customers are recorded net of the amount collected. Shipping and handling expense included in selling expenses amounted to $491,278 and $802,616 for the quarter ended March 31, 2012 and 2011, respectively.

Recent Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2011-05, comprehensive income (Topic 220): Presentation of Comprehensive Income. The objective of this Update is to improve the comparability, consistency, and transparency of financial reporting and to increase the prominence of items reported in other comprehensive income. The amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. Under the amendments to Topic 220, Comprehensive Income, in this Update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. We adopted this standard in the current quarter.

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

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Mar. 31, 2012	Dec. 31, 2011
Accounts receivable, allowance	$ 781,567	$ 792,367	[1]
Series A preferred stock, par value	$ 0.0001	$ 0.0001	[1]
Series A preferred stock, shares authorized	20,000,000	20,000,000	[1]
Series A preferred stock, shares issued	0	0	[1]
Series A preferred stock, shares outstanding	0	0	[1]
Common stock, par value	$ 0.0001	$ 0.0001	[1]
Common stock, shares authorized	100,000,000	100,000,000	[1]
Common stock, issued	19,995,701	19,995,701	[1]
Common stock, outstanding	19,995,701	19,995,701	[1]

[1] Derived from the consolidated audited financial statements included in our annual report filed on Form 10-K with the SEC for the year ended December 31, 2011.

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Stockholders' Equity

3 Months Ended

Mar. 31, 2012

Stockholders' Equity

12. Stockholders’ Equity

Reverse Merger

These consolidated financial statements have been prepared with the effect of the merger of Annec Green Refractories Corporation, formerly E-Band Media and China Green as a reverse acquisition and a recapitalization; therefore, China Green, its wholly owned subsidiaries, and the consolidated VIE are deemed to be acquiring company for accounting purposes. Stockholders’ equity and earnings per share of the Company has been retroactively restated to reflect the number of shares of common stock issued and outstanding retroactively as if the merger had taken place at the earliest period presented. The offset was applied to additional paid in capital.

Earnings per share

Basis and diluted net income per share is computed by dividing net income for the period by the weighted average number of shares outstanding during the period which includes the effect of the 1-for-14,375 reverse stock split stipulated it in the Share Exchange Agreement and the automatic conversion of the 19,220 Series A preferred shares into common stock at a 1-for 1,000 conversion rate. A reconciliation of the numerator and denominator of basic and diluted net income per common share is provided as follows:

	Three months ended March 31,
	2012			2011
Net income (loss)	$	(392,910	)	$	1,402,851
Denominator:
Common shares issued and outstanding		11,150,000			11,150,000
Effect of reverse stock split		(10,374,299	)		(10,374,299	)
Conversion of Series A Prefered stock		19,220,000			19,220,000
Weighted-average common stock outstanding		19,995,701			19,995,701

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Document and Entity Information	3 Months Ended
	Mar. 31, 2012	Apr. 29, 2012
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1
Trading Symbol	ANNC
Entity Registrant Name	ANNEC GREEN REFRACTORIES CORP
Entity Central Index Key	0001501162
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		19,995,701

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Related Party Transactions

3 Months Ended

Mar. 31, 2012

Related Party Transactions

13. Related Party Transactions

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

	March 31,		December 31,
	2012		2011
Fuchao Li	$	490,141	$	572,779
Yinling Fan		192,895		191,682
	$	683,036	$	764,461

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Revenues	$ 15,849,971	$ 13,058,029
Cost of revenues	10,277,356	7,573,416
Gross profit	5,572,615	5,484,613
Operating expenses:
Sales and marketing	3,161,289	2,097,887
General and administrative	1,594,267	1,352,130
Total operating expenses	4,755,556	3,450,017
Income from operations	817,059	2,034,596
Other income (expense):
Interest income	97,188	98,835
Interest expense	(1,279,902)	(603,775)
Other income (expense), net	(1,343)	135,066
Total other income (expense)	(1,184,057)	(369,874)
Income (loss) before provision for income taxes	(366,998)	1,664,722
Provision for income taxes	25,912	261,871
Net (loss) income	(392,910)	1,402,851
Other comprehensive income (loss)
Foreign currency translation adjustment	234,353	160,416
Comprehensive income (loss)	$ (158,558)	$ 1,563,267
Net income (loss) per share-basic and dilutive	$ (0.02)	$ 0.07
Shares used in computing net income (loss) per share-basic and dilutive	19,995,701	19,995,701

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Land Use Rights, net

3 Months Ended

Mar. 31, 2012

Land Use Rights, net

7. Land Use Rights, net

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

	Estimated
	Remaining		March 31,
	Life		2012
Land use rights		47.65 years	$	2,329,028
Less accumulated amortization				(101,031	)
Total land use rights, net			$	2,227,997

Amortization expense related to land use rights was $11,794 and $12,714 for the three months ended March 31, 2012 and 2011, respectively. The difference between the amortization expense and accumulated amortization is due to exchange rate differences as we translate expense using an average exchange rate for the fiscal year and translate the accumulated amortization using the fiscal year end exchange rate.

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

Period ending March 31:
2013	$	47,175
2014		47,175
2015		47,175
2016		47,175
2017		47,175
Thereafter		1,992,122
	$	2,227,997

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Plant and Equipment, net

3 Months Ended

Mar. 31, 2012

Plant and Equipment, net

6. Plant and Equipment, net

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

	March 31,			December 31,
	2012			2011
Plants and buildings	$	14,443,108		$	14,352,338
Machinery and equipment		4,575,408			4,499,602
Vehicles		1,660,623			1,763,312
Others		448,786			462,897
Construction in progress		189,732			-
		21,317,657			21,078,149
Less accumulated depreciation		(4,943,365	)		(4,597,680	)
Total plant and equipment, net	$	16,374,292		$	16,480,469

Depreciation expense related to property and equipment was $371,392 and $322,386 for the quarter ended March 31, 2012 and 2011, respectively. The Company has recorded a loss on sale of property and equipment of $4,910 and $28,582 for the three months ended March 31, 2012 and 2011, respectively.

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Income Taxes

3 Months Ended

Mar. 31, 2012

Income Taxes

14. Income Taxes

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

Zhengzhou Annec qualified as a hi-tech corporation and was accorded certain tax incentives for said designation. Accordingly, Zhengzhou Annec was subject to tax at a statutory rate of 15% for the quarter ended March 31, 2012 and 2011. Zhengzhou Annec will continue to be subject to a 15% tax rate for the quarter ended March, 2012, and expects that thereafter will become subject to a rate of 25% unless Zhengzhou Annec applies for and receives a further tax holiday for the succeeding five years. The tax savings due to this tax holiday is approximately $0 and $154,000 for the three month periods ended March 31, 2012 and 2011, respectively.

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

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Advances from Customers

3 Months Ended

Mar. 31, 2012

Advances from Customers

10. Advances from Customers

The Company’s customer deposits consists of amounts payable to various customers for deposits received and prepayments received from customers for products to be delivered or services to be performed.

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Short-Term Loans

3 Months Ended

Mar. 31, 2012

Short-Term Loans

8. Short-Term Loans

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

	March 31,		December 31,
	2012		2011
Short-term loans:
Loans due to financial institutions	$	16,057,679	$	15,218,314

All short-term loans are due within one year and have interest rates ranging from 7.15% to 11.47% during three months ended March 31, 2012 and during 2011. As of March 31, 2012, we have a total of $16,057,679 short-term loans. All of the short-term loans, with the exception of one, are secured by the Company’s movable property or equipment mortgages. Four loans are secured by multiple guarantors with one loan secured by Zhendong company and Yunbao company. Three loans are secured by an office building and land, one loan is secured by letter of credit and one loan is secured by Fuchao Li’s guarantee.

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Bank Notes Payable

3 Months Ended

Mar. 31, 2012

Bank Notes Payable

9. Bank Notes Payable

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

	March 31,		December 31,
	2012		2011
Notes payable:
Loans due to financial institutions	$	6,798,741	$	1,571,166

Bank notes payable are due to financial institutions with maturity dates of six months. All notes are noninterest bearing notes. The notes payable are not secured, but do require cash to be held in reserve ranging from 70% to 110% of the total outstanding notes payable. At March 31, 2012 and December 31, 2011, the Company had approximately 117% and 100%, respectively, of the loan amounts due held in reserve as restricted cash. The collateral requirements are based on bank financial policy adjustment and improved the reserve proportion.

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Long-Term Loans

3 Months Ended

Mar. 31, 2012

Long-Term Loans

11. Long-Term Loans

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

	March 31,		December 31,
	2012		2011
Long-term loans:
Loan due to financial institution	$	852,214	$	923,846

The long-term loan is due after one year and has interest rate of 7.15% and is secured by one of the Company’s office buildings.

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

Period ending March 31:
2014	$	309,896
2015		309,896
2016		232,422
	$	852,214

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Segment Reporting

3 Months Ended

Mar. 31, 2012

Segment Reporting

16. Segment Reporting

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

All revenues are related to end customers in China.

Information on reportable segments for the three months ended March 31, 2012 and 2011, and as of March 31, 2012 and December 31, 2011 are as follows:

	March 31,
	2012		2011
Revenues:
Zhengzhou Annec	$	15,849,971	$	13,058,029
Beijing Annec		-		-
Total		15,849,971		13,058,029
Cost of revenues:
Zhengzhou Annec		10,277,356		7,573,416
Beijing Annec		-		-
Total		10,277,356		7,573,416
Operating expenses:
Zhengzhou Annec		4,629,645		3,004,410
Beijing Annec		125,910		445,607
Total		4,755,556		3,450,017
Income from operations	$	817,059	$	2,034,596

	2012		2011
Plant and equipment, net:
Zhengzhou Annec	$	12,898,547	$	13,177,027
Beijing Annec		3,475,745		3,303,442
Total identifiable assets	$	16,374,292	$	16,480,469

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Cash flows from operating activities:
Net (loss) income	$ (392,910)	$ 1,402,851
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	383,034	335,100
Loss on sale of plant and equipment	4,910	28,582
Change in assets and liabilities:
Accounts receivable, retentions receivable and long-term retentions receivable	8,684,972	(1,607,296)
Prepaid expenses and deposits	3,388,342	(6,719,772)
Other receivables	(3,282,932)	(37,151)
Inventories	(1,973,509)	(3,285,805)
Accounts payable and accrued expenses	(2,676,867)	6,516,302
Advances from customers	691,149	4,006,641
Salary payable	(25,132)	(137,767)
Taxes payable	(1,606,056)	(492,199)
Deferred income	(43,960)	(42,280)
Other payable	(1,145,943)	658,033
Net cash provided by operating activities	2,005,098	625,239
Cash flows from investing activities:
Net (payments) proceeds from bank notes receivable	(1,155,472)	337,657
Restricted cash for issuance of bank notes payable	(6,395,578)	1,521,769
Deposits for capital expenditure	77,246	126,262
Purchase of plant and equipment	(21,922)	(462,366)
Proceeds from sale of plant and equipment		51,059
Net cash (used in) provided by investing activities	(7,495,726)	1,574,381
Cash flows from financing activities:
Payments of dividends		(698,267)
Proceeds (payments) from loans to related parties, employees, and other individuals, net of payments	55,406	(674,860)
Proceeds (payments) from issuance of short-term borrowings, net	5,965,095	(1,978,300)
Payments from issuance of long-term borrowings, net	(77,530)	(74,567)
Net cash provided (used in) by financing activities	5,942,971	(3,425,994)
Net increase (decrease) in cash	452,343	(1,226,374)
Effect of exchange rate changes	1,851	5,429
Cash at beginning of period	343,028	1,504,971
Cash at end of period	797,222	284,026
Noncash financing and investing activities:
Reduction of accounts payable through disposal of plant and equipment	46,048
Supplemental disclosure of cash flow information:
Interest paid	357,799	245,691
Income taxes paid	$ 211,449	$ 124,458

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Inventories

3 Months Ended

Mar. 31, 2012

Inventories

5. Inventories

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

	March 31,		December 31,
	2012		2011
Raw materials	$	3,805,981	$	4,100,556
Work in process		327,933		692,465
Finished goods		32,474,804		29,625,943
Total inventories	$	36,608,718	$	34,418,964

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2012

Commitments and Contingencies

15. Commitments and Contingencies

Third Party Guarantees

The Company entered into agreements as a debt guarantor during 2011 for six parties. The guaranteed amount is approximately $9,644,726 as of March 31, 2012, and $9,584,144 as of December 31, 2011. On April 12, 2012, Zhengzhou Annec company obtained a short-term bank loan of $790,551 from China Citic Bank for operating purposes which was guaranteed by the Zhendong company . On April 28, 2012, Zhengzhou Annec obtained a short-term bank loan of $1,296,504 from SPD Bank for operating purposes. The SPD Bank loan was secured by the Company’s land and office building. Other parties also acted as a debt guarantor for the Company starting in 2011. As of March 31, 2012, the Company’s loans guaranteed by other parties are approximately $9,486,616 and $9,426,996 as of December 31, 2012. The Company has not historically incurred any losses due to such debt guarantees. Additionally, the Company has determined that the fair value of the guarantees is immaterial.

Leases

The Company leases one of the factories under a non-cancelable operating lease with a third party through April 1, 2014. Rent expense included in general and administrative expense, manufacturing expense are $92,852 and $71,873 for the three months end March 31, 2012 and 2011, respectively. A summary of future minimum lease payments as of March 31, 2012 is presented below.

	Minimum
	Lease
	Payments
Year ending March 31:
2012	$	168,387
2013		224,517
2014		56,129
	$	449,033