UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM 10-Q





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





For the
quarterly period ended September 30, 2010





o
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





Commission
File Number: 000-53825





GUANWEI
RECYCLING CORP.


(Exact
name of registrant as specified in its charter)




Nevada
            
            98-0669936(State
      or other jurisdiction
            
            (I.R.S.
      Employerof
      incorporation or organization)
            
            Identification
      No.)Rong
      Qiao Economic Zone, Fuqing City
              Fujian
      Province,
              People’s
      Republic of China 350301
              (Address
      of principal executive offices) (Zip Code)86-591
      8539 2532
              (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 þ No o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate website, 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
þ   No
o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer  o
            
            
            Accelerated
      filer
            oNon-accelerated
      filer   o
            
            (Do
      not check if a smaller reporting company)
            Smaller
      reporting company
            R





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). Yes o   No
R





As of
November 3, 2010, the registrant had 20,000,006 shares of its common stock
issued and outstanding.










TABLE
OF CONTENTS




PAGEPART
      I – FINANCIAL INFORMATION
            
            3Item
      1.
            
            Financial
      Statements.
            
            3Condensed
      Consolidated Balance Sheets as of September 30, 2010 and December 31, 2009
      (Unaudited)
            
            3Condensed
      Consolidated Statements of Operations for the Three Months and Nine Months
      Ended September 30, 2010 and 2009 (Unaudited)
            
            4Condensed
      Consolidated Statements of Cash Flows for the Three Months and Nine Months
      Ended September 30, 2010 and 2009 (Unaudited)
            
            5Notes
      to the Condensed Consolidated Financial Statements
    (Unaudited)
            
            6Item
      2.
            
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation.
            
            12Item
      3.
            
            Quantitative
      and Qualitative Disclosures About Market Risk.
            
            22Item
      4.
            
            Controls
      and Procedures.
            
            23PART
      II – OTHER INFORMATION
            
            24Item
      1.
            
            Legal
      Proceedings.
            
            24Item
      1A.
            
            Risk
      Factors.
            
            24Item
      2.
            
            Unregistered
      Sales of Equity Securities and Use of Proceeds.
            
            24Item
      3.
            
            Defaults
      Upon Senior Securities.
            
            24Item
      4.
            
            (Removed
      and Reserved).
            
            24Item
      5.
            
            Other
      Information.
            
            24Item
      6.
            
            Exhibits.
            
            25SIGNATURES
            
            27





2




PART
I – FINANCIAL INFORMATION




Item
1.  Financial Statements.





GUANWEI
RECYCLING CORP.


CONDENSED
CONSOLIDATED BALANCE SHEETS


(Expressed
in U.S. dollars)





September
      30,
                    
                    
                    December
      31,2010
                    
                    
                    2009(Unaudited)ASSETSCurrent
      assetsCash
      and cash equivalents
                    
                    $
                    12,706,134
                    
                    
                    $
                    7,302,209Accounts
      receivable
                    
                    
                    953,006
                    
                    
                    
                    4,181Amount
      due from director
                    
                    
                    1,290
                    
                    
                    
                    1,290Amount
      due from an unrelated third party
                    
                    
                    746,146
                    
                    
                    
                    -Prepayments
      and other current assets
                    
                    
                    281,481
                    
                    
                    
                    638,425Inventories
                    
                    
                    3,791,639
                    
                    
                    
                    6,809,865Total
      current assets
                    
                    
                    18,479,696
                    
                    
                    
                    14,755,970Property,
      plant and equipment, net
                    
                    
                    4,940,025
                    
                    
                    
                    4,611,784Land
      use right, net
                    
                    
                    656,837
                    
                    
                    
                    655,295Other
      assets
                    
                    
                    196,983
                    
                    
                    
                    -Total
      Assets
                    
                    $
                    24,273,541
                    
                    
                    $
                    20,023,049LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      liabilitiesShort
      term borrowings
                    
                    $
                    1,447,524
                    
                    
                    $
                    1,420,579Accounts
      payable
                    
                    
                    3,471,599
                    
                    
                    
                    8,685,324Accrued
      expenses and other payables
                    
                    
                    971,248
                    
                    
                    
                    429,124Amount
      due to shareholder
                    
                    
                    814,220
                    
                    
                    
                    352,489Income
      tax payable
                    
                    
                    1,144,722
                    
                    
                    
                    460,695Total
      current liabilities
                    
                    
                    7,849,313
                    
                    
                    
                    11,348,211EquityShareholders’
      equity:Common
      stock, $0.001 par value, 500,000,000 shares authorized,20,000,006 shares and 12,000,000
      shares issued and outstanding, respectively
                    
                    
                    20,000
                    
                    
                    
                    20,000Additional
      paid-in capital
                    
                    
                    1,290,028
                    
                    
                    
                    1,234,133PRC
      statutory reserves
                    
                    
                    805,483
                    
                    
                    
                    805,483Retained
      earnings
                    
                    
                    13,331,818
                    
                    
                    
                    5,908,232Accumulated
      other comprehensive income
                    
                    
                    976,899
                    
                    
                    
                    706,990Total
      shareholders’ equity
                    
                    
                    16,424,228
                    
                    
                    
                    8,674,838Total
      liabilities and shareholders’ equity
                    
                    $
                    24,273,541
                    
                    
                    $
                    20,023,049




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





3




GUANWEI
RECYCLING CORP.


UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME


(Expressed
in U.S. dollars)





Three
      Months Ended
              September
      30,
            
            
            Nine
      Months Ended
              September
      30,2010
            
            
            2009
            
            
            2010
            
            
            2009Net
      revenue
            
            $
            14,983,816
            
            
            $
            7,446,817
            
            
            $
            33,594,779
            
            
            $
            37,892,598Cost
      of revenue
            
            
            9,989,728
            
            
            
            4,330,429
            
            
            
            22,452,934
            
            
            
            29,046,957Gross
      profit
            
            
            4,994,088
            
            
            
            3,116,388
            
            
            
            11,141,845
            
            
            
            8,845,641Operating
      expensesSelling
      and marketing expenses
            
            
            69,972
            
            
            
            64,266
            
            
            
            178,153
            
            
            
            400,142General
      and administrative expenses
            
            
            208,889
            
            
            
            183,494
            
            
            
            928,053
            
            
            
            567,621278,861
            
            
            
            247,760
            
            
            
            1,106,206
            
            
            
            967,763Income
      from operations
            
            
            4,715,227
            
            
            
            2,868,628
            
            
            
            10,035,639
            
            
            
            7,877,878Interest
      income
            
            
            3,750
            
            
            
            5,356
            
            
            
            20,578
            
            
            
            7,070Interest
      expenses
            
            
            (21,824
            )
            
            
            (21,524
            )
            
            
            (63,610
            )
            
            
            (57,307
            )Income
      before income taxes
            
            
            4,697,153
            
            
            
            2,852,460
            
            
            
            9,992,607
            
            
            
            7,827,641Income
      taxes
            
            
            1,149,156
            
            
            
            712,677
            
            
            
            2,569,021
            
            
            
            1,955,596Net
      income
            
            $
            3,547,997
            
            
            $
            2,139,783
            
            
            $
            7,423,586
            
            
            $
            5,872,045Comprehensive
      Income:Net
      income
            
            $
            3,547,997
            
            
            $
            2,139,783
            
            
            $
            7,423,586
            
            
            $
            5,872,045Other
      comprehensive income (loss)-
      Foreign currency translation adjustments
            
            
            202,863
            
            
            
            12,905
            
            
            
            269,909
            
            
            
            21,307Comprehensive
      income
            
            $
            3,750,860
            
            
            $
            2,152,688
            
            
            $
            7,693,495
            
            
            $
            5,893,352Earnings
      per share attributable to shareholders of Guanwei Recycling
      Corp.–
      basic and diluted
            
            $
            0.19
            
            
            $
            0.18
            
            
            $
            0.38
            
            
            $
            0.49Weighted
      average number of shares of common stock used in computingbasic
      and diluted earnings per share
            
            
            20,000,006
            
            
            
            12,000,000
            
            
            
            20,000,006
            
            
            
            12,000,000





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





4




GUANWEI
RECYCLING CORP.


UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(Expressed
in U.S. dollars)





Nine
      Months Ended
                  September
      30,2010
                
                
                2009Cash
      flows from operating activitiesNet
      income
                
                $
                7,423,586
                
                
                $
                5,872,045Adjustments
      to reconcile net income to net cash provided byoperating
    activitiesDepreciation
      of property, plant and equipment
                
                
                303,463
                
                
                
                295,453Amortization
      of land use right
                
                
                10,739
                
                
                
                10,662Loss
      on disposal of property, plant and equipment
                
                
                5,125
                
                
                
                2,693Changes
      in operating assets and liabilitiesAccounts
      receivable
                
                
                (938,368
                )
                
                
                67,245Amount
      due from director
                
                
                -
                
                
                
                14,429Prepayments
      and other assets
                
                
                168,145
                
                
                
                (76,049
                )Inventories
                
                
                3,080,787
                
                
                
                7,089,399Accounts
      payable
                
                
                (5,255,693
                )
                
                
                (6,532,140
                )Accrued
      expenses and other payables
                
                
                556,868
                
                
                
                182,987Income
      tax payable
                
                
                668,105
                
                
                
                709,453Net
      cash provided by operating activities
                
                
                6,022,757
                
                
                
                7,636,177Cash
      flows from investing activitiesPurchase
      of property, plant and equipment
                
                
                (549,823
                )
                
                
                (24,524
                )Net
      cash used for investing activities
                
                
                (549,823
                )
                
                
                (24,524
                )Cash
      flows from financing activitiesAdvance
      from shareholder
                
                
                461,731
                
                
                
                -New
      bank borrowings
                
                
                1,420,767
                
                
                
                1,417,608Repayment
      of bank borrowings
                
                
                (1,420,767
                )
                
                
                -Dividends
      paid to ex-shareholders
                
                
                -
                
                
                
                (6,412,334
                )Amount
      due from an unrelated third party
                
                
                (741,180
                )
                
                
                -Net
      cash flows used in financing activities
                
                
                (279,449
                )
                
                
                (4,994,726
                )Effect
      of exchange rate changes on cash and cash equivalents
                
                
                210,440
                
                
                
                3,368Net
      increase in cash and cash equivalents
                
                
                5,403,925
                
                
                
                2,620,295Cash
      and cash equivalents at the beginning of period
                
                
                7,302,209
                
                
                
                1,029,710Cash
      and cash equivalents at the end of period
                
                $
                12,706,134
                
                
                $
                3,650,005Supplemental
      disclosure of cash flow informationInterest
      received
                
                $
                20,533
                
                
                $
                7,069Interest
      paid
                
                
                63,353
                
                
                
                57,307Income
      taxes paid
                
                
                1,900,915
                
                
                
                1,246,143





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




5




Notes
to Financial Statements.





1       Summary
of Significant Accounting Policies





Guanwei
Recycling Corp. (the “Registrant”) operates through its wholly owned subsidiary,
Hongkong Chenxin International Development Limited (“Chenxin”), a company
incorporated in Hong Kong, and Chenxin’s wholly owned subsidiary, Fuqing Guanwei
Plastic Industry Co., Limited, a company incorporated in Fuzhou city, Fujian
Province, PRC on April 9, 2005 as a wholly domestic-owned enterprise with an
operating period up to April 8, 2055 (“Guanwei”, and
together with the Registrant and Chenxin, hereafter referred to as the
“Company”). The Company is organized as a single business segment and is
principally engaged in the manufacturing and distribution of low density
polyethylene (“LDPE”) and the sales
of scrap materials, including plastic.





The
accompanying unaudited condensed consolidated financial statements have been
prepared pursuant to the rules and regulations for reporting on Form 10-Q.
Accordingly, certain information and footnotes required by accounting principles
generally accepted in the United States of America (“US GAAP”) for annual
financial statements are not included herein. In management’s opinion, these
unaudited condensed consolidated financial statements include all adjustments
necessary for a fair presentation of the information when read in conjunction
with our 2009 audited consolidated financial statements and the related notes
thereto. The financial information as of December 31, 2009 is derived from
our 2009 Annual Report on Form 10-K. The interim condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in our 2009 Annual Report on
Form 10-K. The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for the full
year.





(a)         Basis
of Consolidation





The
condensed consolidated financial statements of the Company include the financial
statements of the Registrant and its wholly-owned subsidiaries. All significant
inter-company transactions and balances have been eliminated on
consolidation.





(b)         Use
of Estimates





The
preparation of financial statements in conformity with US GAAP requires
management to make estimates and assumptions that affect the amounts that are
reported in the financial statements and accompanying disclosures. Although
these estimates are based on management’s best knowledge of current events and
actions that the Company may undertake in the future, actual results may be
different from the estimates.





(c)         Foreign
Currency Translations and Transactions





The
Company’s operations in the PRC use the local currency, RMB, as their functional
currency, whereas amounts reported in the accompanying condensed consolidated
financial statements and disclosures are stated in US dollars, the reporting
currency of the Company, unless stated otherwise.





As such,
the Company uses the “current rate method” to translate its PRC operations from
RMB into US dollars (“USD” or “$”), as required under the Accounting Standards
Codification (“ASC”) 830 “Foreign Currency Matters” (formerly SFAS No. 52,
“Foreign Currency Translation” ). The assets and liabilities of its PRC
operations are translated into USD using the rate of exchange prevailing at the
balance sheet date. The capital accounts are translated at the historical rate.
Adjustments resulting from the translation of the balance sheets of the
Company’s PRC subsidiary, Guanwei, from RMB into USD are recorded in
shareholders’ equity as part of accumulated comprehensive income. The statement
of income and comprehensive income is translated at average rates during the
reporting period. Gains or losses resulting from transactions in currencies
other than the functional currencies are recognized in net income for the
reporting periods. The statement of cash flows is translated at average rates
during the reporting period, with the exception of issuance of shares and
payment of dividends which are translated at historical rates.





6




(d)         Revenue
Recognition





Revenue
from sales of manufactured LDPE is recognized when persuasive evidence of an
arrangement exists, delivery of the goods has occurred, and customer acceptance
has been obtained, which means the significant risks and ownership have been
transferred to the customer, the price is fixed or determinable and
collectability is reasonably assured.





Sales of
scrap materials are recognized on the same basis as sales of LDPE.





Interest
income is recognized on a time proportion basis, taking into account the
principal amounts outstanding and the interest rates applicable.





(e)           Income
taxes





The
Company accounts for income and deferred tax under the provision of the
Accounting Standards Codification 740 (“ASC 740”) ”Income Taxes” (Formerly
SFAS No. 109: “Accounting for Income Taxes”). Deferred tax assets and
liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. ASC 740 also
requires the recognition of the future tax benefits of net operating loss carry
forwards. A valuation allowance is established when the deferred tax assets are
not expected to be realized within a reasonable period of time.





Effective
January 1, 2007, the Company adopted ASC 740-10-25 “Income Taxes” (formerly FIN
No. 48 “Accounting for Uncertainty in Income Taxes”). In accordance with ASC
740-10-25, the Company recognizes tax benefits that satisfy a greater than 50%
probability threshold and provides for the estimated impact of interest and
penalties for such tax benefits. The Company did not have any such uncertain tax
positions in the three months and nine months ended September 30, 2010 and 2009,
and as of the balance sheet dates.





Deferred
income taxes are recognized for temporary differences between the tax basis of
assets and liabilities and their reported amounts in the financial statements,
net operating loss carry forwards and credits by applying enacted statutory tax
rates applicable to future years. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Current
income taxes are provided for in accordance with the laws of the relevant taxing
authorities. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income for the period that includes the enactment
date.





(f)           Inventories





Inventories are stated at the lower of
cost, on the first-in, first-out method, or market value. Costs include purchase
and related costs incurred in bringing each product to its present location and
condition. Market value is calculated based on the estimated normal selling
price, less further costs expected to be incurred for disposal. Provision is
made for obsolete, slow moving or defective items, where
appropriate.





(g)         Related
parties





Entities are considered to be related
to the Company if the parties, directly or indirectly, through one or more
intermediaries, control, are controlled by, or are under common control with the
Company. Related parties also include principal owners of the Company, its
management, members of the immediate families of principal owners of the Company
and its management and other parties with which the Company may deal if one
party controls or can significantly influence the management or operating
policies of the other to an extent that one of the transacting parties might be
prevented from fully pursuing its own separate interests. A party which can
significantly influence the management or operating policies of the transacting
parties or if it has an ownership interest in one of the transacting parties and
can significantly influence the other to an extent that one or more of the
transacting parties might be prevented from fully pursuing its own separate
interests is also a related party.





7




3         Revenue





Three
      Months Ended
              September
      30,
            
            
            Nine
      Months Ended
              September
      30,2010
            
            
            2009
            
            
            2010
            
            
            2009(Unaudited)
            
            
            (Unaudited)
            
            
            (Unaudited)
            
            
            (Unaudited)Sales
      of recycled LDPE
            
            $
            14,721,557
            
            
            $
            7,286,446
            
            
            $
            32,900,273
            
            
            $
            29,939,888Sales
      of raw materials
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            7,483,107Sales
      of scrap materials
            
            
            262,259
            
            
            
            160,371
            
            
            
            694,506
            
            
            
            469,603$
            14,983,816
            
            
            $
            7,446,817
            
            
            $
            33,594,779
            
            
            $
            37,892,598





4           Income
Taxes




No
provision for US or Hong Kong profits tax has been made as the Company has no
assessable profit for tax purposes during the periods.





The
Company provides for PRC Enterprise Income Tax (“PRC - EIT”) at a rate of 25%
(2009: 25%), after offsetting losses brought forward, if any, on the basis of
its income for financial reporting purposes, adjusted for income and expense
items which are not assessable or deductible for PRC-EIT.





Three
      Months Ended
              September
      30,
            
            
            Nine
      Months Ended
              September
      30,2010
            
            
            2009
            
            
            2010
            
            
            2009(Unaudited)
            
            
            (Unaudited)
            
            
            (Unaudited)
            
            
            (Unaudited)The
      provision of income taxes consistsof
      current tax expensePRC
      – EIT
            
            $
            1,149,156
            
            
            $
            712,677
            
            
            $
            2,569,021
            
            
            $
            1,955,596





The
principal reconciling items from income tax computed at the statutory rate and
at the effective income tax rate are stated as follows:





Three
      Months Ended
              September
      30,
            
            
            Nine
      Months Ended
              September
      30,2010
            
            
            2009
            
            
            2010
            
            
            2009(Unaudited)
            
            
            (Unaudited)
            
            
            (Unaudited)
            
            
            (Unaudited)Income
      before income taxes
            
            $
            4,697,153
            
            
            $
            2,852,460
            
            
            $
            9,992,607
            
            
            $
            7,827,641Computed
      tax at PRC statutory rateof
      25%
            
            
            1,174,288
            
            
            
            713,115
            
            
            
            2,498,152
            
            
            
            1,956,910Non-taxable
      items
            
            
            -
            
            
            
            (438
            )
            
            
            -
            
            
            
            (1,314
            )Non-deductible
      items
            
            
            16,664
            
            
            
            -
            
            
            
            152,574
            
            
            
            -Others
            
            
            (41,796
            )
            
            
            -
            
            
            
            (81,705
            )
            
            
            -$
            1,149,156
            
            
            $
            712,677
            
            
            $
            2,569,021
            
            
            $
            1,955,596





No
provision for deferred taxation has been made in the consolidated financial
statements as there were no significant temporary differences arising during
each of the three months and nine months ended September 30, 2010 and 2009 or as
of the balance sheet dates.





The
Company has not provided deferred taxes on undistributed earnings attributable
to its subsidiaries as they are to be permanently reinvested.  On
February 22, 2008, the Ministry of Finance (“MOF”) and the State Administration
of Taxation (“SAT”) jointly issued Cai Shui [2008] Circular 1 (“Circular 1”).
According to Article 4 of Circular 1, distributions of accumulated profits
earned by wholly-owned foreign enterprises (“WOFE”) prior to January 1, 2008 to
foreign investors will be exempt from withholding tax (“WHT”) while distribution
of the profit earned by a WOFE after January 1, 2008 to its foreign investors
shall be subject to WHT.





8


Since the
Company intends to reinvest its earnings to further expand its businesses in
mainland China, its foreign invested enterprises do not intend to declare
dividends to their immediate foreign holding companies in the foreseeable
future. Accordingly, the Company has not recorded any WHT on the cumulative
amount of undistributed retained earnings.





Should
the Company’s subsidiaries distribute all their profits generated after December
31, 2007, the aggregate withholding tax amount will be approximately $1,412,747
and $630,000 as of September 30, 2010 and December 31, 2009,
respectively.





5         Inventories




September  30,
            
            
            December
      31,2010
            
            
            2009(Unaudited)Raw
      materials
            
            $
            2,435,431
            
            
            $
            5,571,535Work-in-progress
            
            
            59,654
            
            
            
            76,155Finished
      goods
            
            
            1,296,554
            
            
            
            1,162,175$
            3,791,639
            
            
            $
            6,809,865




6           Amount
Due From An Unrelated Third Party
 
 The balance represents an advance to a
company controlled by a friend of Mr. Chen, a director of the Company,
which is unsecured, interest-free and repayable on January 6, 2011. The balance
was fully repaid on October 28, 2010.
  7          Short
Term Borrowings





The short term loan as of September 30,
2010 bears interest at a fixed rate of 5.94% per annum with the maturity date on
January 20, 2011, and is secured by the Company’s building and land use
right.





The short term loan as of December 31,
2009 bore interest at a fixed rate of 5.94% per annum and was secured by the
Company’s building and land use right. The loan was fully repaid on January 14,
2010.





8
            PRC
      Reserves





Statutory
Surplus Reserve Fund





Pursuant to applicable PRC laws and
regulations, Guanwei is required to allocate at least 10% of its net income to
the statutory surplus reserve fund until such funds reaches 50% of the
subsidiary’s registered capital. The statutory surplus reserve fund can be
utilized upon the approval by the relevant authorities, to offset accumulated
losses or to increase registered capital, provided that such fund be maintained
at a minimum of 25% of the registered capital. As Guanwei’s statutory surplus
reserve fund had reached 50% of its registered capital, there were no
appropriations to the statutory surplus reserve fund during the three months and
nine months ended September 30, 2010 and 2009.





Statutory
Public Welfare Fund





Pursuant to PRC laws and regulations as
applicable to PRC domestic-owned enterprises, Guanwei, the Company’s subsidiary
in the PRC, is required to allocate a certain amount of its net income to the
statutory public welfare fund determined by Guanwei. Guanwei ceased to allocate
such fund since it became a foreign-owned enterprise in December 2008. The staff
welfare fund can only be used to provide staff welfare facilities and other
collective benefits to the employees. This fund is non-distributable other than
upon liquidation of Guanwei. During the three months and nine months ended
September 30, 2010 and 2009, the board of directors of Guanwei determined no
appropriations to statutory public welfare fund.





9
            Pension
      Plan





As stipulated by the rules and
regulations in the PRC, Guanwei, the Company’s subsidiary in the PRC,
contributes to the national retirement plans for its employees in the PRC. The
subsidiary contributes approximately 20% of the base salaries of its employees,
and has no further obligations for the actual payment of pension or
post-retirement benefits beyond the annual contributions. The state-sponsored
retirement plans are responsible for the entire pension obligations payable to
retired employees.





During the three months ended September
30, 2010 and 2009, the aggregate contributions of the Company to the pension
plan were approximately $20,000 and $27,000, respectively.





9


During the nine months ended September
30, 2010 and 2009, the aggregate contributions of the Company to the pension
plan were approximately $67,000 and $83,000, respectively.





10
            Risk,
      Uncertainties and Concentration





(i)
            Nature
      of Operations





All of the Company’s operations are
conducted in the PRC and are subject to various political, economic, and other
risks and uncertainties inherent in this country. Among other risks, the
Company’s operations are subject to the risks of restrictions on transfer of
funds; export duties, quotas and embargoes; domestic and international customs
and tariffs; changing taxation policies; foreign exchange restrictions; and
political conditions and governmental regulations.





(ii)
            Concentration
      of Credit Risk





Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally of
cash.





As of September 30, 2010 and December
31, 2009, the Company had cash deposits of $12.7 million and $7.3 million placed
with several banks and a financial institution in the PRC, where there is
currently no rule or regulation in place for obligatory insurance of accounts
with banks and financial institutions. The Company has not experienced any
losses in such accounts and believes it is not exposed to any risks on its cash
in accounts with banks and financial institutions.





(iii)
            Concentration
      of Suppliers, Customers and Restriction of Import
  Quota





For the
three months ended September 30, 2010 and 2009, 87% and 94% of raw materials was
purchased from three major suppliers, respectively.  For the nine
months ended September 30, 2010 and 2009, 76% and 93% of raw materials was
purchased from three major suppliers, respectively.





The
Company did not have customer concentration. No one customer was responsible for
more than 10% of the Company’s revenue in the three months and nine months ended
September 30, 2010 and 2009.





In the
PRC, import of regenerative plastic materials is controlled by import quota. The
grant of import quota to the Company is subject to review and approval by the
Ministry of Environmental Protection of the PRC annually. For the fiscal year
ending December 31, 2010 and the fiscal year ended December 31, 2009 the Company
obtained an import quota of 24,000 tons of regenerative plastic materials (note
11).





(iv)
            Foreign
      Exchange Risk





The
Company operates in the PRC and purchases raw materials from overseas suppliers,
and is exposed to foreign exchange risk arising from various currency exposures,
primarily with respect to purchases in USD and Euros. Foreign exchange risk
arises from committed and unmatched future commercial transactions, such as
confirmed import purchase orders, recognized assets and liabilities in the PRC
operations.





The Company does not enter into any
hedging transactions in an effort to reduce exposure to foreign exchange
risk.





(v)
            Dependence
      of Import Quota from a Related
Company





During
the three months and nine months ended September 30, 2010 and 2009, import of
regenerative plastic materials were heavily dependent on the import quota
granted by a related company, Fuqing Huan Li Plastics Company Limited or “Huan
Li” (note 11). Although the Company has not experienced difficulties obtaining
the import quota from Huan Li in the past, the Company cannot guarantee the
grant of import quota will be successfully obtained from Huan Li in the future.
If the Company fails to obtain the import quota from Huan Li, the Company may
have to use domestically supplied plastic wastes for manufacturing. Domestic
plastic wastes are typically poorly sorted, so utilizing the domestic raw
materials would increase production costs.





10




11
            Related
      Party Transactions and Balance





During
the three months and nine months ended September, 2010 and 2009, the Company was
permitted to use, for no consideration, the import quota of a related party,
Huan Li, for the import of regenerative plastic materials. Huan Li is considered
to be a related party since Chen Min, the Chief Executive Officer and Chairman
of the Board of Directors of the Registrant, is also the Chief Executive
Officer, Chairman of Board of Directors and legal representative of Huan
Li.





Chenxin
International Limited, a shareholder of the Registrant, paid accrued expenses of
$62,950 and $461,731 on behalf of the Registrant during the three months and
nine months ended September 30, 2010, respectively. These amounts were related
to legal and professional fees paid by Chenxin International Limited on behalf
of the Registrant and were outstanding as amount due to shareholder on the
consolidated balance sheet as of September 30, 2010.





11





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




Except as
otherwise indicated by the context, references in this Quarterly Report to “we”,
“us”, “our” or the “Company” are to the consolidated businesses of Guanwei
Recycling Corp. and its wholly-owned direct and indirect subsidiaries, Hongkong
Chenxin International Development Limited, a Hong Kong limited company
(“Chenxin”) and Fuqing Guanwei Plastic Industry Co. Ltd., a China limited
company (“Guanwei”), except that references to “our common stock” or “our
capital stock” or similar terms refer to the common stock, par value $0.001 per
share, of Guanwei Recycling Corp., a Nevada corporation (the
“Registrant”).  ”China” or “PRC” refers to the People’s Republic of
China.  References to “RMB” refer to the Chinese Renminbi, the
currency of the primary economic environment in which the Company
operates.





Management’s
Discussion and Analysis of Financial Condition and Results of Operations
(“MD&A”) is designed to provide information that is supplemental to, and
should be read together with, the Company’s consolidated financial statements
and the accompanying notes contained in this Quarterly Report. Information in
this Item 2 is intended to assist the reader in obtaining an understanding of
the consolidated financial statements, the changes in certain key items in those
financial statements from quarter to quarter, the primary factors that accounted
for those changes, and any known trends or uncertainties that the Company is
aware of that may have a material effect on the Company’s future performance, as
well as how certain accounting principles affect the consolidated financial
statements. This includes discussion of (i) Liquidity, (ii) Capital Resources,
(iii) Results of Operations, and (iv) Off-Balance Sheet Arrangements, and any
other information that would be necessary to an understanding of the company’s
financial condition, changes in financial condition and results of
operations.





Forward
Looking Statements





The
following discussion of our financial condition and results of operations is
based upon and should be read in conjunction with our consolidated financial
statements and their related notes included in this Quarterly Report and the
Annual Report on Form 10-K as filed with the SEC for the year ended December 31,
2009. This report contains forward-looking statements. Generally, the words
“believes,” “anticipates,” “may,” “will,” “should,” “expect,” “intend,”
“estimate,” “continue” and similar expressions or the negative thereof or
comparable terminology are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties, including the matters
set forth in this report or other reports or documents we file with the SEC from
time to time, which could cause actual results or outcomes to differ materially
from those projected. Undue reliance should not be placed on these
forward-looking statements which speak only as of the date hereof. We undertake
no obligation to update these forward-looking statements.





Business
Overview





The
Company operates its business through its indirect wholly-owned subsidiary,
Guanwei, which is located in Fuqing City, Fujian Province, PRC. Guanwei imports
and recycles low density polyethylene (“LDPE”) plastic scrap material into
granular plastic for use in the manufacture of various consumer products, and is
one of the largest manufacturers of recycled LDPE in China. Guanwei is one of
the few plastic recyclers in China to import primarily all of its raw materials
(i.e. plastic waste) from foreign suppliers (primarily Germany) where the cost
of processing plastic waste is significantly higher than in China. Guanwei’s
products are sold to customers in a wide range of industries, including shoe
manufacturing, architecture and engineering products, industrial equipment and
supplies, and chemical and petrochemical manufacturing.





The
Company is organized as a single business segment and is committed to sourcing
and developing innovative ideas and markets for recycled materials, and
concentrates on transforming plastic waste into useful plastic grains. Its
mission is to be an environmentally conscious, profitable manufacturer of
plastics products of the highest quality. Guanwei procures raw material in the
form of unrecycled plastic waste from its suppliers and uses this material to
manufacture recycled plastic grains, which are then sold to manufacturers of
consumer products in various industries. Guanwei specializes in the production
of various recycled plastics products, the most important of which is LDPE. In
the last four years, Guanwei has developed four distinct grades of LPDE plastic
grains, which are sold to clients to be manufactured into a broad range of end
products. Guanwei currently sells to more than 300 customers in over 10
industries, ranging from shoe manufacturing, architecture and engineering,
industrial equipment and supplies, and chemical and petrochemical manufacturing.
Guanwei’s LDPE products in particular are widely used in the manufacturing of
chemical and functional fibers, and is the main raw material for shoe soles,
insulation material, fire-proofing and water-proofing material, and
foam.





Guanwei
operates its business in compliance with the highest environmental standards in
order to meet the stringent requirements of both German and Chinese authorities.
In fact, on January 1, 2009, TÜV Rheinland Cert GmbH (“TUV”), a provider of
certification services, issued its audit report on the compliance of Guanwei’s
operations with German regulations regarding pollution and environmental
controls. Based upon its audit, TUV determined that Guanwei should be issued a
certificate (a “Compliance Certificate”) as to such compliance. Holding a
Compliance Certificate permits a plastics recycler to purchase plastic waste
directly from German suppliers.





12


The
Company’s corporate offices are located at Rong Qiao Economic Zone, Fuqing City,
Fujian Province, People’s Republic of China, 350301.





Critical
Accounting Policies, Estimates and Assumptions





Accounting
Principles




Our
discussion and analysis of our financial condition and results of operations are
based upon our unaudited condensed consolidated financial statements. These
financial statements are prepared in accordance with generally accepted
accounting principles in the United States (“US GAAP”), which requires us to
make estimates and assumptions that affect the reported amounts of our assets,
liabilities, revenues and expenditures, to disclose contingent assets and
liabilities on the date of the financial statements, and to disclose the
reported amounts of revenues and expenses incurred during the financial
reporting period. The most significant estimates and assumptions include
revenues recognition, valuation of inventories and provisions for income taxes.
We continue to evaluate these estimates and assumptions that we believe to be
reasonable under the circumstances. We rely on these evaluations as the basis
for making judgments about the carrying values of assets and liabilities that
are not readily apparent from other sources. Since the use of estimates is an
integral component of the financial reporting process, actual results could
differ from those estimates. Some of our accounting policies require higher
degrees of judgment than others in their application. We believe critical
accounting policies as disclosed in this Quarterly Report reflect the more
significant judgments and estimates used in preparation of our financial
statements. We believe there have been no material changes to our critical
accounting policies and estimates.




The
following critical accounting policies rely upon assumptions and estimates and
were used in the preparation of our unaudited consolidated financial
statements:





(a)
            Revenue
      Recognition





Revenue
from sales of manufactured LDPE is recognized when persuasive evidence of an
arrangement exists, delivery of the goods has occurred, and customer acceptance
has been obtained, which means the significant risks and ownership have been
transferred to the customer, the price is fixed or determinable and
collectability is reasonably assured.





Sales of
scrap materials are recognized on the same basis as sales of LDPE.





Interest
income is recognized on a time proportion basis, taking into account the
principal amounts outstanding and the interest rates applicable.




(b)
            Income
      taxes





The
Company accounts for income and deferred tax under the provision of the
Accounting Standards Codification 740 (“ASC 740”) “Income Taxes” (Formerly SFAS
No. 109: “Accounting for Income Taxes”). Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. ASC 740 also requires the
recognition of the future tax benefits of net operating loss carry forwards. A
valuation allowance is established when the deferred tax assets are not expected
to be realized within a reasonable period of time.





Effective
January 1, 2007, the Company adopted ASC 740-10-25 “Income Taxes” (formerly FIN
No. 48 “Accounting for Uncertainty in Income Taxes”). In accordance with ASC
740-10-25, the Company recognizes tax benefits that satisfy a greater than 50%
probability threshold and provides for the estimated impact of interest and
penalties for such tax benefits. The Company did not have any such uncertain tax
positions in the three months and nine months ended September 30, 2010 and 2009,
and as of the balance sheet dates.





Deferred
income taxes are recognized for temporary differences between the tax basis of
assets and liabilities and their reported amounts in the financial statements,
net operating loss carry forwards and credits by applying enacted statutory tax
rates applicable to future years. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be realized. Current
income taxes are provided for in accordance with the laws of the relevant taxing
authorities. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income for the period that includes the enactment
date.




13




(c)
            Inventories





Inventories
are stated at the lower of cost, on the first-in, first-out method, or market
value. Costs include purchase and related costs incurred in bringing each
product to its present location and condition. Market value is calculated based
on the estimated normal selling price, less further costs expected to be
incurred for disposal. Provision is made for obsolete, slow moving or defective
items, where appropriate.





Results
of Operations for the Three Months Ended September 30, 2010 Compared To the
Three Months Ended September 30, 2009





The
following table sets forth a summary of certain key components of our results of
operations for the periods indicated, in USD.





For
      The Three Months Ended
              September
      30,2010
            
            
            2009
            
            
            Change
      in %Net
      revenue
            
            $
            14,983,816
            
            
            $
            7,446,817
            
            
            
            101.21
            %Cost
      of revenue
            
            $
            9,989,728
            
            
            $
            4,330,429
            
            
            
            130.69
            %Gross
      profit
            
            $
            4,994,088
            
            
            $
            3,116,388
            
            
            
            60.25
            %Operating
      expenses
            
            $
            278,861
            
            
            $
            247,760
            
            
            
            12.55
            %Interest
      expenses, net
            
            $
            18,074
            
            
            $
            16,168
            
            
            
            11.79
            %Net
      income
            
            $
            3,547,997
            
            
            $
            2,139,783
            
            
            
            65.81
            %





Net
Revenue





The
following table sets forth a summary of our net revenue by categories for the
periods indicated, in USD.





For
      The Three Months Ended
              September
      30,2010
            
            
            2009
            
            
            Change
      in %Sales
      of recycled LDPE-Manufactured
            
            $
            12,730,548
            
            
            $
            7,286,446
            
            
            
            74.72
            %-Purchased
            
            
            1,991,009
            
            
            
            -
            
            
            
            N/ASales
      of non- LDPE materials
            
            
            262,259
            
            
            
            160,371
            
            
            
            63.53
            %$
            14,983,816
            
            
            $
            7,446,817
            
            
            
            101.21
            %





Our
revenues are primarily derived from sales of recycled LDPE and non-LDPE waste
material. We manufacture recycled LDPE from plastic waste and occasionally also
purchase recycled LDPE from other manufacturers for resale when market
conditions justify doing so. The raw materials (i.e. plastic waste) we use in
our operations generally contain approximately 8-10% of non-LDPE plastic waste,
such as polyethylene terephthalate, polypropylene, or acrylonitrile butadiene
styrene. We sort and classify this non-LDPE material and sell it to other
recycled plastic manufacturers who use these products.





During
the second quarter of 2010, the Company completed the construction projects
involving our washing and smashing plant. The washing and smashing plant is a
key component in the Company’s manufacturing process. After being sorted from
the non-LDPE material, all LDPE material is smashed and cut into pieces by one
of eight smashing machines before being washed and cleaned several times in
order to eliminate impurities. After completion of the construction projects,
the washing pools were drained and excavated to increase their depth, some
components of the pools’ vortex pumps were replaced, and the engine size of the
pumps was enlarged to enhance their efficiency. The improved washing pools allow
the Company to enhance the whiteness of the recycled LDPE material, which
results in a higher grade end-product. This is particularly desirable for the
many customers who mix recycled LDPE with virgin plastics in their production
processes and who typically have strict color requirements.




14


During
this quarter, construction on the new raw material warehouse, which is more than
4,000 square meters, was completed and the warehouse was put into use. Raw
materials were relocated to the new warehouse and the old raw material warehouse
was converted for expansion of the Company’s classification and sorting
operations, which will allow for future increases in production
capacity.




Revenue
generated during the three months ended September 30, 2010 from the sale of
manufactured recycled LDPE was $12,730,548, as compared to $7,286,446 for the
same period of 2009, which represents an increase of 74.72%. This increase was
due to an increase in both sales volume and selling price of manufactured
recycled LDPE.  The Company sold 11,483 tons of manufactured recycled LDPE
in the three months ended September 30, 2010, representing an increase of 64.61%
from the 6,976 tons sold in the corresponding period of 2009. The average
selling price of recycled LDPE increased 6.12% from approximately $1,045 per ton
in the three months ended September 30, 2009 to approximately $1,109 per ton in
the same period in 2010. The average selling prices of recycled LDPE have been
steadily increasing since the first quarter of 2009. Coupled with the strong
demand for our products, we believe this trend should positively impact our
revenues going forward.




During
this quarter, we also purchased recycled LDPE from other recycled manufacturers
for resale in order to meet the demand from certain of our customers. The
product quality of recycled LDPE purchased from other recycled plastic
manufacturers was moderate and accordingly the gross profit margin of such
purchased recycled LDPE was low. The Company sold 1,863 tons of purchased
recycled LDPE, generating net revenue of $1,991,009 during the three months
ended September 30, 2010. There were no sales of purchased recycled LDPE during
the third quarter of 2009.





Revenue
generated from the sales of sorted non-LDPE material increased from $160,371 in
the three months ended September 30, 2009 to $262,259 in the same period of
2010, representing an increase of 63.53%. This was due to an increase in both
sales volume and selling price. Guanwei sold 1,201 tons of sorted non-LDPE
material in the three months ended September 30, 2010, representing an increase
of 29.84% from ­925 tons sold in the same period of 2009. A higher volume of
non-LDPE material was sold during the three months ended September 30, 2010
because the raw materials acquired during the quarter contained a greater
proportion of high-grade LDPE plastics, enabling Guanwei to produce more
higher-priced Grade A recycled LDPE, but also contained a higher level of
non-LDPE plastics. The average selling price of sorted non-LDPE material
increased 26.01% from approximately $173 per ton in the three months ended
September 30, 2009 to approximately $218 per ton in the same period in 2010. As
with recycled LDPE, the average selling price of sorted non-LDPE materials has
increased steadily since the first quarter of 2009.





Our
revenue may be affected by the import quotas granted by the PRC’s Ministry
of Environmental Protection.  Guanwei has been approved for an import
quota of 24,000 tons of plastic waste per year, and for a number of years,
Guanwei has also been permitted to use, at no cost, the 35,000 tons per year
import quota granted to Fuqing Huan Li Plastics Company Limited (“Huan Li”).
Chen Min, our Chief Executive Officer and Chairman of the Board, is also the
Chief Executive Officer, Chairman of the Board and legal representative of Huan
Li. There can be no guarantee that Huan Li’s import quota will be available to
us in the future. If we are unable to use Huan Li’s import quota or obtain the
grant of import quota from the Ministry of Environment Protection, our revenue
and results of operations would be materially adversely affected. Please refer
to the section entitled “Risk Factors” in our Annual Report on Form 10-K for
further information and other factors that may affect our
revenue.





The
Company is applying to the relevant government agencies for an increase in its
import quota for plastic waste. Pre-approval for the application has already
been received from the Development Council of the Fuqing Rongqiao Economic Zone
Authority and the application has been forwarded for further processing to the
General Administration of Quality Supervision, Inspection and Quarantine of the
PRC, the General Administration of Customs of the PRC and the Ministry of
Environmental Protection of the PRC. It is anticipated that the full approval
process will take approximately one year. If successful, by the end of March
2011, the Company expects to add 150,000 tons to its current import quota of
24,000 tons.





Other
than as disclosed elsewhere in this Quarterly Report, we are unaware of any
trends or uncertainties which have or which we reasonably expect to have a
material impact on net sales or revenues from continued operations.





15


Cost of
Revenue





For
      the Three
              Months
      Ended
              September
      30,
              2010
            
            
            %
      of net
              revenue
            
            
            For
      the Three
              Months
      Ended
              September
      30,
              2009
            
            
            %
      of net
              revenue
            
            
            Change in
              %Costs
      of manufactured recycled LDPE and sorted non-LDPE
      material
            
            $
            8,084,199
            
            
            
            62.22
            %
            
            $
            4,330,429
            
            
            
            58.15
            %
            
            
            86.68
            %Costs
      of purchased recycled LDPE
            
            
            1,905,529
            
            
            
            95.71
            %
            
            
            -
            
            
            
            N/A
            
            
            
            N/A$
            9,989,728
            
            
            
            66.67
            %
            
            $
            4,330,429
            
            
            
            58.15
            %
            
            
            130.69
            %





Our cost
of revenue consists of the costs of plastic waste raw materials, both for
production and direct sale, and labor costs and overhead related to
production.





During
the three months ended September 30, 2010 and 2009, our cost of revenue from
sales of manufactured recycled LDPE and sorted non-LDPE material was $8,084,199
and $4,330,429, respectively, representing 62.22% and 58.15% of net revenue from
sales of manufactured recycled LDPE and sorted non-LDPE material, respectively.
The increase in the percentage of cost to net revenue is primarily due to the
fact that the increase in manufacturing cost of recycled LDPE and sorted
non–LDPE material is higher than the increase in average selling
prices.





Because
our cost of revenue from sales of manufactured recycled LDPE and sorted non-LDPE
material consists primarily of the purchase price of imported plastic waste for
production, we have limited influence on such costs. The prices of imported
plastic waste are determined solely by suppliers and are dependent upon market
conditions. The average manufacturing cost of recycled LDPE and sorted
non-LDPE material increased by 16.29% from the third quarter of 2009 to the
third quarter of 2010.





In order
to reduce costs and increase profit margins, Guanwei focuses heavily on
developing relationships with new suppliers and increasing the amount of high
quality raw material purchased directly from European suppliers of plastic
waste, as opposed to purchasing from a wholesaler.  Guanwei will
continue to work on developing such relationships, and obtaining more favorable
terms and discounts by strengthening our relationship with suppliers and placing
more bulk orders. In fact, in May, 2010 and July, 2010, Guanwei entered into
supply arrangements with two German suppliers for the purchase of at least
35,000 tons of plastic waste.




Gross
Profit





The
overall gross profit for the three months ended September 30, 2010 increased
60.25% to $4,994,088 as compared to $3,116,388 for the same period in 2009,
representing an increase of $1,877,700, or 25.21% of net revenue. During the
three months ended September 30, 2010, our overall gross profit margin decreased
to 33.33% from 41.85% in the same period of 2009. The 8.52% period-over-period
decrease in overall gross profit margin is primarily attributable to (i) a
4.07% period-to-period decrease in gross profit margin of sales of manufactured
LDPE and non-LDPE material, and (ii) the increase in sales of purchased
recycled LDPE.





Gross
profit from sales of manufactured recycled LDPE and sorted non-LDPE material
during the three months ended September 30, 2010 increased $1,792,220 to
$4,908,608, or 24.07% of net revenue, from $3,116,388 for the same period of
2009. The increase in gross profit was primarily the result of the increase in
selling price and sales volume. During the three months ended September 30,
2010, the sales volume of manufactured recycled LDPE and sorted non-LDPE
material increased 64.61% and 29.84% respectively, and their average selling
prices increased 6.12% and 26.01%, respectively. The average per-ton cost of
production during the three months ended September 30, 2010 increased 16.29%
compared to the same period of 2009.





Gross
profit from sales of purchased recycled LDPE during the three months ended
September 30, 2010 was $85,480 or 4.29% of net revenue. There were no sales of
purchased recycled LDPE in the same period of 2009.





In order
to reduce costs and to secure availability of raw material supplies, the Company
will continue to work on obtaining more favorable terms and a sustainable supply
of materials by strengthening our relationship with suppliers and by developing
long term supply arrangements.





16




Operating
Expenses





For The Three Months
      Ended
              September 30,2010
            
            
            2009
            
            
            Change
      in %Operating
      expenses-
      Sales & Marketing
            
            $
            69,972
            
            
            $
            64,266
            
            
            
            8.88
            %-
      G&A
            
            
            208,889
            
            
            
            183,494
            
            
            
            13.84
            %Total
            
            $
            278,861
            
            
            $
            247,760
            
            
            
            12.55
            %





For the
three months ended September 30, 2010, operating expenses were $278,861,
representing an increase of 12.55% from $247,760 for the three months ended
September 30, 2009. The increase was primarily due to a 8.88% increase in sales
and marketing expenses and a 13.84% increase in general and administrative
expenses.





Sales and
marketing expenses include transportation and courier costs and sales
remunerations. In the three months ended September 30, 2010, sales and marketing
expenses increased 8.88% to $69,972, as compared to $64,266 for the same period
in 2009. The increase was primarily caused by the increase of wages and packing
material costs, which was partially offset by the decrease of transportation
costs.





General
and administrative expenses primarily consist of management remuneration,
depreciation and amortization, employee welfare costs, and legal and
professional fees.  During the three months ended September 30, 2010,
general and administrative expenses increased 13.84% to $208,889, as compared to
$183,494 in the same period of 2009.  This increase was primarily due
to the increase in legal and professional fees incurred in relation to ongoing
compliance requirements as a result of our share exchange transaction in
November 2009 and our listing on NASDAQ on April 12, 2010.





Net
Income





During
the three months ended September 30, 2010, our net income increased 65.81% to
$3,547,997 from $2,139,783 for the same period of 2009. The increase in net
income is primarily due to the $1,877,700 increase in gross profit which was
largely driven by the increase in sales volume and selling prices in the current
quarter, but was partially offset by a $31,101 increase in operating expenses
and a $436,479 increase in income taxes resulting from higher operating
income.





In order
to continue to improve gross margin and net profit margin, we intend to focus on
enhancing our manufacturing techniques and improving our labor efficiency.
Additionally, we will continue to strengthen our relationships with our major
suppliers to obtain more favorable terms, and we will enhance management control
over the general and administrative expenses.





Interest Income and
Expense





Our
interest income is generated by interest earned on deposits with banks and
financial institutions and interest expenses are amounts we pay in interest with
respect to our borrowings. Net interest expenses (interest expenses offset by
interest income) were recorded at $18,074 in the three months ended September 30
2010, representing an increase of 11.79% from $16,168 in the same period of
2009. The increase is primarily due to the decrease in interest income in the
three months ended September 30, 2010.





We
support our operations with a combination of self-generated profit and limited
amount of loans from banks and financial institutions. For the three months
ended September 30, 2010, we had one short-term loan of $1,447,524 from the
Rural Credit Cooperatives Union, which will mature on January 20, 2011. The
interest rate on this loan is 5.94%.





17




Results
of Operations for the Nine Months Ended September 30, 2010 Compared To the Nine
Months Ended September 30, 2009





The
following table sets forth a summary of certain key components of our results of
operations for the periods indicated, in USD.





For
      The Nine Months Ended
              September
      30,2010
            
            
            2009
            
            
            Change
      in %Net
      revenue
            
            $
            33,594,779
            
            
            $
            37,892,598
            
            
            
            (11.34
            )%Cost
      of revenue
            
            $
            22,452,934
            
            
            $
            29,046,957
            
            
            
            (22.70
            )%Gross
      profit
            
            $
            11,141,845
            
            
            $
            8,845,641
            
            
            
            25.96
            %Operating
      expenses
            
            $
            1,106,206
            
            
            $
            967,763
            
            
            
            14.31
            %Interest
      (income) and expenses, net
            
            $
            43,032
            
            
            $
            50,237
            
            
            
            (14.34
            )%Net
      income
            
            $
            7,423,586
            
            
            $
            5,872,045
            
            
            
            26.42
            %





Net
Revenue





The
following table sets forth a summary of our net revenue by categories for the
periods indicated, in USD.





For
      The Nine Months Ended
              September
      30,2010
            
            
            2009
            
            
            Change
      in %Sales
      of recycled LDPE-   manufactured
            
            $
            30,909,263
            
            
            $
            22,426,985
            
            
            
            37.82
            %-   purchased
            
            
            1,991,009
            
            
            
            7,512,903
            
            
            
            (73.50
            )%Re-sales
      of raw materials
            
            
            -
            
            
            
            7,483,107
            
            
            
            (100.00
            )%Sales
      of non- LDPE materials
            
            
            694,507
            
            
            
            469,603
            
            
            
            47.89
            %$
            33,594,779
            
            
            $
            37,892,598
            
            
            
            (11.34
            )%





For the
nine months ended September 30, 2010, net revenue was $33,594,779, representing
a 11.34% decrease from net revenue of $37,892,598 for the nine months ended
September 30, 2009. This decrease was primarily caused by the fact that the
Company did not sell any raw materials during the nine months ended September
30, 2010 and the sales of purchased recycled LDPE decreased by 73.50% or
$5,521,894. In response to the negative economic conditions and in light of the
business risk created by the Company’s high inventory levels, in early 2009 the
Company resold a large amount of raw materials to other recycled plastic
manufacturers, generating net revenue of $7,483,107. Because the Company’s
inventory levels had decreased to desirable levels by late 2009, there were no
direct sales of raw materials during the first nine months of 2010.




Revenue
generated during the nine months ended September 30, 2010 from the sale of
manufactured recycled LDPE was $30,909,263, as compared to $22,426,985 for the
same period of 2009, which represents an increase of 37.82%. This increase was
due to an increase in both sales volume and selling price of recycled LDPE. In
the 2009 fiscal year, the Company sold a total of 39,076 tons of recycled LDPE,
comprised of 31,149 tons of recycled LDPE manufactured by the Company from
plastic waste and 7,927 tons of recycled LDPE purchased from other manufacturers
for resale during the first quarter of 2009. Accordingly, production volume in
2010 should be compared to the portion of 2009 tonnage attributable to
manufactured recycled LDPE only.  The Company sold 28,853 tons of
manufactured recycled LDPE in the nine months ended September 30, 2010, an
increase of 28.15% from 22,515 tons sold in the corresponding period of 2009.
The average selling price of manufactured recycled LDPE increased 7.53% from
approximately $996 per ton in the nine months ended September 30, 2009 to
approximately $1,071 per ton in the same period in 2010. The average selling
prices of recycled LDPE have increased steadily since the first quarter of 2009.
This increased selling price is expected to have a positive impact on future
revenues.




Revenue
generated from sales of purchased recycled LDPE decreased from $7,512,903 in the
nine months ended September 30, 2009 to $1,991,009 in the same period of 2010,
which represents a decrease of 73.50%. The Company ceased its resale of
purchased recycled LDPE after the first quarter of 2009 because the product
quality supplied by other recycled plastic manufacturers was not sufficient to
satisfy the Company’s high standards and the gross profit margin of such
purchased recycled LDPE was low. During the third quarter of 2010, the Company
generated revenue of $1,991,009 of resale of purchased recycled LDPE to meet the
demand of certain of its existing customers.





Revenue
generated from the sales of sorted non-LDPE material increased from $469,603 in
the nine months ended September 30, 2009 to $694,507 in the same period of 2010,
representing an increase of 47.89%. This was due to an increase in both sales
volume and selling price. Guanwei sold 3,334 tons of sorted non-LDPE material in
the nine months ended September 30, 2010, representing an increase of 24.50%
from 2,678 tons sold in the same period of 2009. The average selling price of
sorted non-LDPE material increased 18.86% from approximately $175 per ton in the
nine months ended September 30, 2009 to approximately $208 per ton in the same
period in 2010. As with recycled LDPE, the average selling price of sorted
non-LDPE materials has steadily increased since the first quarter of 2009 due to
strong market demand, which should have a positive impact on
revenues.





18


Cost of
Revenue





The
following table sets forth a summary of our net revenue by categories for the
periods indicated, in USD.





For
      the Nine
              Months
      Ended
              September
      30,
              2010
            
            
            %
      of net
              revenue
            
            
            For
      the Nine
              Months
      Ended
              September
      30,
              2009
            
            
            %
      of net
              revenue
            
            
            Change in
              %Costs
      of manufactured recycled LDPE and sorted non-LDPE
      material
            
            $
            20,547,405
            
            
            
            65.02
            %
            
            $
            15,546,119
            
            
            
            67.90
            %
            
            
            32.17
            %Costs
      of imported plastic waste for direct sale
            
            
            -
            
            
            
            0.00
            %
            
            
            6,262,944
            
            
            
            83.69
            %
            
            
            (100.00
            )%Costs
      of purchased recycled LDPE
            
            
            1,905,529
            
            
            
            95.71
            %
            
            
            7,237,894
            
            
            
            96.34
            %
            
            
            (73.67
            )%$
            22,452,934
            
            
            
            66.83
            %
            
            $
            29,046,957
            
            
            
            76.66
            %
            
            
            (22.70
            )%





During
the nine months ended September 30, 2010 and 2009, our cost of revenue was
$22,452,934 and $29,046,957, respectively, representing 66.83% and 76.66% of net
revenue, respectively. As previously discussed, during the nine months ended
September 30, 2009, we sold raw materials to other recycled plastics
manufacturers to lower our inventory levels and purchased recycled LDPE from
other recycled plastics manufacturers for resale. Because of our continued
efforts to maintain lower inventory levels and based on our review of the low
profitability of reselling purchased recycled LDPE, we did not directly sell raw
materials and reduced our resale of purchased recycled LDPE during the nine
months ended September 30, 2010. Accordingly, although the cost of revenue as a
percentage of net revenue for the nine months ended September 30, 2010 decreased
significantly from the same period in 2009, this trend is not expected to
continue.





During
the nine months ended September 30, 2010 and 2009, our cost of revenue from
sales of manufactured recycled LDPE and sorted non-LDPE material was $20,547,405
and $15,546,119, respectively, representing 65.02% and 67.90% of net revenue
from sales of manufactured recycled LDPE and sorted non-LDPE material,
respectively. The decrease in the percentage of cost to net revenue is primarily
due to an increase in selling prices during in the nine months ended September
30, 2010. The average selling prices of recycled LDPE and sorted non-LDPE
material in the nine months ended September 30, 2010 increased 7.53% and 18.86%,
respectively, as compared to average prices during the same period of
2009.





A factor
partly offsetting the decrease in cost of revenue versus net revenue between the
first nine months of 2010 and the first nine months of 2009 was the average
manufacturing cost of recycled LDPE and sorted non–LDPE material increased 3.57%
to $639 for the nine months ended September 30, 2010 from $617 in the same
period in 2009.





Gross
Profit





The
overall gross profit for the nine months ended September 30, 2010 increased
25.96% to $11,141,845 as compared to $8,845,641 for the same period in 2009.
During the nine months ended September 30, 2010, our overall gross profit margin
increased to 33.17% from 23.34% in the same period of 2009. The 9.83%
period-over-period increase in overall gross margin was primarily attributable
to the rebound in selling price of recycled LDPE. This increase was partially
offset by an approximate 3.22% period-over-period decrease in overall gross
margin resulting from our cessation of sales of raw materials in
2010.





19


Gross
profit from sales of manufactured recycled LDPE and sorted non-LDPE material
during the nine months ended September 30, 2010 increased by $3,705,896 to
$11,056,365, or 9.78% of net revenue, from $7,350,469 for the same period of
2009. The increase in gross profit was primarily the result of the increase in
selling price and sales volume. During the nine months ended September 30, 2010,
the sales volume of manufactured recycled LDPE and sorted non-LDPE material
increased 28.15% and 24.50% respectively, and their average selling prices
increased 7.53% and 18.86%, respectively. The average per-ton manufacturing
cost of recycled LDPE and sorted non-LDPE material during the nine
months ended September 30, 2010 increased 3.57% compared to the same period of
2009.





Gross
profit from direct sales of raw material during the nine months ended September
30, 2009 was $1,220,163 or 16.31% of net revenue from sales of raw material. The
Company considered the prevailing overall negative economic conditions and the
high inventory risk it had in early 2009 and directly sold raw materials to
other recycled plastics manufacturers in the nine months ended September 30,
2009. Through the Company’s continued efforts on inventory risk management,
inventory levels had been substantially reduced by the first nine months of
2010. There were no direct sales of raw materials in 2010.





Gross
profit from sales of purchased recycled LDPE during the nine months ended
September 30, 2010 was $85,480 or 4.29% of net revenue from sales of purchased
recycled LDPE.  The Company considered the low quality of purchased
recycled LDPE and the low profit margin contributed by such resales and decided
to discontinue reselling purchased recycled LDPE in 2009. However, during the
third quarter of 2010, the Company generated revenue of $1,991,009 from sale of
purchased recycled LDPE only for meeting the demand of certain of its existing
customers.





As
previously discussed, the Company completed the construction projects involving
our washing and smashing plant and new raw material warehouse in the period. The
Company’s sales volume of manufactured recycled LDPE and sorted non-LDPE
material increased to 12,684 ton for the three months ended September 30, 2010
from 7,901 tons for the same period in 2009; and increased to 32,187 tons for
the nine months ended September 30, 2010 from 25,193 tons for the same period in
2009. Furthermore, in order to reduce costs and secure availability of material
supply, the Company will continue to work on obtaining more favorable terms and
a sustainable supply of raw materials by strengthening our relationship with
suppliers and developing long term supply arrangements.





Operating
Expenses





For The Nine
      Months Ended
              September
      30,2010
            
            
            2009
            
            
            Change in
              %Operating
      expenses-
      Sales & Marketing
            
            $
            178,153
            
            
            $
            400,142
            
            
            
            (55.48
            )%-
      G&A
            
            $
            928,053
            
            
            $
            567,621
            
            
            
            63.50
            %Total
            
            $
            1,106,206
            
            
            $
            967,763
            
            
            
            14.31
            %





For the
nine months ended September 30, 2010, operating expenses were $1,106,206,
representing an increase of 14.31% from $967,763 for the nine months ended
September 30, 2009. The increase was primarily due to a combined effect of a
55.48% decrease in sales and marketing expenses and a 63.50% increase in general
and administrative expenses.





Sales and
marketing expenses include transportation and courier costs and sales
remunerations. In the nine months ended September 30, 2010, sales and marketing
expenses decreased 55.48% to $178,153, as compared to $400,142 for the same
period in 2009. The decrease was primarily caused by a significant decrease in
transportation costs from the first nine months of 2010. Our customers may
choose whether to pick up their products with their own vehicles, in which case
the Company deducts transportation costs from the total sales price, or whether
to have the Company arrange delivery, in which case the transportation costs are
categorized as operating expenses. Total transportation costs for the nine
months ended September 30, 2010 and 2009 were approximately $7,538 and $270,264,
respectively, due to more customers choosing to transport products themselves in
the first nine months of 2010 in order to obtain a lower sales price. The
Company believes this trend will continue in the foreseeable
future.





General
and administrative expenses primarily consist of management remuneration,
depreciation and amortization, employee welfare costs, and legal and
professional fees.  During the nine months ended September 30, 2010,
general and administrative expenses increased 63.50% to $928,053, as compared to
$567,621 in the same period of 2009.  This increase was primarily due
to the increase in legal and professional fees incurred in relation to
compliance services after our share exchange transaction in November 2009 and
our listing on NASDAQ on April 12, 2010.





20




Net
Income





During
the nine months ended September 30, 2010, our net income increased 26.42% to
$7,423,586, as compared to $5,872,045 for the same period of 2009. The
improvement is primarily due to overall increased sales of recycled LDPE, which
was partially offset by the Company choosing to discontinue sales of raw
materials and reduced resale of purchased recycled LDPE and by the increase in
cost of materials in the period of 2010.





In order
to continue to improve gross margin and net profit margin, we intend to focus on
enhancing our manufacturing techniques and improving our labor efficiency.
Additionally, we will continue to strengthen our relationships with our major
suppliers to obtain more favorable terms, and we will enhance management control
over general and administrative expenses.





Interest Income and
Expense





Our interest
income is generated by interest earned on deposits with banks and financial
institutions and interest expenses are amounts we pay in interest with respect
to our borrowings. Net interest expenses (interest expenses offset by interest
income) were recorded at $43,032 in the nine months ended September 30 2010,
representing a decrease of 14.34% from $50,237 in the same period of 2009. The
decrease is primarily due to the increase in interest income as a result of the
higher average cash level in the nine months ended September 30,
2010.





We
support our operations with a combination of self-generated profit and limited
amount of loans from banks and financial institutions. For the nine months ended
September 30, 2010, we had one short-term loan of $1,447,524 from the Rural
Credit Cooperatives Union, which will mature on January 20, 2011. The interest
rate on this loan is 5.94%.





Liquidity
and Capital Resources





We
generally finance our operations through operating profit and occasionally
through short-term borrowings from banks and financial institutions. We arranged
one short-term loan of $1,447,524 during the nine months ended September 30,
2010 to satisfy our financing needs.  The interest rate on this loan
is 5.94% annually and it will mature on January 20, 2011. As of the date of this
Quarterly Report, we have not experienced any difficulties due to a shortage of
capital, we have not experienced any difficulty in raising funds through loans
from banks and financial institutions, and we have not experienced any liquidity
problems in settling our payables in the normal course of business and repaying
our loans when they come due.  We are unaware of any trends, demands,
commitments events or uncertainties that will result or be likely to result in
material changes in our liquidity.





We
believe that the level of financial resources is a significant factor for our
future development and accordingly, we may determine from time to time to raise
capital through private debt or equity financing to strengthen the Company’s
financial position, to expand our facilities and to provide us with additional
flexibility to take advantage of business opportunities.  No
assurances can be given that we will be successful in raising such additional
capital on terms acceptable to us.





The
following table sets forth the summary of our cash flows, in USD, for the nine
months ended September 30, 2010 and 2009:





Nine
      Months ended
              September
      30,2010
            
            
            2009Net
      cash provided by operating activities
            
            $
            6,022,757
            
            
            $
            7,636,177Net
      cash used for investing activities
            
            $
            (549,823)
            
            
            $
            (24,524)Net
      cash provided by (used for) financing activities
            
            $
            279,449
            
            
            $
            (4,994,726)Effect
      of exchange rate changes on cash
            
            $
            210,440
            
            
            $
            3,368Net
      increase in cash and cash equivalents
            
            $
            5,403,925
            
            
            $
            2,620,295Cash
      and cash equivalents at beginning of period
            
            $
            7,302,209
            
            
            $
            1,029,710Cash
      and cash equivalents at end of period
            
            $
            12,706,134
            
            
            $
            3,650,005





21




Operating
activities





During
the nine months ended September 30, 2010, we generated net cash from operating
activities of $6,022,757, representing a decrease of 21.13% from $7,636,177 for
the same period in 2009. This decrease is primarily due to the fact that we did
not make any direct sales of raw materials and reduced sales of purchased
recycled LDPE in the first nine months of 2010, which was partially offset by
the improvement in our operating results in the period.





The cash
provided by change in net working capital during the nine months ended September
30, 2010 decreased 269.13% to $2,461,336 net cash used, as compared to
$1,455,324 net cash generated for the same period of 2009, primarily due to the
drop in cash provided by a decrease in inventories from $7,089,399 in the first
nine months of 2009 to $3,080,787 in the first nine months of 2010. As discussed
above, Guanwei sold raw materials directly from inventory in early 2009 to
reduce its high inventory levels. Additionally, the decrease was partially
offset by higher amounts of cash used to reduce accounts payable in early 2009.
During the nine months ended September 30, 2009, Guanwei used $6,532,140 to
reduce accounts payable, compared to $5,255,693 used in the same period of
2010.





Investing
Activities





During
the nine months ended September 30, 2010, net cash used in investing activities
was $549,823, a $525,299 increase as compared to $24,524 in the same period of
2009. The increase is primarily attributable to the higher capital expenditure
in the first nine months ended September 30, 2010.





Financing
Activities





Cash used
for financing activities for the nine months ended September 30, 2010 was
$279,449, as compared to $4,994,726 net cash used in financing activities in the
same period of 2009. The increase is primarily due to the fact that no dividends
were paid in the nine months ended September 30, 2010, which was partially
offset by the advance from shareholder in the period.





Working
Capital





Our
working capital as of September 30, 2010 and December 31, 2009 was $10,630,383
and $3,407,759, respectively, representing an increase of $7,222,624 or 211.95%.
The improved working capital is due to the $5,403,925 increase in cash and cash
equivalents, a decrease of $3,018,226 in inventories, and a decrease of
$5,213,725 in accounts payable for the nine months ended September 30, 2010 as
compared to that as of December 31, 2009. We aim to continue to improve the
level of working capital through enhanced levels of productivity and increased
revenue and efficiently controlling costs.





Following
our continued efforts on inventory risk management, we managed to reduce our
inventory levels as of September 30, 2010 to $3,791,639 as compared to
$6,809,865 as of December 31, 2009. As a result, our accounts payable as of
September 30, 2010 had decreased to $3,471,599 as compared to $8,685,324 as of
December 31, 2009.





Accounts
receivable as of September 30, 2010 increased to $953,006, as compared to $4,181
as of December 31, 2009. It is the Company’s practice to receive payments before
making delivery. This increase is mainly due to the shortfall of payments of a
few customers.





Off-Balance
Sheet Arrangements.





We do not
have any outstanding derivative financial instruments, off-balance sheet
guarantees or interest rate swap transactions of foreign currency forward
contracts.  Furthermore, we do not have any retained or contingent
interest in assets transferred to an unconsolidated entity that serves as
credit, liquidity or market risk support to such entity.  We do not
have any variable interest in an unconsolidated entity that provides financing,
liquidity, market risk or credit support to us or that engages in leasing,
hedging or research and development services with us.





Item
3.  Quantitative and Qualitative Disclosures About Market
Risk.





Not
required for smaller reporting companies.




22





Item 4.  Controls and
Procedures.





Disclosure
controls and procedures





The
Registrant’s Chief Executive Officer and Chief Financial Officer (collectively,
the “Certifying
Officers”) are responsible for establishing and maintaining disclosure
controls and procedures for the Company. Based upon such officers’ evaluation of
these controls and procedures as of the end of the period covered by this
quarterly report, and subject to the limitations noted hereinafter, the
Certifying Officers have concluded that the disclosure controls and procedures
were effective to ensure that information required to be disclosed by the
Registrant in this quarterly report is accumulated and communicated to
management, including to the principal executive officers as appropriate, to
allow timely decisions regarding required disclosure.





Changes
in Internal Control Over Financial Reporting.




During
the three months ended September 30, 2010, there were no changes in our internal
controls over financial reporting that have materially affected, or are
reasonably likely to materially affect, our internal controls over financial
reporting.





23




PART
II. OTHER INFORMATION




Item
1.  Legal Proceedings.





As of the
date of this filing, there exist no legal proceedings to which the Registrant or
any of its subsidiaries is a party or of which any of their property is the
subject, that could reasonably be expected to have a material impact on the
Registrant’s operations or finances.





Item
1A.  Risk Factors.





Not
required for smaller reporting companies.





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.





There
have been no material changes to the procedures by which security holders may
recommend nominees to the Company’s board of directors.




24




Item  6. Exhibits





(a)
            Financial
      Statements





Our
financial statements as set forth in the Index to Financial Statements included
as Item 1 hereto are hereby incorporated by reference.





(b)
            Exhibits





EXHIBIT
              NO.
            
            DESCRIPTION2.1
            
            Share
      Exchange Agreement, by and between the Registrant, Chenxin and Fresh
      Generation, dated November 5, 2009  (1)2.2
            
            Plan
      of Merger, adopted by the Registrant’s Board on December 4, 2009
      (3)3.1
            
            Articles
      of Incorporation of the Registrant, dated December 13,
      2006.  (2)3.2
            
            Bylaws
      of the Registrant  (2)3.3
            
            Certificate
      of Amendment to Articles of Incorporation of the Registrant, dated January
      28, 2008 (2)3.4
            
            Articles
      of Merger, filed with the Secretary of State of the State of Nevada on
      December 16, 2009 (3)3.5
            
            Certificate
      of Incorporation of Chenxin  (1)3.6
            
            Memorandum
      and Articles of Association of Chenxin  (1)3.7
            
            Articles
      of Association of Guanwei  (1)3.8
            
            Enterprise
      Business License of Guanwei, dated December 27,
      2007  (1)3.9
            
            Enterprise
      Business License of Guanwei, dated December 23,
      2008  (1)





10.1
            
            Share
      Exchange Agreement and Stock Purchase between the Registrant and MD
      Mortgage Corp., dated January 15, 2007  (2)10.2
            
            Asset
      Transfer Agreement, between Fuqing State-Owned Assets Management &
      Investment Corp. and Guanwei, dated January 11,
      2006  (1)10.3
            
            Land
      Use Certificate, issued by the Ministry of State-Owned Land Resources of
      the People’s Republic of China to Guanwei, dated November 8,
      2006  (1)10.4
            
            Audit
      Report and Certificate, issued by TÜV Rheinland Cert. GmbH to
      Guanwei  (1)10.5
            
            Form
      of Employment Contract  (1)10.6
            
            Stock
      Purchase Agreement, between the Registrant and Marshall Davis, dated
      November 5, 2009  (1)10.7
            
            Indemnity
      Agreement by and between Chenxin, Fresh Generation, and Marshall Davis,
      dated November 5, 2009  (1)10.8
            
            Maximum
      Amount Loan with Pledge Contract, dated January 17, 2008 between Guanwei
      and Fuqing Rural Credit Cooperative Union
(1)




25




10.9
            
            Sales
      Confirmation, dated May 3, 2010, between TM Recycling GmbH and Guanwei
      (4)10.10
            
            Sales
      Contract, dated as of July 7, 2010, between Guanwei and Sunshine
      Handels & Consulting GmbH. (5)31.1
            
            Rule
      13a-14(a)/15d-14(a) Certification (CEO)  *31.2
            
            Rule
      13a-14(a)/15d-14(a) Certification (CFO)  *32.1
            
            Section
      1350 Certification (CEO) *32.2
            
            Section
      1350 Certification (CFO) *







(1)
            Incorporated
      by reference to the Registrant’s Current Report on Form 8-K, filed on
      November 6, 2009.(2)
            Incorporated
      by reference to the Registrant’s Registration Statement on Form SB-2 (File
      No. 333-149013), filed on February 1,
2008.





(3)
            Incorporated
      by reference to the Registrant’s Current Report on Form 8-K, filed on
      December 22, 2009.(4)
            Incorporated
      by reference to the Registrant’s Quarterly Report on Form 10-Q, filed on
      May 17, 2010.





(5)
            Incorporated
      by reference to the Registrant’s Current Report on Form 8-K, filed on July
      12, 2010.*
            Filed
      herewith.




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SIGNATURES





Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.




GUANWEI
      RECYCLING CORP.Date:
      November 15, 2010
              By:
              /s/
      Chen MinChen
      MinChief
      Executive Officer, Chairman of the Board, President(Principal
      Executive Officer)




Date:
      November 15, 2010
              By:
              /s/
      Yang FengYang
      FengChief
      Financial Officer, Secretary, Treasurer(Principal
      Financial and Accounting Officer)




27